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Research Automation, Inc. v. Schrader-Bridgeport International

November 23, 2010

RESEARCH AUTOMATION, INC., PLAINTIFF-APPELLANT,
v.
SCHRADER-BRIDGEPORT INTERNATIONAL, INC., DEFENDANT-APPELLEE.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:09-cv-01265-Joan B. Gottschall, Judge.

The opinion of the court was delivered by: Hamilton, Circuit Judge.

ARGUED SEPTEMBER 15, 2010

Before MANION, SYKES, and HAMILTON, Circuit Judges.

This case presents a relatively rare appeal of an issue that arises frequently in district courts: two parties file identical lawsuits, each a mirror-image of the other, in different federal districts. To prevent duplication of this sort, district courts may transfer, enjoin, or dismiss one of the lawsuits. We take this opportunity to provide additional guidance on this issue for district courts and for litigants.

The parties in this case filed mirror-image lawsuits in two different district courts, each claiming the other had breached their contract for the manufacture and sale of an industrial cleaning machine. Shortly after seller Research Automation, Inc., an Illinois corporation, delivered the machine to the Virginia manufacturing plant of buyer Schrader-Bridgeport, Inc., a dispute arose as to whether the machine met the contract specifications. Each party filed suit in its home state's courts. After both cases were removed to their respective federal courts, each defendant moved to transfer the competing lawsuit to its preferred venue. Research Automation also asked the Illinois court to enjoin the Virginia proceedings on the ground that the Illinois suit should receive priority for having been filed first. The Illinois district judge ruled on that motion together with Schrader-Bridgeport's transfer motion, finding that a transfer to Virginia under 28 U.S.C. § 1404(a) was the most appropriate resolution of the parties' competing motions.

We affirm the district court's decision to deny the injunction and to transfer the Illinois action to the Western District of Virginia. Where a district court gives thoughtful consideration to the factors applicable to a transfer analysis under section 1404(a), we give its decision substantial deference. That deference applies regardless of whether there is only one lawsuit between the parties or whether there is a second case pending in the other forum.

Facts and Procedural Background

In 2006, plaintiff Research Automation, Inc. entered into an agreement with defendant Schrader-Bridgeport International, Inc. to manufacture a custom-made "High Pressure Water Jet Deburr and Cleaning Machine," which Schrader-Bridgeport planned to use to clean and deburr its automotive valves and stems. The machine was to be completed in 2007, but Schrader-Bridgeport alleged that the machine failed to satisfy the requirements specified in the agreement and filed a lawsuit alleging breach of the agreement in a Virginia state court on November 16, 2007. As the parties attempted to work out their differences, the state court litigation was not pursued and eventually was non-suited on February 2, 2009, due to lack of service.*fn1

Four days later, Research Automation sued Schrader-Bridgeport in an Illinois state court. Research Automation alleged that Schrader-Bridgeport breached the parties' amended agreement by failing to pay. On February 23, 2009, Schrader-Bridgeport filed its own suit in a Virginia state court alleging that Research Automation breached the same agreement. Each case was removed to federal court on the basis of diversity jurisdiction: Schrader-Bridgeport removed the Illinois suit to the Northern District of Illinois on February 27, 2009, and Research Automation removed the Virginia action to the Western District of Virginia on March 23, 2009. The parties agree that these suits are mirror images of each other, with the exception that the Virginia action also names as a defendant a North Carolina corporation that served as Research Automation's agent in the parties' original negotiations.

On March 24, 2009, one day after removing the Virginia action, Research Automation filed a motion in Illinois to enjoin Schrader-Bridgeport from prosecuting its action in Virginia. Two days later, on March 26, Schrader-Bridgeport moved to transfer the Illinois case to the Virginia court pursuant to 28 U.S.C. § 1404(a). On April 27, 2009, the Illinois court denied Research Automation's motion for an injunction and granted Schrader-Bridgeport's motion to transfer. This appeal followed.

Analysis

Under 28 U.S.C. § 1292(a)(1), we have jurisdiction over the appeal of the district court's order denying Research Automation's motion for an injunction. A decision granting or denying a section 1404(a) transfer is ordinarily a non-reviewable interlocutory order. Hill v. Potter, 352 F.3d 1142, 1144 (7th Cir. 2003). The doctrine of pendent appellate jurisdiction, however, allows us to review an otherwise unappealable interlocutory order if it is "inextricably intertwined with an appealable one." Montano v. City of Chicago, 375 F.3d 593, 599 (7th Cir. 2004), quoting Jones v. InfoCure Corp., 310 F.3d 529, 536 (7th Cir. 2002). Here, the district court's two rulings are inextricably intertwined. Both the denial of the injunction and the district court's transfer order concern the same single issue: whether this case should be litigated in Illinois or in Virginia. We exercise pendent appellate jurisdiction over the district court's order transferring the case to Virginia.

The parties agree that we review the district court's decision on both motions for an abuse of its discretion. See Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219-20 (7th Cir. 1986) (reviewing a transfer order under an abuse-of-discretion standard); Martin v. Graybar Electric Co., 266 F.2d 202, 203-05 (7th Cir. 1959) (applying an abuse-of-discretion standard to an injunction to halt proceedings in identical lawsuits). This standard implies "a very limited scope of appellate review." Coté v. Wadel,796 F.2d 981, 985 (7th Cir. 1986). We "do not simply engage in a perfunctory rubber-stamping of the district court's decision," but we "give that decision substantial deference." American Hospital Supply Corp. v. Hospital Products Ltd., 780 F.2d 589, 594 (7th Cir. 1986) (citation and internal quotation marks omitted).

The parties disagree with respect to the scope of the district court's discretion and the manner in which it was applied. Research Automation contends that the judicial doctrine known as the "first-to-file rule" defines the bounds of the district court's discretion, limiting the court's analysis under section 1404(a) to a determination of which case was filed first. Schrader-Bridgeport argues that the district court has the discretion to depart from the first-to-file rule where a transfer analysis otherwise warrants. Based on the weight of authority and principles of sound judicial ...


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