Should I file first or wait to get sued and defend or respond? Aside from the legal merits of claims or defenses, there are procedural advantages to the first-filed rule and that rule is that federal courts in different jurisdictions may, but not always, defer to the first-filed case in parallel cases as a matter of courtesy and convenience. Abstention doctrines come into play when there are parallel state and federal cases. There is no certainty about the application of the rule as one court may decide to keep a case despite the first-filed rule and another may not be persuaded to transfer it on grounds of alleged inconvenience. This increases the risk of inter-jurisdictional conflicts.
One would think that filing first would be a wise strategy at least when you know that your client will get sued or where you want the benefit of a presumptive more convenient or favorable forum. You may still end up defending in two jurisdictions if both courts refuse to transfer their respective actions, but at least you have one forum of your choice.
This is what the supplier must have thought in Ace Hardware Int’l Holdings Inc. v. Masso Expo Corp., 2012 WL 182236 (N.D. Ill. Jan. 23, 2012) when it sued the Puerto Rico distributor for declaratory judgment in federal court in Illinois. Instead of counterclaiming in the Illinois action, Masso, the distributor, responded with a Law 75 action against Ace in federal court in Puerto Rico. 2011 WL 5525381 (D.P.R. Nov. 14, 2011). The case in Illinois was filed first and months before the Puerto Rico action. Still, the federal court in Puerto Rico (Gelpí, J. adopting Vélez Rivé’s recommendations) denied a motion to transfer the parallel action to Illinois.
For its part, the federal court in Illinois was not moved to reconsider its ruling refusing to transfer the parallel action to Puerto Rico. First, it held that, the fact that Puerto Rico law applies is not sufficient to transfer and there is no choice of law provision mandating litigation in Puerto Rico or for that matter, in Illinois. Second, the court disagreed with the Puerto Rico Magistrate Judge’s dictum that Law 75 prohibited litigation of Law 75 claims outside of Puerto Rico courts and distinguished the permissive forum selection clause at issue in the agreements that would not offend Section 278(b) as opposed to mandatory forum-selection clauses that arguably would, but cites to numerous authorities enforcing mandatory forum-selection clauses in Law 75 disputes. While the Illinois court was careful not to cast blame on the Puerto Rico court for refusing to transfer, reading between the lines and citing a case transferring a Puerto Rico case to Texas based on the first-filed rule and Section 1404(a), the court found a way to disagree and keep the action in Illinois. Finally, the court also disagreed with the distributor’s pleas of inconvenience retorting that it was of its own making for having filed the Puerto Rico action instead of filing counterclaims in the Illinois action.