Opinion
Civil Action No. 4:04-CV-612-Y.
November 8, 2004
ORDER DENYING MOTION TO STAY, MOTION TO TRANSFER VENUE AND MOTION TO DISMISS
Pending before the Court is defendant Northwest Airlines, Inc. ("Northwest")'s Motion to Stay or in the Alternative to Transfer Venue or to Dismiss [doc. # 19-1], filed September 14, 2004. Having carefully reviewed the motion, response, reply, surreply, and surreply to the surreply the Court finds that the motion should be DENIED.
I. BACKGROUND
Plaintiff Sabre, Inc. operates a global distribution system (the "Sabre GDS") where various travel providers display information about their services. The Sabre GDS is primarily used by travel agents. For each airline reservation made on the Sabre GDS, Sabre, Inc. charges airline booking fees. Plaintiff Sabre Travel International Limited ("STIL") maintains contracts with travel providers, assisting those providers with the distribution of their travel services. STIL uses the services of Sabre, Inc. and the Sabre GDS in order to meet its contractual obligations. Each airline whose information appears in the Sabre GDS has agreed through a negotiated contract with STIL to provide flight schedule, fare, and inventory information to the Sabre GDS so that its users can book reservations and issue tickets through the Sabre system.
Beginning in 2000, some major airlines, including Northwest, began offering lower web fares on their own web sites and Orbitz.com that were not provided to Sabre, Inc. and STIL (hereinafter collectively referred to as "Sabre"). Though Sabre believed the airlines' practice of withholding these fares violated the existing contracts between STIL and the airlines, STIL renegotiated its contracts in order to avoid litigation. In July 2003, STIL and Northwest finalized an amendment to their contract ("the 2003 amendment") that provided that Sabre and its respective customers would have equal access to all prices for air travel available to the general public, including those special fares formerly only provided through Northwest's own web site and Orbitz.com. In exchange, Sabre would reduce booking fees and freeze them for the three-year term of the contract. Sabre was also required not to introduce any "bias" based on a carrier's identity into its flight display, and to provide Northwest with 60 days' advance notice of any plans to introduce such bias. The parties agree that Texas law governs the terms of the contract.
On August 24, 2004, Northwest announced that, on September 1, it would be introducing a surcharge on tickets purchased through the Sabre GDS; the surcharge would not apply to tickets purchased on Northwest's web site or on Orbitz.com. Due to Northwest's actions, Sabre, Inc. filed suit against Northwest for breach of contract on August 24 in the Northern District of Texas. The United States District Clerk's office was closed when Sabre, Inc. arrived at the courthouse, it placed its complaint in the clerk's drop box. Sabre, Inc. listed only itself as a plaintiff in its complaint. To prevent other airlines from following Northwest's example, Sabre, Inc. also changed the display parameters on the Sabre GDS for any airline breaching the 2003 amendment. Due to the display changes implemented by Sabre, Inc. other airlines were given more prominent visibility than Northwest, even if Northwest's travel options were better suited to a consumer's needs.
Northwest announced that it would add $7.50 to round trip tickets and $3.75 for one-way fares purchased through the Sabre GDS. Northwest decided to create the surcharge to off-set its costs in using the Sabre GDS system. While travel agents typically pay no booking fee when using a GDS, airlines pay approximately $12.50 for each ticket booked.
Sabre maintains that Northwest's actions were an anticipatory breach of its contract with Northwest, stating that its stock value immediately fell after Northwest made its announcement. See Pls.' Resp. to Mot. at 4.
On August 25, at 8:23 a.m., Northwest filed a breach of contract action against STIL and Sabre, Inc. for Sabre's changes to the Sabre GDS display parameters. Northwest filed its suit in the District of Minnesota. On August 27, Sabre, Inc. filed an amended complaint in the Northern District of Texas, adding STIL as a party to the action. Sabre's amended complaint included a breach of contract claim and requested a permanent injunction, a declaratory judgment, damages, and attorneys' fees.
Sabre also moved for a preliminary injunction. Due to Northwest's September 1 cessation of the surcharge, the Court mooted Sabre's motion for preliminary injunction on September 15, 2004.
On September 1, Northwest implemented the surcharge on Sabre-GDS purchased tickets. Sabre also threatened to implement, and eventually did implement, a policy of closing out high-value seats on Northwest's international flights. Sabre filed a motion to dismiss or transfer venue to this Court with the District of Minnesota on September 1. On September 2 at 5:00 p.m., following an announcement by American Airlines that it would not be introducing a similar fee, Northwest rescinded its surcharge. Sabre requested that Northwest state that it would not re-introduce the surcharge, but Northwest refused. On September 14, Northwest filed a motion in this Court to stay, or in the alternative, to transfer venue or dismiss.
"In other words, when travel agents searched for seats in [first or business class], Sabre would show the cabins full, despite the fact that seats were actually available for sale." Mem. of Law in Supp. of Mot. at 7.
This motion is scheduled to be heard before the Honorable Paul Magnuson on November 10, 2004.
II. ANALYSIS
A. Northwest's Motion to Stay
Northwest requests that the Court stay its proceedings in this matter until the District of Minnesota rules on Sabre's motion to transfer. The Court will not grant this form of relief. "The Fifth Circuit adheres to the general rule that the court in which an action is first filed is the appropriate court to determine whether subsequently filed cases involving substantially similar issues should proceed." Save Power Ltd. v. Synteck Finance Corp., 121 F.3d 947, 950 (5th Cir. 1997) (citing West Gulf Maritime Ass'n v. ILA Deep Sea Local 24, 751 F.2d 721, 728 (5th Cir. 1985); Mann Mfg., Inc. v. Hortex, Inc., 439 F.2d 403, 408 (5th Cir. 1971)). The first-filed rule furthers judicial economy and prevents conflicting judicial decisions. Id. For the rule to apply, the issues and parties involved in the separate actions need not be identical — only a substantial overlap on the substantive issues is necessary. Id. (citing Mann Mfg., 439 F.2d at 408). If such a substantial overlap exists, "the cases would be required to be consolidated in . . . the jurisdiction first seized of the issues." Mann Mfg., 439 F.2d at 408 n. 6. The appropriate court to determine whether subsequently filed cases involving substantially overlapping issues should proceed is the court in which jurisdiction first attached. See Save Power, 121 F.3d at 950-952.
The Mann court elaborated: "Once the likelihood of substantial overlap between the two suits ha[s] been demonstrated, it [is] no longer up to the [second-filed court] to resolve the question of whether both should be allowed to proceed. By virtue of its prior jurisdiction over the common subject matter . . ., the ultimate determination of whether there actually [i]s a substantial overlap requiring consolidation of the two suits in [the first-filed court] belong[s] to the [first-filed court]." Mann, Mfg., 439 F.2d at 408.
Sabre's action was filed in this Court before Northwest's suit was filed in the District of Minnesota. Sabre filed its suit against Northwest on August 24, while Northwest filed its suit on August 25. Additionally, both cases involve a substantial overlap on the substantive issues. Sabre's suit involves Northwest's alleged anticipatory breach of its contract with STIL. Northwest's suit involves breach of contract claims against Sabre for changing the display parameters in the Sabre GDS system, an action Sabre took in response to Northwest's alleged anticipatory breach. Since the cases involved have a substantial overlap of their substantive issues, and because Sabre's action was filed first in this Court, the Court concludes that the ultimate determination of whether consolidation of the suits is required resides with this Court. Id. at 408. Therefore, a stay in favor of the District of Minnesota's decision on this issue would be inappropriate.
Northwest argues that, because Sabre moved for a transfer of Northwest's suit to this Court in the District of Minnesota, a stay in this Court would be appropriate. The Court does not agree. While Sabre may have submitted the issue to the District of Minnesota, that does not change the fact that jurisdiction over the related substantive issues first resided with this Court. Since the decision of whether consolidation is appropriate is with "the jurisdiction first seized of the issues", id. at 408 n. 6, it is irrelevant that Sabre filed a motion to transfer with the District of Minnesota. Jurisdiction over the dispute attached first in this Court, and the Court is not compelled to stay its hand simply because Sabre submitted the question to the Minnesota court first.
Northwest also contends that, since the related complaints were filed almost simultaneously, the fist-filed rule is inapplicable. This contention is also faulty. None of the case law cited as support for Northwest's argument hales from the Fifth Circuit. Furthermore, Fifth Circuit precedent is directly contrary to Northwest's contention. See Eastman Med. Prods. v. Squibb, 199 F.Supp.2d 590, 595 (N.D. Tex. 2002) (Lynn, J.) ("[Defendant] tacitly argues that, because the two cases were filed `almost simultaneously,' the `first to file' rule is less important. The case law does not support this view."). The Northern District of Texas permits the filing of documents by drop box, and pleadings are treated as filed on the date that they are file-stamped. See Jones v. Cockrell, No. CA-3:01-CV-1811-H, 2002 WL 1058197, at *1 n. 1 (N.D. Tex. May 22, 2002) (Sanders, J.). While the difference in time between the filing of Sabre's and Northwest's separate actions is not significant, a clear distinction between the filing dates can still be made. Sabre filed on August 24, Northwest filed the day after. Though this difference is small, the first-filed rule provides a clear answer to which action should be controlling in terms of venue. "Although the `first to file' rule is pedestrian, its simplicity furthers comity between courts and should not be casually ignored." See Eastman, 199 F.Supp.2d at 595. Bearing this in mind, the Court declines to accept Northwest's "almost-simultaneously" filed argument, and finds that the Sabre action is the first-filed case and is therefore controlling in terms of venue.
See http://www.txnd.uscourts.gov/filing/dropboxes.html. While the Dallas Division allows filing by drop box 24 hours a day, the Fort Worth Division only provides drop box hours from 7:00 a.m. to 6:00 p.m.
Lastly, Northwest argues that the first-filed rule should apply in favor of the District of Minnesota because jurisdiction did not attach when Sabre filed the above-styled and -numbered cause in this Court. Specifically, Northwest contends that the real party in interest with a claim against Northwest is STIL, and not Sabre Inc., because STIL is the entity involved in a contractual relationship with Northwest. Northwest's argument is that, because Sabre, Inc. was the only plaintiff listed on the August 24th complaint, jurisdiction did not attach in the Northern District of Texas until August 27th, when Sabre's amended complaint listing STIL as a plaintiff was filed. This contention is also without merit.
Leave to amend a pleading "shall be freely given where justice so requires." FED. R. CIV. P. 15(a). Federal Rule of Civil Procedure 15(c) (2) provides that "[a]n amendment of a pleading relates back to the date of the original pleading when the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrences set forth or attempted to be set forth in the original pleading." The relation-back doctrine also includes amendments to complaints: "[a]s long as the amended complaint refers to the same transaction or occurrence that formed the basis for the original complaint and the defendant was put on notice of the claim by the first complaint, there will be no bar to amendment." Williams v. United States, 405 F.2d 234, 237 (5th Cir. 1968). Sabre's claims in the amended complaint relate to the same dispute between the parties asserted in the initial complaint, and Northwest was put on notice of the pending action. Sabre's amended complaint would therefore relate back to the original filing date of August 24.
The fact that only Sabre, Inc. was listed as a plaintiff in the original complaint does not affect this application of the relation-back doctrine. "Initial defects in standing are remediable through an amended complaint." Haddad Bros., Inc. v. Little Things Mean A Lot, Inc., No. 00 Civ. 0578, 2000 WL 1099866, at *9 (S.D.N.Y. Aug. 4, 2000). The amendment of an original complaint to add a party in interest will therefore relate back to the filing date of the original complaint. See Tidewater Marine Towing, Inc. v. Dow Chemical Co., Inc., 689 F.2d 1251, 1253 (5th Cir. 1982) (amended complaint by personal representative related back to original complaint filed by plaintiff without standing); Reyna v. Flashtax, Inc., 162 F.R.D. 530, 532-33 (S.D. Tex. 1995) (amended complaint related back where plaintiff originally sued under a non-existing corporation's name); Flores v. Cameron County, 92 F.3d 258, 273 (5th Cir. 1996); see also Haddad Bros., 2000 WL 1099866 (first-filed rule applied in virtually identical case). "If a plaintiff seeks to correct a technical difficulty, state a new legal theory of relief, or amplify the facts alleged in a prior complaint, then relation back is allowed." Flores, 92 F.3d at 273 (citing F.D.I.C. v. Conner, 20 F.3d 1376, 1386 (5th Cir. 1994)). "Notice is the critical element involved in Rule 15(c) determinations." Id. (citing Williams, 405 F.2d at 236). Here, Sabre's claims arise out of the same events and conduct that were described in the original complaint. Furthermore, even if Sabre, Inc. lacked standing to pursue its claims against Northwest at the time the action was originally filed, the original complaint alleged a breach of contract action, notifying Northwest that it would be required to defend itself against such a claim. The August 27th amendment to the original complaint merely "seeks to correct a technical difficulty" with the original complaint — to allege that both Sabre, Inc. and STIL suffered damages from Northwest's conduct.
In its surreply to Sabre's surreply, Northwest cites Aetna Casualty Surety Co. v. Hillman, 796 F.2d 770 (5th Cir. 1986), as support for its argument that Sabre, Inc.'s initial complaint affects this Court's jurisdiction over the suit. (Northwest's Surreply at 5.) Aetna does provide that "where a plaintiff never had standing to assert a claim against [a] defendant, it does not have standing to amend the complaint and control litigation by substituting new plaintiffs, a new class, or a new cause of action." Aetna, 796 F.2d at 774. However, the circumstances in Aetna are distinguishable from the present dispute. In Aetna, the plaintiff sought to wholly substitute the real party in interest, whereas Sabre's amended complaint merely added another plaintiff to the action. Furthermore, Aetna provides that where a plaintiff initially lacks standing it thereby affects the ability of that plaintiff to substitute itself for another plaintiff with standing. Sabre, however, is not attempting to wholly substitute itself in the action, but rather seeks to add a party that was also allegedly damaged by Northwest's conduct. Sabre, Inc.'s initial complaint sufficiently placed Northwest on notice of the pending suit in this Court, and the addition of STIL as a plaintiff in the action corrected any deficiencies that may have existed in the initial complaint. Though Haddad Brothers is not a Fifth Circuit decision it is almost identical factually to the present dispute, unlike Aetna, in which the named plaintiff sought to entirely substitute a different entity as the party in interest. Haddad Brothers' determination that "[i]nitial defects in standing are remediable through an amended complaint," 2000 WL 1099866 at *9, is therefore compelling, and the Court concludes that Northwest's arguments on this issue are unpersuasive.
Furthermore, the Court notes that Federal Rule of Civil Procedure 17 (a) provides that
[n]o action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest; and such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.
FED. R. CIV. P. 17(a). The difference in time between the filing dates of the initial complaint and the amended complaint — three days' time — complies with the provisions of Rule 17(a). Additionally, both complaints make similar claims arising out of the same conduct. The Court therefore concludes that the amended complaint is sufficient to cure any potential jurisdictional complications that may have arisen from Sabre, Inc.'s initial filing of its complaint, and that Sabre does not lack standing to pursue its suit before this Court.
Furthermore, "Rule 15(a) . . . requires the Court to examine whether the movant would be prejudiced by denial of leave to amend." Reyna, 162 F.R.D. at 532. If Sabre, Inc. in fact does not have standing to pursue its breach-of-contract claim against Northwest, the suit in this Court would be terminated. Sabre should not be denied its choice of forum when the amended complaint alleges the same facts and cause of action as the original complaint — and the contract is governed by Texas law — simply because Northwest argues that an amendment cannot cure any potential deficiency. The Court concludes Sabre's briefing on this issue to be compelling, and therefore finds that Sabre's amended complaint of August 27th cures any potential deficiency that may have existed in terms of the plaintiffs' standing to sue. Therefore, even if Sabre, Inc. lacked standing to pursue a breach-of-contract claim against Northwest, Sabre's August 27th amended complaint relates back to the original filing date of August 24.
Northwest argues that there are "compelling circumstances" that except this case from the first-filed rule. Specifically, Northwest avers that Sabre's original complaint, while titled a breach-of-contract action, actually sought only a declaratory judgment since Northwest had not yet imposed its surcharge. The Court does not agree with this analysis. The original complaint sought damages and attorneys' fees, and also stated facts indicating that Sabre may have suffered immediate injury from Northwest's actions. This is sufficient to protect Sabre's original complaint from Northwest's contentions. See Southwind Aviation, Inc. v. Bergen Aviation, Inc., 23 F.3d 948, 951 (5th Cir. 1994) ("Although some of the relief sought by Southwind is declaratory in nature, Southwind also requests coercive remedies for the breach of contract in the form of damages, attorney's fees, and injunctive relief. Inclusion of these coercive remedies indisputably removes this suit from the ambit of a declaratory judgment action."). Furthermore, "[t]he doctrine of repudiation or anticipatory breach of contract is well established in Texas." Mar-Len of La., Inc. v. Gorman-Rupp Co., 795 S.W.2d 880, 887 (Tex.App.-Beaumont, 1990) (writ denied) (citation omitted). Such breach "may consist of either words or actions that indicate that a party is not going to perform the contract according to its terms in the future." Id.; see also Murray v. Crest Construction Co., Inc., 900 S.W.2d 342, 344 (Tex. 1995). The original complaint therefore asserts a claim for breach of contract, and not for declaratory relief.
A stay under these circumstances is therefore uncalled for and unsupported by law. The Court concludes that Northwest's motion for a stay pending the District of Minnesota's resolution of this issue is DENIED.
B. Northwest's Motion to Transfer Venue
Northwest alternatively moves for a transfer of the action to the District of Minnesota, arguing that (1) the action could have been brought in Minnesota, (2) the damages Northwest suffered at the time it brought its suit in Minnesota are greater than the damages suffered by Sabre when it began its suit in this Court, (3) a transfer is necessary for the convenience of the parties and witnesses, and (4) the interests of justice favor a transfer.
Pursuant to 28 U.S.C. § 1404(a), "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." In other words, a transfer is appropriate under § 1404(a) when the moving party demonstrates: (1) venue is proper in the transferee court; (2) transfer is for the convenience of the parties and witnesses; and (3) transfer is in the interest of justice. See Ferens v. John Deere Co., 494 U.S. 516, 521 (1990) (stating that § 1404 (a) permits a transfer only when convenient and in the interest of justice.); see also Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219 (7th Cir. 1986). The purpose of § 1404(a) "is to prevent the waste `of time, energy, and money' and `to protect litigants, witnesses and the public against unnecessary inconvenience and expense.'" Van Dusen v. Barrack, 376 U.S. 612, 616 (1964) (quoting Continental Grain Co. v. The FBL-585, 364 U.S. 19, 26-27 (1960)). The decision to transfer a pending case is committed to the sound discretion of the district court. Jarvis Christian College v. Exxon Corp., 845 F.2d 523, 528 (5th Cir. 1988).
In deciding whether to transfer a case pursuant to 28 U.S.C. § 1404(a), the court should consider: (1) the convenience of the parties, (2) the convenience of material witnesses, (3) the availability of process to compel the presence of unwilling witnesses; (4) the cost of obtaining the presence of witnesses, (5) the relative ease of access to sources of proof; (6) calendar congestion, (7) where the events in issue took place, and (8) the interests of justice in general. See Gundle Lining Constr. Corp. v. Fireman's Fund Ins. Co., 844 F.Supp. 1163, 1165 (S.D. Tex. 1994); St. Cyr v. Greyhound Lines, Inc., 486 F.Supp. 724, 727 (E.D.N.Y. 1980). However, the general rule is that the plaintiff's choice of forum is not to be disturbed unless the balance weighs strongly in the defendant's favor. See Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947); see also Time, Inc. v. Manning, 366 F.2d 690, 698 (5th Cir. 1966).
Based on a review of these factors, the Court concludes that a transfer is not warranted. Northwest's arguments in favor of transferring the case to Minnesota are simply not persuasive because they do not show that a transfer would be in the interest of justice or convenient for the parties or the witnesses. Although Northwest would clearly prefer that the lawsuit occur in Minnesota, the factors all indicate that Texas is as convenient, if not more convenient, a location for the suit as Minnesota. Regardless of whether the suit proceeds in Texas or Minnesota, some parties and witnesses will be inconvenienced. Furthermore, Texas law governs the terms of the parties' contract. Northwest's claims that "there is practically no difference between Minnesota and Texas law on the interpretation of [the contract]" and that it "expects that there will be significant Minnesota law issues in this dispute" are insufficient reasons for denying Sabre its choice of forum. (Mem. of Law in Supp. of Mot. at 13.) Additionally, the Court has already addressed whether Sabre could have suffered damages at the time it filed suit. Because Sabre chose to litigate the matter in Texas and Northwest has not provided persuasive reasons for transferring the action to Minnesota, the Court concludes that Northwest's motion to transfer should be DENIED.
C. Northwest's Motion to Dismiss
For the reasons stated above, the Court finds that Northwest's motion for a dismissal of this case is without merit, and therefore should be DENIED. The Court has jurisdiction and its venue is appropriate in this matter, and Northwest is not entitled to its requested relief.
III. CONCLUSION
Therefore, it is ORDERED that Northwest's Motion to Stay or in the Alternative to Transfer Venue or to Dismiss [doc. # 19-1], is DENIED.