The Florida Bar

Florida Bar Journal

Understanding the First-to-File Rule and its Anticipatory Suit Exception

Featured Article

At the start of a dispute in the federal courts the strategic decision of where to file suit is often a key consideration. Different venues can bring different juror demographics, docket speeds, and judicial dispositions on substantive law. There is also the comfort factor: Most litigators prefer to appear before their nearest court before judges they know. In commercial suits, the decision of where to file is often enmeshed with the decision of whether to file first and assume the posture of plaintiff.

If the federal suit involves two sophisticated parties, each with veteran counsel on speed dial, deciding where to file is a luxury frequently afforded only to the party that files first. Often both parties will desire to be the plaintiff in order to secure their venue of choice. When this situation arises, both parties will find themselves subject to a well-established but lightly discussed procedural rule and its key exception.

When federal judges must decide which of two competing lawsuits filed in separate federal courts is the first one properly brought, they often invoke the first-to-file rule. The rule and its great anticipatory suit exception, which is almost as widely applied as the rule itself, can mean the difference between the success or failure of one of two competing suits. Those litigants who understand the first-to-file rule and its anticipatory suit exception before filing suit will be better prepared to persuade the court that their suit should have priority.

The First-to-File Rule
Courts in the federal system maintain a system of comity among themselves. The particular expression of comity invoked when two parties file substantially the same suit against each other in different federal jurisdictions is the first-to-file rule.1 This rule is not codified. Rather, the first-to-file rule is a general principle of case management in the federal system.2 The thrust of the rule is that, absent compelling circumstances, federal courts will defer to actions previously filed in other federal courts when the parties and issues in the two suits are essentially the same.3

In general, the first-to-file rule gives priority to a prior-filed action over a later-filed action.4 A corollary of the first-to-file rule gives the decision on the propriety of the first-filed suit to the district court presiding over that suit.5 The rule does not operate as a per se rule but instead allows either the first or second court the discretion to dismiss, stay, or transfer a duplicative suit pending before it upon learning of the existence of a similar suit between similar parties filed in another federal court.6 Courts may also enforce the first-to-file rule by enjoining the plaintiff in the disfavored suit from prosecuting his or her case.7 A court’s discretion in applying the rule, however, does not extend beyond the bounds of comity. Indeed, if a second-seized court fails to consider the application of the first-to-file rule it may commit reversible error.8

The rule is an instrument of deference and discretion9 and is not one to be applied rigidly, mechanically, or inflexibly.10 A court applying the rule can be expected to perform a factual analysis of the dispute’s history, up through and including the competing filings, in exercising its discretion in applying the rule.11

As explained below, the key to persuading a court to apply the rule in one’s favor is to keep a careful record of the evidence regarding the pre-filing history of the dispute.

Anticipatory Suit Exception
Federal courts have fashioned equitable exceptions that prevent the application of the first-to-file rule from working an injustice upon the second-filing party.12 One not uncommonly encountered exception,13 or obstacle, to the application of the first-to-file rule is the so-called “anticipatory suit” exception.14 For the litigator who files suit first against an adversary who then also files suit, the anticipatory suit exception is a potentially formidable argument against the first suit’s priority.

Federal courts will apply the anticipatory suit exception when they determine that the criteria for the exception have been met. The exception criteria are much the same among most federal courts; however, they are not weighed uniformly, rendering application of the anticipatory suit exception inconsistent and occasionally unpredictable.

The purpose of the anticipatory suit exception is to discourage procedurally unfair suits filed to frustrate settlement discussions, or to engage in brinkmanship, or to transmute a party from defendant to plaintiff not to pursue a claim or right, but solely to pick the ground they wish to fight on. As stated by the court in Ontel Products, Inc. v. Project Strategies Corp, 899 F. Supp. 1144, 1150 (S.D.N.Y. 1995): “Where a party is prepared to file a lawsuit, but first desires to attempt settlement discussions, that party should not be deprived of the first-filed rule’s benefit simply because its adversary used the resulting delay in filing to proceed with the mirror image of the anticipated suit.”

At least two policy rationales support the anticipatory suit exception to the first-to-file rule. The first rationale is the desire for procedural fairness. This rationale reflects the courts’ concern that a plaintiff should not lose his or her traditional choice of forum because the defendant anticipated the impending suit and preemptively struck by filing suit first in a different court.15

The second policy rationale reflects the value federal courts place on encouraging settlement discussions. This rationale comports with the general federal judicial trend of winnowing out unnecessary lawsuits. The anticipatory suit exception encourages would-be plaintiffs to attempt settlement talks in good faith, even at a stage in the conflict where the complaint has already been drafted, without fear that the settlement efforts will be punished by the filing of an anticipatory suit.16

Applying Anticipatory Suit Exception
The anticipatory suit exception is applied widely but not uniformly. Variation in the exception’s application is not surprising because the discretionary nature of the rule allows a judge to focus on the facts of each case. Two courts reviewing similar facts can reach different conclusions when applying the exception, not because they use different criteria, but because courts in their discretion assign different weights to the criteria, effectively changing the application of the exception from district to district. This variation can occasionally result in differences in the application of the exception between jurisdictions.17

The party promoting the second-filed suit who raises the anticipatory suit exception bears the burden of producing evidence of the anticipatory character of the first-filed suit.18 After this burden of production is satisfied, the reviewing court weighs this evidence and any counter-evidence tending to show that the first-filed suit was not anticipatory, and decides in its discretion whether the exception has overcome the rule.19

When deciding whether the proponent of the anticipatory suit exception has overcome the presumption favoring the first-filed suit, courts inquire into the pre-filing history of the dispute. In inquiring into this history, courts often focus on pre-filing communications between the parties, examining both their content and their surrounding circumstances.

Pre-filing communications

Demand or notice letters and responses thereto are very often the chosen manner of communication between feuding parties at the outset of a dispute. Not surprisingly, these letters (or increasingly, faxes and e-mails) are prime subjects of examination in the anticipatory suit exception analysis and are evidence that courts expect to see. For example, a demand letter stating an intent to sue promptly if some condition is not met, or if some act is not performed or refrained from, can be evidence that the recipient of the letter anticipated the suit threatened therein.20

Demand letters are hardly uniform, however, and frequently reflect the personality of the author as much as the posture of a dispute. Therefore, courts will scrutinize the content of a letter to determine whether it appears to be an expression of a genuine intent to file suit immediately, or merely a veiled threat, an instrument of leverage, or saber-rattling.21 If a court determines that a letter is theatrical, it may also determine that the recipient drew the same conclusion, and did not anticipate an imminent filing. Because courts give demand letters such scrutiny during an anticipatory suit exception analysis, counsel should objectively analyze their pre-filing communications before transmitting them.

Surrounding circumstances

Besides pre-filing communications, the other area of the anticipatory suit analysis is the circumstances surrounding those communications. In this area of inquiry, courts evaluate the competing parties’ acts or omissions to try to determine if the party accused of committing an anticipatory filing really “jumped the gun.”

In other words, a court will look at circumstantial evidence. When a party accused of a breach of contract or infringement files suit immediately after an unsuccessful settlement meeting or negotiation, a court may find in these circumstances that the suit was filed in anticipation of an impending suit by the accuser.22 Alternately, courts may consider an omission, such as a party’s failure to respond to a demand letter or to entreat their accuser to an out-of-court resolution, prior to filing their lawsuit.23

Moreover, the amount of time that elapsed between pre-filing events and the filing of a suit, or between the filing of two suits, can be significant. For instance, a period of six weeks between the filing of the first and second suits can be circumstantial evidence that the second suit was not really imminent, or seriously contemplated, or that it may not have been filed at all except as a response to the first.24

Combinations of evidence

Evidence of two or more factors indicating an anticipatory filing is generally preferred to evidence of one, which, unless remarkably compelling by itself, will not usually overcome the presumption that the first-filed suit takes precedence.25

A combination of factors can create a synergy of evidence, making each factor appear more persuasive when combined than when presented apart as isolated proofs. For example, when an accuser sends a grave demand letter demanding prompt compliance, and then waits months until filing suit after the accused files first, a court may construe the communicative and temporal elements together and conclude that the accuser’s actual intent to sue was questionable.26

The factors discussed above are by no means exhaustive. A successful proponent of the anticipatory suit exception will usually establish a direct threat of imminent litigation against the suspected anticipatory filer. Where no warning or demand letters have been exchanged, and there have been no settlement discussions or negotiations, a party needs a creative argument to establish that the first suit was anticipatory.27

Special factors for declaratory judgment actions

If one of two competing suits is a declaratory judgment action, some federal courts will consider the declaratory nature of the suit as a factor weighing in favor of an anticipatory filing.28 When the first-filed suit seeks declaratory judgment, evidence that the suit was not filed to either minimize the risk of an avoidable loss or to limit the unnecessary accrual of damages can indicate that the first suit was anticipatory.29

Similarly, declaratory judgment actions which for practical purposes raise only what amounts to an affirmative defense can also be considered as suits improperly filed in anticipation of the true plaintiff’s legitimate choice of forum.30 Of course, because federal district courts have the discretion to decline jurisdiction over a properly filed declaratory judgment action under the under the Declaratory Judgment Act, 22 U.S.C. §2201,31 independent of the first-to-file rule, some courts may be more inclined to choose against exercising jurisdiction over a declaratory judgment action that is potentially anticipatory.32 Not surprisingly, and in the discretionary spirit of the rule, other federal decisions note that the rule should be applied without regard to whether the first-filed suit was a declaratory judgment action.33

When federal courts decide the priority of two nearly identical lawsuits, they often invoke the first-to-file rule. This court-made rule, although discretionary, usually favors the first-filed suit. However, the anticipatory suit exception—which is almost as large as the rule—can be used to promote the second-filed suit if the proponent of that suit can establish that the first suit was anticipatory.

Courts examine the pre-filing history of the parties’ dispute in determining whether a first-filed lawsuit is anticipatory. Accordingly, counsel should maintain careful records of pre-filing correspondence in anticipation of proving or disproving the anticipatory suit exception. A federal court will look to both the content of such evidence and its circumstantial context. Counsel should also be aware that additional factors can arise if one of the competing suits is a declaratory judgment action.

The policy rationales underlying the first-to-file rule and the anticipatory suit exception are the idea of procedural fairness and the notion of encouraging settlement discussions before lawsuits are filed. Grounded as they are in these rationales, and because their application involves significant judicial discretion, the first-to-file rule and its anticipatory suit exception are an important pair of procedural concepts within the federal judicial system.

1 See Tingley Systems, Inc. v. Bay State HMO Management, Inc., 833 F. Supp. 882, 887 (M.D. Fla. 1993) (describing the rule as “consistent with the doctrine of federal comity which requires the federal district courts to refrain from interfering with each other’s affairs in order to avoid duplication of judicial resources and conflicting decisions”); see also R.E.F. Golf Co. v. Roberts Metals, Inc., 24 U.S.P.Q. 2d (BNA) 1070 (M.D. Fla. 1992) (recognizing the rule’s origin in the policy of federal courts to avoid rulings which may entrench upon the authority of sister courts).

2 The rule was first applied, albeit without a label, by the U.S. Supreme Court in Smith v. M’Iver, 22 U.S. (9 Wheat) 532, 535 (1824). In Florida’s federal courts, alternate names for the rule have included the first-filed rule and the first court and time rule. See Allstate Ins. Co. v. Clohessy, 9. F. Supp. 2d 1314, 1316 (M.D. Fla. 1998); Bellsouth Advertising & Publ. Corp. v. The Real Color Pages, Inc., 792 F. Supp. 775, 785 (M.D. Fla. 1991). While the rule is rarely invoked in procedural contests between a suit in federal court and a suit in state court, possibly because of the well-developed rules of federal-state comity, the 11th Circuit has opined that the rule can be equally applicable where one of two competing courts is a state court. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Haydu, 675 F.2d 1169, 1174 (11th Cir. 1982).

3 For the rule to come into play, the competing cases usually involve closely related questions, common subject matter, or substantial overlap of issues, but they need not be identical. See Texas Instruments, Inc. v. Micron Semiconductor, Inc., 815 F. Supp. 994, 997 (E.D. Tex. 1993), citing Mann Mfg., Inc. v. Hortex, Inc., 439 F.2d 403, 407 (5th Cir. 1971); See also Fat Possum Records, Ltd. v. Capricorn Records, Inc., 909 F. Supp. 442, 445 (N.D. Miss. 1995) (“a substantial overlap of the content of each suit is sufficient”), but cf. Owens v. Blue Tee Corp., 177 F.R.D. 673, 679 (M.D. Ala. 1998) (finding the rule inapplicable where a prior filed suit involved certain identical claims, but where two of the three plaintiffs in the second suit were not parties to the first suit).

4 Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 218 (2d Cir. 1978). When the first-filed action is a state suit that is later removed to federal court, the filing date with the state court remains the filing date of the first-filed action. Manufacturers Hanover Trust Co. v. Palmer Corp., 798 F. Supp. 161, 166 (S.D.N.Y. 1992). Moreover, a federal court examines the dates of filing, not of service, to determine which party filed first. See Allstate Ins. Co. v. Clohessy, 9 F. Supp. 2d 1314, 1316 (M.D. Fla. 1998); Capricorn Records, 909 F. Supp. at 446; but see Pittman v. Triton Energy Corp., 842 F. Supp. 918, 923 (S.D. Miss. 1994) (finding that a suit served by mail to an expired mailing address did not qualify as the first-filed suit because the party to be served did not have sufficient notice of the suit).

5 See Texas Instruments, Inc. v. Micron Semiconductor, Inc., 815 F. Supp. 994, 999 (E.D. Tex. 1993) (opining that the rule gives the court presiding over the first-filed suit the responsibility to determine which suit should proceed, and that the sister court presiding over the second-filed suit may not usurp the role of the first court); see also Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622, 628 (9th Cir. 1991); but cf. Trippe Mfg. Co. v. American Power Conversion Corp., 46 F.3d 624, 628–29 (7th Cir. 1995) (finding that the discretion with respect to the first-to-file rule allows the court presiding over the first-filed suit to dismiss or stay the first-filed suit, thus allowing the second court to decide between the two competing forums). Typically, the courts that decide to dispense with the rule in a particular situation are the courts presiding over the first-filed action. See, e.g., Supreme Int’l Corp. v. Anheuser-Busch, Inc., 972 F. Supp. 604, 607 (S.D. Fla. 1997).

6 The Seventh Circuit has aptly described the first-to-file rule as the product of “discretion hardened by experience.” Tempco Electric Heater Corp. v. Omega Engineering, Inc., 819 F.2d 746, 749 (7th Cir. 1987). The Tempco court announced that it did not favor the use of a first-to-file rule, but this was after the court had already applied what is now recognized as the anticipatory suit exception under the guise of the court’s statutory discretionary power to dismiss declaratory judgment actions. Id. at 749–50. See, e.g., supra note 31.

7 See Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986). Enjoining the unsuccessful litigant, and not a sister district court, is the typical method of enforcing the rule in the federal system. Cf. Brittingham v. Commn’r, 451 F.2d 315, 318 (5th Cir. 1971) (“Comity dictates that courts of coordinate jurisdiction not review, enjoin, or otherwise interfere with one another’s jurisdiction.”).

8 See West Gulf Maritime Assoc. v. ILA Deep Sea Local 24, 751 F.2d 721, 728–731 (5th Cir. 1985) (finding that a district court having jurisdiction over a second-filed lawsuit abused its discretion and intruded upon the authority of the first-seized district court where the court issued a temporary injunction upon a subject matter which the first-seized court had already accepted jurisdiction to decide).

9 Kerotest Manf. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180 (1952) (in questions of priority between similar proceedings, “[a]n ample degree of discretion, appropriate for disciplined and experienced judges, must be left to the lower courts”); Alltrade, Inc. v. Uniweld Products, Inc., 946 F.2d 622, 629 (9th Cir. 1991) (“The most basic aspect of the first-to-file rule is that it is discretionary.”).

10 Northwest Airlines, Inc. v. American Airlines, Inc., 989 F.2d 1002, 1005 (8th Cir. 1993); Texas Instruments, Inc. v. Micron Semiconductor, Inc., 815 F. Supp. 994, 997 (E.D. Tex. 1993).

11 See Boatmen’s First Nat’l Bank of Kansas City v. KPERS, 57 F.3d 638, 641 (8th Cir. 1995) (in remanding the question of whether the first-to-file rule should apply, instructing the district court to engage in a sufficient factual analysis of the procedural history of the case to support appellate review and to determine if the application of the rule supports its purposes). District court applications of the rule are reviewed under an abuse of discretion standard. See Serco Servs. Co., L.P. v. Kelley Co., Inc., 51 F.3d 1037, 1040 (Fed. Cir. 1995), but see Tempco Electric Heater Co., 819 F.2d 746, 747 (7th Cir. 1987) (finding the de novo standard of review to be the better approach when deciding the appeal of a district court’s discretionary decision to dismiss a suit under the rule).

12 There are three exceptions: balance-of-convenience favoring the second suit, bad faith, and the anticipatory suit exception, sometimes also labeled “forum shopping.” See Plating Resources, Inc. v. UTI Corp., 47 F. Supp. 2d 899, 905 (N.D. Ohio 1999). These exceptions are not ranked in any hierarchy. Instead, each should be considered when available because the anticipatory suit exception does not supersede or foreclose a court’s inquiries into the other exceptions, or into a balance-of-convenience inquiry under 28 U.S.C. §1404(a) under a motion to transfer analysis. See River Road Int’l, L.P. v. Josephthal Lyon & Ross, Inc., 871 F. Supp. 210, 214–15 (S.D.N.Y. 1995). The line of inquiry between whether a suit is anticipatory and whether it has been brought in bad faith can blur, because under both exceptions the court is attempting to determine whether the suspect suit was justified. See IMS Health, Inc. v. Vality Technology, Inc., 59 F. Supp. 2d 454, 463 (E.D. Pa. 1999). One distinction may be the tendency of the anticipatory suit inquiry to focus on the sequence of events leading to the filing of the suspect suit, while the bad faith inquiry can encompass a wider variety of factors, such as evidence of an intent to frustrate settlement efforts. See, e.g., Hanson PLC v. Metro-Goldwyn-Mayer Inc., 932 F. Supp 104, 106 (S.D.N.Y. 1996).

13 More than one district court has noted that the recognized exceptions to the rule frequently arise. See Solo Cup Co. v. Fort James Corp., 1999 U.S. Dist. LEXIS 18586, *4 (99C4724) (N.D. Ill. 1999), citing Hunt Manufacturing Co. v. Fiskars OY AB, 1997 U.S. Dist. LEXIS 15457 (972460) (E.D. Pa. 1997).

14 See Guthy-Renker Fitness, L.L.C. v. Icon Health & Fitness, Inc., 179 F.R.D. 264, 271 (C.D. Cal. 1998) (suggesting that an exception to the first-to-file rule disfavors deferment to suits deemed “anticipatory”; the exception is intended to eliminate the “race to the courthouse door in an attempt to preempt a later suit in another forum”), citing Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599, 602 n.3 (5th Cir. 1983).

15 British Telecomm. plc v. McDonnell Douglas Corp., 1993 U.S. Dist. LEXIS 6345, *8 (C930677) (N.D. Cal. 1993).

16 Columbia Pictures Indus., Inc. v. Schneider, 435 F. Supp. 742, 747–48 (S.D.N.Y. 1977).

17 For example, when examining the lapse of time between the first and second filings for purposes of determining which suit was filed first, some courts have held that when two suits are filed on the same day, the rule is inapplicable and the time of day of the filings is immaterial, being too small a concern for the court and of questionable evidentiary value. See Ontel Prods., Inc. v. Project Strategies Corp., 899 F. Supp. 1144, 1153 (S.D.N.Y. 1995); Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 219 (2d Cir. 1978); cf. New England Machinery, Inc. v. Conagra Pet Products Co., 827 F.Supp. 732, 733 (M.D. Fla. 1993) (court was unable to determine the priority of filing when the competing parties filed their suits on the same day). Other courts examine the time of day of the filings and declare the earlier filer to be the first, in situations where either of two parties could assume the mantle of the plaintiff. See Plating Resources, Inc. v. UTI Corp., 47 F. Supp. 2d 899, 904 (N.D. Ohio 1999).

18 See Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622, 628 (9th Cir. 1991).

19 See id.

20 See Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 217–19 (2d Cir. 1978).

21 Guthy-Renker Fitness, L.L.C. v. Icon Health & Fitness, Inc., 179 F.R.D. 264, 270–71 (C.D.Cal. 1998).

22 See Sweetheart Plastics, Inc. v. Illinois Tool Works, Inc., 267 F. Supp. 938, 941-42 (S.D.N.Y. 1967).

23 909 Corp. v. Village of Bolingbrook Police Pension Fund, 741 F. Supp. 1290, 1293 (S.D. Tex. 1990).

24 Northwest Airlines, Inc. v. American Airlines, Inc., 989 F.2d 1002, 1007 (8th Cir. 1993).

25 Abbott Labs., Inc. v. Mead Johnson & Co., 1998 U.S. Dist. LEXIS 12317, *12-13 (C2980157) (S.D. Ohio 1998).

26 British Telecomm. plc. v. McDonnell Douglas Corp., 1993 U.S. Dist. LEXIS 6345, *9-10 (C930677) (N.D. Cal. 1993).

27 800-Flowers, Inc. v. Intercontinental Florist, Inc., 860 F. Supp. 128, 132–33 (S.D.N.Y. 1994).

28 See supra notes 29 and 30. A mutation of the anticipatory suit exception has been applied to dismiss a declaratory judgment action filed in a federal district court in an attempt to preempt a federal criminal prosecution. See Christoforu v. U.S., 842 F. Supp. 1453, 1455 (S.D. Fla. 1994); see also Ven-Fuel, Inc. v. Dept. of Treas., 673 F.2d 1194, 1195 (11th Cir. 1982) (finding unacceptable a declaratory judgment action brought in anticipation of a Treasury Department civil suit intended to collect a penalty imposed by a prior criminal conviction).

29 Koch Engineering Co., Inc. v. Monsanto Co., 621 F. Supp. 1204, 1206–07 (E.D. Mo. 1985).

30 See BASF Corp. v. Symington, 50 F.3d 555, 559 (8th Cir. 1995).

31 See Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995); Minnesota Mining And Mfg. Co. v. Norton Co., 929 F.2d 670, 672 (Fed. Cir. 1991).

32 Even without discrete grounds for dismissal of a declaratory judgment action under the act, courts that tend to favor actions for damages over declaratory judgment actions may be affected by the “double dose” of discretion they enjoy when one of two competing suits in an anticipatory suit exception analysis is a declaratory judgment action.

33 Abbott Labs., Inc. v. Mead Johnson & Co., 1998 U.S. Dist. LEXIS 12317, *9 (C2980157) (S.D. Ohio 1998) (opining that the considerations affecting transfer or dismissal in favor of another forum do not change simply because the first-filed action is a declaratory action), citing Genentech, Inc. v. Eli Lilly And Co., 998 F.2d 931 (Fed. Cir. 1993); see also 800-Flowers, Inc. v. Intercontinental Florist, Inc., 860 F. Supp. 128, 132 (S.D.N.Y. 1994).

Michael Cavendishpractices in the commercial litigation department of McGuire Woods, LLP, Jacksonville. He attended Florida State University (B.S.) and the University of Florida (M.A., J.D.) and is a past contributor to the Bar Journal.