Unpublished Disposition, 924 F.2d 1062 (9th Cir. 1989)Annotate this Case
United States Court of Appeals, Ninth Circuit.
Before ALARCON and WILLIAM A. NORRIS, Circuit Judges, and GEORGE,* District Judge.
Com Systems, Inc. sought an injunction from the United States District Court for the Central District of California to prevent an action filed by Albert Nahmad and Watsco, Inc. (Watsco) in the United States District Court for the Southern District of Florida from proceeding. The district court denied the injunction. Com Systems now appeals.
On July 28, 1988, Com Systems filed suit against Watsco, and Albert Nahmad, its chief executive, in the Superior Court of the State of California for the County of Los Angeles. Com Systems alleged causes of action for intentional and negligent misrepresentation, rescission, breach of fiduciary duty, breach of the covenant of good faith and fair dealing, breach of contract, and declaratory relief, all arising from a dispute over an agreement in which Watsco would provide financing in return for Com Systems securities. On November 17, 1988, Com Systems amended its complaint to drop the causes of action for intentional misrepresentation and breach of the covenant of good faith and fair dealing. On December 15, 1988, Watsco removed the action to the United States District Court for the Central District of California. The case was assigned docket number CV-88-7392-CBM
Com Systems voluntarily dismissed case No. CV-88-7392-CBM pursuant to Fed. R. Civ. P. 41(a) (1) (i). The voluntary dismissal was filed with the Clerk of the Central District of California on January 19, 1989, and entered on January 23, 1989. Com Systems did not indicate its intention to refile at that time, although it later asserted that it had filed the dismissal "to avoid what appeared to be the consequences of [the trial judge's] order to show cause or remand."
Com Systems refiled a substantially similar complaint at 1:15 p.m. PST on January 17, 1989 (the California action). That case was assigned docket number CV-89-0292-CBM. Some four hours earlier, at 11:51 a.m. EST on January 17, 1989, Watsco filed suit against Com Systems in the United States District Court for the Southern District of Florida (the Florida action). The Florida action, assigned docket number CIV-89-0203-Ryskamp, alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1951-1966 (1982 and Supp.V 1987), arising from the securities transactions that formed the basis of the California action.
On February 9, 1989, Watsco filed a motion to dismiss the California action or, in the alternative, to transfer it to the United States District Court for the Southern District of Florida. On March 14, 1989, Com Systems filed a motion to enjoin the prosecution of the Florida action, contending that the California action was first to be filed and that the Florida action was therefore a mandatory counterclaim pursuant to Fed. R. Civ. P. 13(a). On July 25, 1989, the district court denied Watsco's motion to dismiss and Com Systems' motion to enjoin prosecution, but granted Watsco's motion to transfer pursuant to 28 U.S.C. § 1404(a). The district court found that the "transfer of this action would be in the interests of both the defendants and a majority of the witnesses in this case. After the district court denied Com Systems' motion for reconsideration, case No. CV-89-0292-CBM was transferred to the Southern District of Florida on October 30, 1989. Com Systems timely appeals.
When "an act or event sought to be enjoined has been performed or has occurred, an appeal from the denial of the injunction will be dismissed as moot." In re Combined Metals Reduction Co., 557 F.2d 179, 189 (9th Cir. 1977). Watsco asserts that this appeal is moot because the district court's transfer of venue pursuant to 28 U.S.C. § 1404(a) is a nonappealable interlocutory order, which has not been stayed during the pendency of the appeal. As a result, Watsco argues, this court cannot fashion an effective remedy.
United States Aluminum Corp. v. Kawneer Co., Inc., 694 F.2d 193, 195 (9th Cir. 1982), involved similar facts. Kawneer filed a federal patent infringement action against Aluminum Corporation (Aluminum) in Georgia. Id. at 194. Aluminum subsequently filed a federal action for declaratory judgment in California. Id. Kawneer moved for a transfer to Georgia pursuant to Sec. 1404(a). Aluminum requested an injunction to restrain Kawneer from proceeding with any patent action against its customers. Id. The district court denied the injunction and granted the transfer. Id.
Before this court, Kawneer argued that we lacked jurisdiction to review the transfer order. Id. at 195. We held that while a party cannot appeal a transfer order under Sec. 1292, " [t]he court of appeals can review the 'entire venue question [including a transfer order] as ancillary to the appeal from the disposition of a request for an injunction against a suit in another district.' " Id. (quoting Emerson Electric Co. v. Black and Decker Manuf. Co., 606 F.2d 234, 237 (8th Cir. 1979)).
In Lou v. Belzberg, 834 F.2d 730 (9th Cir. 1987), cert. denied, 485 U.S. 993 (1988), we determined that we had jurisdiction to consider the validity of a transfer pursuant to Sec. 1404(a) in reviewing the denial of a preliminary injunction. Id. at 733. We concluded that our jurisdiction attaches if the notice of appeal is filed before the transferee court dockets the case. Id. In the instant matter, Com Systems filed its notice of appeal on the injunction issue before the case was docketed in Florida. Accordingly, this appeal is not moot.
The contract between Com Systems and Watsco contains a forum selection clause. This clause states that
With respect to any legal action or proceeding arising under this Agreement or any other note ... Debtor to the fullest extent permitted by law: (a) submits to the jurisdiction of the state and federal courts in the State of Florida; (b) agrees that the venue of any such action or proceeding may be laid in Dade County (in addition to any county in which any of the Collateral is located)....
Watsco contends, as it did before the district court, that this forum selection clause dictates that the venue for this action lies exclusively in Florida.
A forum selection clause is " 'prima facie valid and should be enforced unless enforcement is shown by the resisting party to be "unreasonable" under the circumstances.' " Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762, 763 (9th Cir. 1989) (quoting M/S Bremen v. Zapata Offshore Co., 407 U.S. 1, 10 (1972)). Com Systems makes no allegations of fraud or undue influence underlying the forum selection clause that would make its enforcement unreasonable. Id. As a result, the sole issue before us is whether the clause is mandatory or permissive. Id.
When "venue is specified with mandatory language the clause will be enforced." Id. at 764. However, " [w]hen only jurisdiction is specified the clause will generally not be enforced without some further language indicating the parties' intent to make jurisdiction exclusive." Id. The clause at issue here uses the permissive, rather than mandatory, language "may." Compare id. (clause stating that " [v]enue of any action brought hereunder shall be deemed to be in ... Virginia" was mandatory) with Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77 (9th Cir. 1987) (clause providing that " [t]he courts of California, County of Orange, shall have jurisdiction over the parties" did not provide for exclusive jurisdiction and therefore was permissive). Because the language used by the parties is expressly permissive, the forum selection clause does not mandate venue in Florida.
C. Denial of the Request for a Preliminary Injunction
Com Systems asserts that the California action (case No. CV-89-0292-CBM) is really just a continuation of case No. CV-88-7392-CBM. Thus, Com Systems maintains the district court should have enjoined the parallel Florida action from proceeding under the "first to file" rule.
"When a district court has jurisdiction over all parties involved, it may enjoin later filed actions." Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986); see also Asset Allocation & Management Co. v. Western Employers Ins. Co., 892 F.2d 566, 572 (7th Cir. 1989) (" [T]here is overwhelming case authority that the first court has power, independently of the equitable doctrine that bars vexatious litigation, to enjoin the defendant from bringing a separate suit against the plaintiff in another court, thereby forcing the defendant either to litigate his claim as a counterclaim or to abandon it"). However, " ' [t]his "first to file" rule is not a rigid or inflexible rule to be mechanically applied, but rather is to be applied with a view to the dictates of sound judicial administration.' " Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d at 844 (quoting Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93, 95 (9th Cir. 1982)). Moreover, "the decision to enjoin rests in the sound discretion of the trial judge, and will rarely be overturned." Del Mar Avionics v. Quinton Instruments Co., 645 F.2d 832, 836 (9th Cir. 1981).
1. The Effect of Com Systems' Voluntary Dismissal
Rule 41(a) (1) (i) provides that "an action may be dismissed by the plaintiff without order of the court (i) by filing a notice of dismissal at any time before service by the adverse party of an answer or of a motion for summary judgment...." Fed. R. Civ. P. 41(a) (1) (i). Under this rule, " [a] voluntary dismissal by a plaintiff ... automatically terminates the action upon the filing of the dismissal with the clerk." Hamilton v. Shearson-Lehman American Express, Inc., 813 F.2d 1532, 1534-35 (9th Cir. 1987). " [N]o action by the court is required...." Id. at 1534. In this case, no answer or motion for summary judgment had been filed when Com Systems filed its voluntary dismissal. As a result, the dismissal was effective on January 19, 1989.
A voluntary dismissal without prejudice "leaves the situation the same as if the suit had never been brought in the first place." Humphreys v. United States, 272 F.2d 411, 412 (9th Cir. 1959) (footnote omitted). "After a dismissal the action is no longer pending in the court and no further proceedings in the action are proper." 9 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2367 (1971) (footnote omitted). Thus, when Com Systems dismissed case No. CV-88-7392-CBM, that action terminated and had no effect on the priority of filing of the two actions at issue in this case. As a result, the district court did not err by concluding that Case No. CV-89-0292 was filed after the filing of the Florida action.
Com Systems also asserts that the balance of contacts and conveniences favored granting an injunction in this case. " [N]ormally the forum non conveniens argument should be addressed to the court in the first-filed action. Apprehension that the first court would fail to appropriately consider the convenience of the parties and the witnesses should not be a matter for our consideration." Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93, 96 (9th Cir. 1982). As the Supreme Court stated in Kerotest Manufacturing Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180 (1952):
Such apprehension implies a lack of discipline and of disinterestedness on the part of the lower courts, hardly a worthy or wise basis for fashioning rules of procedure. It reflects an attitude against which we were warned by Mr. Justice Holmes, speaking for the whole Court, likewise in regard to a question of procedure: "Universal distrust creates universal incompetence." Graham v. United States, 231 U.S. 474, 480. If in a rare instance a district judge abuses the discretionary authority the want of which precludes an effective, independent judiciary, there is always the opportunity for corrective review by a Court of Appeals and ultimately by this Court.
Id. at 185.
Com Systems presented its forum non conveniens argument to the United States District Court for the District of Southern Florida. That court denied Com Systems' motion to transfer the Florida action on August 21, 1989, reasoning that "it does not appear that any further convenience will be achieved by transferring the case to California. A significant number of witnesses reside in this district, many of the transactions were conducted in Florida, therefore much of the evidence and litigation will revolve around this district." Appellee's Br., App.A, at 2. Com Systems may seek review of this order before the United States Court of Appeals for the Fifth Circuit.
Com Systems' two final arguments lack merit. First, although Com Systems argues that more progress has been made in the California action, this activity concerned case No. CV-88-7392-CBM, which Com Systems voluntarily dismissed. Second, although Com Systems contends that Watsco is guilty of bad faith and forum shopping by filing the action in Florida, the record does not support these conclusions. Com Systems argues that by appearing without contesting personal jurisdiction in the Superior Court and removing to the Central District of California, Watsco has somehow engaged in "blatant efforts at forum-shopping." Appellant's Opening Br. at 21. This argument is curious since it was Com Systems that chose the California forum. In the absence of any facts showing improper nature, Watsco's failure to contest personal jurisdiction would appear to be no more than implied admission that Watsco has sufficient contacts with California to satisfy the requirements of personal jurisdiction in the forum selected by Com Systems.
The district court did not abuse its discretion by denying Com Systems' request for a preliminary injunction.