Free MEMORANDUM in Support - District Court of Delaware - Delaware

Case 1:04-cv—O1339-SLR Document 41-11 Filed 06/O3/2005 Page 1 gig? 2 OH
EXHIBIT J
Westlaw
Not Reported in F.Supp. Page l
1997 WL 699328 (D.Del.)
(Cite as: 1997 WL 699328 (D.Del.))
processes. (D.I. 10, Ex. B at 1[ 2) G-P is a Georgia
Motions, Pleadings and Filings corporation which manufactures paper and paper
products in numerous plants located throughout the
Only the Westlaw citation is currently available. United States.
As of May 30, 1995, ESI and G-P entered into a
United States District Court, D. Delaware. contract, entitled Computer Software License and
ENVIROMETRICS SOFTWARE, INC., Plaintiff, Services Agreement (the "License Agreement"),
v. whereby ESI licensed use of its "P1antWare"
GEORGLA-PACIFIC CORPORATION, Defendant. software to G-P. The License Agreement expressly
No. CIV. A. 97-243-SLR. set forth numerous warranties respecting PlantWare
(including performance and documentation
Nov. 4, 1997. warranties), as well as functional enhancements.
M. Duncan Grant, Esquire, Daniel V. Folt, Esquire, (D.I.7, 1] 3). G-P paid $1,000,000 to ESI for
and Tara L. Lattomus, Esquire, of Pepper, Hamilton PlantWare and over $400,000 for "consulting"
& Scheetz LLP, Wilmington, Delaware, for plaintiff. services in connection with PlantWare. (D.I.7, {I 4)
Thomas C. Grimm, Esquire, and Karen L. Pascale, ESI and G-P also entered into a separate agreement
Esquire, of Morris, Nichols, Arsht & Tunnel], entitled Program and Documentation Maintenance
Wilmington, Delaware, for defendant. Agreement (the "Maintenance Agreement") as of
May 30, 1995, in which ESI agreed to provide G-P
MEMORANDUM OPINION with certain specified maintenance services for the
PlantWare software. (D.I. 10, Ex. B at 11 7)
ROBINSON, District J. Pursuant to the terms of the Maintenance
Agreement, G-P owed ESI $20,000 as of July 15,
INTRODUCTION 1996, and an additional $20,000 as of December
15, 1996, for services provided between June 15,
*1 Pending before the court is a motion filed by 1996 and June 15, 1997. (D.I. 10, Ex. B atil 8)
plaintiff EnviroMetrics Software, Inc. ("ESI") to
enjoin a related case pending in the United States G-P asserts that during the two years following
District Court for the Northern District of Georgia. execution of the License Agreement, it reported to
Also pending is a motion to dismiss the instant ESI "more than 100 deficiencies, defects and bugs
litigation filed by defendant Georgia-Pacific with P1antWare..., many of which were
Corporation ("G-P"). The underlying facts to the fundamental, and irremedial, flaws in the software,
parties' dispute are relatively straightforward. and many others of which were not corrected within
· the time period specified by the License
ESI is a Delaware corporation with its principal Agreement." (D.I.7, 1] 5) ESI relatedly asserts that
place of business in New Castle, Delaware. (D.I. when G-P completed payment of the $1,000,000
10, Ex. B at 1] 3) ESI is in the business of writing _ under the License Agreement on August 14, 1996,
computer software that may be used by companies G-P expressly "confrm[ed to ESI] that it accepted
with industrial operations to monitor and to provide the PlantWare software as satisfactory at the
reporting on air, water, and solid waste emissions conclusion of the acceptance period provided for in
that are being generated by their industrial the Licensing Agreement." (D.I. 10, Ex. B at1]10)
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Case 1 :04-cv-01339-SLR Document 41 -1 1 Filed 06/O3/2005 Page Zbfgfi 3 Of5
Not Reported in F.Supp. Page 2
1997 WL 699328 (D.Del.)
(Cite as: 1997 WL 699328 (D.Del.)) ‘
The parties are in agreement that, at a meeting held due and owing under the Maintenance
on April 22, 1997, G-P demanded reimbursement of Agreement.
the entire $1,000,000 it had already paid under the
Licensing Agreement, contending that the FN3. Both the License Agreement and the
PlantWare software failed to meet warranty Maintenance Agreement provide that if
specifications. (D.I. 7, 11 7; D.I. 10, Ex. B at 111| either G-P or ESI commences litigation to
11-13) This meeting was followed by a letter to Mr. enforce its rights under the agreements,
James E. Bostic, Jr., a Senior Vice President at G-P, "the successful party in any such suit or
dated April 28, 1997 from David N. Hommrich, action shall be entitled to recover from the
President of ESI, whereby ESI offered a " 'no-risk' other such sum as the court may adjudge
set of services" by which ESI was to help G-P reasonable as an attomey's fee in such suit
successfully implement PlantWare at two or action and in any appeals therefrom."
appropriate facilities. Mr. Hommrich concluded (D.I. 7, Ex. Aat11 13.10)
his letter with the following: "I look forward to
hearing from you, and am hopeful that we can work On June 25, 1997, G-P filed an action in Georgia
with you in the near future." (D.I.15, Ex. A) state court against both ESI and ESI's President,
David M. Hommrich, alleging breach of the License
*2 Mr. Bostic received Mr. Hommrich's letter on Agreement as well as fraud and negligent
May 2, 1997. Mr. Bostic and Mr. Hommrich had a misrepresentations in connection with G-P's
follow-up conversation on May 12, 1997, as purchase of PlantWare. (D.I.10, Ex. A) Defendants
confirmed by a letter dated May 14, 1997 from Mr. ESI and Hommrich have removed the state court
Honmrrich. Mr. Hommrich ended this letter as action to the United States District Court for the
follows: "I‘ll be calling you today to discuss this Northern District of Georgia.
matter. There are people here, Jim, who are
prepared for this challenge and want to work very This court has jurisdiction pursuant to 28 U.S.C. §
hard for you. I hope you'll take us up on this 1332. The question at issue is whether the court
offer." (D.I.15, 1111 7-10, Ex. B) During the should exercise such jurisdiction under the
course of these discussions and without advance Declaratory Judgment Act, 28 U.S.C. § 2201(a).
warning to G-P, on May 7, 1997, ESI filed a
complaint in this court against G-P. [FNI] Count I DISCUSSION
of the complaint seeks a declaration under 28
U.S.C. § 2201 et seq. that ESI has not breached the Plaintiff ESI contends that the court must exercise
License Agreement. Count II of the complaint is a its jurisdiction under the "first-filed" rule. As
$40,000 breach of contract claim under the explained by the Third Circuit in E.E.O. C. v.
Maintenance Agreement. [FN2] Count III is a claim University 0f Pennsylvania, 850 F.2d 969, 976-77
for attomeys' fees. [FN3] (D.I.1) Not until May 16, (3d Cir.1988),
1997, when the complaint was served on G-P's [a]lthough exceptions to the [first-filed] rule are
registered agent in Georgia, did G-P understand that . rare, courts have consistently recognized that the
the parties' negotiations had been terminated. (D.I. first-filed rule "is not a rigid or inflexible rule to
7, 1111 9-10; D.I. 15, Exs. C, D) be mechanically applied .... " Bad faith and
forum shopping have always been regarded as
FN1. Mr. Hommrich averred in this proper bases for departing from the rule ....
litigation that, "[a]t the time [ [ESI] filed Similarly, courts have rejected the rule when the
suit, there were no ongoing settlement second-filed action had developed further than
negotiations." (D.I. 10, Ex. B at 11 15) the initial suit... and when the fust-filing party
The record indicates otherwise. instituted suit in one forum in anticipation of the
opposing party's imminent suit in another, less
FN2. G-P has refused to pay the $40,000 favorable, forum ....
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Case 1 :04-cv-01339-SLR Document 41 -1 1 Filed 06/O3/2005 Page 3 BFEF 4 CICS
Not Reported in F.Supp. Page 3
1997 WL 699328 (D.Del.)
(Cite as: 1997 WL 699328 (D.Del.))
The letter and spirit of the first-filed rule, Miller, § 2758, at 631- 632.
therefore, are grounded on equitable principles. Gribin, 793 F.Supp. at 235. Indeed, the Third
See Columbia Plaza Corp. v. Security Nat. Bank, Circuit has instructed courts to look critically at
525 F.2d 620, 621 (D.C.Cir.l975); cf. Kerotest "any attempt to circumvent the laudable purposes
Mfg. Co. v. C—O—Two Co., 342 U.S. 180, 183-84, of the Act, and [to] seek to prevent the use of the
72 S.Ct. 219, 221-22, 96 L.Ed. 200 (1952) (under declaratory action as a method of procedural
Federal Declaratory Judgment Act, factors fencing, or as a means to provide another forum
relevant to wise judicial administration between in a race for res judicata." 6A J. Moore, J. Lucas
coordinate federal courts "are equitable in & G. Girtheer, Jr., Moore’s Federal Practice 1]
nature"). To be sure, the rule's primary purpose 57.08[5], at 57-50 (2d ed.1987) (footnote
is to avoid burdening the federal judiciary and to omitted).
prevent the judicial embarrassment of conflicting Terra Nova Ins. Co., Ltd. v. 900 Bar, Inc., 887
judgments .... Yet, fundamental fairness dictates F.2d 1213, 1225 (3d Cir.1989); see also Nat’l
the need for "fashioning a flexible response to the Union Fire Ins. C0. ‘ of Pittsburgh v.
issue ofconcurrentjurisdiction." Freeport—McMoRan Inc., 767 F.Supp. 568, 573
*3 (citations omitted) (emphasis added). (D.Del.1991). Venerable Third Circuit precedent
specifically has directed that "it is not one of the
Defendant G-P maintains that plaintiff at bar purposes of the declaratory judgment acts to enable
instituted suit first in Delaware "in anticipation of a prospective defendant to obtain a declaration of
the opposing party's [i.e., G-P's] imminent suit in non-liability .... " Sun Oil Co. v. Transcontinental
another, less favorable, forum," id. at 976, in this Gas Pqme Line Corp., 108 F.Supp. 280, 282
case Georgia state court. Not only do these (E.D.Pa.1953). The "race to the courthouse" is
circumstances constitute a recognized exception to particularly inappropriate under circumstances
the first-filed rule, but constitute as well a where " 'the party entitled to bring a coercive action
framework for analyzing the exercise of the COUITIS [has not] fail[ed] or delay[ed] in bringing it." '
discretion under the Declaratory Judgment Act, 28 Gribin, 793 F.Supp. at 236 (quoting State Farm
U.S .C. §2201(a), which provides: Fire & Cas. Co. v. Taylor, 118 F.R.D. 426, 429
In a case of actual controversy within its (M.D.N.C.l988) (emphasis in original)), and where
jurisdiction any court of the United States, (aside from potential litigation costs) there is no
upon the filing of an appropriate pleading, may "accruing damage," Crown Cork & Seal Co., Inc. v.
declare the rights and other legal relations of any Borden, Inc., 779 F.Supp. 33, 36 (E.D.Pa.l991);
interested party seeking such declaration, whether see also, ACand.Sj Inc. v. Aetna Cas. & Sur. Co.,
or not further relief is or could be sought .... 666 F.2d 819, 823 (3d Cir.1981) (because
Declaratory relief is appropriately awarded when it "declaratory judgment relief was intended to avoid
will " ‘serve a useful purpose in clarifying the legal the 'accrual of avoidable damages to one not
relations in issue or terminate and afford relief from certain of his rights," ' it is proper to exercise
the uncertainty, insecurity, and controversy giving jurisdiction where judgment would "affect present
rise to the proceeding." ' Gribin v. Hammer behavior, have present consequences and resolve a
Galleries, 793 F.Supp. 233, 234 (C.D.Cal.1992) present dispute.").
(quoting Tierney v. Schweiker, 718 F.2d 449, 457
(D.C.Cir.1983)). It is generally recognized, *4 The record at bar demonstrates that defendant
however, that G-P was dissatisfied with the performance of
"[t]he Declaratory Judgment Act was not plaintiff ESI's PlantWare software and initiated
intended to enable a party to obtain a change of discussions with ESI to resolve outstanding
tribunal from a state to federal court, and it is not problems and complaints. It is apparent under the
the function of the federal declaratory action circumstances presented that defendant G-P is "the
merely to anticipate a defense that otherwise party entitled to bring a coercive action." The
could be presented in a state action." Wright & parties had been discussing G-P's complaints for
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Case 1 :04-cv-01339-SLR Document 41 -1 1 Filed 06/O3/2005 Page 4 Biigfl 5 0f5
Not Reported in F.Supp. Page 4
1997 WL 699328 (D.Del.)
(Cite as: 1997 WL 699328 (D.Del.))
only a matter of days (and were still discussing For the reasons stated, plaintiffs motion to enjoin
possible resolutions) when plaintiff ESI filed this is denied and defendant's motion to dismiss is
lawsuit. Such a time frame from notice of breach grantedinpart and denied in part.
to lawsuit surely is insufficient to generate the
magnitude of uncertainty and insecurity typically Anorder shall issue.
associated with declaratory judgment actions,
especially where (as here) the conduct at issue was 1997 WL 699328 (D.Del.)
already complete and the damages record thus
established. Plaintiff ESI's declaratory judgment Motions, Pleadings and Filings (Back to top)
action clearly was filed in anticipation of a coercive
action by G-P and, as such, constitutes an • l:97CV00243 (Docket)
inappropriate use of the declaratory judgment (May. 07, 1997)
remedy and an exception to the first-filed rule. The
court declines to exercise its discretionary END OF DOCUMENT
jurisdiction over Cotmt I under these circumstances.
[FN4]
FN4. These circumstances include as well
the fact that the Georgia action is directed
at the President of ESI, David M.
Hommrich, an individual who is not a
party to the instant lawsuit.
With respect to Counts II and HI, plaintiff has
carried its burden of persuading the court that the
remaining amounts in controversy are sufficient to
satisiy the $75,000 jurisdictional prerequisites of 28
U.S.C. § 1332. The question rests on Count IH,
which seeks attomeys' fees under the License and
Maintenance Agreements. Although the court is
speculating to some extent in fmding jurisdiction, it
cannot say to a "legal certainty that the plaintiff
carmot recover more than [$75,000]" under the
circumstances presented. Suber v. Chrysler Corp.,
104 F.3d 578, 583 (3d Cir.l997) (citing St. Paul
Mercury Indemnity C0. v. Red Cab C0., 303 U.S.
283, 288, 58 S.Ct. 586, 82 L.Ed. 845 (1938)).
Having so concluded, the court recognizes that it is
inefficient to have both this court and the Georgia
court handling different pieces of the same dispute.
Therefore, the court will order the parties to submit
their respective positions on transferring this action
to the Northem District of Georgia pursuant to 28
U.S.C. § 1404.
CONCLUSION
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