• March 23, 2012

In business litigation, particularly in litigation between businesses that have had an on-going relationship, like more than a few couples, there is a recognition that divorce is traumatic and divorce lawyers expensive.  There is, therefore, a build-up, pre-filing skirmishing, sometimes for weeks, months, or years before a complaint is filed in court.

But there comes a time when one or both sides concludes that only litigation will resolve the problem and then there can a “race to the courthouse” to pick one’s favored forum, one’s home field advantage.

Litigators need to be careful of what they say in their pre-suit jousting because anything they say can and will be used against them, if possible, down the road.  

(The race to the courthouse, incidentally, is sometimes quite literal.  Here is a case where complaints were filed on the very same day in Mississippi and Iowa between the same parties.)

A complaint filed this week in federal court in Minnesota is a curious twist on the race to the courthouse because the plaintiff seeks to get into federal court for a business dispute based in part on an allegation that there is federal jurisdiction because of what the adversary said in letters as one charge in a litany of allegations of business wrong-doing.  At one point, apparently, it was alleged that the plaintiff had violated federal law.  But the “parade of horribles” in the letter-writing exchange were, for the most part, were allegations of violation of state contract law.  Will a lawyer’s name-calling convert a breach of contract lawsuit into a federal suit?

Sixty years ago the U.S. Supreme Court cautioned:

If the cause of action, which the declaratory defendant threatens to assert, does not itself involve a claim under federal law, it is doubtful if a federal court may entertain an action for a declaratory judgment establishing a defense to that claim. This is dubious even though the declaratory complaint sets forth a claim of federal right, if that right is in reality in the nature of a defense to a threatened cause of action.
Federal courts will not seize litigations from state courts merely because one, normally a defendant, goes to federal court to begin his federal-law defense before the state court begins the case under state law.

Pub. Serv. Comm’n of Utah v. Wycoff Co., Inc., 344 U.S. 237, 248, 73 S. Ct. 236, 242-43, 97 L. Ed. 291 (1952).  

Who knows?  Maybe the West Virginia declaratory judgment defendant (“J&M”) will be delighted to litigate before U.S. District Court Judge Susan Richard Nelson (D. Minn.).  On the other hand, perhaps J&M has already filed its own lawsuit in a preferred forum and will respond to the complaint with a motion to dismiss.

Then we would see whether J&M would be held to have created a “federal question” by suggesting that declaratory judgment plaintiff Hearth & Home violated the Robinson Patman Act.

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