Opinion
No. 1:01CV180-D-D
January 31, 2002
OPINION GRANTING MOTION TO TRANSFER
Presently before the court is the Defendants' motion to transfer. Upon due consideration and pursuant to the "first-to-file" rule, the court finds that the motion should be granted, and this cause transferred to the United States District Court for the Southern District of Mississippi.
Also pending before the court is the Plaintiffs' motion for summary judgment. Upon due consideration, the court finds that the motion should be denied.
A. Factual and Procedural Background
The Defendants obtained or co-signed for consumer loans from City Finance of Mississippi, Inc. These loans included the purchase of credit-related insurance from the Plaintiffs American Security Insurance Company and Union Security Life Insurance Company. In connection with the loan transactions, the Defendants each signed a document entitled "Alternative Dispute Resolution Agreement," which is a standard arbitration agreement. These Agreements contain a mandatory arbitration provision, requiring that all claims or disputes between the parties in connection with the loan transactions be submitted to binding arbitration.
Washington Mutual Finance Group, LLC, is the successor in interest to City Finance of Mississippi, Inc. by virtue of a merger between the two companies.
Despite the Agreements' mandatory arbitration provision, the Defendants commenced a civil action in the Circuit Court of Hinds County, Mississippi, seeking monetary damages for, inter alia, fraudulent misrepresentation in connection with the loan and insurance transactions. The Plaintiffs subsequently removed the Defendants' state court action to the United States District Court for the Southern District of Mississippi, where it is presently pending. In the meantime, and subsequent to the filing of the removed state court action, the Plaintiffs filed a petition in this court, pursuant to Section Four of the Federal Arbitration Act, seeking an order compelling the Defendants to submit all pending claims to arbitration. The Defendants now seek to have this cause transferred to the Southern District of Mississippi pursuant to the first-to-file rule.
B. Discussion
The Fifth Circuit adheres to the general rule, known as the first-to-file rule, that when related cases are pending before two federal courts, the court in which the case was last filed may refuse to hear it if the issues raised by the cases substantially overlap. Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 603 (5th Cir. 1999). Importantly, the first-to-file rule does not require that the issues involved in the two cases be identical; rather, the crucial inquiry is whether the issues involved in the two cases "substantially overlap." Save Power Ltd. v. Syntek Fin. Corp., 121 F.3d 947, 950 (5th Cir. 1997); see Mann Mfg., Inc. v. Hortex, Inc., 439 F.2d 403, 408 (5th Cir. 1971) ("[R]egardless of whether or not the suits here are identical, if they overlap on the substantive issues, the cases would be required to be consolidated in . . . the jurisdiction first seized of the issues.").
Courts use the first-to-file rule to maximize judicial economy and minimize inconsistencies by refusing to hear a case raising issues that might substantially duplicate the issues raised by a case filed previously and still pending in another federal court. Cadle, 174 F.3d at 604. In determining whether to apply the first-to-file rule, the court must also determine whether sufficiently compelling circumstances exist to avoid the rule's application. Mann Mfg., 439 F.2d at 407; Igloo Prods. Corp. v. The Mounties, Inc., 735 F. Supp. 214, 217 (S.D.Tex. 1990).
Here, the Defendants filed the suit pending in the Southern District of Mississippi some eight months before the Plaintiffs filed their Petition in this court seeking to have the Defendants' claims sent to arbitration. It is undisputed, therefore, that the Southern District case was filed first.
Further, the Plaintiffs do not dispute, nor could they, that the issues involved in this case and the case pending in the Southern District substantially overlap. Indeed, the issues and parties in the two cases are identical — all the Defendants in this action are Plaintiffs in the Southern District action; both this case and the Southern District case involve the same loan and insurance transactions; and, the Plaintiffs in this action have filed a pending counterclaim in the Southern District action seeking the same relief from that court as they do from this court: an order compelling the Defendants to submit their claims to arbitration. As such, it is clear that the first-to-file rule applies to the facts of this case.
Finally, in reviewing the submissions of the parties and the circumstances surrounding this case, the court does not find any compelling circumstances that would dictate that the first-to-file rule not be applied here. The Plaintiffs are seeking the same relief from this court that they are seeking from the Southern District in the removed action. It would constitute an unnecessary interference by this court into a sister court's affairs, as well as an unwise use of judicial resources, for this court to compel the Defendants to arbitrate claims that are currently pending in the Southern District.
Accordingly, the court finds that the issues in these two cases substantially overlap, the first-to-file rule applies, and this cause is properly transferred to the Southern District of Mississippi for ultimate resolution.
A separate order in accordance with this opinion shall issue this day.
ORDER GRANTING MOTION TO TRANSFER
Pursuant to an opinion issued this day, it is hereby ORDERED that
(1) the Defendants' motion to transfer (docket entry 32) is GRANTED;
(2) this cause is hereby TRANSFERRED to the United States District Court for the Southern District of Mississippi; and
(3) the Plaintiffs' motion for summary judgment (docket entry 34) is DENIED.
SO ORDERED.