Understanding the first-to-file rule and its anticipatory suit exception.

• Author: Cavendish, Michael
• Position: Federal courts

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 discretion(9) 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...