Collegiate Licensing Company v. American Casualty Co. of Reading Pennsylvania, et al.

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 12-10673
________________________
D.C. Docket No. 1:11-cv-03432-TWT
COLLEGIATE LICENSING COMPANY,
Plaintiff - Appellee,
versus
AMERICAN CASUALTY CO. OF READING,
PENNSYLVANIA, GREAT DIVIDE INSURANCE
COMPANY, ALLIED WORLD NATIONAL ASSURANCE
COMPANY, CONTINENTAL CASUALTY COMPANY,
Defendants - Appellants.
________________________
Appeals from the United States District Court
for the Northern District of Georgia
________________________
(March 21, 2013)
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Before MARCUS and MARTIN, Circuit Judges, and SCRIVEN,* District Judge.
SCRIVEN, District Judge:
This appeal arises from the grant of an injunction by the United States
District Court for the Northern District of Georgia that enjoined Appellants,
pursuant to the first-filed rule, from proceeding with intervention complaints filed
in a pending lawsuit in California. For the reasons set forth below, we affirm the
Georgia district court’s decision.
I. BACKGROUND
Appellee, Collegiate Licensing Company (“CLC”) is a licensing agent for
more than 200 colleges and universities, and the National Collegiate Athletic
Association (“NCAA”). CLC licenses trademarks and trade dress to its licensees,
including Electronic Arts, Inc. (“EA”), a publicly-traded company that sells NCAA
football and basketball related video games that utilize licensed trademarks, logos,
and college colors. Beginning in May 2009, CLC was named as a defendant in
multiple class action lawsuits (the “Underlying Actions”), which allege that CLC,
together with EA and the NCAA, wrongfully profited from the unauthorized and
uncompensated use of college athletes’ names and likenesses in a variety of
mediums, including videogames and televised and print advertisements. Most of
* Honorable Mary S. Scriven, United States District Judge for the Middle District of Florida,
sitting by designation.
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the Underlying Actions have been filed in California. The plaintiffs in the
Underlying Actions reside throughout the country.
CLC is a named insured under numerous insurance policies pursuant to
which it seeks coverage for the Underlying Actions. Beginning in 2007, National
Union Fire Insurance Company (“National Union”) issued several commercial
general liability and umbrella policies to California-based EA. CLC is listed as an
additional insured under the National Union policies. CLC is also a named insured
under commercial general liability policies issued by American Casualty Co. of
Reading, Pennsylvania (“American Casualty”), Great Divide Insurance Company
(“Great Divide”), and Allied World National Assurance Company (“Allied
World”). Finally, CLC is insured under several umbrella policies issued by
various carriers: Continental Casualty Company (“Continental”), Westchester Fire
Insurance Company (“Westchester”), and Lexington Insurance Company
(“Lexington”)1. All of the policies provide defense and indemnity coverage or
excess coverage arising from lawsuits alleging “personal and advertising injury.”
However, the policies also provide that “th[e] insurance [policies] d[o] not apply to
personal or advertising injury arising out of the infringement of copyright, patent,
1 For purposes of this Appeal, American Casualty, Great Divide, Allied World, and Continental,
are hereinafter collectively referred to as “Appellants.” Westchester and Lexington are not
parties to this Appeal as they never sought to intervene in the California Action. Further, on
December 21, 2011, Lexington was dismissed from the Georgia Action without prejudice.
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trademark, trade secret, or other intellectual property rights.” It is the latter form
language that lies at the center of the coverage actions that give rise to this appeal.
Although the National Union policies and the Appellants’ policies contain
this identical form language, there is no relationship between National Union and
the Appellants. Additionally, the Appellants’ policies are in no way related to the
National Union policies, although certain of the Appellants’ policies purport to
provide coverage only in excess of other coverage benefits to which CLC might be
entitled. Further, the policies are not identical in every way. The Appellants’
policies contain different endorsements than are present in the National Union
policies. The National Union policies have different policy limits and different
premiums than the Appellants’ policies. None of the insurance policies at issue
has a choice of law provision or a forum selection clause.
CLC sought coverage from American Casualty, Great Divide, and Allied
World for the lawsuits filed against it in the Underlying Actions. CLC also sought
coverage, as an additional insured, from National Union under the policies issued
to EA in California. Coverage issues arose among the parties. CLC contends that
American Casualty initially agreed to defend CLC in the Underlying Actions
pursuant to a reservation of rights. However, according to CLC, American
Casualty imposed significant restrictions that are unreasonable and contrary to
Georgia law. CLC objected to the restrictions.
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CLC also contends that National Union initially agreed to defend CLC in the
Underlying Actions subject to a reservation of rights and certain limitations to
which CLC has objected. On October 3, 2011, National Union sued EA and CLC
in the Northern District Court of California (“California Action”) to ascertain
whether it is obligated to provide insurance coverage under the policies it issued in
California to EA with CLC as an additional insured. The Insurance Company of
the State of Pennsylvania (“ISOP”), an affiliated company of National Union that
insured EA under separate policies not issued to CLC, is also a plaintiff in the
California Action, asserting claims only against EA. In the California Action,
National Union seeks a determination regarding its duty to defend or indemnify
CLC and EA in the Underlying Actions.
On October 10, 2011, CLC filed suit in the Northern District of Georgia
(“Georgia Action”) against the Appellants seeking a declaration that the Appellants
are obligated to defend and indemnify CLC in connection with the Underlying
Actions. CLC also sued the Appellants for breach of contract.
On October 27, 2011, November 16, 2011, and November 23, 2011, the
Appellants filed separate motions to intervene in the California Action. The
Appellants also sought leave to file intervention complaints. They argued they
should be permitted to intervene in the California Action as a matter of right
pursuant to Federal Rule of Civil Procedure 24(a) or, in the alternative,
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permissively, pursuant to Federal Rule of Civil Procedure 24(b). On November 8,
2011, and November 28, 2011, CLC moved the Georgia district court to enjoin the
Appellants’ pursuit of intervention in the California Action, arguing the Georgia
Action was the “first-filed” suit against the Appellants. On November 14, 2011
November 18, 2011, and November 30, 2011, the Appellants filed in the Georgia
district court their separate motions to transfer the Georgia Action to California.
On December 14, 2011, before the Georgia district court ruled on CLC’s
motion to enjoin the Appellants from intervening in the California Action or the
Appellants’ motions to transfer, the California district court granted the
Appellants’ motions to intervene in the California Action and granted the
Appellants leave to file their intervention complaints on or before December 21,
2011. The California district court found permissive intervention was appropriate.
The California district court undertook the classic permissive intervention
analysis. Citing the relevant Rules of Civil Procedure, it found the Appellants’
actions shared common questions of law or fact with National Union’s lawsuit
because the Appellants proposed to seek the same declaratory relief as National
Union and because the insurance policies at issue in the Georgia Action involved
certain provisions and exclusions that are identical to those of the National Union
policies. The California district court also found that the Appellants would have
had complete diversity with CLC if they had filed complaints independent of the
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California Action. Finally, the California district court found the motions to
intervene were timely because the lawsuit was still in its beginning stages and
intervention would not cause any prejudice to the existing parties. Although the
first-filed issue was argued before the California district court, the California
district court’s order was silent on that issue.
On December 19, 2011, after the Appellants filed their intervention
complaints in the California Action, CLC filed an emergency motion with the
Georgia district court asking it to issue an injunction precluding the Appellants
from proceeding with their intervention complaints in the California Action. After
holding a hearing on the motion, the Georgia district court granted CLC’s motion
and ordered the Appellants to dismiss their intervention complaints without
prejudice. The Georgia district court found it was the first-filed court for purposes
of deciding the CLC declaratory action in Georgia and the Appellants’ intervention
complaints in California.
Conducting its analysis of the applicability of the first-filed rule, the Georgia
district court rejected the Appellants’ notion that the relevant cases for comparison
purposes were CLC’s complaint filed in Georgia versus National Union’s
complaint in California. It found that the National Union Action and the CLC
Action in Georgia were distinct actions because the policies issued by National
Union and ISOP to EA and CLC, which are at issue in the California Action, are
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“different policies, [involving] different insureds, different brokers, and different
adjusters, and they were placed in different states.”2 See (R. Vol. 27, Tab. 101, p.
4.) The Georgia district court concluded instead that, for purposes of the first-filed
analysis, the Georgia Action and the Appellants’ intervention complaints were the
proper comparators. It reasoned that those two actions contained the same parties,
the same policies, and the same issues to be litigated.
Before exercising any authority over the Appellants vis-a-vis their
intervention complaints, the Georgia district court expressly found that the
California district court’s order granting intervention did not contain any explicit
finding on the first-filed issue, even though the issue was raised before the
California district court. It further found that the anticipatory suit exception to the
first-filed rule did not apply to CLC’s complaint in this case, concluding that
CLC’s lawsuit was “a legitimate and reasonable attempt by CLC to have its rights
adjudicated in a forum having jurisdiction over the dispute, and in a forum of its
choice.” See id., p. 7. Finally, the Georgia district court found that the transfer of
venue factors considered in an analysis under 28 U.S.C. § 1404 did not justify an
exception to the first-filed rule.
2 The Georgia district court found that Allied World, Great Divide, and Westchester delivered
their insurance policies to CLC’s parent Company, IMG, in Ohio. American Casualty and
Continental delivered their policies directly to CLC in Georgia. The insurance brokers for the
policies issued by the Appellants were based in Georgia.
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II. STANDARD OF REVIEW
This Court reviews a district court’s decision to grant an injunction under an
abuse of discretion standard. Klay v. United Healthgroup, Inc., 376 F.3d 1092,
1096 (11th Cir. 2004). A district court abuses its discretion if it applies an
incorrect legal standard, follows improper procedures in making the determination,
or makes findings of fact that are clearly erroneous. Id. (quotations and citation
omitted). A district court may also abuse its discretion by applying the law in an
unreasonable or incorrect manner. Id. (citations omitted). The abuse of
discretion standard allows a range of choices for the district court, so long as any
choice made by the court does not constitute a clear error of judgment. Manuel v.
Convergys Corp., 430 F.3d 1132, 1135 (11th Cir. 2005) (citation omitted).
III. DISCUSSION
The principal issues before this Court are (1) whether the Georgia district
court erred in its application of the first-filed rule; and (2) whether the court abused
its discretion in ordering the Appellants, pursuant to the first-filed rule, to dismiss
their intervention complaints filed in the California Action after the California
district court had already allowed the Appellants to intervene in the lawsuit. We
hold that the Georgia district court’s application of the first-filed rule in this case
was not erroneous and that the court did not abuse its discretion in issuing an
injunction ordering Appellants to dismiss their intervention complaints.
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Appellants’ principal contention on appeal is that the Georgia district court
erred in its application of the first-filed rule in this case. Appellants contend that
the first-filed rule does not apply to complaints in intervention, and, even if the
first-filed rule applies, the California district court, not the Georgia district court, is
the first-filed court. Appellants also contend even if the Georgia district court were
the first-filed court, the anticipatory suit exception and the 28 U.S.C. §1404(a)
factors apply in this case and warrant dismissal or transfer of the Georgia Action to
the California district court. Finally, Appellants contend that even if the Georgia
district court properly applied the first-filed rule, the Georgia district court abused
its discretion by rejecting and overruling the California district court, a sister court
of equal dignity.
A. The Georgia District Court Did Not Err in its Application of the
First-Filed Rule.
The first-filed rule provides that when parties have instituted competing or
parallel litigation in separate courts, the court initially seized of the controversy
should hear the case. Merrill Lynch, Pierce, Fenner & Smith, Inc., v. Haydu, 675
F.2d 1169, 1174 (11th Cir. 1982). Thus, we have held that “[w]here two actions
involving overlapping issues and parties are pending in two federal courts, there is
a strong presumption across the federal circuits that favors the forum of the first-
filed suit under the first-filed rule.” Manuel, 430 F.3d at 1135 (citations omitted).
The first-filed rule not only determines which court may decide the merits of
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substantially similar cases, but also generally establishes which court may decide
whether the second filed suit must be dismissed, stayed, or transferred and
consolidated. See Mann Mfg., Inc. v. Hortex, Inc., 439 F.2d 403, 408 (5th Cir.
1971); Sutter Corp. v. P & P Industries, Inc., 125 F.3d 914, 920 (5th Cir. 1997)
(citing Mann Mfg., 439 F.2d at 408).
In this case, the Georgia district court did not err in finding it was the court
“initially seized” of the action instituted by CLC’s complaint against the
Appellants. National Union’s action in California was obviously already filed at
the time the intervention was sought. The complaints that CLC asserted offended
the first-filed rule, however, were the complaints Appellants sought permission to
file in intervention before the California district court. In this regard, it is
important to note that Appellants did not simply seek to intervene as parties to
assert an interest in the existing case already pending in the California district
court. This is so because that existing action did not involve their policies, and any
determination in that action likely would not have afforded them relief other than
perhaps to serve as persuasive authority in any action that did implicate their
policies. Recognizing this, Appellants presented their own proposed complaints—
what we refer to here as the intervention complaints. The intervention complaints
filed in the California Action involve the exact same parties, the exact same
insurance policies, and the exact same legal issues as the complaint filed by CLC
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in the Georgia Action. The intervention complaints were also indisputably filed
after the Georgia Action was instituted. Thus, contrary to Appellants’ assertion,
and as the Georgia district court found, the proper comparative complaints for
purposes of the first-filed analysis in this case are CLC’s Georgia complaint and
Appellants’ proposed intervention complaints.
Appellants’ reliance on an issue-based analysis to support a contrary
conclusion is flawed for several reasons. The fact that the form coverage language
is identical among the policies does not establish that the California district court,
where interpretation of the language was first urged, is the court first seized of the
“action.” A first-filed analysis looks to the character of the suits and the parties to
the suits, not simply to the similarity of issues without regard to the identity of the
parties asserting them and their asserted rights as presented in the initial lawsuit.
Here, there is no relationship between National Union and the Appellants.
Appellants do not bring claims against National Union in their intervention
complaints in the California Action. Appellants’ intervention complaints name
themselves as Plaintiffs and only CLC as a defendant. National Union is not suing
Appellants in the California Action, and Appellants are not suing EA, which is a
defendant in the California Action. Thus, the only party in common in the
Georgia Action and the California Action is CLC. Further, the policies at issue in
National Union’s complaint are different policies than those at issue in the Georgia
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Action. The two lawsuits involve different insurance companies, with policies
issued by brokers in different states. Although this Court does not take issue with
the California district court’s conclusion that the Appellants’ proposed claims
shared certain common questions of law or fact with National Union’s action, that
finding is not dispositive of whether the actions in which those disputes are raised
are the same for purposes of the first-filed rule.
Appellants’ contention that the first-filed rule does not apply to complaints
in intervention is also unpersuasive. Appellants cite no authority to support this
contention. The Court can discern no reasoned basis for enjoining Appellants
under the first-filed rule from filing a new complaint in a subsequent jurisdiction,
which seeks to litigate issues between the same parties in a suit already pending in
another jurisdiction, but refusing to enjoin them from filing the identical complaint
in intervention. A contrary rule would allow an end-run around the first-filed rule
any time permissive intervention might be allowed in a different court. Certainly,
it cannot be said that the Georgia district court committed legal error or abused its
discretion when it declined to permit such a maneuver in the case before it.
Finally, the Georgia district court properly found that the anticipatory suit
exception to the first-filed rule does not apply and that the 28 U.S.C. § 1404 factors
do not justify an exception to the first-filed rule. The anticipatory suit exception to
the first-filed rule applies when one party, on notice of a potential lawsuit, files a
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declaratory judgment action in its home forum. See Manuel, 430 F.3d at 1135. In
that circumstance, the “first-filed” court can decline to invoke the first-filed rule to
retain the strategically filed action. However, even if a court finds that a filing is
anticipatory, such finding does not automatically compel abandoning the first-filed
rule. Rather, the matter remains one of discretion for the trial court. Id.
In this case, National Union sued CLC in California claiming it had no duty
to defend CLC as an additional insured under the EA policies. CLC then
determined that it too needed a determination of coverage from its own unrelated
carriers. The Georgia district court cannot be said to have committed clear error in
finding that CLC was justified in suing its primary insurers in Georgia, where it
had been headquartered for many years, to protect its asserted interest under those
policies.
Likewise, the Georgia district court did not abuse its discretion in
concluding that forum conveniens and forum affinity factors did not warrant
suspension of the first-filed rule. While this Court has recognized the convenience
of the parties and the second-filed forum’s connection with the controversy as
relevant in deciding whether an exception to the first-filed rule exists, those factors
are non-exclusive and do not mandate transfer of this action to the California
district court. As the Georgia district court found, there is no evidence that any of
the witnesses relevant to the inception and interpretation of the Appellants’ policies
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are located in California. Further, many of the relevant documents at issue are
located in Georgia because CLC is a Georgia corporation and the policies were
either issued in Georgia or Ohio by Georgia-based brokers. While certain
documents may be on file in the Underlying Actions in state courts in California,
those files can just as easily be accessed in Georgia federal court as in California
federal court. Finally, none of the Appellants are California citizens.
Accordingly, we find that the Georgia district court did not commit legal
error in the application of the first-filed rule in this case.
B. The Georgia District Court Did Not Abuse its Discretion in
Enjoining the Appellants from Proceeding with their Intervention
Complaints in the California Action.
Appellants contend that the Georgia district court’s order improperly
infringed on the authority of a sister court of equal dignity. More specifically,
Appellants argue that the California district court impliedly ruled on the first-filed
issue when it found that the motions for intervention were timely filed. Thus,
Appellants contend, the Georgia district court’s decision to enjoin them from
proceeding to intervene effectively overruled the California district court—or
worse, was a de facto attempt by the Georgia district court to exercise authority
under the All Writs Act3 to enjoin a sister court.
3 The Appellants must and do concede that the Georgia district court did not expressly invoke or
otherwise reference the All Writs Act, nor did the Appellees in seeking relief from the Georgia
district court.
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The first-filed rule is a rule of equity, see Manuel, 430 F.3d at 1135, and a
court in issuing an injunction invokes its equitable authority. See Salazar v.
Buono, 559 U.S. 700, 130 S.Ct. 1803, 1816 (2010) (plurality opinion) (“An
injunction is an exercise of a court’s equitable authority.”) The parties agree
therefore that the Georgia district court’s decision to enjoin Appellants from
proceeding with their intervention complaints pursuant to the first-filed rule will
not be disturbed absent a showing of abuse of discretion. See Manuel, 430 F.3d at
1135. Under that standard, the Georgia district court’s decision will not be
disturbed unless it constitutes a clear error of judgment. Id. We have, of course,
already concluded that the decision was not legally erroneous. See discussion
supra at pp. 10-15. To find an abuse of discretion notwithstanding, as urged by
Appellants, this Court would have to infer that the California district court reached
an issue that is nowhere present on the face of its Order. We decline to do so in
this case.4 We would additionally have to infer that the Georgia district court so
concluded and yet sought to interfere with the jurisdiction of a sister court, which
the Georgia district court is presumed to know is prohibited by black letter law.
The record simply does not bear out such an abuse of discretion.
4 See Dunlop v. Ledet’s Foodliner of Larose, Inc., 509 F.2d 1387, 1389 (5th Cir. 1975) (rejecting
appellant’s argument that district court intended to dispose of both claims, even where district
court’s judgment was silent as to one of the claims, noting this Court “will not search a record to
clarify an unambiguous judgment”). In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th
Cir. 1981), the Eleventh Circuit adopted as binding precedent all Fifth Circuit decisions prior to
September 30, 1981.
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To the contrary, it appears from a review of the record that both the
California district court and the Georgia district court were acutely aware of their
parameters and deftly avoided infringing on the authority of the other. This is
evidenced by the California district court’s decision to resolve the Appellants’
motions to intervene solely, and unambiguously, on an articulation of permissive
intervention standards without any reference to the first-filed issue, even though
the first-filed rule was raised before the California district court. This is also
evidenced by the Georgia district court’s statement on the record that it “would be
inclined to give the question of comity and judicial deference a great deal more
weight if there had been an explicit finding by the judge in the California district
court that it was the first-filed jurisdiction.” See (R. Vol. 27, Tab. 94, p. 29.)
Moreover, the Georgia district court’s order was expressly directed to the
Appellants. The injunction order was not directed to the California district court.
It enjoined the Appellants from pursuing their claims in contravention of the
Georgia district court’s jurisdiction over this case of which it was initially seized
before the intervention was sought or granted.
Thus, this Court finds the Georgia district court did not impermissibly
exercise any de facto authority under the All Writs Act, and it did not otherwise
abuse its discretion by enjoining Appellants, pursuant to the first-filed rule, from
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proceeding with their intervention complaints. For these reasons, the decision of
the Georgia district court is AFFIRMED.
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