Last week, in Baatz v. Columbia Gas Transmission LLC, No. 15-3208, 2016 WL 731900 (6th Cir. 2016), a panel of the Sixth Circuit Court of Appeals reversed the dismissal of a lawsuit brought by a group of landowners in Medina, Ohio against Columbia Gas Transmission for allegedly storing natural gas under their property without compensation. The district court had dismissed the lawsuit under the “first-to-file” rule on the ground that it was duplicative of a class action filed against Columbia over a year earlier by other Ohio landowners: Wilson v. Columbia Gas Transmission LLC, No. 2:12–cv–01203 (S.D. Ohio Dec. 21, 2012). While the panel concluded that the first-to-file rule applied, it nevertheless reversed the district court’s dismissal because it found that the Medina landowners raised “serious concerns” about their ability to have their claims heard in the earlier-filed class action.
The first-to-file rule provides that “when actions involving nearly identical parties and issues have been filed in two different district courts, ‘the court in which the first suit was filed should generally proceed to judgment.’” Certified Restoration Dry Cleaning Network, LLC v. Tenke Corp., 511 F.3d 535, 551 (6th Cir. 2007). One of the purposes of the rule is to avoid duplicative litigation, but courts must also consider whether equitable considerations, such as evidence of forum shopping, should preclude application of the first-to-file rule.
In Baatz, the Medina landowners argued that the parties to their action and the Wilson class action were not “nearly identical” because (1) although the Medina landowners were within the putative class in Wilson, the class had not yet been certified, and (2) even if the class were certified, the Medina landowners would opt out. The Sixth Circuit rejected these arguments, noting that if plaintiffs were allowed to avoid application of the first-to-file rule simply by representing that they would opt out of an earlier-filed class action, then litigants, rather than the courts, would decide when the rule applied and could unilaterally “force resource-draining duplicative class actions to proceed simultaneously.”
But while the Sixth Circuit agreed that the first-to-file rule applied, the court nonetheless held that the district court’s dismissal of the Medina landowners’ suit was inappropriate because it allegedly jeopardized their ability to have their claims heard on the merits if the Wilson class is not certified. This risk stems both from statute of limitation concerns and the fact that the district court’s dismissal order did not specify that the dismissal was without prejudice, and therefore is presumed to be with prejudice. Thus, if the Wilson class is not certified or if the Medina landowners opt out, they would still be barred from pursuing their claims.
While the Sixth Circuit left it to the district court to decide how best to manage the suit going forward, the court suggested that staying the case while the Wilson court resolved the issues raised by the Medina landowners would be the most reasonable course of action. To that end, the court quoted Judge Posner: “Why take chances? It is simpler just to stay the second suit.” Asset Allocation & Mgmt. Co. v. W. Emp’rs Ins. Co., 892 F.2d 566, 571 (7th Cir. 1989).
Baatz suggests that when class action defendants are faced with subsequent, separate lawsuits covering similar issues as the class action, the first-to-file rule may not be used to obtain dismissal of the subsequent suit if there are legitimate concerns about whether those claims could be heard in the “first-filed” class action. Courts in these situations may decide not to “take chances” by dismissing the suit, and may instead opt to stay the suit while the plaintiff’s ability to participate in the earlier-filed class action is litigated.