Copycat Class Actions: The First-To-File Rule Provides Remedies

In the class action world, the proliferation of “copycat” lawsuits has plagued courts and litigants for decades.  Until a class action is certified under Federal Rule 23, it has merely a “putative” status, meaning that the claims are asserted solely on behalf of the individual named plaintiff(s).  Since the claims at that point are “individual,” some attorneys, hoping to procure large fees with reduced effort, “piggy-back” on existing class actions by filing copycat suits.  This has become easier through modern technology, where routine internet searches can enable counsel to locate and sign-up at least one other “similarly situated” person to serve as a plaintiff in a new class action based upon the same product and controversy as the pending one.  The new action may be identical to the existing one, or it may involve “tweaking” of the pending allegations, legal claims, named defendants and/or class definitions in an effort to make it appear different.  It may be commenced in the same court as the pending action or in an entirely different jurisdiction.  It may be commenced for an improper purpose, such as to extort another attorney fee out of an already existing controversy, to ride the coattails of or interfere with a proposed settlement, or to expand the dispute to other courts and jurisdictions.  Regardless of the motive, such lawsuits impose substantial burdens upon courts, defendants and even the plaintiffs and their counsel.

There is a legal antidote for duplicative or copycat lawsuits – a doctrine called the “first-to-file” rule.  The rule has two facets: (1) it provides a legal presumption that the first-filed action is the correct forum for the controversy, and (2) it empowers the court to dismiss, stay or transfer a second similar action based on the pendency of the first-filed action.  E.E.O.C. v. Univ. of Pennsylvania, 850 F.2d 969 (3d Cir. 1988), aff’d, 493 U.S. 182 (1990); Penders v. Sega of America, 2013 U.S. App. LEXIS 21540 (9th Cir. Oct. 23, 2013); Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93 (9th Cir. 1982); Collegiate Licensing Co. v. American Casualty Co. of Reading, Pa., 713 F.3d 71 (11th Cir. 2013).  Discretionary in its application, the first-to-file rule is designed to promote the important goals of judicial economy, efficiency and avoidance of inconsistent results.  Alltrade, Inc. v. Uniweld Products, Inc., 946 F.2d 622, 625 (9th Cir. 1991); Zanghi v. Freightcar Am., Inc., 2014 U.S. Dist. LEXIS 4299, *13-15 (W.D. Pa. Jan. 14, 2014).  To foster these goals, courts have said that the first-to-file rule should not be disregarded except in compelling circumstances. Id.; Neuralstem, Inc. v. Stemcells, Inc., 573 F. Supp. 2d 888, 900 (D. Md. 2008).

The first-to-file rule is not limited to class actions but has particular significance in the class action context.  Motions based on the first-to-file rule are generally decided on three factors:  (1) chronology of the actions, (2) similarity of the parties and (3) similarity of the issues.  Penders, supra at *2; Bankers Ins. Co. v. DLJ Mortgage Capital, Inc.,  2012 U.S. Dist. LEXIS 19361, *3 (M.D. Fla. Jan. 26, 2012).

(1)  The “chronology” factor favors the first-filed suit, especially where it is in a more advanced stage of litigation than the second suit.  Id.

(2)  The “similarity of the parties” factor does not require complete party identity but only that the parties in both actions be substantially similar.  Hilton v. Apple, Inc., 2013 U.S. Dist. LEXIS 142354, *23-26 (N.D. Cal. Oct. 1, 2013).  Where multiple class actions involve different “individual” plaintiffs, the putative classes are compared.  Similarity of parties has been found where the actions share at least one common defendant and the putative class of the second action is similar to or at least partially subsumed within the putative class of the first-filed action.  Id.; Medlock v. HMS Host USA, Inc., 2010 U.S. Dist. LEXIS 133143, *8-10 (E.D. Cal. Dec. 16, 2010).  Thus, similarity is satisfied if the named plaintiff in the second suit (or at least one of multiple named plaintiffs) falls within the putative class definition of the first-filed action.  Id.

Further, a court can dismiss or transfer a copycat class action even if, as is often the case, the copycat action alleges a broader class than that of the first-filed action, such as a broader scope of class members and/or the addition of other products of defendant.  See, e.g., Koehler v. Pepperidge Farm, Inc., 2013 U.S. Dist. LEXIS 128440, *12-13 (N.D. Cal. Sept. 9, 2013)(ordering transfer under first-to-file rule where proposed class in new action encompassed purchasers of all Goldfish crackers, whereas proposed class in first suit encompassed only purchasers of “Cheddar” Goldfish crackers).

(3)  The “similarity of the issues” factor also does not require complete identity; only that the issues are substantially similar.  The fact that a copycat suit contains varied allegations, additional legal claims or different legal claims does not preclude the court from dismissing, staying or transferring the action if the suit involves the same or substantially similar controversy or dispute.  Walker v. Progressive Casualty Ins. Co., 2003 U.S. Dist. LEXIS 7871, *7-8 (W.D. Wash. May 9, 2003); Inherent.com v. Martindale-Hubbell, 420 F. Supp. 2d 1093, 1099 (N.D. Cal. 2006).  Nor is relief precluded when, for instance, the copycat suit alleges a more expansive definition that includes more putative class members (such as lessors in addition to purchasers) and/or more of defendant’s products (such as additional products or additional model years of the same product).

The remedy chosen by the court will depend upon case specific facts and circumstances.  Dismissal should be ordered where the actions are duplicative, or where the putative class and claims in the second action are substantially similar to or subsumed within the first action.  Other cases which are not substantially similar may be appropriate for a stay where, for example, a determination of the first action may have a binding effect on claims or issues raised in the second action.  Still other cases may be appropriate for a transfer and/or consolidation in the interest of judicial economy.  Regardless of the remedy ultimately employed, an appropriate motion to dismiss, stay or transfer under the first-to-file rule could eliminate or reduce the costs and burdens imposed by a copycat class action.

More by | Michael Gallub Michael Gallub , Law.com Contributor
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