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In a race to the courthouse, the winner is not always the first to file suit. In her 36-page opinion in FMC Corp. v. AMVAC Chemical Corp., U.S. District Judge Gene E.K. Pratter of the Eastern District of Pennsylvania refused to dismiss a suit under the “first-to-file rule” after finding that the defendant’s decision to file suit first was motivated by “bad faith” and “forum shopping and/or forum avoidance.” Pratter found that AMVAC had recently received a “cease-and-desist” letter from FMC in which it was told that it would be hit with a lawsuit in five days if it did not cease violating FMC’s copyrights. At the time, FMC had recently won a decision from Pratter in another suit, FMC Corp. v. Control Solutions Inc., in which the judge had held that copyright law protects the contents of a label for a pesticide, and that a generic manufacturer therefore could not simply copy the brand-name-maker’s label verbatim. In that suit, FMC contended that in the early to mid-1980s, it developed bifenthrin, a chemical that kills termites and other pests. After the patent on bifenthrin expired, the suit said, generic producers were free to market their own bifenthrin products. But in early 2005, the suit said, FMC learned that Control Solutions was marketing a bifenthrin product under the name Bifen I/T with a label that is “virtually identical” to FMC’s label. Insecticide labels are often hefty documents — sometimes coming in the form of a 10-page booklet — and are strictly controlled by federal law. Every label must be approved by the Environmental Protection Agency before a product hits the shelves. FMC claims it spent more than 13 years and nearly $400,000 in the process of developing the label for bifenthrin products. In the May 16 decision, Pratter issued a preliminary injunction in which she ordered Control Solutions to cease using the copied label and to destroy all existing copies. At the time, FMC and AMVAC were in settlement talks over a nearly identical dispute. But after Pratter issued her ruling in the Control Solutions case, FMC’s lawyer, Abbe F. Fletman of Wolf Block Schorr & Solis-Cohen, sent a cease-and-desist letter to AMVAC demanding that it stop using the two labels that FMC alleges that AMVAC copied from FMC. In the letter, Fletman wrote: “Now that the legal issues AMVAC has raised have been decided in an extensive and well reasoned opinion, FMC is giving AMVAC one last opportunity to resolve this matter short of litigation.” The letter said FMC was willing to settle if AMVAC would immediately enter into an agreement consistent with the [Control Solutions] preliminary injunction order and agree to negotiate a reasonable royalty due to its past infringement. The letter also demanded that AMVAC respond within five business days or face a lawsuit. Pratter found that during the five-day period — which was set to expire on May 27 — FMC and AMVAC “appeared to be negotiating in good faith.” But on May 26, Pratter said, AMVAC filed suit in federal court for the Central District of California, seeking a declaratory judgment that it was not violating FMC’s copyrights. In the California suit, AMVAC says it paid $2.7 million to FMC for the right to use FMC’s scientific data studies in connection with AMVAC’s submission of registrations to both the Environmental Protection Agency and the California Department of Pesticide Registration for bifenthrin-based pesticide products. The suit alleges that the contract between the two companies authorizes AMVAC to sell generic versions of FMC’s pesticides that carries a label that is nearly identical to the labels FMC attaches to its own products. Pratter found that FMC was unaware of the California suit when, on June 1, it filed suit in the Eastern District of Pennsylvania. Because the second case was “related to” the Control Solutions case, it was also assigned to Pratter. The California case, Pratter noted, was filed Thursday, May 26 — a date Pratter described as “one day before the unofficial start of Memorial Day holiday weekend.” The evidence, Pratter found, showed that AMVAC took steps to avoid FMC’s learning of the existence of the California case. “Curiously, rather than serve the FMC’s lawyers in Pennsylvania … with whom AMVAC and its counsel had been negotiating directly for some time, on Friday, May 27, 2005, late in the afternoon before the long Memorial Day weekend, AMVAC served FMC’s registered agent, in Delaware,” Pratter wrote. As a result, Pratter found that FMC and Wolf Block did not learn of the California suit until late in the evening on June 1. The news, Pratter said, came in a response to Wolf Block’s e-mail in which it informed AMVAC of the suit and attached a copy. Pratter found that the response e-mail exhibited “a certain problematic professional one-upmanship.” In the e-mail, AMVAC’s lawyer, Arthur Rose of Knobbe Martens Olson & Bear in Irvine, Calif., wrote: “Thank you for sending us a copy of the complaint you filed on behalf of FMC [June 1, 2005]. I am wondering if you could also send us a copy of the exhibits attached to the complaint. A copy of the complaint we filed on [May 26, 2005] is attached. Thank you.” Rose could not immediately be reached for comment yesterday evening. In its motion to dismiss, AMVAC argued that the California case should take precedence under the first-to-file rule. Under the first-to-file rule, tradition dictates that whenever there are parallel proceedings in different federal courts, the first court in which jurisdiction attaches has priority to consider the case. But Pratter found that courts have also recognized there are “exceptions to the traditional first-to-file rule.” In its 1988 decision in Equal Employment Opportunity Commission v. University of Pennsylvania, Pratter said, the 3rd U.S. Circuit Court of Appeals held that the first-to-file rule “is not a mandate directing wooden application of the rule without regard to rare or extraordinary circumstances, inequitable conduct, bad faith, [anticipatory filing] or forum shopping.” Looking to the case law, Pratter found that AMVAC’s California case qualified for several of the exceptions. AMVAC, she said, was aware of the Control Solutions case prior to filing suit in California, but failed to mention that case or Pratter’s May 16 decision in its initial filing. “Such a presumably conscious failure to highlight a major prospective issue, in addition to the disquieting apparent lack of courtesy and professionalism with regard to AMVAC’s failure to appropriately notify, and serve the California action directly upon FMC’s Wolf Block counsel (the lawyers with whom AMVAC had been actively negotiating immediately prior to the filing) supports FMC’s theory that AMVAC was indeed racing to its local courthouse steps while also trying to lull FMC into believing that it was negotiating in good faith,” Pratter wrote. Pratter said the record was clear that FMC had given AMVAC until May 27, 2005, to accept FMC’s terms or face a lawsuit. AMVAC, she said, made a “conscious choice” to file the California suit prior to FMC’s deadline. Although settlement talks were still underway at the time, Pratter found that AMVAC’s lawyer showed “disregard of the conventional professional courtesy of providing contemporaneous notice” of the California suit. Pratter also found that the way in which AMVAC notified FMC and Wolf Block of the Califiornia suit appeared to be “a mere afterthought to Wolf Block’s ‘heads-up’ with regard to FMC’s June 1 filing of the Philadelphia action.” As a result, Pratter concluded that AMVAC’s California suit “can only be construed as one (or some combination) of the following – inequitable conduct, bad faith, anticipatory filing, forum shopping or avoidance.” Pratter found that the 3rd Circuit’s decision in EEOC v. University of Pennsylvania was based on analogous facts. In that case, she said, the university was facing an imminent subpoena enforcement action by the EEOC and was aware of a precedent from the District Court for the District of Columbia that suggested hostility toward the EEOC’s position. Three days prior to an EEOC deadline, the university filed suit in the District of Columbia. The EEOC then filed its own lawsuit in the Eastern District of Pennsylvania. The 3rd Circuit found that departure from the first-to-file rule was appropriate because the university had filed a lawsuit instead of complying with the subpoena or notifying EEOC of its intention to contest the EEOC’s demand. Likewise, Pratter found, “AMVAC was faced with an imminent deadline established by FMC.” As a result, Pratter concluded that the California suit was an “anticipatory” filing and therefore “not entitled to the benefits of the first-filed rule.”

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