Learning Network, Inc. v. Discovery Communications, Inc.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
THE LEARNING NETWORK, 
INCORPORATED; HEADLAND DIGITAL
MEDIA, INCORPORATED; PEARSON
INCORPORATED; PEARSON, PLC; PHILLIP
HOFFMAN,
Plaintiffs-Appellees,  No. 01-1202
v.
DISCOVERY COMMUNICATIONS,
INCORPORATED,
Defendant-Appellant.

Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Marvin J. Garbis, District Judge.
(CA-00-2565-MJG)
Argued: May 9, 2001
Decided: June 7, 2001
Before WIDENER, Circuit Judge,
HAMILTON, Senior Circuit Judge, and
James H. MICHAEL, Jr., Senior United States District Judge
for the Western District of Virginia, sitting by designation.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Robert Lloyd Raskopf, WHITE & CASE, L.L.P., New
York, New York, for Appellant. Peter Buscemi, MORGAN, LEWIS
2 LEARNING NETWORK v. DISCOVERY COMMUNICATIONS
& BOCKIUS, L.L.P., Washington, D.C., for Appellees. ON BRIEF:
John P. Reiner, WHITE & CASE, L.L.P., New York, New York, for
Appellant. Halley F. Sexter, MORGAN, LEWIS & BOCKIUS,
L.L.P., Washington, D.C.; Stephen W. Feingold, David Leichtman,
MORGAN, LEWIS & BOCKIUS, L.L.P., New York, New York, for
Appellees.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Discovery Communications, Inc. ("Discovery") appeals an order of
the United States District Court for the District of Maryland enjoining
Discovery from proceeding in a trademark infringement and dilution
suit Discovery filed against Learning Network, Inc. ("Network") in
the United States District Court for the Southern District of New
York. For the reasons stated herein, we shall affirm the order of the
court below.
I.
Appellee Network, a subsidiary of Pearson, Inc. ("Pearson"), dis-
tributes textbooks and other educational materials world-wide. Net-
work’s principal place of business is in San Francisco, California.
Pearson’s principal place of business is in New York, New York. The
public has access to Network’s services on the Internet through a ded-
icated America Online ("AOL") link, and through the domain "learn-
ingnetwork.com," which is owned by Headland Digital Media
("Headland"), an affiliate of Network.
Appellant Discovery, a Delaware corporation, has its principal
place of business in Bethesda, Maryland. Discovery provides enter-
tainment and information services using multiple media platforms.
LEARNING NETWORK v. DISCOVERY COMMUNICATIONS 3
Discovery’s flagship product is the Discovery Channel, a cable net-
work launched in 1985. In or about 1991, Discovery acquired The
Learning Channel, which had been broadcasting educational and
information programming since 1982. Discovery provides education-
based programming and content to teachers and students under The
Learning Channel brand. Discovery owns numerous federal trade-
mark registrations and pending applications for "THE LEARNING
CHANNEL" and "TLC THE LEARNING CHANNEL" marks. Dis-
covery also operates a web-site, located at "discovery.com," which
contains a section reflecting the attributes of The Learning Channel’s
on-air brand. This section is located at "www.tlc.discovery.com." Dis-
covery also owns the domain name "learningchannel.com," although
it apparently has not used it.
On June 29, 2000, Network issued a press release announcing that
it would become an anchor tenant on the main screen of AOL’s
Research and Learn Channel, providing online educational content for
all stages of a person’s life. The press release also announced Net-
work’s intention to launch its own educational website. On August
11, 2000, counsel for Discovery sent a cease and desist letter to Phil-
lip Hoffman, Chief Executive Officer of Network, and President of
Pearson ("August 11 Letter"). In the August 11 Letter, Discovery
alleged violations of its trademark rights in "THE LEARNING
CHANNEL" and "TLC THE LEARNING CHANNEL" by Network’s
use of the name "Learning Network;" reserved all rights and reme-
dies; expressed desire "to reach a quick and amicable resolution to
this matter;" and requested Network’s "urgent attention" to the matter.
On August 18, 2000, Network’s counsel responded with a letter
stating that Network was "looking into" Discovery’s allegations and
would contact Discovery with a response "promptly." However, on
August 23, 2000, Network and Headland filed a declaratory judgment
action in the District Court of Maryland, seeking a declaration that
Network’s use of the designation "LEARNING NETWORK" did not
infringe or dilute the distinctive quality of Discovery’s marks
("Maryland Action").
On or about August 30, 2000, Network provided Discovery with
a courtesy copy of the complaint filed in the Maryland Action. A
series of correspondence and meetings followed, which lead to an
4 LEARNING NETWORK v. DISCOVERY COMMUNICATIONS
agreement on September 29, 2000, wherein the parties agreed not to
"file or serve further pleadings," pending the outcome of the settle-
ment negotiations ("Standstill Agreement"). Sometime between
December 6 and 12, 2000, settlement negotiations broke off.
On or about December 20, 2000, Discovery’s counsel accepted for-
mal service of the summons and complaint in the Maryland Action.
Discovery was required to respond to the complaint by January 9,
2001. As this date approached, counsel for Discovery called Network
to request an extension of the time to respond, on the basis that Dis-
covery had not yet determined how it would proceed. Network agreed
to the extension of time, but apparently did so on the strength of
assurances from counsel for Discovery that it was not intending to
"sandbag" Network. Accordingly, on or about January 9, 2001, the
parties filed a stipulation requesting an extension of the time for Dis-
covery to respond to the complaint until February 8, 2001. The court
in the Maryland Action granted the extension.
Despite Discovery’s apparent assurances that it would not "sand-
bag" Network, on or about January 22, 2001, Network’s counsel was
advised that Discovery had filed an action in the Southern District of
New York ("New York Action"). In the New York Action, Discovery
alleged trademark infringement and dilution as well as state law
claims against Network, Headland, Pearson, and Hoffman. Counsel
for Discovery also advised counsel for Network that Discovery
planned to file an application for a temporary restraining order and
preliminary injunction in the New York Action. The apparent purpose
of this motion was to enjoin Network from proceeding in the Mary-
land Action.
On January 23, 2001, the presiding judge in the New York Action
denied Discovery’s application for a temporary restraining order, but
ordered expedited discovery and set a trial date of February 27, 2001.
On January 25, 2001, Network filed, in the Maryland Action, a
motion for a preliminary injunction enjoining Discovery from pro-
ceeding in the New York Action, and from instituting any action in
any other court involving substantially the same issues. Discovery
filed a cross motion to dismiss the Maryland Action.
LEARNING NETWORK v. DISCOVERY COMMUNICATIONS 5
On February 6, 2001, the presiding judge in the Maryland Action
granted Network’s motion for preliminary injunction and denied Dis-
covery’s motion to dismiss. Discovery herein appeals the order of
preliminary injunction.1
II.
We review the grant or denial of a preliminary injunction for an
abuse of discretion, recognizing that preliminary injunctions are
extraordinary remedies to be granted in limited circumstances. See
Direx Israel, Ltd. v. Breakthrough Med. Corp., 952 F.2d 802, 814
(4th Cir. 1992). We also review decisions of the district courts to
grant, or to refrain from granting, declaratory relief for an abuse of
discretion. See Wilton v. Seven Falls Co., 515 U.S. 277, 289 (1995).
Thus, "a district court’s decision to stay or dismiss a declaratory judg-
ment action is reviewed for abuse of discretion." Centennial Life Ins.
Co. v. Poston, 88 F.3d 255, 258 (4th Cir. 1996). District courts are
"vested with discretion in the first instance, because facts bearing on
the usefulness of the declaratory judgment remedy, and the fitness of
the case for resolution, are peculiarly within their grasp." Wilton, 515
U.S. at 289; Centennial Life, 88 F.3d at 258.
III.
The court below relied on the "first-filed" rule to enjoin Discovery
from proceeding in the New York Action. The Fourth Circuit has rec-
ognized the "first to file" rule of the Second Circuit, giving priority
to the first suit absent showing of a balance of convenience in favor
of the second. See Ellicott Mach. Corp. v. Modern Welding Co., Inc.,
502 F.2d 178, 180 n.2 (4th Cir. 1974), citing and quoting Mattel, Inc.
v. Louis Marx & Co., 353 F.2d 421, 423 (2d Cir. 1965). Discovery
1
Discovery’s outstanding motion to stay the District Court of Mary-
land’s order enjoining proceedings in the New York Action is rendered
moot by this opinion. The motion to expedite the briefing schedule also
is now moot. Furthermore, contrary to Appellant’s assertion at oral argu-
ment, this court does not have jurisdiction to consider the denial of Dis-
covery’s motion to dismiss in the Maryland Action. Orders denying
motions to dismiss are not final, and thus, not immediately reviewable.
See Catlin v. United States, 324 U.S. 229, 236 (1945).
6 LEARNING NETWORK v. DISCOVERY COMMUNICATIONS
challenges the district court’s decision to enjoin the New York
Action, arguing that the district court improperly applied the first-
filed rule to Network’s benefit. Discovery argues that the first-filed
rule was inapplicable because of special circumstances2 or a balance
of convenience in favor of New York.
A.
In support of Discovery’s argument for a special circumstances
exception to the first-filed rule, Discovery asserts that Network’s fil-
ing of the Maryland Action was an improper anticipatory filing
because it was made under the threat of imminent litigation. Accord-
ingly, Discovery argues, the impropriety of Network’s filing of the
Maryland Action warrants a departure from the first-filed rule, and
the court below abused its discretion by giving preference to the
Maryland Action and enjoining the later-filed New York Action.
Declaratory judgment actions are proper when there is a potential
lawsuit. See e.g. United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488,
494 (4th Cir. 1998) ("The declaratory judgment action allows the
uncertain party to gain relief from the insecurity caused by a potential
suit waiting in the wings."). Here, a case or controversy existed
between the parties because Discovery’s assertion of rights in the
August 11 letter was contrary to Network’s immediate business plan.
In some cases, there may come a point after which the potential
lawsuit that may otherwise have given rise to a proper declaratory
judgment action has become so certain or imminent, that the declara-
tory judgment action is merely an improper act of forum shopping, or
a race to the courthouse. See e.g., Aetna Cas. & Sur. Co. v. Quarles,
92 F.2d 321, 324 (4th Cir. 1937) (Courts should decline jurisdiction
over declaratory judgment actions filed "for the purpose of anticipat-
ing the trial of an issue in a court of co-ordinate jurisdiction."); Citig-
2
The Fourth Circuit has not stated explicitly that special circumstances
may warrant an exception to the first-filed rule. Because we find that the
court below did not abuse its discretion in finding no special circum-
stances in this case, we do not herein undertake to determine whether the
presence of special circumtances would, in fact, merit a departure from
the first-filed rule.
LEARNING NETWORK v. DISCOVERY COMMUNICATIONS 7
roup Inc. v. City Holding Co., 97 F. Supp.2d 549, 557 (S.D.N.Y.
2000) ("An improper anticipatory filing is one made under the appar-
ent threat of a presumed adversary filing the mirror image of that suit
in another court." (citations and quotations omitted)). Discovery
argues that the imminence of its lawsuit against Network made Net-
work’s filing in Maryland improper, thereby not entitling the Mary-
land Action to the presumptive benefits of the first-filed rule.
It has long been established that courts look with disfavor upon
races to the courthouse and forum shopping. Such procedural fencing
is a factor that counsels against exercising jurisdiction over a declara-
tory judgment action. See Myles Lumber Co. v. CNA Financial Corp.,
233 F.3d 821, 824 (4th Cir. 2000); Centennial Life Ins. v. Poston, 88
F.3d 255, 257 (4th Cir. 1996); Nautilus Ins. Co. v. Winchester Homes,
Inc., 15 F.3d 371, 377 (4th Cir. 1994).
However, there can be no race to the courthouse when only one
party is running. Discovery’s own actions belie its argument that its
potential suit against Network was imminent at the time of the filing
of the Maryland Action. Discovery’s August 11 letter to Network was
sent nearly six weeks after Network’s June 29 press release, and nei-
ther overtly threatened litigation nor threatened to take particular
action if Network failed to respond to the letter by a certain date.
After Discovery received notice on August 30, 2000 of the Maryland
Action, it did not file the New York action until January 22, 2001.
The court recognizes that the Standstill Agreement was in place for
approximately eight to ten weeks, during which time Discovery could
not have filed the New York Action. However, even after the negotia-
tions broke off in December and Discovery formally was served in
the Maryland Action, Discovery waited an additional four to six
weeks before filing the New York Action. Thus, not including the
period of time between Network’s press release and Discovery’s
August 11 cease and desist letter, there was a total of at least eight
to ten weeks after which Discovery had notice of the Maryland
Action and was not bound by a Standstill Agreement, but failed to file
the allegedly "imminent" New York Action. In fact, as of January 9,
2001, counsel for Discovery indicated to counsel for Network that
Discovery was uncertain as to the course of action it intended to
undertake. Such representations, combined with a relatively mild
cease and desist letter and several months of inaction, counsel against
8 LEARNING NETWORK v. DISCOVERY COMMUNICATIONS
a finding that the potential lawsuit that gave rise to the Maryland
Action was imminent. Accordingly, the district court did not abuse its
discretion in finding that the Maryland Action was not an act of pro-
cedural fencing, so as to merit an exception to the first-filed rule.
B.
This court also recognizes an exception to the first-filed rule when
the balance of convenience favors the second action. See Ellicott, 502
F.2d at 180 n.2. Discovery did not argue this point in its briefs to this
court; however, balance of convenience briefly was argued by Net-
work. As is often the case, there are factors counseling in favor of
both fora. However, the district court’s well-reasoned finding that the
balance of convenience did not favor New York was not an abuse of
discretion. Accordingly, the balance of convenience exception to the
first-filed rule is inapplicable in this case.
IV.
Because the court below did not abuse its discretion in applying the
first-filed rule in favor of the Maryland Action, and in finding no
exception to the first-filed rule applicable to this case, the Maryland
Action deserves priority over the New York Action. Consequently,
the injunction issued by the court below was not an abuse of discre-
tion, and hereby is
AFFIRMED.