Stone & Webster, Inc. v. Georgia Power Company

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 9, 2014 Decided March 10, 2015
No. 13-7151
STONE & WEBSTER, INC. AND WESTINGHOUSE ELECTRIC
COMPANY, LLC,
APPELLANTS
v.
GEORGIA POWER COMPANY, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 1:12-cv-01783)
Brian G. Corgan argued the cause for appellants. With him
on the briefs were David C. Smith and Shelly L. Ewald. Michael
A. Branca and Timothy E. Heffernan entered appearances.
Gordon L. Garrett Jr. argued the cause for appellees. With
him on the brief were Joseph E. Finley, Melvin S. Blanton,
Andrew D. Ness, and Charles W. Whitney.
Before: WILKINS, Circuit Judge, and SENTELLE and
RANDOLPH, Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge
RANDOLPH.
2
RANDOLPH, Senior Circuit Judge: This is an appeal from
the judgment of the district court, Judge Kollar-Kotelly,
dismissing a complaint filed in the United States District Court
for the District of Columbia in favor of a complaint filed in the
federal district court for the Southern District of Georgia. The
plaintiff in the D.C. action is the defendant in the Georgia
action, and vice versa. Each suit is, to a large extent, the mirror
image of the other. Jurisdiction rests on diversity of citizenship,
28 U.S.C. § 1332. There is no contention that both suits should
proceed. The question is which complaint—the one filed in
D.C. or the one filed in Georgia—should go forward. The
district judge, in a thorough and closely reasoned opinion,
determined that the D.C. action should be dismissed and that the
Georgia action should proceed.
The dispute arises under a contract, signed in 2008, for the
design and construction of two nuclear electrical generating
units at a power plant in Georgia. Stone & Webster, Inc., and
another company agreed to build the units for Georgia Power
Company and others. The contract, which specifies that it is to
be governed by Georgia law, sets a fixed price for the work but
includes reimbursement for some additional costs.
Regulatory requirements of the United States Nuclear
Regulatory Commission delayed the project and imposed
additional costs. Stone & Webster sought payment for the
added expenses. Georgia Power denied that the contract made
it responsible for the extra charges.
The contract includes dispute resolution procedures. The
parties must first meet to seek a resolution. If this does not end
the dispute within thirty days, the parties are to engage in
mediation. For claims of more than $25 million (the claims here
are considerably larger), if the mediation does not conclude
3
within sixty days, “either Party shall have the right to proceed to
litigation . . . in a court of competent jurisdiction.”
Under the heading “Venue,” the contract states that the
parties “agree to the non-exclusive jurisdiction of the United
States District Court for the District of Columbia for any legal
proceedings” arising out of the contract and “accept[], generally
and unconditionally, the jurisdiction” of that court. Each party
“waives” the right to challenge cases brought in the D.C. District
Court “on the basis of forum non-conveniens or improper
venue.” The contract adds, in the same “Venue” provision, that
the parties do not “waive any first-to-file challenges to venue.”
Stone & Webster and Georgia Power attempted to negotiate
a resolution of their dispute and, when that failed, entered into
mediation. They agreed that mediation, if unsuccessful, would
conclude on November 1, 2012, at 8:00 p.m., and that no lawsuit
could be filed before then.
When the designated hour arrived on November 1, Stone &
Webster filed its District of Columbia complaint against the
Georgia Power group. The complaint sought more than $900
million resulting from regulatory changes that had occurred and
would occur in the future. The law firm representing Stone &
Webster used the district court’s electronic filing system.
Affidavits from the firm stated that one of its computers was
connected to the United States Naval Observatory Master
Clock.1 When the Navy’s clock registered 8:00:00 p.m., a
paralegal pressed the “submit” button on an adjacent computer,
thereby “filing” the complaint according to local rules. See
Rule 5.4(c)(3), Rules of the U.S. District Court for the District
of Columbia; U.S. DISTRICT COURT FOR THE DISTRICT OF
1
This is a network of atomic clocks guaranteed not to gain or lose
even one second in more than a million years—or your money back.
4
COLUMBIA, ELECTRONIC CASE FILING SYSTEM USER’S MANUEL
20 (Jan. 2010). The district court’s electronic filing log reported
“11/01/2012 20:00:01” as the filing date and time of Stone &
Webster’s complaint.
In the meantime, or at the same time, Georgia Power
brought an action in the United States District Court for the
Southern District of Georgia. Georgia Power’s complaint
sought to recover more than $100 million paid under protest to
Stone & Webster pursuant to a contract provision requiring the
payment of 50 percent of disputed invoices until the dispute is
resolved. The complaint also sought a declaratory judgment that
the Georgia Power group was not contractually obligated to pay
for costs caused by regulatory changes. According to the
affidavit of a Georgia Power attorney, he handed the complaint
to the court’s deputy clerk exactly when the clock on the
attorney’s cell phone registered 8:00:00 p.m. The deputy clerk
noted, on the hard copy of the complaint, “November 1, 2012”
and “8:00 p.m.” as the date and time of the filing.
A few days later, Stone & Webster filed a motion in the
District of Columbia action to enjoin Georgia Power from
prosecuting the Georgia suit. Georgia Power responded with a
motion to dismiss or stay the District of Columbia action. Each
party claimed that it had filed first and that its complaint should
therefore be given priority over the other. The district court did
not decide who filed first. After reviewing the law and the
equities, the court determined that the controversy should be
adjudicated in the Southern District of Georgia, regardless of
which party filed first. The court therefore dismissed Stone &
Webster’s complaint, but without prejudice. Stone & Webster,
Inc. v. Georgia Power Co., 965 F. Supp. 2d 56, 61-64, 66-67
(D.D.C. 2013).
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Stone & Webster claims the district court erred for two
reasons: the court “applied an improper legal standard in a first
to file analysis and incorrectly interpreted” the contract.
Appellants’ Brief at 15. Stone & Webster does not take issue
with the district court’s findings regarding the comparative
advantage of trying the case in Georgia rather than D.C.
As to the legal standard, the general rule was set in Kerotest
Manufacturing Co. v. C-O-Two Fire Equipment Co., 342 U.S.
180, 183 (1952), a decision the parties here neglected to
mention. The Kerotest Court noticed that the Federal
Declaratory Judgments Act, 28 U.S.C. §§ 2201-2202, had given
rise to “the initiation of litigation by different parties to many-
sided transactions . . ..” Kerotest, 342 U.S. at 183. To
determine which of two pending suits should proceed, the
Supreme Court decided that the lower courts must be given “an
ample degree of discretion,” id. at 183-84; see UtahAmerican
Energy, Inc. v. Dep’t of Labor, 685 F.3d 1118, 1123 (D.C. Cir.
2012). “Wise judicial administration, giving regard to
conservation of judicial resources and comprehensive
disposition of litigation, does not counsel rigid mechanical
solution of such problems.” Kerotest, 342 U.S. at 183.
In Kerotest there were two lawsuits, one begun by the
patent holder in Illinois against an alleged infringer. The patent
holder later amended its complaint to add Kerotest as a
defendant. The amendment in the Illinois case came about two
weeks after Kerotest sued the patent holder in Delaware seeking
a declaration that its products did not infringe the patents. Id. at
181-83. The Supreme Court did not decide the case on the basis
of which suit was filed first, a basis the Court deemed a “rigid
mechanical solution.”2 Id. at 183. Instead the Court held that
2
More than a century earlier the Court had stated flatly that “In
all cases of concurrent jurisdiction, the Court which first has
6
the “factors relevant to wise administration here are equitable in
nature” and that the lower court had properly weighed those
factors in holding that the Delaware action should be stayed.
Id.; see Handy v. Shaw, Bransford, Veilleux & Roth, 325 F.3d
346, 350 (D.C. Cir. 2003); Columbia Plaza Corp. v. Sec. Nat’l
Bank, 525 F.2d 620, 627-28 (D.C. Cir. 1975); Semmes Motors,
Inc. v. Ford Motor Co., 429 F.2d 1197, 1202-04 (2d Cir. 1970)
(Friendly, J.).
Kerotest thus held that which of two actions came first was
not determinative although it could be relevant, particularly if
the earlier action had already progressed beyond the complaint
stage. In Kerotest itself, the patent holder did not bring Kerotest
into its Illinois case until two weeks after Kerotest sued in
Delaware. Nonetheless the Supreme Court agreed that the
Delaware action should be stayed in favor of the Illinois suit.
From Kerotest our court has concluded that “an injunction
favoring” the action filed first is not “a mandatory step in all
instances because countervailing equitable considerations, where
present, cannot be ignored.” Columbia Plaza Corp., 525 F.2d
at 627. The district court in the case before us followed these
principles and added that “equitable considerations” are
particularly important if the competing complaints are filed
closely in time, as they were here. Stone & Webster, 965 F.
Supp. 2d at 61; see James P. George, Parallel Litigation, 51
BAYLOR L. REV. 769, 788 (1999).
Citing Tempco Electric Heater Corp. v. Omega
Engineering, Inc., 819 F.2d 746, 749-50 (7th Cir. 1987), Stone
& Webster argues that Georgia Power’s action should be
disfavored because it was an “anticipatory declaratory judgment
possession of the subject must decide it.” Smith v. McIver, 22 U.S.
532, 535 (1824).
7
action.” Appellants’ Brief at 28, 30. Whatever the validity of
the rule in Tempco,3 the decision has no application here. Both
lawsuits, the one in D.C. and the one in Georgia, were filed in
anticipation of each other. And as the district court determined,
both lawsuits sought not only coercive relief but also declaratory
relief. See Stone & Webster, 965 F. Supp. 2d at 64-65.
In all of this, the district court applied the correct legal
principles in making a comparative judgment between venue in
the District of Columbia and venue in the Southern District of
Georgia. For all practical purposes, the filings here were
simultaneous and the district court properly treated them as
such. As to what Kerotest called “equitable” factors, the court’s
evaluation pointed strongly in favor of allowing the Georgia
action to go forward. The Georgia district court is presumably
more familiar with the law governing the contract—that is,
Georgia state law. Id. at 62. Trying the case in the Southern
District of Georgia “would permit easier access to relevant
evidence”—the construction site is located there and “several
potential witnesses with knowledge of the claims” are located in
Georgia. Id. at 62-63. Other “ties between the parties’ dispute
3
Tempco was a trademark case in which the alleged infringer
brought a declaratory judgment action after the holder of a trademark
threatened to sue in another venue and later did so. Tempco held that
the first-filed declaratory judgment action should be dismissed
because it was “in anticipation of an infringement action,” 819 F.2d
at 749. The Federal Circuit has refused to follow Tempco. Genentech,
Inc. v. Eli Lilly & Co., 998 F.2d 931, 937 (Fed. Cir. 1993), abrogated
on other grounds by Wilton v. Seven Falls Co., 515 U.S. 277, 282
(1995). Two district courts in the Seventh Circuit have since refused
to follow Tempco in patent suits, which are appealable only to the
Federal Circuit under 28 U.S.C. § 1295(a)(1). See K & F Mfg. Co. v.
Western Litho Plate & Supply Co., 831 F. Supp. 661, 663-64 (N.D.
Ind. 1993); Technical Concepts, L.P. v. Zurn Indus., Inc., No. 02-C-
2827, 2002 WL 31027962, at *6 (N.D. Ill. Sept. 10, 2002).
8
and the Southern District of Georgia are numerous and
undeniable.” Id. at 63.
There is no reason to say anything more on this subject. As
we have mentioned, Stone & Webster does not argue that the
court committed any error in evaluating these factors. It claims
instead that the court should not have done the evaluation. We
have rejected Stone & Webster’s first argument that the district
court’s analysis of the governing law was in error. Stone &
Webster’s second argument is that the “Venue” provision of the
contract, which is set forth in the margin,4 barred the court from
considering equitable factors.
The “Venue” provision states that the parties consent to
venue in the District of Columbia and—to quote the contractual
language—“waive[] any right to stay or dismiss any action or
proceeding . . . [in that court] on the basis of forum non-
conveniens or improper venue.” The provision also states: “For
the avoidance of doubt, the Parties do not by this Section . . .
waive any first-to-file challenges to venue.” It follows, Stone &
Webster contends, that the parties barred the district court from
deciding a first-to-file claim on the basis of any factors that
4
Article “34.3 Venue. The Parties agree to the non-exclusive
jurisdiction of the United States District Court for the District of
Columbia for any legal proceedings that may be brought by a Party
arising out of or in connection with this Agreement or for recognition
or enforcement of any judgment. Each Party accepts, generally and
unconditionally, the jurisdiction of the aforesaid court for legal
proceedings arising out of or in connection with this Agreement. Each
Party hereby waives any right to stay or dismiss any action or
proceeding under or in connection with this Agreement brought before
the foregoing court on the basis of forum non-conveniens or improper
venue. For the avoidance of doubt, the Parties do not, by this Section
34.3, waive any first-to-file challenges to venue.”
9
would also be relevant to forum non conveniens. The district
court rejected this interpretation and so do we.
The contractual language just quoted is a permissive forum
selection clause. The District of Columbia is deemed a proper
venue but it is not the only possible venue or even the preferred
one. The clause permitting first-to-file challenges to venue
contemplates what an adjacent clause makes explicit: “The
Parties agree to the non-exclusive jurisdiction of the United
States District Court for the District of Columbia . . ..” A first-
to-file challenge compares one lawsuit with another. Under the
law of the Supreme Court, and of this and other federal courts,
some of the factors to be considered in making this comparison
overlap with those considered in forum non conveniens cases.
But other factors are generally considered only in first-to-file
cases. Examples are the relative progress of the two cases and
the similarity of the cases. See, e.g., George, Parallel Litigation,
supra, 51 BAYLOR L. REV. at 787-88 (listing eleven factors in
addition to the convenience of the parties). To credit Stone &
Webster’s argument would be to treat the contractual “Venue”
provision as if it waived any first-to-file challenge resting on
considerations of equity. That would be to contradict the
contract, which states in the clearest possible terms that first-to-
file challenges were permitted and that the “Venue” provision
did not waive “any” such challenges. We agree with the district
court that when the parties agreed to the first-to-file clause they
took the law as it has developed since the Supreme Court’s 1952
decision in Kerotest.
The judgment of the district court is affirmed.
So ordered.