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Microtel Inns and Suites Franchising, INC. v. Presidential Hospitality, LLC.

United States District Court, D. New Jersey

March 8, 2018

MICROTEL INNS AND SUITES FRANCHISING, INC., a Georgia Corporation, Plaintiff,
PRESIDENTIAL HOSPITALITY, LLC, a New Mexico Limited Liability Company, and SAM BLUE, an individual, Defendants.


          Steven C. Mannion, United States Magistrate Judge

         Before this Court is the motion to stay, dismiss, or transfer by defendants, Presidential Hospitality, LLC (“Presidential”) and Sam Blue.[1] The Honorable Susan D. Wigenton, U.S.D.J., referred the motion to the undersigned for disposition in accordance with Local Civil Rule 72.1(a)(1). There was no oral argument. Upon consideration of the parties' submissions and for the reasons set forth herein, Defendants' motion to transfer venue and to stay is DENIED, and the motion to dismiss shall be terminated pending further jurisdictional discovery.


         On August 1, 2017, this action was filed by Plaintiff, Microtel Inns and Suites Franchising, Inc. (“Microtel”).[3] The complaint alleges that Microtel and Mr. Blue entered into a license agreement for the construction and operation of a Microtel guest lodging facility in Durango, Colorado for a twenty year term.[4] According to the agreement, Mr. Blue is required to make periodic payments to Microtel for the license to operate the hotel. Mr. Blue subsequently assigned his rights and obligations under the License Agreement to Presidential, [5] and he provided Microtel with a Guaranty of Presidential's obligations under the License Agreement.[6] Microtel alleges that Defendants' refusal to make payments resulted in the premature termination and breach of the license agreement for the operation of the hotel. The License Agreement is governed by New Jersey law, and includes a consent to jurisdiction and venue provision that all disputes between the parties shall be instituted exclusively in the state or federal court of general jurisdiction closest to Microtel's then-current principal business address, which is in Parsippany, New Jersey.[7]

         On September 12, 2017, Presidential filed an action in the San Juan County Court in New Mexico against Microtel and others (the “New Mexico” action).[8] On September 26, 2017, Microtel and the other defendants removed the New Mexico action to the U.S. District Court for the District of New Mexico.[9] On September 29, 2017, Microtel filed a motion to transfer venue in the New Mexico action to this Court.[10] The complaint challenges the validity of the agreements and documents executed with Microtel, including the venue provision.[11] Defendants allege that Microtel and its parent company fraudulently induced them to enter into the agreements at issue in this litigation and seek to rescind the agreement and venue provision and have them declared void ab initio.[12]

         In the New Mexico action, Presidential alleges that Microtel and its parent company Wyndham began a relationship with Mr. Blue in 2011 through which they used representations, promises, omission, and high-pressured sales tactics to fraudulently induce Presidential and Blue to enter into the Microtel construction and operation agreement and related documents, including an assignment, guaranty, and Note.[13] The discussions at issue took place while Defendants were in New Mexico, the agreement was executed in New Mexico, and a check for the Agreement was delivered in New Mexico.[14]


         Magistrate judges are authorized to decide any non-dispositive motion designated by the Court.[15] This District has specified that magistrate judges may determine any non-dispositive pre-trial motion.[16] Motions to transfer are non-dispositive.[17] Decisions by magistrate judges must be upheld unless “clearly erroneous or contrary to law.”[18]


         A. First to File Rule

         The first-to-file rule “provides that [i]n all cases of federal concurrent jurisdiction, the court which first has possession of the subject must decide it.”[19] The first-to-file rule “is a policy of comity which counsel[s] trial judges to exercise their discretion by enjoining the subsequent prosecution of similar cases in different federal district courts.”[20] It “encourages sound judicial administration and promotes comity among federal courts of equal rank.”[21] The rule also “applies where actions are truly duplicative such that a determination in one action leaves little or nothing to be determined in the other action.”[22] “However the issues and parties need not be identical.”[23]

         “The first-to-file rule permits a court to dismiss, stay, or transfer the later-filed action.”[24]In deciding whether to transfer pursuant to the first-to-file rule, a court must consider the same factors applicable to a motion to transfer under 28 U.S.C. § 1404(a). “If the factors balance in favor of the first to file rule, then a court may properly…transfer the second-filed action to avoid duplicative litigation under its ‘inherent powers.'” Id.

         Here, both this Court and the District of New Mexico appear to have concurrent jurisdiction over a nearly identical case. It is undisputed that the two cases are based on the validity and enforceability of a License Agreement. All the parties in the instant action are also named parties in the New Mexico action. The instant action was filed first, and the New Mexico action was filed approximately six weeks later. None of the exceptions to the first to file rule, such as bad faith, forum shopping, or the fact that the second-filed action developed further than the first-filed action, are alleged to have taken place here by Defendants. Hence, the first to file rule dictates that this court decide the issues in this action.

         Because the Court finds that the first-to-file rule applies, it will not stay the case in this Court. The Court finds that it is not in the interest of judicial economy to stay the instant action pending the outcome of the action in the District of New Mexico, in light of the fact that the first-filed action was filed in this District.

         B. Transfer under 28 U.S.C. 1404

         The first-to-file rule notwithstanding, Defendants fail to meet their burden of demonstrating that a transfer of this action to the District of New Mexico under 28 U.S.C. 1404 is warranted.

28 U.S.C. 1404(a) provides:

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.

         “The purpose of §1404(a) is to avoid the waste of time, energy and money and, in addition, to safeguard litigants, witnesses, and the public against avoidable inconvenience and expense.”[25]Transfer analysis under § 1404 is flexible and individualized, with no rigid rule governing a court's determination.[26] ...

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