Being the first to file business litigation could be an advantage

Being the first to file business litigation could be an advantage

On behalf of Kadish & Associates Law Group posted in Business Litigation on Friday, March 4, 2016.

Many Arizona companies do not limit their contracts to other companies within the state. When those relationships cross state lines, contract disputes can end up in federal court. When negotiations break down, winning the race to be the first to file business litigation could be an advantage.

For example, companies based in different states were involved in contract disputes that were not resolved. Each of them filed a lawsuit in a different federal court. The judges in those courts reviewed the cases and the issues involved to determine whether there was enough similarity in the cases to consolidate them in one jurisdiction.

It was determined that the federal cases in Pennsylvania and Michigan did have enough overlap to be tried together in one jurisdiction. At that point, the “first-filed” rule was invoked, which means that the jurisdiction in which the first suit was filed will hear the case. This is done for several reasons, the least of which is to keep costs down for both the parties and the judicial system.

In this example, the party from Michigan filed its case first. Therefore, the Pennsylvania court ruled that the case should be moved to Michigan, and the other court concurred. It remains to be seen whether this will provide the Michigan based company with an advantage.

This is also a risk for any Arizona company involved in business litigation with the same parties over the substantially similar issues in two separate federal jurisdictions. It is possible that the question of combining the two cases in one jurisdiction will arise. Whether to contest jurisdiction in such a scenario is often a reflection of a company’s legal strategy.

Source: pennrecord.com, “Philadelphia federal court sends breach of contract case to Michigan“, Nicholas Malfitano, Feb. 17, 2016

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