Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-03894/USCOURTS-cand-3_07-cv-03894-4/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

DAVID C. SOWARD, et al.,

Petitioners,

 v.

THE & TRUST, et al.,

Respondents /

No. C-07-3894 MMC

ORDER DENYING PETITIONERS’

MOTION TO REMAND; GRANTING

RESPONDENTS’ MOTION TO

TRANSFER OR STAY; VACATING

HEARING

Before the Court are two motions: (1) petitioners David Soward (“Soward”) and &

Management Company’s (“& Management”) motion to remand, filed August 13, 2007; and

(2) respondents The & Trust, Sandy Lerner (“Lerner”), Leonard Bosack (“Bosack”), Richard

Troiano, & Capital Partners, L.P., Cartesian Partners, L.P. (“Cartesian”), Leonard Bosack

and Bette M. Kruger Foundation, and & Capital, Inc.’s motion, filed August 31, 2007, to

transfer the instant action to the Western District of Washington or, alternatively, stay the

action in favor of an action pending in the Western District of Washington. Having

considered the parties’ submissions filed in support of and in opposition to the motions, the

Court deems the matters appropriate for decision on the papers, VACATES the hearing

scheduled for October 5, 2007, and rules as follows.

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Case 3:07-cv-03894-MMC Document 46 Filed 10/09/07 Page 1 of 7
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1

On August 31, 2007, respondents filed two Declarations of Daniel H. Bromberg, one

in support of their motion to transfer or stay, and one in support of their opposition to the

motion to remand. The citations to “Bromberg Decl.” herein refer to the Bromberg

Declaration filed in support of the motion to transfer or stay.

2

BACKGROUND

In February 2004, Soward and & Management filed an action in arbitration, seeking,

in part, an accounting of Soward’s interest in Cartesian, a partnership in which Soward was

a member. (See Appendix of Arb. Awards, Tab 1 at 7, 14.) In July 2004, Bosack and

Lerner filed an action against Soward and & Management in the Western District of

Washington, alleging claims for breach of fiduciary duty, breach of contract, fraud, and

conversion. (See Bromberg Decl. Ex. G.)1

 In November 2004, the Washington district

court issued an order staying the action filed by Bosack and Lerner, and directed the

parties to arbitration. (See id. Ex. P.)

On April 19, 2007, Bosack and Lerner voluntarily dismissed the 2004 action they had

filed in the Western District of Washington. (See id. ¶ 21, Ex. Q.) Also, on April 19, 2007,

Bosack, Lerner, and Cartesian filed in that district a new action, specifically, a petition

seeking to confirm one “interim” award, Interim Award # 3, and to vacate another “interim”

award, Interim Award No. 4. (See id. Ex. R.) On May 1, 2007, Soward and & Management

filed a motion to dismiss the newly-filed Washington action, asserting the Washington court

did not have diversity jurisdiction and the petition failed to state a viable claim for relief. 

(See id. Ex. S.) On May 2, 2007, the Washington district court issued a minute order

staying the Washington action. (See id. Ex. U.) On June 28, 2007, the Washington district

court held a status conference, at which time the district court continued the stay and

ordered Bosack, Lerner, and Cartesian to file an amended petition within five days after

entry of a final arbitration order. (See id. ¶ 26.)

On July 26, 2007, the arbitration panel issued a Final Award, which the panel

subsequently “corrected” by order issued August 14, 2007. (See Appendix of Arb. Awards,

Tabs. 6 and 7.) On July 27, 2007, Soward and & Management filed in San Francisco

Superior Court the instant petition to confirm the final arbitration award. (See Sharp Decl.,

Case 3:07-cv-03894-MMC Document 46 Filed 10/09/07 Page 2 of 7
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filed August 13, 2007, Ex. A.) On July 30, 2007, respondents removed the instant petition

to the district court for the Northern District of California, alleging the existence of diversity

jurisdiction. (See Notice of Removal ¶ 4.) Also, on July 30, 2007, Bosack, Lerner, and

Cartesian filed in the Washington district court an amended petition, as previously directed

by the Washington district court. (See Bromberg Decl. Ex. U.) Subsequently, on August

20, 2007, the Washington district court issued a minute order declining to lift the stay

imposed on the petition pending therein, and ordered the parties to inform the Washington

district court of this Court’s determination as to the motion to remand. (See id. Ex. V.)

DISCUSSION

A. Motion to Remand

In the Notice of Removal, respondents allege that Soward and & Management are

residents of California, and that each respondent is a resident of a state other than

California. In their motion to remand, Soward and & Management assert that respondent

Cartesian is a citizen of California because Soward, at all relevant times a resident of San

Francisco, remains a partner of Cartesian. Consequently, Soward and & Management

argue, the parties are not diverse.

For purposes of determining whether parties to a removed action are diverse,

“diversity [is] assessed as of the time that the complaint is filed and removal is effected.” 

See Strotek Corp. v. Air Trans. Ass’n of Am., 300 F. 3d 1129, 1132 (9th Cir. 2002). A

partnership is considered a citizen of each state in which a partner resides. See Carden v.

Arkoma Assocs., 494 U.S. 185, 195 (1990). Where a partner in a partnership sues the

partnership itself, the plaintiff partner’s citizenship is attributed to both the plaintiff and the

defendant partnership. See Buckley v. Control Data Corp., 923 F. 2d 96, 97 (8th Cir.

1991).

 As noted, the instant petition was filed in state court on July 27, 2007 and was

removed on July 30, 2007. On December 12, 2006, in Interim Award # 3, the arbitration

panel found the amount of Soward’s interest in Cartesian was $1,464,391, plus interest,

and ordered Cartesian to pay Soward that amount within sixty days. (See Appendix of Arb.

Case 3:07-cv-03894-MMC Document 46 Filed 10/09/07 Page 3 of 7
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Soward and & Management rely on language in Decker v. Merrill Lynch, Pierce,

Fenner & Smith, 205 F. 3d 906 (6th Cir. 2000), specifically, the statement that an

“arbitrator’s award will be binding on the parties unless they challenge the validity of the

underlying contract to arbitrate . . . or seek to vacate, modify, or correct the award.” See id. at 909. Here, however, no party has challenged the validity of the underlying contract to

arbitrate or has sought to vacate, modify, or correct either Interim Award # 3 or the Final

Award to the extent it is based thereon.

3

In Interim Order # 3, the arbitration panel stated such award was “confirmable upon

entry by the Panel.” (See Appendix of Arb. Awards, Tab 3 at 10.)

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Awards, Tab 3 at 11.) The panel further found that “[u]pon payment to Soward . . . Soward

shall no longer be a partner of Cartesian and shall be considered for every purpose as

having withdrawn as a partner.” (See id.) On December 14, 2006, Soward was paid the

sum of $1,464,391, plus interest. (See Appendix of Arb. Awards, Tab 4 at 8.) Soward and

& Management argue that, even though Soward has been paid the amount ordered by the

arbitration panel, Soward is still a partner of Cartesian because a court has not confirmed

Interim Award # 3. An arbitration award, however, “does not require affirmation from a

court to take effect.” See Centurion Air Cargo, Inc. v. United Parcel Serv. Co., 420 F. 3d

1146, 1150 (11th Cir. 2005) (citing cases).2 There being no dispute that Soward was timely

paid the amount set forth in Interim Order # 3, the arbitration panel’s finding that Soward

“shall no longer be a partner of Cartesian” took effect as of the date of such payment,

specifically, December 14, 2006.3

 Moreover, the Final Award, issued July 26, 2007,

“incorporated” Interim Award # 3. (See Appendix of Arb. Awards, Tab 6 at 3.) Thus, even

if Interim Award # 3 is not deemed effective until issuance of the Final Award, the Final

Award was, as noted, issued on July 26, 2007, and thus the arbitration panel’s finding that

Soward “shall no longer be a partner of Cartesian” took effect no later than July 26, 2007. 

Consequently, because Soward was not a partner of Cartesian when the instant action was

removed on July 30, 2007, the Court finds the parties were diverse as of the date the

instant petition was removed.

Accordingly, the motion to remand will be denied.

//

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All parties seek to confirm Interim Award # 3, petitioners seek to confirm Interim

Order # 4, and respondents seek to vacate the Final Order to the extent it is incorporates

Interim Award # 4.

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B. Motion to Stay or Transfer

The earlier-filed petition currently pending in the Western District of Washington

seeks confirmation of the arbitration panel’s Interim Award # 3 and vacatur of the panel’s

Interim Award # 4. In Interim Award # 3, the panel resolved one claim, specifically,

Soward’s claim for an accounting as to the amount of his interest in Cartesian. In Interim

Award # 4, the panel resolved two other claims, specifically, Soward’s claim against

Bosack for breach of fiduciary duty and Soward’s claim against Bosack and Lerner for

conversion.

Respondents seek to stay the instant action, relying on the “first-to-file” rule, or,

alternatively, to transfer the instant action to the Western District of Washington, relying on

28 U.S.C. § 1404(a).

Under the “first-to-file rule,” a district court has discretion to “transfer, stay, or

dismiss an action when a similar complaint has already been filed in another federal court”

and both actions involve the same parties. See Alltrade, Inc. v. Uniweld Products, Inc., 946

F. 2d 622, 623, 625 (9th Cir. 1991). Respondents argue, and Soward and & Management

do not dispute, that the instant petition and the petition filed on April 19, 2007 in the

Western District of Washington involve the same parties, specifically, the parties to the

arbitration proceeding. Further, respondents argue, and Soward and & Management do

not dispute, that the two petitions raise the same issues; each seeks judicial review of the

same orders issued in the same arbitration proceeding.4

 Consequently, the Court finds the

Washington action is the first-filed action for purposes of the “first-to-file” rule.

Soward and & Management argue the Court should not exercise its discretion to

apply the first-to-file rule, because the Washington petition was anticipatory in nature. See

Alltrade, 946 F. 2d at 628 (holding “exception to the first-to-file rule typically will be made”

where first-filed action was “anticipatory”). “Anticipatory suits are disfavored because they

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In light of this finding, the Court has not considered respondents’ alternative

argument that the action should be transferred in the interests of justice, pursuant to 28

U.S.C. § 1404(a).

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are aspects of forum shopping.” Id. (internal quotation and citation omitted). Here, there is

an insufficient showing that respondents, in filing the April 2007 action in Washington,

engaged in forum shopping. Respondents filed their initial pleading concerning the instant

dispute in Washington in 2004. Moreover, Soward and & Management have not identified

any tactical advantage respondents might gain by having a district court in Washington, as

opposed to a district court in California, consider whether to confirm or vacate any of the

subject arbitration awards, and no such advantage is evident. Cf. Travelers Indemnity Co.

v. Madonna, 914 F. 2d 1364, 1371 (9th Cir. 1990) (holding, for purposes of determining

under Colorado River doctrine whether to stay second-filed federal action in favor of firstfiled state court action, federal plaintiff engages in “forum shopping” if it files federal action

to “avoid adverse rulings made in the state court or to gain a tactical advantage from the

application of federal court rules”).

Finally, although, as Soward and & Management point out, the portion of the

Washington petition seeking vacatur of Interim Award No. 4 may have been premature

when filed in April 2004, Soward and & Management have not argued, let alone shown,

that the Washington petition was prematurely filed to the extent it seeks an order confirming

Interim Award No. 3. Indeed, the arbitration panel stated that Interim Award No. 3 was

“confirmable upon entry by the Panel.” (See Appendix of Arb. Awards, Tab 3 at 10.)

Under the circumstances presented, the Court finds Soward and & Management

have failed to show an exception to first-to-file rule is applicable.

Respondents request that the Court, under the first-to-file rule, stay the instant

action. In lieu of a stay, however, the Court finds transfer is the more appropriate remedy,

as transfer will avoid possible fragmentation of the parties’ claims.

Accordingly, the Court finds it appropriate to exercise its discretion to transfer the

instant petition to the Western District of Washington.5

Case 3:07-cv-03894-MMC Document 46 Filed 10/09/07 Page 6 of 7
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CONCLUSION

For the reasons set forth above:

1. Soward and & Management’s motion to remand is hereby DENIED.

2. Respondents’ motion to transfer is hereby GRANTED, and the instant action is

hereby TRANSFERRED to the district court for the Western District of Washington.

IT IS SO ORDERED.

Dated: October 9, 2007 

MAXINE M. CHESNEY

United States District Judge

Case 3:07-cv-03894-MMC Document 46 Filed 10/09/07 Page 7 of 7