Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-03515/USCOURTS-cand-3_05-cv-03515-2/pdf.json

Parties Involved:
Inherent
Plaintiff
Inherent.Com
Plaintiff
Lexis/Nexis Inc.
Defendant
Martindale-Hubbell
Defendant

Document Text:

United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

INHERENT.COM aka INHERENT,

Plaintiff,

 vs.

MARTINDALE-HUBBELL, LEXIS/NEXIS INC. and

DOES 1 through 200, inclusive,

Defendants. /

No. C 05-3515 MHP

MEMORANDUM & ORDER

Defendant's motion to dismiss or,

in the alternative, to transfer

On July 29, 2005 plaintiff Inherent.com (“Inherent”) filed this action in the Superior Court

of the State of California against defendants Martindale-Hubbell (“Martindale”) and Lexis/Nexis,

Inc. (“LexisNexis”) alleging breach of contract and fraudulent acquisition of trade secrets. On

August 30, 2005 Martindale and LexisNexis removed the action to this court. Now before the court

is the defendants’ motion to dismiss the action pursuant to the first-to-file rule or, in the alternative,

defendants’ motion to transfer the action to the federal district court of New Jersey pursuant to 28

U.S.C. section 1404. Having considered the arguments presented and for the reasons stated below,

the court enters the following memorandum and order. 

BACKGROUND

Martindale and LexisNexis are not legal entities but are divisions of Reed Elsevier, Inc.

(“Reed”) which specializes in the provision of various products and services used by the legal

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profession. Inherent provides internet-related services for professional organizations such as law

firms and legal professional associations. See Corcoran Dec. ¶ 3. Reed’s principal place of

business is in Newton, Massachussetts and LexisNexis’ principal place of business is in

Miamisburg, Ohio. At the inception of the relationship between Inherent and Martindale, Inherent’s

principal place of business was in Portland, Oregon. Although LexisNexis is a named defendant in

the lawsuit, substantially all the disputed activity occurred with its affiliate Martindale, and thus

LexisNexis has adopted Martindale’s arguments in the current motion. Def.’s Mot. at 3. 

Since the mid-1990s, Martindale and Inherent have had a significant business relationship. 

In 1996, the parties entered into a Marketing Alliance Agreement (“MAA”) to “market and provide

Internet Web facilities for lawyers and law firms.” Corcoran Dec., Exh. A. This MAA provided for

the resolution of any disputes between the parties through arbitration in New Jersey or New York.

Id. ¶ 11. Although the MAA expired in 2002, during its effective period, Inherent generated

revenues in excess of $200,000 through Martindale’s sales to its customers. Despite the expiration

of the MAA, the two companies continued to engage in substantial business dealings with one

another. Martindale paid Inherent over $93,000 in 2003, $67,000 in 2004 and $78,000 in 2005 thus

far. Id. ¶ 8. Indeed since January of 2000, Inherent has received in excess of $1,000,000 from

Martindale. Additionally, executives of Inherent have made trips to Martindale’s New Jersey offices

approximately forty times during the course of their business relationship, the great majority of these

trips being made by the president of Inherent, Debra Kamys.

In August of 2004, Ms. Kamys approached Martindale about the feasibility of a purchase of

Inherent by Martindale. Concomitant with the acquisition negotiations, the parties executed a nondisclosure agreement (“Non-Disclosure Agreement” or “NDA”) on November 1, 2004. Pursuant to

this NDA, which is governed by New Jersey law, the parties were prohibited from using

confidential, proprietary or trade secret information disclosed during the run-up to the proposed

acquisition. Little Dec., Exh. A ¶¶ 1,6. The parties continued their acquisition negotiations and on

May 25, 2005 Ms. Kamys visited the headquarters of Martindale in New Jersey where she was

presented with a proposed non-binding letter of interest (“Letter of Interest”). The Letter of Interest

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For the Northern District of California

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was drafted by Martindale in New Jersey, sent to Inherent in Oregon for signing and then returned to

Martindale in New Jersey. See Little Dec. ¶¶7–16 and Exh. C. The final form of the Letter of

Interest was executed on June 17, 2005 with a stated purpose of providing a “preliminary nonbinding indication of interest in acquiring the web site development, management and hosting

applications and services business . . . of Inherent.com, Inc. . . . and [detailing Martindale’s]

proposed next steps to move this potential transaction forward.” Id., Exh. B at 1 (emphasis added). 

The Letter of Interest also noted that “any [resulting acquisition] transaction based upon this

indication of interest will be subject to . . . [a number of] conditions precedent.” Id. at 2. One such

key condition was the completion of the legal and business due diligence of Inherent. After the

execution of the Letter of Interest, Martindale began its due diligence of the target company. On

June 28, 2005 (a mere eleven days after the execution of the Letter of Interest) Martindale informed

Inherent that based on some discoveries during its initial due diligence, it no longer desired to

proceed with the acquisition. As a result, Martindale asserts that all confidential files were returned

to Inherent pursuant to the requirements of the NDA. Little Dec. ¶ 17. From August 2004 (when

Ms. Kamys first approached Martindale about the proposed acquisition) through June 2005 (when

this Letter of Interest was signed), Martindale and Inherent exchanged a substantial amount of

telephone calls, e-mails and in person meetings in Oregon and in New Jersey. Id. ¶ 7; Kamys. Dec.

¶¶ 11, 12.

On July 13, 2005 Inherent’s counsel notified Martindale of his client’s belief that Martindale,

by declining to proceed with the acquisition, had breached an acquisition contract with Inherent and

warned that if the matter was not settled in five days, Inherent would seek to litigate its claims in

court. Duckstein Dec., Exh. E at 5. On July 18, 2005 Reed filed for declaratory relief in the

Superior Court of New Jersey requesting that the court issue a declaratory judgment stating that

Martindale was not in breach of any obligation to Inherent in connection with the acquisition

negotiations and that Reed had no liability to Inherent for terminating its preliminary interest in

pursuing the transaction. Id., Exh. A at 5. On the same day of the filing, Martindale informed

Inherent of its filed complaint and completed service of process on plaintiff on July 20, 2005. Id.,

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Exh. C. 

On July 29, 2005 Inherent filed a similar action in the Superior Court of California seeking

declaratory relief and damages for breach of contract and for fraudulent acquisition of its trade

secrets. Plaintiff claims that this filing was made in California because of the relocation of its

business and its key witnesses to San Francisco, California—an event that allegedly occurred prior

to the filing of Reed’s complaint in New Jersey. According to the Kamys declaration, two of

plaintiff’s principal witnesses (Ms. Kamys and her husband) have relocated from Oregon to

California. Kamys Dec. ¶ 15. Plaintiff supports its claim that a change in Inherent’s principal place

of business from Oregon to California occurred in early July with a certification of registration

issued by the state of California which is dated August 23, 2005. Kamys Dec. Exh. A. Inherent’s

purported new principal place of business shares an address with that of its San Francisco counsel: 

781 Beach Street, # 333, San Francisco, CA. Id. As of August 22, 2005, there was no record of any

business under the name of “Inherent” or “Inherent.com” registered with the California Secretary of

State. Marinez Dec., Exh. B.1

 As of October 11, 2005 contact information on Inherent’s website

listed a Portland, Oregon address. Marinez Supp. Dec., Exh. A.2 As of October 14, 2005 there was

no local directory listing for “Inherent.com” or “Inherent” in San Francisco. 

On August 15, 2005 Inherent removed the New Jersey action to federal court on diversity

grounds. Similarly, on August 30, 2005 Martindale removed the current action to this court. 

Martindale has identified fourteen witnesses, twelve of whom reside in New Jersey. Little Dec. ¶¶

18–19. Inherent has identified nine witnesses, seven of whom reside in Oregon. Kamys Dec. ¶15.

Now before this court is defendant Martindale’s motion to dismiss or transfer the action in

light of the previously filed New Jersey action or because of a failure to plead fraud with sufficient

particularity. In the alternative, Martindale has filed a motion to transfer the action to the district

court in New Jersey. Plaintiff opposes the motions, arguing inter alia that: (1) the first-to-file rule is

inapplicable in the present case, (2) equitable considerations weigh in favor of a departure from the

first-to-file rule, (3) the New Jersey district court lacks personal jurisdiction over Inherent, and (4)

litigation in New Jersey would be inconvenient for Inherent because they did not anticipate

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litigation in that forum.

Having considered fully the parties’ arguments and submissions, and for the reasons set forth

below, the court enters the following memorandum and order.

LEGAL STANDARD

I. First-to-File Rule

The first-to file rule is “a generally recognized doctrine of federal comity which permits a

district court to decline jurisdiction over an action when a complaint involving the same parties and

issues has already been filed in another district.” Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d

93, 94–95 (9th Cir. 1982) (quoting Church of Scientology of California v. United States Dep’t of the

Army, 611 F.2d 738, 749 (9th Cir. 1979)); see also Z-Line Designs, Inc. v. Bell’O Int’l, LLC, 218

F.R.D. 663 (N.D. Cal. 2003) (Whyte, J.); MP3 Board v. Recording Indus. Assoc. of Am., Inc., No.

C-00-20606, 2001 WL 804502 (N.D. Cal. Feb. 27, 2001) (Whyte, J.). The “sameness” requirement

does not mandate that the two actions be identical, but is satisfied if they are “substantially similar.”

Dumas v. Major League Baseball Properties, Inc., 52 F. Supp. 2d 1183 (S.D. Cal. May 14, 1999),

vacated on other grounds by, 104 F. Supp. 2d 1224 (S.D. Cal. June 21, 2000), aff’d, 300 F.3d 1083

(9th Cir. 2002). See also British Telecomm. v. McDonnell Douglas Corp., No. C-93-0677, 1993 WL

149860 at *4 (N.D. Cal. May 3, 1993) (Patel, J.) (finding that Alltrade “does not stand for a blanket

rule that there must be strict identity of parties for the first-to-file rule to apply.”). The purpose of

this well-established rule is to promote efficiency and to avoid duplicative litigation and thus it

should not be lightly disregarded. Alltrade, Inc. v. Uniweld Prod., Inc., 946 F.2d 622, 625 (9th Cir.

1991). Under the doctrine, a district court may transfer, stay or dismiss the second action if it

determines that it would be in the interest of judicial economy and convenience of the parties. 

Pacesetter, 678 F.2d at 95. The pre-requisites for application of the doctrine are chronology and

identity of the parties and issues involved. Alltrade, 946 F.2d at 625. 

In its discretion, the district court may depart from the rule for reasons of equity, when the

filing of the first suit evidences bad faith, anticipatory suit, or forum shopping. Id. at 628. The

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anticipatory suit exception is rooted in a concern that a plaintiff should not be “deprived of its

traditional choice of forum because a defendant with notice of an impending suit first files a

declaratory relief action over the same issue in another forum.” British Telecomm., 1993 WL

149860 at *3. In order for a court to find that the initial suit was anticipatory, the plaintiff in the first

action must have been in receipt of “specific, concrete indications that a suit by defendant was

imminent.” Ward v. Follett Corp., 158 F.R.D. 645, 648 (N.D. Cal. 1994) (Whyte, J.) (citing

Amerada Petroleum Corp. v. Marshall, 381 F.2d 661, 663 (5th Cir. 1967) (where the court found the

filing of a declaratory action by plaintiff anticipatory when it followed receipt of defendant’s letter

stating that defendant would sue plaintiff in another forum where it could properly serve plaintiff, if

plaintiff did not voluntarily submit to jurisdiction in the current forum)); see also Bryant v. Oxxford

Express, Inc., 181 F. Supp. 2d 1045, 1048-9 (C.D. Cal 2000) (finding that the receipt of a letter

declaring that plaintiff was in breach did not render the suit filed “anticipatory” because it did not

indicate that a lawsuit was imminent and plaintiff already had a pre-existing motive for going to

court); Guthy-Renker Fitness, LLC v. Icon Health & Fitness, Inc., et al., 179 F.R.D. 264 (C.D. Cal.

1998) (letter informing plaintiff about possible patent infringements did not threaten litigation and

thus declaratory action filed was not anticipatory). 

II. Motion to Transfer

Pursuant to 28 U.S.C. section 1404(a), a district court may transfer a civil action “for the

convenience of parties and witnesses [and] in the interest of justice . . . to any other district or

division where it might have been brought.” 28 U.S.C. § 1404(a); Straus Family Creamery v.

Lyons, 219 F. Supp. 2d 1046, 1047 (N.D. Cal. 2002) (Zimmerman, J.). A motion to transfer venue

lies within the broad discretion of the district court, and must be determined on an individualized

basis. Jones v. GNC Franchising, Inc., 211 F.3d 495, 498 (9th Cir.) (citing Stewart Org., Inc. v.

Ricoh Corp., 487 U.S. 22, 29 (1988)), cert. denied, 531 U.S. 928 (2000). The burden of showing

that transfer is appropriate is on the moving party. The Carolina Casualty Co. v. Data Broad. Corp.,

158 F. Supp. 2d 1044, 1048 (N.D. Cal. 2001) (Walker, J.). 

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District courts use a two step analysis to determine whether a transfer is proper. The

threshold question under section 1404(a) requires the court to determine whether the case could have

been brought in the forum to which the transfer is sought. 28 U.S.C. § 1404(a); Hatch v. Reliance

Ins. Co., 758 F.2d 409, 414 (9th Cir. 1985). If venue would be appropriate in the transferee court,

then the court must make an “individualized, case-by-case consideration of convenience and

fairness.” Jones, 211 F.3d at 498. Among the factors that a district court may consider in deciding

whether a transfer is appropriate are: (1) the location where the relevant agreements were negotiated

and executed; (2) the state that is most familiar with the governing law; (3) the plaintiff's choice of

forum; (4) the respective parties' contacts with the forum; (5) the contacts relating to the plaintiff's

cause of action in the chosen forum; (6) the differences in the costs of litigation in the two forums;

(7) the availability of compulsory process to compel attendance of unwilling nonparty witnesses; (8)

the ease of access to sources of proof and (9) any relevant public policy of the forum state. Jones,

211 F.3d at 498-99 (citing Stewart, 487 U.S. at 29-31 and Lou v. Belzberg, 834 F.2d 730, 739 (9th

Cir. 1987)). 

DISCUSSION

I. First-to-File Rule

Martindale asserts that Inherent’s current action must be dismissed, or in the

alternative transferred, because of the previously filed action in New Jersey. In opposition, plaintiff

argues that the first-to-file rule is inapplicable because the issues presented in the two cases are not

identical. Alternatively, even if the doctrine is found to be applicable, plaintiff asserts that the court

should depart from the rule for reasons of equity. 

The first-to-file rule is applicable in this case because the New Jersey action was filed before

the current action and it involves the same issues and parties. Martindale and Inherent are the

parties in dispute in both the New Jersey and California actions. Although the suit in New Jersey

was filed by Reed, it seeks declaratory relief that Reed is not obligated, through the actions of its

Martindale division, to purchase any of Inherent’s assets. See Duckstein Dec., Exh. A ¶20.

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Plaintiff contends, however, that the issues in the two actions are dissimilar because Inherent

has asserted a claim for damages in its latter-filed action that is “the result of the tortious conduct of

defendants and . . . [is] not dependent upon whether or not any contract for the sale of [Inherent] was

valid or not.” Pl.’s Opp. at 6. Thus, plaintiff argues, if the action is dismissed pursuant to the firstto-file doctrine, it would be deprived of this additional remedy. However, the issues in the first and

second action need not be identical but “substantially similar. See Dumas, 52 F. Supp. 2d at 1189. 

The key dispute in both actions is over whether or not the Letter of Interest gave rise to a binding

contract, and if so whether a breach did in fact occur. The allegedly tortious conduct with respect to

Inherent’s trade secrets occurred during the acquisition negotiations and, indeed, in its complaint,

Inherent asserts that Martindale entered into these negotiations with the express purpose of

misappropriating these trade secrets. See Duckstein Dec., Exh. E ¶15. Additionally, even though

Inherent does not specifically make note of this in its complaint, plaintiff’s fraud claim necessarily

involves a construal of the Non-Disclosure Agreement — an agreement that was executed in

furtherance of the proposed acquisition and the terms of which expressly govern the disclosure of

confidential information. Thus a ruling on this fraud issue will be intimately intertwined with the

factual and legal considerations surrounding the acquisition. Moreover, the mere existence of this

fraud claim does not disqualify an application of the first-to-file rule as plaintiff may raise this

additional prayer for relief as a counter-claim in the previously filed New Jersey action. 

A. Dismissal of the California Action

Notwithstanding the applicability of the doctrine, the anticipatory nature of plaintiff’s New

Jersey suit, as well as judicial economy and efficiency, counsel against a dismissal of the current

suit. Plaintiff alleges that the filing of suit in New Jersey was a “preemptive strike” by defendants

and an exercise in forum-shopping, which should militate against application of the doctrine. See

Alltrade, 946 F.2d at 628. Plaintiff contends that Reed filed the New Jersey action in response to an

attempt by Inherent to informally resolve the matter and thus the first-to-file rule should be

disregarded for equitable reasons because such activity “discourages the informal resolution of

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disputes between parties.” Pl.’s Opp. at 9.3 

It is clear that the New Jersey action was a suit filed in anticipation of litigation by Inherent. 

The July 13, 2005 letter was a specific and concrete indication that a suit by Inherent was imminent. 

See Ward, 158 F.R.D. at 648. The letter not only claimed that there had been a breach of contract,

but after a five-page exhaustive analysis of the factual history surrounding the acquisition

negotiations and a discussion of the harms allegedly suffered by Inherent, it stated that “unless a

settlement is reached within five (5) business days a lawsuit will be filed.” Duckstein Dec., Exh E at

5. The letter also requested that Martindale respond no later than July 18, 2005. Instead of

responding to this letter, Reed filed a declaratory action in New Jersey at the end of the five business

day period, on July 18, 2005. Thus, with notice of an impending suit by Inherent, Martindale chose

to preemptively file a declaratory suit in its home district. See Ex-Im Plastics, Inc., v. Miwon Am.,

Inc., No. CV 96-5710, 1996 WL 928189 at *5 (C.D. Cal. 1996) (noting that the filing of a

declaratory action is a “red flag that there may be compelling circumstances to depart from the firstto-file rule.”). To impose the “first-to-file” doctrine in this instance by dismissing this action would

unreasonably penalize Inherent which attempted to resolve the dispute before filing suit. 

Consequently, because of the anticipatory nature of the suit filed in New Jersey, it would be

inequitable to dismiss the current action under the first-to-file doctrine.4

B. Transfer of the California Action

Absent dismissal, defendant requests that the court transfer the action to the District Court

for the District of New Jersey under section 1404 for the convenience of the parties and in the

interest of justice. Plaintiff opposes this request, arguing that the New Jersey District Court lacks

personal jurisdiction over Inherent and that New Jersey is not the most convenient forum for the

litigation. Plaintiff requests that if the action is not maintained in California, it should be transferred

to Oregon.

Transfer of the suit from California would be proper because this state has no relation to the

parties or to the dispute. Under the general rule, a plaintiff’s choice of forum is given deference.

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Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1985). However, “the

degree to which courts defer to the plaintiff's chosen venue is substantially reduced when the

plaintiff's choice is not its residence or where the forum lacks a significant connection to the

activities alleged in the complaint.” Carolina Casualty, 158 F. Supp. 2d at 1048 (quoting Fabus

Corp. v. Asiana Express Corp., No. C 00-3172, 2001 WL 253185 at *1 (N.D. Cal. 2001)). Here, the

only connection that this litigation has to California is the alleged relocation of Inherent’s business

and two of its key witnesses to the state in early July. However, as noted by the New Jersey District

Court in denying Inherent’s motion to dismiss or, in the alternative, to transfer venue to California:

“Inherent’s relocation appears to be no more than an ingenious ‘forum shopping’ event.” Def’s

Supp. Req. Jud. Notice, Exh. E at 7.5 Besides a registration certificate, which bears an August 2005

rather than a July 2005 date, when this case was filed,6

 Inherent has offered up no other evidence of

a relocation to justify the filing of suit in California.7

 As of October 12, 2005 there was no record,

on either its own website or on the California Secretary of State website that Inherent was registered

to do business in, and had indeed moved to, California. With a business address which is the same

as that of its California counsel, and a website that as of October 12, 2005, still listed Portland,

Oregon as its principal place of business, it is clear that Inherent’s relocation is illusory at best. 

Furthermore, the court finds that transfer to Oregon would be inequitable in light of plaintiffs

gaming of the venue question. Plaintiff can hardly complain of the failure to transfer this case to

Oregon since it could have brought the action there in the first place.8 Having chosen not to do so, it

lost its opportunity to litigate this case in Oregon. The court also notes that when plaintiff filed its

complaint on July 29, 2005 plaintiff did not allege that it was a California corporation or that it had

its principal place of business in California. It merely alleged that it “is a corporation conducting

substantial business in San Francisco, California . . .”. Duckstein Dec., Exh. E ¶ 1. Even in its

removal notice filed in the New Jersey District Court and dated August 15, 2005 (after its purported

re-location to California), plaintiff stated that it “was a corporation incorporated under the laws of

the State of Oregon, and with its principal place of business in Oregon.”9

 Id., Exh. F ¶ 4. 

A transfer of the action to New Jersey rather than Oregon would be for the convenience of

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the parties and witnesses and serve the interest of justice as: (1) New Jersey local law is implicated

in this action,10 (2) New Jersey is the place where the majority of witnesses are located, (3)

consolidation with the first-filed action is feasible and (4) the New Jersey district court has personal

jurisdiction over Inherent and the suit could have been properly brought in New Jersey.11 Plaintiff

asserts that seven of its nine identified witnesses reside in Oregon, that all its internal documents

relating to the proposed acquisition are in Oregon and that the Non-Disclosure Agreement and the

Letter of Interest were executed by Inherent in Oregon. However, Martindale drafted the Letter of

Interest in New Jersey and the majority of witnesses (twelve of the fourteen witnesses identified by

Martindale) reside in New Jersey. Although, both parties exchanged an enormous amount of

communications and made visits to each other’s headquarters during the acquisition negotiations,

New Jersey has a stronger interest than Oregon in litigating the case because its local law is

implicated and there is a pending suit on the same issues. Additionally, to transfer the suit to New

Jersey would further the first-to-file rule’s purpose of promoting efficiency and avoiding the

duplication of litigation. The New Jersey District Court is well-suited to make a determination as to

the enforceability of the Letter of Interest and the viability of the fraudulent acquisition claim. 

Consequently, given the fact that suit could have been properly brought in New Jersey federal court,

and given the interest of efficiency, justice and convenience, transfer to the court where the first suit

was filed is appropriate. 

CONCLUSION

For the reasons stated above, defendants’ motion to dismiss is DENIED and defendant’s

motion to transfer is GRANTED. The Clerk of Court shall transfer the file in this action to the

United States District Court for the District of New Jersey.

IT IS SO ORDERED.

Date: March 10, 2006

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1. The court conducted another search on November 21, 2005 and as of that date the California

Secretary of State website still did not list “Inherent” or “Inherent.com” as a company registered to do

business in California.

2. The Inherent website has now been changed, listing the company’s principal place of business as

being in both California and Oregon. At oral argument Inherent argued unpersuasively that despite

being an internet business, the change in its website did not occur sooner because the company was

preoccupied with increased financial problems following the failure of the proposed acquisition.

3. Given the fact that the court grants defendant’s motion to transfer pursuant to section 1404, the court

need not reach the parties’ dispute over the sufficiency of plaintiff’s fraud allegations under Fed. R. Civ.

Pro Rule 12(b)(6). 

4. At oral argument on October 31, 2005 defendant asserted that this court should not find that the filing

of its anticipatory suit was evidence of forum shopping since New Jersey was an appropriate venue in

which to file the action. Defendant’s argument misses the point because, as the court noted at oral

argument, an anticipatory suit is an exercise in forum shopping. See Alltrade, 946 F.2d at 628 (quoting

Mission Ins. Co. v. Puritan Fashions Corp., 706 F.3d 599, 602 n. 3 (5th Cir. 1983) for the proposition

that “anticipatory suits are disfavored because they are aspects of forum-shopping”).

5. The court grants defendant’s request and supplemental request for judicial notice pursuant to Federal

Rule of Evidence 201(d).

6. To date, Inherent has provided no explanation for the lag in time between its purported relocation

and the issuance of the certificate by the California Secretary of State.

7. The court declines to consider plaintiff’s late-filed declarations attempting to introduce new

evidence in support of its purported relocation to California. Moreover, these two declarations refer for

the most part to activities that occurred after Inherent’s July 2005 filing and thus are irrelevant to a

determination of what would constitute appropriate venue.

8. The court finds unpersuasive plaintiff’s argument that they were unable to file suit in Oregon initially

because of the fact that plaintiff’s counsel, due the financial difficulties facing Inherent, was essentially

maintaining the company’s directors here in San Francisco. 

9. At oral argument, in attempting to explain the apparent inconsistency between Inherent’s claim of

a business relocation and the statements in its filings before the courts in California and New Jersey,

defendant’s counsel conceded that Inherent was an Oregon corporation until the time of the filing of the

New Jersey complaint on July 18, 2005. 

 

MARILYN HALL PATEL

United States District Court Judge

Northern District of California

ENDNOTES 

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10. As discussed above, plaintiff’s fraud claim with respect to the misappropriation of trade secrets

implicates the Non-Disclosure Agreement which expressly designates New Jersey law as the governing

law. 

11. This issue is barred by issue preclusion as the New Jersey court, in its October 13, 2005 ruling, has

already determined that Inherent purposely availed itself of the protection of the laws of New Jersey,

engaging in substantial business activities with a New Jersey-based company for approximately ten

years. See Supp. Req. Jud. Notice, Exh. E at 4. Having entered into several agreements with Martindale

which have either New Jersey law as the governing law or designate New Jersey as the place for dispute

resolution, Inherent cannot now claim that they did not reasonably expect to be hauled into a New Jersey

court. At oral argument, plaintiff argued that the New Jersey District Court simply denied its motion

to transfer and made no legal findings. However, this contention is belied by the fact that the court in

its opinion conducted an extensive analysis of its ability to exert personal jurisdiction over Inherent.

See Supp. Req. Jud. Notice, Exh. E. 

Case 3:05-cv-03515-MHP Document 32 Filed 03/10/06 Page 13 of 13