its complaint morc than three weeks after SVE filed its amended complaint.

Second, pursuant to 735 ILCS 5/2-619(a)(3), it is a ground for dismissal of a second-filed
lawsuit if “there is another action pending between the same parties for the same cause.” Ilowever,
this statute applies only in cases in which Illinois substantive law governs, i.¢., if this court’s subject
matter jurisdiction is based upon diversity of citizenship or supplemental jurisdiction. See Houben
v. Telular Corp., 309 F.3d 1028, 1032 (7th Cir, 2002); Brach & Brock Confections. Inc. v. Redmond,
988 F. Supp. 1106, 1107 (N.D. Ill. 1997). Here, regardless of SVE’s allcgations in its amended
complaint,' this court’s jurisdiction is premised upon 28 U.S.C, § 1338(a), as to the copyright claim,
and either 28 U.S.C. § 1367, supplemental jurisdiction, or 28 U.S.C. § 1332, diversity jurisdiction,
as to the breach of contract claim. Consequently, with regard to the breach of contract claim, this
court must apply Illinois substantive law. [owever, as discussed above, this case and the South
Carolina Action are not the “same cause.”? Accordingly, the Illinois statute does not mandate

dismissal.

' SVE alleges that this court’s subject matler jurisdiction is based upon 28 U.S.C. §
1338(a), copyrights, and 28 U.S.C. § 1332, diversity. (Am. Compl. § 3.)

2 Under Illinois law, “[t]wo actions are for the same cause when the relief requested is
based on substantially the same set of facts. The crucial inquiry is whether the two actions arise
out of the same transaction or occurrence, not whether the Icgal theory, issues, burden of proof or
relief sought materially differ between the two actions. Furthermore, the purpose of the two
actions need not be identical; rather, there need only be a substantial similarity of issues between
them.” Village of Mapleton v. Cathy's Tap. Inc., 729 N.E.2d 854, 856, 313 Ill. App. 3d 264, 266
(3d Dist. 2000) (citations omitted). Ilere, the two actions are not based on the same set of facts.
In the South Carolina Action, contract formation and termination are central, and in this court,
facts relating to performance are most important. They do not appear to arise out of the same
transaction or occurrence nor are the issucs substantially similar.

Further, because the Llinois statute does not apply to the federal copyright claim, it
cannot be dismissed. Therefore, as cases would remain in this district and the District of South
Carolina, no judicial efficiency is gained by dismissing the breach of contract claim and not the
copyright infringement claim.



is exactly what UAV seeks as part of the South Carolina Action, Because it docs not appear that an
actual controversy exists, at least as to the declaratory judgment issue, it is likely that this claim, if

not the entire South Carolina case, will be dismissed. As in Galileo, “the possibility that the [South

Carolina] case will be dismissed or transferred is not insignificant.” Jd, at *3, Because in the case
at hand, the “first-filed action is trivial in relation to the second-filed action,” Inforizons, 204 F.R.D
at 120, SVEF’s claims in this court should not be dismissed or stayed.

The fact that UAV filed an amended complaint in South Carolina adding additional claims
for wrongful repudiation, tortious interference with cxisting and prospective contractual relations,
and violation of South Carolina’s Unfair Trade Practices Act does not sway this court’s opinion. On
March 21, 2003, the same day SVE filed its motion to dismiss the South Carolina Action and morc
than three weeks after SVE filed its amended complaint in this court, UAV amended its complaint
adding the three causes of action stated above and sought a preliminary injunction. UAV initially
brought suit in South Carolina to address onc issue, namely the term of the parties’ agrcement. SVE
then filed suit in this court to address different issues, i.e., whether UAV had infringed SVE’s
copyrights and breached the agrecment. In response, and “ironJically}” (Sce Def.’s Reply at 3 n.1),
UAV amended its complaint, on the same day SVE’s admission as to the agreement's term mooted
the declaratory judgment action, to include claims that do not appear to be related in any way to its
initial request for declaratory judgment. Because the claims in the South Carolina amended
complaint may relate back under Rule 15(c), the action in this court may not be, technically, the first-
filed action. However, under the special circumstances of this case, this court should not stay or
dismiss the action pending in this court where SVE filed a claim unrelated to the declaratory

judgment action pending in South Carolina regarding the agreement’s term and UAV then amended


I. Transfer

Pursuant to 28 U.S.C. § 1404(a), this court may transfer a pending action “[flor the
convenience of parties and witnesses [and] in the interest of justice...” Because SVE is located
in Illinois and has identified sevcral witnesses who reside in I! linois, it appears that the convenience
factors are equally balanced. No matter which forum is selected, one side or the other will be
burdened with bringing itsclf and its witnesses from far away. However, the forum selection clause
in the partics’ agreement, albeit arguably not exclusive, weighs heavily against transfer. ‘he fact that
UAV agrced Ulinois was an appropriate forum, whereas SVE never agreed to litigate in South
Carolina, favors venue in Illinois. Accordingly, because one party will be inconvenienced in cither
forum and the interests of justice do not favor the South Carolina forum, UAV’s motion to transfer
is denied.
I. Conclusion

Based on the foregoing, UAV’s motion to dismiss, stay, or transfer is denied, UAV is
ordered to file an answer to SVE’s amended complaint on or before April 18, 2003. Counsel are to
confer pursuant to Rule 26(f) and file a jointly completed Form 35 signed by counsel for each party
on or before April 24, 2003. This case is set for a report on status and the entry ofa scheduling order

at 9:00 a.m. on April 29, 2003. The parties are strongly urged to discuss settlement.

JAMES F. HOLDERMAN
United States District Judge

ENTER:

DATE: April 7, 2003



«© Minuts Onder Pare (0697)

United States District Court, Northern District of Iinois

Name of Assigned Judge
or Magistrate Judge

James F. Holderman

Sitting Judge if Other
than Assigned Judge

CASE NUMBER 03 C578 DATE 4/7/2003
CASE NEW SVE INC vs. UAV CORP
TITLE
[In the following box (a) indicate the party filing the mation, ¢.g,, plaintiff, defendunt, 3¢d party plaintiff, and (b) slate briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
qd) Qo Filed motion of [ use listing in “Motion” box above.]
(2) o Brief in support of motion due
(3) Q Answer brief to motion due__ . Reply to answer brief due
(4) im Ruling/Hearing on _ set for at
(5) oO Status hearing{held/continued to] [sct for/re-set for] on set for at
(6) o Pretrial conference[held/continued to] [set for/re-sct for] on _ set for ato
(7) Oo Trial [set for/re-set for] on at
(8) Q [BenelyJury trial] [Hearing] held/continued to at
(9) Qo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOERCP4(m) OLocal Rule 41.1 OFRCP4I(a\(1) OO FRCP41(a)(2).
| [Other docket entry] Pursuant to Memorandum Opinion and Order entered this day, defendant’s
motion to dismiss, stay or transfer is denied. Defendant is ordered to file an answer to the amended
complaint by April 18, 2003. The parties are to conduct an FRCP 26(f) conference and file a form 35 by
April 24, 2003. Status hearing to sct a discovery and trial schedule is set for April 29, 2003 at 9:00 am.
(11) [For further detail see order attached to the original minute order. ]
No notices required, advised in open court. i = i
No notices required. umber of notices” :
oY | Notices mailed by judge's stall, : “

Notified counsel by telephone.
Docketing to mail notices,

Mail AQ 450 form.

Copy to judge/magistrate judge,

ATE

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date mailed notice

courtroom PEEL Uh ue we
deputy’s vores 1s
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IN THE UNITED STATES DISTRICT COURT ;
FOR THE NORTHERN DISTRICT OF ILLINOIS DOCKETED
EASTERN DIVISION APR 0.8 2003

New SVE, Inc., a corporation,
Plaintiff,

v. No. 03 C 578

UAV Corporation, a corporation,

Defendant.

wee eS SS SSS Sr

MEMORANDUM OPINION AND ORDER

JAMES F. HOLDERMAN, District Judge:

On January 27, 2003, plaintiff New SVE, Inc. (“SVE”) filed suit against UAV Corporation
(UAV”) alleging copyright infringement. SVE, on February 27, 2003, filed a first amended
complaint adding a breach of contract claim. On March 11,2003, UAV moved this court to dismiss,
stay, or transfer venue. For the following reasons, UAV’s motion is denied.

UAV argues that SVL’s claim in this court is a compulsory counterclaim to UAV’s
complaint filed in the United State District Court for the District of South Carolina on December 10,
2002, and amended on March 21, 2003 (“South Carolina Action”), and thus must be dismissed.

UAV also asserts that this action must be dismissed pursuant to Illinois law. Alternatively, UAV

argues that this court should transfer this case to the District of South Carolina.



L Dismiss or Stay

First, contrary to UAV’s arguments, Federal Rule of Civil Procedure 13(a) does not expressly
bar a party from bringing an independent action it could have brought as a compulsory counterclaim

in a pending action. Inforizons, Inc, v. VED Sofiware Servs., Ing., 204 F.RD. 1 16, 118 (ND. ILL

2001). The compulsory counterclaim requirement of Rule 13(a) operates under the doctrine of res
judicata to bar a party from suing on a claim that it should have brought as a compulsory
counterclaim ina prior action. Id. Generally, however, although there is no “rigid ‘first to file’ rule”
in the Seventh Circuit, Tempco Elec. Heater Corp. v. Omega Eng’g, Inc,, 819 7.24 746, 750 (7th Cir.
1987), in the interests of judicial administration, a court will cither dismiss or stay a second-liled
action which is a compulsory counterclaim in another pending action or is duplicative of parallel
action already pending in another federal court. Inforizons, 204 F.R.D. at 118. Thus, assuming for
purposes of this decision that SVE’s claims in this court are compulsory counterclaims, this court
should dismiss or stay this action unless there is a clear showing that the balance of convenience or

other special circumstances favor this forum. Galileo Int’] P’ship v. Global Vill. Communication

Inc,, No. 96 C 3554, 1996 WL 452273, at #2 (N.D. Ill, Aug. 8, 1996). This court finds that such
“other special circumstances” arc present, and thus this case should not be dismissed or stayed.
The original complaint in the South Carolina Action sought a judicial declaration as to the
term of the parties’ agreement. The action in this court addresses different claims altogether, namely
whether UAV has infringed SVE’s copyrights and breached the parties’ agreement. Although the
license agreement is central to both actions, UAV’s declaratory judgment action centers on the term

of the agreement, not infringement or breach. In fact, the declaratory judgment claim appears to be

moot, as SVE, on March 21, 2003, admitted that the agreement runs through January 2008, which