Court Opinion

ID: 9960643
Source: CourtListenerOpinion
Date Created: 2024-04-16 18:00:40.160393+00
Date Added: 2024-06-11T08:19:42.570685
License: Public Domain

Case: 22-10329          Document: 135-1           Page: 1    Date Filed: 04/16/2024

          United States Court of Appeals
               for the Fifth Circuit
                                  ____________
                                                                            United States Court of Appeals
                                                                                     Fifth Circuit
                                    No. 22-10329
                                  ____________                                      FILED
                                                                               April 16, 2024
DIRTT Environmental Solutions, Incorporated, Lyle W. Cayce
                                                                                      Clerk
                                                                 Plaintiff—Appellant,

                                         versus

Falkbuilt, Incorporated; Falkbuilt Limited,

                                           Defendants—Appellees.
                  ______________________________

                  Appeal from the United States District Court
                      for the Northern District of Texas
                           USDC No. 3:21-CV-1483
                  ______________________________

Before Clement, Southwick, and Ho, Circuit Judges.
Per Curiam: *
      The district court dismissed this suit based on forum non conveniens
grounds. We AFFIRM.
      This dispute started in 2018 with the ouster of Canadian citizen Mo-
gens Smed as the Chief Executive Officer of DIRTT Environmental Solu-
tions, Ltd. (“DIRTT Ltd.”). DIRTT Ltd. is the Canadian parent company
of DIRTT Environmental Solutions, Inc. (“DIRTT Inc.”), the plaintiff in

      _____________________
      *
          This opinion is not designated for publication. See 5th Cir. R. 47.5.4.
Case: 22-10329         Document: 135-1        Page: 2   Date Filed: 04/16/2024

                                     No. 22-10329

this case. DIRTT Inc. is incorporated in Colorado and is the wholly-owned
subsidiary of DIRTT Ltd. After his dismissal from DIRTT Ltd., Smed
founded the Canadian company Falkbuilt, Ltd.; Falkbuilt, Inc. is its U.S. sub-
sidiary (together, the “Falkbuilt entities”).
        In May 2019, DIRTT Ltd. sued Falkbuilt, Ltd., Smed, and another
individual in a Canadian court, asserting that they appropriated trade secrets
and recruited its employees and affiliates. DIRTT Inc. has since been added
as a plaintiff to that litigation.
        In December 2019, DIRTT Inc. filed a separate suit in the United
States District Court for the District of Utah, claiming that its former Utah-
based employee Lance Henderson had copied confidential DIRTT computer
files before leaving to work for Falkbuilt, Ltd. in the United States. Falkbuilt,
Ltd. was one of the initial defendants to that suit. DIRTT Inc. later amended
its complaint to add Falkbuilt, Inc. and Smed as defendants, as well as
DIRTT Ltd. as a plaintiff.
        The Falkbuilt entities and Smed moved to have the amended com-
plaint in Utah district court dismissed for forum non conveniens, arguing that
Canada was the more appropriate forum. The other defendants, Lance and
Kristy Henderson, and Falk Mountain Shares LLC, did not join the motion.
On May 21, 2021, the Utah district court granted the motion to dismiss but
only with respect to the Falkbuilt entities and Smed. This left the Hender-
sons and Falk Mountain Shares LLC as defendants to the Utah suit.
        Following that decision, DIRTT Inc. filed the present suit in the
United States District Court for the Northern District of Texas on June 24,
2021.    The differences between the Utah and Texas lawsuits include

                                          2
Case: 22-10329          Document: 135-1           Page: 3      Date Filed: 04/16/2024

                                       No. 22-10329

somewhat different parties and a more limited claim for damages. 1 Not con-
cerned about the differences, the Texas district court adopted the Utah dis-
trict court’s forum non conveniens analysis and dismissed the action without
prejudice on March 10, 2022.
        On April 11, 2023, the Tenth Circuit reversed the Utah district court.
DIRTT Env’t Sols., Inc. v. Falkbuilt Ltd., 65 F.4th 547, 556 (10th Cir. 2023).
The circuit court held that the district court abused its discretion by dismiss-
ing the action on forum non conveniens grounds as to the Falkbuilt entities and
Smed but allowing it to proceed against the other defendants. Id. at 549. The
case was remanded with instructions for the district court to exercise juris-
diction over the entirety of the action, expressly disclaiming any further re-
view of the district court’s forum non conveniens analysis. Id. at 555–56.
DIRTT Inc. now seeks reversal of the Texas district court’s forum non con-
veniens dismissal because of that court’s reliance on the now-overruled Utah
district court decision.
        This court may affirm the district court’s judgment “on any basis sup-
ported by the record.” Walker v. Beaumont Indep. Sch. Dist., 938 F.3d 724,
734 (5th Cir. 2019) (citation omitted). The first-to-file rule was one of the
arguments presented to the Texas district court. “Under the first-to-file
rule, when related cases are pending before two federal courts, the court in
which the case was last filed may refuse to hear it if the issues raised by the
cases substantially overlap.” Defense Distrib. v. Platkin, 55 F.4th 486, 494
(5th Cir. 2022) (quoting Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599,
603 (5th Cir. 1999)). The parties agree, and so do we, that the issues

        _____________________
        1
           Only DIRTT Inc., the American subsidiary, is a plaintiff here; only the Falkbuilt
entities, and not Smed, the Hendersons, or Falk Mountain Shares LLC, are defendants;
and the complaint purports to limit damages to injuries sustained within the United States.

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Case: 22-10329          Document: 135-1         Page: 4       Date Filed: 04/16/2024

                                      No. 22-10329

presented in this case and the case before the Utah district court substantially
overlap for purposes of the first-to-file rule.
        Ordinarily, the appropriate course upon a determination of substantial
overlap is to transfer the case. See Cadle Co., 174 F.3d at 606 (holding that
the district court erred by dismissing the suit instead of transferring it). Al-
ternatively, dismissal without prejudice in the first-to-file context is appro-
priate under certain circumstances. See Mann Mfg. v. Hortex, Inc., 439 F.2d
403, 408 (5th Cir. 1971) (reversing and remanding with instructions to trans-
fer the action or dismiss the suit); West Gulf Maritime Ass’n v. ILA Deep Sea
Local 24, 751 F.2d 721, 732 (5th Cir. 1985) (vacating and remanding for the
entry of an order of stay, transfer, or dismissal). Under the facts of this case,
we affirm the district court’s dismissal without prejudice, based on the first-
to-file rule. 2
        We express no opinion on the propriety of the district court’s forum
non conveniens analysis. We also express no opinion on which jurisdiction will
be the appropriate forum for these claims. It is enough to conclude that the
Texas district court is not the proper one. AFFIRMED.

        _____________________
        2
         DIRTT Inc. filed two separate motions for leave to supplement the record.
Neither supplementation would affect our resolution of this appeal under the first-to-file
rule. Accordingly, DIRTT Inc.’s motions are DENIED.

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