United States District Court, D. South Dakota, Southern Division
OPINION AND ORDER DENYING MOTION TO TRANSFER
ROBERTO A. LANGE, UNITED STATES DISTRICT JUDGE
Lewis & Clark Regional Water System, Inc. (Lewis &
Clark) sued Defendant/Third-Party Plaintiff Carstensen
Contracting, Inc. (Carstensen) in South Dakota state court
alleging breach of contract. Carstensen removed the case to
this Court and filed a third-party action against Third-Party
Defendant Ameron Water Transmission Group, LLC (Ameron).
Ameron filed a Motion to Transfer Venue to the District of
Minnesota under 28 U.S.C. § 1404(a), Doc. 13, which
Lewis & Clark opposed, Doc. 16. This Court held oral
argument on the motion on August 28, 2018,  at which time
Carstensen joined with Lewis & Clark in opposing the
motion. Doc. 40. For the reasons stated below, Ameron's
Motion to Transfer Venue is denied.
Facts Pertinent to Motion to Transfer
& Clark's breach of contract action, commenced under
South Dakota law by serving a Summons on Carstensen on May
17, 2018, concerns part of a massive multistate treated water
pipeline system (the System) to bring potable water from the
Missouri River to communities in eastern South Dakota,
southwest Minnesota, and northwest Iowa. Doc. 1 at 1; Doc. 10
at ¶ 7. The System started in 2003, and, when complete,
the System will span over 330 miles of total pipeline. Doc.
17-1 at ¶ 13. The System is funded by federal, state,
and local monies. Doc. 17-1 at ¶ 15. The State of
Minnesota has already funded $5.45 million to the System.
Doc. 17-1 at ¶ 15.
& Clark contracted with Carstensen to install
approximately ten miles of pipeline for the System, roughly
between Magnolia and Adrian, Minnesota (the Project). Doc. 10
at ¶ 6. Specifically, the contract calls for Carstensen
to install twenty-inch diameter steel pipe with a
polyurethane exterior coating exhibiting a minimum adhesion
strength of 1, 750 pounds per square inch (psi)
post-installation and 2, 500 psi pre-installation. Doc. 1-1
at 5. The contract between Lewis & Clark and Carstensen
provides that the governing law will be "the state in
which the Project is located." Doc. 10-1 at ¶
perform the contract with Lewis & Clark, Carstensen
issued a Purchase Order to Ameron to supply the pipes for the
Project. Doc. 10-2. The Purchase Order contains detailed
specifications for the ordered pipes. Doc. 10-2.
Additionally, the Purchase Order states that
"[Carstensen] and [Ameron] hereby submit to the
nonexclusive jurisdiction of the United States District Court
for the Central District of Minnesota." Doc. 10-2 at ¶
17 (emphasis omitted).
pipes supplied by Ameron and installed by Carstensen
allegedly did not meet the agreed to specifications, and
Lewis & Clark believes that about nine of the ten miles
of pipes must be replaced. Doc. 16 at 2. On March 28, 2018,
the Project engineer, Banner Associates, notified Carstensen
that the pipes were being rejected because of defective
coating. Doc. 17-3. Carstensen maintains that the alleged
failure of the pipes to meet the coating specifications is
due to manufacturing problems in Mexico encountered by
Ameron. Doc. 1-1 at ¶ 7.
April 17, 2018, Carstensen received an email from Lewis &
Clark that stated, in part:
Carstensen and AMERON have long said they will "make
Lewis & Clark whole . . . ." Be assured we will have
no choice but to vigorously pursue every legal avenue
possible to ensure that happens .... At the end of the day,
if this must proceed to court, it will be a simple case from
L&C's perspective: it is undisputed L&C did not
get what it paid for and a local jury (including the
taxpayers who paid the original bill) will be eager to make
sure L&C collects every dime it is entitled to.
Doc. 10-3 at 3. Carstensen forwarded this email to Ameron,
advising Ameron that "[Lewis & Clark is] growing
very impatient with us .... I [l]ook forward to
Ameron[']s response ...." Doc. 10-3 at 2.
receiving this email, Ameron, according to Lewis & Clark,
"went dark for a month." Doc. 16 at 7. On May 15,
2018, Carstensen received Ameron's draft Complaint for
Declaratory Relief against Carstensen, Lewis & Clark,
Rustnot Corrosion Control Services, Inc. (Rustnot), and
William Spickelmire (Spickelmire). Doc. 26 at 5; Doc. 11 at 1.
Carstensen apparently advised Lewis & Clark that Ameron
was going to file suit.
17, 2018, Lewis & Clark commenced this action in South
Dakota state court by serving Carstensen with a
Summons. Doc. 1-1 at 1. On May 21, 2018, Lewis
& Clark served counsel for Carstensen with a copy of its
Complaint alleging breach of contract. Doc. 1-1 at 2-4. Lewis
& Clark seeks to recover: (a) the expense to remove and
replace the defective pipe; (b) liquidated damages totaling
$1, 350/day from November 17, 2017, to the date the project
is substantially complete; and (c) consequential damages.
Doc. 1-1 at ¶¶ 8-10. On May 22, 2018, Ameron filed
its declaratory judgment action in the United States District
Court for the District of Minnesota (Second
Action). Doc. 17-1. Ameron moves to transfer this
action to the District of Minnesota where Ameron's
declaratory judgment action is pending. Doc. 13 at 1; Doc.
17-1; Doc. 26 at 2.
& Clark is a South Dakota non-profit 501(c)(4)
corporation with its principal place of business in Tea,
South Dakota. Doc. 17-1 at ¶ 3. Lewis & Clark's
executive and administrative staff work in South Dakota. Doc.
17 at ¶ 5. Banner Associates, the Project engineer, is
headquartered in Sioux Falls, South Dakota. Doc. 17 at ¶
6; Doc. 17-3. Carstensen is a Minnesota corporation with its
principal place of business in the southwest Minnesota town
of Pipestone. Doc. 1 at ¶ 10. Carstensen's employees
primarily reside in Minnesota. Doc. 10 at ¶ 3. Ameron is
a Delaware limited liability company with its principal place
of business in Rancho Cucamonga, California. Doc. 40.
motion to transfer argues that the factors analyzed under
§ 1404(a) justify transfer to the District of Minnesota.
Lewis & Clark responds that its choice of venue in South
Dakota is proper under the "first-filed rule," but
Ameron questions whether Lewis & Clark's action
deserves any deference as being first-filed. Whether a suit
is first-filed or whether transfer is justified under §
1404(a) are separate questions with separate analyses.
Zimmer Enters., Inc. v. Atlandia Imps., Inc., 478
F.Supp.2d 983, 989 (S.D. Ohio 2007); see also Diamond
Mowers. Inc. v. S. Vegetation Mgmt LLC, No.
4:07-cv-04109-KES, at *5-10 (D.S.D. Mar. 13, 2008) (analyzing
a motion to dismiss under the first-filed rule and a motion
to transfer venue under § 1404(a)). The first-filed rule
does not "'trump' an analysis pursuant to §
1404(a)." Terra Int'l. Inc. v. Miss. Chem.
Corp., 922 F.Supp. 1334, 1349 (N.D. Iowa 1996), aff
d on other grounds, 119 F.3d 688 (8th Cir. 1997). For
example, "a determination that the [South Dakota] action
[is] the first-filed and that none of the exceptions to the
first-to-file rule exist, does not preclude the Court from
determining that transfer of venue is proper under 28 U.S.C.
§ 1404(a)." Zimmer Enters., Inc., 478
F.Supp.2d at 989; see generally Johnson Bros. Liquor Co.
v. Bacardi U.S.A., Inc., 830 F.Supp.2d 697, 711 (D.
Minn. 2011) (reasoning that the analysis under § 1404(a)
is "distinct" from the analysis under the
first-filed rule). Accordingly, this Court considers both the
first-filed rule and § 1404(a) in considering whether to
grant the motion to transfer.
"first-filed rule gives priority, for purposes of
choosing among possible venues when parallel litigation has
been instituted in separate courts, to the party who first
establishes jurisdiction." Nw. Airlines. Inc. v. Am.
Airlines. Inc.,989 F.2d 1002, 1006 (8th Cir. 1993)
(citing U.S. Fire Ins. Co. v. Goodyear Tire & Rubber
Co.,920 F.2d 487, 488 (8th Cir. 1990)); see also
Orthmann v. Apple River Campground. Inc.,765 F.2d 119,
121 (8th Cir. 1985) (stating that "the first court in
which jurisdiction attaches has priority to consider the
case"). The first-filed rule "conserve[s] judicial
resources and avoid[s] conflicting rulings." Nw.
Airlines. Inc., 989 F.2d at 1006 (citing
Goodyear, 920 F.2d at 488). However, the rule
"is not intended to be rigid, mechanical, or
inflexible." Id. at 1005 (quoting
Goodyear, 920 F.2d at 488). The rule "yields to
the interests of justice, and will not be applied where a
court finds 'compelling circumstances' supporting its
abrogation." Id. at 1006 (quoting