United States District Court, D. South Dakota, Southern Division
DIGITALIRA.COM, LLC and ALTERNATIVE IRA SERVICES, LLC, Plaintiffs,
THE KINGDOM TRUST COMPANY, Defendant.
ORDER STAYING PROCEEDINGS
E. SCHREIER UNITED STATES DISTRICT JUDGE
DigitalIRA.com, LLC and Alternative IRA Services, LLC, filed
a complaint against defendant, the Kingdom Trust Company,
seeking a temporary restraining order, preliminary and
permanent injunctions, and money damages to redress injuries
suffered by plaintiffs as a result of Kingdom Trust's
alleged tortious conduct and breach of contract. Docket 1
¶ 1. Kingdom Trust moves to dismiss or transfer the
action based on the “first-filed” rule. Docket
13. Digital IRA opposes this motion. Dockets 20, 25. For the
following reasons, the court stays this action pending
resolution of Digital IRA's motion to dismiss the
parallel action that was filed by Kingdom Trust in the
Western District of Kentucky.
IRA and Alternative IRA Services are Delaware limited
liability companies with their principal places of business
at the same address in Sherman Oaks, California. Docket 1
¶¶ 2, 3. For the purposes of this motion,
plaintiffs appear to operate as a single business entity and
will be referred to collectively as Digital IRA. Kingdom
Trust is a South Dakota corporation with its principal place
of business in Sioux Falls, South Dakota. Id. ¶
5. Kingdom Trust provides self-directed individual retirement
account (IRA) custodial services for its clients. Docket 14
at 1. A portion of the assets in some of these accounts is
digital, held in cryptocurrency. Id. Digital IRA
provides a technology platform for trading such
cryptocurrency assets. Id. at 1-2.
IRA refers its clients to self-directed trust custodians,
like Kingdom Trust, so they can use Digital IRA's
platform to manage investments in cryptocurrency.
Id. ¶ 11. On September 5, 2018, Kingdom Trust
and Digital IRA entered into a referral agreement. Docket 1
¶ 23; Docket 1-1. The agreement provided that Digital
IRA would refer some of its users to Kingdom Trust to serve
as the customers' trust custodian in exchange for a
referral fee from Kingdom Trust. Docket 1-1 at 2. Digital IRA
referred numerous customers under the agreement, who used
Digital IRA's online platform with Kingdom Trust's
self-directed custodianship. Docket 1 ¶ 27.
spring of 2019, the Kingdom Trust-Digital IRA relationship
began to deteriorate. Digital IRA entered into a custodial
referral relationship with a separate trust custodian, BitGo
Trust. Docket 14 at 7-8. Kingdom Trust was not a party to the
referral contract. Id. at 8. Following the
agreement, hundreds of Digital IRA customers who used Kingdom
Trust as a custodian began requesting “in-kind”
transfers of their IRA assets from Kingdom Trust to BitGo
Trust. Docket 1 ¶ 27. According to Digital IRA, Kingdom
Trust engaged in delay tactics to avoid effectuating the
transfers. Id. ¶ 31.
response to the alleged delay tactics, Digital IRA's CEO,
Camilo Concha, sent a demand letter to Kingdom Trust. Docket
25 at 13-14. The letter threatened that if Kingdom Trust
continued to delay the transfer of accounts to BitGo Trust,
Digital IRA would report complaints about Kingdom Trust to
the South Dakota Division of Banking. Docket 32-2 at 4.
Concha threatened to instruct account owners to lodge their
own complaints with the Division of Banking. Id.
Concha, himself a Kingdom Trust customer, also threatened to
spearhead a class action against Kingdom Trust by its
customers. Id. In a July 3, 2019 email, Concha
requested information about Kingdom Trust's agent for
service of process. Docket 28-1 at 2.
Trust and Digital IRA continued to disagree as to when and
how Kingdom Trust was to transfer accounts to BitGo Trust.
Docket 1 ¶¶ 37-44. On August 22, 2019, Kingdom
Trust filed suit against Digital IRA in the Western District
of Kentucky (the Kentucky action), alleging a variety of
business torts and contract breaches related to the dispute.
Docket 14-1. On August 23, 2019, Digital IRA sent a cease and
desist letter to Kingdom Trust, demanding that it retract
alleged defamatory statements made to Digital IRA customers.
Docket 1 ¶ 53. Digital IRA filed its complaint in this
action, in the District of South Dakota, on August 26, 2019.
first-filed rule “typically determines . . . which of
two concurrent federal court actions should proceed to
judgment.” Smart v. Sunshine Potato Flakes,
LLC, 307 F.3d 684, 687 (8th Cir. 2002). “The
first-filed rule gives priority, when parallel litigation has
been instituted in separate courts, to the party who first
establishes jurisdiction in order to conserve judicial
resources and avoid conflicting rulings.” Keymer v.
Mgmt. Recruiters Int'l, Inc., 169 F.3d 501, 503 n.2
(8th Cir. 1999). The standard is that “in the absence
of compelling circumstances” the court should apply the
first-filed rule. Nw. Airlines, Inc. v. Am. Airlines,
Inc., 989 F.2d 1002, 1005 (8th Cir. 1993) (internal
quotation omitted). The decision whether to apply the
first-filed rule is one that is within the discretion of the
court. See Anheuser-Busch, Inc. v. Supreme Int'l
Corp., 167 F.3d 417, 419 (8th Cir. 1999). Federal courts
have “an ample degree of discretion” in
determining how best to administer multiple cases in the
federal judicial system. Kerotest Mfg. Co. v. C-O-Two
Fire Equip. Co., 342 U.S. 180, 183-84 (1952).
IRA and Kingdom Trust agree that parallel actions, arising
out of the same set of facts, are pending in the Western
District of Kentucky and the District of South Dakota. Docket
14 at 18; Docket 25. The parties dispute, first, whether the
case given priority under the first-filed rule is the first
case where a defendant is served or the first case where the
complaint is filed. Docket 25 at 6; Docket 30 at 2. Second,
Digital IRA argues that even if the first-filed case, and not
first-served, is given priority, circumstances surrounding
the Kentucky and South Dakota actions warrant a departure
from the rule. Docket 25 at 12. Kingdom Trust argues that
such circumstances are not present here. Docket 30 at 5.
Does the first-filed rule give priority to the first case
filed or the first case served?
conserve judicial resources and avoid conflicting rulings,
the 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.,
989 F.2d at 1006 (citing U.S. Fire Ins. Co. v. Goodyear
Tire & Rubber Co., 920 F.2d 487, 488 (8th Cir.
1990)). Numerous courts have held that “jurisdiction
attaches upon the filing of the complaint and not the service
of it.” Med-Tec Iowa, Inc. v. Nomos, 76
F.Supp.2d 962, 970 (N.D. Iowa 1999). See also Pacesetter
Sys., Inc. v. Medtronic, Inc., 678 F.2d 93, 96 n.3 (9th
Cir. 1982); Hospah Coal Co. v. Chaco Energy Co., 673
F.2d 1161, 1163 (10th Cir. 1982); Barber Greene Co. v.
Blaw-Knox Co., 239 F.2d 774, 778 (6th Cir. 1957);
Fat Possum Records, Ltd. v. Capricorn Records, Inc.,
909 F.Supp. 442, 445 (N.D. Miss. 1995); Marianna Imps.,
Inc. v. Helene Curtis, Inc., 873 F.Supp. 308, 309 (D.