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Current Developments in the Commercial Divisions of the
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Posted: November 3, 2019

Suit Stayed in Favor of Prior Pending Federal Action

On October 15, 2019, Justice Borrok of the New York County Commercial Division issued a decision issued a decision in Mahar v General Elec. Co., 2019 NY Slip Op. 29322, staying a suit in favor of an earlier-filed federal action, explaining:

CPLR ยง 2201 provides that, the court in which an action is pending may grant a stay of proceedings in a proper case, upon such terms as may be just. New York courts generally follow the first in-time rule, which provides the court which has first taken jurisdiction is the one in which the matter should be determined and it is a violation of the rules of comity to interfere. Contrary to the plaintiffs’ argument in opposition to the stay, the First Department has held that the two actions need not be identical. Rather, a stay is warranted where there is a substantial identity of parties, and both actions arose out of the same subject matter or series of alleged wrongs. This standard is readily met here. The Federal Action, which was filed over eight months before this action, and the instant action (i) arise out of the same subject matter or series of alleged wrongs, (ii) involve substantially the same parties, and (iii) seek substantially the same relief. Comity, orderly procedure and judicial economy are all well served by a stay of the instant action as certain rulings in the Federal Action are likely to resolve (or at least streamline) the issues in this case. Staying this case based on the earlier-filed Federal Action, therefore, would avoid the risk of inconsistent rulings, ensure orderly proceedings (including coordinated discovery if the cases go forward) and preserve judicial resources. There is little to no risk of prejudice to the plaintiffs from the stay, nor have the plaintiffs articulated any. Simply put, neither party will suffer undue detriment or gain undue advantage by having the earlier-filed action determined first, particularly since the other action may well determine the underlying issues. Finally, the fact that this action involves claims under the 1933 Act and the Federal Action involves claims under the 1934 Act is not a reason to deny a stay motion: it is inconsequential that different legal theories or claims are set forth in the two actions. As noted, the hallmark for a stay under First Department law is that both actions seek to recover for the same alleged harm based on the same underlying events, and that is concededly the case here.

(Internal quotations and citations omitted).

This decision shows that sometimes (but not always) a court will dismiss a duplicative lawsuit. The question, of course, often turns on whether the lawsuit is truly duplicative. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have a question about whether one of multiple lawsuits should be dismissed as duplicative.

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