RMBS Suit Stayed in Favor of Prior Pending Action in Wisconsin

On September 20, 2016, Justice Friedman of the New York County Commercial Division issued a decision in Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 2016 NY Slip Op 31748(U), staying an RMBS insurer action in favor of a prior pending action in Wisconsin, explaining:

CPLR 2201 provides that except where otherwise prescribed by law, 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. The determination as to whether to grant a stay involves an exercise of discretion.

Generally, however, a stay will not be granted unless the issues, relief sought, and parties in the two actions are substantially identical. Courts also consider the potential prejudice to the parties resulting from ordering or denying a stay. Issues of comity, orderly procedure, and judicial economy are related factors that will be considered where the other action is pending in another state or in a federal jurisdiction.

In determining whether to grant stays pursuant to CPLR 2201, the courts also consider the order in which the actions were commenced. In the analogous context of motions to dismiss pursuant to CPLR 3211(a)(4) on the ground of another action pending, courts have more explicitly articulated a first-in-time rule. Under this rule, 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. This general rule is not to be applied in a mechanical way, especially when commencement of the competing actions has been reasonably close in time. Thus, courts have considered whether the first-in-time action was commenced preemptively, in order to deprive the other party of its choice of forum and to gain a tactical advantage. Courts also have considered whether New York or the alternative jurisdiction has a significant nexus to the dispute. The inquiry is similar to that undertaken in applying the doctrine of forum non conveniens - whether the litigation and the parties have sufficient contact with this State to justify the burdens imposed on our judicial system.

(Internal quotations and citations omitted) (emphasis added).

Applying these factors, the court granted the stay. First, it found "that resolution of the merits of the Wisconsin Action would dispose of the fraudulent inducement claim in the instant action." Second, it found that "[p]rinciples of comity also favor a stay" and that there was no reason not to apply "the first-in-time rule in these circumstances." As to the argument that "plaintiffs commenced this action solely to preserve their ability to sue in this state, should the jurisdictional issue [in Wisconsin] ultimately be decided against them," the court held that "[t]o the extent that New York authorities have addressed this issue, they have recognized that New York permits plaintiffs to bring a kind of holding action as a precautionary back-up to an action elsewhere, lest the statute of limitations or a problem of jurisdiction be held to bar the action in that other place." The court also rejected the argument "that this litigation should take priority over the Wisconsin Action because New York possesses greater familiarity and expertise with the key legal and factual issues namely, the timeliness of plaintiffs' fraudulent inducement claims," explaining that "[a]lthough this court has extensive experience in applying the New York statute of limitations to RMBS fraudulent inducement claims brought in this state, Wisconsin has both the authority and capacity to apply the New York statute of limitations if called upon to do so."