Cisco's Take on 'Unfavorable' Antitrust Ruling' an 'Incorrect Reading': Dexon

Cisco’s interpretation that Dexon “drafted a roadmap for evasion of unfavorable rulings” is an “incorrect reading” of the district court’s orders, said Dexon’s response (docket 23-40257) Friday to Cisco and CDW’s April petition for mandamus relief in the 5th U.S. Circuit Court of Appeals.

Cisco sued Dexon, a computer networking equipment reseller, in the Northern District of California based on Dexon’s alleged sales of counterfeit Cisco equipment (see 2304250056). Dexon countersued, alleging Cisco wields monopoly power in the market for networking equipment, and it recruited reseller CDW to help promote its anticompetitive conduct. The California court dismissed Dexon’s counterclaims with leave to amend, it said. But rather than reassert those counterclaims in California, and while the California litigation remained pending, Dexon refiled the claims against Cisco and CDW in the Eastern District of Texas.

Cisco, joined by CDW, moved to transfer the case to the Northern District of California under the first-to-file rule, but the district court denied Cisco’s motion, said the petition. In denying Cisco’s motion to transfer, the Eastern District of Texas “misunderstood both the plain language” of the 5th Circuit’s precedents and the principles of comity and sound judicial administration on which the first-to-file rule rests, it said.

If the case is permitted to proceed in Texas, said Cisco and CDW, Dexon “has drafted a roadmap for evasion of unfavorable rulings, inviting forum-shopping, ensuring inefficiency, and undermining the authority of the federal courts,” said their petition.

In its Friday response, Dexon said petitioners Cisco and CDW “fail to show that mandamus is appropriate.” Courts reserve mandamus for “truly extraordinary cases” such as those requiring “a clear abuse of discretion,” a showing of no other means to obtain relief and “that the writ is otherwise appropriate,” it said: “These are high bars, and Petitioners do not meet them.”

The case involves transfer under the first-to-file rule, which “vests district courts with substantial discretion,” said the response. Dexon called the rule “forward-looking,” saying it focuses on whether issues raised in a second lawsuit will “substantially overlap with the issues pending in a first lawsuit.” The claims at hand are not, and “have never been pending in another court,” Dexon said. Different antitrust claims that petitioners argue invoke the rule “were dismissed without prejudice by a California court almost 18 months ago,” it said. With “no antitrust claims pending in another court, there is no judicial economy, comity, or consistency that transfer of this case would serve,” it said.

The Texas case, filed in April 2022 against Cisco and CDW, which was never a party in California, “raises different claims and allegations that were never in California,” Dexon said. Those included a “conspiracy” between CDW and Cisco, attempted monopolization of a different relevant market (IP phones) and Texas state-law claims, it said. Cisco and CDW moved to dismiss the Texas complaint under Rule 12(b)(6) and moved to transfer under the first-to-file rule, said the response, but the district court denied both motions.

The Texas district court said the proper analysis, based on the Cadle v. Whataburger decision in the 5th Circuit, is to compare the pending claims in California (based on the Lanham Act) to the Texas antitrust claims and held “there was not substantial overlap.”

Cisco and CDW claim the orders will allow plaintiffs to file a lawsuit in one forum and, if it's dismissed, to refile the same claims and allegations in a more favorable forum, said the response. "That is not what happened here and it is an incorrect reading" of the district court's orders, it said. If a case arises where a plaintiff does refile the same claims in a second court after losing in the first court, which is permitted under the Federal Rules of Civil Procedure, "This Court can deal with that situation then," said Dexon: "But the District Court’s orders do not provide a 'roadmap' for that strategy because it is not what happened in this case."