GWACS Armory, LLC v. KE Arms, LLC

UNITED STATES DISTRICT COURT FOR THE

NORTHERN DISTRICT OF OKLAHOMA

GWACS ARMORY, LLC, )

)

Plaintiff, )

)

v. ) Case No. 20-CV-0341-CVE-CDL

)

KE ARMS, LLC, RUSSELL )

PHAGAN, SINISTRAL SHOOTING )

TECHNOLOGIES, INC., )

BROWNELLS, INC., and )

SHAWN NEALON, )

)

Defendant. )

OPINION AND ORDER

Now before the Court are the Motion to Transfer Venue or Stay Proceedings of Defendant,

KE Arms, LLC, and Brief in Support (Dkt. ## 17, 19)1 and the Motion to Dismiss for Improper

Venue of Defendants, and Brief in Support (Dkt. # 21). Defendants argue that venue is improper

in this District, and they ask the Court to dismiss the case or transfer it to the District of Arizona.

Dkt. # 21. Defendants also argue that the case should be stayed or transferred to the District of

Arizona under the first to file rule, because KE Arms, LLC (KEA) filed a lawsuit against GWACS

Armory, LLC (GWACS) in Arizona involving the same parties and legal issues. Dkt. # 17.

GWACS responds that the Arizona case does not involve the same parties or issues and will not fully

resolve the dispute between the parties. Dkt. # 27, at 6. GWACS asserts that the first to file rule

should not be applied in this case, because the rule is discretionary and the Arizona case is an

improper anticipatory lawsuit. Id. at 14-15.

1 All of the other defendants have requested to join (Dkt. # 20) in the motion to transfer venue

or stay the case, and the Court finds that the request should be granted.

I.

In December 2000, Cavalry Arms (Cavalry)2 created a polymer lower receiver for the AR-15

assault rifle, and Cavalry produced the original design of the product, known as the CAV-15, until

February 2003. Dkt. # 2, at 3. Cavalry began producing a new version of its polymer lower receiver

later in 2003, and the new design was known as CAV-15 MKII. Id. Cavalry was owned by Shawn

Nealon, but Cavalry and Nealon lost their federal firearms license and left the firearms industry. Id.

Russell Phagan was employed by Cavalry from 2001 to 2010 and Phagan’s company, Sinistral

Shooting Technologies, LLC (SST), purchased the intellectual property relating to the CAV-15

polymer lower receiver from Cavalry. Id. Phagan abandoned his own efforts to obtain a federal

firearms license, and SST entered an Asset Purchase and Sales Agreement with GWACS for the sale

of the intellectual property rights to the CAV-15 polymer lower receiver. Dkt. # 2-1. The asset

purchase agreement states that “this Agreement shall be governed by, construed and enforced in

accordance with the laws of the State of Oklahoma” and “[a]ny suit brought hereunder shall be

brought in the state or federal courts sitting in Tulsa County, Oklahoma . . . .” Id. at 5-6. SST also

agreed to waive any “claim or defense that such forum is not convenient or proper” and that “any

such court shall have in personam jurisdiction over it . . . .” Id. at 6.

GWACS began producing CAV-15 polymer lower receivers after it purchased the intellectual

property from SST, and Phagan worked for GWACS as a sales representative from February 2013

to April 2015. Id. at 4-5. In April 2015, Phagan left his employment with GWACS and began

2 In GWACS’ briefing, it refers to Cavalry Arms as “Calvary Arms,” but the complaint refers

to this entity as “Cavalry Arms.” Dkt. # 27, at 8; Dkt. # 28, at 5. The Court assumes that a

firearms company would operate under the name “Cavalry Arms,” in reference to a highly

mobile army historically mounted on horses, and the Court will refer to this entity as

“Cavalry Arms” in this Opinion and Order.

2

working for KEA. Id. at 5. On June 2, 2015, GWACS and KEA executed a non-disclosure

agreement (NDA) under which the parties agreed to maintain the confidentiality of “trade secrets and

proprietary information” that may be disclosed while the parties engaged in negotiations for a

potential business relationship. Dkt. # 2-2, at 1. The NDA provides that any party in receipt of

proprietary information was permitted to use the information only for the purpose of evaluating the

parties’ potential business relationship. Id. The parties did not include a venue or forum selection

clause in the NDA, but they agreed that the NDA “is made under and shall be construed in

accordance with the laws of Oklahoma without regard to its provisions regarding conflict of laws.”

Id. at 3. On February 25, 2016, KEA purchased two boxes of assorted blue prints and a thumb drive

from Nealon in exchange for $1,000 in cash and $9,000 in firearms products. Dkt. # 2-3. GWACS

alleges that the blue prints and thumb drive contained information relating to the CAV-15 polymer

lower receiver and that KEA knew that GWACS owned the rights to the intellectual property relating

to this product. Dkt. # 2, at 5.

By 2018, GWACS had sold its entire supply of CAV-15 receivers, and GWACS advised

KEA that it would be discontinuing production of the MKII version of the CAV-15 in order to

design a newer model. Id. at 6. GWACS advised KEA that it was looking for investors to fund the

development of a new model of the CAV-15, and GWACS alleges that KEA was aware that

GWACS had submitted an investment packet to Brownells, Inc. (Brownells). Id. GWACS advised

KEA that Brownells had submitted a purchase order for 100 units of the new model of the CAV-15,

and Brownells provided a letter that GWACS could show to investors stating Brownells anticipated

that it would order another 8,500 units. Id. at 7. GWACS and Brownells had executed two non-

disclosure agreements as part of GWACS’ efforts to solicit an investment from Brownells, and

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GWACS alleges that this was part of a broader effort with multiple manufacturers to distribute a

fully assembled AR-15 rifle that incorporated the new model of the CAV-15 polymer lower receiver.

Id. GWACS was eventually unable to raise the necessary capital to produce a new model of the

CAV-15, and it alleges that KEA and Brownells colluded to produce a polymer lower receiver using

the intellectual property shared with them by GWACS pursuant to the NDAs. Id. at 8. GWACS

states that it did not consent to KEA or Brownells’ use of its intellectual property, and KEA

advertised the new product using the name KE-15 MKIII. Id.

On April 7, 2020, Russell Anderson, the director of programs and compliance for GWACS,

sent an e-mail to KEA demanding that it cease and desist further production and sales of the KE-15

MKIII polymer lower receiver, because KEA allegedly manufactured this product using designs

shared with KEA pursuant to the NDA. Dkt. # 27-1, at 2. GWACS invited KEA to negotiate a

license for the use of its intellectual property and advised KEA that it would take legal action if KEA

continued to use GWACS’ intellectual property without a licensing agreement. Id. KEA did not

respond to the e-mail and, on April 21, 2020, GWACS sent a copy of the e-mail to Brownells. Dkt.

# 17-1, at 4. On April 27, 2020, KEA filed a lawsuit in Maricopa County Superior Court seeking

a declaratory judgment that KEA complied with its obligations under the NDA. Id. at 5. KEA

alleges that the NDA includes a provision recognizing that KEA and GWACS could offer competing

products, and KEA was not prohibited from developing a polymer lower receiver through

independent means. Id. at 3-4. KEA also alleges claims for breach of the implied covenant of good

faith and fair dealing, interference with prospective economic advantage, and business disparagement

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against GWACS, GWACS Defense, Inc., Jud Gudgel,3 and Anderson. These claims are based on

KEA’s assertion that GWACS has falsely alleged to potential customers that KEA violated the NDA

and that GWACS made this false allegation to force KEA to pay for an unnecessary license to

intellectual property from GWACS. Id. at 7. The case was removed to the federal district court in

Arizona on August 18, 2020.

On July 15, 2020, GWACS filed this case alleging numerous claims against KEA, Phagan,

Brownells, and Nealon arising out of defendants’ alleged misuse of GWACS’s intellectual property

disclosed pursuant to the NDAs with KEA and Brownells. The complaint alleges claims of breach

of contract, misappropriation of trade secrets, trademark infringement, trade dress infringement,

copyright infringement, misappropriation of intellectual property, and breach of the implied covenant

of good faith and fair dealing against KEA (first through seventh causes of action).4 Dkt. # 2, at 8-

14. GWACS alleges an “alternative” claim for breach of contract against SST on the ground that

SST may have breached the asset purchase agreement if it falsely represented that it owned the

intellectual property rights to the CAV-15 receiver (eighth cause of action). Id. at 15. GWACS also

alleges a breach of contract claim against Brownells for allegedly breaching the NDA (ninth cause

of action), and the trademark infringement claim (third cause of action) is asserted against KEA and

Brownells. Id. at 11, 16. GWACS seeks damages in excess of $75,000 against each defendant,

injunctive relief, punitive damages, and attorney fees.

3 The complaint in the Arizona case states that Gudgel is the chief executive officer of

GWACS Defense, Inc. and an owner of GWACS. Dkt. # 17-1, at 2.

4 GWACS also asserts its claims for misappropriation of trade secrets and misappropriation

of intellectual property against Phagan and Nealon, and the claim for breach of the implied

covenant of good faith and fair dealing is alleged against all defendants.

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II.

Defendants argue that venue is improper in this District, because a substantial part of the

events giving rise to GWACS’ claims did not occur in the Northern District of Oklahoma. Dkt. #

21. Defendants also ask the Court to dismiss the case for improper venue or to transfer the case to

the District of Arizona under the first to file rule. Dkt. # 17. GWACS responds that a substantial

part of the events giving rise to its claims occurred in this District, and venue is proper here. Dkt.

# 28. GWACS also argues that the first to file rule does not apply, because there is not substantial

overlap of parties or issues in the Arizona case and the Arizona case was an improper anticipatory

lawsuit. Dkt. # 27.

A.

Defendants argue that a substantial part of the events giving rise to GWACS’s claims did not

occur in Oklahoma, and they ask the Court to dismiss the case for improper venue. Once an issue

as to venue has been raised, the plaintiff bears the burden to show that venue is proper. Scott v.

Buckner Co., 388 F. Supp. 3d 1320, 1324 (D. Colo. 2019); Mohr v. Margolis, Ainsworth & Kinlaw

Consulting, Inc., 434 F. Supp. 2d 1051, 1058 (D. Kan. 2006); McCaskey v. Continental Airlines,

Inc., 133 F. Supp. 2d 514, 523 (S.D. Tex. 2001). When venue is challenged under Rule 12(b)(3) and

the parties have not requested an evidentiary hearing, the plaintiff must make only a prima facie

showing that venue is proper in its chosen forum. Mitrano v. Hawes, 377 F.3d 402 (4th Cir. 2004);

Delong Equipment Co. v. Washington Mills Abrasive Co., 840 F.2d 843, 845 (11th Cir. 1988).

Under 28 U.S.C. § 1391(b)(2), a civil action “may be brought in . . . a judicial district in

which a substantial part of the events or omissions giving rise to the claim occurred . . . .” Venue

may be proper in more than one district in which a substantial part of the events giving rise to the

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plaintiff’s claims occurred. Wilson v. Qorvis Communications, LLC, 2007 WL 4171567 (W.D.

Okla. 2007). The plaintiff does not have to establish that its chosen venue “has the most substantial

contacts to the dispute; rather, it is sufficient that a substantial part of the events occurred [here],

even if a greater part of the events occurred elsewhere.” Nat’l Council on Compensation Ins. Inc.

v. Caro & Graifman, P.C., 259 F. Supp. 2d 172 (D. Conn. 2003) (quoting Indymac Mortgage

Holdings Inc. v. Reyad, 167 F. Supp. 2d 222, 237 (D. Conn. 2001)). The Court must determine

whether “the forum activities played a substantial role in the circumstances leading up to the

plaintiff’s claim. If the selected district’s contacts are ‘substantial,’ it should ‘make no difference

that another’s are more so, or the most so.’” Crowe & Dunlevy, P.C. v. Stidham, 609 F. Supp. 2d

1211, 1221 (N.D. Okla. 2009). The Tenth Circuit has explained that a venue challenge is subject

to a two step analysis: (1) courts “examine the nature of the plaintiff’s claims and the acts or

omissions underlying those claims;” and (2) “determine whether substantial ‘events material to those

claims occurred’ in the forum district.” Employers Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d

1153, 1166 (10th Cir. 2010).

Although GWACS has alleged nine claims for relief, the central issue underlying most of

GWACS’ claims is whether KEA used proprietary information protected by an NDA to develop a

competing product. The complaint states that venue is proper in this Court on the grounds that

GWACS and SST executed an asset purchase agreement containing a forum selection clause, the

harm suffered by GWACS occurred in Tulsa, GWACS’ proprietary information is located in

Oklahoma, and KEA and Brownells signed NDAs with Oklahoma choice of law provisions. Dkt.

# 30. The Court initially notes that not all of these grounds support proper venue under § 1391(b)(2).

The asset purchase agreement does contain a forum selection clause selecting “the state or federal

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courts sitting in Tulsa County, Oklahoma” as the forum for disputes arising under the agreement, but

the forum selection clause is not enforceable against any defendant except for SST. GWACS alleges

that the effects of defendants’ actions were felt by GWACS in Tulsa, but that is only because

GWACS was located in Tulsa. To establish that venue is proper, the Court must focus on where the

conduct occurred rather than where the consequences or effects of that conduct were felt. Clarendon

Nat’l Ins. Co. v. Glickauf, 2019 WL 7168657, *3 (N.D. Okla. Dec. 23, 2019); Allstate Life Ins. Co.

v. Stanley W. Burns, Inc., 80 F. Supp. 3d 870 (N.D. Ill. 2015). The Court also notes that a choice

of law provision selecting the law of a particular state does not show that a party also consented to

venue in that state, and choice of law and forums selection provisions serve distinct and separate

purposes. Red Rock Resources, LLC v. Trident Steel Corp., 2014 WL 12769664 (W.D. Okla. Nov.

24, 2014).

The first factor for the Court to consider is the nature of plaintiff’s claims and the acts or

omissions underlying those claims. Employers Mut. Cas. Co., 618 F.3d at 1166. Seven of the nine

claims alleged in the complaint concern the potential business relationship between KEA and

GWACS, and the key act underlying all of these claims is KEA’s alleged violation of the NDA.

GWACS alleges claims of breach of contract, misappropriation of trade secrets, trademark

infringement, trade dress infringement, copyright infringement, misappropriation of intellectual

property, and breach of the implied covenant of good faith and fair dealing against KEA, and some

of the claims are also alleged against Phagan, Nealon, or Brownells. The polymer lower receiver

was originally designed and marketed by Cavalry, and Cavalry sold the rights to the product to SST.

Dkt. # 2, at 3. SST sold the intellectual property and related equipment to GWACS pursuant to the

asset purchase agreement, and GWACS manufactured the CAV-15 polymer lower receiver until it

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ran out of supply in 2018. Id. at 4, 6. GWACS asserts that it was seeking investors to fund the

development and production of a new design of polymer lower receiver, and it disclosed proprietary

information to KEA and Brownells pursuant to NDAs in an effort to form a business relationship

with them. Id. at 6. GWACS claims that it was unable to obtain the necessary capital to produce

a new model of the CAV-15 polymer lower receiver, but KEA and Brownells used the proprietary

information disclosed under the NDAs to develop a polymer lower receiver. Id. at 7-8. GWACS

alleges that KEA used GWACS’ intellectual property to develop the KE-15 MKIII polymer lower

receiver, but the NDA did not permit KEA to use the intellectual property for any other purpose than

exploring a potential business relationship with GWACS. Id. at 9-10.

The Court must next determine whether substantial events material to GWACS’ claims

occurred in the Northern District of Oklahoma. In response to the motion to dismiss, GWACS takes

the position that nearly everything relevant to its claims occurred in Oklahoma, because GWACS

itself is based in Oklahoma and the effects of defendants’ actions were felt by GWACS in

Oklahoma. Dkt. # 28, at 5-7. However, the venue analysis is focused on where the events occurred,

not where the effects were felt, and the Court must consider whether defendants engaged in

substantial actions related to GWACS’ claims in the forum state. The Court finds that venue would

likely be appropriate in Arizona where much of the alleged conduct by defendants took place, but

GWACS has made a prima facie showing that a substantial part of the events giving rise to its claims

took place in Oklahoma. GWACS is organized under the laws of Oklahoma and has its principal

place of business in Oklahoma, and GWACS states that it manufactured the CAV-15 polymer lower

receiver in Oklahoma. Dkt. # 28-1, at 1. The NDAs are central to almost all of GWACS’ claims,

and GWACS states that those agreements were drafted in Oklahoma and are to be construed under

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Oklahoma law. Id. at 2. KEA and Brownells engaged in negotiations with GWACS for the possible

development of a new model of the CAV-15 polymer lower receivable, and it is reasonable to

assume that KEA intended to manufacture the new model in Oklahoma and that some of these

negotiations occurred in Oklahoma. Dkt. # 2, at 6. Oklahoma may not have the most significant

connections of all possible forums to defendants’ actions, but defendants’ actions in this forum

substantially contributed to plaintiff’s claims in this case. Therefore, the Court finds that venue is

proper in this forum and defendants’ motion to dismiss for improper venue (Dkt. # 21) is denied.

B.

KEA asks the Court to transfer this case to the District of Arizona under the first to file rule

or, in the alternative, KEA asks the Court to stay this case pending a resolution of jurisdictional

motions in the Arizona case. Dkt. # 17. Plaintiff responds that the first to file rule does not apply,

because there is no substantial overlap of parties and issues between the two cases and the Arizona

case was an improper anticipatory filing. Dkt. # 27, at 6.

“The rule is that the first federal district court which obtains jurisdiction of parties and issues

should have priority and the second court should decline consideration of the action until the

proceedings before the first court are terminated.” Cessna Aircraft Co. v. Brown, 348 F.2d 689, 692

(10th Cir. 1965). A district court should consider three factors when determining if the first to file

rule applies: “(1) the chronology of events (2) similarity of the parties involved, and (3) similarity

of the issues or claims at stake.” Wakaya Perfection, LLC v. Youngevity Int’l, Inc., 910 F.3d 1118,

1124 (10th Cir. 2018). The Court must look to the filing date of the complaints in both cases to

determine which case was filed first. Hospah Coal Co. v. Chaco Energy Co., 673 F.2d 1161, 1163

(10th Cir. 1982) (rejecting argument that case in which defendant was served first should have

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priority and clarifying that the filing of the complaint is the event used to establish priority of cases).

However, the first to file rule is not mandatory and, instead, is a general rule of deference in cases

involving overlapping parties and issues. See Wakaya, 910 F.3d at 1124 (the “first to file” rule is

general in nature and there may be cases when the “first court to acquire jurisdiction may not be

ideally suited to decide the merits”); Cherokee Nation v. Nash, 724 F. Supp. 2d 1159 (N.D. Okla.

2010); see also O’Hare Int’l Bank v. Lambert, 459 F.2d 328, 331 (10th Cir. 1972) (“The rule of

comity is a self-imposed restraint upon an authority actually possessed. The abstention doctrine is

not an automatic rule; it rather involves a discretionary exercise of the court’s equity powers where

there exist special circumstances prerequisite to its application on a case-by-case basis.”).

The first issue the Court must consider is the chronology of events in order to determine

whether the Arizona case was actually the first-filed case. Wakaya Perfection, LLC, 901 F.3d at

1125. The Tenth Circuit has determined that courts applying the first to file rule in a situation where

a case was removed to federal court should treat the date that the case was initially filed in state court

as the applicable date for the first to file rule. Id. at 1125-26. KEA filed the complaint in Arizona

state court on April 27, 2020, and GWACS filed its complaint in this case on July 15, 2020.

GWACS does not dispute that KEA’s lawsuit in Arizona is the first filed case, but GWACS argues

that the Arizona case was an anticipatory filing or the result of forum shopping by KEA. Dkt. # 27,

at 13. GWACS claims that KEA took no action to respond to the two cease and desist letters sent

by GWACS and, instead, filed a lawsuit against GWACS without attempting to negotiate a licensing

agreement. Dkt. # 27, at 10, 14-17. The Court will separately consider GWACS’ argument that

equitable factors preclude application of the first to file rule, but there is no dispute that KEA’s

lawsuit in Arizona was the first-filed case.

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The next issue for the Court to consider is the similarity of the parties involved in each case.

KEA filed a lawsuit in Arizona naming GWACS, GWACS Defense, Inc., Gudgel, and Anderson as

defendants. Gudgel is the chief executive officer of GWACS and Anderson is the director of

programs and compliance of GWACS. In this case, GWACS is the plaintiff and the complaint

names KEA, Phagan, SST, Brownells, and Nealon as defendants. Phagan owns SST and he is

employed by KEA as a sales representative. Nealon sold documents and a thumb drive to KEA, and

GWACS believes that the information purchased by KEA related to the CAV-15 polymer lower

receiver. Dkt. # 2, at 5. Brownells is a firearms dealer who signed an NDA with GWACS, and

GWACS alleges that Brownells violated the NDA by working with KEA and another competitor to

develop a fully assembled AR-15 rifle that incorporated GWACS’ CAV-15 polymer lower receiver.

Id. The parties in this case and the Arizona case are not identical, but the key component of both

cases is the business relationship between GWACS and KEA. The other parties in both cases are

employees, officers, or business entities who have been named as parties because of their association

with GWACS or KEA. It is not required that the parties be identical in each lawsuit, and the first

to file rule may apply when the parties are substantially similar. Letbetter v. Local 514, Transport

Workers Union of America, 2014 WL 4403521 (N.D. Okla. Sep. 5, 2014); Cherokee Nation, 724

F. Supp. 2d at 1169; Shannon’s Rainbow, LLC v. Supernova Media, Inc., 683 F. Supp. 2d 1261,

1279 (D. Utah 2010). The parties are not identical in both cases, but the Court finds that the parties

are substantially similar for application of the first to file rule.

Finally, the Court will consider the similarity of the issues involved in this case and the

Arizona case. GWACS argues that the issues in this case and the Arizona case are “substantially

distinguishable,” because the Arizona case involves only a request for declaratory relief that

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defendants can market and produce products that compete with the polymer lower receiver designed

by GWACS. Dkt. # 27, at 11. According to GWACS, the Arizona court will not be required to

consider whether defendants violated the NDAs and there is only “minor overlap” between the issues

raised in this case. Id. at 2. The Court has reviewed the pleadings in both cases, and the key issue

that must be resolved by this Court or the Arizona court is whether defendants violated the NDA by

developing a competing product by using proprietary information belonging to GWACS. KEA’s

complaint filed in Arizona states that it did not violate the NDA, because any competing product

distributed by KEA was independently developed using information already in its possession or from

the public domain. Dkt. # 17-1, at 3. KEA also alleges that GWACS committed various torts by

falsely accusing KEA of violating the NDA, and the key issue for the viability of these tort claims

will be whether KEA actually violated the NDA. Id. at 4-7. GWACS asserts nine claims for relief

in this case, including breach of the NDA, misappropriation of trade secrets and intellectual property,

copyright infringement, and trade dress infringement against KEA, and GWACS asserts breach of

contract claims against Brownells and SST. Regardless of the legal theory, the central issue that will

determine whether GWACS recovers against any of the defendants is whether GWACS can prove

that the defendants violated the NDA by using proprietary information to develop a competing

product. The Court finds that both lawsuits require a determination of whether KEA and the other

defendants named in this case violated the NDA, and this is a substantial issue supporting application

of the first to file rule.

The Court finds that the Arizona case was the first-filed case and the requirements to invoke

the first to file doctrine have been established. However, GWACS asks the Court to refrain from

transferring or staying this case under an equitable exception to the first to file rule. The first to file

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rule is discretionary, not mandatory, and the Court is not required to defer to the first-filed case if

doing so would permit inequitable conduct, bad faith, forum shopping, or an anticipatory lawsuit.

Choctaw Defense Servs., Inc. v. T & H Servs., LLC, 2019 WL 8194730 (W.D. Okla. Oct. 21, 2019);

Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc., 679 F. Supp. 2d (D. Kan. 2010).

The first to file rule may be disregarded “to prevent a misuse of litigation in the nature of vexatious

and oppressive foreign suits.” Wakaya Perfection, LLC, 910 F.3d at 1127 (quoting O’Hare Int’l

Bank v. Lambert, 459 F.2d 328, 331 (10th Cir. 1972). Courts have also recognized an anticipatory

suit exception to the first to file rule that is intended to discourage a race “to the courthouse door in

an attempt to preempt a later suit in another forum.” Alter v. F.D.I.C., 57 F. Supp. 3d 1325, 1331

(D. Utah 2014). However, a court must examine the full context under which the first case was filed,

and a party may not invoke the anticipatory filing exception merely because it was the first party to

threaten litigation. MedSpring Group, Inc. v. Atlantic Healthcare Group, Inc., 2006 WL 581018, *4

(D. Utah Mar. 7, 2006).

GWACS argues that the Arizona case was an improper anticipatory filing, because GWACS

had threatened to file suit against KEA and KEA immediately filed a declaratory judgment action

in a forum that was inconvenient for GWACS. Dkt. # 27, at 15. GWACS claims that it invited KEA

to engage in settlement negotiations and, instead of accepting GWACS’ invitation, KEA filed a

lawsuit seeking declaratory relief in a distant forum to gain a better bargaining position in settlement

negotiations with GWACS. Id. The fact that KEA is seeking declaratory relief is relevant to the

Court’s consideration of the anticipatory filing exception, especially in a contract case, because it

is not uncommon for a party threatened with litigation to preemptively file a lawsuit seeking

declaratory relief. Morgan v. 3-B Cattle Co., Inc., 2018 WL 6651529, *3 (N.D. Okla. Dec. 19,

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2018). The Court has considered the timing and context of KEA’s decision to file the Arizona case,

and finds that GWACS would have had a compelling argument for application of the anticipatory

filing exception if had not forwarded the cease and desist letter to Brownells. The Court would

likely have found the Arizona case to be anticipatory if KEA filed a case seeking only declaratory

relief shortly after it received the cease and desist letter from GWACS. However, KEA was not

obligated to take action in response to the cease and desist letter, and KEA did not immediately file

a lawsuit seeking declaratory relief. Instead, GWACS forwarded the cease and desist letter to

Brownells, and KEA alleges that GWACS’ false and disparaging accusations concerning KEA’s

alleged violation of the NDA has harmed its business relationship with Brownells. Dkt. # 17-1, at

4. KEA filed a lawsuit in Arizona seeking a declaratory judgment that it had not violated the NDA,

but KEA also alleged tort claims based on GWACS’ alleged interference with KEA’s business

relationship with Brownells. These claims directly relate GWACS’ act of forwarding the cease and

desist letter to Brownells, and this is not simply a mirror-image lawsuit filed to beat GWACS in a

race to the courthouse. GWACS argues that KEA purposefully filed the case in a forum that would

be inconvenient for GWACS, and KEA is engaged in forum shopping by forcing GWACS to litigate

in a distant forum. Dkt. # 27, at 17. This argument does not tend to show that KEA engaged in

improper forum shopping. There is no forum that is equally convenient for all parties, and the choice

of forum will present an inconvenience to certain parties whether the case proceeds in Arizona or

Oklahoma. The fact that GWACS may be somewhat inconvenienced by proceeding in Arizona does

not amount to improper forum shopping, and the Court does not find that any equitable exceptions

are present that would prevent the application of the first to file rule.

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The Court finds that the first to file rule is applicable and GWACS has not shown that an

equitable exception to this rule weighs in favor of allowing this case to proceed. The Court notes

that a motion to dismiss is pending in the District of Arizona, and GWACS has moved to dismiss

the Arizona case for lack of personal jurisdiction. GWACS has also alleged claims against SST in

this case, and those claims may be subject to a forum selection clause selecting the “state or federal

courts sitting in Tulsa County, Oklahoma” as the appropriate forum for claims arising under the asset

purchase agreement. Given the present procedural posture of this case and the Arizona case, the

Court finds that the appropriate remedy is to stay this case to allow the Arizona court to determine

whether it will exercise jurisdiction over KEA’s claims.

IT IS THEREFORE ORDERED that the Motion to Transfer Venue or Stay Proceedings

of Defendant, KE Arms, LLC, and Brief in Support (Dkt. ## 17, 19) is granted, and this case is

stayed pending a ruling on the motion to dismiss in the District of Arizona.

IT IS FURTHER ORDERED that the parties shall file notice within 14 days of the District

of Arizona’s ruling on GWACS’ motion to dismiss, and the Court will consider whether to lift the

stay or transfer the case to the District of Arizona at that time. In the interim, an administrative

closing order will be entered.

IT IS FURTHER ORDERED that the Motion to Dismiss for Improper Venue of

Defendants, and Brief in Support (Dkt. # 21) is denied.

IT IS FURTHER ORDERED that the motion (Dkt. # 20) to join in KEA’s motion to

transfer venue or stay the case is granted.

DATED this 21st day of January, 2021.

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