Gratuity Solutions, LLC v. Toast, Inc.

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

FORT MYERS DIVISION

GRATUITY SOLUTIONS, LLC, and

GRATUITY, LLC,

Plaintiffs,

v. 2:24-cv-737-JLB-NPM

TOAST, INC.,

Defendant.

ORDER

This misappropriation-of-trade-secrets action arises from business

interactions between plaintiffs Gratuity Solutions, LLC and Gratuity, LLC

(collectively “Gratuity”) on the one hand and defendant Toast, Inc., on the other.

Gratuity, as implied by its name, offers a platform for gratuity distribution for the

hospitality industry, while Toast sells restaurant-management products and services.

In August 2016, Gratuity approached Toast to discuss the possibility of providing

its platform to Toast’s point-of-sale customers. The parties entered a mutual non-

disclosure agreement to foster open communication, such as the exchange of trade

secrets and other confidential information.1 In late 2019, the parties entered into a

1 Gratuity alleges that upon signing the NDA, Toast obtained access to some of Gratuity’s

“trade secrets and other confidential information including certain technical and/or financial

information related to, for example, certain business plans and strategies; customer lists and

preferences; development information and plans including feature sets and feature development,

and release plans; applications and/or methodologies for integrating and implementing such

second non-disclosure agreement after Gratuity contacted Toast about acquiring the

Gratuity businesses. During these latter negotiations, Gratuity further disclosed trade

secrets and confidential information to Toast. In January 2020, Toast declined to

move forward with the Gratuity acquisition, and subsequent efforts by Gratuity in

September 2021 also failed.

On November 16, 2021, Toast announced its own gratuity management

solution, “Toast Tips Manager,” which Gratuity believed had many specific features

found in its developed products. So on September 19, 2022, Gratuity filed suit

against Toast—in the district of Massachusetts—for patent infringement, along with

a claim for breach of contract as to both nondisclosure agreements. Gratuity

Solutions, LLC and Gratuity, LLC v. Toast, Inc., No. 1:22-cv-11539-PBS (D. Mass.

Sept. 19, 2022). The infringement action was stayed on April 24, 2024 (and remains

stayed), after the Patent Trial and Appeal Board granted Toast’s petition for inter

partes review, which challenges the validity of a Gratuity patent.

Shortly thereafter, Gratuity filed this action for trade secret misappropriation

on August 14, 2024, alleging that Toast obtained trade secrets and other confidential

information about Gratuity’s “PayDayPortal” program through certain customer

advisory board members associated with Toast and that Toast has, in turn, used the

features sets and future features; work flows including customer-specific flows, software routines

and applications for obtaining and processing customer-specific information; system architectures

and interfaces; and associated source code.” (Doc. 50, ¶ 18).

information to develop its “Tips Manager” program. Gratuity asserts state and

federal claims for misappropriation and claims for civil conspiracy and intentional

interference with contracts. (Doc. 50). Gratuity seeks injunctive relief, compensatory

and punitive damages, and attorney’s fees and costs. Id.

We are presented with three motions: (1) Toast’s opposed motion to dismiss

the second amended complaint or to transfer venue to the District of Massachusetts

(Doc. 54); (2) Toast’s request for oral argument regarding the same (Doc. 55); and

Toast’s motion to stay discovery pending resolution of its transfer-or-dismiss motion

(Doc. 56). Against this backdrop, the court addresses Toast’s request to transfer

venue.

Toast argues that this action should be transferred to the district of

Massachusetts under the first-to-file rule. When a complaint involving overlapping

parties and issues has already been filed in another district court, the “first-to-file”

rule creates “a strong presumption” that the second case should be heard by the court

with the first-filed matter. Manuel v. Convergys Corp., 430 F.3d 1132, 1135 (11th

Cir. 2005). “The primary purpose of the rule is to conserve judicial resources and

avoid conflicting rulings.” Allstate Ins. Co. v. Clohessy, 9 F. Supp. 2d 1314, 1316

(M.D. Fla. 1998) (citing Nw. Airlines, Inc. v. Am. Airlines, Inc., 989 F.2d 1002, 1006

(8th Cir. 1993)).

In determining whether the first-to-file rule applies, courts consider “(1) the

chronology of the two actions, (2) the similarity of the parties, and (3) the similarity

of the issues.” Marrero v. Laundress, LLC, No. 2:23-cv-00519-JLB-KCD, 2024 WL

478370, *2 (M.D. Fla. Jan. 26, 2024) (citation omitted). Where the rule applies, “the

party objecting to jurisdiction in the first-filed forum carr[ies] the burden of proving

“compelling circumstances” to warrant an exception to the first-filed rule.” Women’s

Choice Pharms., LLC v. Rook Pharms., Inc., No. 16-cv-62074, 2016 WL 6600438,

*2 (S.D. Fla. Nov. 8, 2016) (quoting Manuel, 430 F.3d at 1135). Compelling

circumstances include bad-faith negotiations, anticipatory litigation, and forum

shopping. See Belacon Pallet Servs., LLC v. Amerifreight, Inc., No. 15-cv-191, 2016

WL 8999936, *4 (N.D. Fla. Mar. 26, 2016).

The first two elements of the rule—the chronology of the actions and the

similarity of the parties—are quickly dispensed with. The Massachusetts action was

filed in September 2022, almost two years before this one. And the parties aren’t just

similar; they are identical. Thus, the key issue is whether the two actions are

sufficiently similar.

The first-to-file rule does not require that the complaints be “mirror-images”

of each other; instead, “[w]hat is required is a similarity or an overlapping in subject

matter.” Rudolph and Me, Inc. v. Ornament Cent., LLC, No. 8:11-cv-670-T-33EAJ,

2011 WL 3919711, *3 (M.D. Fla. Sept. 7, 2011) (citing Manuel, 430 4 F.3d at 1135);

see also Strother v. Hylas Yachts, Inc., No. 12-80283-CV, 2012 WL 4531357, *2

(S.D. Fla. Oct. 1, 2012) (explaining that “[a]ll that need be present is that the two

actions involve closely related questions or common subject matter …. The cases

need not be identical to be duplicative”) (citation omitted).

Looking past the legal dressing, it is apparent from the complaints that there

is indeed similarity and overlap. See Peterson v. Aaron’s, No: 1:14-cv-1919-TWT,

2015 WL 224750, *3 (N.D. Ga. Jan. 15, 2015) (“[W]hether cases are similar is a

question of substance rather than form … [a]s long as the underlying facts are the

same … the fact that the two complaints allege violations of different … laws is not

enough to render them dissimilar for purposes of the first-to-file analysis.” (citation

omitted)). At the heart of each case is Toast’s Tips Manager. While the

Massachusetts action alleges patent infringement and this action alleges

misappropriation of trade secrets, at bottom, the issue to be resolved in each case is

whether Toast unlawfully used Gratuity’s proprietary information or invention to

develop its Tips Manager. (Mass. Comp. ¶ 80; Doc. 50 ¶ 29).

Despite the overlap, Gratuity argues that its trade-secret claims are factually

distinct from its patent-infringement claims because Toast allegedly obtained

Gratuity’s trade secrets about its PayDayPortal through members of Toast’s

Customer Advisory Board. But the means by, or conduit through which, the

information was obtained does not change the ultimate issue to be decided—whether

Gratuity’s intellectual property was used to create the Toast Tips Manager program.

Furthermore, answering this question also involves the non-disclosure agreements

(and any breach thereof), as Gratuity alleges in each action that upon signing the

non-disclosure agreements Gratuity disclosed not only its patents (and pending

applications), but also trade secrets, applications and methodologies for integrating

feature sets, and software applications. (Mass. Comp. ¶ 32; Doc. 50 ¶ 20). There will

also be some redundancy in discovery. As Gratuity conceded on December 16, 2024,

during the Rule 16 conference, written and deposition discovery will overlap.

Finally, Gratuity offers no compelling circumstances to overcome the strong

presumption of the first-to-file rule. Since Gratuity initiated the patent suit in

Massachusetts, Toast’s request to transfer this action there is not forum shopping.

For the same reason, Gratuity cannot convincingly argue that litigating this action in

Massachusetts would be unduly burdensome.

Accordingly, Toast’s opposed motion to dismiss the second amended

complaint or to transfer venue to the District of Massachusetts (Doc. 54) is

GRANTED as to its request to transfer venue and otherwise DEFFERED for

resolution by the transferee court. Toast’s requests for oral argument (Doc. 55) and

to stay discovery (Doc. 56) are DENIED as moot.

If no objections are filed within 14 days of this order, which is the time allotted

under Civil Rule 72(a), the clerk is directed to transfer this action to the District of

Massachusetts and to close the case. If any objections are timely filed, the clerk is

directed to withhold the transfer until so ordered by the district judge.’

ORDERED on February 28, 2025

NICHOLAS P. MIZE

United States Magistrate Judge

2 Generally, parties who timely object to a magistrate judge’s action are entitled to clear-

error review. See 28 U.S.C. § 636(b)(1)(A); see also Fed. R. Civ. P. 72 advisory committee notes

(explaining that Rule 72(a) objections correspond to matters referred under § 636(b)(1)(A), and

Rule 72(b) objections correspond to matters referred under § 636(b)(1)(B)); Adkins v. Mid-Am.

Growers, Inc., 143 F.R.D. 171, 176 (N.D. Ill. 1992) (“The terms ‘dispositive’ or ‘nondispositive’

in Rule 72 do not create categories separate from the statute which Rule 72 implements.”). There

are eight exceptions; and to view the list as merely illustrative is to leave it to the courts to rewrite

the statute and create a patchwork of inconsistent regimes throughout the country. See 28 U.S.C.

§ 636(b)(1)(A); Wachovia Bank, N.A. v. Deutsche Bank Tr. Co. Americas, 397 F. Supp. 2d 698,

701 (W.D.N.C. 2005) (“[T]he language of § 636(b)(1)(A) is exceedingly clear that a magistrate

judge may ‘hear and determine any pretrial matter pending before the court, except’ a very specific

list of eight matters. Congress would be hard-pressed to use language more clearly indicating its

intent to create an exhaustive list than ‘any...except.””).

A transfer-of-venue motion is not among the eight exceptions. Thus, a “Magistrate Judge

is empowered to issue the transfer order, which is non-dispositive ....” Bartko v. Wheeler, No.

1:13-CV-1006, 2014 WL 29441, *1 n.1 (M.D.N.C. Jan. 3, 2014), aff'd, 589 F. App’x 181 (4th Cir.

2015) (collecting cases). Indeed, by only excepting Rule 12(b)(6) motions and not all Rule 12(b)

motions, the federal-magistrate-judges statute (28 U.S.C. § 636) provides that magistrate judges

may dispose of jurisdictional and venue motions—Rules 12(b)(1) through (3)—by order; and a

transfer-of-venue motion likewise concerns forum-selection issues and not the merits of a claim

or defense.

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