     Case: 16-20688      Document: 00514012061         Page: 1    Date Filed: 05/30/2017




           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT


                                    No. 16-20688                         United States Court of Appeals
                                  Summary Calendar                                Fifth Circuit

                                                                                FILED
                                                                            May 30, 2017
GATEWAY MORTGAGE GROUP, L.L.C.,                                            Lyle W. Cayce
                                                                                Clerk
              Plaintiff–Appellant,

v.

LEHMAN BROTHERS HOLDINGS, INCORPORATED,

              Defendant–Appellee.



                   Appeal from the United States District Court
                        for the Southern District of Texas
                             USDC No. 4:16-CV-2123


Before HIGGINBOTHAM, PRADO, and HAYNES, Circuit Judges.
PER CURIAM:*
       Plaintiff–Appellant Gateway Mortgage Group, L.L.C. (“Gateway”)
brought this declaratory judgment action against Lehman Brothers Holdings,
Inc. (“LBHI”) after LBHI sued Gateway in the U.S. Bankruptcy Court for the
Southern District of New York. Applying the first-to-file rule, the district court
dismissed this action without prejudice. For the reasons stated below, we
AFFIRM.


       * Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                 No. 16-20688
                              I. BACKGROUND
      Gateway is an Oklahoma-based mortgage lender. In 2006, pursuant to a
loan purchase agreement, Gateway sold a number of mortgages to Lehman
Brothers Bank, FSB, which assigned these mortgages to LBHI. LBHI then
packaged these mortgages together with mortgages originated by other lenders
and sold them to investors, including the Federal National Mortgage
Association (“Fannie Mae”). Many of the mortgages sold in this way wound up
in foreclosure, precipitating the 2008 financial crisis and subsequent recession.
LBHI declared bankruptcy in 2008.
      In 2009, LBHI sued Gateway in Texas state court for breach of contract
and breach of warranty regarding certain mortgages sold in 2006. The parties
settled these claims in 2012. Pursuant to the settlement agreement, LBHI
released its claims against Gateway; however, this release did not cover “any
potential claims against [Gateway] that may result from Proofs of Claim filed
against LBHI by creditors in LBHI’s bankruptcy with respect to loans
originated by [Gateway].” The parties also agreed that Harris County, Texas
would be the “exclusive venue” for any disputes “aris[ing] under” the
settlement agreement.
      In LBHI’s bankruptcy, Fannie Mae filed a proof of claim against LBHI
for approximately $19 billion in 2009. LBHI later settled this claim for
approximately $2 billion. LBHI in turn sought indemnification from Gateway
and other originators of allegedly defective mortgages. In 2016, LBHI initiated
an adversary proceeding in the U.S. Bankruptcy Court for the Southern
District of New York against Gateway and 150 other mortgage originators.
This adversary proceeding has since been severed into over one hundred
separate proceedings.
      Later in 2016, Gateway filed the instant declaratory judgment action in
Texas state court. This action is in response to LBHI’s demand for
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                                    No. 16-20688
indemnification. Gateway seeks a declaration that (1) LBHI’s claims are
barred by the statute of limitations, (2) the claims are barred by the 2012
settlement agreement, (3) LBHI is not entitled to indemnification under the
original loan purchase agreement, and (4) LBHI’s recovery on these loans is
limited to actual losses. After removing this action to federal court, LBHI
moved to dismiss or transfer venue. The district court granted LBHI’s motion
to dismiss without prejudice based on the first-to-file rule. The district court
also noted that discretionary factors weighed in favor of dismissing the
declaratory judgment action, see St. Paul Ins. Co. v. Trejo, 39 F.3d 585, 590–91
(5th Cir. 1994), and that the forum selection clause in the 2012 settlement
agreement did not control. This appeal followed.
                                 II. DISCUSSION
      We limit our discussion to whether the district court erred by dismissing
this action pursuant to the first-to-file rule. We review a district court’s
application of the first-to-file rule for abuse of discretion. Int’l Fid. Ins. v. Sweet
Little Mex. Corp., 665 F.3d 671, 677 (5th Cir. 2011). “Under the first-to-file rule,
when related cases are pending before two federal courts, the court in which
the case was last filed may refuse to hear it if the issues raised by the cases
substantially overlap.” Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599,
603 (5th Cir. 1999). “In deciding if a substantial overlap exists, this court has
looked at factors such as whether ‘the core issue . . . was the same’ or if ‘much
of the proof adduced . . . would likely be identical.’” Int’l Fid., 665 F.3d at 678
(footnotes omitted) (quoting W. Gulf Mar. Ass’n v. ILA Deep Sea Local 24, S.
Atl. & Gulf Coast Dist. of the ILA, 751 F.2d 721, 730 (5th Cir. 1985); Mann
Mfg., Inc. v. Hortex Inc., 439 F.2d 403, 407 (5th Cir. 1971)).
      Here, the core issue is the same: LBHI’s right to indemnification from
Gateway. LBHI’s adversary proceeding presents the affirmative case for
indemnification, while Gateway’s declaratory judgment action asserts
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defenses. The underlying facts in both cases relate to the mortgages originated
by Gateway and sold to LBHI in 2006. Thus, the two cases substantially
overlap and the district court did not err in applying the first-to-file rule.
      Gateway argues that a compelling circumstance—namely, the existence
of a forum selection clause—displaces the first-to-file rule in this case. We have
noted that “[i]n the absence of compelling circumstances the court initially
seized of a controversy should be the one to decide whether it will try the case.”
Mann Mfg., 439 F.2d at 407. The existence of a forum selection clause is not a
compelling circumstance in this case because Gateway is free to move for a
transfer of venue before the bankruptcy court. Cf. Bank of Am. v. Berringer
Harvard Lake Tahoe, No. 3:13-CV-0585-G, 2013 WL 2627085, at *4 (N.D. Tex.
June 12, 2013) (noting that “the issue of whether the forum-selection clause
binds the parties does not need to be addressed by the court in the second-filed
action”). Gateway does not contend that this procedural path would be
prejudicial (apart from generally disparaging “bulk litigation” related to
LBHI’s bankruptcy). Moreover, as the district court noted, Gateway may
return to the Southern District of Texas if its claims are not fully resolved in
the Southern District of New York. Accordingly, the district court did not abuse
its discretion by dismissing Gateway’s declaratory judgment action without
prejudice. We express no opinion on whether the forum selection clause is
triggered by this dispute.
                              III. CONCLUSION
      For the foregoing reasons, the district court’s dismissal without prejudice
is AFFIRMED.




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