Stargames Corp Pty Limited v WMS Gaming Inc

[2007] NSWSC 940

CITATION:	Stargames Corp Pty Limited v WMS Gaming Inc [2007] NSWSC 940 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	23 August 2007
JUDGMENT DATE :	23 August 2007
JUDGMENT OF:	Bergin J
EX TEMPORE JUDGMENT DATE:	23 August 2007
DECISION:	Injunction granted to 5pm on 29 August 2007.
CATCHWORDS:	[INJUNCTIONS] Proceedings commenced in US Court seeking to restrain the plaintiffs from continuing Australian proceedings.
CASES CITED:	CSR Limited v CIGNA Insurance (Australia) Limited (1997) 189 CLR 345
PARTIES:	Stargames Corporation Pty Limited (first plaintiff) Shuffle Master Australiasia Holdings (second plaintiff) Shuffle Master Inc (third plaintiff) WMS Gaming Inc (defendant)
FILE NUMBER(S):	SC 50127/07
COUNSEL:	AS Bell SC/G Wright (plaintiffs)
SOLICITORS:	Addisons (plaintiffs)

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BERGIN J

23 AUGUST 2007

50127/07 STARGAMES CORP PTY LIMITED & ORS v WMS GAMING INC

JUDGMENT

1 This is an application for urgent relief brought by the plaintiffs in proceedings 50127 of 2007, Stargames Corporation Pty Limited, Shuffle Master Australasia Holdings Pty Limited, and Shuffle Master Inc against WMS Gaming Inc (WMS) as the defendant (the Australian proceedings).

2 The plaintiffs were and are parties to an agreement with WMS, which is the subject of a confidentiality regime and accordingly I shall not descend into it in detail. However, for the purposes of understanding the orders I intend to make it is sufficient to say that disputation arose in respect of the arrangements under the agreement. Such disputation is evidenced in correspondence in Exhibit C, in which the plaintiffs requested the defendant to rectify what they claimed to be a short supply of the relevant items the subject of their agreement in the fiscal year ending 30 June 2006. That correspondence was in about March/April 2007.

3 Since then a separate dispute arose in which WMS sought payment from the plaintiffs of an amount of money pursuant to the agreement. WMS served a demand on the plaintiffs identifying a period of 30 days from, it appears, 30 July 2007 to pay that amount of money or to "cure such default".

4 Notwithstanding the time period given to the plaintiffs to pay the demanded amount WMS commenced proceedings in the United States District Court for the Northern District of Illinois, Eastern Division (the US Court), on 6 August 2007 (the US proceedings). That claim sought the amount by way of damages, plus interest, plus costs, and related expenses. It also sought what was referred to as any additional "consequential damages". In addition it contained a prayer for a declaration that the plaintiffs had breached certain duties to pay WMS a particular amount.

5 On 13 August 2007 the parties filed with the court a Joint Motion for Entry of Joint Stipulation and Proposed Order Regarding Service. The Joint Stipulation recited the fact that WMS had filed a complaint against the defendants on 6 August 2007, that it had requested these plaintiffs to agree to waive service in accordance with Federal Rule of Civil Procedure 4(d), and it was noted that the plaintiffs resided outside the United States.

6 The recitals also claimed that the parties had been discussing an amended agreement which "if agreed to by the parties, would likely resolve the litigation". The parties then stipulated and agreed that:

1. All Defendants hereby agree to waive service of
process and enter their appearances instanter .

2. The parties agree that Defendants’ answer or other responsive pleading shall be deferred pending the parties' negotiations with respect to an amended agreement;

3. This deferral is terminable upon 30-days written notice, provided, however, that any such notice cannot be made prior to October 1, 2007;

4. The parties will jointly move the Court to enter an Order providing that the Defendants shall have until at least November 1, 2007, or 30 days after the deferral is lifted, whichever is later, to answer or otherwise respond to the complaint, including but not limited to moving to dismiss under Federal Rule of Civil Procedure 12.

7 Rule 4(d), in relation to waiver of service, provides that a defendant who waives service of a summons does not thereby waive any objection to the venue or to the jurisdiction of the Court over the person of the defendant.

8 The plaintiffs commenced the Australian proceedings in the Commercial List of this Court on 15 August 2007. In these proceedings the plaintiffs seek a declaration that the defendant, WMS, breached a clause in the agreement and seek damages in respect of that alleged breach. This claim relates to what I have referred to as the short supply in the fiscal year ending 30 June 2006. There are allegations made, and to be made, in respect of technological matters that occurred in Australia. As I understand from senior counsel for the plaintiffs, the issues in these proceedings will include a review of what may appear to be rather complex technological structures and substructures to accommodate aspects of the delivery of services and products between the parties.

9 On 15 August 2007 the plaintiffs tendered payment of the amount in question in the US proceedings. On the same day, 15 August 2007, the plaintiffs sought in the US proceedings, as defendants, to dismiss the proceedings pursuant to rule 12(b)(1) of the Federal Rules. That motion includes a claim that WMS moved prematurely during the period of 30 days that it had provided to the plaintiffs to pay the amount.

10 On 20 August 2007 WMS made application to amend its process in the US proceedings. From the amendment one draws the irresistible conclusion that notice was taken, firstly, of the receipt of the amount paid by the plaintiffs, secondly that the motion to dismiss had claimed that the plaintiff had moved prematurely, and thirdly that the plaintiffs had commenced the Australian proceedings.

11 The amendment incorporated what is referred to as a "Second Claim", referring to the fact that the plaintiffs had initiated the Australian proceedings and included the following:

The Australian Action involves the same parties, the same Agreement, the same fiscal year (ending June 30, 2007) and the same issue (the proper amount due and owing under the Agreement) as the instant action. As such the claims in the Australian Action constitute compulsory counterclaims, which could and should have been brought in the instant action, to be resolved by this Court.

12 Orders sought include a restraint on the plaintiffs from proceeding with the Australian proceedings. The Federal Rules provide for compulsory counter claims in rule 13(a), which provides inter alia:

A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.

13 The plaintiff in filing its motion to dismiss WMS's claim in the US proceedings apparently attached or filed what is referred to as an "Answer" dated 15 August 2007. I understand that the motion to dismiss is not listed for hearing until early November 2007.

14 The affidavit evidence of Martin Joseph O'Connor in the Australian proceedings includes the following statement:

“… given that WMS has applied for and now been granted leave to file its Amended Complaint in the Illinois Proceedings, and in that Amended Complaint it seeks an order in terms of paragraph D of the Relief Requested enjoining my clients “ preliminarily and permanently from initiating any further proceedings in the Australian action [which is defined as the proceedings in this Court] and directing [my clients] to withdraw that action instanter” (my emphasis), I am concerned that if given notice of this application and unless otherwise restrained, WMS will apply to the District Court in the Illinois Proceedings to obtain relief which would prevent these proceedings from continuing and prevent this Notice of Motion from being heard.”

15 The Notice of Motion filed in the Australian proceedings today seeks permanent relief against WMS, preventing it from proceeding against the plaintiffs in the US proceedings. Without descending into the detail of the agreement between the parties, it is however appropriate that I indicate that each of them consented to the exclusive jurisdiction and venue of the state and federal courts of the State of Illinois, located in Chicago, and the courts located in New South Wales with respect to any matter relating to the agreement. Each party also consented to the personal jurisdiction of those courts and agreed to subject themselves to such personal jurisdiction.

16 It should be noted, however, that the agreement is to be governed by the laws of the State of Illinois applicable to the contracts made and wholly performed in the State of Illinois regardless of the jurisdiction in which any dispute is to be heard.

17 Where there are competing claims in different jurisdictions one factor to be taken into account is the timing of the proceedings, that is the date upon which the proceedings were commenced. It is clear that WMS commenced the US proceedings on 6 August 2007, about nine days prior to the plaintiffs commencing the Australian proceedings. However, it is also clear that there is a reasonably arguable case that those proceedings were commenced prematurely. It is also the case that WMS has apparently misconceived the Australian proceedings, referring to them incorrectly as relating to the same fiscal year the subject of the US proceedings. It would appear that this misconception has not been drawn to the US Court's attention, as yet.

18 The plaintiff in the Australian proceedings moves for an injunction to protect the jurisdiction of this Court. It also bases its application on other matters including a claim that WMS's conduct, which I have described above, is oppressive and vexatious. Any application of this nature must be approached with caution: CSR Limited V CIGNA Insurance (Australia) Limited (1996-1997) 189 CLR 345 at 396.

19 I am very conscious of the need for caution and the reasons therefor described by the High Court at the cited passage in CSR. However, there are matters that persuade me to grant a limited restraint. Those matters include: the apparent pre-emptive nature of WMS's application during a period of time that it gave to the plaintiffs in these proceedings to pay the requested sum; the concern that arises out of the misconception evident on WMS's pleading of the nature of the present proceedings in Australia; and the nature of the amendment that was sought and granted. No notice was given to the plaintiff in the Australian proceedings that WMS intended to commence the proceedings, nor was any notice given that it intended to amend its claim in the way that I have described. I can understand in those circumstances the fear expressed by Mr O'Connor in his affidavit.

20 I do not intend to grant the wider orders sought by the plaintiffs in these proceedings in their Notice of Motion filed today. It seems to me that the most appropriate course to adopt, having regard to the comity between the courts of this nation and those of the United States, is to have a very short period of restraint to bring the parties back before this court so that a proper and more detailed argument can take place.

21 I am satisfied that the plaintiffs in these proceedings have a reasonably arguable case for dismissal of the US proceedings, and/or a restraint preventing WMS from proceeding with the US proceedings.

22 Accordingly, I make the following orders:

1. Upon the plaintiffs, by their counsel, giving the usual undertaking as to damages I order that the defendant be restrained until 5pm Australian Eastern Standard Time on 29 August 2007 from taking any step directly or indirectly to obtain from the United States District Court for the Northern District of Illinois, Eastern Division, or from any other court, an order:

(a) enjoining, restraining or purporting to restrain the plaintiffs both preliminarily or permanently from initiating any further action in these proceedings 50127 of 2007 in the Commercial List of the Equity Division of the Supreme Court of New South Wales;
(b) directing the plaintiffs to withdraw or discontinue these proceedings.

2. I order that the plaintiffs serve on the defendant by facsimile to 0011 1 [phone] the Notice of Motion, the affidavit of Martin Joseph O'Connor sworn 23 August 2007, without the exhibits (Exhibit C), the plaintiffs' written outline of submissions, and a copy of these orders, by 6pm Australian Eastern Standard Time on 23 August 2007.

3. I order that the plaintiffs provide a copy of the Notice of Motion, the affidavit of Martin Joseph O'Connor sworn 23 August 2007, without the exhibits (Exhibit C), the plaintiffs' written outline of submissions, and a copy of these orders, to the defendant's solicitors Jones Day by facsimile number 0011 1 [phone] by 6pm Australian Eastern Standard Time on 23 August 2007.

4. It is noted that I have delivered ex tempore reasons which will be transcribed on an urgent basis and provided to the parties as soon as they are ready. Those reasons should also be provided to the defendant and the defendant's solicitors by facsimile after receipt.

5. I direct that the plaintiffs draw the defendant's attention to the apparent misconception of the nature of the Australian proceedings contained in the defendant's pleading in the US proceedings.

6. This matter is listed before the Commercial List Duty Judge, Bergin J, at 10am on 28 August 2007.

7. I grant liberty to apply on three hours notice.

8. These orders may be entered forthwith.

9. I direct the registry to attend to this matter by no later than 4.10pm.

**********

27/08/2007 - Add the plaintiff's solicitor to the front sheet - Paragraph(s) front sheet