Pinkston v. CB Operations, LLC

Background

Gary Pinkston sued CB Operations, LLC and Baz Properties, LLC based on loans the defendants made to him for constructing and developing condominium units in Hawaii. The loan agreements were executed in June and August 2023. The defendants’ principal places of business and all of their members were in Illinois. The agreements provided for a 14% annual default interest rate if Pinkston defaulted.

After the Lahaina wildfires and Kauai floods, Pinkston failed to meet certain construction deadlines. The defendants determined that he was in default and entered into negotiations with him. When those negotiations broke down, the defendants gave Pinkston until March 28, 2025, to pay default interest or face a federal lawsuit in Illinois. They also provided him with a draft complaint. Pinkston filed this case in the Northern District of California on March 28. The defendants filed their complaint in the Northern District of Illinois on April 1, 2025.

Motion and Analysis

The defendants moved to dismiss on three grounds: that Pinkston’s case was an improper anticipatory lawsuit, that the court lacked personal jurisdiction over them, and that Pinkston failed to state a claim for relief. The court resolved the motion on the anticipatory-filing ground and declined to reach the other two grounds.

The court explained that federal district courts ordinarily apply the first-to-file rule when similar lawsuits are pending in different federal courts. That rule permits a court to dismiss, transfer, or stay a case when a similar complaint was filed first in another federal court. But courts may set aside that rule for equitable reasons, including bad faith, anticipatory filing, and forum shopping.

An anticipatory lawsuit is one filed when the plaintiff expects the opposing party to sue and files first to select the forum. The court stated that settlement discussions, dialogue, and a draft complaint can indicate that the opposing party’s lawsuit was imminent. It also stated that anticipatory lawsuits are disfavored because they can involve forum shopping and gamesmanship.

The court found that Pinkston and the defendants had engaged in settlement discussions and that the defendants had shared a draft complaint for an Illinois lawsuit. The court noted that Pinkston did not deny those facts and had acknowledged filing in California so he could benefit from a local forum. The court rejected Pinkston’s suggestion that the defendants’ aggressive negotiation tactics prevented dismissal because he cited no supporting case law.

Disposition

The court found that Pinkston’s lawsuit was an improper anticipatory filing and granted the defendants’ motion to dismiss. It dismissed the action without prejudice to Pinkston raising his claims in an appropriate forum, including potentially as counterclaims in the Illinois case. The court expressly took no position on the merits of Pinkston’s claims, on whether he would be able to assert them, or on Pinkston’s motion to dismiss the Illinois case for lack of personal jurisdiction. The defendants were instructed to file a copy of the order in the Illinois case.