Scholl v. Mnuchin

Background

Colin Scholl and Lisa Strawn filed a putative class action against Steven Mnuchin, Charles Rettig, the U.S. Department of the Treasury, the U.S. Internal Revenue Service, and the United States. They alleged violations of the Administrative Procedure Act, the CARES Act, and the Little Tucker Act based on the failure to provide economic-impact payments to incarcerated and formerly incarcerated people who allegedly met the payment criteria. They sought certification of a nationwide class.

John Galvan and Patrick Taylor were the named plaintiffs in a similar putative class action filed in the Northern District of Illinois one day before the Scholl action. Their case asserted the same three causes of action against the same defendants and sought certification of a similar nationwide class. They moved to intervene in the Scholl action and initially sought transfer to Illinois. In their reply, they also sought a stay under the first-to-file rule.

Motion to Intervene

The court analyzed permissive intervention under Federal Rule of Civil Procedure 24(b). It found the motion timely because the case was at an early stage and no substantive motion had been decided. The court also found that the two actions involved similar or identical legal issues and that intervention for the narrow purpose of seeking a stay would not unduly delay or prejudice the original parties.

The court further held that an independent jurisdictional basis was unnecessary because Galvan and Taylor were not seeking to litigate their claims on the merits. The court therefore granted their motion to intervene, but limited the intervention to seeking a stay of the Scholl action.

First-to-File Rule

The first-to-file rule allows a court to transfer, stay, or dismiss a later-filed case when another district already has a case involving substantially similar parties and issues. Courts generally consider the order in which the cases were filed, the similarity of the parties, and the similarity of the issues.

The court found that the similarity-of-parties and similarity-of-issues factors favored applying the rule. Because the actions were class actions with substantially similar proposed classes, the court compared the proposed classes rather than focusing only on the named representatives. The court also recognized that the Illinois action was technically filed first, on July 31, 2020, while the Scholl action was filed on August 1, 2020.

The court nevertheless declined to apply the rule. Less than 24 hours separated the filings, and both cases were still at the beginning of the litigation. The court concluded that applying the rule in these circumstances would give too much importance to a race to the courthouse rather than conserving judicial resources. It therefore denied the motion to transfer or stay the case under the first-to-file rule.

Disposition

The court granted the motion to intervene for the limited purpose of seeking a stay and denied the motion to transfer or stay the case under the first-to-file rule. The order did not resolve the parties’ underlying claims about economic-impact payments.