Durocher et al v. Van Steenwyk-Marsh et al Case electronically transferred to Central District of California.

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
GENE DUROCHER, ET AL., §
Plaintiffs, §
§
v. § CIVIL ACTION NO. 4:25-CV-0757
§
GRETCHEN M. VAN STEENWYK-MARSH, §
ET AL, §
Defendants. §
MEMORANDUM AND RECOMMENDATION
Plaintiffs initiated this case by filing Plaintiffs’ Original Petition for
Declaratory Judgment in Texas Business Court in Harris County on February 11,
2025.1 ECF 1-3. Defendants timely removed the case to federal court based on
diversity subject matter jurisdiction. ECF 1. Plaintiffs filed an Amended Petition
for Declaratory Judgment on April 3, 2025. ECF 18. Pending before the Court is
“Defendants’ Motion to Dismiss Under Rules 12(b)(2), 12(b)(3), 12(b)(6), and 28
U.S.C. § 1406(a), or, in the Alternative, to Transfer Venue Under 28 U.S.C. §
1404(a),” seeking dismissal of Plaintiffs’ Amended Petition. Having considered the
parties’ submissions and the law, the Court recommends that this case be transferred
1 The District Judge referred this case to the undersigned Magistrate Judge pursuant to 28 U.S.C.
§ 636(b)(1)(A) and (B), the Cost and Delay Reduction Plan under the Civil Justice Reform Act,
and Federal Rule of Civil Procedure 72. ECF 30.
United States District Court
Southern District of Texas
ENTERED
January 20, 2026
Nathan Ochsner, Clerk
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to the United States District Court for the Central District of California, the court in
which Civil Action 2:24-cv-07401 is pending.
I. Background
Plaintiffs Gene Durocher, Phillip Gobe, Joseph McCoy, Stephen M. Orr,
Pamela Pierce, and Gordon Thomson (collectively, Directors) were all at one time
directors of Applied Technologies Associates, Inc. (ATA) and Scientific Drilling
International, Inc. (SDI) (collectively, Companies). ECF 18 ¶2. Defendants are
Gretchen M. Van Steenwyk-Marsh individually (Gretchen) and Matthew D. Van
Steenwyk, individually and as trustee and beneficiary of The Matthew Van
Steenwyk GST Trust and The Matthew Van Steenwyk Issue Trust, and as co-trustee
of the Gretchen Marie Van Steenwyk-Marsh GST Trust and The Gretchen Marie
Van Steenwyk-Marsh Issue Trust (Matthew). Id. ¶¶21-22. The Companies are
named as nominal defendants. Id. ¶¶23-24.
The Directors entered into Indemnification Agreements with each of the
Companies. Id.; ECF 18 at 48-171. The ATA Indemnification Agreements state
they will be governed by California law; the SDI Indemnification Agreements state
they will be governed by Texas law; and all of the Indemnification Agreements
include the parties’ consent to jurisdiction in state or federal court in Harris County,
Texas. Id. at 58, 69, 80, 91, 103, 115, 127, 138, 149, 160, 171.
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In March 2020, Matthew filed Civil Action 2:20-cv-02375 in United States
District Court for the Central District of California against Directors Pierce, McCoy,
Gobe, Durocher, and others (the 2020 Lawsuit). Id. ¶4. After a jury trial, the
California court entered a judgment against these four Directors and others for
breach of their fiduciary duties to ATA in connection with a winery known as
Adelaida Cellars, Inc. Id. n.4.; ECF 19-7; ECF 19-8. On February 25, 2025, upon
Matthew’s motion, the California Court presiding over the 2020 Lawsuit enjoined
the Companies and another entity, ATA Ranches, from:
paying, advancing, or reimbursing any attorney fees or costs incurred
by [Directors], except ATA may indemnify [Directors] . . . for expenses
actually and reasonably incurred to defend against Plaintiff’s claim for
corporate waste as to ATA, and ATA may indemnify [Directors] . . .
for expenses actually and reasonably incurred to defend against
Plaintiff’s claim for punitive damages with respect to Defendants’
conduct as to ATA.
Van Steenwyk v. Van Steenwyk, No. 2:20-CV-02375-FLA (AJRX), 2025 WL
740177, at *17 (C.D. Cal. Feb. 24, 2025). The California Court’s rulings in the 2020
Lawsuit are currently on appeal before the Ninth Circuit. See ECF 37 at 3
(representing that briefing is expected to be complete on December 22, 2025); Van
Steenwyk v. Van Steenwyk, No. 2:20-CV-02375-FLA (AJRX), 2025 WL 1421904,
at *3 (C.D. Cal. Mar. 27, 2025) (denying stay pending appeal).
In August 2024, Matthew and Gretchen filed a second lawsuit in United States
District Court for the Central District of California, Civil Action No. 2:24-cv-07401,
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against Directors Pierce, McCoy, Gobe, and Durocher, and others (the 2024
Lawsuit). ECF 18 ¶7. The 2024 Lawsuit seeks to stop the Companies from
continuing to advance legal expenses for the Directors for the 2020 and 2024
Lawsuits and to “claw back” expenses paid prior to the injunction issued in the 2020
Lawsuit. Id. Matthew and Gretchen’s Motion for Preliminary Injunction, filed on
May 2, 2025, and the Directors’ Motion to Dismiss, filed on December 13, 2024, are
still pending and under advisement in the 2024 Lawsuit. ECF 37 at 4.
In the instant lawsuit, the Directors seek Declaratory Judgments that:
1. “[T]hey are not required to repay to the Companies any moneys advanced to
them in the 2020 Lawsuit prior to the date of the Court’s injunction;”
2. “[The Companies] must advance expenses to them under the terms of the
Indemnification Agreements until the exhaustion of any and all appeals in the
2024 Lawsuit;”
3. “[I]ssues related to indemnification and advancement in connection with the
2024 Lawsuit must be litigated in Texas per the terms of the Indemnification
Agreements;” and
4. “[O]nce all appeals are exhausted in the 2024 Lawsuit, . . . [the Directors]
are entitled to a determination by [the Companies] in the first instance—not
Matthew, Gretchen, or a court—as to whether they will be indemnified for
expenses in connection therewith.”
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ECF 18 ¶¶9-12.
Defendants seek dismissal of the Directors’ claims in this suit, either under
the “first to file rule,” or pursuant to the Court’s discretionary authority as set forth
in St. Paul Ins. Co. v. Trejo, 39 F.3d 585, 590 (5th Cir. 1994). Defendants also
move for dismissal pursuant to Rule 12(b)(3) and 28 U.S.C. § 1406 based on
improper venue, under Rule 12(b)(2) based on lack of personal jurisdiction, and
under Rule 12(b)(6) for failure to state a claim. In the alternative, Defendants seek
a transfer of venue under 28 U.S.C. § 1404(a). ECF 19. For the reasons discussed
below, the Court finds transfer to the Central District of California is appropriate
under the “first-to-file rule” and declines to address Defendants’ other arguments.
II. Legal Standards
The “first-to-file” rule is a discretionary doctrine designed to “maximize
judicial economy and minimize embarrassing inconsistencies by prophylactically
refusing to hear a case raising issues that might substantially duplicate those raised
by a case pending in another court.” Cadle Co. v. Whataburger of Alice, Inc., 174
F.3d 599, 604 (5th Cir. 1999). The doctrine permits the district court to decline to
hear a case if the issues substantially overlap with a first-filed case in another federal
court. Id.; Int'l Fid. Ins. Co. v. Sweet Little Mex. Corp., 665 F.3d 671, 677–78 (5th
Cir. 2011). The district court presiding in the later-filed case may “dismiss the case,
stay the case, or transfer the case to the court in the first filed action.” Store Master
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Funding XXIX, LLC v. Triangle Cap. Props., LLC, No. 4:23-CV-1194, 2025 WL
1349000, at *4 (S.D. Tex. Apr. 10, 2025) (citations omitted), report and
recommendation adopted, No. 4:23-CV-1194, 2025 WL 1343038 (S.D. Tex. Apr.
29, 2025).
The standard of “substantial overlap” does not require complete overlap of
either issues or parties. Id. “In deciding if a substantial overlap exists, courts
examine factors such as whether the core issue is the same and whether much of the
proof adduced would be identical.” Id. (citing Sweet Little Mex. Corp., 665 F.3d at
678 (internal citations omitted)). “Where the overlap between two suits is less than
complete, the judgment is made case by case, based on such factors as the extent of
overlap, the likelihood of conflict, the comparative advantage and the interest of each
forum in resolving the dispute.” Id. (quoting Save Power Ltd. v. Syntek Fin. Corp.,
121 F.3d 947, 950-51 (5th Cir. 1997) (internal quotation and quotation marks
omitted)). The court in which the second case is filed decides only if the issued
substantially overlap; the court overseeing the first-filed case must ultimately decide
where or if the case will proceed. Id. *5; Cadle Co., 174 F.3d at 604. A district
court abuses its discretion if it declines to transfer a case when a first-filed action
that substantially overlaps is pending in another district. Save Power Ltd., 121 F.3d
at 952; Store Master Funding XXIX, LLC, 2025 WL 1349000, at *4.
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III. Analysis
A. No mandatory forum selection clause applies in this case.
As a threshold matter, the Court rejects the Directors’ contention that the
Indemnification Agreements require this case to proceed in Texas. The Directors
fail to cite a single case holding that a clause similar to paragraph 9(a) of the
Indemnification Agreements, which states that the Directors are “entitled to”
adjudication in Texas, constitutes a mandatory forum selection clause. ECF 20 at 9
(citing cases using the terms “shall be prosecuted,” “shall be instituted,” “will be
brought,” and “shall be adjudicated” as mandatory). In addition, the cited provision
applies where a Company has “determined” that a Director is not “entitled” to
indemnification, a situation which has not occurred here. ECF 118 at 124.
Nonetheless, the first-filed court must decide whether the Indemnification
Agreements contain a mandatory forum selection clause.2 Cadle Co., 174 F.3d at
604 (holding the district court did not err by failing to address its jurisdiction prior
to transferring the case based on the first-to-file rule).
2 In the 2020 Lawsuit, the Californian court considered the Indemnification Agreements but found
they “have minimal effect on the outcome, as detailed below.” Van Steenwyk v. Van Steenwyk,
No. 2:20-CV-02375-FLA (AJRX), 2025 WL 740177, at *12 (C.D. Cal. Feb. 24, 2025). It appears
that Plaintiffs here implored the California Court to consider the Indemnification Agreements and
made no argument that the Agreements required the court to transfer the case to the Texas.
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B. Substantial overlap exists between this case and the lawsuits
currently on appeal or pending in California.
Having reviewed the record, the Court comes to the unavoidable conclusion
that the issues in this case substantially overlap with the issues on appeal in the 2020
Lawsuit and in the pending 2024 Lawsuit. Plaintiffs’ “Amended Petition” is rife
with references to the 2020 and 2024 Lawsuits. See, e.g., ECF 18 ¶¶ 4 n.4, 7-13.
Each of the declaratory judgments Plaintiffs seek in this lawsuit is in essence a
declaration regarding the parties’ respective rights and obligations in the 2020 and
2024 Lawsuits, neither of which has been finally concluded. Id. ¶¶ 9-13; See ECF
36 (Defendants’ Status Report); ECF 37 (Plaintiffs’ Status Report). Specifically,
Plaintiffs acknowledge that this entire lawsuit is necessitated because: (1) “[i]n the
2020 Lawsuit, Matthew seeks to impermissibly apply the California Indemnification
Decision’s injunction to claw-back monies validly advanced to Directors Pierce,
McCoy, Gobe, and Durocher by the Companies pursuant to the Indemnification
Agreements,” and (2) “[s]eparately, Matthew and Gretchen have threatened to apply
that very same injunction, or seek a new one, to enjoin indemnification Directors
Pierce, McCoy, Orr, and Thomson in connection with the 2024 Lawsuit.” Id. ¶ 13.
Plaintiffs further allege that the Companies cannot determine the Directors acted in
bad faith “until all appeals have been exhausted” in the California cases. Id. ¶ 49.
In addition, Plaintiffs implicitly acknowledge the substantial overlap of the
relevant cases. They allege that “by asking a California court to determine the
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Directors’ entitlement to indemnification and advancement, Matthew and Gretchen
have breached the Directors’ rights under the Indemnification Agreements to have
these issues decided by a Texas Court.” Id. ¶ 53 (emphasis in original). Plaintiffs
reiterate their breach of contract allegation by alleging that “Matthew’s and
Gretchen’s challenges to indemnification and advancement in the California
Lawsuits threaten the Directors’ bargained-for and statutorily protected rights to
advancement of expenses and indemnification.” Id. ¶ 69 (emphasis added).
Plaintiffs’ allegations here—that Matthew’s and Gretchen’s action in the California
Lawsuits are in breach of the Indemnification Agreements—substantially overlap
with issues in the 2024 Lawsuit and arise out of the same transaction or occurrence,
part of the requirement for a compulsory counterclaim. See Park Club, Inc. v. Resol.
Tr. Corp., 967 F.2d 1053, 1058 (5th Cir. 1992) (citing FED. R. CIV. P. 13(a) and
identifying the characteristics of a compulsory counterclaim as “(1) whether the
issues of fact and law raised by the claim and counterclaim largely are the same; (2)
whether res judicata would bar a subsequent suit on defendant's claim absent the
compulsory counterclaim rule; (3) whether substantially the same evidence will
support or refute plaintiff's claim as well as defendant's counterclaim; and (4)
whether there is any logical relationship between the claim and the counterclaim”).
Moreover, Plaintiffs “Amended Petition” directly challenges the
indemnification order issued by the California Court in the 2020 Lawsuit, which is
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currently on appeal and which Matthew and Gretchen seek to enforce via the 2024
Lawsuit. Id. ¶ 70 (stating “the [California] district court failed to analyze the
Directors’ rights to indemnification and advancement under the Indemnification
Agreements and instead entered an injunction based on the Court’s ‘equitable
powers’ without taking the Indemnification Agreements into account”).
Plaintiffs’ Response to Defendants’ Motion further undermines their
argument that this case does not overlap with the California cases. Plaintiffs concede
that “ [a]lthough the directors argued [in the 2020 Lawsuit] that the indemnification
agreements expressly guaranteed advancement until all appeals were exhausted, and
also that the request for an injunction could be heard only in Texas, the California
Court overruled those objections.” ECF 20 at 2. Plaintiffs also concede they
brought this case to counter Matthew and Gretchen’s claims in the 2024 Lawsuit
which seek to claw-back previously advanced funds and bar the advancement of
costs in that suit. Id. Under the circumstances presented here, failure to transfer this
case to the federal court in California in which the first-filed 2024 Lawsuit is
pending, would constitute an abuse of discretion.
IV. Conclusion and Recommendation.
For the reasons set forth above, the Court RECOMMENDS that this case be
transferred to the United States District Court for the Central District of California
in which Civil Action 2:24-cv-07401 is pending.
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The Clerk of the Court shall send copies of the memorandum and
recommendation to the respective parties, who will then have fourteen days to file
written objections, pursuant to 28 U.S.C. § 636(b)(1)(C). Failure to file written
objections within the time period provided will bar an aggrieved party from attacking
the factual findings and legal conclusions on appeal. Douglass v. United Servs. Auto.
Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc), superseded by statute on
other grounds.
Christina A. Bryan
United States Magistrate Judge
Signed on January 19, 2026, at Houston, Texas.
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