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holding that the locus of operative facts was where the defendants prepared and issued "allegedly misleading press releases and financial statements"
Summary of this case from Brown v. W. Dig. Corp.Opinion
00 Civ. 0629 (MBM).
November 16, 2000.
Brian Murray, Esq., Joseph Vincent Mcbride, Esq., Rabin Peckel, attorneys for plaintiff's, New York, NY.
Gregory A. Markel, Esq., Nancy I. Ruskin, Esq., Brobeck Phleger Harrison, attorneys for defendants, New York, NY.
OPINION ORDER
Plaintiff's Sally Adair, Richard Cerrato, Steve Chiaramonte, David Maxim and Robert Santopietro bring this putative class action against Microfield Graphics Inc. ("Microfield"), a developer of computer conferencing and telecommunications products, and its Chief Executive Officer, John B. Conroy, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa et seq. (1994) (the "1934 Act"), and Rule 10b-5 promulgated thereunder. Defendants move under 28 U.S.C. § 1404(a)(1994) to transfer this action to the District of Oregon. For the reasons set forth below, defendants' motion is granted.
I.
Microfield is an Oregon corporation with its principal place of business in Tigard, Oregon. (Conroy Aff. ¶ 3) Plaintiff's allege that on July 14, 1997, Microfield entered into a General Purchase and Development Agreement with Minnesota Mining and Manufacturing Company ("3M") providing for the sale of Microfield products to 3M. (Compl. ¶ 19) This agreement required 3M to submit all purchase orders to Microfield at least 90 days prior to shipment. (Id.) According to plaintiff's, Microfield's sales to 3M represented a significant percentage of Microfield's over-all sales from the end of 1997 through the second fiscal quarter of 1998. (ID. ¶¶ 20-26) Beginning in the third quarter, Microfield sales to 3M declined significantly, causing a decrease in the price of Microfield's common stock. (Id.)
Plaintiff's allege that from July 23, 1998 through April 2, 1999, defendants disseminated false and misleading statements regarding the volume of Microfield's sales to 3M. (Id. ¶¶ 27-35) According to plaintiff's, because 3M was required to submit purchase orders at least 90 days prior to shipment, defendants knew that Microfield's sales to 3M would decline well before any such information was actually disclosed. (Id. ¶¶ 27, 31, 33) Plaintiff's filed this putative class action on January 28, 2000, alleging violations of Sections 10(b) and 20(a) of the 1934 Act, and Rule 10-5 promulgated thereunder. Defendants now move under 28 U.S.C. § 1404(a) to transfer this action to the District of Oregon.
II.
Transfer of venue under 28 U.S.C. § 1404(a) is appropriate if it serves the convenience of the parties and witnesses, and is otherwise in the interest of justice. Van Dusen v. Barrack, 376 U.S. 612(1964). The threshold question in a § 1404(a) inquiry is whether venue is proper in the proposed transferee forum. See Purcell Graham, Inc. v. National Bank of Detroit, 1994 WL 584550, *3, 93 Civ. 8786 (S.D.N.Y. Oct. 24, 1994). Section 27 of the 1934 Act lays venue in any district in which an "act or transaction constituting a violation has occurred" or where the defendant is "found," "is an inhabitant or transacts business." 15 U.S.C. § 78aa. Here, the allegedly false and misleading statements were made at Microfield's headquarters in Oregon. In addition, both defendants are domiciled in Oregon. (Conroy Aff. ¶¶ 1, 3) Venue in the District of Oregon therefore is proper.
Once venue in the transferee forum is found, the following factors may be considered in resolving a motion to transfer: the convenience of the witnesses; the location of relevant physical evidence; the locus of operative facts; the convenience of the parties; the availability of process to compel testimony of unwilling witnesses; the forum's familiarity with the governing law; the relative means of the parties; the weight afforded plaintiffs' choice of forum; trial efficiency and the interests of justice. See National Patent Dev. Corp. v. American Hosp. Supply, 616 F. Supp. 114, 119 (S.D.N.Y. 1984)(Weinfeld, J.).
Of the factors outhned above, the convenience of the witnesses usually is the most important consideration. Stein v. Microelectronic Pkg., Inc., 1999 WL 540443, *7 (S.D.N.Y. 1999) (citing Viacom Int'l. Inc. v.Melvin Simon Prods., Inc., 774 F. Supp. 858, 868 (S.D.N.Y. 1991)). As in most class actions brought under the 1934 Act, the key issues likely to be in dispute here are the accuracy of Microfield's statements and defendants' state of mind. Defendants identify numerous nonparty witnesses whose testimony would touch on these issues, including several current and former Microfield employees and Microfield's outside accountant. (Conroy Aff. ¶ 12) All of these witnesses are located in Oregon. (Id.) Plaintiff's have not identified any non-party witnesses. Accordingly, the convenience of the witnesses factor weighs in favor of transfer.
The locus of operative facts in this case is Oregon. Misrepresentations and omissions are deemed to "occur" in the district where the misrepresentations are issued or the truth is withheld, not where the statements at issue are received. See Morgan Guaranty Trust Co. v.Tisdale, 1996 WL 544240, *6, 95 Civ. 8023 (S.D.N.Y. Sept. 25, 1996). Here, the preparation and issuance of the allegedly misleading press releases and financial statements occurred in Oregon. (Conroy Aff. ¶ 10) Plaintiff's argue that the events which generated the operative facts of this case occurred "all over the United States." (P1. Mem. at 9) Specifically, plaintiff's claim that some events took place in New York, where some of the named plaintiff's reside and purchased their stock. (Id.) However, the purchase of shares in this state does not make New York a forum which has significant contact with the operative facts. See In re Nematron Corp. Securities Litigation, 30 F. Supp.2d 397, 404 (S.D.N.Y. 1998) Indeed, New York appears to have no greater connection to this case than any other district in which a potential class member resides. See id.
The convenience of the parties to this action also weighs in favor of transfer. Microfield currently has 18 employees, all of whom work at Microfield's offices in Tigard, Oregon. (Conroy Aff. ¶ 8) Microfield has no offices or employees in New York. (Id. ¶ 7) Conducting a trial in New York would impose a significant burden on the defendants, especially because several of Microfield's employees are likely to testify at trial. Plaintiff's respond that a trial in Oregon would be burdensome because "[f]our of the five proposed Lead Plaintiff's either live in [the Southern District of New York] or in a county adjacent to it." (P1. Mem. at 6) However, the central issues in this case relate to facts and circumstances outside the personal knowledge of the plaintiff's including the accuracy of Microfield's statements and the defendants' state of mind. Even if the named plaintiff's participate at trial, it is unlikely that their participation will involve lengthy testimony. Moreover, as several courts have explained, the residence of a class representative is often a "mere happenstance," which may be discounted by a court when weighing transfer factors. See Job Haines Home For The Aged v. Young, 936 F. Supp. 223, 228 (D.N.J. 1996); IBJ Schroder Bank Trust Co. v. Mellon Bank, N.A., 730 F. Supp. 1278, 1282 (S.D.N Y 1990). The convenience of the parties favors transfer to Oregon.
The availability of process to compel testimony of unwilling witnesses also favors transfer. Although plaintiff's have not identified any non-party witnesses, defendants have identified several non-party witnesses in Oregon whose testimony may be relevant at trial, including several former Microfield employees and Microfield's outside accountant. As defendants note, these out-of-state witnesses may be unwilling or unable to attend if trial is held in New York. See Fed.R.Civ.P. 45(c)(3)(B)(iii). These obstacles would be significantly reduced if this action were tried in Oregon.
Plaintiff's argue that transfer is inappropriate because the district court in Oregon, which is in the Ninth Circuit, would be required to apply the Second Circuit's interpretation of the 1934 Act. (P1. Mem. at 10) However, the Ninth Circuit has held that, when reviewing federal claims, a transferee court in the Ninth Circuit is bound only by Ninth Circuit precedent. See Newton v. Thomason, 22 F.3d 1455, 1460 (9th Cir. 1994). Thus, contrary to plaintiffs' assertions, if this case is transferred, the district court in Oregon would be bound to apply itsown circuit's interpretation of the federal securities laws.
Finally, plaintiffs' choice of New York as a forum for this action does not warrant denial of defendants' motion. A plaintiff's choice of forum generally is entitled to considerable weight and should not be disturbed unless the balance of factors weighs strongly in favor of the defendant.In re Nematron Corp. Sec. Litig., 30 F. Supp.2d 397, 405 (S.D.N.Y 1998). Here, the balance of factors strongly weighs in favor of transfer even if plaintiffs' choice of forum in this putative class action is accorded as much weight as one would accord an individual plaintiff's choice. See DiRienzo v. Philip Services Corp., 2000 WL 1678026, *12, 99 Civ. 7825 (2nd Cir. Nov. 8, 2000) (holding that presumption favoring plaintiffs' choice of forum was not diminished in class action); but see Warrick v. General Electric Co., 70 F.3d 736, 741 n. 7 (2d. Cir. 1995) (noting that a "plaintiff's choice of forum is a less significant consideration in a . . . class action than in an individual action.") As discussed, the convenience of the parties and witnesses strongly favors transfer to Oregon. Moreover, the events which generated the operative facts in this case occurred in Oregon and bear little or no connection to New York. Finally, there is the risk that certain out-of-state, non-party witnesses may be unwilling or unable to appear at a trial in New York; these witnesses may be compelled to appear in Oregon. When taken together, these considerations significantly outweigh plaintiffs' choice of forum.
* * *
For the reasons stated above, defendants' motion to transfer venue to the District of Oregon pursuant to 28 U.S.C. § 1404(a) is granted.Dated: New York, New York November 15, 2000.