Opinion
01-CV-4398 (ILG).
November 30, 2001.
MEMORANDUM AND ORDER
SUMMARY
Plaintiffs Aetna, Inc. and Aetna Life Insurance Co. (collectively "Aetna") bring this action for damages and injunctive relief against defendants Medtest Express, Inc. ("Medtest"), Medical Laboratories, L.L.C. ("ML"), David P. Meyers ("David Meyers"), and Stuart J. Meyers, M.D. ("Stuart Meyers"), alleging medical insurance fraud in violation of the New Jersey Insurance Fraud Prevention Act, N.J. Stat. §§ 17:33A-1 et seq.; the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § § 42-110a et seq.; and common law fraud, negligent misrepresentation, and unjust enrichment. The defendants now move to transfer the action to the Northern District of Georgia ("NDGA") pursuant to 28 U.S.C. § 1404 (a) or 28 U.S.C. § 1406 (a). The defendants also move to dismiss the action against the four defendants for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) and for lack of venue pursuant to Fed.R.Civ.P. 12(b)(3), and against the individual defendants for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons that follow, the motion to transfer venue is granted, and, accordingly, the Court declines to address the motions to dismiss.
BACKGROUND
The following facts are either undisputed or are alleged by the plaintiffs and accepted as true for purposes of this motion. Aetna, Inc. is a Pennsylvania corporation, with its principal place of business in Blue Bell, Pennsylvania. (See Compl. ¶ 13.) Aetna Life Insurance Co. is a Connecticut corporation, with its principal place of business in Hartford, Connecticut. (Id.) Aetna, through its subsidiaries, with principal places of business in New York, New Jersey, Connecticut and Pennsylvania, underwrites and administers, inter alia, health care insurance, and operates health maintenance organizations ("HMOs") throughout the United States. (Id. ¶ 14.) Both Medtest and ML are Georgia companies and have their principal places of business in Atlanta, Georgia. (Id. ¶¶ 15, 16.) David Meyers resides in Atlanta, Georgia, and is the cofounder, President, and Chief Executive Officer ("CEO") of Medtest, and is also an officer of ML, which operates out of his home. (Id. ¶ 17.) Stuart Meyers resides in New Orleans, Louisiana, and is the co-founder and Medical Director of MedTest. (Id. ¶ 18.)
According to David Meyers's Affidavit in Support of the Motions, Stuart Meyers is also a resident and citizen of Atlanta, Georgia. (See David P. Meyers Affidavit ("Meyers Aff.") ¶ II.)
Aetna alleges that, while Medtest makes itself look like a medical laboratory, boasts a connection to a prominent medical director, and even claims that it owns medical testing equipment, Medtest's only true function is to provide "laboratory tracking services" to more than one hundred health care companies nationwide that treat patients in their homes. (Id. ¶¶ 2, 19.) For example, when a homecare company needs to send blood samples or other materials to a medical laboratory for testing, Medtest tells the company which laboratory it should use, and then purportedly "tracks" the test results as an intermediary between the homecare company and the laboratory. (Id. ¶¶ 2, 22, 41.) Medtest provides this service to homecare companies free of charge. (Id. ¶¶ 2, 23.)
Aetna alleges that Medtest provides this free service in order to gain access to confidential medical and insurance information about the patients whom the homecare companies serve. (Id. ¶ 4.) Medtest then mails the bills for the tests to the patients' insurers based on this confidential information, and falsely indicates that Medtest performed the tests itself. (Id. ¶ 5.) Aetna alleges that the false medical claims defraud insurers in three ways: (1) the bill misrepresents that Medtest itself performed the medical test when in fact a separate laboratory administered the test; (2) Medtest's verification department arranges, whenever possible, for tests to be performed by laboratories that offer discounts, but Medtest then submits bills for amounts much higher than the discounted price; and (3) the bill misrepresents that Medtest performed a separate test apart from the test performed by the laboratory, and the insurer then often times receives two bills for different tests when in fact only one test was performed. (Id. ¶¶ 6-8, 25-39.)
Since 1995, Medtest has mailed thousands of allegedly fraudulent claims to Aetna, and Aetna has paid almost $18,000,000 to Medtest on those claims. (Id. ¶¶ 40, 54.) Aetna alleges that at least $72,763 was paid to Medtest by Aetna's New York subsidiaries, and that some of those claims were mailed by Medtest to a post office box in Jamaica, New York (those claims may or may not have actually been processed in New York), and to a processing center in Jackson Heights, New York. (See Plaintiffs' Memorandum in Opposition ("Pl. Mem.") at 10-11; Katia Berman Affidavit ("Berman Aff.") at ¶¶ 5-8; copies of six bills sent to New York post office, attached as Ex. B.)
Some of Aetna's subsidiaries, with their principal place of business in New Jersey, were formerly owned by Prudential Insurance Company of America ("Prudential"). (Id. ¶ 55.) In 1999, Prudential began questioning some of Medtest's bills. (Id. ¶ 56.) Pending an investigation of Medtest, Prudential stopped paying most of Medtest's bills. (Id.) Aetna alleges that, in response to Prudential's actions, Medtest continued to operate as before, but had the fraudulent bills sent to Prudential by another company, namely ML. (Id. ¶ 57.) The following year, other Aetna subsidiaries stopped paying Medtest's bills, and Medtest again responded by sending those subsidiaries fraudulent bills using ML's name. (Id. ¶ 58.) Aetna alleges that it has paid ML at least $105,000,000 based on fraudulent claims. (Id. ¶ 60.)
DISCUSSION
I. Change of Venue
The change of venue statute, 28 U.S.C. § 1404 (a), provides: "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." The purpose of Section 1404(a) "is to prevent `waste of time, energy and money' and `to protect litigants, witnesses and the public against unnecessary inconvenience and expense. . . .'" Van Dusen v. Barrack, 376 U.S. 612, 626 (1964) (quotingCont'l Grain Co. v. Barge FBL-585, 364 U.S. 19, 26, 27 (1960)). In deciding whether transfer is appropriate, the court must engage in a two part inquiry: first, whether this action might have been brought in the proposed transferee district, and, second, if the action could have been brought in the proposed district, whether a transfer to that district is appropriate considering the convenience of the parties and the witnesses and the interest of justice. See United States Fidelity and Guar. Co. v. Republic Drug Co., Inc., 800 F. Supp. 1076, 1079 (E.D.N.Y. 1992) (citations omitted).
It is well established that motions for transfer of venue "lie within the broad discretion of the district court and are determined upon notions of convenience and fairness on a case-by-case basis." In re Cuyahoga Equip. Corp., 980 F.2d 110, 117 (2d Cir. 1992) (citing Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988)). The burden of demonstrating that a case should be transferred is on the movant, Haskel v. FPR Registry, Inc., 862 F. Supp. 909, 916 (E.D.N Y 1994) (citation omitted), and a "clear-cut showing" must be made that transfer is in the best interest of the litigation, Connors v. Lexington Ins. Co., 666 F. Supp. 434, 454 (E.D.N.Y. 1987); Smart v. Goord, 21 F. Supp.2d 309, 315 (S.D.N.Y. 1998).
This action could have been brought in the NDGA as both venue and personal jurisdiction are proper there as to all defendants. Hoffman v. Blaski, 363 U.S. 335, 344 (1960). Venue is proper because "a substantial part of the events giving rise to the claim" occurred in Atlanta, Georgia, 28 U.S.C. § 1391 (a)(2), and personal jurisdiction is proper because all of the defendants reside in or transact business within the state see Ga. Code Ann. §§ 50-2-21 and 9-10-91(1) (2001). The Court will therefore consider whether a transfer is warranted.
In making such a determination, a court will consider the following relevant factors: (1) the weight accorded plaintiffs' choice of forum; (2) the place where the operative facts took place; (3) the convenience of the parties; (4) the convenience of witnesses, and the availability of process to compel unwilling witnesses; (5) the location of relevant documents and the relative ease of access to sources of proof; (6) a forum's familiarity with the governing law; and (7) trial efficiency and the interest of justice. See, e.g., Balaban v. Pettigrew Auction Co. Inc., No. 96-CV-3177, 1997 WL 470373, at *2 (E.D.N.Y. 1997) (citingBernal v. DuPont De Nemours E.I. and Corp., No. 93-CV-1639, 1993 WL 378790, at *1 (S.D.N.Y. Sept. 24, 1993)); Dwyer v. Gen. Motors Corp., 853 F. Supp. 690, 692 (S.D.N.Y. 1994); Designs by Glory, Ltd. v. Manhattan Creative Jewelers, Inc., 657 F. Supp. 1257, 1258-59 (S.D.N.Y. 1987); Orb Factory. Ltd. v. Design Science Toys, Ltd., 6 F. Supp.2d 203, 208 (S.D.N.Y. 1998) (citing Wilshire Credit Corp. v. Barrett Capital Mgmt. Corp., 976 F. Supp. 174, 181 (W.D.N.Y. 1997)).
"A plaintiff's choice of forum is generally entitled to considerable weight and should not be disturbed unless the balance of the factors is strongly in favor of the defendant." Berman v. Informix Corp., 30 F. Supp.2d 653, 659 (S.D.N.Y. 1998) (citations omitted). However, the emphasis placed on a plaintiff's choice diminishes where "the operative facts upon which the litigation is brought bear little material connection to the chosen forum." Nieves v. Am. Airlines, 700 F. Supp. 769, 772 (S.D.N.Y. 1988). Here, aside from the fact that some bills were mailed to New York, there are far more substantial connections to Georgia which militate strongly in favor of transfer there.
The majority of operative facts are located in Georgia. Aetna alleges that the defendants provide tracking services to homecare companies from Atlanta for the purpose of obtaining confidential information about the patients of these homecare companies. (See Compl. ¶¶ 20-23.) Based on this confidential information, the defendants then prepare and mail allegedly fraudulent insurance bills from Atlanta to various Aetna subsidiaries in New Jersey, Connecticut, Pennsylvania, and New York at post office boxes which may or may not be located in the same state as the subsidiary. (Id. ¶¶ 27, 63, 69; Pl. Mem. at 10-11; Medtest bills mailed to Greensboro, North Carolina and Dover, Delaware, attached to Robert D. Helfand Affidavit ("Helfand Aff.") as Exs. A, B, E.) It is clear from the plaintiffs' allegations that the majority of operative facts arise out of the defendants' activities in Georgia. The defendants maintained their businesses and developed their allegedly fraudulent business scheme in Georgia, and the insurance bills were prepared and mailed from Georgia to the plaintiffs. Accordingly, transfer to Georgia is favored. See Berman, 3 F. Supp. 2d at 358 ("Courts routinely transfer cases when the principal events occurred and the principal witnesses are located in another district.).
Courts also look to the convenience of witnesses, which is "considered a particularly compelling factor guiding the decision to transfer a case." Kingsepp v. KMart Corp. No. 96-CV-5167, 1997 WL 269582, at *2 (E.D.N.Y. May 5, 1997). Here, all of the defendants reside in Georgia, and most, if not all, of the defendants' employees reside in Georgia. In contrast, Aetna's potential witnesses, including primarily Aetna employees, are located in various parts of the country, including Pennsylvania, Connecticut, New Jersey, New York, and elsewhere. (See Pl. Mem. at 20.) Thus, inevitably, many Aetna witnesses will have to travel regardless of whether the case proceeds in New York or Georgia, while the defendants and their witnesses will have to travel only if the case proceeds in New York. In addition, more witnesses will be beyond the reach of this Court's subpoena power. These factors tip the scale in favor of transfer to Georgia.
Moreover, all of the defendants' documents are located in Georgia, while only a fraction of Medtest's bills were sent to New York. Additionally, Aetna chose to include in the complaint statutory claims arising under Connecticut and New Jersey law. Thus, it is more likely than not that the majority of Aetna's sources of proof are located in Connecticut, New Jersey and Georgia, as opposed to in New York. Documents will have to be inspected and/or retrieved from either Georgia or locales other than New York. This factor also favors transfer to Georgia. See Gerling Am. Ins. Co. v. FMC Corp., No. 97 Civ. 6473, 1998 WL 410898, at *4 (S.D.N.Y. July 22, 1998) (finding that the location of essential documents was a factor in ordering transfer).
With respect to familiarity with applicable law, it is likely that Georgia law will apply to the common law claims in this case, and this factor favors transfer to Georgia. When a case is transferred pursuant to Section 1404(a), the transferee forum must apply the law, including the choice of law rules, that the transferor forum would have applied. Van Dusen, 376 U.S. at 639. For tort claims, New York law requires courts to apply the law of the state with the greatest interest in the outcome of the litigation. See Schultz v. Boy Scouts of Am., Inc., 65 N.Y.2d 189, 197 (1985). That is determined "almost exclusively [by] the parties' domiciles and the locus of the tort." Id. Where, as here, the parties' domiciles are split, the locus of the tort would control the applicable law. See Neumeier v. Kuehner, 31 N.Y.2d 121, 128 (1972). The one common factor among the tens of thousands of bills at issue in this case is that they were all sent from the defendants' offices in Atlanta, Georgia. The bills were sent to various states nationwide, and only a fraction were sent to New York. These facts suggest that the locus of the tort is Georgia, having a greater interest in the outcome of the case than New York or any other one state. If Georgia law applies in this case, the NDGA is more suited to apply the law of that state than this Court. See Howard, No. 96-CV-4587, 1997 WL 107633, at *3 (S.D.N.Y. Mar. 10, 1997);Kingsepp, 1997 WL 269582, at *3; but see O'Neill v. Stanwood Corp., 577 F. Supp. 1001, 1003 (S.D.N.Y. 1984) (holding that choice of law is by no means dispositive of a motion to transfer, especially when there are no complex issues of foreign law).
Georgia has far more connections to this case than New York. In fact, the only connection this case has to New York is that a fraction of the defendants' bills were mailed to a post office and a processing center in New York. This fact alone, however, is not enough to maintain the plaintiffs' chosen forum when many more of the operative facts, witnesses, and documentary evidence is located in Georgia. For these reasons and in the interest of justice this case will be transferred to the NDGA.
II. Motions to Dismiss
Having found that this action should be transferred to the NDGA, the Court declines to resolve the defendants' motions to dismiss. See Handler v. Regents of the Univ. of Mich., No. 00-CV-6314, 2000 WL 1635701, at *3 (S.D.N.Y. Nov. 1, 2000) (transferring action and therefore declining to reach motions to dismiss for lack of venue and personal jurisdiction);Delarosa v. Holiday Inn, No. 99-CV-2873, 2000 WL 648615, at *5 (S.D.N.Y. May 19, 2000) ("The issue of personal jurisdiction over the defendants need not be resolved because a court may transfer a case to another district even in the absence of personal jurisdiction.") (citing Goldlawr v. Heiman, 369 U.S. 463, 466 (1962) (holding that a court may transfer venue whether the court in which it was filed had personal jurisdiction over the defendants or not)); but see Leroy v. Great Western United Corp., 443 U.S. 179, 180 (1979) (holding that generally courts should resolve issues of jurisdiction before venue, but courts may reverse this order when there is a "sound prudential justification for doing so"). Moreover, the Court need not address the defendants' motion to dismiss the complaint as to the individual defendants for failure to state a claim, because substantive questions are better left to resolution by the transferee court. Cf. Transamerica Corp. v. Transfer Planning, Inc., 419 F. Supp. 1261, 1264 (S.D.N.Y. 1976) (declining to reach merits of preliminary injunction motion for reason that "it is preferable for the transferee court, before whom the action will be ultimately determined, to do so").
CONCLUSION
For the foregoing reasons, the motion to transfer venue pursuant to Section 1404(a) is granted.
SO ORDERED.