Summary
holding venue appropriate in Connecticut because file servers containing confidential business information at issue in case located in Connecticut
Summary of this case from ECL Grp., LLC v. MassOpinion
Civil Action No. 3:05cv01456 (SRU).
June 27, 2006
RULING ON DEFENDANT'S MOTION TO TRANSFER
Argent Funds Group, LLC ("Argent") has sued Linda Marie Schutt for damages and injunctive relief under the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. Schutt contends that venue in the District of Connecticut is inappropriate under 28 U.S.C. § 1391(b), and moves to transfer the case to the Southern District of California or the Southern District of Florida pursuant to 28 U.S.C. § 1404(a). For the reasons set forth below, venue is appropriate in Connecticut, and Schutt's motion to transfer to California or Florida is denied.
Argent has also sued Schutt for misappropriation of trade secrets, Conn. Gen. Stat. §§ 33-50, et seq., violation of Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. §§ 42-110a, et seq., and civil theft, Conn. Gen. Stat § 52-564.
I. Background
Argent is a financial services entity, incorporated in Delaware, that maintains its headquarters in Greenwich, Connecticut. Argent alleges that Schutt, a former employee of Argent, accessed confidential and valuable fund and financial information remotely, downloaded that information to two laptop computers and two hard drives of a Dell desktop computer, and stole the laptops, the hard drives, and their associated software after being terminated from her position. The confidential information that Schutt allegedly stole was located on computer file servers at Argent's headquarters in Connecticut. The laptop computers and the Dell desktop and associated software were in Schutt's former Florida residence before they were allegedly stolen.
Schutt currently resides in San Diego, California, in the Southern District of California. She states that she is unaware of any Argent confidential information that may have been downloaded onto the hard drives, which belong to her husband, and that she never used the hard drives for Argent business activity. The Dell desktop had been given to her for personal use by her father, Bruce McMahan, who is the CEO of Argent. Schutt declaration ¶ 20. If confidential information had been downloaded onto the hard drives, Schutt alleges that it must have happened while she was away in California, when Argent employee Aaron McKay installed the hard drives onto the Dell desktop in Florida. See id. ¶ 17. Schutt believes that the true subject of the lawsuit is her father's desire to obtain control over personal information rather than the theft of confidential information, id. ¶ 16, and apparently believes that the facts and events underlying her personal dispute with her father are relevant to the transfer of venue motion.
II. Venue under 28 U.S.C. § 1391(b)
Section 1391(b) of Title 28 of the United States Code states:
(b) A civil action wherein jurisdiction is not founded solely on diversity of citizenship may, except as otherwise provided by law, be brought only in . . . (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated.28 U.S.C. § 1391(b) (emphasis added).
Venue is appropriate in any judicial district in which a substantial part of the underlying events took place, and may be appropriate in multiple districts. Bates v. C S Adjusters, Inc., 980 F.2d 865, 867 (2d Cir. 1992). If the subject of the action is property, venue is also appropriate in a district in which a substantial part of the property is situated. 28 U.S.C. § 1391(b)(2). When venue is proper in more than one district, the plaintiff has no obligation to determine the "best venue," Bates, 980 F.2d at 867, nor to file in the most convenient forum, Sussman v. Bank of Israel, 56 F.3d 450, 457 (2d Cir. 1995) (quotations omitted).
Determining whether venue is appropriate in Connecticut pursuant to 28 U.S.C. § 1391(b) involves a two-part inquiry. See Daniel v. American Board of Emergency Medicine, 428 F.3d 408, 432 (2d Cir. 2005). First, the court identifies the "nature of the claims" and the acts that gave rise to the claims. Id. Second, the court determines whether significant events that are material to the claim occurred in the judicial district where the plaintiff filed the lawsuit. Id. When material acts that occurred in the judicial district "bear a close nexus" to a claim, they are considered significant. Id. The number of contacts with the judicial district is irrelevant to the inquiry. See id.
In Bates, the Second Circuit held that venue was appropriate in the district in which the injury occurred. 980 F.2d at 868. Plaintiff debtor commenced an action based on violation of the Fair Debt Collection Practices Act in the Western District of New York. The nature of the claim was injury (e.g., marital instability, loss of a job, bankruptcy, invasion of privacy) arising from violation of the Act. Although the plaintiff incurred the debt while he was a resident of Pennsylvania, the court held that the "harm does not occur until receipt of the collection notice." Id. at 868. Thus, the significant events material to the claim occurred in New York, the state in which the plaintiff was situated and where he resided at the time he received the bill. It was immaterial that the defendant creditor did not regularly transact business in New York. Id. at 865.
In this case, the nature of Argent's claim is an injury arising from the alleged theft of confidential information, the computers, and the software that was originally installed on the computers. Substantial events material to the claim occurred in Connecticut; Schutt would not have been able to obtain the confidential information had the Connecticut file server never transferred the information to her via the internet. The Connecticut file servers thus played a central role in the events that gave rise to the claim, and were one of the means by which the defendant allegedly stole the confidential information. As in Bates, where it was immaterial that the defendant transacted no regular business with New York, it is immaterial that Schutt does not transact any business or have many contacts with Connecticut, because a substantial event underlying plaintiff's claims occurred in Connecticut.
Even if a substantial part of the events or omissions giving rise to the claim had not occurred in Connecticut, venue would still be appropriate here pursuant to section 1391(b) because a substantial part of property that is the subject of the action is situated in Connecticut. The intellectual property at issue in this case is Argent's confidential business information, which is located on the file servers in Connecticut. Therefore, venue is appropriate in Connecticut either because the property at issue is located here, or because a substantial part of the events giving rise to the claim occurred in Connecticut.
II. Transfer of Venue Under 28 U.S.C. § 1404(a)
Section 1404(a) of Title 28 of the United States Code states:
(a) For 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.28 U.S.C. § 1404(a).
In a motion to transfer pursuant to 28 U.S.C. § 1404(a), the defendant has the burden of presenting a strong case for transfer. Ford Motor Co. v. Ryan, 182 F.2d 329, 330 (2d Cir. 1950). The defendant must show that: (1) the action might have been brought in the district court in which the movant is seeking transfer, and (2) transfer promotes the convenience of parties and witnesses and the interest of justice. Excelsior Designs v. Sheres, 291 F. Supp. 2d 181, 185 (E.D.N.Y. 2003) (citing Schertenleib v. Traum, 589 F.2d 1156, 1161 (2d Cir. 1978)).
Schutt has moved to transfer the case from the District of Connecticut to the Southern District of Florida or the Southern District of California. Because section 1391(a) permits venue for a diversity action in "a judicial district where any defendant resides, if all defendants reside in the same State," 28 U.S.C. § 1391(a)(1), venue is appropriate in the Southern District of California, where Schutt resides. Venue is also appropriate in the Southern District of Florida, because section 1391(b) permits venue in a district where a substantial part of the events or omissions giving rise to the claim occurred. 28 U.S.C. § 1391(b)(2). Schutt was in Florida when she allegedly accessed the confidential information, and when she allegedly stole the computers and their associated software.
District courts have considerable discretion to adjudicate motions for transfer according to an individualized, case-by-case consideration of convenience and fairness. Red Bull Assoc. v. Best Western International, Inc., 862 F.2d 963, 967 (2d Cir. 1988). Because Congress' intent in section 1404(a) was for the courts to engage in a "flexible and multifaceted analysis," courts balance a number of case-specific factors when deciding a transfer of venue motion. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988). Factors that are irrelevant to a case or that have not been addressed by the parties need not be addressed. See Royal Sunalliance v. British Airways, 167 F. Supp. 2d 573, 576 (S.D.N.Y. 2001).
A. Convenience of the parties
A plaintiff's choice of venue is afforded substantial weight. Warrick v. General Electric Co., 70 F.3d 736, 741 (2d Cir. 1995). "Unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed." Ford Motor Co., 182 F.2d at 330 (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947)).
In Golconda v. Herlands, 365 F.2d 856 (2d Cir. 1966), the plaintiff began an action in New York; the defendants moved to transfer the action to Idaho. Id. at 857. Even though Idaho was the best venue for trial efficiency, the state where one of the defendants resided, and the place of incorporation and principal place of business for the defendant corporation, the court determined that transfer was inappropriate because the plaintiff's choice of forum is accorded substantial weight. Id. It would have been inconvenient for the plaintiff to try the case in Idaho, because all potential witnesses for the plaintiff resided in New York, Pennsylvania, and New Jersey. Id.
Argent chose Connecticut as the forum for this lawsuit. Its headquarters are in Connecticut and most of the Argent employee witnesses work there. The confidential information at issue is stored on the company's file server, which is also located in Connecticut. It would be inconvenient for the plaintiff to try the case in California, because none of its witnesses reside there. Although Argent has an office in California, that office is not its principal place of business, and none of Argent's witnesses work in the California office. The Southern District of Florida may be a slightly more convenient forum for the plaintiff than the Southern District of California, because one of its key witnesses, McKay, lives and works out of the Florida office. McKay affidavit ¶ 9. Argent has stated, however, that McKay would not be inconvenienced by travel to Connecticut because he frequently travels as part of his job.
In balancing the convenience of the parties, the court also looks at their relative financial means. A Slice of Pie Productions v. Wayans Brothers Entertainment, 392 F. Supp. 2d 297, 309 (D. Conn. 2005). When a party asserts that transfer would be unduly burdensome to his finances, he must offer evidence supporting such an assertion. Excelsior Designs, 291 F. Supp. 2d at 187. In A Slice of Pie Productions, the financial hardship factor weighed in favor of the plaintiff, who filed an affidavit stating that he had only $2,000 in his bank account and that litigating the trial in a distant forum would bankrupt him. 392 F. Supp. 2d at 308. In contrast, in Excelsior Designs, the court held that financial hardship was not a factor in the case because the financial disparity was minor and because the defendant did not offer evidence supporting his assertion of hardship. 291 F. Supp. 2d at 187.
Argent has substantially greater means than Schutt. Argent is a large corporation with offices in at least three different states; Schutt is an individual who resides in California. Schutt argues that defending in Connecticut would create financial hardship, because she is currently unemployed, does not have access to her bank account in Florida, and would incur expenses traveling to Connecticut. Schutt declaration ¶ 29. Furthermore, Schutt argues that, because she has already retained counsel in California and Florida, one of these forums would be preferable to Connecticut.
Schutt has not shown that litigating in another forum would cause her hardship. Although she is presently unemployed, that fact does not demonstrate financial hardship, because Schutt herself indicates that her salary even when she was employed was minimal and she had other resources. See id. ¶ 11. Schutt provides documents showing that during the time she worked for Argent, she made a minimal income and depended largely on personal gifts from her father and on accounts assigned to her. Id. While Schutt was employed by Argent, her salary was only $12,000 per year. Id. Schutt's exhibit shows that her year-to-date earnings for the year 2005 through September 9, 2005 were $8,307.72, and her gifts amounted to roughly $197,000. Unlike the plaintiff in A Slice of Pie Productions, who had only $2,000 in his bank account, Schutt does not indicate what monies are available to her. She only states that she cannot access her bank account because it is in Florida. Schutt declaration ¶ 29.
The examples of financial hardship that Schutt offers, aside from her current state of unemployment, demonstrate only minor hardship at best. Regardless of where Schutt litigates the case, she will have to pay for the services of an attorney. Indeed, Schutt has retained Connecticut counsel to defend this action. Schutt also fails to explain why she cannot access the money in her bank account in Florida.
In sum, because Schutt has not demonstrated that venue in Connecticut would be unduly burdensome financially, as compared with California or Florida, and because Argent has chosen venue in Connecticut, the issue of convenience to the parties favors Argent.
B. Convenience of witnesses
The convenience of witnesses is an important factor in deciding a transfer of venue motion, due to concern over the parties' ability to compel witnesses to testify. See Ford Motor Co., 182 F.2d at 331. The parties cannot require a witness to testify by subpoena, if the witness would have to travel more than 100 miles from the place where he "resides, is employed or regularly transacts business in person." Fed.R.Civ.P. 45(c)(3)(A)(ii). Nonetheless, non-party witnesses who cannot be compelled to testify by subpoena can appear at trial through a videotaped deposition. Kodak Polychrome Graphics, LLC v. Southwest Precision Printers, Inc., 2005 WL 2491571, at *3 (D. Conn. Oct. 7, 2005).
In assessing the convenience of witnesses, courts examine the residence of witnesses, see Golconda, 365 F.2d at 857, and the "materiality, nature, and quality of each witness." Royal Sunalliance, 167 F. Supp. 2d at 577. When a party seeks transfer based on the convenience of witnesses, he must specify who the key witnesses are and what their testimony will generally cover, and support his statements with affidavits. Factors Etc., Inc. v. Pro Arts Inc., 579 F.2d 215, 218 (2d Cir. 1978).
Schutt has specified that her key witnesses, presumably in addition to herself, are her husband, Sargeant Schutt, and Argent employees Bruce McMahan, Aaron McKay, Pat Ransom, and Jose Fuyana. Schutt also states that certain Miami Dade police officers are potential third-party witnesses. Although Schutt does not specify what several of those witnesses will be testifying about, the affidavits indicate that some of them could have been involved in material events in this case.
Bruce McMahan, CEO of Argent and Schutt's father, lives and works in Fisher Island, Florida. Schutt declaration ¶ 8. McMahan both hired and fired Schutt. Id. ¶¶ 10, 11. McMahan also gave Schutt the Dell desktop and one of the laptop computers in this case. Id. ¶¶ 19, 20. Schutt alleges that she kept the other laptop computer because she intended to give it to her mother and McMahan acknowledged that that would be appropriate. Id. ¶ 18.
McKay, Argent's Director of Communications, lives and works in Florida. McKay affidavit ¶ 9. McKay states that, while Schutt was employed by Argent, she had access to Argent proprietary information through email, on-line applications, and data repositories. Id. ¶ 8. After Schutt was terminated, McKay noticed that both of the laptop computers and the two hard drives were missing from her condominium unit. See id. ¶ 10. He states that the computers and hard drives contain propietary and confidential information. Id. ¶ 11.
Sargeant Schutt is a potential key witness because he was the owner of the hard drives at the time the confidential information was allegedly transferred to the hard drives. See Schutt declaration ¶ 20. Ransom, Fuyana, and the Miami Dade police officers were involved in events that took place after the alleged theft of the confidential information. Id. ¶ 26. Because Schutt provides no general statement of what they will be testifying about, there is no basis from which to conclude that those individuals are key witnesses.
Argent's witnesses are Argent employees McKay and Robert Arent, and consulting and technical services firm, Stroz Friedberg, LLC. Arent is the Director of Information Systems and supervises Argent's computers at the Connecticut headquarters. Arent Affidavit ¶ 4. Arent states that he installed software on Schutt's computers that enabled her to access the Connecticut file servers from wherever she was located. Id. ¶ 8. For example, he states that an email was sent to Schutt on September 2, 2005 from the file servers, and that confidential business information about an Argent fund was transmitted as an attachment through that email. Id. ¶ 9.
Stroz Friedberg, LLC is Argent's expert witness. Stroz Friedberg is a consulting and technical services firm that specializes in fields such as computer forensics and computer investigations. Its headquarters are in New York City, and it has offices in New York, Minnesota, and Washington, D.C. The firm provides forensic analysis of computer data for investigations and litigation.
In sum, the key witnesses in this case are Argent employees McMahan, McKay, and Arent, expert witness Stroz Friedberg, LLC, Schutt and her husband, Sargeant Schutt. Because Argent chose Connecticut as its venue, and is opposing the motion to transfer to Florida or California, Argent is apparently not concerned about its ability to compel its employees to testify here. Even though McMahan and McKay may live and work in Florida, both of them travel regularly for their work, and it is not inconvenient for them to travel to Connecticut. Connecticut is likely the most convenient forum for Stroz Friedberg as well, because it has its headquarters in New York City, which is much closer to Connecticut than to Florida or California.
Aside from Schutt and Sargeant Schutt, Connecticut would be the most convenient venue for the principal witnesses. Because it would be simpler to depose Sargeant Schutt than to require all of the Argent employees to travel to California, this factor weighs in favor of the plaintiff's choice of a Connecticut forum.
C. Locus of Operative Fact
Another factor to be considered in a motion to transfer under section1404(a) is the locus of operative fact, or the place where the events that gave rise to the claim took place. The Charter Oak Fire Insurance Co. v. Broan-Nutone, L.L.C., 294 F. Supp. 2d 218, 220 (D. Conn. 2003). Schutt argues that California is a locus of operative fact, but fails to show which, if any, events that took place in California gave rise to the claim. The only relevance of California to this case is that Schutt currently resides there, and the hard drives at issue in this case are currently in California. Schutt declaration ¶ 26. Schutt also asserts that the confidential information at issue in this case was added to the hard drives while she was in California. Id. ¶ 17. None of these facts or assertions demonstrate how the alleged theft of confidential information and computers arose from events in California. Thus, I conclude that California is not a locus of operative fact.
Florida and Connecticut, on the other hand, are proper loci of operative fact. The claim arises from the plaintiff's alleged acts of accessing confidential information that resided on the file server in Connecticut, transferring this data to her computer in Florida, and eventually stealing the computers that were formerly in Florida.
Balancing all the factors in this case, I conclude that Schutt has not met her burden of presenting a strong case for transfer of venue to either the Southern District of Florida or the Southern District of California. Transfer of venue is not appropriate when it merely shifts the inconvenience from one party to another. See Excelsior Designs, Inc., 291 F. Supp. 2d at 187 (citing MBCP Peerlogic, LLC v. Critical Path, Inc., 2002 WL 31729626, at *2 (S.D.N.Y. Dec. 5, 2002)).
Although California is Schutt's place of residence and is therefore a more convenient forum for her, that alone is insufficient to justify a transfer of venue when the balance of the other factors, (i.e., convenience of parties and witnesses, locus of operative fact), do not favor such a transfer. Transferring this action to California would merely shift the burden of inconvenience from Schutt to Argent.
Schutt has not met her burden of presenting a strong case for transfer to Florida either. Transferring this action to Florida would not be convenient for either Schutt or Argent. Litigating in Florida would still require Schutt to incur travel expenses similar to those she would incur traveling to Connecticut. Although Florida is a locus of operative fact, none of the other factors favor transfer to Florida.
III. Conclusion
Because the relevant factors favor venue in Connecticut, and do not favor a transfer to California or Florida, Schutt's motion to transfer (doc. #14) and her amended motion to transfer (doc. #26) are DENIED.
It is so ordered.