Opinion
No. 01 Civ. 11422 (SAS)
July 12, 2002
Richard L. Klein, Esq., Willkie, Farr Gallagher, New York, NY, for Plaintiff.
Thomas J. Fleming, Esq., Olshan, Grundman, Frome, Rosenzweig Wolosky, L.L.P., New York, NY, for Defendant.
OPINION AND ORDER
KPMG Consulting, Inc. brings this action against LSQ II, LLC. ("LSQ") for breach of contract and unjust enrichment. LSQ now moves for a change of venue to the Middle District of Florida, Orlando Division, pursuant to 28 U.S.C. § 1404 (a). For the following reasons, the motion to transfer is granted.
LSQ also moves for dismissal for lack of personal jurisdiction. See Defendant's Memorandum of Law in Support of Motion to Dismiss or, in the Alternative, for Transfer of Venue ("Def. Mem.") at 1. However, as the motion to transfer has been granted, this Court does not need to consider the issue of personal jurisdiction. See Fort Knox Music, Inc. v. Baptiste, 257 F.3d 108, 112 (2d Cir. 2001) ("The district court has [the] power to transfer venue even if it lacks personal jurisdiction over the defendants."); see also Goldlawr, Inc. v. Heiman, 369 U.S. 463, 466 (1962).
I. RELEVANT HISTORY
KPMG Consulting is a Delaware Corporation with nationwide offices. See 11/2/01 KPMG Consulting's Original Complaint to the Supreme Court of New York ("Complaint") ¶¶ 9-10, Ex. D to 4/23/02 Affidavit of Robert J. Kheel, attorney for KPMG Consulting ("Kheel Aff."). KPMG Consulting provides internet-based solutions, software, and a full range of technology and process services designed to enhance the competitive advantage of a client's business model. See id. KPMG Consulting maintains an office in New York at 757 Third Avenue in Manhattan. See id. ¶ 5. LSQ is a Florida Corporation with its sole place of business in Orlando, Florida. See Declaration of Anthony J. Oresteen, Chief Information Officer of LSQ ("Oresteen Decl.") ¶ 2. LSQ provides clients with financial services. See Kheel Aff. ¶ 6.
In late 2000, LSQ retained KPMG Consulting to design, develop and activate a transactional website. See Reply Declaration of Anthony J. Oresteen, Chief Information Officer of LSQ ("Oresteen Reply Decl.") ¶ 3. The purpose of this website was to enable LSQ to offer clients online access to capital financing, online trade credit facilitation, and related commercial transactions. See Oresteen Decl. ¶ 3. KPMG Consulting began work without a written agreement, and the parties later memorialized their arrangement in a Development and Consulting Services Agreement ("Development Contract") on March 7, 2001. See id.
A portion of KPMG Consulting's work under the Development Contract was done in its "New York Broadband Center. See Declaration of Marcus Mollersten, Senior Manager at KPMG Consulting ("Mollersten Decl.") ¶¶ 5-8. Although KPMG Consulting and LSQ disagree as to the cause of its failure, the website developed under the Development Contract never functioned correctly. See id. ¶¶ 21-26; Def. Mem. at 6. The Development Contract contains a forum selection clause that designates Florida as the proper venue for any claims that may arise under it. See Development Contract, Ex. C to Defendant's Notice of Motion ("Def. Notice") at 33.
A few months later, on June 30, 2001, KPMG Consulting and LSQ entered into a second contract called the Master Services Agreement ("Service Contract"). See Service Contract, Ex. D to Def. Notice. Under the Service Contract, KPMG Consulting was to provide website consulting services, and maintain and upgrade LSQ's website. See id. KPMG Consulting continued to provide consulting services pursuant to the Service Contract from June 15, 2001 until October 15, 2001. See Complaint ¶ 14. KPMG Consulting supervised the project through its Charlotte, North Carolina Office. See Oresteen Reply Decl. ¶ 12. The Service Contract designates New York law as its choice of law, but does not contain a forum selection clause. See Service Contract.
The parties dispute where the Service Contract was negotiated. See Oresteen Reply Decl. ¶ 8; Mollersten Decl. ¶ 27.
KPMG Consulting appears to have begun work before the contract was signed on June 30.
LSQ did not pay KPMG Consulting for any of the Service Contract work. See Complaint ¶ 15. LSQ missed payment on a series of eight invoices between June 30, 2001 and November 1, 2001. See id. On November 1, 2001, KPMG Consulting sent a notice of termination to LSQ. See id. ¶ 17.
KPMG Consulting commenced this action in the Supreme Court of New York, New York County on November 2, 2001. See Complaint ¶¶ 22, 36. LSQ removed this action to this Court on November 16, 2001, on grounds of diversity of citizenship pursuant to 28 U.S.C §§ 1332 and 1446. See Notice of Removal, Ex. B to Def. Notice.
On January 15, 2002, LSQ commenced an action in the Middle District of Florida, Orlando Division, claiming breach of contract under the Development Contract and fraudulent inducement to enter the Service Contract. See 1/15/02 LSQ's Florida Complaint, Ex. E to Def. Notice ¶¶ 24-35. LSQ also seeks a declaratory judgment from the Florida Court declaring that LSQ need not pay the Service Contract invoices. See id. ¶¶ 37-38. The Florida Court has denied KPMG Consulting's motion to dismiss or stay that action. See LSQ II, LLC. v. KPMG Consulting, Inc., Case No. 6:02-cv-47-Orl-28KRS (M.D. Fla. June 19, 2002)).
This was the same day that LSQ filed its 1404(a) motion in this Court. See Def. Mem. at 19.
The Florida Court held that "the Florida action expressly raises material claims that are not squarely before our sister court in New York. Hence, the two actions are not sufficiently parallel for application of the first filed rule." LSQ II, at 2.
II. DISCUSSION
A. Standard of Review for a Section 1404(a) Motion
Section 1404(a) provides: "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). A motion to transfer venue is governed by a two-part test: (1) whether the action could have been brought in the transferee venue; and (2) whether the balance of convenience and justice favors transfer. See American Alliance Ins. Co. v. Sunbeam Corp., No. 98 Civ. 4703, 1999 WL 38183, at *3 (S.D.N.Y. Jan. 28, 1999); Gerling American Ins. Co. v. FMC Corp., No. 97 Civ. 6473, 1998 WL 410898, at *2 (S.D.N.Y. July 22, 1998). Because this action could have been brought in Florida, transfer depends on the balance of convenience and justice.
In making this determination, a judge has "[c]onsiderable discretion in adjudicating a motion for transfer according to an individualized, case-by-case consideration of convenience and fairness." Bionx Implants, Inc. v. Biomet, Inc., No. 99 Civ. 740, 1999 WL 342306, at *3 (S.D.N.Y. May 27, 1999) (quoting In re Cuyahoga Equip. Corp., 980 F.2d 110, 117 (2d Cir. 1992)). A non-exclusive list of factors to consider includes:
(1) the convenience of witnesses; (2) the location of relevant documents and the relative ease of access to sources of proof; (3) the convenience of the parties; (4) the locus of the operative facts; (5) the availability of process to compel attendance of unwilling witnesses; (6) the relative means of the parties; (7) a forum's familiarity with the governing law; (8) the weight accorded a plaintiff's choice of forum; and (9) trial efficiency and the interests of justice based on the totality of the circumstances.
Ayala-Branch v. Tad Telecom, Inc., 197 F. Supp.2d 13, 15 (S.D.N.Y. 2002). See also Astor Holdings, Inc. v. Roski, No. 01 Civ. 1905, 2002 WL 72936, at *10 (S.D.N.Y. Jan. 17, 2002); 800-Flowers, Inc. v. Intercontinental Florist, Inc., 860 F. Supp. 128, 130-31 (S.D.N.Y. 1994). No individual factor is determinative, and "the Court has discretion to weigh the factors to reach an equitable result, although plaintiff's choice of forum is accorded significant weight." Pharmaceutical Resources, Inc. v. Alpharma USPD Inc., No. 02 Civ. 1015, 2002 WL 987299, at *5 (S.D.N.Y. May 13, 2002) (citing Citigroup Inc. v. City Holding Co., 97 F. Supp.2d 549, 560 (S.D.N.Y 2000)).
In addition, the Supreme Court has held that in balancing the case-specific factors in a 1404(a) motion, the presence of a forum selection clause will be a "[s]ignificant factor that figures centrally in the district court's calculus." Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988). When a defendant's 1404(a) motion for transfer is supported by a forum selection clause, the defendant "[i]s no longer attempting to limit the plaintiff's right to choose its forum; rather, the [defendant] is trying to enforce the forum that the plaintiff had already chosen: the contractual venue. In re Ricoh Corp., 870 F.2d 570, 573 (11th Cir. 1989) (remand of Stewart Organization). The Supreme Court has explained that in the motion to transfer context "[t]he flexible and individualized analysis Congress prescribed in § 1404(a) thus encompasses consideration of the parties' private expression of their venue preferences." Stewart Organization, 487 U.S. at 29-30. See also Red Bull Associates v. Best Western Int'l, Inc., 862 F.2d 963, 967 (2d Cir. 1988).
See Stewart, 487 U.S. at 33 ("[a] valid forum selection clause [should be] given controlling weight in all but the most exceptional cases.") (Kennedy, J., concurring).
B. Consideration of the Factors Favors Transfer
1. Inconvenience of Witnesses
"When a party seeks to transfer on account of the convenience of witnesses under § 1404(a), [it] must clearly specify the key witnesses to be called and must make a general statement of what their testimony will cover." Bombardier Capital, Inc. v. Solomon, No. 00 Civ. 0848, 2000 WL 1721138, at *5 (S.D.N.Y. Nov. 17, 2000) (quoting Factors Etc., Inc. v. Pro Arts Inc., 579 F.2d 215, 218 (2d Cir. 1978)). LSQ, as movant, should have identified specific witnesses that are inconvenienced by this forum. Instead, LSQ makes a vague reference to its witnesses that is too general to support transfer. See Crow Const. Co. v. Jeffrey M. Brown Assoc., Inc., No. 01 Civ. 3839, 2001 WL 1006721, at *3 (S.D.N.Y. Aug. 31, 2001); Orb Factory, Ltd. v. Design Sci. Toys, Ltd., 6 F. Supp.2d 203, 208-09 (S.D.N.Y. 1998) ("Vague generalizations and failure to clearly specify the key witnesses to be called . . . are an insufficient basis upon which to grant a change of venue under § 1404(a)."). Therefore, the inconvenience of LSQ's witnesses is not a factor that can be considered in this motion.
2. The Location of Documents and Access to Proof
The location of documents and access to sources of proof will be found in both New York, Florida, and North Carolina. Thus, this factor does little to help either side. In any event, the location of records is "not a compelling consideration when records are easily portable." Astor, 2002 WL 72936, at *12; Choker v. Bank of America, 984 F. Supp. 757, 766 (S.D.N.Y. 1997) ("In today's era of photocopying, fax machines and Federal Express," the location of documents factor is neutral).
3. Convenience of the Parties
Normally, the inconvenience of a party traveling between Florida and New York is minimal. See DiRienzo v. Philip Services Corp., NO. 99-7825, 2000 WL 33725106, at *7 (2d Cir. 2002) ("[W]itnesses can easily travel from Toronto to New York by a direct 90 minute flight. . . . Such travel today is not burdensome in terms of cost or time, and defendants have not shown otherwise.") (forum non conveniens context).
However, in the instant case, if KPMG Consulting's choice of forum were to stand, its witnesses in North Carolina would have to travel to New York and Florida, and its New York witnesses would still be required to travel to Florida. LSQ would have to travel to New York and still appear again in Florida. KPMG Consulting claims that transferring this case to Florida favors LSQ and inconveniences KPMG Consulting. But KPMG Consulting is mistaken. This is not a case where transfer shifts the burden and inconvenience from one party to another. Rather, "this is a case where transfer would aid one party and not disadvantage its adversary." Bionx, 1999 WL 342306 at *4 Therefore, the convenience of the parties slightly favors transfer.
Although consolidating litigation in the Florida venue is more convenient for KPMG Consulting as well, KPMG Consulting may choose to waive its own inconvenience. See NBA Properties, Inc. v. Salvino, Inc., No. 99 Civ. 11799, 2000 WL 323257, at *3 (S.D.N.Y. Mar. 27, 2000) ("A party can waive its inconvenience by agreeing to venue and that party's inconvenience is then not taken into account when the Court balances the inconvenience of the parties.").
4. The Locus of Operative Facts
The location of the operative events "[i]s a `primary factor' in determining a § 1404(a) motion to transfer." Smart v. Goord, 21 F. Supp.2d 309, 316 (S.D.N.Y. 1998) (quoting 800-Flowers, 860 F. Supp. at 134. Because the facts giving rise to the Development and Service Contracts took place in several jurisdictions, this factor is neutral.
5. Availability of Process to Compel Unwilling Witnesses
Normally, non-party witnesses who must be compelled to travel is a factor in the balance of convenience. See Ayala-Branch, 197 F. Supp.2d at 15. However, in this case neither side has argued that process to compel unwilling witnesses is an issue. Therefore, the availability of process to compel unwilling witnesses is a neutral factor.
6. Relative Means of the Parties
A court should consider the relative means of the parties "[w]here a disparity exists between the means of the parties, in determining venue." Everest Capital Ltd. v. Everest Funds Mgmt. LLC., 178 F. Supp.2d 459, 467 (S.D.N.Y. 2002) (quoting Aerotel, Ltd. v. Sprint Corp., 100 F. Supp.2d 189, 197 (S.D.N.Y. 2000)). Because no evidence as to relative means has been provided, this factor is neutral.
7. Governing Law Is a Neutral Factor
In a 1404(a) motion to transfer, "the `governing law' factor is to be accorded little weight on a motion to transfer venue because federal courts are deemed capable of applying the substantive law of other states." Astor, 2002 WL 72936 at *13 (quoting Prudential Sec., Inc. v. Norcom Dev., Inc., No. 97 Civ. 6308, 1998 WL 397889, at *6 (S.D.N.Y. July 15, 1998)). In the instant case, because the relevant law is not complex, there is no reason to conclude that the Florida Court will have any trouble applying New York law. See Renaissance Cosmetics, Inc. v. Dev. Specialists, Inc., 277 B.R. 5, 19 (S.D.N.Y. 2002). The governing law factor is therefore neutral.
8. Plaintiff's Choice of Forum
When there are two actions pending in different jurisdictions, "the first filed of the two takes priority absent `special circumstances' or a balance of convenience in favor of the second." Citigroup, 97 F. Supp.2d at 555 (citing First City Nat. Bank and Trust Co. v. Simmons, 878 F.2d 76, 79 (2d Cir. 1989)). The party seeking to deviate from the rule bears "the burden of demonstrating that circumstances justifying an exception exist." Citigroup, 97 F. Supp.2d at 555-56.
Here, KPMG Consulting filed first, and LSQ has given this Court no reason to deviate from the first filed rule. Therefore, the deference due to KPMG's choice of forum carries significant weight against transfer.
LSQ's claim that KPMG engaged in "deceptive" settlement negotiations in an attempt to delay LSQ's filing is flawed because LSQ did not file its own action until two months after KPMG. This was not a "race to the courthouse." Kellen Co., Inc. v. Calphalon Corp., 54 F. Supp.2d 218, 223 (S.D.N.Y. 1999).
9. Judicial Economy and the Interest of Justice
Judicial economy and the interest of justice is "a separate component of the court's § 1404(a) transfer analysis . . . and may be determinative in a particular case." Tucker Anthony, Inc. v. Bankers Trust Co., No. 93 Civ. 0257, 1994 WL 9683, at *8 (S.D.N.Y. Jan. 10, 1994) (internal citations omitted). The interest of justice is a broad concept which requires the court to consider the totality of the circumstances presented." Capital Venture Int'l. v. Network Commerce, Inc., No. 01 Civ. 4390, 2002 WL 417246, at *1 (S.D.N.Y. Mar. 15, 2002) (quoting Bombardier, 2000 WL 1721138, at *6). "The interest of justice is implicated where transferring the case would serve the interest of judicial economy." Capital, 2002 WL 417246, at *2. Transfer of venue under § 1404(a) exists "[t]o prevent the `waste of time, energy and money' and `to protect litigants and the public against unnecessary inconvenience and expense." Schuur v. Walt Disney Co., No. 98 Civ. 2212, 1998 WL 190321, at *1 (S.D.N.Y. Apr. 21, 1998) (quoting Van Dusen v. Barrack, 376 U.S. 612, 616 (1964) (internal citations omitted)).
Litigation between the parties is already underway in Florida, and the Florida court has recently ruled that LSQ's action can proceed in Florida regardless of the outcome of this motion. Concurrent proceedings in Florida and this Court would needlessly waste judicial resources and hamper timely adjudication in both courts, as the parties, witnesses, subject matter and many of the factual disputes are virtually identical. As one court has recently explained:
There is strong policy favoring the litigation of related claims in the same tribunal in order that pretrial discovery can be conducted more efficiently, duplicitous litigation can be avoided, thereby saving time and expense for both parties and witnesses, and inconsistent results can be avoided.
Capital, 2002 WL 417246 at *2. See also Bombardier, 2000 WL 1721138 at *6 (quoting Levitt v. State of Maryland Deposit Insurance Fund Corp., 643 F. Supp. 1485, 1493 (E.D.N.Y. 1986) ("Transfer of an action to a district where a related case is pending . . . saves witnesses time and money in both trial and pretrial proceedings . . . thereby eliminating unnecessary expense to the parties while at the same time serving the public interest.")). Allowing this lawsuit to proceed in New York would be "wasteful and unnecessarily duplicative." Levitt, 643 F. Supp at 1493. Therefore, trial efficiency and the interests of justice strongly support transfer to Florida.
10. The Forum Selection Clause
When a 1404(a) motion involves a forum selection clause, "deference to the plaintiff's choice of forum is inappropriate." Strategic Marketing Communications, Inc. v. Kmart Corp., 41 F. Supp.2d 268, 273 (S.D.N.Y. 1998). See also Stonehenge, Ltd. v. Garcia, 989 F. Supp. 539, 542 (S.D.N.Y 1998); Weiss v. Columbia Pictures Television, Inc., 801 F. Supp. 1276, 1278 (S.D.N.Y. 1992) (deference to a plaintiff's choice of forum, "[i]s inappropriate where plaintiff has already chosen the appropriate venue.").
The forum selection clause of the Development Contract is only valid for that contract. Both parties agree that the Service Contract is a distinct contract. Thus, as KPMG Consulting's cause of action is built upon the Service Contract, it is not subject to the forum selection clause. Therefore, the forum selection clause is not relevant in determining transfer of venue.
IV. CONCLUSION
Although plaintiff's choice of forum is entitled to significant weight, I find that judicial economy and the convenience of the parties outweigh this consideration. LSQ's motion to transfer this action to the Middle District of Florida is granted. The Clerk of the Court is directed to transfer this case forthwith.