Opinion
CASE NO. 03cv2182-BEN (JMA).
August 29, 2005
ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT and GRANTING DEFENDANTS' MOTION TO TRANSFER VENUE TO THE MIDDLE DISTRICT OF FLORIDA
Now before the Court are Plaintiff's Motion for Summary Judgment and Defendants' Motion to Transfer Venue to the Middle District of Florida. No hearing is necessary. Having reviewed the arguments and the evidence presented the Court finds that genuine issues of material fact exist which preclude the entry of summary judgment and require resolution by trial. Therefore, Plaintiff's Motion for Summary Judgment is Denied. Because a trial on the merits is necessary to resolve the case, the Court next considers Defendant's Motion to Transfer Venue. The Motion to Transfer Venue is Granted.
I. PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
The salient facts and the standards governing motions for summary judgment are set forth in this Court's earlier Order filed September 29, 2004 and need no repeating here. This Court has granted Plaintiff a preliminary injunction, having previously found that Plaintiff is likely to succeed on the merits of its claims. Nevertheless, Defendant has come forward with sufficient evidence to establish genuine issues of material fact which cannot be decided as a matter of law, precluding the entry of summary judgment on Plaintiff's seven claims for relief.
For example, Claims One and Two allege Ruthenberg and Dixon breached the non-compete, non-solicitation, confidentiality, and inventions provisions of their employment agreements with Plaintiff. However, there are many genuine issues of fact surrounding what information Defendants used and whether it was kept confidential by Plaintiff.
Likewise, there are genuine issues of fact precluding summary judgment on Plaintiff's misappropriation of trade secrets claim (Claim Four). For example, simply proving that Defendants used Plaintiff's customer list is not enough. That is because customer lists that merely identify customers "are often not protectable trade secrets." Ernest Paper Products, Inc. v. Mobile Chemical Company, Inc., slip op. Case No. CV95-7918 LGB (AJAX) 1997 U.S. Dist. LEXIS 21817 (C.D. Cal. Sept. 17, 1997) (citing ABBA Rubber Co. v. Seaquist, 235 Cal.App.3d 1 (1991)); Sargent Fletcher, Inc. v. Able Corp., 110 Cal.App.4th 1658 (2003) (identifying plaintiff's burden of proof for a misappropriation of trade secrets claim). To be protectable as a trade secret, the customer information must be the subject of efforts that are reasonable to maintain secrecy and derive independent economic value from not being generally known to the public. Id. "The central question is whether [Plaintiff]'s trade secrets . . . were secret, meaning: (1) they were valuable because they were unknown to others, and (2) [Plaintiff] attempted to keep them secret." Pixion, Inc. v. Placeware, Inc., slip op. Case No. C 03-02909 SI, 2005 U.S. Dist. LEXIS 11356 (N.D. Cal. Jan. 13, 2005) (citing DVD Copy Control Assn., Inc. v. Bunner, 116 Cal. App. 4th 241 (2004)). There are genuine issues regarding Plaintiff's efforts to maintain the secrecy of its customer information and the independent economic value of its customer information. There are genuine issues about whether Defendants "cherry picked" business from Plaintiff's customer base or used generally available industry information and product pricing information to seek customer's for the new waterfall business. There are genuine issues as to whether Defendants used Plaintiff's customer lists or developed customer targets through publicly available trade association information. These and other genuine issues of material fact preclude entering summary judgment for Plaintiff. Ernest Paper Products v. Mobile (denying summary judgment on misappropriation of trade secret claim due to genuine issues of whether customer lists were a trade secret based on their economic value and efforts made to maintain secrecy); Gamma-Metrics, Inc. v. Scantech Ltd., 52 U.S.P.Q.2d (BNA) 1568 (S.D. Cal. 1998) (denying summary judgment on misappropriation of trade secrets claim due to existence of fact issues).
There are also genuine issues of material fact which preclude summary judgment on Plaintiff's claim of tortious interference with business relations (Claim Three) and unfair competition claim (Claim Seven). "A claim for tortious interference requires a plaintiff to `plead and prove as part of its case-in-chief that the defendant not only knowingly interfered with the plaintiffs expectancy, but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself.'" Id. (quoting Della Penna v. Toyota Motor Sales, USA, Inc., 11 Cal. 4th 376, 393, 902 P.2d 740 (1995)). Unfair competition includes business practices that are at the same time forbidden by law. Id. (citing Summit Technology, Inc. v. High-Line Medical Instruments, 933 F. Supp. 918 (C.D.Cal. 1996)). "The common element of intentional interference with economic relations and unfair competition is unlawful conduct on the part of the defendant." Id. Because Defendants have presented evidence which creates genuine issues of fact concerning the lawfulness of their conduct, summary judgment is unwarranted. Id. (denying summary judgment on intentional interference and unfair competition claims). Moreover, there are genuine issues as to whether Plaintiff lost business as a result of the activities of the new waterfall company. This provides another basis for the denial of summary judgment on a tortious interference claim. PMC, Inc. v. Saban Entertainment, Inc., 45 Cal. App. 4th 579, 595, 52 Cal. Rptr. 2d 877 (1996) (to prevail on a claim for interference plaintiff must demonstrate: (1) existence of a prospective business relationship; (2) knowledge by defendant of that relationship; (3) intentional acts designed to disrupt that relationship; (4) actual causation; and (5) damages to plaintiff caused by defendant's conduct.)
As to Plaintiff's trademark infringement claim (Claim Six), plaintiff has failed to make out a prima facie case of infringement. In the recent case of KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 125 S.Ct. 542 (2004), the Supreme Court observed, "a plaintiff claiming infringement of an incontestable mark must show likelihood of consumer confusion as part of the prima facie case, 15 U.S.C. § 1115(b), while the defendant has no independent burden to negate the likelihood of any confusion." Id. at 551. Here, Plaintiff alleges infringement based upon the "Florida Falls" mark being left on Defendants' building. However, Plaintiff has not identified any evidence of actual customer confusion, and very little evidence bearing on any of the other seven factors of the eight-factor test the Ninth Circuit uses to determine whether a likelihood of confusion exists. KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 408 F.3d 596, 608 (9th Cir. 2005) (reversing grant of summary judgment on remand from the Supreme Court). Instead, Plaintiff simply asserts that a likelihood of confusion existed. This is insufficient to grant Plaintiff's motion for summary judgment. Id. ("Due to the factual nature of likelihood of confusion, determining whether a likelihood of confusion exists at the summary judgment stage is generally disfavored.")
In the same way, for Plaintiff's common law conversion claim (Claim Five), Plaintiff has put forth no evidence to support its claim that Defendants converted "customer files and information contained in boxes." Complaint, ¶¶ 60, 62. Instead, Plaintiff makes a new argument now: that it was Defendant Ruthenberg's Aqua Stream device and T-baffle prototype that was "converted." This is a departure from the Complaint and cannot justify summary judgment for Plaintiff on the Complaint.
These examples of material fact disputes are not exhaustive, but illustrative of the issues which must be resolved at trial and which preclude summary judgment for Plaintiff at this stage.
II. DEFENDANT'S MOTION TO TRANSFER VENUE
"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. The moving party bears the burden of showing that the balance of convenience to the parties and witnesses and the interest of justice would be served by the transfer. See Decker Coal Co. v. Commonwealth Edison Co., 805 F. 2d 834, 843 (9th Cir. 1986).
A. This Action Could Have Originally Been Brought in Florida
This action could have properly been brought in the transferee venue. 28 U.S.C. § 1404(a). Venue can be properly brought in "a judicial district where any defendant resides, if all defendants reside in the same State." 28 U.S.C. § 1391(a)(1). "[A] defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced." 28 U.S.C. § 1391(c). Personal jurisdiction over a corporation is proper in the district where the corporation is headquartered and from which it conducts substantial business. Royal Queentex Enterprises v. Sara Lee Corp., 2000 WL 246599, 3 (N.D. Cal. 2000).
Defendants Douglas A. Ruthenberg and Benjamin F. Dixon are citizens of the State of Florida and appear to reside within the Middle District of Florida. See Complaint ¶ 1. Defendant Great American Waterfall Company ("GAWC") is a corporation incorporated in Florida and has its principal place of business in Spring Hill, Florida. GAWC' headquarters, corporate officers, and business records are all located in Spring Hill, Florida, within the Middle District of Florida. Radford Declaration at ¶ 3. As such, all Defendants are subject to personal jurisdiction and reside in the Middle District of Florida. 28 U.S.C. § 1391(c); Royal Queentex Enterprises, 2000 WL 246599 at 3. Therefore the Middle District of Florida would have been a proper venue for this action. 28 U.S.C. § 1391(a)(1).
B. The Forum Selection Clause Does Not Control
Plaintiff's choice of this district was, no doubt, animated by the forum selection clause in the employment contracts agreed to by Plaintiff and individual Defendants Ruthenberg and Dixon. Although the forum selection clause identifies the Southern District of California as the agreed forum for suit, the forum selection does not control this Court's decision. It is to be considered along with the other factors set out in § 1404(a). The Supreme Court in Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 31 (1988), explained, "[t]he forum selection clause, which represents the parties' agreement as to the most proper forum, should receive neither dispositive consideration . . . nor no consideration . . . but rather the consideration for which Congress provided in § 1404(a)." In the case at bar, this Court finds that the convenience of the numerous witnesses necessary for trial, and not the forum selection clause, is the overriding concern.
Stewart suggests that a court should evaluate the "the fairness of transfer in light of the forum-selection clause and the parties' relative bargaining power." 487 U.S. at 29. In the instant litigation, the Court finds that the forum selection clause was the product of bargaining between parties with equal bargaining power. Although Plaintiff is a large subsidiary of a larger multinational corporation and Ruthenberg and Dixon are individuals, the forum selection clause in the employment agreements came about through the individuals' desire to sell their small pool business to Plaintiff. The individuals were under no apparent pressure to sell the business and negotiated an advantageous cash buyout deal for themselves which included positions as employees for Plaintiff to essentially continue running their former business for Plaintiff's benefit. Moreover, while some of the claims in this action are for breach of the employment contract, other claims are not covered by the forum selection clause, and Defendant GAWC is not a signatory to the forum selection clause.
C. Most Importantly, The Transfer Will Serve the Convenience of the Witnesses
The convenience of the parties and witnesses weighs in favor of the transfer.
Under § 1404(a), the district court has discretion "to adjudicate motions for transfer according to an `individualized, case-by-case consideration of convenience and fairness.'" A motion to transfer venue under § 1404(a) requires the court to weigh multiple factors in its determination whether transfer is appropriate in a particular case. For example, the court may consider: (1) the location where the relevant agreements were negotiated and executed, (2) the state that is most familiar with the governing law, (3) the plaintiff's choice of forum, (4) the respective parties' contacts with the forum, (5) the contacts relating to the plaintiff's cause of action in the chosen forum, (6) the differences in the costs of litigation in the two forums, (7) the availability of compulsory process to compel attendance of unwilling non-party witnesses, and (8) the ease of access to sources of proof.Jones v. GNC Franchising, Inc., 211 F.3d 495, 498-499 (9th Cir. 2000) (internal citation omitted). A "transfer should not be granted if the effect is simply to shift the inconvenience to the party resisting the transfer." Van Dusen v. Barrack, 376 U.S. 612, 646 (1964).
All of the claims are based upon operative facts which occurred outside of the present forum, and the Middle District of Florida will be a much more convenient forum for the vast majority of the witnesses. "The relative convenience to the witnesses is often recognized as the most important factor to be considered in ruling on a motion under § 1404(a)." Saleh v. Titan Corp., 361 F.Supp.2d 1152, 1160-1161 (S.D. Cal. 2005) (internal citation omitted); 15 Charles A. Wright, et al., Fed. Practice Procedure, § 3851 (West 2003). In determining the convenience of the witnesses, a court must examine the materiality and importance of the anticipated witnesses' testimony and then determine their accessibility and convenience to the forum. Id.; see also State Street Capital Corp. v. Dente, 855 F.Supp. 192, 197 (S.D. Tex. 1994).
Defendants have shown that a considerable number of material witnesses are located in the transferee venue. Few witnesses are located in California. The two fora are approximately 2,500 miles apart at opposite ends of the United States. According to the Declaration of Michael Radford, Esq., Plaintiff identified 68 potential witnesses. Of those, only 11 are residents of California and 10 of those are current or former employees of Plaintiff. There are 38 witnesses located in Florida. The remaining witnesses are predominantly located in Texas and New York, with one witness located in each of these states: Tennessee, Oklahoma, and Arizona. On Defendants' side, the vast majority of their witnesses will come from Florida businesses alleged to be customers of Polaris who bought $546,000 of goods from GAWC. These include five distributors and one dealer located in or near the Middle District of Florida. According to the Declaration of Radford, it is unlikely that individuals from these six major customers of GAWC will be willing to travel to California to testify at trial. Conversely, most would be within the subpoena power of the Middle District of Florida and most would voluntarily appear for trial if held in Tampa, Florida. Likewise, according to the spreadsheet exhibit prepared by Plaintiff (Exhibit 11, Notice of Lodgment of Exhibits), the vast majority (68 of 101) of individual witnesses are located in Florida or much closer to Florida than California. At the same time, 26 of the California individual witnesses are either current (17) or former (9) Polaris employees. Moreover, the vast majority of the 52 organization witnesses are located in, or much closer to, Florida than to California. The location of the large number of potential witnesses in Florida and other states in the eastern half of the country and their relative importance weigh heavily in favor of transferring the trial to the Middle District of Florida.
The Middle District of Florida also provides the best access to evidence. "[T]he ease of access to sources of proof" is another factor in the transfer analysis. Jones, 211 F.3d at 498-499. As mentioned above, both individual Defendants and Defendant GAWC's corporate headquarters and officers are located in Spring Hill, Florida. That is also where Defendants maintain their business records. Likewise, as mentioned above, most of the customers from which Plaintiff allegedly lost business to GAWC are located in Florida. No doubt, any evidence from these transactions also is located in Florida. In short, most of the trial evidence and related testimony would be the easiest to obtain or present in the Middle District of Florida. Because the overwhelming majority of witnesses for both parties reside far from California and in close proximity to the Florida venue and all Defendants reside in that venue, the transfer to the Middle District of Florida will serve the convenience of the witnesses and parties and ease access to relevant evidence. Jones, 211 F.3d at 498-499.
D. The Transfer Will Not Result in Significant Delay
This transfer will not result in significant delay or prejudice. The duration of the pendency of the litigation prior to the motion to transfer is another factor to be considered by the Court. Moore v. Telfon Communications Corp., 589 F.2d 959, 968 (9th Cir. 1978). The delay weighs against the transfer if it is substantial and the case may be nearing its conclusion. See Id. (case pending for six years prior to the motion to transfer); Kasey v. Molybdenum Corp. of America, 408 F.2d 16, 20 (9th Cir. 1969) (case pending for nine years and "moving toward conclusion."). "The law presumes injury from unreasonable delay." In re Eisen, 31 F.3d 1447, 1452 (9th Cir. 1994). The present action has been litigated for a year and a half. Discovery is ongoing. The final pre-trial conference date is set for October 14, 2005. There is no trial date set. These considerations do not weigh against the transfer.
E. The Transfer Will Likely Reduce Litigation Costs
The transfer is likely to help reduce overall litigation costs. The parties will have to incur additional costs for their counsel to travel to the transferee venue. If the case remains in California, however, Defendants will have to pay for bringing in the witnesses from the east coast and across the eastern states and evidence from their corporate headquarters and the headquarters of their customers in Florida. Moreover, because the vast majority of the numerous witnesses for both parties live in or close to Florida and far from California, any costs associated with their travel or discovery will also be greatly reduced by the transfer. Therefore the potential for reducing the cost of litigation favors the transfer.
F. The Transfer Will Serve the Interests of Justice
The transfer will serve the interests of justice. The Middle District of Florida is the location of Defendant's corporate headquarters and has a substantial interest in the outcome of this action. The transfer will not encourage forum-shopping. Federal courts have traditionally sought to discourage forum-shopping. Wilson v. City of San Jose, 111 F.3d 688, 694 (9th Cir. 1997); see also Decker Coal Co., 805 F.2d at 842. In this case, Defendants' motion was brought at the invitation of the Court — not as part of a litigation strategy. The interest of justice will be served by a transfer from a venue that has little connection to the operative facts giving rise to the Complaint to a venue that is the central location of most of the witnesses and evidence.
III. CONCLUSION
Defendant's Motion for Summary Judgment is DENIED.
Further, having considered all of the factors set forth in 28 U.S.C. § 1404(a), the Court finds that the transfer of the present action to the Middle District of Florida will serve the paramount interest of the convenience of the witnesses, as well as the interests of justice. Accordingly, Defendants' Motion to Transfer Venue is GRANTED and the case is transferred to the United States District Court for the Middle District of Florida for all future purposes.
IT IS SO ORDERED.