Summary
ordering transfer
Summary of this case from Distance Learning Sys. Indiana v. a D Nursing InstituteOpinion
CASE NO. 1:03-cv-0428-DFH
March 18, 2004
ENTRY ON PENDING MOTIONS
Defendants in this diversity action have moved to dismiss for lack of personal jurisdiction or for a transfer to the Northern District of Illinois pursuant to 28 U.S.C. § 1404(a). After being given six months to conduct relevant discovery, plaintiff responded to the motions. As explained below, the court grants the defendants' motion to transfer and denies their motion to dismiss as moot. See Goldlawr, Inc. v. Heiman, 369 U.S. 463, 466 (1962) (finding that a district court may grant a petition to transfer under 28 U.S.C. § 1406(a) whether or not it had personal jurisdiction over the defendant).
To the extent that personal jurisdiction may affect whether the transfer is made under 28 U.S.C. § 1404(a) or § 1406(a) (with the attendant consequences for choice of law), the court reads defendants' motion papers as effectively consenting to transfer pursuant to § 1404(a) regardless of the personal jurisdiction issue. See Def. Mem. at 2 n. 1.
Factual Background
Plaintiff Worldwide Financial, LLP filed this action in state court and named as defendants Frederick H. Kopko, Jr., McBreen Kopko, and Rimas Buinevicius. Defendants removed the case to this court on grounds of diverse citizenship. The Notice of Removal states that all of plaintiff's partners are citizens of Indiana and that defendants are citizens of Illinois and Wisconsin for purposes of 28 U.S.C. § 1332 and 1441. The complaint alleges that the defendants defrauded plaintiff into paying $1.5 million for some worthless shares of stock, so the amount in controversy easily satisfies the jurisdictional requirement.The complaint alleges that defendant Buinevicius owned 150,000 shares of a company called Cadant, Inc., a Maryland corporation with its principal place of business in Illinois. Buinevicius is a Wisconsin citizen who has extensive business dealings in Chicago. Defendant Kopko is a Chicago attorney and partner of defendant law firm McBreen 85 Kopko.
Plaintiff alleges that Kopko contacted Worldwide to arrange a sale of Buinevicius's shares of Cadant. (There is also unrebutted evidence from Kopko that George Grkinich, one of plaintiff's principals, had previously visited Cadant and was exploring the possibility of investing in it.) Because the shares were restricted, the sale was not handled as a sale directly to Worldwide. Instead, the parties established an irrevocable trust in Illinois with Worldwide as the beneficiary and Kopko as the trustee. As part of the transaction closing in July 2000, the Buinevicius shares were transferred to the Illinois trust of which Kopko was trustee, and Worldwide wired $1.5 million to an Illinois bank account.
According to the complaint, to encourage Worldwide to go through with the transaction, Kopko falsely indicated to Worldwide that the Cadant shares were valued at $10 per share. The complaint also alleges that Kopko falsely told Worldwide that transferring the restricted shares to an irrevocable trust would be legally sufficient to avoid the restrictions. Some time in 2002, Cadant filed for bankruptcy, rendering the shares in the trust worthless or nearly so. According to plaintiff, the shares had little or no value at the time of the July 2000 transaction. The complaint asserts claims under Indiana securities law and the common law of fraud and attorney malpractice.
Although the current motions present no issues concerning the merits of plaintiff's claims, it is worth noting that in the transaction documents, Worldwide appears to have warranted that "No oral or written representations have been made with respect to the Company [Cadant, Inc.]," that Worldwide "understands that none of the Company, the Trust, the Trustee [Kopko] or the Trustor [Buinevicius] make any representation or warranty concerning the accuracy or completeness of any information, relating to the Company or its operations," that Worldwide had consulted its own financial, legal and tax consultants and had not relied on the other parties for such advice, and that Worldwide recognized and waived the conflicts of interest presented by the parties' respective roles in the transaction. See Letter Agreement ¶ 2(j), (n), (o), and (p).
The affidavits submitted on the motion to transfer show that one of Worldwide's principals, George Grkinich, Jr., played a key role and was the original contact between Kopko and Worldwide. In 2000, Grkinich did extensive business in Illinois and actually maintained a Chicago telephone number. The transaction in question here arose from contacts between Grkinich and Kopko in Kopko's Chicago office. Face-to-face negotiations occurred in Chicago between Grkinich and Kopko in July 2000. No face-to-face meetings between the parties occurred in Indiana. To close the transaction, Buinevicius delivered the shares in Chicago, and Grkinich wired the $1.5 million payment to Buinevicius's bank account in Chicago.
There were also a number of telephone calls and faxes between Illinois and Indiana in the negotiations, though the most substantive ones were between Chicago and plaintiff's lawyer located in Highland, Indiana, which is in the Northern District of Indiana.
The court is concerned about representations made in the briefs of both parties about potentially critical facts. For example, defendants' brief states at page 2: "In July 2000, the parties met in Chicago to close on the contract to place the Cadant shares in an Illinois trust." The evidence cited to support that important assertion indicates only that preliminary negotiations occurred in Chicago. See Kopko Aff. ¶ 11. There is no evidence that there was a physical closing where everyone met face-to-face in Chicago. Defendants state at page 4 of their brief: "Also, there are two related cases currently pending in the Northern District of Illinois, which make allegations of fraud involving Plaintiff's partners in certain financing transactions with Cadant." The cited evidence refers to some litigation pending in the Northern District of Illinois, but it supplies no explicit link to "Plaintiff's partners," let alone to plaintiff itself. Leng Aff. ¶¶ 2-4. On the other side, plaintiff asserts at page 6 of its brief without citation: "Kopko initiated numerous phone calls to Worldwide in soliciting and negotiating the sale of the Cadant Stock during which certain misrepresentations at issue in this case were made." That is a clear exaggeration of the supporting affidavits. Such exaggerations of the evidence by both sides are not helpful and result in extra scrutiny of other claims, as well.
Discussion
When jurisdiction and venue are otherwise proper, 28 U.S.C. § 1404(a) authorizes the court to transfer a civil case to another district for the convenience of the parties and witnesses and in the interest of justice. Under § 1404(a), a transfer is appropriate if the Northern District of Illinois would be "clearly more convenient" than the Southern District of Indiana. Coffey v. Van Dorn Iron Works, 796 F.2d 217, 220 (7th Cir. 1986). Such a transfer is committed to the sound discretion of the district court. Id. at 219.In support of transfer, defendants make several points. The parties' agreement includes a provision that the agreement will be governed by Illinois law. The parties all consented to jurisdiction and venue in Illinois state and federal courts "in connection with any action or proceeding arising out of or relating to this Agreement, any document or instrument delivered pursuant to, in connection with or simultaneously with this Agreement, or a breach of this Agreement or any such document or instrument." Defendants also point out that the only face-to-face negotiations occurred in Illinois and that the trust in question is an Illinois trust. Perhaps most important, defendants have identified a number of non-party witnesses from the now-defunct Cadant who are Illinois residents and who are beyond this court's subpoena power.
Plaintiff Worldwide responds that the choice of law provision in the agreement does not apply to tort claims as distinct from contract claims, and that its consent to jurisdiction and venue in Illinois is not exclusive. Worldwide emphasizes the importance of its choice of forum as the plaintiff, and it asserts that much of the negotiations were carried on by fax and telephone between the defendants in Illinois and Worldwide in Indiana. Plaintiff also questions the importance of the non-party witnesses identified by defendants.
I. Convenience of Parties and Witnesses
Either forum, Southern Indiana or Northern Illinois, would be inconvenient for one side or the other. Merely shifting inconvenience from one party to another does not warrant a transfer. E.g., Moore v. ATT Latin Am. Corp., 177 F. Supp.2d 785, 789 (N.D. Ill. 2001), citing Promatek Med. Sys., Inc. v. Ergometrics, Inc., 1990 WL 19491, at *4 (N.D. Ill. Feb. 15, 1990); accord, Educational Visions, Inc. v. Time Trend, Inc., 2003 WL 1921811, at *7 (S.D. Ind. April 17, 2003) (denying motion to transfer that would have merely shifted inconvenience between parties). In this case, however, because plaintiff consented to jurisdiction and venue in Illinois, it cannot complain that a transfer would be inconvenient for it. See Heller Financial, Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1293 (7th Cir. 1989) ("a valid forum-selection clause may waive a party's right to assert his own inconvenience as a reason to transfer a case"). Defendants never consented to jurisdiction or venue in Indiana, and litigation here would be less convenient for them than litigation in Illinois. The convenience of the parties therefore weighs in favor of transfer, at least to a modest degree.
The more important concern under § 1404(a) is the availability of non-party witnesses and evidence. The courts ordinarily assume that the parties will be sufficiently motivated to have their own partners or employees or other allies appear for trial wherever it might take place. See, e.g., FUL Inc. v. Unified Sch. Dist. No. 204, 839 F. Supp. 1307, 1311 (N.D. Ill. 1993), cited in Greene Mfg. Co. v. Marquette Tool Die Co., 1998 WL 395155, at *3 (N.D. Ill. July 9, 1998); accord, JMC Technology Group, Inc. v. EDM Sales Supplies, Inc., 2004 WL 392945, at *2 (S.D. Ind. Feb. 10, 2004) (ordering transfer based on location of non-party witnesses and physical evidence). Parties may use Rule 45 of the Federal Rules of Civil Procedure to conduct discovery all over the United States, so the principal concern along these lines is to make non-party witnesses available for trial. The aim is to minimize the risk of "trial by deposition." See, e.g., Volkswagen Aktiengesellschaft v. Dee Engineering, Inc., 2003 WL 1089515, at *4 (S.D. Ind. March 4, 2003); Kendall U.S.A., Inc. v. Central Printing Co., 666 F. Supp. 1264, 1268 (N.D. Ind. 1987); Preston v. Missouri-Nebraska Exp., Inc., 1991 WL 626751, at *2 (W.D. Mo. Oct. 16, 1991).
In this case, this factor weighs heavily in favor of transfer to the Northern District of Illinois. From the pleadings, it is apparent that the financial condition and business prospects of Cadant, especially in the spring and summer of 2000, will be a central issue and perhaps the critical issue. Defendants have identified seven Illinois residents who are potential non-party witnesses with specific knowledge about Cadant's financial condition at the relevant time. The witnesses include Cadant's founder and former CEO, its financial officer in 2000, its director of finance, a director of Cadant in 2000, the interim CEO and chief technology officer for Cadant in 2000, the vice president of engineering in 2000, and a banker with knowledge of the company.
Plaintiff responds that the issue should not be which party can produce the longest list of witnesses. According to plaintiff, defendant has not suggested that these witnesses will be unwilling to appear for trial in Indiana. If the named witnesses are not willing to come to Indiana, plaintiff says it would be happy to use videotaped depositions.
Plaintiff's response is not persuasive. Plaintiff has not identified any non-party witnesses or evidence that would be available in Indiana but not in Illinois. Defendants have offered a sufficient explanation of the relevance of the information these witnesses would offer and of the inconvenience appearing in an Indiana court might cause the non-party witnesses in this case. Cf. Brandon Apparel Group, Inc. v. Quitman Mfg. Co., 42 F. Supp.2d 821, 833-34 (N.D. Ill. 1999) (discounting such a claim where party provided no explanation of witnesses' importance). To the extent plaintiff has implied that the non-party witnesses' testimony would be cumulative, the court notes that testimony from a witness who has no stake in the outcome of a case can often be decisive in resolving a conflict between the interested parties' accounts of a transaction or other event. Also, the listed witnesses would be witnesses because of their relationship to a now-defunct company. There is no apparent reason why any should volunteer to travel to Indianapolis to testify. As plaintiff points out, videotaped depositions can be used instead of live testimony. The point of the cases cited above, however, is that there is a strong preference for live testimony, as anyone who has tried to stay attentive during extensive deposition testimony during a trial could attest. The convenience of the witnesses and the availability of evidence weigh heavily in favor of a transfer to Illinois.
II. Interest of Justice
The choice of law weighs modestly in favor of a transfer to Illinois. The underlying contracts are governed by Illinois law. With respect to tort claims, this court would apply Indiana choice of law rules. Indiana still adheres to the rule of lex loci delicti in most tort cases. See Alien v. Great American Reserve Ins. Co., 766 N.E.2d 1157, 1164-65 (Ind. 2002) (applying lex loci delicti in fraud case to apply law of state where injured plaintiff's relied upon misrepresentations and were damaged). Under that approach, the location of the trust to which the shares were transferred and where payment was made, rather than the location of plaintiff, are probably most significant. Plaintiff agreed, after all, to become the beneficiary of an Illinois trust and to hold the shares, whatever their value, in that Illinois trust so as to avoid the effects of a restriction on the transferability of the shares.
In a transfer pursuant to § 1404(a), the choice-of-law rules of the original court follow along with the transfer. See Van Dusen v. Barrack, 376 U.S. 612 (1964).
Another factor that weighs in favor of transfer here is the personal jurisdiction issue, especially over defendant Buinevicius. Buinevicius is a citizen and resident of Wisconsin. He has extensive business contacts and activities in Chicago. He has had no direct contacts with Indiana. He sold his Cadant stock to an Illinois trust, and he received payment in Illinois. To establish jurisdiction over Buinevicius, plaintiff relies on the telephone calls and faxes between Kopko and one of his partners in Chicago and plaintiff (in the Southern District of Indiana) and plaintiff's lawyer (in the Northern District of Indiana). Plaintiff's theory is that Kopko and his partner were acting as agents for Buinevicius. The transaction documents clearly indicate, however, that Kopko and his law firm were acting as attorneys for both sides of the transaction, and plaintiff is suing Kopko and the firm for malpractice. That claim presupposes that plaintiff's principals viewed Kopko and the firm as plaintiff's own lawyer. In any event, if it is constitutional to exercise jurisdiction over Buinevicius in Indiana on this basis, then such an exercise is close to the outer bounds of such jurisdiction.
Transfer to Illinois, where jurisdiction cannot be questioned, eliminates the issue and would be in the interest of justice.
The court gives little weight to defendants' contention that related litigation is pending in Illinois. Defendants have offered no evidence establishing a relationship between this case and the cases pending in Illinois such that transfer of this case would promote a more comprehensive resolution of all the cases.
Plaintiff's choice of forum is entitled to considerable weight in the transfer calculus. ISI Int'l, Inc. v. Borden Ladner Gervais LLP, 316 F.3d 731, 731-32 (7th Cir. 2003) ("strong presumption" in favor of plaintiff's choice of forum was overcome, and case was properly dismissed on grounds of forum non conveniens in favor of a Canadian proceeding); FDIC v. Citizens Bank Trust Co., 592 F.2d 364, 368 (7th Cir. 1979). In this case, however, where the property and non-party witnesses are located in Illinois, where the only face-to-face negotiations occurred in Illinois, where Illinois is clearly the center of gravity of the case, and especially where plaintiff itself and the defendants all agreed to jurisdiction and venue in Illinois, the court does not believe that the plaintiff's attempt to impose its unilateral choice of forum is sufficient to overcome the substantial reasons to transfer for the convenience of the witnesses and in the interest of justice.
Conclusion
For the foregoing reasons, the court exercises its discretion under 28 U.S.C. § 1404(a) and orders the Clerk of the court to transfer this action to the Northern District of Illinois. Defendants' motion to dismiss for lack of personal jurisdiction is denied as moot.So ordered.