Opinion
No. 02 Civ. 1693 (GEL)
August 12, 2002
E. Michael Keating III, Hollstein, Keating, Cattell, Johnson Goldstein, P.C., Philadelphia, PA, for Plaintiffs.
Beth D. Jacob (Jay Williams, on the brief), Schiff Hardin Waite, New York, NY, for Defendants.
OPINION AND ORDER
Defendants Martin Automatic, U.K., Ltd., Swath Ocean Europe, Ltd., and Party Line Cruise Co., Inc. (the "Swath Defendants") move to transfer this action to the U.S. District Court for the Eastern District of Pennsylvania, arguing principally that transfer would serve the interests of judicial economy in light of the pendency in that judicial district, before Judge Bruce W. Kauffman, of an action involving the same parties and same underlying factual issues. The motion will be granted.
In its current configuration, following a series of rulings by Judge Kauffman, the action pending before the district court in Pennsylvania, Philadelphia Gear Corp. v. Swath International, Ltd., No. 01 Civ. 998 (E.D. Pa.), involves a three-way dispute among (1) Philadelphia Gear Corporation ("PGC"), a designer and manufacturer of power transmission equipment, including enclosed gear drives for marine vessel propulsion, which is not a party to the instant action; (2) the Swath Defendants, which are three related entities that either currently own or will soon own and operate a ship known as the "Cloud X"; and (3) the eight insurance companies that are the plaintiffs in this action (the "Insurers"), which sold a marine insurance policy providing hull, machinery, protection, and indemnity coverage to the Swath Defendants. PGC, which initiated the action, seeks a declaratory judgment that it is not liable to the Swath Defendants or its insurers for any damages resulting from the alleged failure of two allegedly defective gearboxes that it manufactured, sold, and installed in the Cloud X, and asserts claims against the Swath Defendants for specific performance, unjust enrichment, misrepresentation, and quantum meruit. The Swath Defendants maintain that they suffered damages from the failure of those gearboxes and asserts thirteen counterclaims against PGC. Finally, subsequent to the Insurers' filing of the instant action, and with leave of the district court in Pennsylvania, the Swath Defendants have impleaded the Insurers as third-party defendants, seeking indemnification from the Insurers for consequential damage and expenses incurred by the Swath Defendants, costs of the repair work performed by the Swath Defendants if they are found liable to PGC for that work, and attorneys fees and other costs.
The Swath Defendants' claims against PGC originally were asserted in a separate action filed after PGC filed the complaint in the Eastern District of Pennsylvania. Swath Int'l Ltd. v. Philadelphia Gear Corp., No. 01 Civ. 4446 (E.D. Pa.). The district court granted PGC's motion to dismiss that action, but granted the Swath Defendants leave to file those same claims as counterclaims in PGC's pending action.
In its discretion, this Court may transfer a case to another district where venue is proper "for the convenience of the parties and witnesses, in the interests of justice." 28 U.S.C. § 1404(a); see. e.g., Filmline (Cross-Country) Prod., Inc. v. United Artists Corp., 865 F.2d 513, 520 (2d Cir. 1989) ("The determination whether to grant a change of venue requires a balancing of conveniences, which is left to the sound discretion of the district court."). While a transfer may be ordered under § 1404(a) upon a lesser showing of inconvenience than would be required to warrant a dismissal under the doctrine of forum non conveniens, Norwood v. Kirkpatrick, 349 U.S. 29, 32 (1955), the burden nevertheless remains with the movant to make a "clear-cut showing" that a transfer of venue "is in the best interests of the litigation." Dwyer v. Gen. Motors Corp., 853 F. Supp. 690, 692 (S.D.N.Y. 1994) (internal citations and quotation marks omitted). The plaintiffs choice of forum is "entitled to substantial consideration." In re Winnick, 70 F.3d 736, 741 (2d Cir. 1995). Factors that guide the court's exercise of its discretion, based on the totality of the circumstances, include the convenience of witnesses, the convenience of parties, the locus of operative facts, the location of relevant documents and relative ease of access to sources of proof the availability of process to compel the attendance of unwilling witnesses, the forum's familiarity with governing law, the relative financial means of the parties, docket congestion and trial efficiency, and the interests of justice generally. In re Nematron Corp. Securities Litigation, 30 F. Supp.2d 397, 400 (S.D.N.Y. 1998); Prudential Securities, Inc. v. Norcom Development, Inc., No. 97 Civ. 6308 (DC), 1998 WL 397889, at *3 (S.D.N.Y. July 16, 1998).
Here, the Swath Defendants have amply met their burden of showing that transfer "is in the best interests of the litigation." Dwyer, 853 F. Supp. at 692. In most circumstances, a litigant seeking to transfer an action to a nearby district will find it difficult to demonstrate the degree of inconvenience necessary to prevail. See, e.g., Paragon Int'l, N.V. v. Standard Plastics, Inc., 353 F. Supp. 88, 92 (S.D.N.Y. 1973) (concluding that, in view of the proximity of Philadelphia to New York, there is no reason why, in the interest of justice, the plaintiffs' choice of forum should be disturbed" and the case transferred to Eastern Pennsylvania); Jenkins v. Wilson Freight Forwarding Co., 104 F. Supp. 422, 425 (S.D.N.Y. 1952) (noting that transfer statute primarily "was designed and reserved for those instances where the transfer was sought to a District Court substantially distant from the district where the action had been instituted; otherwise it is difficult to imagine that there could be real inconvenience to the parties or witnesses" in most circumstances). Thus, while the Swath Defendants make a compelling showing that the "center of gravity" of this litigation is in fact in Pennsylvania, where most of the operative facts took place, and that this judicial district offers a forum that is less convenient for witnesses and may make access to documents and other sources of proof somewhat more difficult, the Court would not necessarily find those factors, by themselves, sufficient to justify transfer to a judicial district as close as the Eastern District of Pennsylvania.
Here, however, considerations of trial efficiency and judicial economy make this an easy case for transfer. In the instant action, the Insurers allege that the insurance policy at issue does not provide any coverage for (1) the costs of repairs to the gearboxes; (2) the costs or expenses related to the removal or reinstallation of the gearboxes; (3) the costs or expenses incurred with respect to the repairs, modifications, upgrades, removal, and replacement of the gearboxes; or (4) any indemnity payments or costs, expenses, or counsel fees relating to the failure of the two gearboxes or the subsequent modifications and upgrades of those gearboxes. (S.D.N.Y. Compl. ¶¶ 44, 48, 50, 54-55.) In the action before Judge Kauffman, PGC seeks a judgment declaring that it is not liable to the Swath Defendants or their insurers for any damages arising from the failure of the gearboxes, and the Swath Defendants claim that the Insurers are obligated under the insurance policy to indemnify the Swath Defendants for losses and damages caused by PGC's alleged negligence or by latent defects in the gearboxes, to reimburse them for all costs and expenses incurred in repairing the gearboxes and the Cloud X, and to defend the Swath Defendants and reimburse them for legal expenses incurred in connection with their dispute with PGC. (Second Amend. E.D. Pa. Compl. ¶¶ 60-62; E.D. Pa. Third Party Compl. ¶¶ 49-60, 62-69, 71-78, 80-87.)
The action before this Court therefore involves essentially the same issues of law and fact that are before Judge Kauffman in Philadelphia. While litigating the dispute between the Insurers and the Swath Defendants in New York may only be marginally less convenient to the parties and witnesses than litigating the dispute in Philadelphia, it seems beyond doubt that litigating the questions of law and fact that underlie that dispute in both New York and Philadelphia is both inconvenient to all concerned and a waste of scarce judicial resources. While the Insurers attempt to characterize the dispute presented in this action as one involving an abstract question of contract interpretation, entirely disconnected from the underlying factual questions before Judge Kauffman concerning the installation, failure, and repair of the gearboxes, that characterization seems misplaced. For one thing, PGC directly places at issue in its complaint the question of whether it is liable to the Swath Defendants' insurers, making the questions raised here a central part of the Philadelphia action. For another, it strains the imagination to contemplate any resolution of the parties' dispute over the scope of the insurance policy's coverage without first ascertaining the underlying factual circumstances concerning the failure of the gearboxes. At the time the Insurers filed this action, it was perfectly clear that the many of the factual and legal questions placed at issue by this action inevitably would be addressed in the Philadelphia action, as well. It is not at all surprising, under such circumstances, that Judge Kauffman granted the Swath Defendants leave to implead the Insurers as third party defendants, for the circumstances of this case present an axiomatic example of a situation in which impleader under Rule 14 is appropriate. See 6 Charles Alan Wright, Arthur R. Miller, Mary Kay Kane, Federal Practice Procedure § 1449 (2d ed. 1990) (noting that in connection with third party claims against a defendant's insurer, "[w]hen the insurer disclaims liability and refuses to defend on behalf of the insured, the federal courts . . . uniformly recognize the propriety of impleader," and citing cases). The claims presented by the Insurers here are essentially the mirror image of the claims asserted against them by the Swath Defendants in their third-party complaint in the Philadelphia action.
Indeed, the Insurers' representation to this Court that they intend to file a motion to dismiss the Swath Defendants' third party complaint on account of the pendency of this action, here in New York (Pl. Br. at 6), seems to constitute an implicit concession that the two actions involve common questions of law and fact that justify transfer and consolidation.
The Insurers maintain that transfer is not warranted because the Eastern District of Pennsylvania is not a forum "where [this action] might have been brought," 28 U.S.C. § 1404(a), since that court would not have had personal jurisdiction over the Swath Defendants at the time, The Insurers certainly are correct that when determining whether the proposed transferee court is, in fact, a forum in which the action "might have been brought" within the meaning of the statute, the plain language of § 1404(a) "directs the attention of the judge who is considering a transfer to the situation which existed when the suit was instituted." Hoffman v. Blaski, 363 U.S. 335, 343 (1960) (quoting Paramount Pictures, Inc. v. Rodney, 186 F.2d 111, 119 (3d Cir. 1950) (Hastie, J., dissenting)). It follows that this Court lacks authority to transfer this action to the Eastern District of Pennsylvania unless that court would have had personal jurisdiction over the Swath Defendants at the time this action was brought — without regard to whether the Swath Defendants now may be willing to consent to that court's jurisdiction. Id at 344; Alexander Alexander, Inc. v. Donald F. Muldoon Co., 685 F. Supp. 346, 349-50 (S.D.N.Y. 1985).
However, the Insurers fail to recognize that under Pennsylvania law, which governs the question of whether the Swath Defendants are subject to personal jurisdiction in the Eastern District of Pennsylvania, Volkswagen de Mexico, S.A. v. Germanischer Lloyd, 768 F. Supp. 1023 (S.D.N.Y. 1991), that court unquestionably would have had jurisdiction over the Swath Defendants at the time this action was filed. Pennsylvania authorizes its courts to exercise jurisdiction over non-residents to the fullest extent permitted by the U.S. Constitution. 42 Pa. C.S.A. § 5322(b). Within those constitutional limits, a non-resident corporation is subject to Pennsylvania's general jurisdiction if it consents to that jurisdiction or carries on a "continuous and systematic part of its general business" within the state, 42 Pa. C.S.A. § 5301(2)(a)(2)(ii)-(iii), and is subject to Pennsylvania's specific jurisdiction if it has "transact[ed] any business" within the state and the cause of action arises from that transaction of business, 42 Pa. C.S.A. § 5322(a)(1); see also Burger King v. Rudzewicz, 471 U.S. 462, 472 (1985).
In this case, the Swath Defendants have amply demonstrated ongoing contacts with the Eastern District of Pennsylvania, over a period of many years, that are sufficient to permit the exercise of either general or specific personal jurisdiction over them. Specific jurisdiction under the circumstances of this case seems perfectly obvious. The parties' dispute over the insurance policy at issue in this case arises from the purposeful activities of the Swath Defendants in Pennsylvania in connection with their purchase, installation, removal, and shipment of gearboxes that were manufactured and repaired in Pennsylvania as part of a business relationship with PGC spanning approximately ten years and involving hundreds of thousands of dollars on this project alone. (Gieseke Aff. ¶¶ 4-8; Holcomb Aff. ¶¶ 5-24.) Certainly, by the time this action was filed during the early months of 2002, the relationship between the parties' contractual dispute over the insurance policy and the Swath Defendants' transaction of business in Pennsylvania in connection with the gearboxes and the Cloud X should have been clear to all concerned. Indeed, the Swath Defendants' transaction of business with PGC is so extensive, and represents such a "continuous and systematic part of [their] general business" within the state, 42 Pa. C.S.A. § 5301(2)(a)(2)(iii), of designing, building, and operating the Cloud X, that it also would appear to form a basis for the exercise of general jurisdiction over the Swath Defendants. Accordingly, the Insurers' argument that this action could not have been brought in Pennsylvania at the time it was filed necessarily fails.
CONCLUSION
Accordingly, for the foregoing reasons, the Swath Defendants' motion to transfer is GRANTED. The Clerk of Court is requested to send a certified copy of this Order and any original documents filed in this action to the Clerk of Court for the Eastern District of Pennsylvania.
SO ORDERED.