Opinion
Civil Action No. 01-2165 (JBS).
March 13, 2002
Michael Carton, Esquire, LeBouef, Lamb, Greene MacRae, LLP, Newark, New Jersey, Counsel for Plaintiff.
Thomas Jude Goodwin, Esquire, Krugman Kailes, LLP, Saddle Brook, New Jersey, Counsel for Defendant.
MEMORANDUM OPINION
This action is before the Court on defendant's motion to dismiss the complaint, pursuant to Rule 12(b)(6), Fed.R. Civ, P., or, alternatively, to transfer the action to the United States District Court for the Central District of California, pursuant to the first-filed rule and 28 U.S.C. § 1404. Plaintiff opposes the motion, arguing that the California action, although filed first, should not disturb plaintiff's choice of forum in this action because the California action was filed in anticipation of JBA's filing in this Court. For the reasons expressed herein, defendant's motion to transfer will be granted and this action will be transferred to the United States District Court for the Central District of California.
I. Background
Plaintiff JBA International, Inc. ("JBA") is a business incorporated and with its principal place of business in the State of Georgia. (Compl., ¶ 3.) JBA has an office located at Centerpointe Building, 161 Gaither Drive, Suite 200, Mount Laurel, New Jersey, which from May 1994 to February 2000 employed approximately 25% of the JBA workforce and handled accounting, billing and personnel for the entire company. (See Marshaleck Decl., ¶¶ 3-4.) JBA engages in the business of licensing and supporting software to various business organizations. Defendant Cels Enterprises, Inc. ("Cels"), is a corporation organized and existing under the laws of the State of New York, with a principal place of business in Los Angeles, California. (See Goldman Aff., ¶ 2.)
In early 1999, California sales representatives of JBA engaged in discussions with Cels for the sale of a Computer and Management Information System ("CMIS") and related hardware and software for installation in Cels's Los Angeles, California offices. (See Goldman Aff., ¶ 4.) JBA made a sales presentation to Cels in California and the terms and conditions of the agreement were negotiated in California. (See Goldman Aff., ¶¶ 4-5.) A representative of Cels signed the CMIS equipment and software sales contracts (the "Equipment Agreement" and "Software Agreement," respectively) in California (see Goldman Aff., ¶ 9) and Jane Marshaleck, former Controller and Chief Financial Officer of JBA, signed the same contracts in New Jersey (Marshaleck Decl., ¶ 5.)
In August 1999, the CMIS system was installed in Cels's Los Angeles offices by JBA and, shortly thereafter, it is alleged that problems with the system arose. (See Goldman Aff., ¶¶ 11-12). California-based technical service technicians from JBA responded to the Los Angeles Cels office to remedy the problems, allegedly without success. (See Goldman Aff., ¶¶ 11-13). Payment and contractual issues arose between the parties. (See Compl., ¶¶ 14, 17; Goldman Aff., ¶ 15.) On December 27, 2000, Geac Enterprise Solutions, JBA's agent (see Pl.'s Opp. Br. at 4), wrote to Cels's Chief Financial Officer, Agnes Yang, indicating that the Cels account was past due in the amount of $179,478.39. (Goldman Aff., Ex. B.) The letter indicated that Geac was considering referring the matter to its attorney if payment was not made. (Id.) After receiving this letter, there were continued negotiations and discussions between the parties, but no resolution was achieved.
On May 8, 2001, Cels filed a lawsuit in the Superior Court of California, Los Angeles, against Geac Computer Corporation, Ltd., named in the California complaint as JBA's successor in interest. (See Goldman Aff., Ex. C.) Cels, as plaintiff in the California action, alleges that Geac, as successor in liability to JBA, committed fraud and deceit related to the sale of the CMIS equipment and software and used unlawful and unfair business practices. Cels sought declaratory relief and monetary damages. Two days later, on May 10, 2001, JBA submitted a complaint and proposed summons to the Clerk of this Court. On May 16, 2001 the summons was issued and Cels was served on May 18, 2001. (See Damon Decl., ¶ 5.) JBA, as plaintiff in the New Jersey action, alleges breach of contract and seeks to enforce the Software Agreement, and also seeks damages. (See Compl.)
This action (the "California action") was removed by the defendant Geac, and has since been remanded to state court.
On July 25, 2001, the instant motion to dismiss or, in the alternative, to transfer, was filed by defendant Cels. On November 15, 2001, this Court heard oral argument on this motion. On November 21, 2001, this motion was dismissed without prejudice to defendant's right to reopen the motion, pending the outcome of mediation under our Court's program for mediation of complex cases under Local Civil Rule 301.1. On November 21, 2001, the matter was referred to mediation. On March 5, 2002, after mediation had not resolved the dispute between the parties, this case was removed from mediation and defendant, by letter dated March 8, 2002, reopened the motion to dismiss or transfer. For the reasons stated herein, defendant's motion to transfer the action pursuant to 28 U.S.C. § 1404(a) will be granted, and the action will be transferred to the United States District Court for the Central District of California.
II. Discussion
Defendant initially argues that plaintiff's claim should be dismissed pursuant to Rule 12(b)(6), Fed.R.Civ.P., because the agreement underlying the dispute contained a valid and applicable arbitration clause. Alternatively, as discussed below, defendant moves to transfer this action to California pursuant to the first-filed rule and 28 U.S.C. § 1404(a).
Plaintiff disputes that this matter is subject to binding arbitration. First, JBA points out that the arbitration clause referenced by defendant is contained only in the Equipment Agreement, while the instant dispute involves the Software Agreement. Second, JBA argues that Cels cannot, after initiating a lawsuit in California, now argue to this Court that the matter is subject to binding arbitration. If the arbitration argument was a clear and obvious winner, this Court would decide that issue and send the case to arbitration, since this Court has both personal and subject matter jurisdiction over the parties and this dispute. The arbitration issue, however, is not so clear. This Court tends to agree that the arbitration provision applies only to the Equipment Agreement, which was separately signed and executed by the parties. Although this Court does not decide the arbitration issue in this opinion, it also notes that defendant's choice to initiate a lawsuit in California weakens its current argument that this case requires binding arbitration.
A. First Filed Rule
Courts apply the first-filed rule where parties have instituted competing or parallel litigation in separate federal courts. Generally, the rule states that the court initially having the controversy before it should retain jurisdiction over the entire case and decide it. One World Botanicals Ltd. v. Gulf Coast Nutritionals, Inc., 987 F. Supp. 317, 325-26 (D.N.J. 1997) (citing EEOC v. University of Pa., 850 F.2d 969, 971 (3d Cir. 1988), aff'd on other grounds, 493 U.S. 182, 110 S. Ct. 577, 107 L. Ed.2d 571 (1990)). It has been recognized that "`it is the policy of our Circuit Court that absent unusual circumstances,' the first-filed rule applies in cases of concurrent federal jurisdiction." Id. (quoting Berkshire Intern. Corp. v. Marquez, 69 F.R.D. 583, 586 (E.D. Pa. 1976)).
The purpose of the first-filed rule is to promote sound judicial administration and comity among courts in the federal system. One World Botanical, 987 F. Supp. at 326 (citing cases). However, the rule "is not a mandate directing wooden application of the rule without regard to rare or extraordinary circumstances, inequitable conduct, bad faith or forum shopping."Id. (quoting EEOC v. University of Pa., 850 F.2d 969, 972 (3d Cir. 1988). The Third Circuit has recognized that "no precise rule governs relations between federal district courts possessing jurisdiction, but the general principle is to avoid duplicative litigation." Id. at 326 (citing Colorado River Water Conserv. Dist. v. United States, 424 U.S. 800, 817, 96 S. Ct. 1236, 1246, 47 L. Ed.2d 483 (1976)). Additionally, courts have rejected the argument that the rule compels a district court to stay the second filed action without regard to the circumstances of the case. One World Botanical, 987 F. Supp. at 326. The decision to apply the first-filed rule and dismiss a subsequent suit rests within the discretion of the trial court. Id. (citing Crosley Corp. v. Westinghouse Elec. Mfg. Co., 130 F.2d 474, 475-76 (3rd Cir.), cert. denied, 317 U.S. 681, 63 S. Ct. 202, 87 L. Ed. 546 (1942)); Peregrine Corp. v. Peregrine Indus. Inc., 769 F. Supp. 169, 174 (E.D. Pa. 1991).
Defendant argues that the first-filed rule, as adopted by the Third Circuit, mandates dismissal of this action so that the United States District Court, Central District of California can decide the case. Defendant argues that no exceptional circumstances exist to warrant a departure from this rule. Cels asserts that it filed suit in good faith in California because its headquarters are there, the CMIS system was demonstrated, installed, and allegedly malfunctioned there, the contract negotiations took place there, the repairs took place there, and because it signed the contracts there. Cels also asserts that the California action involves essentially the same parties and exactly the same issues as this later filed action.
Plaintiff opposes application of the first-filed rule, arguing that the California action was an anticipatory action, filed in response to the December 27, 2000 letter from JBA (through Geac) to Cels indicating that JBA would refer the conflict to their attorneys if Cels did not pay the money that JBA, through its agent Geac, asserted was owed pursuant to the CMIS contracts. Plaintiff further asserts that it, not Cels, is the natural plaintiff in this action, that defendant's California action is nothing more than an attempt to wrest the choice of forum from the natural plaintiff, and also that the first filed rule cannot apply because the California action names Geac, JBA's agent, rather than JBA itself. Defendant Cels opposes these arguments, stating that it filed the California action in good faith against Geac as JBA's successor in liability because Geac sent the December 2000 letter demanding payment.
Plaintiff JBA offers no substantial evidence of rare or extraordinary circumstances, inequitable conduct, bad faith or forum shopping that would warrant a departure from the first-filed rule. Cels's choice of California as a forum for their lawsuit makes sense; the allegedly faulty system was pitched and installed in California, the terms of both the Equipment and Software Agreements were negotiated in California, and Cels signed the contracts in California. That Geac, and not JBA, is named as the defendant in the California action is not enough to overcome the first-filed rule. JBA does not dispute that Geac is its agent, or that the December 27, 2000 letter from Geac to Cels was written on behalf of JBA for monies allegedly due under the CMIS contracts. Therefore, JBA's assertion there can be no transfer to California because the parties are not the same carries little weight.
The California action, however, was filed only a few days before the New Jersey action, and New Jersey is not an improper forum for this action, so the first-filed rule will not serve as the sole basis for transfer in this case. The Court will also consider the factors used in the 28 U.S.C. § 1404(a) analysis.
B. 1404(a) Transfer
Defendant Cels additionally argues that transfer is appropriate pursuant to 28 U.S.C. § 1404(a). Plaintiff JBA argues that defendant has failed to meet its burden under Section 1404 and that JBA's choice of venue in this district should not be disturbed.
Section 1404(a) authorizes a district court to transfer a case to any other district where venue is proper "[for the convenience of the parties and witnesses, in the interest of justice. . . ." 28 U.S.C. § 1404(a). The purpose of that section is to avoid wasting time, energy and money, and also to avoid exposing litigants, witnesses and the public to avoidable inconvenience and expense. See Lexecon, Inc. v. Milberg Weiss Bershad Hynes Lerach, 523 U.S. 26, 22, 118 S. Ct. 956, 140 L. Ed.2d 62 (1998); Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995); Hoffer v. Infospace.com, Inc., 102 F. Supp.2d 556 (D.N.J. 2000). The transfer analysis, however, is a flexible one and should consider the unique facts of each case. Ricoh Co., Ltd. v. Honeywell, Inc., 817 F. Supp. 473, 479 (D.N.J. 1993) (citingStewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 29-30, 108 S. Ct. 2239, 101 L. Ed.2d 22 (1988)).
There are three non-exhaustive factors to consider when determining whether to transfer a matter: (1) the convenience of the parties; (2) the convenience of the witnesses; and (3) the interest of justice. 28 U.S.C. § 1404(a); Hoffer, 102 F. Supp.2d at 570. The forum to which the moving party seeks to transfer the action must be one where the action could have originally been brought. See 28 U.S.C. § 1404(a); One World Botanical, 987 F. Supp. at 325. Courts commonly analyze the above three factors in two categories: the private interests of the parties and the public interest in the fair and efficient administration of justice. In re Consolidated Parlodel Litigation, 22 F. Supp.2d 320, 323 (D.N.J. 1998) (citingJumara, 55 F.3d at 879-80). The moving party, here the defendant Cels, has the burden of persuasion on a motion to transfer and must show not only that the proposed alternate forum is adequate, but also that it is more appropriate than the present forum. Jumara, 55 F.3d at 879; Hoffer, 102 F. Supp.2d at 572.
1) Private Interests of the Parties
a. Plaintiff's Choice of Forum
The plaintiff's choice of venue is of paramount importance in this district and is not usually disturbed, absent evidence requiring such a transfer. Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir. 1970), cert. denied, 401 U.S. 910 (1971);Sandivik, Inc. v. Continental Ins. Co., 724 F. Supp. 303, 307 (D.N.J. 1997). Where the plaintiff chooses its home state as the forum, that decision is entitled to even more deference. Piper Aircraft v. Reyno, 454 U.S. 235, 255, 102 S. Ct. 252, 265 (1981); Sandivik, 724 F. Supp. at 307. Where the plaintiff selects a forum other than its home state as the forum for litigation, however, as is the case in this action, plaintiff's choice of forum is given less deference than usual.NCR Credit Corp. v. Yeseekera Horizon, Inc., 17 F. Supp.2d 317, 321 (D.N.J. 1998). Such a plaintiff can regain "equal footing with a home plaintiff by making a `strong showing' of convenience attaching to the original forum selection." Id.
JBA does not dispute that New Jersey is not its home forum. In an attempt to overcome this fact, JBA argues that its representative signed the contracts at issue in JBA's New Jersey office, which houses the accounting, personnel, and billing departments for the whole company. JBA also does not dispute that the contracts at issue were negotiated in California, that the subject equipment and software were installed and used in California, and that the alleged failure of same occurred in California. Whatever slight weight plaintiff's choice of forum holds in this case, it is not enough, without more, to defeat defendant's transfer motion, in light of the fact that the dispute arose from a system negotiated for and installed in California. Plaintiff's choice of forum is also entitled to less weight when, as in this case, it had already been named as defendant in a closely related suit elsewhere by the same party it wishes to sue here.
b. Access to Proof and Witnesses
The parties concede that these factors are at best neutral since there are witnesses and documents relating to this dispute which are located, among other places, in California, New Jersey and Georgia. Neither party has identified specific witnesses or documents that could not be produced in both venues.
c. Other Private Factors
The remaining private interest factors, such as costs, obstacles to a fair trial, and the need for viewing the premises are all neutral. Plaintiff does not dispute that the claims arose out of the CMIS system that was pitched, sold, and installed in California. Therefore, this Court finds that the private factors tilt in favor of granting defendant's motion to transfer.
2) Public Interest in the Administration of Justice
The parties concede that the public interest factor of judicial backlog bears no weight in this case. Defendant argues that the factors of jury duty burden and local interest tilt in favor of transfer, and this Court agrees. The dispute underlying this case, that is the failure of defendant to pay plaintiff for a CMIS system it asserts was faulty, arose, for the most part, in California, because of software installed and applied in California. Additionally, the California action was filed first.
The last public factor is the choice of law provision, which identifies New Jersey law as applicable. The parties have identified no detectible difference in the law of California and New Jersey, and that provision, without more, is not enough to defeat transfer to California. Plaintiff JBA seeks a contractual remedy in its complaint, and it has not demonstrated why its contract rights under New Jersey law, presumably the Uniform Commercial Code, cannot be equally enforced in a California forum. New Jersey has some interest in the dispute, and indeed this Court has jurisdiction. The facts, however, indicate that California is the more appropriate venue for this action. Although plaintiff has identified some reasons to not transfer the case, in light of the first-filed action in California, plaintiff JBA's choice to file in a forum that is not their home forum, and the stronger factual nexus to California, defendant's motion will be granted and the action will be transferred.
III. Conclusion
For the reasons stated herein, and for good cause shown, defendant's motion to transfer this action to the United States District Court for the Central District of California pursuant to the first-filed rule and 28 U.S.C. § 1404(a) will be granted. The accompanying Order is entered.
ORDER
This matter having come before the Court upon a motion by defendant Cels Enterprises, Inc. ("Cels") to dismiss the complaint pursuant to Rule 12(b)(6), Fed.R.Civ.P., or, alternatively, to transfer this action to the United States District Court, Central District of California, pursuant to 28 U.S.C. § 1404(a); and the Court having considered the written submissions of the parties; and having heard oral argument November 15, 2001; and for the reasons expressed in the Memorandum Opinion of today's date; and for good cause shown;IT IS this day of March 2002, hereby
ORDERED that defendant's motion to transfer this action to the United States District Court, Central District of California [Docket Item 29-1] be, and hereby is, GRANTED ;
IT IS FURTHER ORDERED that this action is hereby transferred to the United States District Court for the District of California; and
IT IS FURTHER ORDERED that the Clerk of Court shall transfer this case to the United States District Court for the District of California.