Opinion
Case No. 04 CV 9266 (KMK).
January 31, 2005
William C. Rand, Esq., Law Office of William Coudert Rand, New York, New York, Counsel for Plaintiffs.
Richard A. Beran, Esq., Steven A. Beckelman, Esq., McCarter English, LLP, New York, New York, Counsel for Defendants.
OPINION AND ORDER
Plaintiffs Ravenswood Investment Company, LP, Robotti Company, Inc., and Robotti Company, LLC ("Plaintiffs"), on their own behalf and derivatively on behalf of Bishop Capital Corp., bring this action under, inter alia, Sections 10, 14(a), 20(a) of the Securities Exchange Act of 1934 ("the 1934 Act"), 15 U.S.C. §§ 78j(b), 78n. 78t (West 1997 Supp. 2004), Rule 10b-5 promulgated thereunder. 17 C.F.R. § 240.10b-5 (2004), and various provisions of the Wyoming Business Corporations Act against Bishop Capital Corp. ("Bishop Capital"), Bishop Capital's President, Chairman, and Chief Executive Officer, Robert E. Thrailkill, and two of its directors, Robert J. Thrailkill and Sherry L. Moore ("Defendants"). Plaintiffs seek to block a shareholder vote of a proposed reverse stock split transaction that would, in effect, take Bishop Capital private and relieve it of its reporting requirements under the 1934 Act. In particular, Plaintiffs allege that Defendants have fraudulently misrepresented and/or omitted material facts regarding the assets of Bishop Capital, thereby undervaluing the company and falsely inducing shareholders to approve the proposed transaction. Defendants counter by moving for dismissal under Fed.R.Civ.P. 12(b)(1) and (6), or in the alternative, for transfer of this case to the District of Wyoming pursuant to 28 U.S.C. § 1404(a). For the reasons set forth on the record on December 21, 2004 and herein, the motion to transfer is granted.
I. Background
A. Facts
The relevant facts are as follows: Robert E. Robotti is the President and Treasurer of plaintiffs Robotti Company, Inc. and Robotti Company, LLC, and a managing member of Ravenswood Management Company, LLC, which is the general partner of plaintiff Ravenswood Investment Company, LP ("Ravenswood"). (Robotti Decl. ¶ 1) As of November 5, 2004, Plaintiffs owned approximately 55,000 shares of Bishop Capital stock, or approximately 5.7% of the approximately 969,127 shares outstanding. (Compl. ¶ 24; 12/9/04 Tr. at 10) Plaintiffs are all located in New York. (Compl. ¶¶ 6-8)
Defendant Bishop Capital is a Wyoming corporation that has its principal place of business in Riverton. Wyoming, where it keeps its corporate records. (Moore Decl. ¶¶ 2-3; Compl. ¶ 9) It is a small business that develops and operates real estate assets owned directly and through partnership interests, and that owns an interest in royalties from natural gas leases. (Robert E. Thrailkill Decl. ¶ 3) Bishop Capital's assets are located only in Wyoming and Colorado, and the company conducts no business in New York. (Moore Decl. ¶¶ 5-9) Defendants Moore and Robert E. Thrailkill reside in Riverton, Wyoming, while Defendant Robert J. Thrailkill resides in Phoenix, Arizona. (Moore Decl. ¶ 10)
In December 2003, Bishop Capital filed a preliminary Schedule 14A proxy statement with the Securities and Exchange Commission ("SEC"). (Robert E. Thrailkill Decl. ¶ 9) Bishop Capital made modifications to the proxy statement after consultation with the SEC, and on or about October 12, 2004, filed a final proxy statement with the SEC. (Compl. ¶ 15; Robert E. Thrailkill Decl. ¶ 10) Bishop Capital mailed the final proxy statement to shareholders on or about November 12, 2004. (Compl. ¶ 15) The proxy statement solicited proxies to vote at a special shareholders meeting on December 16, 2004 ("the special shareholders meeting") to approve an amendment to the company's articles of incorporation to effect a 1 for 110 reverse stock split and the repurchase of fractional shares at $1.00 per share. (Compl. ¶¶ 15-16, 21) The proposed transaction would have the effect of reducing the number of shareholders of record to below 300 and permit the company to go private. (Compl. ¶ 15)
Between January and October 2004, Ravenswood made several offers to purchase all the shares of Bishop Capital at prices ranging from $1.00 to $2.00 per share. (Robert E. Thrailkill Decl. ¶¶ 14-17).
B. Procedural History
Plaintiffs initiated this case on their behalf and derivatively on behalf of Bishop Capital on November 23, 2004. The Complaint is in nine counts and includes alleged violations of the 1934 Act and the Wyoming Business Corporations Act. Plaintiffs' primary claim is that Defendants made "false, misleading and unlawful" statements in the proxy statement mailed to shareholders on November 12, 2004 in violation of Section 14(a) of the 1934 Act. (Compl. ¶ 1) In particular, Plaintiffs accuse Defendants of misleading the shareholders into believing that the fair value of Bishop Capital's stock is $1.00 per share, the price to be paid to fractional shareholders, when in fact the fair value of the stock is as high as $9.26 per share. Id. Plaintiffs contend that the falsely deflated valuation derives from a number of misleading statements regarding the value of Bishop Capital's various assets. For example, Plaintiffs assert that Bishop Capital's interest in its gas royalties is worth in excess of $3.2 million, and not $351,605, as claimed in the proxy statement, and that its property assets are worth approximately $8.5 million more than reflected in the proxy statement. (Compl. ¶¶ 28-50) Plaintiffs also allege that by failing to hold any shareholder meetings since Bishop Capital became a public company in 1997, and by failing to obtain shareholder approval for distribution of shares to Moore and the Thrailkills, Defendants breached their fiduciary duties to the shareholders. (Compl. ¶¶ 67-77) The Complaint requests monetary and injunctive relief, including an order barring Defendants from going forward with the special shareholders meeting and/or consummating the reverse stock split transaction.
On December 3, 2004, Plaintiffs filed an Order to Show Case for a Temporary Restraining Order and a Preliminary Injunction seeking, inter alia, to restrain Defendants from holding the special shareholders meeting. On December 8, 2004, Defendants submitted opposition papers in response to Plaintiffs' Order to Show Cause, and simultaneously cross-moved to dismiss the Complaint or, in the alternative, to transfer the case to the District of Wyoming under 28 U.S.C. § 1404(a). At the Court's suggestion, the parties agreed to a standstill whereby the special shareholders meeting would be held but, if the proposed stock split was approved, nothing would be done to implement the transaction. (Stipulation and Order, 12/14/04) After hearing oral argument on December 21, 2004, the Court granted Defendants' motion to transfer venue. This Opinion supplements and incorporates the reasons earlier provided by the Court.
The parties have reported that the proposed transaction was approved at the special shareholders meeting.
Because the Court grants Defendants' motion to transfer this case to the District of Wyoming, Defendants' motion to dismiss need not be decided here. See Eisenberg v. Wachovia Bank, N.A., No. 00 Civ. 7910, 2001 WL 30452, at *1 (S.D.N.Y. Jan. 11, 2001) (granting motion to transfer venue and therefore not deciding Rule 12(b)(6) motion).
II. Discussion
A. Applicable StandardsSection 1404(a) permits the transfer of any civil action to any other district where the case might have been brought, as long as such a transfer serves "the convenience of parties and witnesses, [and is] in the interest of justice." 28 U.S.C. § 1404(a). "This section is a statutory recognition of the common law doctrine of forum non conveniens as a facet of venue in the federal courts." Wilshire Credit Corp. v. Barrett Capital Mgmt. Corp., 976 F. Supp. 174, 180 (W.D.N.Y. 1997). The purpose of Section 1404(a) is to "prevent the waste `of time, energy and money' and `to protect litigants, witnesses and the public against unnecessary inconvenience and expense.'" Van Dusen v. Barrack, 376 U.S. 612, 616 (1964) (quoting Cont'l Grain Co. v. Barge FBL-585, 364 U.S. 19, 26, 27 (1960)). As such, the "core determination under § 1404(a) is the center of gravity of the litigation. . . ." Hubbell Inc. v. Pass Seymour, Inc., 883 F. Supp. 955, 962 (S.D.N.Y. 1995).
"Section 1404(a) is intended to place discretion in the district court to adjudicate motions for transfer according to an `individualized, case-by-case consideration of convenience and fairness.'" Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988) (quoting Van Dusen, 376 U.S. at 622); see also In re Cuyahoga Equip. Corp., 980 F.2d 110, 117 (2d Cir. 1992) ("[M]otions for transfer lie within the broad discretion of the district court and are determined upon notions of convenience and fairness. . . ."). "The burden of demonstrating the desirability of transfer lies with the moving party, and in considering the motion for transfer, a court should not disturb a plaintiff's choice of forum `unless the defendants make a clear and convincing showing that the balance of convenience favors defendants' choice.'" Linzer v. EMI Blackwood Music, Inc., 904 F. Supp. 207, 216 (S.D.N.Y. 1995) (quoting Hubbell, Inc., 883 F. Supp. at 962). "The defendant moving for a transfer must, therefore, demonstrate `that transfer is in the best interests of the litigation.'" Linzer, 904 F. Supp. at 216 (quoting Eskofot A/S v. E.I. du Pont de Nemours Co., 872 F. Supp. 81, 95 (S.D.N.Y. 1995)).
In determining whether transfer is appropriate, the court may consider the following factors: (a) the convenience of witnesses: (b) the convenience of the parties; (c) the locus of operative facts; (d) the location of relevant documents and relative case of access to sources of proof; (e) the availability of process to compel the attendance of unwilling witnesses; (f) the forum's familiarity with the governing law; (g) the relative financial means of the parties; (h) the weight afforded plaintiff's choice of forum; and (i) trial efficiency and the interests of justice. In re Stillwater Mining Co. Sec. Litig., No. 02 Civ. 2806, 2003 WL 21087953, at *3 (S.D.N.Y. May 12, 2003); Lewis v. C.R.I. Inc., No. 03 Civ. 651, 2003 WL 1900859, at *2 (S.D.N.Y. Apr. 17, 2003); Cento Group, S.P.A. v. OroAmerica, Inc., 822 F. Supp. 1058, 1060 (S.D.N.Y. 1993); Hernandez v. Graebel Van Lines, 761 F.Supp. 983, 987 (E.D.N.Y. 1991).
B. Application
The threshold consideration in a transfer motion is whether venue is proper in the proposed transferee district. See Adair v. Microfield Graphics, Inc., No. 00 Civ. 0629, 2000 WL 1716340, at *1 (S.D.N.Y. Nov. 16, 2000). In this case, as Plaintiffs note, venue is governed by Section 27 of the 1934 Act, 15 U.S.C. § 78aa, which provides that venue is proper in any district in which an "act or transaction constituting the violation occurred," or where "the Defendant is found or is an inhabitant or transacts business." Here, Defendants propose the District of Wyoming, which is home to two of the individual Defendants and the lone corporate Defendant, and where the allegedly false and misleading proxy statements originated. Thus, as Plaintiffs conceded at oral argument, the District of Wyoming is a proper venue for this case. ( See 12/21/04 Tr. at 20)
Next is the weighing of the above-listed factors to determine the best interests of the litigation. Taking them in turn, the balance of these factors overwhelmingly favors transfer of this action to the District of Wyoming.
Convenience of Witnesses
This is generally considered the most important factor in deciding a venue transfer motion. See D'Angelo v. Amtrak Rys., No. 03 Civ. 2560, 2004 WL 2049262, at *3 (S.D.N.Y. Sept. 13, 2004); Schander v. Int'l Knife Saw, Inc., No. 02 Civ. 8361, 2003 WL 1961611, at *3 (S.D.N.Y. Apr. 28, 2003). The convenience of witnesses is a matter of "`the materiality, nature, and quality of each witness, not merely the number of witnesses in each district.'" D'Angelo, 2004 WL 2049262, at *3 (quoting Royal Sunalliance v. British Airways, 167 F. Supp. 2d 573, 577 (S.D.N.Y. 2001)). Meeting Plaintiffs' explicit challenge to identify any witnesses who would be inconvenienced by this action remaining in New York (Pls.' Mem. Law at 12), Defendants produced a list of nine possible non-party witnesses, all of whom reside in either Wyoming or Colorado and all of whom would offer testimony regarding the valuation of Bishop Capital's assets in those states or, in the case of the witnesses from Colorado, Bishop Capital's financial affairs. (Robert E. Thrailkill Supplemental Decl. ¶¶ 2-5) The inconvenience to these potentially critical witnesses is obvious on its face and weighs strongly in favor of transfer. See Stillwater Mining, 2003 WL 21087953, at *4 (noting that all fifteen defense witnesses lived in transferee state (Montana) or nearby states (Colorado and Arizona)); In re Nematron Corp. Sec. Litig., 30 F.Supp.2d 397, 400-01 (S.D.N.Y. 1998) (explaining that transfer was favored where majority of defense non-party witnesses resided in transferee state); Fontana v. E.A.R., a Div. of Cabot Corp., 849 F. Supp. 212, 214 (S.D.N.Y. 1994) (explaining that transfer to Wyoming was appropriate where all relevant third-party witnesses resided in Wyoming).
For example, Defendants have identified William Graves of Riverton, Wyoming, as being a petroleum geologist with whom defendant Robert E. Thrailkill spoke regarding the value of Bishop Capital's natural gas royalty interests, as well as William N. and Patricia Spratt of Lysite, Wyoming as being potential witnesses about Bishop Capital's royalty interests. (Robert E. Thrailkill Supplemental Decl. ¶ 2) Defendants also have identified Steven Engel, Chris Smith and James Spittler of Colorado Springs. Colorado, and Larry Unruh, Todd Gress and Jim Brendel of Denver, Colorado as being potential witnesses regarding Bishop Capital's other property interests and its financial affairs in general. (Robert E. Thrailkill Supplemental Decl. ¶¶ 3-5) Colorado Springs and Denver are only 170 and 101 miles, respectively, from Cheyenne. (Moore Decl. ¶ 12).
On the other side of the ledger, Plaintiffs have identified no witnesses other than Mr. Robotti, a principal in the plaintiff companies. However, "[i]t it is well known that trials in securities fraud [cases] focus almost entirely on the defendants' conduct." Nematron Corp., 30 F. Supp. at 402. While Robotti may "reside in New York, and New York obviously is the most convenient forum for him, his testimony will most likely concern the more straightforward topic of the actual sale and purchase of the stock, and, as such is less likely to be as controversial, complex, or extensive as that of the witnesses proposed by" Defendants residing in and near Wyoming. Id.; see also Morgan Guar. Trust Co. of N.Y. v. Tisdale, No. 95 Civ. 8023, 1996 WL 544240, at *5 (S.D.N.Y. Sept. 25, 1996) ("Assessing the degree to which a transfer would inconvenience witnesses entails not merely counting the parties' prospective witnesses, but considering which are likely to provide important testimony."). Thus, under these circumstances, the residence of Plaintiffs' potential fact witnesses "has diminished relevance." Nematron Corp., 30 F. Supp. 2d at 403.
Counsel for Plaintiffs conceded at oral argument that he had not determined whether Mr. Robotti was going to be an expert witness regarding the proper valuation of Bishop Capital's assets, and, in fact, that he had not yet identified an expert to substantiate Plaintiffs' claims against Defendants regarding the fair value of Bishop Capital's stock. (12/21/04 Tr. at 23).
Convenience of the Parties
The convenience to the parties also weighs heavily in favor of transfer. On this point, the facts of this case precisely mirror those in Stillwater Mining, only in that case the transferee forum was the District of Montana. Here, to paraphrase Judge Chin's analysis in that case, "[t]wo of the three individual defendants reside within the District of [Wyoming], [Bishop Capital's] headquarters are also in the District of [Wyoming], and [Bishop Capital] has no offices in the Southern District of New York." Stillwater Mining, 2003 WL 21087953, at *4. Moreover, as was true in Stillwater Mining, because "the facts giving rise to this action lie within the knowledge of the officers and employees of [Bishop Capital] who participated in creating and disseminating the allegedly false and misleading statements," any inconvenience to a New York-based Plaintiff is minor compared to the inconvenience to the three individual Defendants, who collectively comprise the senior management of Bishop Capital. Id. Simply put, forcing the individual Defendants to travel to New York to defend this action not only would be a personal inconvenience to these individuals, but it would place a burden on the management of Bishop Capital. See Lewis, 2003 WL 1900859, at *3 (noting that defendants would "likely bear the burdens of the discovery process and a potential trial"); Nematron Corp., 30 F.Supp. 2d at 401-03 (finding transfer appropriate, among other reasons, where two individual defendants were high-ranking officers of small defendant corporation).
At oral argument, counsel for Plaintiffs focused on the third individual Defendant, Robert J. Thrailkill, who resides in Arizona, and suggested that it is no more inconvenient for him to travel to New York than to Cheyenne. (12/21/04 Tr. at 21-22) The Court is unpersuaded that the additional 1,500 miles in distance from Cheyenne to New York is insignificant.
The relative inconvenience to Plaintiffs is slight. Mr. Robotti was prepared to travel to Wyoming in pursuit of his companies' interest in Bishop Capital, and would have done so if it was in his business interest. (12/21/04 Tr. at 18) Moreover, as previously noted, any participation by Plaintiffs or their representatives in any hearing or trial would be minimal given that the focus of this action is the intent and conduct of Defendants in Wyoming. See Adair, 2000 WL 1716340, at *2 ("[T]he central issues in this case relate to facts and circumstances outside the personal knowledge of plaintiffs — including the accuracy of Microfield's statements and the defendants' state of mind. Even if the named plaintiffs participate at trial, it is unlikely that their participation will involve lengthy testimony."). Thus, even taking into account Plaintiffs' location in New York, the convenience of the parties weighs in favor of transfer. See Stillwater Mining, 2003 WL 21087953, at *4.
Locus of Operative Facts
"Where the operative facts occurred is an obvious factor to consider." Pall Corp. v. PTI Techns., Inc., 992 F.Supp. 196, 200 (E.D.N.Y. 1998). More to the point, "where the operative facts are concentrated in a specific district other than the district in which plaintiff has sued, the action should be transferred to that district, notwithstanding plaintiff's choice of forum." Lewis, 2003 WL 1900859, at *3. Indeed, "[c]ourts routinely transfer cases when the principal events occurred and the principal witnesses are located in another district." Nematron Corp., 30 F. Supp. 2d at 404. Here, virtually all of the critical events occurred in Wyoming. The information used in the proxy statements was collected in Wyoming, the proxy statements were drafted in and issued from Wyoming principally by the individual Defendants, two of whom live in Wyoming, and all of the business decisions contested by Plaintiffs were made in Wyoming. See Stillwater Mining, 2003 WL 21087953, at *4 (describing similar conduct in transferee forum).
The Southern District's most significant contact with the operative facts of this case is the mailing of the proxy statements to shareholders residing in New York. Focusing on this connection, Plaintiffs point to Defendants' apparent trading agreement with the Depository Trust Company in support of their threshold argument that venue is proper in the Southern District. (Matthew J. Day Decl. ¶¶ 11-13) According to Plaintiffs, there are 270 shareholders with addresses in New York State and these shareholders own a total of 351,021 shares (36.2% of Bishop Capital's outstanding shares). (Day Decl. ¶ 6) All but approximately 10,000 of those shares are owned by the Depository Trust Company, a New York trading operation. (Day Decl. ¶¶ 8-10).
The trading and holding of stock in New York is not, however, a significant contact with the operative facts of this action. See Stillwater Mining, 2003 WL 21087953, at *5 (finding that one institutional investor meeting and the trading of defendant's stock on the New York Stock Exchange did not constitute material connections); Nematron Corp., 30 F. Supp. 2d at 404 ("[T]hat the shares were directed to New York does not make it a forum which has a significant contact with the operative facts."). "Misrepresentations and omissions are deemed to `occur' in the district where they are transmitted or withheld, not where they are received." Purcell Graham, Inc. v. Nat'l Bank of Detroit, No. 93 Civ. 8786, 1994 WL 584550, at *4 (S.D.N.Y. Oct. 24, 1994); accord Adair, 2000 WL 1716340, at *2; IBJ Schroder Bank Trust Co. v. Mellon Bank, N.A., 730 F. Supp. 1278. 1281 (S.D.N.Y. 1990). Thus, while the existence of New York shareholders of Bishop Capital stock may be sufficient to establish venue in this district, see 15 U.S.C. § 78aa, any "connection to a nonparty [such as DTC] performing a particular service for [Bishop Capital] is tenuous compared to the connection between [Plaintiffs'] claims and the ongoing activities in [Wyoming] that form the basis of this lawsuit." Lewis, 2003 WL 1900859, at *3. The "center of gravity of this case" plainly is in Wyoming. Stillwater Mining, 2003 WL 21087953, at *4. Therefore, this factor weighs in favor of transfer.
Location of Relevant Documents
The location of documents and ease of access to sources of proof "is clearly an important consideration in motions to transfer." Aquatic Amusement Assoc., Ltd. v. Walt Disney World Co., 734 F. Supp. 54, 58 (N.D.N.Y. 1990). Here, the significant quantum of relevant documents is located in either Wyoming or Colorado (Moore Decl. ¶ 3; Robert E. Thrailkill Supplemental Decl. ¶ 6) (describing 13 boxes and 11 file drawers of relevant files, and other records) In addition, proof of the proper valuation of these assets may require visits to the sites by expert and other witnesses. Coordination of expert assessments would be substantially easier if the case is litigated in Wyoming. "Of course the documents at issue here could be copied and shipped to New York. Yet this would impose an extra cost that is unnecessary," and therefore favors transfer, even if marginally. Nematron Corp., 30 F. Supp. 2d at 404; see also Stillwater Mining, 2003 WL 21087953, at *5 ("While it is true that documents can be transported from state to state, for purposes of weighing transfer factors, the fact that the documents are all currently located in Montana favors transfer.").
Availability of Process
Defendants' proposed witnesses are not within the control of the Defendants and reside outside this Court's subpoena power. However, Defendants have made no firm representation that these witnesses would refuse to testify in New York, if asked. That said, it remains beyond dispute that at least some of the Defendants' witnesses would be subject to the subpoena power of the District Court in Wyoming. This would "substantially reduce" Defendants' burden in calling witnesses on their behalf. Stillwater Mining, 2003 WL 21087953, at *5 (describing this factor as weighing in favor of transfer even though defendants did not "specify whether any witnesses would be unwilling or unable to attend trial in New York"). Thus, this factor marginally weighs in favor of transfer. See Adair, 2000 WL 1716340, at *3 (listing as among the factors favoring transfer "the risk that certain out-of-state, non-party witnesses may be unwilling or unable to appear at a trial in New York") (emphasis added). Forum's Familiarity With Governing Law
This is a federal securities fraud action that also alleges violations of Wyoming business law. This Court and the District of Wyoming are equally capable of applying federal securities law to this case. See Stillwater Mining, 2003 21087953, at *5. Similarly, this Court can apply Wyoming law. See Lewis, 2003 WL 1900859, at *3 n. 3; Prudential Sec., Inc. v. Norcom Dev., Inc., No. 97 Civ. 6308, 1998 WL 397889, at *6 (S.D.N.Y. July 16, 1998) ("[T]his Court has routinely held that 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."). But see Fontana, 849 F. Supp. at 215 ("[I]t is likely that Wyoming law will apply to this action. This is yet another factor favoring transfer of this action to Wyoming."). This factor is therefore neutral.
Parties' Relative Financial Means
This factor is similarly neutral. Neither party asserts that it does not have the means to litigate this case in one or the other forum. Indeed, counsel for Plaintiffs conceded at oral argument that Plaintiffs' representatives travel west frequently in the interest of their business ventures. (12/21/04 Tr. at 18)
Weight Afforded Plaintiff's Choice of Forum
"A plaintiff's choice of forum generally is entitled to considerable weight and should not be disturbed unless the balance of factors weighs strongly in favor of the defendant." Adair, 2000 WL 1716340, at *3. Thus, equally balanced factors favor the plaintiff's choice of forum. See Nematron Corp., 30 F. Supp. 2d at 405. However, "[w]here there is little material connection between the case and the chosen forum . . . a plaintiff's choice of forum carries less weight." Stillwater Mining, 2003 WL 21087953, at *5; see also Nieves v. Am. Airlines, 700 F. Supp. 769, 772 (S.D.N.Y. 1988); The Charter Oak Fire Ins. Co. v. Broan-Nutone, L.L.C., 294 F. Supp. 2d 218, 220 (D. Conn. 2003); Abramson v. INA Capital Mgmt. Corp., 459 F. Supp. 917, 921-22 (E.D.N.Y. 1978). As discussed, Plaintiff's chosen forum bears little, if any, connection to this district. Instead, this forum's only association with this case is the fact that Bishop Capital stock is owned by shareholders, including Plaintiffs, here in New York. However, in the context of a securities fraud action, this does not constitute a material connection to the forum. See Stillwater Mining, 2003 WL 21087953, at *5 (discussing immateriality of fact that defendant corporation's stock was traded on the New York Stock Exchange).
Regarding this factor, Plaintiffs stress two points. First, Plaintiffs distinguish cases such as Lewis and Nematron Corp. because they are class actions in which the plaintiff's choice of forum may be accorded less weight because the plaintiff represents a dispersed class. However, in Nematron, although the existence of the class diluted plaintiffs' forum choice, Judge Sweet also specifically found that plaintiffs' selection bore little weight given the chosen forum's lack of material connection to the operable facts of that case. Nematron Corp., 30 F. Supp. 2d at 405; see also Stillwater Mining, 2003 WL 21087953, at *5 ("Even according plaintiffs' choice of forum substantial weight, the balance of factors strongly favors transfer. . . .").
While Plaintiffs' action is in part a derivative one on behalf of Bishop Capital, the Court does not discount Plaintiffs' choice of forum for this reason. Instead, the Court holds that Plaintiffs' choice of forum, afforded diminished weight because of the forum's lack of connection to the operative facts in this case, is simply outweighed by all the other factors that support transfer to the District of Wyoming.
Second, Plaintiffs claim that their choice of forum "is particularly strong in an action brought under [the 1934 Act] since the venue provision of the Act is designed to serve the underlying federal policy of allowing the plaintiff the widest possible choice of forums." (Pls.' Mem. Law at 10-11) (citing Lemberger v. Westinghouse Elec. Corp., 76-C-552, 1976 WL 834 (E.D.N.Y. 1976); Zorn v. Anderson, 263 F.Supp. 745, 748 (S.D.N.Y. 1966)). Indeed, the provision to which Plaintiffs refer does afford broad venue options to securities fraud plaintiffs, by providing, for example, that an action can be brought in any district where the allegedly fraudulent statements are delivered. See In re AES Corp. Sec. Litig., 240 F. Supp. 2d 557 (E.D. Va. 2003). However, "a court's discretion under § 1404(a) is not circumscribed by the jurisdictional provisions of" the 1934 Act. Nematron Corp., 30 F. Supp.2d at 406. In fact, the clear weight of authority is that nothing in this provision "alter[s] the standard employed in deciding whether transfer is appropriate." Id.; see also Securities Exchange Comm'n v. Savoy Indus., Inc., 587 F.2d 1149, 1153 (D.C. Cir. 1978) ("[Section 1404(a)] applies to actions governed by special venue provisions . . . of the federal securities statutes.") (citations omitted); Ruo-Fang Lo v. Chang, No. Civ. A. 03-3156, 2004 WL 307472, at *4 (E.D. La. Feb. 12, 2004) ("[W]hile this district may indeed be a proper venue for this action pursuant to the [1934] Act, the case may also be subject to transfer for reasons of convenience under 1404(a)."); Burstein v. Applied Extrusion Tech., Inc., 829 F. Supp. 106, 111 (D. Del. 1992) ("[Section 78aa]" does not, by its terms, prohibit a court from transferring an action to a more convenient forum. Nor does it, by its terms, alter the standard that courts must follow in deciding whether to transfer an action."); Belgiovine Enters., Inc. v. City Fed. Sav. Bank, 748 F.Supp. 33, 35 n. 5 (D.D.C. 1990) ("Section 1404(a) has been held to apply to all cases, including those brought under `special venue' statutes.") (citations omitted); Minstar, Inc. v. Laborde, 626 F. Supp. 142, 149 (D. Del. 1985) ("[T]here is no authority in this circuit for the proposition that the burden to transfer a federal securities case is somehow higher than the burden in other types of civil actions. The Court is of the view that 28 U.S.C. § 1404(a) applies in the same form to all types of civil actions; further, Congress could have, but did not, carve out a securities law exception to § 1404(a)."). But see Micheel v. Haralson, 586 F. Supp. 169, 172 (E.D. Pa. 1983) (citing Lemberger, 1976 WL 834, at *5); S-G Sec. Inc. v. Fuqua Inv. Co., 466 F. Supp. 1114, 1121-22 (D. Mass. 1978) (citing Lemberger, 1976 WL 834, at *5) ("[The plaintiff's choice of forum is a] particularly strong [consideration] in an action brought under the [1934 Act] since the venue provision of the Act is designed to serve the underlying federal policy of allowing the plaintiff the widest possible choice of forums.").
Moreover, even if Plaintiffs' choice of venue under § 78aa is to be afforded added deference, the cases on which Plaintiffs rely are sufficiently distinguishable as to offer little by way of support. For example, in Lemberger, although the court denied defendants' transfer motion and gave particular weight to plaintiff's choice of forum because of 15 U.S.C. § 78aa, it also found that the defendants' claims of inconvenience were undercut by the fact that they maintained a major corporate office in New York City. Lemberger, 1976 WL 834, at *5. Also, in Zorn, the court found that the inconvenience of the parties was equally balanced and that, in light of the "broad venue statutes in the various Acts regulating securities," this would not justify disturbing the plaintiff's choice of forum. Zorn, 263 F. Supp. at 749. Here, because the applicable factors heavily weigh in favor of Defendants, Plaintiffs' choice of forum, even if exceptionally important in securities fraud cases, does not change the calculus in favor of transfer.
Thus, while Plaintiffs may be permitted to file this case in the Southern District of New York, where there are minimal connections between this district and the operative facts, Plaintiffs' choice properly is given less deference. However, even assigning Plaintiffs' choice of forum substantial weight, the balance of the factors heavily favors transfer of this case to the District of Wyoming. Trial Efficiency and the Interests of Justice
For trial efficiency and in the interests of justice, this case should be transferred to the District of Wyoming. As the above analysis demonstrates, this Court has no connection to this action. Instead, the "center of gravity" of this litigation is in Wyoming. Almost all of the Defendants, and all of the non-party witnesses and the relevant and voluminous documents, are in or near Wyoming. The Defendant company's headquarters are in Wyoming and the alleged misrepresentations and omissions, which are at the heart of Plaintiffs' case, all occurred in Wyoming. In sum, the balance of factors tilts heavily in favor of transferring this case to the District of Wyoming.
III. Conclusion
For the reasons set forth above, the motion to transfer is granted. The parties' standstill agreement will remain in effect until such time as the transferee court directs otherwise. The Clerk will transfer the case to the United States District Court for the District of Wyoming.
SO ORDERED.