Opinion
01 CIV. 213 (DLC).
June 11, 2001
Thomas Moreland Marc D. Merriweather Kramer Levin Naftalis Frankel LLP New York, NY., Attorneys for Plaintiffs.
Leo Fox Leo Fox, Esq. New York, NY., Attorney for Defendant Thomas Kornitzer.
OPINION ORDER
Plaintiffs Ocean Walk Mall LLC ("OWM"), R.A.F., LLC ("RAF") and Benjamin Heller ("Heller") bring this action asserting fraud, breach of fiduciary duty, and RICO violations, among other claims, in relation to the acquisition and development of a commercial real property complex known as the Ocean Walk Mall ("Mall") located at Hollywood Beach Resort ("Resort") in Hollywood, Florida (the "Project"), in which the plaintiffs and defendants became joint venturers. Defendant Thomas Kornitzer ("Kornitzer") has brought this motion, pursuant to 28 U.S.C. § 1404 (a) and 28 U.S.C. § 1965, for a transfer of venue to the Southern District of Florida. For the reasons discussed below, this motion is granted.
Kornitzer represents that defendant Michael McManus ("McManus"), appearing pro se, consents to this motion.
BACKGROUND
The following facts are either undisputed or are alleged by plaintiffs and accepted as true for purposes of this motion. Plaintiffs OWM and RAF are limited liability companies licensed to do business in Florida with their principal places of business in New York. Plaintiff Heller is a resident of New York. Defendants Kornitzer and McManus are residents of Florida and New Jersey, respectively. The Complaint, filed on January 10, 2001, alleges mainly that the defendants fraudulently induced Heller and RAF to form OWM in order to purchase, renovate, and lease the commercial condominium units comprising the Mall, to provide the principal funding for the Project, and to entrust defendants with full on-site responsibility for the Project. After the plaintiffs agreed to contribute capital and to share profits and losses in a ratio of 80% for the plaintiffs and 20% for defendants, the defendants engaged in a pattern of self-dealing to divert revenues and assets to themselves, resulting in a loss of $4,000,000 to the plaintiffs.
While the Complaint alleges complete diversity, the Court noted at the pretrial conference held on March 30, 2001, that such diversity may not exist. The plaintiffs admit in their papers that while OWM is a New York limited liability corporation, one of its members is a Florida corporation. This Court retains jurisdiction over this case by virtue of the RICO claim.
The Complaint alleges that "numerous meetings" between the parties occurred in New York and that the defendants materially misrepresented or knowingly omitted true facts in telephone conversations with and written reports sent to the plaintiffs. The Complaint further alleges that many of these false oral and written reports were "made or transmitted to plaintiffs in New York."
DISCUSSION
Section 1404(a) of Title 28, United States Code, allows for a transfer of venue "[f]or the convenience of parties and witnesses, [and] in the interest of justice." Such motions are in the Court's discretion to grant or deny and are "`determined upon notions of convenience and fairness on a case-by-case basis.'" Hall v. South Orange, 89 F. Supp.2d 488, 493 (S.D.N.Y. 2000) (quoting In re Cuyahoga Equip. Corp., 980 F.2d 110, 117 (2d Cir. 1992)). The moving party bears the burden to establish that there should be a change of forum. Berman v. Informix Corp., 30 F. Supp.2d 653, 656 (S.D.N.Y. 1998). Courts should, ordinarily, defer to plaintiffs' choice of venue, but may give the plaintiffs' choice of forum substantially less deference when the "operative facts upon which the litigation is brought bear little material connection to the chosen forum." Id. at 659 (citation omitted).
To determine whether a transfer is warranted, the Court must first determine whether the case could have properly been brought in the transferee court. Id. at 656. If the transferee court appears to have jurisdiction over the case, the Court must next consider whether the transfer is appropriate based upon several factors:
(1) the convenience of witnesses, (2) the convenience of the parties, (3) the location of relevant documents and the relative ease of access to sources of proof, (4) the locus of operative facts, (5) the availability of process to compel the attendance of unwilling witnesses, (6) the relative means of the parties, (7) the forum's familiarity with the governing law, (8) the weight accorded the plaintiff's choice of forum, and (9) trial efficiency and the interest of justice, based on the totality of the circumstances.
Id. at 657.
The parties agree that this case could have been brought in the Southern District of Florida. The property comprising the subject of this litigation is located there and a substantial part of the events or omissions giving rise to the claim occurred there. See 28 U.S.C. § 1391(b).
The defendants have met their burden in showing that transfer to the Southern District of Florida is appropriate. Defendants assert that Heller visited Florida on several occasions in connection with the Project, was kept fully apprised of the progress of the Project and the decisions made on behalf of the Project through his lawyers and agents in Florida, making activities in Florida of crucial import. Plaintiffs contend that the "main thrust" of their claims are the misrepresentations made by the defendants to Heller, which they allege occurred primarily in New York. Specifically, plaintiffs argue that the defendants solicited Heller, negotiated with Heller, contracted with Heller, and reported to Heller in New York. Misrepresentations and omissions, however, are "deemed to `occur' in the district where they are transmitted or withheld, not where they are received." Morgan Guaranty Trust Co. v. Tisdale, No. 95 Civ. 8023 (BSJ), 1996 WL 544240, at *6 (S.D.N.Y. Sept. 25, 1996) (citation omitted). While Heller's affidavit specifically states that the "defendants concealed and misrepresented their conduct principally in communications sent to me in New York, and in meetings held with me in New York," Heller points to only four specific meetings in New York but testifies to weekly phone calls from Florida to New York as well as at least fifteen misleading reports sent from Florida to New York.
It appears that New York's connection to this case is that Heller lives in New York and agreed to contribute money to the Project while in New York. Plaintiffs RAF and OWM, while New York companies, were specifically formed for involvement in the Florida Project. In contrast, the alleged misrepresentations and omissions occurred primarily in Florida and center around the status and prospects of a real estate development project located in Florida. For example, the plaintiffs allege that the defendants misrepresented the nature of their relationship with the owner of one of the Mall's businesses, that they had assurances of a HUD-backed loan from the City of Hollywood, and that OWM would have voting control on the Board of the Resort's Condominium Association. At this stage of the litigation, then, it appears that the locus of operative facts is in Florida and that the plaintiffs' choice of forum is not controlling. See Westwood Ventures, Ltd. v. Forum Financial Group, No. 97 Civ. 514 (WK), 1997 WL 266970, at *2 (S.D.N.Y. May 19, 1997) ("While a plaintiff's choice of forum is generally `entitled to substantial consideration,' the emphasis a court places on this choice `diminishes where . . . the facts giving rise to the litigation bear little material connection to the chosen forum.") (citation omitted).
The location of relevant documents and ease of access to sources of proof as well as the convenience of witnesses further support transfer of venue. The majority of pertinent documents appear also to be found in Florida. Defendants admit that the documents memorializing agreements between the parties "probably exist in New York as well as in Florida" but that the third-party documents are "more easily obtainable" in Florida from the third-party witnesses and that the documents concerning transactions regarding the development of the Florida property were executed in Florida. Plaintiffs counter that its documents are located in New York and that the documents located in Florida pertain to details of the Project and would be almost entirely immaterial to the merits of the plaintiffs' claims. Given the extent to which the success of the plaintiffs' claims, however, will depend on whether or not the defendants actually misrepresented the progress of the Project, convenience and efficiency weighs on the side of transfer to Florida.
Likewise, while both sides appear to have important witnesses in Florida and New York, it appears that the more crucial witnesses are located in Florida. Plaintiffs argue that the key witnesses are those who directly participated in the negotiations and other communications between the parties and intend to call a large number of non-party New York, New Jersey or Connecticut resident witnesses who would be inconvenienced by a transfer, including their principal contractual negotiator, OWM's independent accountant, several lenders, consultants who reviewed defendants' work on the Project, and individuals who worked on the leasing of the Project. It appears, however, that at least the first four witnesses listed by the plaintiffs are their lawyer, accountants, and employee, all of whom are presumably under the plaintiffs' control and would not require a subpoena to appear. Defendants counter that Heller includes several witnesses who either were hired after the failure of the Project, possess no personal knowledge of the events at issue, or possess significantly less knowledge than some of the defendant's Florida witnesses, such as Heller's Florida attorney who was "involved in each and every transaction representing the Plaintiffs and who singly is more knowledgeable than any of the personnel" identified by the plaintiffs. The defendants have submitted a list of 33 witnesses, the majority of which are located in Florida. While the plaintiffs argue that the majority of these witnesses are immaterial to the claims of fraudulent inducement since Heller himself does not know of or has not spoken to them, the defendants' witnesses appear to be Florida consultants hired by Heller as well as independent third parties who will offer testimony either about information they shared with Heller or about their perceptions regarding the progress and perceived soundness of the Project. As with the Florida-based documents, these witnesses go to the heart of the plaintiffs' misrepresentations and fraudulent inducement claims.
Finally, the convenience of the parties as well as the interest in judicial efficiency and the interest of justice, based on the totality of the circumstances, further advise transferring this action to Florida. Plaintiffs argue that the existence of several agreements signed or negotiated by Kornitzer consenting to litigation in New York demonstrates Kornitzer's anticipation of possible litigation in New York and "highlight[s] the nexus between plaintiffs' claims and New York." They concede, however, that these agreements do not require that defendants submit to suit in New York in this lawsuit. At the present time, there are three actions pending in Florida courts that involve the same parties and arise out of the Project. Although plaintiffs assert that trial in Florida would be less convenient, they do not make a showing of financial hardship that would prevent them from fully litigating this case there. Inconveniences stemming from the plaintiffs' need to retain counsel in the transferee district "`is of little, if any, weight on a motion to transfer.'" Strauss v. West Highland Capital, Inc., No. 00 Civ. 01184 (GEL), 2000 WL 1505957, at *3 (S.D.N.Y. Oct. 6, 2000). In this case, however, Heller already retains counsel in Florida for OWM in connection with the other Florida actions, making a transfer to Florida less burdensome to the plaintiffs than maintaining an action in New York for defendants.
While the parties argue about whether Kornitzer traveled to New York more or less frequently than Heller traveled to Florida, it is clear that the material facts that support plaintiffs' allegations concerning the underlying misbehavior of the defendants occurred in Florida. The totality of circumstances, therefore, supports defendants' motion to transfer. See, e.g., Invivo Research, Inc. v. Magnetic Resonance Equip. Corp., 119 F. Supp.2d 433, 437-41 (S.D.N.Y. 2001).
Moreover, a federal court in Florida will be as familiar with the provisions of RICO as a court sitting in New York. The parties disagree as to whether choice of law principles would result in Florida or New York law being applied to plaintiffs' non-federal claims. The Court declines to perform a choice of law analysis in this case where the weight of factors support transfer to Florida and where choice of law is merely "one of many factors and is accorded little weight on a motion to transfer." Toy Biz, Inc. v. Centuri Corp., 990 F. Supp. 328, 331 n. 3 (S.D.N.Y. 1998) (citing Zangiacomi v. Saunders, 714 F. Supp. 658, 661 (S.D.N.Y. 1989)); see also Prudential Sec. Inc. v. Norcom Development, Inc., No. 97 Civ. 6308 (DC), 1998 WL 397889, at * 6 (S.D.N.Y. 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.").
Because the Court has granted a transfer of venue pursuant to 28 U.S.C. § 1404(a), it declines to consider defendant's arguments with respect to 18 U.S.C. § 1965(A).
CONCLUSION
For the reasons discussed above, the defendants' motion to transfer this action to the Southern District of Florida is granted. The Clerk of Court shall send a certified copy of this Opinion and any original documents to the Clerk of Court for the Southern District of Florida.SO ORDERED:
Dated: New York, New York June 11, 2001 ______________________________ DENISE COTE United States District Judge