Opinion
No. 01-C-70346
June 8, 2001
MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO TRANSFER VENUE
BACKGROUND FACTS
On December 23, 1998, the Defendant entered into a contract to serve as an escrow agent for a Joan transaction between the Plaintiff and the Frontier Group. The Plaintiff loaned sixty seven million dollars to certain subsidiaries of the Frontier Group. As security for Plaintiff's loan to Frontier, Plaintiff received mortgages on certain long-term healthcare facilities operated by the Frontier Entities in Massachusetts and Connecticut. To perfect the Plaintiff's security interest in these items, certain documents were required to be filed or recorded with various governmental agencies and filing offices. To protect and perfect Omega's security interests, and as a part of the Defendant's services as escrow agent for the transaction, First American agreed to file or record the necessary documents with the various governmental agencies as soon as possible after the loan transaction closed. Among the documents the Defendant allegedly agreed to file or record for the benefit of the Plaintiff were UCC-1 Financing Statements for the accounts receivable, inventory, equipment, licenses, permits, certificates of need, instruments, investment property, proceeds, insurance rights, and other intangibles, of Frontier Group of Massachusetts, Inc. and its subsidiaries, the loan transaction between the Plaintiff and Frontier closed on December 31, 1998. The Plaintiff also alleges that upon closing, the Defendant received express instructions from the Plaintiff and Frontier to promptly and properly file and record all of the documents required to be filed or recorded to perfect the Plaintiff's security interests in connection with the loan transaction, including the Massachusetts UCC-1 Financing Statements.
By early February, 1999, the Defendant had forwarded to the Plaintiff written confirmations that it had recorded or filed certain documents necessary to perfect Plaintiff's security interests, but the Defendant did not forward written confirmation that it had filed the Massachusetts UCC-1 financing statements. The Plaintiff claims that it demanded written confirmation that the Defendant had filed the UCC-1 statements. The Defendant allegedly responded by advising the Plaintiff that it had filed the UCC-1 statements.
By the end of June, 1999, the Plaintiff determined that Frontier was in severe financial crises and instructed its attorneys to conduct UCC searches. The attorneys determined that the Defendant had never filed the Massachusetts UCC-1 Financing Statements with the Massachusetts Secretary of the Commonwealth. After being notified of the oversight the Defendants made the proper filings. Within 90 days of filing the UCC-1 statements Frontier filed for bankruptcy.
Finally, the Plaintiff claims that due to Defendant's failure to file the Massachusetts UCC-1 Financing Statements, Plaintiff's security interest in the property identified therein was not perfected prior to 90 days of the date that Frontier Group filed for bankruptcy. As a result, the bankruptcy trustee asserted that the Plaintiff's security interest in the property described in the Massachusetts UCC-1 Financing Statements, was a voidable preferential transfer, and the trustee has sued the Plaintiff. Plaintiff is requesting that the Defendant pay damages incurred as a result of the trustee's suit.
The Plaintiff filed its complaint alleging breach of contract, negligence, and misrepresentation on December 28, 2000. The case was removed to this court on January 24, 2001. The Defendant filed their motion to transfer venue and motion to dismiss on February 23, 2001. Plaintiff filed it's response on March 29, 2001. Defendant filed it's response on April 16.
STANDARD OF REVIEW
In considering a motion for transfer of venue pursuant to 28 U.S.C. § 1404(a) it is the "duty of the district judge to balance inconveniences and to determine upon which litigant the greater hardship [should] rest."Nicol v. Koscinski, 188 F.2d 537 (6th Cir. 1951). This determination rests "within the sound judicial discretion of the district judge to whom the petition for change of venue is addressed, and his decision should not be set aside unless there is an apparent abuse of discretion." Id. at 538.
Section 1404(a) of Title 28 provides: "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." The statute presupposes that venue in the "transferor" court is proper (otherwise transfer is made pursuant to § 1406(a)), and is appropriate even where the defendant has removed the case from state to federal court. 15 Charles Alan Wright, et al., Federal Practice and Procedure §§ 3842 3843 (2d ed. 1986). A motion for change of venue may be made at any time in the proceedings. Id. § 3844. Transfer is proper only to a venue in which the cause of action could have been brought and where the court has subject matter jurisdiction.Id. § 3845. In addition, the "transferee" court must have personal jurisdiction over the defendant. Id. The burden of proof is on the moving party to make a "convincing showing of the right to transfer." American Standard, Inc. v. Bendix Corp., 487 F. Supp. 254, 261 (W.D. Mo. 1980).
Section 1391(a) of Title 28, governs venue in civil cases in which jurisdiction is based on diversity of citizenship. It provides that venue is proper only in the district where (1) the defendant resides, (2) in which a "substantial part of the events or omissions giving rise to the claim occurred," or (3) "in which defendants are subject to personal jurisdiction at the time the action is commenced." Section 1391(c) further provides that a corporate defendant is "deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced." In states with more than one district, the corporate defendant is "deemed to reside in any district in that State within which its contacts would be sufficient to subject it to personal jurisdiction if that district were a separate State, and, if there is no such district, the corporation shall be deemed to reside in the district within which it has the most significant contacts." Id.
This statute was extensively modified in 1990; diversity plaintiffs can no longer "lay venue" in the district in which they reside, 15 Charles Alan Wright, et al., Federal Practice and Procedure § 3804 (1994 Supp.).
The statute no longer references the district where the corporate defendant "does business" or is incorporated; instead, the consideration is for where the corporation is subject to personal jurisdiction. According to Wright and Miller, the "test" is:
whether its contacts within that district would be sufficient to subject it to personal jurisdiction if that district were a separate state. If that test is satisfied with regard to more than one district in the state, the corporation is regarded as a resident of each of those districts. If a corporation has sufficient contacts with a state to make it subject to personal jurisdiction in the state, but here is no single district in the state where the contacts are sufficient, the corporation is deemed to reside in the district in which it has the most significant contacts.Id. § 3811.
LAW AND ANALYSIS
Defendant proposes transferring this lawsuit to the United States District Court of Massachusetts. Because the court's jurisdiction is based on diversity, venue in the United States District Court of Massachusetts is proper, as both the Plaintiff and Defendant are subject to personal jurisdiction in Massachusetts.Having established that the proposed transferee venue is proper, although not mandated by 42 U.S.C. § 2000e, the court must consider the following factors in exercising its discretion to transfer an action:
(1) the convenience of the parties;
(2) the convenience of the witnesses;
(3) the relative case of access to sources of proof;
(4) the availability of process to compel attendance of unwilling witnesses;
(5) the cost of obtaining willing witnesses;
(6) the practical problems associated with trying the case most expeditiously and inexpensively; and
(7) the interest of justice.
Helder v. Hitachi Power Tools, USA, Ltd., 764 F. Supp. 93, 96 (E.D. Mich. 1991) (citations omitted). "In short, the Court may consider any factor that may make any eventual trial easy, expeditious and inexpensive." Id. (citations omitted).
(a) convenience of the parties:
In considering the convenience of the parties, the court must factor in the plaintiff's choice of forum. Although there is a wide range of opinion within the United States courts as to how much weight to accord the plaintiff's choice, it is clear that the burden of persuasion lies with the defendant to convince the court that the proposed transfer will accomplish more than "shift[ing] the inconvenience from one party to the other." Miller, supra, § 3848. According to Wright Miller, a defendant "must show that the original forum is inconvenient for it and that plaintiff would not be substantially inconvenienced by a transfer."Id. § 3849.
The court may also consider the financial burden to the plaintiff in weighing the convenience of the parties. Id. While Defendant is silent on the matter, Plaintiff asserts that they would be adversely affected if this cause of action was moved to Massachusetts.
Convenience of counsel, is accorded little or no weight in the "convenience of the parties" analysis unless it is so severe as to conflict with the interest of justice or could impose a significant financial burden on the litigants. Id. § 3850.
(b) convenience of the witnesses availability of process;
(c) cost of obtaining willing witnesses; and (d) availability of process to compel unwilling witnesses.
Both parties claim that their choice of venue would be the most convenient for witnesses. The Defendants argue that many of the witnesses live in Massachusetts. However, the evidence indicates that number of witness located in and near Michigan is almost equal to the number of witnesses located in Massachusetts.
(d) access to sources of proof:
Both parties claim that the majority of proofs are in the their venue of choice, Presumably the materials serving as sources of proof can be readily transported as required to either venue. According to Wright Miller, the court should consider the location of records if transfer would serve to bring them within the court's subpoena power or where moving them would create a hardship for one of the parties; otherwise, their location is afforded little weight in the analysis. Id. § 3853.
(e) interest of justice:
"Interest of justice" may be the most important of the factors the court weighs in considering a motion for transfer of venue. Defendant asserts that in the "interest of justice" the case should be transferred. The properties at issue are located in Massachusetts. The underlying business transaction regarded businesses in Massachusetts. And the bankruptcy proceeding is still going on in Massachusetts. These factors would seem to favor Massachusetts as the most interested forum.
(f) practical problems:
Aside from those issues discussed above, neither party raises additional practical problems in support of its position.
Although venue would be proper in either state, after weighing all of the factors the court must consider in deciding a motion for change of venue, the court is convinced that the proposed transfer to the United States District Court for the Eastern District of Massachusetts will do more than just shift the inconvenience of the litigation to the plaintiff.
ORDER
THEREFORE, for the reasons stated above, IT IS ORDERED that Defendant's April 16, 2001 motion for change of venue is GRANTED.