Opinion
Case No. 02 C 8018
May 28, 2003
ORDER
Defendant Tweeter home Entertainment Group, Inc. ("Tweeter") has moved to transfer this action to the United States District Court for the District of Massachusetts pursuant to 28 U.S.C. § 1410 (a), which permits a discretionary transfer "[f]or the convenience of parties and witnesses, in the interest of justice." The motion is granted.
This is an action brought by plaintiffs Leo Portnoy, a Tweeter shareholder, and his attorney, Jerrold M. Shapiro, for legal fees incurred in connection with a letter written by Shapiro to Tweeter on July 31, 2002, demanding that Tweeter's Board of Directors take all steps necessary to recoup short-swing profits realized by two Tweeter insiders, in violation of § 16(b) of the Securities Exchange Act of 1934; plaintiffs' complaint alleges that because Shapiro's July 31, 2002 letter "provided the critical impetus that solely and directly established the fund of $211,826.88 that financially benefited `TWTR' and all of its shareholders," Complaint, ¶ 8, plaintiffs are entitled to reimbursement of Shapiro's attorney's fee. Tweeter does not dispute that such insider profits were realized, albeit inadvertently, and asserts that the insiders involved have disgorged the improper profits; it defends on the grounds that plaintiffs neither caused the recovery of the short-swing profits nor conferred any benefit on Tweeter because its own Insider Trading Compliance Program would inevitably have discovered the violation and recovered the profits. As Tweeter points out, the central issue in this case is whether Shapiro's letter caused the recovery of the short-swing profits.
Shapiro's July 31, 2002 letter was sent to Tweeter two days after the trading information which revealed the improper trading became publicly available. Thus, it appears that all that happened in connection with this action in Chicago was that attorney Shapiro, for some brief period of time, reviewed public documents and wrote a letter. Presumably, the only evidence relevant to this case which exists in Chicago is public documentation reviewed by attorney Shapiro and possibly Shapiro's own testimony, although except for the question of the amount of fees incurred, it is not clear that Shapiro's testimony will even be material.
Tweeter's principal place of' business is Canton, Massachusetts. The insider trades challenged by plaintiff's were placed from Massachusetts. The individuals who placed the insider trades are located in Massachusetts. The Internal Compliance Program was created and administered in Massachusetts, where Tweeter investigated the trades and recovered the short-swing profits. Most critically, all the witnesses with information and documents about the normal workings of the internal Compliance Program, as well as how it worked in this particular case, are located in Massachusetts. As Tweeter points out, it is likely that a number of Tweeter employees have relevant information on the creation, implementation, and administration of the Internal Compliance Program, and all such employees are located in Massachusetts.
The court sees two factors which favor denial of the motion to transfer: the convenience of attorney Shapiro and the plaintiffs' choice of forum. The convenience of all other potential witnesses and the location of the vast bulk of the relevant documentation strongly favors litigation in the District of Massachusetts. Requiring Tweeter to move all the relevant documents to Chicago, and finance the movement of all its employees with relevant information to Chicago, will create significant inconvenience and expense. Massachusetts is the situs of all the material events at issue in this case, other than the preparation and mailing of one brief letter. The case can be prepared for trial and tried far more inexpensively and efficiently in Massachusetts, savings in time and money which will benefit Tweeter's shareholders. The factors favoring litigation in Massachusetts overwhelm the factors favoring Chicago. The motion to transfer venue is therefore granted and this case is transferred to the District of Massachusetts.