Opinion
00 Civ. 01184 (GEL)
October 6, 2000.
OPINION AND ORDER
Before the Court is defendants' motion to transfer this shareholder's derivative action to the United States District Court for the Northern District of California pursuant to 28 U.S.C. § 1404(a). The Complaint alleges that defendants West Highland Capital, Inc. ("WHC"), West Highland Partners, L.P. ("WHP"), Buttonwood Partners, L.P. ("BP"), Estero Partners, LLC ("EP"), and Lang H. Gerhard, acting as a group (the "Gerhard Group"), garnered short-swing profits which must be disgorged pursuant to Section 16(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78p (p) ("Exchange Act"). All claims arise out of alleged transactions by the Gerhard Group in shares of nominal defendant Administaff, Inc. ("Administaff"). Plaintiff is a New York resident and owner of Administaff common stock.
For the reasons stated below, the motion is GRANTED.
DISCUSSION
In its discretion, this Court may transfer a case to another district where venue is proper "for the convenience of the parties and witnesses, in the interests of justice." 28 U.S.C. § 1404 (a); see, e.g., Filmline (Cross-Country Prod., Inc. v. United Artists Corp., 865 F.2d 513, 520 (2d Cir. 1989) ("The determination whether to grant a change of venue requires a balancing of conveniences, which is left to the sound discretion of the district court."). Movants bear the burden of making a "clear-cut showing" that a transfer of venue "is in the best interests of the litigation." Dwyer v. Gen. Motors Corp., 853 F. Supp. 690, 692 (S.D.N.Y. 1994) (internal citations and quotation marks omitted). Factors to be considered include (1) the convenience and location of witnesses; (2) the location of relevant documents; (3) the ease of access to sources of proof; (4) the convenience of the parties; (5) the locus of the operative facts; (6) the availability of process to compel the attendance of unwilling witnesses; (7) the weight accorded the plaintiffs choice of forum; and (8) trial efficiency and the interest of justice, based on the totality of the circumstances.See Dan-Dee International, Ltd. v. Kmart Corp., No. 99 Civ. 11689(DC), 2000 WL 1346865 (S.D.N.Y. Sept. 19, 2000) (internal citations omitted). "The core determination under Section 1404(a) is the center of gravity of the litigation." Bionx Implants, Inc. v. Biomet, Inc., No. 99Civ.740 (WHP), 1999 WL 342306. *4 (S.D.N.Y. May 25, 1999).
It is uncontested that the Northern District of California — where all defendants reside — is a proper venue for this case. See 15 U.S.C. § 78aa (a)(a) (venue proper where "defendant is found or is an inhabitant"). Defendants demonstrate overwhelmingly that the Northern District of California is likewise the center of gravity for this litigation. Defendant WHC is a California corporation; defendants WHP and BP are California limited partnerships; and defendant EP is a California limited liability company. See Complaint at ¶¶ 3-7, Declaration of Lang H. Gergard ("Gerhard Decl.") at ¶¶ 3-4. All three corporate defendants (WHC, WHP and BP) have their places of business in Greenbrae, a town in the Northern District of California. See Gerhard Decl. at ¶ 3. Defendant Lang H. Gerhard is an officer of three corporate defendants and a resident of Larkspur, also in the Northern District of California. See id. at ¶ 2. The Complaint does not allege that any defendant had any connection with New York or that any purchase of the stock at issue occurred in New York. All documentary evidence and potential witnesses are located in California and all pertinent investment decisions were made in California by California residents. See id. at ¶ 6. Third party witnesses (all of whom are located in California) could be compelled to testify' at a trial in California, but not in New York. See id. at ¶ 8; Fed.R.Civ.P. 45(c)(3)(A)(ii). On these facts, the scales weigh heavily in favor of granting defendants motion. See. e.g., Viacom Int'l, Inc. v. Melvin Simon Productions. Inc., et al., 774 F. Supp. 858, 868 (S.D.N.Y. 1991) ("Courts routinely transfer cases when the principal events occurred, and the principal witnesses are located, in another district.").
Plaintiff opposes defendants' contention that California is a more convenient forum chiefly on the grounds (1) that as a matter of policy, a plaintiffs choice of forum should rarely be disturbed, and (2) that defendants allegedly fail to name witnesses whose convenience would be served by transfer to California. Both arguments are unavailing. First, in a derivative action, the weight given plaintiffs choice of forum is "considerably weakened" because the plaintiff is only one of many potential plaintiffs, "all of whom could with equal show of right go into their many home courts. . . ." Koster v. Lumbermens Mut. Cas. Co., 323 U.S. 518, 524 (1947). Therefore, the nominal plaintiffs New York residence and choice of a New York forum do not weigh heavily against transferring this case to California. See IBJ Schroder Bank Trust Co. v. Mellon Bank, 730 F. Supp. 1278, 1282 (S.D.N.Y. 1990) ("In shareholder derivative suits . . . the accidental residence of the named plaintiff is discounted in weighing the transfer factors."). And where (as here) the forum lacks any significant contact with the activities alleged in the complaint, a plaintiffs choice of forum is "diminished substantially." Studiengesellschaft Kohle MBH v. Shell Oil Co., No. 93 Civ. 1868 (PKL), 1993 WL 403340 at *4 (S.D.N.Y. October 7, 1993) (internal citations omitted); e.g., Hernandez v. Graebel Van Lines, 761 F. Supp. 983, 990 (E.D.N.Y. 1991) (where forum lacks any connection to activities alleged in complaint "plaintiffs choice of forum is not accorded any great significance"). Moreover, the plaintiffs convenience is not at issue in this case since there is no dispute that the nominal plaintiff sues on behalf of a corporation chartered in Delaware and headquartered in Texas,see Complaint at ¶ 2, and is neither the real party in interest nor a likely trial or deposition witness.
Second, the defendants' submissions identify five individuals (Lang H. Gerhard, Michael I. Wilkens, Antonie J. Tristani, John D. Scully, and Bonnie G. George) who may be called to testify, and specify that these individuals are the persons with knowledge relevant to the trading of Administaff stock. See Gerhard Decl. at ¶ 6; e.g., Noriega v. Lever Bros. Cos., Inc., 671 F. Supp. 991, 996 (S.D.N.Y. 1987) (noting that movant is required to "specifically identify" witnesses and provide a "general statement" of their testimony). These five witnesses reside in the Northern District of California and may be called to refute plaintiffs allegations that they agreed to act in concert with respect to the securities of Administaff. Id. Such an agreement is an essential element of plaintiffs claim. See Complaint at ¶¶ 13 and 14; SEC Rule 13d-5(b) [ 17 C.F.R. § 240.13d-5(b)]. Though plaintiff contends that this Section 16(b) action is of "garden variety," he still must prove its every element and it remains uncontested that all evidence required for that purpose is located in the Northern District of California.
As to the interests of justice generally, it is telling that plaintiff never contends that a Californian forum would substantial inconvenience or impair his ability to prosecute this case. The plaintiff is a nominal one with no connection to the underlying merits of his clam. Thus, there is no apparent reason (and the plaintiff offers none) why his deposition need ever be taken, why any discovery need take place in New York, or why the plaintiff would be prejudiced in the transferee forum. See, e.g.,Bionx Implants, 1999 WL 342306 at *3 (granting motion under Section 1404(a) where "transfer would aid one party and not disadvantage the adversary"). Inconveniences due to plaintiffs need to retain counsel in the transferee district "is of little, if any, weight on a motion to transfer." Scheinbart v. Certain-Teed Products Corp., 367 F. Supp. 707, 710 (S.D.N.Y. 1973); accord Graebel Van Lines, 761 F. Supp. at 988. Any inconvenience caused to the plaintiff upon transfer of this case to California will thus be minimal compared to the substantial inconvenience that litigation in New York would cause to the defendants and to every potential witness.
Finally, plaintiff apparently contends that the need to enforce § 16(b) by private right of action somehow weighs against transfer. See Plaintiff's Mem. of Law at 9. But this is a nonsequitur. That plaintiff seeks to enforce a significant statute does not entail that his claim has merit, still less that procedural questions must be decided in his favor. Plaintiff cites no authority for the proposition that the nature of the statute he invokes weighs against transfer, nor is there any reason to believe that a § 16(b) claim will be less effectively adjudicated in the Northern District of California.
CONCLUSION
For the foregoing reasons, transfer will best serve the convenience of parties and of witnesses, and is in the interests of justice. The defendant's motion to transfer this action to the United States District Court for the Northern District of California is granted.
SO ORDERED: