Opinion
No. 3:02-CV-1954-P
January 21, 2003
MEMORANDUM OPINION AND ORDER
Presently before the Court for consideration is Defendants' Motion to Dismiss for Improper Venue Under Rule 12(b)(3) FRCP and for Alternative Relief, filed November 8, 2002. Plaintiff filed a Response on November 26, 2002. Defendants' Reply was filed on December 13, 2002. After considering the pleadings, the briefing, and the applicable law, the Court DENIES Defendant's Motion.
Factual Background
Plaintiff The CIT Group/Commercial Services, Inc. ("Plaintiff" or "CIT") is a New York corporation; its principal place of business is in the State of New York. Defendant Romansa Apparel, Inc. ("Romansa Apparel") is a Texas corporation with its principal place of business in San Antonio, Texas. Defendant Andres Santos Roman ("Roman") is a citizen of Mexico; his business address is located in Cuernavaca, Morelos, Mexico. Defendant Industrias Romansa S.A. de C.V. is a corporation organized, incorporated, and existing under the laws of Mexico. Plaintiff alleges that this Court has subject-matter jurisdiction under 28 U.S.C. § 1332 because the parties are diverse and the amount in controversy exceeds $75,000.
The Complaint alleges that Romansa Apparel and CIT entered two contracts on December 1, 1999: a so-called Factoring Agreement and an Inventory Security Agreement. Pl.'s Compl. ¶ 6. According to Defendant Romansa Apparel, these two agreements were executed by the parties in San Antonio, Texas. Def.'s Br. ¶ 3. Under the Factoring Agreement, Romansa Apparel agreed to "sell and assign" to CIT "all accounts receivable arising from [Romansa Apparel's] sales of inventory or renditions of services." Pl.'s Compl., Ex. A ¶ 1. In return, CIT agreed to "purchase the Accounts for the gross amount of the respective invoices" less factoring fees, charges, discounts or allowances. Id. ¶ 5. The Factoring Agreement requires Romansa Apparel to maintain a tangible net worth (as defined by the agreement) of no less than $1,500,000.00. Id. ¶ 7 Ex. A ¶ 4.4. The Complaint further states that Defendants Roman and Industrias Romansa executed Guaranty Agreements on December 1, 1999, by which "they became individually and personally and jointly and severally liable to CIT for the full and indefeasible payment and performance when due of all existing and future indebtedness, obligations or liabilities of Romansa to CIT." Id. ¶ 10 Ex. C at 1.
Plaintiff alleges that Defendant Romansa Apparel beached its agreement to maintain a Tangible Net Worth of $1,500,000. Id. ¶ 8. Plaintiff notified Romansa Apparel of this breach and accelerated its obligations under the Factoring Agreement. Id. ¶ 9. Romansa Apparel did not pay its accelerated obligations and again breached the Factoring Agreement, causing Plaintiff damages in excess of $748,612.00. Id. ¶ 16. Further, Plaintiff gave notice to and demanded payment from Roman and Industrias Romansa concerning their obligations under the Guaranty Agreement, but they refused to pay Romansa Apparel's debt to CIT. Id. ¶ 11. Plaintiff has sued Defendant Romansa Apparel for breach of the Factoring Agreement and Defendants Roman and Industrias Romansa for breach of the Guaranty Agreement. Id. ¶ 14-29.
The Complaint contains no allegations related to venue. Plaintiff has submitted the sworn affidavit of Brian Shaw, who avers that, "[s]ince the Factoring Agreement came into existence, CIT's account managers for the Factoring Agreement have been located in Dallas, Texas. Shaw Aff. ¶ 4. The affidavit further avows that Romansa Apparel, in order to obtain funding under the Factoring Agreement, "had to send [to the CIT offices in Dallas] copies of the invoices that it issued to CIT." Id. ¶ 7. According to Shaw, "[t]he amount due from Romansa to CIT is [attributable] to Romansa's breach of the Factoring Agreement and is based upon the funding Romansa received as a result of the invoices Romansa sent to CIT in Dallas, Texas." Id. ¶ 8. Shaw further states that "Andres Santos and Jason Brown, officers of Romansa, have communicated with CIT in Dallas, Texas numerous times by telephone" since the Factoring Agreement was entered. Id. ¶ 9.
The 12(b)(3) Motion to Dismiss
Defendant Romansa Apparel moves this Court to dismiss the suit for improper venue under Rule 12(b)(3) of the Federal Rules of Civil Procedure. Noting that neither Roman nor Industrias Romansa has been served, the Motion to Dismiss questions the propriety of this venue with respect to Romansa Apparel. When a defendant raises the issue of proper venue, the plaintiff must identify facts that would establish venue in the district in which the action is pending. Advanced Dynamics Corp. v. Mitech Corp., 729 F. Supp. 519 (N.D. Tex. 1990). In deciding whether venue is proper, the court accepts uncontroverted facts alleged in the complaint as true and resolves conflicts in the parties' affidavits in favor of the plaintiff. McCaskey v. Continental Airlines, Inc., 133 F. Supp.2d 514, 523 (S.D. Tex. 2001). This Court's subject-matter jurisdiction is based solely on diversity of citizenship. In such cases, venue is proper in
(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of the property that is the subject of the action is situated, or (:3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.28 U.S.C. § 1391(a).
There is no basis for finding proper venue under subsection (1) because Defendant Roman is not a resident of Texas.
The Court need not decide whether Defendants Romansa Apparel and Industrias Romansa are residents of Texas pursuant to 28 U.S.C. § 1391(c).
Plaintiff asserts that venue is proper under subsection (3) because Romansa Apparel "did not challenge the court's jurisdiction over the person of Romansa and Romansa had sufficient contact with the Northern District of Texas . . ." Pl.'s Resp. ¶ 2. Plaintiff misreads the statute. Subsection 3 does not make a venue proper simply because a court can assert jurisdiction over a defendant's person. To invoke subsection (3), a plaintiff must first show that there is no other district in which the action may be brought. See McCaskey, 133 F. Supp.2d at 525-526; FS Photo, Inc. v. Picture Vision, Inc., 48 F. Supp.2d 442, 448 (D. Del. 1999). As discussed below, Plaintiff cannot (and need not) make that showing.
Plaintiff alternatively contends that the Northern District of Texas is a proper venue because "a substantial part of events or omissions giving rise to the claim occurred in [this judicial district]." Pl.'s Resp. ¶ 4; 28 U.S.C. § 1391(a)(2). "Substantiality is intended to preserve the element of fairness so that a defendant is not haled into a remote district having no real relationship to the dispute." Cottman Transmission Sys., Inc. v. Martino, 36 F.3d 291, 294 (3d Cir. 1994). It is important to note that "[t]he test is not whether a majority of the activities pertaining to the case were performed in a particular district, but whether a substantial portion of the activities giving rise to the claim occurred in the particular district." TruServ Corp. v. Neff, 6 F. Supp.2d 790, 792 (N.D. Ill. 1998) (emphasis added). "[T]here may be more than one district in which a substantial part of the events giving rise to the claim occurred, and . . . venue would be proper in each such district." Sidco Indus., Inc. v. Wimar Tahoe Corp., 768 F. Supp. 1343, 1346 (D. Or. 1991).
The Complaint alleges that "Romansa's failure to pay [its] debt to CIT constitutes a breach of the Factoring Agreement." The Affidavit of Brian Shaw indicates that CIT maintains an office in Dallas, Texas, and that the account managers for the Factoring Agreement have been located in Dallas since the agreement came into existence. The affidavit avers that Romansa Apparel sent invoices to CIT's offices in Dallas and that Romansa Apparel received funding as a result of the invoices sent to Dallas. Romansa Apparel's failure to pay the amount due upon CIT's acceleration of Romansa Apparel's obligations under the Factoring Agreement — that is, to repay the funds it received as a result of sending invoices to the Dallas office — is the alleged breach giving rise to the claim asserted against Romansa Apparel. The Court finds that these alleged facts comprise a substantial enough portion of the events and omissions giving rise to the claim against Romansa Apparel that venue is proper in the Northern District of Texas. See TIG Ins. Co. v. NAFCO Ins. Co., 177 F. Supp.2d 561, 567 (N.D. Tex. 2001) (in suit alleging breach of reinsurance contract, finding venue proper in district where plaintiff negotiated the contract, the contract issued, and a significant amount of the activities allegedly insured took place); TruServ Corp. v. Neff, 6 F. Supp.2d 790, 792 (N.D. Ill. 1998) (in suit alleging breach of guaranty agreement, finding venue proper in district where payment was to be made); H.D. Vest Investment Sec., Inc. v. Schulz, Civ. Action No. 3:02-CV-0658-M, 2002 U.S. Dist. LEXIS 16839, at *5 (N.D. Tex. Sept. 6, 2002) (in suit alleging breach of an indemnification agreement, finding venue proper in district where client account applications were approved and retained, sued-on trades were completed and confirmed, settlement checks were issued, and the breached contract was executed by plaintiff); Tel. Audio Prods., Inc. v. Smith, Civ. Action No. 3:97-CV-0863-P, 1998 U.S. Dist. LEXIS 4101, at *12-13 (N.D. Tex. Mar. 26, 1998) (in trademark dispute, finding venue proper in district where Web site containing mark could be accessed, defendants attended trade show and solicited dealers and distributors to sell products and services using the mark, and a distributor placed an order with defendants); Half Price Books, Records, Magazines, Inc. v. Riepe, Civ. Action No. 3:98-CV-0585-P, 1998 U.S. Dist. LEXIS 9035, at *18 (N.D. Tex. June 12, 1998) (in suit alleging breach of a noncompetition agreement, finding venue not to be proper in district where the only connection to the alleged breach was the formation of the contract and all acts constituting breach occurred in another State). The Motion to Dismiss is DENIED.
The Motion to Transfer Venue
In the alternative, Defendant Romansa Apparel moves this Court to transfer this case to the Western District of Texas pursuant to 28 U.S.C. § 1404(a), which states: "For the convenience of parties and witnesses, in the interests of justice, a district court may transfer any civil action to any other district or division where it might have been brought." The party seeking to transfer the case bears the burden of proving that transfer is appropriate. Time, Inc. v. Manning, 366 F.2d 690, 698 (5th Cir. 1966). The decision to transfer venue is committed to the sound discretion of the district court. Jarvis Christian Coll. v. Exxon Corp., 845 F.2d 523, 528 (5th Cir. 1988); Peteet v. Dow Chem. Co., 868 F.2d 1428, 1436 (5th Cir. 1989).
As a threshold matter, the Court must determine whether the venue to which the defendant seeks to transfer the case is a judicial district in which the action "might have been brought," that is, whether venue would lie in the proposed judicial district. 28 U.S.C. § 1404(a). See Q West Energy v. Gen. Elec. Co., Civ. Action No. 3:98-CV-1491-P, 1998 U.S. Dist. LEXIS 19771, at *4 (N.D. Tex. Dec. 1, 1998) (finding venue proper in district to which defendant would have the court transfer the case). Defendant Romansa Apparel maintains its principal place of business in San Antonio, Texas, which is within the Western District of Texas. The allegedly breached agreements were purportedly executed in San Antonio. Romansa Apparel contends that any failure on its part to maintain a Tangible Net Worth of $1,500,000 took place, if at all, in San Antonio. The Court finds that a substantial portion of the events or omissions giving rise to Plaintiff's cause of action occurred in San Antonio, Texas, and that venue would be proper in the Western District of Texas.
"A plaintiff's choice of forum should only be disturbed upon a clear showing of facts that establish either oppressiveness or vexatiousness towards a defendant as to be out of proportion to a plaintiff's convenience., or [that] make a trial in the chosen forum inappropriate because of considerations affecting the court's own administrative and legal problems." FTC v. Multinet Mktg., LLC, 959 F. Supp. 394, 396 (N.D. Tex. 1997) (internal quotation marks omitted). When deciding whether to transfer a case to another proper venue pursuant to § 1404(a), a court may consider the following factors: "the availability and convenience of witnesses and parties; the location of counsel; the location of pertinent books and records; the cost of obtaining attendance of witnesses and other trial expenses; the place of the alleged wrong; the possibility of delay and prejudice if transfer is granted; and the plaintiff's choice of forum." McCaskey v. Continental Airlines, Inc., 133 F. Supp.2d 514, 527 (S.D. Tex. 2001)(citing, inter alia, Henderson v. A T T Corp., 918 F. Supp. 1059, 1065 (S.D. Tex. 1996)). See also Burlington N. Santa Fe Ry. Co. v. Herzog Svcs., Inc., 990 F. Supp. 503, 504 (N.D. Tex 1998). A plaintiff's choice of forum is generally "highly esteemed" and is entitled to great weight. Time, Inc., 366 F.2d at 698. See also Continental Airlines, Inc. v. Am. Airlines, Inc., 805 F. Supp. 1392, 1395-96 (S.D. Tex. 1992); United Sonics, Inc. v. Shock, 661 F. Supp. 681, 683 (W.D. Tex. 1986). "Unless the balance of factors strongly favors the moving party, the Plaintiff's choice of forum should generally not be disturbed." TIC Ins. Co. v. NAFCO Ins. Co., 177 F. Supp.2d 561, 568 (N.D. Tex. 2001) (citing, inter alia, Gulf Oil Corp.v. Gilbert, 330 U.S. 501, 508 (1947)). Cases should not be transferred where the only practical effect is to shift inconvenience from the moving party to the nonmoving party. See Q West Energy, 1998 U.S. Dist. LEXIS 19771 at *6; TIG Ins. Co., 177 F. Supp.2d at 568; Salem Radio Representatives, Inc. v. Can Tel Market Support Group, 114 F. Supp.2d 553, 558 (N.D. Tex. 2000).
Defendant Romansa Apparel contends that the factors collectively weigh in favor of transfer. See Def.'s Br. ¶ 8. First, it is noted that Romansa Apparel and its counsel reside in the Western District. The facts do not weigh in favor of transfer because the inconvenience of litigating in another city is merely shifted from Defendant to Plaintiff.
Romansa Apparel avers that almost all of its witnesses reside in the Western District and would be outside the subpoena powers of this Court. For this reason to weigh in favor of transfer, the party requesting transfer must present the court with "more than a general allegation that certain key witnesses are necessary:, the movant must specifically identify key witnesses and outline the substance of their testimony." Tel. Audio Prods., Inc. v. Smith, Civ. Action No. 3:97-CV-0863-P, 1998 U.S. Dist. LEXIS 4101, at *16 (N.D. Tex. Mar. 26, 1998). This Romansa Apparel has failed to do.
Defendant also notes that its books and records are located in the Western District. This factor weighs in favor of transfer because inspection of these books and records is fundamental to determining whether Defendant breached the Factoring Agreement by failing to maintain an agreed upon tangible net worth.
It is further contended that the cost of conducting litigation in the Northern District would be "overly burdensome and costly" to Defendant. Romansa Apparel avers that it "faces `overwhelming hardship' due to the current venue" because
Romansa [Apparel] is in the process of an out-of-court workout and turnaround of its business and financial affairs with the goal of avoiding filing for relief under Title 11 of the United States Code. A creditors s committee consisting of at least five (5) of Romansa's largest creditors has been formed and is function and the Plaintiff has been aware of the on going [sic] workout/turnaround process. Defendant simply does not have the financial resources to conduct litigation outside its home district.
Def's Br. ¶ 8(h). "As to expense, parties `encounter certain unavoidable costs and encumbrances in going to trial. It is rare in federal court that the chosen forum is the least expensive venue for every individual affiliated with the dispute." Tel. Audio Prods., 1998 U.S. Dist. LEXIS 4101 at * 17-18 (quoting Hupp v. Siroflex of Am., 848 F. Supp. 744, 750 (S.D. Tex. 1994)). In the instant case, both parties would bear travel costs, Plaintiff to conduct discovery at Romansa Apparel's offices in San Antonio, and Defendant to litigate in Dallas. On the whole, it appears that the inconvenience to Defendant would be much greater than the inconvenience to Plaintiff. This consideration weighs in favor of transfer.
According to Defendant, the alleged wrong took place, if at all, in the Western District. The Court disagrees. Although Defendant's alleged breach may have occurred in San Antonio, the alleged harm was felt in Dallas. "[I]f a plaintiff's injuries occur within the [Northern] District of Texas, this Court gives great weight to the plaintiff's choice of this court as the forum in which to seek relief." Dupre v. Spanier Marine Corp., 810 F. Supp. 823, 825 (S.D. Tex. 1993). This consideration does not weigh in favor of transfer.
The risks of delay and prejudice are minimal in this action. Insofar as this Court has familiarized itself with the parties and the facts, interests in judicial economy weigh against transfer. See Tel. Audio Prods., 1998 U.S. Dist. LEXIS 4101 at *18.
Aside from urging this Court to "deny Defendant Romansa Apparel, Inc.'s Motion to Dismiss for Improper Venue or Transfer of Venue," Plaintiff makes no argument against transfer and, indeed, is under no obligation to do so. "A plaintiff's choice of a proper forum is a paramount consideration in any determination of a transfer request, and that choice should not be lightly disturbed." Young v. Armstrong World Indus., Inc., 601 F. Supp. 399, 401 (N.D. Tex. 1984). On the whole, the balance of factors does not so strongly favor transfer. Defendant's burden is not so out of proportion to Plaintiff's convenience as to demand transfer. Consequently, the Court declines to exercise its discretion to transfer this case to the Western District of Texas. The Motion to Transfer Venue is DENIED.
Conclusion
Defendant Romansa Apparel's Motion to Dismiss is DENIED, as is its Motion to Transfer Venue.