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transferring venue where locus of operative facts occurred mainly in transferee venue
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00 Civ. 6593 (SHS)
May 12, 2004
OPINION ORDER
Defendants Nature's Farm Products, Inc., Dennis Choi, and Peter Pizzo (collectively, the "NFP defendants") have moved to transfer this action for the convenience of the parties and witnesses and in the interest of justice pursuant to 28 U.S.C. § 1404(a) to the Northern District of California. The NFP defendants have also moved, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss the government's second claim alleging that the defendants conspired to defraud the government in violation of the False Claims Act, 31 U.S.C. § 3729 et seq. Because, as set forth below, a transfer of this action to the Northern District of California would serve the convenience of the parties and witnesses and the interest of justice within the meaning of 28 U.S.C. § 1404(a), the NFP defendants' motion to transfer this action is granted.
I. Background
A. The Parties
Nature's Farm is a California corporation with its principal place of business in California. Choi and Pizzo are residents in the Northern District of California. Choi was the President of Nature's Farm and Pizzo was its Vice-President. Defendants Ravine Foods, Inc. ("Ravine"), a canning corporation, and Aliments Heritage, Inc. ("Heritage"), a distributor, are Canadian corporations. The Bank of China is a corporation organized and existing under the laws of the People's Republic of China with a branch located in the Southern District of New York. The New York branch of that bank ("BOCNY") was a defendant in this litigation prior to the Court's approval of a settlement agreement resolving the claims in this action and the subsequent entry of a judgment against BOCNY on February 19, 2004.
It should be noted that pursuant to an unopposed motion for entry of a default judgment made by plaintiff on notice pursuant to Fed.R.Civ.P. 55, a final judgment is being entered against Heritage today.
B. Procedural Background
This action was commenced in 2000, when relator Huangyan Import Export Corporation filed a complaint seeking to recover on behalf of the United States government for violations of the False Claims Act, 31 U.S.C. § 3732(a). For the next three years the government periodically requested that the Court extend the seal that covered the action in order for the government to continue its investigation into the allegations in the complaint. In October 2003, the government moved to intervene as a party, to lift the seal, and to dismiss Huangyan Import Export Corporation as the relator. It also proposed a settlement with BOCNY for this Court's approval. In January 2004, this Court granted the government's motion to dismiss the relator. The following month, a hearing was held on the fairness, reasonableness and adequacy of the government's proposed settlement with BOCNY and that settlement was subsequently approved. The NFP defendants then filed a motion to transfer this action to the Northern District of California, pursuant to 28 U.S.C. § 1404(a), and to dismiss the second claim in the complaint. Ravine filed a motion to dismiss the complaint, which the NFP defendants also joined in part.
C. The Alleged Conspiracy
The following facts are as alleged in the complaint filed by the government in October 2003. In 1998 the International Trade Administration of the Department of Commerce issued a Final Determination that certain brine mushrooms that were being exported from Chile to the United States by the Chilean branch of Nature's Farm were being sold at less than fair value, and it ordered United States customs to raise the duty imposed on those mushrooms to 148.51% of declared value as an "antidumping duty." (Compl. ¶ 15). In response to the imposition of these antidumping duties, the NFP defendants allegedly developed a scheme to avoid paying U.S. duties by shipping the mushrooms to Mexico and Canada, re-packing them into cans, and then shipping the canned mushrooms, improperly labeled as products of Canada or Mexico, into the U.S. market. (Compl. ¶ 18).
In August 1998, Pizzo allegedly contacted Heritage, a Canadian importer, and Ravine, a Canadian canning corporation, concerning the scheme. (Compl. ¶ 26). In October of 1998, the government contends that an "Agency Agreement" relating to the mushrooms was signed by Pizzo, Philip Hirst, President of Heritage, and Ravine's Plant Manager Peter Quattrociocchi. (Compl. ¶ 29). This agreement allegedly specified that Nature's Farm would provide Chilean mushrooms for processing, Ravine would pack the mushrooms into cans, and Heritage would provide a Certificate of Origin and other shipping documents. (Id.). The government contends that defendants submitted false information about the origin of the mushrooms at the Canadian border by representing that the mushrooms originated in Canada, when they had in fact been grown elsewhere. (Compl. ¶ 35-37).
The government also contends that Choi made repeated requests to BOCNY for approval of a credit extension and explained the details of this importation plan to support his requests. (Compl. ¶ 16-25). At a February 12, 1999 meeting at the BOCNY office in midtown Manhattan, Choi and BOCNY personnel allegedly discussed the "modus operandi" of the scheme. (Compl. ¶ 49-52; Exh. H at 1). BOCNY approved an extension of Nature's Farm credit, and in exchange Choi agreed to provide more information to BOCNY on the mushroom importation scheme so that Cheedi Chen, general counsel to BOCNY, could assess the legality of the arrangement. (Compl. ¶ 49-52, Exh. H).
The government asserts that the NFP defendants knew that this scheme was illegal and attempted to conceal it. It supports that allegation by pointing out that in March 1999, Choi indicated he knew of the illegality of the mushroom importation when he wrote to a BOCNY General Manager as follows: "I am certain that the Bank is not acting as the policeman for U.S. petitioners in the anti-dumping action and therefore, it is not necessary to get into legal issues with Ravine Foods, a Canadian company." (Compl. ¶ 59; Exh. I.). The government further alleges that the NFP defendants knew of the illegality of their conduct because on April 13, 1999, Bart Fisher of the law firm Porter, Wright, Morris Arthur ("PWMA") wrote to Nature's Farm, Choi, and Pizzo "strongly advis[ing] [Nature's Farm] to import only moderate amounts of mushrooms to the U.S. to avoid any unwanted attention to this transaction." (Compl. ¶ 69; Exh. L). Nature's Farm and Choi have sued PWMA in a separate action in the Northern District of California regarding this advice.
Further, the government alleges that the NFP defendants took various steps to conceal their illegal importation scheme, including the creation of a new company to import the mushrooms, Horley Trading Company, Limited, with an identical address to that of Nature's Farm. (Compl. ¶ 82-84).
II. Discussion
Plaintiffs have requested that this Court transfer this action pursuant to 28 U.S.C. § 1404(a), which allows a district court to transfer an action for "the convenience of parties and witnesses" and "in the interest of justice" to another judicial "district or division where it might have been brought." 28 U.S.C. § 1404(a); see e.g. In re Cuyahoga Equipment Corp., 980 F.2d 110, 117 (2d. Cir. 1992). Such a grant is within the discretion of the district court. (Id.).
A. Defendants' Burden
In order to prevail on a motion to transfer pursuant to section 1404(a), the moving party bears the burden of establishing that the convenience of parties and witnesses and the interest of justice will be better served by transfer to another forum. See Nabisco, Inc. v. Brach's Confections, Inc., No. 00 Civ. 5875, 2000 WL 1677935, at *3 (S.D.N.Y. Nov. 6, 2000); Toy Biz, Inc. v. Centuri Corp., 990 F. Supp. 328, 330 (S.D.N.Y. 1998); Christina Canada Inc. v. Wior Corp., 702 F. Supp. 461, 464 (S.D.N.Y. 1988). "That burden is heavy: `unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed.'" Id. at 463 (quoting Gulf Oil Corp. v. Gilbert 330 U.S. 501, 508 (1947)). While the plaintiffs choice of forum is "entitled to substantial consideration," Warrick v. General Elec. Co. (In re Warrick), 70 F.3d 736, 741 (2d Cir. 1995) (quoting A, Olnick Sons v. Dempster Bros., Inc., 365 F.2d 439, 444 (2d Cir. 1966)), "[t]he emphasis that a court places on plaintiff's choice of forum diminishes where the facts giving rise to the litigation bear little material connection to the chosen forum." Fontana v. E.A.R., 849 F. Supp. 212, 215 (S.D.N.Y. 1994).
Here, because plaintiff's selected forum — the Southern District of New York — has only a slight or "tenuous" connection to the operative facts of the litigation, as set forth below, "plaintiffs' selection of [the] forum has an artificial quality that entitles a court to give it less weight." Id.; see also Anadigics, Inc. v. Raytheon Co., 903 F. Supp. 615, 616 (S.D.N.Y. 1995); Coker v. Bank of America 984 F. Supp. 757, 766 (S.D.N.Y. 1997) (collecting cases). Thus, the emphasis normally placed on plaintiff's choice of forum is lessened in this instance.
B. Transfer Pursuant to Section 1404(a): "Convenience" and "Interest of Justice"
"The prerequisite to evaluating the propriety of a transfer is whether there is a transferee forum available with proper jurisdiction and venue." Bristol-Myers Squibb Co. v. Andrx Pharmaceuticals, LLC, No. 03 Civ. 2503, 2003 WL 22888804 at *2 (S.D.N.Y. December 5, 2003) (citingAlfadda v. Fenn, 159 F.3d 41, 54 (2d Cir. 1998)). That prerequisite is met in this action as venue and jurisdiction are proper in the Northern District of California.
Once a finding has been made that the proposed transferee forum has jurisdiction and venue exists there as well, a court should assess the "convenience" and "fairness" of a transfer. The court considers factors such as "(1) convenience of the witnesses; (2) location of relevant documents and the relative ease of access to sources of proof; (3) locus of operative facts; (4) convenience of the parties; (5) availability of process to compel attendance of unwilling witnesses; (6) relative means of the parties; (7) forum's familiarity with the governing law; (8) weight accorded a plaintiff's choice of forum; and (9) trial efficiency and the interests of justice based on the totality of the circumstances." Bristol-Myers, 2003 WL 22888804 at *2 (citing Kiss My Face Corp. v. Bunting, No. 02 Civ. 2645, 2003 WL 22244587, at *1 (S.D.N.Y. 2003); Telebrands Corp. v. Wilton Indus., Inc., 983 F. Supp. 471, 477 (S.D.N.Y. 1997). An evaluation of the convenience arid fairness of granting a transfer should be based on an "individualized, case-by-case consideration of convenience and fairness." Id. (citing In re Cuyahoga Equip. Corp., 980 F.2d at 117). The Court shall now turn to a consideration of each of the relevant factors.
1. The Convenience of the Parties
"The convenience of the parties and witnesses is generally the most important factor for a court to consider when deciding whether a change of venue is proper." Bristol-Myers, 2003 WL 22888804 at *3; Telebrands Corp. v. Wilton Industries. Inc., 983 F. Supp. 471, 477 (S.D.N.Y., 1997). "However, the costs and burdens should not merely be shifted from one party to the other." Id.
When considering the convenience of the parties "[t]he logical and relevant starting point is a consideration of the residence of the parties." Wine Markets Int'l v. Bass, 939 F. Supp. 178, 182 (E.D.N.Y.1996). The defendants have shown that a trial in the Northern District of California would be more convenient for the two parties — Dennis Choi and Peter Rizzo — who reside in the San Francisco area. The government responds that "[i]f it was convenient for defendants to conduct financial dealings here, it is convenient for them to litigate here," (Reply to Motion to Dismiss p. 12). Although there is some merit to this contention, it is not sufficient to rebut the defendants' showing that it is more convenient for them to litigate where they reside and do business.
Plaintiff claims that a transfer would be inconvenient for it, as "the Government and the BOC[NY] are both located in the Southern District of New York." (Opp. To Mot. p. 12). However, neither the government's nor the BOCNY's presence in New York properly weighs against transfer. BOCNY is no longer a defendant in this action and therefore its convenience, at least as a party, is not relevant. Although the government attorneys assigned to this matter are located in this district, the United States government clearly also has attorneys resident in the Northern District of California. See Bionx Implants, Inc. v. Biomet, Inc., No. 99 Civ. 740, 1999 WL 342306, at *4 (S.D.N.Y. May 27, 1999) ("[C]onvenience of counsel is not a consideration in the transfer analysis.").
All parties reside in the Northern District of California except for the Canadian defendants who reside in locations that will require travel for litigation regardless of whether the forum is in New York or California. Because the relevant parties reside in California, and transfer would aid the California-based parties without causing a significant disadvantage to plaintiff, Biomet, at *4, this factor weighs in favor of transfer. U.S. ex rel. Gervae v. Payne and Poland, Inc., No. 01 Civ. 0383, 2003 WL 23185881 (W.D.Wis. July 14, 2003).
2. Location of the Documents and Sources of Proof
Nature's Farm states that the vast majority of documents to be produced by all parties in this action are located in California and the government has not contended otherwise. The location of documents in this action is "entitled to little weight unless the defendant makes a detailed showing as to the burden it would incur absent transfer." Royal Ins. Co. of America v. Tower Records, Inc., 2002 WL 31385815, at *6 (S.D.N.Y. Oct 22, 2002). Although there has been no such showing in this action, and therefore the Court presumes that in this "era of photocopying, fax machines and Federal Express" the documents can be relocated to New York without undue expense, see Bristol-Myers, 2003 WL 22888804, at *3 (quoting Coker, 984 F. Supp. at 766); see also Constitution Reinsurance Corp. v. Stonewall Ins. Co., 872 F. Supp. 1247, 1251 (S.D.N.Y. 1995), the fact that the majority of documents are in California weighs slightly in favor of transfer. See e.g. Matra et Manurhin v. Int'l Armament Co., 628 F. Supp. 1532, 1534 (S.D.N.Y. 1986) (transferring action from New York to Virginia because defendants' documents were located in Virginia).
3. Locus of Operative Facts
The locus of operative facts is "traditionally an important factor to be considered in deciding where a case should be tried." Bristol-Myers, 2003 WL 228804, at *3 (quoting Royal Ins. Co., 2002 WL 31385815, at *3). Nature's Farm and defendants Choi and Rizzo are the alleged conspirators and makers of false records, and those acts allegedly originated at the California headquarters of Nature's Farm.
While the government relies on SEC v. Lybrand, No. 00 Civ 1387, 2000 WL 913894, at *6 (S.D.N.Y. 2000) to maintain that the locus of operative facts weigh in favor of keeping the case in the Southern District of New York, that reliance is misplaced. In Lybrand, the locus of operative facts weighed in favor of retaining the case in the Southern District of New York because "the transactions that constituted the core of the fraudulent scheme," as alleged by the plaintiff, were undertaken in New York. Id. Here, however, the transactions that constituted the core of the allegedly fraudulent scheme were undertaken by the NFP Defendants in California and Canada. The government directs the Court to only two actions alleged by the government to have taken place in New York: (1) Choi traveled to the Southern District of New York to obtain money from Bank of China New York to fund the fraudulent scheme, and (2) "the funding decisions which made the alleged conspiracy possible occurred in this district." (Compl. 18-23, 25, 41-42, 48, 49-52, 60, 62-64; Exh. H). The remaining operative facts all occurred in Buffalo, New York, in Detroit, Michigan or in Canada. Thus, the locus of operative facts favors a transfer to California where the bulk of the operative facts occurred; the Southern District of New York has a much weaker connection to the facts of this litigation.
4. Convenience of the Witnesses
The government does argue that the convenience of the witnesses would be served by litigation in this forum but fails to list any actual witnesses who will appear and who require the forum to be in the Southern District of New York. Schechter v. Tauck Tours, Inc., 17 F. Supp.2d 255, 261 (S.D.N.Y. 1998). ("A party seeking or opposing transfer must identify the witnesses by name and summarize their testimony."). The government merely lists witnesses who are in close proximity to New York City. For the purposes of this analysis, the Court "dismisses from consideration the convenience of witnesses who are located outside both the current and transferee forums." Bristol-Myers, 2003 WL 22888804 at *3; Wechsler v. Macke Int'l Trade, Inc., No. 99 Civ. 5725, 1999 WL 1261251, at *6 (S.D.N.Y. 1999). Therefore, the convenience of the Canadian entities is not relevant. Similarly, the proximity of members of the law firm PWMA, who are defendants in a related action in the Northern District of California, is not relevant as their location in Washington, D.C. requires travel regardless of the forum chosen. Wechsler, 1999 WL 1261251 at *6 (holding that the convenience of witnesses who live outside the districts of both the transferee and current court is irrelevant). Accordingly, this factor is neutral.
5. Ability to Compel Unwilling Witnesses
No party has set forth any witnesses who would refuse to appear in either forum; therefore, this factor is neutral.
6. Relative Means of the Parties
The NFP defendants have indicated that they will not be able to sustain the expenses of litigating in the Southern District of New York. Both the government and the NFP defendants agree that defendant Nature's Farm is in bankruptcy. (Opp. Brief at 7; Mem. Supp. Mot. Transfer p. 6). Defendants Choi and Pizzo also claim that they have "limited financial resources," (Reply Mot. Transfer p. 6), and that their need to "retain local counsel in New York to try this action in New York over a substantial period of time will strain the resources of the California defendants." (Mot. Transfer p. 7). However, Choi and Pizzo fail to support their claims of financial hardship with any evidence. Nevertheless, due to the financial circumstances of Nature's Farm, this factor favors transfer to California.
7. Forum's Familiarity with Governing Law
The forum's familiarity with the governing law favors neither the Southern District of New York nor the Northern District of California because the False Claims Act is a federal statute and "any district court may handle [a federal case] with equal skill." Bristol-Myers, 2003 WL 22888804 at *4. The analysis of a court's familiarity with governing law is usually reserved for motions to transfer an action involving state law claims to a court that may have more familiarity with the applicable state law. Transatlantic Reinsurance Co. v. Continental Ins. Co., No. 03 Civ. 3227, 2003 WL 22743829, at *5 (S.D.N.Y. Nov. 20, 2003). This action is entirely based on federal law and therefore this factor is neutral.
8. Plaintiff's Choice of Forum
"Attention must always be paid to the eighth factor — `the weight accorded the plaintiff's choice of forum' for `unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed.'" Bristol-Myers, 2003 WL 22888804, at *5 (quoting Amersham Pharmacia Biotech, 11 F. Supp.2d at 730 (citing Ford Motor Co. v. Ryan, 182 F.2d 329, 330 (2d Cir. 1950)). However, as set forth above, in this action, the importance of plaintiff's choice of forum is greatly diminished for two reasons.
First, the plaintiff is the federal government, which is no more a resident of the Southern District of New York than it is of the Northern District of California. Because the United States government can adequately litigate in multiple fora, "while its choice [of forum] is properly granted significant weight, it is not a choice that deserves the same level of deference as does a choice by a plaintiff to bring an action in her home district." United States v. Klearmn, 82 F. Supp.2d 372, 375 (E.D. Pa.1999); see also U.S. ex rel. Gervae v. Payne and Doland, Inc., 2003 WL 23185881, at *3. Thus, this factor would weigh only slightly against transfer.
Second, as set forth above, the forum selected by plaintiff for this action has a substantially weaker connection to the operative facts of the litigation than the proposed transferee forum does. See e.g. Fontana v. E.A.R., 849 F. Supp. 212, 215 (S.D.N.Y.1994). The government contends that because venue rests upon a specific venue provision in the False Claims Act, rather than the venue provision set forth in 28 U.S.C. § 1391, plaintiff's choice of forum is entitled to greater deference. 31 U.S.C. § 3732(a); U.S. ex rel. Vallejo v. Investronica, Inc., 2 F. Supp.2d 330, 336 (W.D.N.Y., 1998); United States ex. rel. Thistlethwaite v. Dowty Woodville Polymer, Ltd., 110 F.3d 861 (2d Circ. 1997). However, even if that were true, in this action plaintiff's selected forum has such a relatively weak connection to the operative facts of the litigation, that even a heightened deference for plaintiff's forum selection does not support the selection of the Southern District of New York.
In this case, because (1) venue is proper in both jurisdictions, (2) the government can adequately litigate this in either forum, and (3) the selected forum has a weak connection to the operative facts of the litigation, the government's choice of venue does not weigh heavily against transfer.
9. Trial Efficiency and the Interest of Justice Based on the Totality of the Circumstances
The government argues that venue should not be transferred because this Court has already developed a familiarity with the facts and the parties in this case, and the government's counsel has already devoted three years to this matter. The government is correct that this Court has familiarity with this action through ruling on a motion to dismiss the relator and to approve a settlement, but this Court has not had an opportunity to rule on the merits of this case, see Huangyan Import Export Corp. v. Nature's Farm Products, Inc., 2000 WL 1224814 99 Civ. No. 9404 (S.D.N.Y. Aug. 29, 2000) and U.S. ex rel. Huangyan Import Export Corp. v. Nature's Farm Products, No. 00 Civ. 6593, 2004 WL 74310 (S.D.N.Y. Jan. 15, 2004). The focus of the litigation has been such matters as the role of the relator in the action and the fairness of the settlement with BOCNY.
Moreover, a transfer to the Northern District of California would not needlessly delay this action. Although the case commenced in 2000, no complaint was filed by the government — as opposed to the relator — until late in 2003. Accordingly, this litigation is still in the early stages, which weighs in favor of a transfer of venue. Pratt v. Rowland, 769 F. Supp. 1128, 1133 (N.D. Cal. 1991). In addition, "the `interests of justice' are not served by imposing travel inconvenience and significant expense on individual litigants for the convenience of the United States government." Cohen v. U.S., 1999 WL 294777, *1 (E.D.N.Y. 1999).
Last, Nature's Farm and Choi have a related action pending in California against PWMA. The presence of a related case in the transferee forum is a strong reason to transfer venue, See e.g., Blanning v. Tisch, 378 F. Supp. 1058, 1061 (E.D.Pa.1974); see also Craft-Bilt Mfg. Co. v. Patio Enclosures, Inc., No. 92 Civ. 0545 1992 WL 81402 (E.D. Pa. April 20, 1992), at *1; Ballard Medical Prods, v. Concord Lab., Inc., 700 F. Supp. 796, 801 (D. Del. 1988). Transferring this case to the Northern District of California will serve judicial economy in that the two cases will be related. In addition, California's substantive law apparently governs the case involving PWMA, and it would not serve judicial economy to maintain such a case in New York. It is in the interests of judicial economy to avoid a duplication of efforts and costs and to have these two lawsuits proceed in the same forum.
III. Conclusion
The NFP defendants have satisfied their burden of showing that transfer would be for the convenience of the parties and in the interest of justice. Because this action is transferred to the Northern District of California, this Court declines to rule on the NFP defendants' motion to dismiss the second claim and Ravine's motion to dismiss the complaint against it. See Eisenberg v. Wachovia Bank, N.A., No. 00 Civ. 7910, 2001 WL 30452, at *1 (S.D.N.Y. Jan.11, 2001): see also Matra Et Manurhin v. Int'l Armament Co., 628 F. Supp. 1532, 1533 (S.D.N.Y. 1986). Therefore, for the reasons set forth above, this action is transferred to the Northern District of California.
SO ORDERED.