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granting transfer because 15 nonparty witnesses resided in Ohio, and of these, the defendant no longer had a business relationship with 13 of them, and thus could not require their voluntary presence in Minnesota
Summary of this case from Sparks v. Goalie Entertainment, Inc.Opinion
No. 02-1224 (RHK/AJB)
March 13, 2003
James W. Rude and Richard A. Beens, Felhaber, Larson, Fenlon Vogt, Minneapolis, Minnesota, for Plaintiff.
Thomas C. Stewart, Richard M. Dahl and Carl S. Wosmek, Dunkley, Bennett, Christensen Madigan, Minneapolis, Minnesota; and Julie E. Brigner and Thomas J. Byrne, Hahn, Loeser, Parks, Columbus, Ohio, for Defendant and Third Party Plaintiff.
Dale O. Thornsjo and Chad H. Gabert, Johnson Condon, Edina, Minnesota, for Third Party Defendant Jerry Connor.
MEMORANDUM OPINION AND ORDER
Introduction
Plaintiff GMAC/ Residential Funding Corporation ("GMAC") has sued The Platinum Company of Real Estate and Financial Services ("Platinum") alleging breaches of contract and warranty based on GMAC's purchase of loans involved in a "property-flipping" scheme whereby properties were bought and sold quickly after the value of the property was artificially inflated through improper appraisals. In turn, Platinum has impleaded the persons and businesses associated with the alleged property flipping scheme: Angela Robinson, Michael Rose, Jerry Connor, Appraisal Ohio, ASC Title and Closing Services, Elliot Scott Zoog, Zeus Appraisal, and John Doe (collectively, "Third-Party Defendants"). Before the Court are two motions: (1) GMAC's Motion to Transfer this action to the Southern District of Ohio; and (2) Third-Party Defendant Jerry Connor's Motion to Dismiss for lack of personal jurisdiction. For the reasons set forth below, the Court will grant Platinum's motion to transfer and deny Connor's motion to dismiss as moot.
Background
GMAC, a company based in Minnesota and incorporated in Delaware, purchases mortgages from primary lenders on the secondary mortgage market. Platinum, headquartered and incorporated in Arizona, provides loans directly to borrowers. On June 4, 1998, GMAC and Platinum entered into an agreement ("the Contract") regarding the sale and servicing of mortgage loans. (Compl. ¶ 8.) As part of the Contract, Platinum warranted that it would not submit "false, fraudulent, or erroneous information" or "omit any material fact" in the loan packages it submitted to GMAC. (Compl. Ex. A.) Should "[GMAC] determine that there is any evidence of fraud," Platinum is required under the Contract to repurchase "any loan sold to [GMAC] pursuant to this Agreement within twenty business days of receipt of written notice. . . ." (Id.)
GMAC alleges that Platinum sold it eight residential mortgages involved in a "property-flipping" scheme. In this scheme, properties were purportedly purchased at or near market value and then resold shortly thereafter for a greatly inflated price based on a false appraisal. GMAC alleges that the loan documents submitted by Platinum in connection with each loan were incomplete and inaccurate in that "[t]he market value of the loan properties were, in reality, substantially below the appraised values as set forth in the documents Platinum submitted to GMAC." (Compl. ¶ 25.)
Upon discovering the alleged scheme, GMAC demanded that Platinum repurchase the loans under the Contract. Platinum, to date, has refused to do so. This litigation followed.
Analysis
Section 1404(a) of Title 28, United States Code, states that "[f]or 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." 28 U.S.C. § 1404(a). Section 1404(a) therefore lays out three general categories of factors: (1) the convenience of the parties, (2) the convenience of the witnesses, and (3) the interest of justice. Terra Int'l, Inc. v. Mississippi Chem. Corp., 119 F.3d 688, 691 (8th Cir. 1997) (internal citations omitted). The district court's evaluation of a transfer motion, however, is not limited to these factors. Id. Rather, such determinations require a case-by-case evaluation of the particular circumstances at hand and a consideration of all relevant factors. Id. "The idea behind § 1404(a) is that where a `civil action' to vindicate a wrong — however brought in a court — presents issues and requires witnesses that make one District Court more convenient than another, the trial judge can, after findings, transfer the whole action to the more convenient court." Continental Grain Co. v. The FBL-585, 364 U.S. 19, 26 (1960). The burden is on the moving party to show why a change of forum is warranted. Stinnett v. Third Nat'l Bank of Hampden County, 443 F. Supp. 1014, 1017 (D.Minn. 1978) (MacLaughlin, J.).
As this Court recently noted in Ahlstrom v. Clarent Corp., Civ. No. 02-780, slip op. at 8 n. 9 (D.Minn. Dec. 19, 2002) (Kyle, J.), the enactment of § 1404 had the effect of limiting forum non conveniens analyses to cases where the alternative forum is the court of another country. The language "unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed" initially appeared in Gulf Oil v. Gilbert, 330 U.S. 501, 508 (1947), a forum non conveniens case. While many courts-including this one-have used that language in the standard of decision, the Supreme Court has made clear that § 1404 is not merely a codification of the forum non conveniens doctrine. Instead, § 1404 "permits courts to grant transfers upon a lesser showing of inconvenience." Norwood v. Kirkpatrick, 349 U.S. 29, 32 (1955) (emphasis added). As this Court noted in 1971, "it is now clear that a plaintiff's choice of forum is no longer entitled to the great weight given it under the doctrine of forum non conveniens, and is simply one factor to be considered." Medtronic, Inc. v. American Optical Corp., 337 F. Supp. 490, 497 (D.Minn. 1971) (Larson, J.).
A. Interest of Justice
Courts weigh the interest of justice factor very heavily. Radisson Hotels Int'l, Inc. v. Westin Hotel Co., 931 F. Supp. 638, 641 (D.Minn. 1996) (Kyle, J.). The interest of justice factor "may be determinative in a particular case, even if the convenience of the parties and witnesses might call for a different result." Coffey v. Van Dorn Iron Works, 796 F.2d 217, 221 (7th Cir. 1986). Among the considerations that may be relevant to a court in analyzing this factor are the relative familiarity of the two courts with the law to be applied, the relative abilities of the parties to bear the expenses of litigating in a distant forum, judicial economy, the plaintiff's choice of forum, obstacles to a fair trial, and each party's ability to enforce a judgment. Terra, 199 F.3d at 696.
Here, the parties contest three aspects of the interest of justice factor. First, GMAC asserts that the Court should defer to its choice of forum. Second, Platinum argues that a transfer is warranted because of judicial economy. Third, GMAC asserts that the District of Minnesota is more familiar with the applicable state law.
1. Plaintiff's Choice of Forum
GMAC contends that transfer is inappropriate because of the "substantial deference" owed to a plaintiff's choice of forum. (Pls.' Mem. Op. Mot. to Trans. at 6 (citing Iragorri v. United Techs. Corp., 274 F.3d 65 (2d Cir. 2000).) That presumption, GMAC correctly notes, is given more weight when the chosen forum is the plaintiff's residence. (Id. (citing 15 Wright, Miller Cooper, Federal Practice and Procedure § 3849 (1986).) GMAC is headquartered in the District of Minnesota. Plaintiff's choice of forum, however, is given substantially less weight if "operative events" giving rise to the lawsuit took place in a forum other than that chosen by the plaintiff. 17 Moore's Federal Practice § 111.13[1][c]. Indeed, "a motion to transfer to the district in which the events occurred is likely to succeed." Id.; see also Tranor v. Brown, 913 F. Supp. 388, 391 (E.D.Pa. 1996); Anadigics, Inc. v. Raytheon Co., 903 F. Supp. 615, 617 (S.D.N.Y. 1995).
Here, both parties agree, the operative events constituting the fraud alleged in the Complaint took place in Ohio. The property-flipping scheme occured in Ohio and all of the public records at issue in the litigation that arose from the scheme are located in Ohio. The Court will therefore afford GMAC's choice of forum little deference.
2. Judicial Economy
Judicial economy is served by allowing related actions to proceed in the same district. 17 Moore's Federal Practice § 111.13[1][o]. The avoidance of duplicative or piecemeal litigation is a factor that weighs in favor of transferring an action to a district in which all parties can be joined in a single action. Houk v. Kimberly-Clark Corp., 613 F. Supp. 923, 932 (W.D.Mo. 1985). While the ability of a party to implead an entity which is not subject to the jurisdiction of the transferor court may be an appropriate reason for granting a transfer, this factor is not dispositive and will not outweigh other factors. Id.; see also Murphy v. Allen County Claims Adjustments, 550 F. Supp. 128, 133 (S.D. Ohio 1982); Hervey v. United States, 450 F. Supp. 1148, 1148 (E.D. Wis 1978).
Platinum asserts that, save for a transfer, it would have to dismiss its third-party claim for indemnity because the Court lacks personal jurisdiction over the Third-Party Defendants. Indeed, the Court presently has before it a Motion to Dismiss for lack of personal jurisdiction brought by one of the Third Party Defendants. While the importance of this factor can diminish when the main and third-party actions proceed on different evidentiary bases, cf. Prentice-Hall Corp. Systems, Inc. v. Insurance Co. of N. Am., 81 F.R.D. 477, 481 (S.D.N.Y. 1979), the actions here appear to involve substantially the same set of facts.
As the Court indicated in its extended colloquy with counsel on this subject during oral argument, filing a complaint over which counsel knows the Court does not have jurisdiction poses an obvious Rule 11 problem. See Fed.R.Civ.P. 11. By presenting signed papers to the Court, the attorneys of record have certified that their claims and legal contentions are "warranted by existing law. . . ." Id. Counsel has exacerbated this problem — and mightily tried the Court's patience — by arguing in a signed memorandum that, under an 1893 state law case, Third Party Defendant Connor waived his right to challenge the Court's exercise of personal jurisdiction by requesting additional time to move or plead. This argument, entirely specious, can hardly be said to be "warranted by existing law. . . ." Id. It is clear that the Court does not have jurisdiction over the Third-Party Defendants. Accordingly, while transferring the action to the Southern District of Ohio, the Court will retain jurisdiction over the issue of possible Rule 11 sanctions against Platinum's counsel of record.
Because a transfer would avoid duplicative discovery and conserve judicial resources, judicial economy weighs in favor of transfer.
3. Relative Familiarity with Applicable State Law
In general, courts favor adjudication of diversity actions by the court that sits in the state whose substantive law governs the case. 17 Moore's Federal Practice 111.13[1][l]. If the questions of state law are relatively simple, however, courts tend to give this factor little weight in the analysis. See Scheidt v. Klein, 956 F.2d 963, 965 (10th Cir. 1992). Here, although the Contract contains a Minnesota choice of law clause, the application of Minnesota law should be a fairly straightforward matter. Accordingly, this factor tips only slightly against transfer.
4. Conclusion
While the transferee court would have to apply Minnesota law, questions of judicial economy militate for transfer and GMAC's choice of forum is entitled to little deference in this context. The interest of justice therefore weighs in favor of transfer.
B. The Convenience of the Witnesses
The convenience of the witnesses is "probably the single most important factor for the court since it determines the relative ease of access to sources of proof." Graff v. Quest Communications Corp., 33 F. Supp.2d 1117, 1121 (D.Minn. 1999) (Doty, J.) (internal quotation omitted). To determine the convenience of the witnesses, the Court must examine the materiality and importance of the anticipated witnesses' testimony and then determine their accessibility and convenience to the forum. Reid-Walen v. Hansen, 933 F.2d 1390, 1396 (8th Cir. 1991). Relevant considerations include the number of essential non-party witnesses, their location, and the preference of courts for live testimony as opposed to depositions. Coast-to-Coast Stores, Inc. v. Womack-Bowers, Inc., 594 F. Supp. 731, 734 (D.Minn. 1984).
Platinum has identified fifteen non-party witnesses who reside within the Southern District of Ohio. (Defs.' Mem. Supp. Mot. to Trans. at 6-7.) Platinum "no longer has a business relationship with thirteen of these non-party witness and cannot obtain the voluntary presence of these individuals at trial." (Id. at 7.) Moreover, Platinum avers, "the anticipated witnesses' testimony will be integral for Platinum's defense. . . ." (Id. at 6; Brigner Aff. at ¶¶ 5, 8, 9, 10, 12.) The non-party witnesses consist of the appraisers, loan officers, title clerks, and purchasers involved in the alleged property flipping scheme.
While the parties analyze this factor under the "convenience of the witnesses," it is really more germane to the interests of justice. If, for instance, Platinum must put on its entire defense by videotape, the convenience of the witnesses is not impaired, but the interest of justice is. Nevertheless, the Court will examine the factor as presented by the parties, keeping in mind that the categorization of these factors is not inflexible.
GMAC counters that "said witnesses [do not] provide Platinum with a valid defense to [GMAC's] claims." (Pls.' Mem. Op. Mot. to Trans. at 8.) This is not, however, entirely accurate. For instance, were GMAC to argue that Platinum submitted a loan package to GMAC "containing an appraisal that contains false, fraudulent or erroneous information where such information was or should have been within the knowledge and control of [Platinum]" (Compl. Ex. A at 3), the testimony of non-party appraisers would be highly relevant. Likewise, were GMAC to argue Platinum submitted false information "after failing to follow standard practices and procedures prevalent in the mortgage banking industry" (id.), the testimony of loan officers-including those no longer employed with Platinum-could provide significant evidence.
GMAC's Rule 26 disclosures indicate only that it plans to call its own employees as witnesses. (Pls.' Mem. Op. Mot. to Trans. at 12.) Because the presence of "employees of a party . . . can be obtained by that party," 15 Wright, Miller, Cooper, Federal Practice and Procedure § 3851 (1986), this factor weighs strongly in favor of transfer.
C. The Convenience of the Parties
"The logical staring point for analyzing the convenience of the parties is a consideration of their residences in relation to the district chosen by the plaintiff and the proposed transferee district." 17 Moore's Federal Practice § 111.13[1][e][I] (quotation omitted). Section 1404(a) provides for transfer to a more convenient forum, "not to a forum likely to prove equally convenient or inconvenient." Graff, 33 F. Supp.2d at 1121 (citing Van Dusen v. Barrack, 376 U.S. 612, 646 (1964)). Here, GMAC is located in Minnesota while Platinum is headquartered in Arizona. A plaintiff that chooses its home forum is generally presumed to have chosen the forum because it is convenient. See Morales v. Navieras de Puerto Rico, 713 F. Supp. 711, 713 (S.D.N.Y. 1989). While GMAC's choice of forum is not granted great deference in this instance, see supra, this factor weighs against transfer.
D. Summary
Because both the interests of justice and the convenience of the witnesses weigh in favor of transfer, the Court finds that it is appropriate to transfer this action to the Southern District of Ohio. Moreover, the Court finds, in light of this ruling, Third Party Defendant Jerry Connor's Motion to Dismiss for Lack of Personal Jurisdiction is moot. See, e.g., Amwest Sur. Ins. Co. v. Guarantee Elec. Const. Co., 2000 WL 1310512 *1 n. 1 (D.Kan. Aug. 21, 2000).
Conclusion
Based on the foregoing, and all of the files, records, and proceedings herein, IT IS ORDERED
1) Defendant's Motion to Transfer Venue under 28 U.S.C. § 1404(a) (Doc. No. 17) is GRANTED. The Clerk of Court is hereby directed to transfer this matter to the United States District Court for the Southern District of Ohio;
2) Third Party Defendant Jerry Connor's Motion to Dismiss for Lack of Personal Jurisdiction (Doc. No. 33) is MOOT and is therefore DENIED.