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Trico Bancshares & Subsidiaries v. Rothgerber Johnson & Lyons LLP

October 14, 2009

TRICO BANCSHARES & SUBSIDIARIES, PLAINTIFF,
v.
ROTHGERBER JOHNSON & LYONS LLP AND DOES 1-20 INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTIONS TO DISMISS*fn1

Defendant, the law firm Rothgerber Johnson & Lyons LLP ("Rothgerber"), seeks dismissal under Federal Rule of Civil Procedure 12(b)(3) of Plaintiff Trico Bancshares & Subsidiaries' ("Trico") claims, for improper venue; or alternatively, an order transferring this case under 28 U.S.C. § 1406(a) to the District of Colorado. Rothgerber also seeks dismissal of Trico's breach of fiduciary duty claim under Federal Rule of Civil Procedure 12(b)(6), arguing the allegations in that claim are insufficient to state a viable claim.

For the reasons stated below, Rothgerber's motion is GRANTED and DENIED IN PART.

I. Factual Background

Trico filed suit against Rothgerber, alleging that Rothgerber committed professional negligence and breached its fiduciary duties in preparing a stock option plan for Trico. (Compl. ¶¶ 1, 21-28.) Trico is a commercial bank headquartered in Chico, California. (Compl. ¶ 2.) Rothgerber is a law firm with offices in Colorado and Wyoming. (Kanan Decl. ¶ 2.)

Trico retained Rothgerber to "handle all phases of SEC compliance" in February 1989. (Belton Decl. ¶ 3.) Rothgerber prepared a stock option plan (the "plan") for Trico in 2001. (See Belton Decl. ¶ 5.) The plan was researched, drafted and revised in Rothgerber's Colorado office. (Kanan Decl. ¶ 4.) In connection with preparing the plan, "numerous phone calls [were] made between the offices of Trico in Chico, California and Rothgerber in Colorado." (Belton Decl. ¶ 4.) Further, Rothgerber attorneys visited Trico's offices in Chico twice; one of these visits was for the purpose of attending the shareholders meeting where the plan was adopted. (Kanan Decl. ¶ 5.) When Rothgerber lawyers visited Trico's offices they did not prepare or draft the plan. (Kanan Decl. ¶ 5.) Instead, their visits involved only the "usual communication and consultation" concerning the law firm's activities. (Kanan Decl. ¶ 5.)

Trico alleges the plan Rothgerber prepared did not include a "single employee cap" provision. (Compl. ¶ 14; Kanan Decl. ¶ 6.) Trico's accountants KPMG discovered this alleged omission in August 2008. (Belton Decl. ¶ 5.) As a result of this alleged error, Trico was required to pay an additional $440,000 in federal and California income taxes. (Belton Decl. ¶ 5.)

II. Rothgerber's Motion to Dismiss for Improper Venue

A. Legal Standard

Federal Rule of Civil Procedure 12(b)(3) permits a defendant to move for dismissal when venue is improper. "It is well established that once venue is challenged, the burden is on plaintiff to show that venue is proper." Pong v. American Capital Holdings, Inc., 2007 WL 657790, at *2 (E.D. Cal. Feb. 28, 2007)(citation and quotations omitted); Remley v. Lockheed Martin Corp., 2001 WL 681257, at *3 (N.D. Cal. June 4, 2001)(citing Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th Cir. 1979)(stating plaintiff has the burden of proving venue is proper in a motion for summary judgment)). "Also, because [Rothgerber's] motion . . . is made pursuant to Fed. R. Civ. P. 12(b)(3), the pleadings need not be accepted as true, and the court may consider facts outside the pleadings." Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1137 (9th Cir. 2004)(citations omitted). "When the facts [concerning venue] are disputed, the trial court must draw all reasonable inferences in favor of the non-moving party and resolve all factual conflicts in favor of the non-moving party." Lansing v. Feast At Lele, 2009 WL 800228, at *3 (E.D. Cal. Mar. 25, 2009)(citations omitted).

Where federal jurisdiction is based solely on diversity of citizenship, venue is proper "only in . . . a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred . . . ." 28 U.S.C. § 1391(a)(2)(emphasis added). Under § 1391(a)(2), "it is possible for venue to be proper in more than one judicial district." Mitrano v. Hawes, 377 F.3d 402, 405 (4th Cir. 2004); see also Gulf. Ins. Co. v. Glasbrenner, 417 F.3d 353, 356 (2d Cir. 2005)("We thus join several other circuits in holding that the civil venue statute permits venue in multiple jurisdictions as long as a substantial part of the underlying events took place in those districts . . . .")(citations omitted). "Additionally, in determining whether events or omissions are sufficiently substantial to support venue . . ., a court should not focus only on those matters that are in dispute or that directly led to the filing of the action. Rather, it should review the entire sequence of events underlying the claim." Mitrano, 377 F.3d at 405 (citations and quotations omitted).

"Under 28 U.S.C. § 1391(a)(2), it is not necessary that a majority of the events occurred in the district where suit is filed, that the events in that district predominate, or that the chosen district is the best venue, rather plaintiff[] must show that a substantial part of the events giving rise to [its] claims occurred in the chosen district." Kelly v. Qualitest Pharmaceuticals, Inc., 2006 WL 2536627, at *8 (E.D. Cal. Aug. 31, 2006)(citing Pecoraro v. Sky Ranch for Boys, Inc., 340 F.3d 558, 563 (8th Cir. 2003))(quotations omitted). "That means, for venue to be proper, significant events or omissions material to the plaintiff's claim must have occurred in the district in question, even if other material events occurred elsewhere." Gulf Ins. Co., 417 F.3d at 357 (emphasis in original). "Only the events that directly give rise to a claim are relevant. And of the places where the events have taken place, only those locations hosting a substantial part of the events are to be considered." Jenkins Brick Co v. Bremer, 321 F.3d 1366, 1371 (3rd Cir. 2003). Since the events or omissions giving rise to the plaintiff's claim must be substantial, "events or omissions that might only have some tangential connection with the dispute in litigation are not enough." Cottman Transmission Sys., Inc. v. Martino, 36 F.3d 291, 294 (3d Cir. 1994). This is because "[s]ubstantiality 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." Id.

In determining whether events or omissions are sufficiently substantial to support venue under ยง 1391(a)(2), "the court should generally focus on activities of the defendant and not the activities of plaintiff." Kelly, 2006 WL 2536627, at *8 (citing Jenkins Brick, 321 F.3d at 1371-72). In tort actions, "the locus of the injury [is] a relevant factor" in ...


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