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Rader v. Bruister

May 26, 2010

JOEL D. RADER, VINCENT SEALY, ET AL., PLAINTIFFS,
v.
HERBERT C. BRUISTER, AMY O. SMITH, JONDA HENRY, ROBERT EDDY, AND BRUISTER FAMILY LLC, DEFENDANTS.



The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

Through the present action, Plaintiffs seek redress for alleged violations of the Employee Retirement Income Security Act ("ERISA") in connection with several complex transactions relating to Bruister & Associates, Inc. ("B&A") and the Bruister and Associates Employee Stock Ownership Plan.

Presently before the Court are Motions to Dismiss for improper venue brought on behalf of Defendant Robert Eddy ("Defendant Eddy") and on behalf of Defendant Herbert C. Bruister, Amy O. Smith, Jonda C. Henry and the Bruister Family Limited Liability Company (hereinafter collectively referred to as "Bruister Defendants" unless otherwise indicated) pursuant to Federal Rule of Civil Procedure 12(b)(3).*fn1 Alternatively, the Bruister Defendants seek to transfer venue of this matter to the United States District Court for the Southern District of Mississippi in accordance with 28 U.S.C. § 1404(a). For the reasons set forth below, Defendants' Motion to Dismiss for improper venue will be denied. The Court will, however, order transfer this matter to the Southern District of Mississippi for the convenience of the parties and witnesses.

BACKGROUND

At all times relevant to this action, B&A provided residential and commercial installation services for cable and satellite television. The company now known as Southeastern Ventures, Inc., is a Mississippi corporation with headquarters located in Meridian, Mississippi and additional offices elsewhere in Mississippi, Tennessee, Alabama, Georgia, and Louisiana.

Pls.' Compl., ¶ 12. The named Plaintiffs to the instant action are Tennessee residents.

B&A has never done business in California, has never had an office in California, and has no employees in California. Decl. Of Herbert C. Bruister, April 9, 2010 ("Bruister Decl."), ¶ 4.

B&A established an Employee Stock Ownership Plan ("ESOP") on or about January 1, 2002. By December 21, 2004, the ESOP owned some 69.9 percent of outstanding B&A shares. According to the Complaint, in 2005 B&A began planning a series of transactions that would transfer 100 percent of the company's ownership to the ESOP. The first step in that program consisted of the stock purchase itself. An asset purchase was thereafter contemplated.

On or about December 13, 2005, the stock purchase transaction was consummated. Plaintiffs, who are participants in the ESOP, allege that the shares were transferred at a price substantially in excess of their fair market value. They have sued the trustees of the ESOP, Defendants Herbert Bruister, Jonda Henry, and Amy Smith, for breach of their fiduciary duties in authorizing the transfer. Bruister and Henry are Mississippi residents; Smith lives in Panama City Beach, Florida.

The only Defendant with any California connection is Robert Eddy, who resides in Truckee, California. Eddy, however, alleges that he was not retained by the ESOP until December 15, 2005, two days after the stock ownership transfer referenced above took place. He argues that under the terms of his Engagement Agreement, he was retained as a fiduciary only with respect to the proposed asset sale that was slated to occur after the B&A stock had been transferred to the ESOP. Decl. of Robert Eddy, ¶ 4.

Both Defendants Eddy and Bruister contend that venue in California is improper because the only basis for that venue rests with Eddy's California residence. They assert that Eddy is not a proper Defendant to this lawsuit because the asset sale for which he was retained as a fiduciary never occurred, and he was not a trustee with respect to the December 13, 2005 stock transfer that Plaintiffs claim was wrongful. Defendants accordingly request dismissal of the case for improper venue since it has no viable link to California. Alternatively, as indicated above, the Bruister Defendants ask that if the matter is not dismissed it be transferred to Mississippi on grounds that the transactions at issue occurred in Mississippi, the alleged fiduciary breach took place in Mississippi, the documents and records pertaining to the ESOP are in Mississippi, and the majority of the witnesses and parties are located in Mississippi. The Bruister Defendants claim that Mississippi is the proper forum for adjudicating the lawsuit.

STANDARD

A. Motion to Dismiss for Improper Venue

Both Federal Rule of Civil Procedure Rule 12(b)(3)*fn2 and 28 U.S.C. ยง 1406(a) authorizes the Court to dismiss an action ...


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