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Jay Gill v. David Simpson

October 11, 2012

JAY GILL,
PLAINTIFF,
v.
DAVID SIMPSON, JASON CHRISCO, CLAYTON LOGOMASINI, GLOBAL SERVICES, INC., A MISSOURI CORPORATION, NAVISS, LLC, A MISSOURI LIMITED LIABILITY COMPANY D/B/A NAVISS DIRECT, AND DOES 1 THROUGH 80, INCLUSIVE,
DEFENDANTS.



ORDER ON DEFENDANTS' MOTION TO DISMISS OR TRANSFER (Doc. No. 11)

This case arises out of a business relationship between Plaintiff Jay Gill ("Gill") and Defendants.*fn1 Gill has alleged California state law claims against Defendants for conspiracy, conversion, intentional and negligent interference with prospective economic relations, accounting, misappropriation of trade secrets, failure to use reasonable care, and breach of contract. The active complaint is the First Amended Complaint ("FAC"). On June 21, 2012, Defendants removed this matter from the Fresno County Superior Court on the basis of diversity jurisdiction. Defendants now move to dismiss this matter for lack of personal jurisdiction under Rule 12(b)(2) or alternatively to transfer venue to the Eastern District of Missouri under 28 U.S.C. § 1404(a). For the reasons that follow, Defendants' motion to transfer will be granted.

FACTUAL BACKGROUND

From the FAC, in March 2009, Defendant David Simpson ("Simpson") approached Gill in Fresno County to borrow money from Gill for Simpson's company, Defendant Global Services, Inc. ("Global"). Global was formed and incorporated to be a warranty company that marketed used car warranties. Gill agreed to loan Global $100,000 in exchange for 51% of Global's stock. On March 10, 2009, Gill loaned Global the $100,000 and Gill received 51% (1,020 shares) of Global's stock. Simpson, as well as Shaundra Stapleton, Tommy Stapleton, and Defendant Jason Chrisco, owned the remaining shares of Global stock (245 shares each). Further, in connection with the $100,000 loan, Simpson, Gill, Chrisco, and the Stapletons executed a Non-Compete Agreement ("NC Agreement"). In pertinent part, the NC Agreement provided: "Jurisdiction for filing any complaint based on this Non-Compete Agreement shall be in the Superior Court of the County of Fresno of the State of California and shall be subject to California Law." See FAC Ex. A at ¶ 2.

On April 1, 2009, Gill was elected to be President and Chairman of the Board of Global, Simpson was elected Chief Executive Officer, and Chrisco was elected Chief Distribution Officer.

On October 15, 2009, Simpson spoke with Gill about obtaining more capital and having the shareholders reduce their stock interest on a pro-rata basis. Gill understood that Global would issue an additional 8,000 shares of stock. Gill understood that he and the other investors would be issued a small amount of the new shares in the same proportion as they then held, but that their overall interest in the corporation would be reduced on a pro-rata basis. Based on this understanding, Gill, as the 51% shareholder, agreed to the stock issuance.

Contrary to Simpson's representations that all shareholders' interests in Global would be reduced on a pro-rata basis, Gill subsequently learned that his interest had dropped from 51% to 16.25%, while the other stockholders' interests changed from 12.25% to 10%.

On October 16, 2009, Gill received an e-mail from Simpson indicating that Global's name had been changed to North American Vehicle Insurance Service Specialists. However, unknown to Gill at the time, a new limited liability company with the name North American Vehicle Insurance Service Specialists was formed and the articles of organization were filed on December 10, 2009. Also unknown to Gill at the time, on February 26, 2010, an amendment to the articles of organization changed the name of North American Vehicle Insurance Service Specialists to NAVISS, LLC.

On December 4, 2009, Global executed a promissory note in the amount of $100,000 to Gill. By March 2001, Gill had been repaid the entire amount due on the promissory note, plus interest. Gill still retained his ownership interest in Global.

As part of an alleged conspiracy to deprive Gill of his interest in the business and profits of Global, Simpson fraudulently advised Plaintiff that a separate company needed to be created to contract with the insurance companies, from which Global obtained its warranties. On March 11, 2011, Simpson advised Gill that Gill would be given the same ownership interest in the new company as his ownership interest in Global. However, not only did Defendants fail to give Gill the same percentage interest in NAVISS as he had in Global, Defendants failed to give Gill any interest in NAVISS.

Thereafter, Simpson, Chrisco, and Defendant Clayton Logomasini caused the assets of Global to be transferred to NAVISS fraudulently and without consideration, which resulted in injury and damage to Gill.

DEFENDANTS' MOTION

Defendants' Argument Defendants argue inter alia that venue is proper in the Eastern District of Missouri because each of the Defendants is a citizen of Missouri and resides in the St. Louis area, and any transfer of assets would have occurred in Missouri. Defendants argue that the various factors that the Court is required to examine weigh decidedly in favor of transferring this matter. The Eastern District of Missouri is a more convenient venue for four of the five parties. There are five non-party witnesses who will testify about the operations and accounting practices of Global and NAVISS, and those witness are outside the subpoena power of the Eastern District of California, but within the subpoena power of the Eastern District of Missouri. No contracts were formed in California. The events giving rise to this lawsuit did not occur in California, thus Gill's decision to file the lawsuit in California is given less deference. Missouri has a more substantial connection to the parties in this case, and the contacts with California involve only limited trips by Simpson and Chrisco. Litigating in Missouri will lower costs because most witnesses and parties, and most if not all evidence/documents are located in Missouri, which means that transportation costs will be reduced. Missouri will be able to subpoena all material non-party witnesses and documents, including documents relating to Global that are in the possession of non-party witness Shaundra Stapleton. The Eastern District of Missouri will be able to enforce a judgment easier because Defendants are challenging the personal jurisdiction of the Eastern District of California. The Eastern District of Missouri's docket is less congested, which will lead to a quicker resolution of this matter. Litigating this matter in Missouri would avoid difficult legal questions such as personal jurisdiction and, should one or more of the defendants be dismissed for lack of personal jurisdiction, questions regarding whether that defendant is a necessary party would be avoided. Finally, Missouri has a more compelling interest in this case because there are no allegations that indicate any improper conduct occurred in California, and each of the Defendants is a Missouri citizen. Thus, this case should be transferred to the Eastern District of Missouri.

Plaintiff's Opposition

Gill argues that the Court should not transfer this case. This forum was chosen because Gill resides and does business in California. The convenience of the parties does not favor transfer because Gill, as well as Parmjeet Matharu, Thomas Schindler, and Lisa Schindler (who are all witnesses and investors in Global/NAVISS) are California residents. Thus, whether the case is transferred to Missouri or retained in California, four parties will be inconvenienced.*fn2

Merely shifting the inconvenience is not appropriate. There are also more non-party witnesses who reside in California than non-party witnesses who reside in Missouri. Further, the substantive law to be applied is that of California, and the Eastern District of California is more familiar with California law than the Eastern District of Missouri. Finally, that the Eastern District of California has a more congested docket and that it may take six more months to try the case in California is a factor that is given little weight. Thus, this case should not be transferred.

Legal Standard

28 U.S.C. § 1404(a) provides: "For 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). This statute partially displaces the common law doctrine of forum non conveniens. See Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986). The purpose of § 1404(a) is "to prevent the waste of time, energy, and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense." Van Dusen v. Barrack, 376 U.S. 612, 616 (1964). "Section 1404(a) is intended to place discretion in the district court to adjudicate motions for transfer according to an 'individualized, cases by case consideration of convenience and fairness.'" Stewart Organization, Inc. v. RICOH Corp., 487 U.S. 22, 29 (1988).

In order to transfer a case under § 1404(a), the "defendant must make a strong showing of inconvenience to warrant upsetting the plaintiff's choice of forum." See Decker, 805 F.2d at 843. The district court must weigh numerous factors when deciding whether to transfer a case under § 1404(a), including:

(1) the location where the relevant agreements were negotiated and executed, (2) the state that is most familiar with the governing law, (3) the plaintiff's choice of forum, (4) the respective parties' contacts with the forum, (5) the contacts relating to the plaintiff's cause of action in the chosen forum, (6) the differences in the costs of litigation in the two forums, (7) the availability of compulsory process to compel attendance of unwilling non-party witnesses, and (8) the ease of access to sources of proof. Additionally, the presence of a forum selection clause is a "significant factor" in the court's § 1404(a) analysis . . . [and] the relevant public policy of the forum state, if any, is at least as significant a factor in the § 1404(a) balancing.

Jones v. GNC Franchising, Inc., 211 F.3d 495, 498-99 (9th Cir. 2000). The Court should also consider the convenience of parties and witnesses, feasability of consolidation of other claims, local interest in the controversy, and the court congestion of the two forums. See Metz v. United States Life Ins. Co., 674 F.Supp.2d 1141, 1145-46 (C.D. Cal. 2009); Williams v. Bowman, 157 F.Supp.2d 1103, 1106 (N.D. Cal. 2001)

Discussion

There is no dispute that this case "might have been brought" in the Eastern District of Missouri. Each of the Defendants is a citizen of Missouri, and substantial acts relating to Gill's causes of action occurred in the Eastern District of Missouri. Thus, the Court will ...


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