Belsome et al v. Rex Venture Group LLC et al
ORDER & REASONS: ORDERED that Intervenor Kenneth Bell's and Defendant Paul Burks' Motions to Stay and Transfer (Rec. Docs. 13 , 19 ) are GRANTED. FURTHER ORDERED that this matter is TRANSFERRED to the United States District Court for the Western District of North Carolina. Signed by Judge Carl Barbier on 12/3/12.(sek, ) [Transferred from Louisiana Eastern on 12/4/2012.]
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
BELSOME ET AL.
REX VENTURE GROUP, LLC. ET
SECTION: "J” (1)
ORDER AND REASONS
Before the Court are Intervenor Kenneth Bell’s and Defendant
Paul Burks’ Motions to Stay and Transfer (Rec. Docs. 13, 19),
Plaintiffs’ opposition to both (Rec. Doc. 24), and Defendant and
Intervenor’s replies thereto (Rec. Docs. 35, 38). The motions are
motions and legal memoranda, the record, and the applicable law,
reasons set out more fully below.
PROCEDURAL HISTORY AND BACKGROUND FACTS
This is a class action filed on behalf of individuals and
entities who invested in a high yield investment program (ponzi
scheme) run by Rex Venture Groups, LLC between January 1, 1997
violations of the Securities Exchange Act, 15 U.S.C. §§ 78j,
78t(a), and Rule 10b-5 as well as related state laws. On August
24, 2012, Plaintiffs filed this action on behalf of themselves
and putative class members, naming as Defendants Rex Venture
Group, LLC d/b/a www.ZeekRewards.com (“Rex Venture”) and Paul
participation in the ZeekRewards program, which operated penny
Defendants received more than $600 million from approximately
Defendants obtained approximately $38,250.00 directly from them.
On October 25, 2012, Kenneth Bell (“Mr. Bell”) filed a
motion to intervene in the instant action. In his motion, Mr.
Bell explained that he had been appointed as the Receiver for Rex
Venture in conjunction with an August 17, 2012 civil action filed
Plaintiffs note in paragraph four of their complaint that they learned
“that ZeekRewards was in fact a massive Ponzi and Pyramid scheme when the
Securities and Exchange Commission (“SEC”) filed suit in Rex Venture’s home state
of North Carolina” on August 17, 2012. Compl., Rec. Doc. 1, p. 2, ¶ 4.
by the Securities and Exchange Commission (“SEC”) against Rex
Venture and Paul Burks in the United States District Court for
explained that, in appointing him as Receiver, the North Carolina
court had entered an order which froze all of Rex Venture’s
assets, dismissed its attorneys, and authorized Mr. Bell, “to
take custody, control, and possession of all [of Rex Venture’s]
property  pending further order from the United States District
Court for the Western District of North Carolina [and] to take
such action as necessary and appropriate for the preservation of
[Rex Venture’s] property or to prevent the dissipation of [Rex
Venture’s] property; and to resist and defend all suits, actions,
claims, and demands against [Rex Venture].” Mot. to Intervene,
Rec. Doc. 7, p. 3, ¶ 2. Mr. Bell further explained that the order
issued by the North Carolina court had also included a stay of
all other civil legal proceedings which involved Rex Venture’s
receivership property.” Mot. to Intervene, Rec. Doc. 7, p. 3, ¶
5. Accordingly, Mr. Bell’s motion asserted that he had a legal
interest related to the property and claims filed in the instant
intervene. On October 30, 2012, this Court granted Mr. Bell’s
request to intervene as the Receiver for Rex Venture.
On October 30, 2012, Mr. Bell, as Intervenor, filed the
Defendant Burks also filed his own Motion to Stay and Transfer.
Plaintiffs filed an opposition to the motions on November 13,
2012, with both Defendant Burks and the Mr. Bell filing replies
on November 28, 2012.
THE PARTIES’ ARGUMENTS
should be stayed because it falls under the scope of the stay
entered in connection with the August 17, 2012 action filed in
the Western District of North Carolina. The moving parties assert
Intervenor’s Mem. in Supp., Rec. Doc. 13-1, p. 3 (quoting SEC v.
Rex Ventures Grp., LLC et al., No. 12-519, Order Appointing
Temporary Receiver and Freezing Assets of Def. Rex Venture Grp.
LLC, pp. 15-17 (W.D.N.C. Aug. 17, 2012)). The moving parties
assert that the “Receivership Defendants” include Rex Ventures
and Paul Burks, the Defendants in the instant suit. Furthermore,
the moving parties report that the North Carolina order goes on
to require that “[a]ll Ancillary Proceedings are stayed in their
entirety, and all Courts having any jurisdiction thereof are
enjoined from taking or permitting any action under further Order
of this Court. . . .”2 As such, the moving parties argue that the
instant action falls within the scope of the North Carolina order
and, therefore, should be stayed.
In addition, the moving parties also argue that this Court
should transfer the instant action to the Western District of
North Carolina. The parties contend that the public and private
interest factors that courts use to determine when transfer is
appropriate weigh in favor of transferring this case because “the
activities at issue were centered in North Carolina and the
primary parties and witnesses are located in North Carolina.”
Intervenor’s Mem. in Supp., Rec. Doc. 13-1, p. 4. In particular,
the moving parties argue that all of the private interest factors
weigh in favor of transfer. They contend that the Defendants are
Intervenor’s Mem. in Supp., Rec. Doc. 13-1, p. 3 (quoting SEC v. Rex
Ventures Grp., LLC et al., No. 12-519, Order Appointing Temporary Receiver and
Freezing Assets of Def. Rex Venture Grp. LLC, p. 16, ¶ 34 (W.D.N.C. Aug. 17,
2012)). It should be noted that the term “Ancillary Proceedings” in the North
Carolina order refers to any civil action filed against the Receivership
Defendants. SEC v. Rex Ventures Grp., LLC et al., No. 12-519, Order Appointing
Temporary Receiver and Freezing Assets of Def. Rex Venture Grp. LLC, pp. 15-17,
¶ 34 (W.D.N.C. Aug. 17, 2012).
located in the Western District of North Carolina and, therefore,
the majority of the evidence in this case is also located there.
In addition, they assert that the vast majority of witnesses are
also located in the Western District of North Carolina. Thus,
they argue, the compulsory process as well as the practical costs
of transportation and trial preparation require that the case be
heard in North Carolina. The moving parties contend that transfer
inexpensively. Furthermore, the moving parties aver that three of
the public interest factors are neutral, and that one of them
weighs in favor of transfer to the Western District of North
Carolina. The moving parties contend that because the company
defendants and its agents are located there, the Western District
of North Carolina has a localized interest in hearing the case.
Lastly, the moving parties assert that the weight that should be
attributed to the Plaintiffs’ choice of forum is considerably
includes individuals who are not from Louisiana, and any class
member could provide support for moving the case to any number of
In response, Plaintiffs argue that this Court should deny
the moving parties’ request to stay the action and transfer the
case. With respect to the stay, Plaintiffs contend that the
moving parties have not demonstrated a need for a stay, other
than stating that it fits within the scope of the North Carolina
court’s order. Plaintiffs argue, conversely, that this suit does
not fit within the scope of the North Carolina stay, because the
Plaintiffs. Plaintiffs argue that, therefore,
they should be
allowed to sue on their own behalves, in their chosen forum.
Plaintiffs contend that to the extent that the North Carolina
stay applies, the scope of the North Carolina stay is over broad
precisely because the Receiver would have no ability to sue on
behalf of the Plaintiffs.
Furthermore, Plaintiffs aver that the moving parties have
not carried their burden of demonstrating why the “interests of
justice” require the Court to transfer this case. Plaintiffs
affidavits which point out: (1) specific witnesses who will be
reasons as to why the chosen Louisiana forum would inconvenience
those witnesses, and (3) a generalized statement of what those
witnesses would testify about, before the Court can consider
transferring this case. Plaintiffs argue that the moving parties
arguments for transfer do not demonstrate that transferring this
case will balance the inconveniences of a Louisiana forum between
Plaintiffs and Defendants, but rather, they merely shift the
transfer. In addition, Plaintiffs contend that the fraud alleged
in this suit was the result of statements that were made online
via YouTube videos and online marketing. Therefore, Plaintiffs
argue that the relevant evidence can be obtained in any district,
not just the Western District of North Carolina, thereby weighing
in favor of keeping the suit in this Court. Lastly, Plaintiffs
aver that there is no other case in North Carolina which seeks to
therefore, keeping the suit in this forum is still proper with
respect to judicial economy.
In reply, Defendant Burks asserts that Plaintiffs’ arguments
are misguided. In particular, Defendant Burks argues that the
instant suit fits squarely within the language of the North
Carolina stay, and that, if the Plaintiffs wish to challenge the
stay itself, they should have sought leave to file their action
in the Western District of North Carolina.
Defendant argues that
the Plaintiffs’ actions in this Court seek to circumvent the
judicial economy and the administration of judicial resources,
allowing this action to proceed in this Court would be a poor use
of judicial resources, because the outcome would likely be set
aside by the Receiver in the North Carolina action after-thefact.
In response to Plaintiffs’ arguments regarding transfer,
both Defendant Burks and Mr. Bell have submitted sworn affidavits
which list specific witnesses who will likely testify and who are
located in North Carolina. The affidavits also set out specific
traveling to Louisiana. Furthermore, the moving parties also note
that in addition to the August 17, 2012 SEC action, a similar
class action was filed in a state court in North Carolina which
seeks to redress the same issues and, therefore, warrants giving
even less weight to the Plaintiffs’ forum choice.
Lastly, in his
reply, Mr. Bell contends that, in actuality, it may be more
prudent for this Court not to address the question of whether to
stay the case and, instead, to simply transfer the case to the
address the arguments raised by all of the parties in this case.
The Court finds that this case should be transferred to the
Western District of North Carolina. A district court may transfer
an action to any other district where the plaintiff could have
originally filed suit “for the convenience of the parties and the
witnesses” when such a transfer is “in the interest of justice.”
28 U.S.C. § 1404(a). Such transfers are committed to “‘the sound
discretion of the transferring judge.’” Mills v. Beech Aircraft
Corp., Inc., 886 F. 2d 758, 761 (5th Cir. 1989) (quoting Jarvis
Christian Coll. v. Exxon Corp., 845 F.2d 523, 528 (5th Cir.
important, that choice is “neither conclusive nor determinative.”
In re Horseshoe Entm't, 337 F.3d 429, 434–35 (5th Cir. 2003).
Furthermore, in class actions where there are many potential
plaintiffs who could all equally demonstrate a right to many
different home forums, a plaintiff’s claim that his home forum is
Lumbermens Mut. Cas. Co., 330 U.S. 518, 524 (1947). In making a
determination about whether a case should be transferred, the
transferring judge may consider the private and public interest
factors. In re Volkswagen of Am., Inc., 545 F.3d 304, 315 (5th
Cir. 2008) (“Volkswagen II”).
include: (1) “the relative ease of access to sources of proof;”
premises, if view would be appropriate to the action;” and (4)
“all other practical problems that make trial of a case easy,
expeditious and inexpensive.” In re Volkswagen AG, 371 F.3d 201,
203 (5th Cir. 2004) (citing Piper Aircraft Co. v. Reyno, 454 U.S.
235, 241 (1981)). The relevant public interest factors are: (1)
the administrative difficulties created by court congestion; (2)
the interest in having localized controversies decided at home;
(3) the interest in having the trial of a diversity case in a
forum that is at home with the state law that must govern the
case; (4) the unfairness of burdening citizens in an unrelated
unnecessary problems in conflict of laws, or in the application
of foreign law. Id. The above-listed factors are not necessarily
exhaustive or exclusive, and none should be given dispositive
weight. Volkswagen II, 545 F.3d at 315 (citing Action Indus.,
Inc. v. U.S. Fid. & Guar. Corp., 358 F.3d 337, 340 (5th Cir.
In the instant case, the Court finds that the private and
public interest factors weigh in favor of transferring this case
presented by the moving parties persuasive. For example, with
respect to the first private interest factor, “the relative ease
of access to sources of proof,” as the moving parties have noted,
the primary Defendant in this action, Rex Ventures, is located in
the Western District of North Carolina. Likewise, the Defendant’s
offices, employees, and records are also located in Charlotte,
North Carolina under the control of the Receiver. See Burks Aff.,
Rec. Doc. 35-3, pp. 2, 4, ¶¶ 5-7,14; Bell Aff., Rec. Doc. 38-1,
p. 4, ¶¶ 13-14. Although Plaintiff has argued that much of the
fraudulent information at issue is available on the internet and,
sufficiently undercut the fact that the majority of all material
evidence that is not available on the internet is located in the
Western District of North Carolina, thereby weighing in favor of
transferring the case.
Likewise, the Court finds that the second and fourth private
interest factors also weigh in favor of transferring the case to
the Western District of North Carolina. In particular, the Court
demonstrate that a number of company witnesses
who would be
Carolina and, furthermore, that some of these witnesses would
undergo serious hardship in traveling to Louisiana. See Burks
Aff., Rec. Doc. 35-3, p. 2-4, ¶¶ 9 - 12 (noting that Defendant
Burks would serve as a witness and would have hardship traveling
due to a medical condition and his need to care for his wife who
has suffered from cancer and a stroke, and also noting specific
material employee witnesses who all reside in North Carolina);
Bell Aff., Rec. Doc. 38-1, pp. 3-4, ¶¶ 10-12 (noting specific
material witnesses that live in North Carolina, other material
witnesses that live in states other than North Carolina (but have
witnesses live in Louisiana). The Court also finds that the third
private interest factor likely does not apply in this case and,
therefore, is neutral. As such, the great weight of the private
interest factors indicate that this Court should transfer the
instant case to the Western District of North Carolina.
With respect to the public interest factors, the Court finds
that for the most part, they are neutral in relation to the
conflicts, the Court finds that the fact that there are two
related cases in North Carolina weighs in favor of transferring
the instant action. In particular, the Court notes that one of
the related cases could likely result in the setting aside of any
judgment in this case, and the other concerns the same issues
present in this case.
Furthermore, because the Court finds that this case should
be transferred to the Western District of North Carolina, it will
not address the parties’ arguments with respect to staying this
case. While it appears likely that this case falls within the
scope of the North Carolina stay as it is currently written, the
Court believes that Plaintiffs’ challenges to the scope of the
stay, as well as Plaintiffs’ arguments with regard to standing,
are better suited for the issuing court. Therefore, the Court
declines to make any findings on this point. Accordingly,
IT IS HEREBY ORDERED that the Intervenor and Defendant’s
motions are GRANTED.
IT IS FURTHER ORDERED that the above-captioned matter is
TRANSFERRED to the United States District Court for the Western
District of North Carolina.
New Orleans, Louisiana this 3rd day of December, 2012.
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
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