Aurora Bank FSB v. Lenox Financial Mortgage Corporation
ORDER granting in part and denying in part 15 Defendants Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(3) (Motion to Dismiss) or, in the alternative, Motion to Transfer Venue under 28 U.S.C. § 1404(a) to the District C ourt for the Eastern District of California. Defendants Motion to Dismiss Pursuant to Rule 12(b)(3) is DENIED; and Defendants Motion to Transfer Venue is GRANTED. This case shall be transferred to the Eastern District of California, by Judge William J. Martinez on 9/16/2013.(ervsl, ) [Transferred from cod on 9/16/2013.]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 13-cv-0323-WJM-MJW
AURORA COMMERCIAL CORP.,
LENOX FINANCIAL MORTGAGE CORPORATION,
ORDER DENYING DEFENDANT’S MOTION TO DISMISS
AND GRANTING DEFENDANT’S MOTION TO TRANSFER VENUE
Plaintiff Aurora Commercial Corp. (“Plaintiff”) has brought this diversity action
alleging claims for breach of contract and breach of warranty against Defendant Lenox
Financial Mortgage Corporation (“Defendant”). (ECF No. 12.) Before the Court is
Defendant’s Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(3)
(“Motion to Dismiss”) or, in the alternative, Motion to Transfer Venue under 28 U.S.C. §
1404(a) to the District Court for the Eastern District of California (“Motion to Transfer”).
(ECF No. 15.) For the reasons set forth below, Defendant’s Motion to Dismiss is
denied, and its Motion to Transfer is granted.
Plaintiff filed its Complaint on February 6, 2013 (ECF No. 1), and an Amended
Complaint on March 14, 2013 (ECF No. 12). Plaintiff seeks damages for breach of
contract and breach of warranty arising out of Plaintiff’s purchase of a mortgage loan
from Defendant, alleging that the application for the home loan known as “Loan
****3253” contained material misrepresentations of the borrower’s income and
employment in breach of the loan purchase agreement. (ECF No. 12 at 5-9.)
On March 20, 2013, Defendant filed the instant Motion to Dismiss or, in the
alternative, to Transfer Venue under 28 U.S.C. § 1404(a). (ECF No. 15.) Plaintiff filed
a Response on April 10, 2013 (ECF No. 24), and Defendant filed its Reply on April 24,
2013 (ECF No. 25). The Court will consider each aspect of Defendant’s Motion in turn.
II. MOTION TO DISMISS
The purpose of a motion to dismiss pursuant to Rule 12(b)(3) is to test whether
venue is proper in the plaintiff’s chosen forum. In a civil action, venue is proper in:
(1) a judicial district where any defendant resides . . . ; (2) a
judicial district in which a substantial part of the events or
omissions giving rise to the claim occurred, or a substantial
part of property that is the subject of the action is situated; or
(3) a judicial district in which any defendant is subject to
personal jurisdiction at the time the action is commenced, if
there is no district in which the action may otherwise be
28 U.S.C. § 1391(b). The state of citizenship of a corporation may not be its sole
residence. “For all venue purposes . . . [a corporation] shall be deemed to reside, if a
defendant, in any judicial district in which such defendant is subject to the court’s
personal jurisdiction with respect to the civil action in question . . . .” 28 U.S.C. §
1391(c)(2). Where personal jurisdiction is in question, the plaintiff bears the burden of
establishing personal jurisdiction over a defendant. Behagen v. Amateur Basketball
Ass’n, 744 F.2d 731, 733 (10th Cir. 1984).
Defendant’s Motion to Dismiss first argues that venue is improper in this District
because Defendant is a resident of California, not Colorado. (ECF No. 15 at 3-4.)
Plaintiff responds that Defendant is a resident of Colorado for purposes of venue,
because it is subject to this Court’s personal jurisdiction based on the fact that it is
registered to do business in Colorado and maintains a registered agent here. (ECF No.
24 at 2-3.)
While Defendant does not concede personal jurisdiction, Defendant raises no
argument contesting Plaintiff’s jurisdictional allegations. (See ECF No. 25 at 2.) In
Colorado, the personal jurisdiction analysis need only address the constitutional
question of whether the exercise of personal jurisdiction comports with due process
because the state’s long arm statute is broadly written. Dudnikov v. Chalk & Vermillion
Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008). To defeat a motion to dismiss,
“the plaintiff need only make a prima facie showing” of personal jurisdiction by alleging
facts that, if true, would support the exercise of jurisdiction. Behagen, 744 F.2d at 733.
Such a showing is made when Plaintiff alleges that the cause of action “arises
out of” the forum-related actions of a defendant that “purposefully avails itself of the
privilege of conducting activities within the forum state.” Far W. Capital, Inc. v. Towne,
46 F.3d 1071, 1074 (10th Cir. 1995).
Plaintiff has made uncontested allegations that this case arises out of a contract
between Defendant and Plaintiff, a forum state resident, that Defendant has done
business in Colorado for many years, and that as an entity registered to do business
here since 1999, with a registered agent here, Defendant has purposely availed itself of
the benefits of doing business in Colorado. (ECF No. 24 at 3; see ECF No. 25 at 2
(failing to contest such allegations).) The Court finds that this constitutes a prima facie
showing of personal jurisdiction over Defendant. Accordingly, pursuant to 28 U.S.C. §
1391(b)(1) and (c)(2), venue is proper in this District because Defendant is deemed to
“reside” in any district having personal jurisdiction over it.
Because the Court finds that venue is proper under 28 U.S.C. § 1391(b)(1), the
Court need not discuss Plaintiff’s alternative argument under § 1391(b)(2). As venue is
proper, Defendant’s Motion to Dismiss Pursuant to Rule 12(b)(3) must be denied.
III. MOTION TO TRANSFER VENUE
Foreseeing the possibility that the Court would likely deny its Motion to Dismiss,
Defendant moves in the alternative for the Court to transfer this case to the Eastern
District of California pursuant to 28 U.S.C. § 1404(a). (Id. at 4-6.)
“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). The party seeking to transfer a case bears the
burden of establishing that the existing forum is inconvenient. See Chrysler Credit
Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1515 (10th Cir. 1991). In ruling on a
motion to transfer venue, district courts must assess two issues: (1) whether the case
might have been brought in the proposed transferee district, and (2) whether the
“competing equities” weigh in favor of adjudicating the case in that district. See Hustler
Magazine, Inc. v. U.S. Dist. Court for the Dist. of Wyo., 790 F.2d 69, 71 (10th Cir.
1986); Chrysler Credit Corp., 928 F.2d at 1516 (defining the “competing equities”). The
decision to transfer venue lies in the sole discretion of the district court and should be
based on an “individualized, case-by-case consideration of convenience and fairness.”
Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988) (quoting Van Dusen v.
Barrack, 376 U.S. 612, 622 (1964)).
This Case Might Have Been Brought in the Eastern District of California
Plaintiff does not dispute that this case might have been brought in the Eastern
District of California. (See ECF No. 24 at 3-5.) Defendant is a California corporation,
and the loan out of which this case arises, Loan ****3253, was issued for property
located in the Eastern District of California. (ECF No. 15 at 2); see 28 U.S.C. § 84(b).
As Plaintiff does not contend that venue is improper in the transferee district, and the
challenged actions here have a connection to that district, the Court finds that this case
might have been brought in the Eastern District of California. See 28 U.S.C. §
The “Competing Equities” Factors
As defined in Tenth Circuit case law, the competing equities that must be
weighed in a motion to transfer venue under 28 U.S.C. § 1404(a) include the following
(1) plaintiff’s choice of forum; (2) the accessibility of
witnesses and other sources of proof, including the
availability of compulsory process to insure attendance of
witnesses; (3) the cost of making the necessary proof; (4)
questions as to the enforceability of a judgment if one is
obtained; (5) relative advantages and obstacles to a fair trial;
(6) difficulties that may arise from congested dockets; (7) the
possibility of the existence of questions arising in the area of
conflict of laws; (8) the advantage of having a local court
determine questions of local law; and (9) all other
considerations of a practical nature that make a trial easy,
expeditious and economical.
Chrysler Credit Corp., 928 F.2d at 1516 (quoting Texas Gulf Sulphur Co. v. Ritter, 371
F.2d 145, 147 (10th Cir. 1967)). The Court will discuss each applicable factor below.
Plaintiff’s Choice of Forum
Plaintiff argues that its choice of this forum should be given considerable weight.
(ECF No. 24 at 4.) “Unless the balance is strongly in the favor of the movant[,] the
plaintiff’s choice of forum should rarely be disturbed” by the court. Scheidt v. Klein, 956
F.2d 963, 965 (10th Cir. 1992) (quoting William A. Smith Contracting Co. v. Travelers
Indem. Co., 467 F.2d 662, 664 (10th Cir. 1972)). This factor weighs most heavily
against transfer when the plaintiff files suit in his home forum. See Sinochem Int’l Co.
v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 430 (2007).
Plaintiff is a Colorado corporation, and has filed suit in its home forum. (ECF No.
12 at 2.) Accordingly, Plaintiff’s choice of forum weighs against transfer, and the other
factors must strongly favor transfer in order to disturb Plaintiff’s choice to litigate in
Colorado. See Scheidt, 956 F.2d at 965.
Witnesses and Sources of Proof
Although a plaintiff’s choice of forum is entitled to considerable weight, the Tenth
Circuit has held that “[t]he convenience of witnesses is the most important factor in
deciding a motion [to transfer venue] under § 1404(a).” Employers Mut. Cas. Co. v.
Bartile Roofs, Inc., 618 F.3d 1153, 1169 (10th Cir. 2010) (quoting Cook v. Atchison,
Topeka & Santa Fe Ry. Co., 816 F. Supp. 667, 669 (D. Kan. 1993)). “To demonstrate
inconvenience, the movant must (1) identify the witnesses and their locations; (2)
indicate the quality or materiality of their testimony; and (3) show that any such
witnesses were unwilling to come to trial, that deposition testimony would be
unsatisfactory, or that the use of compulsory process would be necessary.” Id. (quoting
Scheidt, 956 F.2d at 966) (brackets and internal quotation marks omitted).
Defendant argues that this factor weighs strongly in favor of transfer because
Plaintiff’s claim arises out of alleged misrepresentations in the borrower’s application for
Loan ****3253, and witnesses to the truth or falsity of the statements in the application
are located in the Eastern District of California. (ECF No. 15 at 6.) Defendant
specifically names the borrower, his employer, and Defendant’s employees involved in
issuing Loan ****3253, all of whom are located in the transferee district. (Id.)
Plaintiff does not contest that witnesses are located in California, but instead
argues that if the case remains in Colorado, any inconvenience arising out of their
location in California would fall on Plaintiff, traveling to California to depose such
witnesses, rather than on Defendant. (ECF No. 5.) This argument ignores the purpose
of this factor in the convenience analysis: it is not the parties’ inconvenience, or that of
the parties’ attorneys, but rather the witnesses’ inconvenience that is weighed in this
factor. See Employers Mut. Cas. Co., 618 F.3d at 1169. Plaintiff makes no argument
that the witnesses would not be seriously inconvenienced by being required to travel to
Colorado for trial.
The Court notes that Defendant’s Motion has not discussed in detail “that
deposition testimony would be unsatisfactory, or that the use of compulsory process
would be necessary” in order to obtain the testimony of such witnesses at trial. See id.
However, given the distance between California and Colorado, the Court notes that
witnesses resident in California could not be compelled to travel to Colorado for a trial.
The impact the non-presence of the primary fact witnesses would have on a trial,
should both parties be required to rely solely on their deposition testimony, would be
Thus, Defendant has shown that, because of the factual basis of Plaintiff’s
claims, the relevant witnesses are all located in California, and would all be required to
travel to Colorado for trial if transfer is not granted. Plaintiff has not contested the
identity or location of these witnesses, or the potential significant inconvenience to
them. Accordingly, the Court finds that this second factor—the most important
factor—weighs strongly in favor of transfer.
The Cost of Making the Necessary Proof
As discussed above, Defendant argues that the witnesses and sources of proof
are all located in California, either near the location of the subject property or at
Defendant’s place of business. (ECF No. 15 at 5-6.) Accordingly, Defendant contends
that the cost of requiring the witnesses to travel to Colorado for trial would be
significant. (Id. at 6.) Plaintiff does not respond to the contention that such travel would
be costly, except to state that the witness depositions would occur in California, and
such deposition testimony is admissible in dispositive motions and trial. (ECF No. 24 at
The costs Defendant cites, though significant, would only occur in the event that
the case proceeds to trial and the witnesses are all called to testify. Furthermore, the
majority of the information located at Defendant’s place of business can be sent
electronically. Nevertheless, for the purposes of weighing the competing equities, the
Court cannot assume that one of the parties’ dispositive motions will succeed or that
the witnesses’ travel will otherwise be unnecessary. Furthermore, even if such
witnesses testified solely by deposition, the Court notes that witness depositions
intended to be used at trial are often videotaped, adding to their cost. Therefore, the
Court finds that the cost of making the necessary proof weighs in favor of transfer.
Local Courts Determining Questions of Local Law
The eighth factor favors a local forum to decide questions of local laws. The
contract allegedly breached in this case has a New York governing law provision,
making neither forum more or less adequate for the resolution of those issues. (See
ECF No. 12 ¶ 30.) Defendant notes that it is possible that California law may apply if
issues arise regarding Loan ****3253 itself, which was made to a California borrower for
property in California. (ECF No. 15 at 6.) Regardless, there is no indication that any
Colorado law is implicated here. Thus, the factor regarding local laws weighs slightly in
favor of transfer.
All Other Factors and Considerations
The remaining factors, largely ignored by both parties here, are either irrelevant
or neutral in this case. (See ECF No. 15 at 6; ECF No. 24 at 5.) There is nothing in the
record to suggest that a judgment will be more or less enforceable by either District,
that the parties litigating in either forum will have difficulties with obtaining a fair or
expedient trial, or that any conflicts of law or practical questions are likely to arise here.
See Hustler Magazine, 790 F.2d at 71. Therefore, the Court finds no other particular
advantages or disadvantages of either forum that weigh for or against transfer.
In sum, when considering the “competing equities,” only the first factor, Plaintiff’s
choice of forum, weighs against transfer. The second factor, convenience of witnesses,
weighs strongly in favor of transfer, and the third and eighth factors, cost of proof and
local laws, weigh in favor of transfer. The remaining factors weigh neither for nor
against transfer. Although Plaintiff’s choice of forum requires Defendant to establish
that the other factors weigh strongly in favor of transfer in order to show that the existing
forum is inconvenient, the Court finds that Defendant has met that burden, particularly
given that the convenience of witnesses, the “most important” factor, strongly favors
transfer. As such, Defendant has established that the existing forum is inconvenient,
and as a consequence this case should be transferred to the Eastern District of
California. See Chrysler Credit Corp., 928 F.2d at 1515.
For the reasons set forth above, the Court ORDERS as follows:
Defendant’s Motion (ECF No. 15) is GRANTED IN PART and DENIED IN PART;
Defendant’s Motion to Dismiss Pursuant to Rule 12(b)(3) is DENIED; and
Defendant’s Motion to Transfer Venue is GRANTED. This case shall be
transferred to the Eastern District of California.
Dated this 16th day of September, 2013.
BY THE COURT:
William J. Martínez
United States District Judge
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