AT&T Corp. v. Teliax, Inc.

Filing 29

ORDER DENYING 10 MOTION TO CHANGE VENUE by Hon. William H. Orrick. (jmdS, COURT STAFF) (Filed on 8/11/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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AT&T CORP.,

Case No. 16-cv-01914-WHO

Plaintiff,
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ORDER DENYING MOTION TO
CHANGE VENUE

v.
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TELIAX, INC.,

Re: Dkt. No. 10

Defendant.

United States District Court
Northern District of California

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INTRODUCTION

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Plaintiff AT&T Corp. contends in this case that defendant Teliax, Inc. failed to make

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payments pursuant to a contract between the parties. Teliax seeks to transfer the case from this

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district to the District of Colorado. Because Teliax waived personal jurisdiction, venue is proper

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in this district. A discretionary transfer under 28 U.S.C. § 1404(a) is unwarranted. Teliax’s

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motion is DENIED.

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BACKGROUND
AT&T provides national telecommunication and information services. Compl. ¶ 1 [Dkt.

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No. 1]. AT&T is a New York corporation with its principal place of business in Bedminster, New

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Jersey. Id. Teliax is a carrier certified by the California Public Utilities Commission to provide

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telephone exchange services to users in California. Id. ¶ 2. Its principal place of business is in

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Denver, Colorado and it is incorporated in Colorado. Id.

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Around July 2011, AT&T and Teliax entered into a contract in which AT&T agreed to

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provide Voice Over IP Connect Service (“AVOICS”) to Teliax under contractually specified terms

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and conditions. Id. ¶¶ 6-7. AVOICS is an internet communication software that Teliax

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subscribers used for long-distance calls. Id. ¶ 7. In exchange for these services, Teliax agreed to

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pay AT&T a monthly fee, plus extra charges associated with late payments. Id.

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AT&T performed its obligations under the contract from October 2011 to September 2015.

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Id. ¶ 8. It asserts that Teliax stopped making many of its payments beginning around May 2014.

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Id. ¶ 9. AT&T issued multiple demands for payment and ultimately terminated its services around

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September 2015. Id. ¶¶ 10-11. As a result, Teliax allegedly owes AT&T at least $382,497.29

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including late payment charges. Id. ¶ 12.

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The complaint consists of two claims, a breach of contract claim and a “Common Count -

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Open Book Account” claim based on liquidated damages stemming from the breach of contract

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allegation. AT&T contends that venue is proper in the Northern District of California under 28

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U.S.C. § 1391(b)(2) because a substantial part of the events or omissions under the AVOICS
Contract occurred in this district. Id. ¶ 5. According to AT&T, Teliax “substantially performed”

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United States District Court
Northern District of California

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the Contract in California “based on Teliax’s termination of access services to end users in [this

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state].” Id. ¶ 4. Additionally, about 80% of the AVOICS calls terminated in California and “the

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largest portion of end users [were] located in Northern California.” Id. ¶ 8.

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LEGAL STANDARD

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Federal Rule of Civil Procedure 12(b)(3) allows a party to move to dismiss a case for

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improper venue. The question of whether venue is “wrong” or “improper” is generally governed

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by 28 U.S.C. § 1391. When venue is challenged, the court must determine whether the case falls

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within one of the three categories set out in § 1391(b). If it does, venue is proper. If it does not,

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venue is improper, and the district court “shall dismiss, or if it be in the interests of justice, transfer

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such case to any district or division in which it could have been brought.” 28 U.S.C. § 1406(a).

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Additionally, 28 U.S.C. § 1404(a) provides that “[f]or the convenience of the parties and

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witnesses, in the interest of justice, a district court may transfer any civil action to any other

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district or division where the action might have been brought.” The purpose of this section is to

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“prevent the waste of time, energy, and money and to protect litigants, witnesses and the public

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against unnecessary inconvenience and expense.” Van Dusen v. Barrack, 376 U.S. 612, 616

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(1964) (internal citations and quotations omitted). The moving party bears the burden of showing

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that the inconvenience of litigating in this forum favors transfer. Florens Container v. Cho Yang

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Shipping, 245 F. Supp. 2d 1086, 1088 (N.D. Cal. 2002). A motion for transfer lies within the
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broad discretion of the district court, and must be determined on an individualized basis. Jones v.

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GNC Franchising, Inc., 211 F.3d 495, 498 (9th Cir. 2000).
DISCUSSION

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Teliax moves under Rule 12(b)(3) to have this case transferred to the District of Colorado

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pursuant to 28 U.S.C. § 1406 or, alternatively, to transfer venue for “convenience” purposes under

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28 U.S.C. § 1404.

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I.

28 U.S.C. § 1406
Under 28 U.S.C. § 1406(a), “[t]he district court of a district in which is filed a case laying

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venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer

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such case to any district or division in which it could have been brought.” Venue is proper in “a

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United States District Court
Northern District of California

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judicial district in which any defendant resides,” or “a judicial district in which a substantial part

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of the events or omissions giving rise to the claim occurred.” 28 U.S.C. § 1391(b). A defendant is

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deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time

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the action is commenced. 28 U.S.C. § 1391(c). It is the plaintiff’s burden to demonstrate that

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venue is proper. Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th Cir.

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1979).

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AT&T asserts that venue is proper in this district because Teliax failed to argue lack of

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personal jurisdiction in its motion. Oppo. at 6 [Dkt. No. 18]. A party waives a defense based on

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lack of personal jurisdiction by omitting it from its first Rule 12(b) motion. Fed. R. Civ. P. 12(h).

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In its reply brief, Teliax concedes that it waived its right to challenge personal jurisdiction but

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argues that venue is nonetheless improper. Reply at 6 (“AT&T is also correct that Teliax waived

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its right to challenge personal jurisdiction by not raising it in a 12(b) motion.”). But, because

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Teliax did not contest personal jurisdiction, it is therefore “subject to personal jurisdiction” in this

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district for the purposes of establishing venue. 28 U.S.C. § 1391; see also Wright & Miller §

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3811.1Particular Classes of Parties – Corporations, 14D Fed. Prac. & Proc. Juris. § 3811.1 (4th

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ed.) (“[I]f an entity defendant waives its right to object to personal jurisdiction, it has ipso facto

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consented to venue under [28. U.S.C. § 1391]. It is, after all, ‘subject to personal jurisdiction with

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respect to the civil action in question.’”); Underberg v. Employers Mut. Cas. Co., No. 15-cv-112,
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2016 WL 1466506, at *5 (D. Mont. Apr. 14, 2016) (holding that because the defendant did not

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challenge personal jurisdiction, it waived its right to do so under Rule 12(h)(1) and therefore

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venue was proper under 28 U.S.C. § 1391(1)). Accordingly, no transfer or dismissal is proper

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pursuant to 28 U.S.C. § 1406.

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II.

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28 U.S.C. § 1404
Section 1404(a) provides: “For the convenience of parties and witnesses, in the interest of

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justice, a district court may transfer any civil action to any other district or division where it might

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have been brought.” 28 USC § 1404(a). “Unlike § 1406(a), § 1404(a) does not condition transfer

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on the initial forum’s being ‘wrong.’” Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of
Texas, 134 S. Ct. 568, 579 (2013). A motion to transfer venue under section 1404 requires a

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United States District Court
Northern District of California

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consideration of multiple factors including: “(1) the location where the relevant agreements were

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negotiated and executed, (2) the state that is most familiar with the governing law, (3) the

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plaintiff’s choice of forum, (4) the respective parties’ contacts with the forum, (5) the contacts

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relating to the plaintiff’s cause of action in the chosen forum, (6) the differences in the costs of

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litigation in the two forums, (7) the availability of compulsory process to compel attendance of

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unwilling non-party witnesses, and (8) the ease of access to sources of proof.” Jones, 211 F.3d at

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498-99.

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Teliax has not made the required “strong showing” that this case should be transferred to

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the District of Colorado. See Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843

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(9th Cir. 1986) (“The defendant must make a strong showing of inconvenience to warrant

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upsetting the plaintiff’s choice of forum.”). Many of the factors, including the governing law, the

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location where the agreements were executed, and the ease of access to sources of proof, do not

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weigh in favor of either forum. For example, the parties agree that New York law governs the

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contract at issue. Both this district and the District of Colorado would be equally positioned to

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apply New York law. Further, Teliax contends that given that the contract was negotiated and

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executed in Colorado, “most” of the documents related to AT&T’s breach of contract claim are

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expected to be in Colorado. Mot. at 8 [Dkt. No. 10]. But AT&T, which is likely more familiar

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with the evidentiary basis for its complaint, asserts that the relevant documents have been
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generated and maintained electronically and therefore can be accessed from computers

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nationwide. See Lax v. Toyota Motor Corp., 65 F. Supp. 3d 772, 780 (N.D. Cal. 2014) (“[W]here

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electronic discovery is the norm (both for electronic information and digitized paper documents),

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ease of access is neutral given the portability of the information.”).

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The factors that weigh in Teliax’s favor do so only slightly. Teliax contends the location

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of the witnesses dictates that this case should be heard in Colorado. It asserts that “roughly half”

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of its anticipated witnesses are in Colorado. Mot. at 7. “However, the convenience of a litigant’s

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employee witnesses are entitled to little weight because litigants are able to compel their

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employees to testify at trial, regardless of forum.” Skyriver Tech. Sols., LLC v. OCLC Online
Computer Library Ctr., Inc., No. 10-cv-03305-JSW, 2010 WL 4366127, at *3 (N.D. Cal. Oct. 28,

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United States District Court
Northern District of California

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2010). More important to me is the convenience of non-party witnesses, and Teliax acknowledges

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that their identities are not known at this stage of the lawsuit. Mot. at 9. Moreover, AT&T

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represents that its likely witnesses are scattered throughout the United States including in Florida,

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Wisconsin, Illinois, and Texas. Oppo. at 8. In addition, AT&T represents that depositions will be

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taken in a location convenient to the witnesses or via teleconference. Oppo. at 8.

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Teliax also argues that because it is principally located in Colorado, litigating in this

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district would be expensive. Mot. at 8. While I recognize that litigating in California may be

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more burdensome than litigating in Colorado for Teliax, which is dwarfed in size and revenue by

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AT&T, a plaintiff’s choice of forum is afforded substantial weight. See Lou v. Belzberg, 834 F.2d

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730, 739 (9th Cir. 1987) (recognizing that “great weight is generally accorded plaintiff’s choice of

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forum”).

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Lastly, courts also consider the “administrative difficulties flowing from court congestion”

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as another factor relevant to determining whether to grant a motion to transfer pursuant to section

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1404(a). Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986).

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Teliax contends that AT&T has chosen to burden the already “busy” Northern District of

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California when it could have brought its lawsuit as a counterclaim (although not a compulsory

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one) in other litigation pending between the parties in the District of Colorado. Mot. at 1, Reply at

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3. While I appreciate the concern for this district’s docket, AT&T is not required to bring its suit
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in Colorado. The Colorado case is a suit for monetary damages under the Communications Act

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based on Teliax’s allegations that AT&T refused to pay it for the use of its facilities to switch and

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deliver toll free calls from end users to AT&T’s toll free subscribers. Aldworth Decl., Exh. A

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[Dkt. No. 10-1]. This case, on the other hand, involves an alleged breach of the AVOICS contract

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under which AT&T performed a long-distance, internet-based service for Teliax’s subscribers. As

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AT&T represents, and Teliax does not dispute, none of the phone calls at issue in the Colorado

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case are at issue here and different divisions within AT&T are involved in the two lawsuits.

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Lordo Decl. ¶ 4 [Dkt. No. 18-1]. While the two lawsuits share some overlapping elements, and

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AT&T likely could have brought the instant suit in Colorado, it was not required to do so.

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United States District Court
Northern District of California

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Administrative considerations do not compel a transfer.
Ultimately, Teliax has not carried its burden to present a strong show of inconvenience.
Transfer pursuant to 28 USC § 1404(a) is unwarranted.
CONCLUSION

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Teliax’s motion to transfer venue is DENIED.

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IT IS SO ORDERED.

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Dated: August 11, 2016
______________________________________
WILLIAM H. ORRICK
United States District Judge

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