Memoryten, Inc. v. LV Administrative Services, Inc. et al

Filing 176

ORDER Plaintiffs Motion for Relief from Order of Dismissal Pursuant to Fed. R. Civ. P. 60(b) and Transfer to the Southern District of New York Pursuant to 28 U.S.C. § 1631 ECF No. 165 is GRANTED; The Courts April 30, 2013 Order Granting De fendants Motion to Dismiss ECF No. 163 is VACATED to the extent it dismissed the LV Defendants from this action. The Courts ruling that the LV Defendants are not subject to personal jurisdiction in the District of Colorado is unaffected; The C lerk shall RESTORE as party- Defendants the following entities: LV Administrative Services, Inc., Laurus Master Fund, Ltd., Laurus Capital Management, LLC, Valens Capital Management, LLC, and Valens Investment Advisors, L.P.; The above-captioned action is TRANSFERRED in its entirety to the Southern District of New York in accordance with 28 U.S.C. § 1631; and The Clerk shall transmit the record, by Judge William J. Martinez on 1/29/2014.(evana, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 12-cv-0993-WJM-BNB
MEMORYTEN, INC., a California corporation,
Plaintiff,
v.
LV ADMINISTRATIVE SERVICES, INC., a Delaware corporation,
LAURUS MASTER FUND, LTD., a Cayman Islands corporation,
LAURUS CAPITAL MANAGEMENT, LLC, a Delaware limited liability company,
VALENS CAPITAL MANAGEMENT, LLC, a New York limited liability company,
VALENS INVESTMENT ADVISORS, L.P., a Delaware limited liability partnership,
SILICON MOUNTAIN HOLDINGS, INC., a Colorado corporation,
SILICON MOUNTAIN MEMORY, a Missouri limited liability company, and
WAYTECH, LLC, a Missouri limited liability company,
Defendant.

VALENS U.S. SPV I, LLC, a Delaware limited liability company,
VALENS OFFSHORE SPV I, LTD., a Cayman Islands corporation,
PSOURCE STRUCTURED DEBT LIMITED, a Guernsey company,
VALENS INVESTMENT ADVISORS, L.P., a Delaware limited liability partnership,
LAURUS MASTER FUND, LTD., a Cayman Islands corporation,
LV ADMINISTRATIVE SERVICES, INC., a Delaware corporation,
LAURUS CAPITAL MANAGEMENT, LLC, a Delaware limited liability company, and
VALENS CAPITAL MANAGEMENT, LLC, a New York limited liability company,
Counterclaimants,
v.
MEMORYTEN, INC., a California corporation, and
KENNETH OLSEN,
Counter-Defendants.

ORDER GRANTING DEFENDANTS’ MOTION FOR RELIEF FROM ORDER OF
DISMISSAL AND TRANSFER TO SOUTHERN DISTRICT OF NEW YORK

Plaintiff MemoryTen, Inc. (“Plaintiff”) brings this action against Defendants LV
Administrative Services, Inc., Laurus Master Fund, Ltd., Laurus Capital Management,
LLC, Valens Capital Management, LLC, Valens Investment Advisers, L.P., (collectively
the “LV Defendants”), Silicon Mountain Holdings, Inc. (“Silicon”), Silicon Mountain
Memory, and WayTech, LLC, alleging breach of contract and related claims. (Second
Am. Compl. (“SAC”) (ECF No. 125).)
On April 30, 2013, the Court granted the LV Defendants’ Motion to Dismiss,
finding that the LV Defendants did not have sufficient minimum contacts with the District
of Colorado so as to subject them to the jurisdiction of this Court (“Dismissal Order”).
(ECF No. 163.) Before the Court is Plaintiff’s “Motion for Relief from Order of Dismissal
Pursuant to Fed. R. Civ. P. 60(b) and Transfer to the Southern District of New York
Pursuant to 28 USC § 1631” (“Motion”). (ECF No. 165.) The Motion asks the Court to
alter or amend the Dismissal Order to vacate the dismissal and instead transfer the
case to the Southern District of New York. (Id.) For the reasons set forth below, the
Motion is granted.
I. LEGAL STANDARD
Plaintiff moves for relief under Federal Rule of Civil Procedure 60(b)(1), which
permits the court to relieve a party from a final judgment, order or other proceeding on
the grounds of “mistake, inadvertence, surprise, or excusable neglect”. As a general
proposition, the “mistake” provision in Rule 60(b)(1) provides for the reconsideration of
judgments only where: (1) a party has made an excusable litigation mistake or an
attorney in the litigation has acted without authority from a party, or (2) where the judge
has made a substantive mistake of law or fact in the final judgment or order. Cashner
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v. Freedom Stores, Inc., 98 F.3d 572, 577 (10th Cir. 1996). The standard for
excusable neglect is somewhat more forgiving. Excusable neglect is an “elastic
concept” that is “not limited strictly to omissions caused by circumstances beyond the
control of the movant.” Pioneer Inv. Servs. Co. v. Brunswick Assocs., Ltd. P’ship., 507
U.S. 380, 392 (1993). Rather, for purposes of Rule 60(b), “excusable neglect”
encompasses situations in which an attorney’s mistake can be attributed to negligence,
in addition to “simple, faultless omissions to act, and . . . omissions caused by
carelessness.” Id. at 388, 394.
A motion for relief from a judgment under Rule 60(b) is addressed to the sound
discretion of the trial court. Zimmerman v. Quinn, 744 F.2d 81, 82 (10th Cir. 1984); see
also LeaseAmerica Corp. v. Eckel, 710 F.2d 1470, 1475 (10th Cir. 1983) (decision
whether relief should be granted under Rule 60(b) is discretionary and the ruling should
not be disturbed except for a manifest abuse of discretion).
II. ANALYSIS
In opposing the LV Defendants’ Motion to Dismiss for lack of personal
jurisdiction, Plaintiff argued that the LV Defendants had consented to jurisdiction in
Colorado, and that they had sufficient minimum contacts with the state so as to permit
the Court to exercise jurisdiction. (ECF No. 34.) Notably, Plaintiff did not seek transfer
of the case in the event the Court determined that it did not have personal jurisdiction
over the LV Defendants. (Id.) The Court ultimately found that it did not have personal
jurisdiction over the LV Defendants, and dismissed the claims against them without
prejudice. (ECF No. 163 at 23.) The case remains pending against Defendants Silicon

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Mountain Holdings, Inc., Silicon Mountain Memory, LLC, and Waytech, LLC. (Id.)
The instant Motion seeks relief from the Dismissal Order on the grounds that
Plaintiff’s counsel inadvertently neglected to seek transfer of the case in the event the
Court found that it lacked jurisdiction over the LV Defendants. (ECF No. 165 at 5.) The
LV Defendants and Waytech have submitted briefs opposing the relief requested, and
arguing that Plaintiff has failed to show excusable neglect. (ECF Nos. 170 & 171.)
“The determination of whether neglect is excusable ‘is at bottom an equitable
one, taking account of all relevant circumstances surrounding the party’s omission.’”
Jennings v. Rivers, 394 F .3d 850, 856 (10th Cir. 2005) (quoting Pioneer, 507 U.S. at
395). The factors that a court should consider in determining whether neglect was
excusable are: (1) danger of prejudice to the opposing party; (2) the length of the delay
and its potential impact on judicial proceedings; (3) the reason for the delay, including
whether it was within the reasonable control of the movant; and (4) whether the movant
acted in good faith. Id. at 856-57.
The most important factor in assessing the equities is the reason for the alleged
neglect. United States v. Torres, 372 F.3d 1159, 1163 (10th Cir. 2004) (noting that the
reason for the error was “a very important factors—perhaps the most important single
factor—in determining whether neglect is excusable.”) Plaintiff argues that it assumed
the Court would transfer the action if it determined that personal jurisdiction over the LV
Defendants was lacking. (ECF No. 165 at 5.) Plaintiff’s counsel has submitted an
affidavit stating that he “mistakenly did not request for the Court to transfer this action in
the event the Court found no jurisdiction over LV in the State of Colorado.” (Jacobs Aff.
(ECF No. 165-1) ¶ 2.)
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In similar cases involving counsel’s failure to request certain relief, the courts’
refusal to find excusable neglect often turns on whether that failure was a strategic
decision or a mere oversight. See Nemaizer v. Baker, 793 F.2d 58, 62 (2d Cir. 1986)
(explaining that “[m]ere dissatisfaction in hindsight with choices deliberately made by
counsel is not grounds for finding the mistake, inadvertence, surprise or excusable
neglect necessary to justify Rule 60(b)(1) relief”); Slaughter v. S. Talc Co., 919 F.2d
304, 307 (5th Cir. 1990) (stating that “tactical decision” to withhold affidavits on motion
for summary judgment could not be deemed excusable neglect). In this case, Plaintiff
explicitly states that the failure to request transfer was not a tactical decision. (ECF No.
165 at 6.) Defendants offer no evidence to rebut this.
Plaintiff instead contends that it simply assumed that the Court would transfer
the case, pursuant to 28 U.S.C. § 1631, if it found jurisdiction lacking. Section 1631
provides that where a court lacks jurisdiction, “the court shall, if it is in the interest of
justice, transfer such action or appeal to any other such court in which the action or
appeal could have been brought at the time it was filed or noticed”. The Court
disagrees with Plaintiff’s suggestion that the Court should have acted more with more
“vigilance” and transferred the case to the Southern District of New York sua sponte
upon finding that it lacked personal jurisdiction over the LV Defendants. (See ECF No.
165 at 5.) It is counsel’s job to advocate for his client; the Court has no duty to comb
through federal statutes to identify a source of relief for a party. See Mitchell v. City of
Moore, Oklahoma, 218 F.3d 1190, 1199 (10th Cir. 2000) (holding that the Court is not
obligated to make arguments for the parties).

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Additionally, although Section 1631 contains the word “shall”, the Tenth Circuit
has interpreted the phrase “if it is in the interest of justice” to give the Court discretion to
either transfer an action or dismiss without prejudice. Trujillo v. Williams, 465 F.3d
1210, 1222-23 (10th Cir. 2006). As Plaintiff’s opposition to the LV Defendants Motion
to Dismiss did not address transfer at all, Plaintiff also failed to make a showing that
transfer was in the interests of justice. Thus, dismissal of this case without prejudice
was plainly within the Court’s discretion, and it was Plaintiff’s burden to show that
transfer, rather than dismissal, was appropriate.
Despite this, in light of the seemingly mandatory language in Section 1631, the
Court finds that counsel’s failure to specifically request that the Court transfer the case
if jurisdiction was found lacking was excusable. Therefore, the Court finds that the
reason for counsel’s neglect in this case weighs in favor of granting the relief requested.
See Yapp v. Excel Corp., 186 F.3d 1222, 1231 (10th Cir. 1999) (stating that Rule
60(b)(1) allows for relief from mistakes that are “excusable litigation mistakes”).
Furthermore, the Court finds that setting aside the dismissal and transferring the
entire case to the Southern District of New York would not prejudice Defendants. The
LV Defendants have not attempted to allege any prejudice that would result from the
transfer. (ECF Nos. 170 & 171.) Indeed, the LV Defendants are based in New York, so
defending against this action in that jurisdiction would likely be significantly easier for
them. Waytech is based in Missouri—as is its counsel—so defending against this
action is equally inconvenient in either jurisdiction.
In contrast, Plaintiff could suffer significant prejudice if the Court fails to grant the
relief requested. The Court’s dismissal of the LV Defendants was without prejudice
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and, therefore, Plaintiff could re-file that action in the Southern District of New York.
However, this case remains pending in the District of Colorado against three of the
eight original Defendants. Therefore, if the Court does not grant relief from the
Dismissal Order and transfer the entire case, Plaintiff may be forced to litigate this
action piecemeal, which is prejudicial to Plaintiff and a waste of judicial resources.
Therefore, the Court finds that the prejudice to the parties weighs in favor of granting
the relief requested.
The length of delay also weighs in favor of granting relief. The Court entered its
dismissal order on April 30, 2013 and the instant Motion was filed on June 4, 2013.
Given the one year deadline for Rule 60(b)(1) motions, Plaintiff acted relatively promptly
in filing its Rule 60(b) motion. Additionally, during the five week delay between entry of
the Dismissal Order and the filing of the Motion, there were no court proceedings.
Thus, the Court finds that the delay in filing the Motion did not impact the proceedings
in any way.
Finally, there is also no evidence of bad faith on the part of Plaintiff. Plaintiff’s
counsel has admitted that the failure to request transfer in the alternative was a simple
oversight. (ECF No. 165-1 ¶ 2.) Defendants have offered no evidence or argument to
the contrary. Although the Court certainly does not condone counsel’s actions in this
case—it is plainly counsel’s obligation to request the appropriate relief and cite the
relevant authority for each request—there is no suggestion that the failure to request
transfer was in bad faith.
Therefore, the Court finds that all four Rule 60(b)(1) factors weigh in favor of
granting the relief requested and setting aside the Dismissal Order. In accordance with
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28 U.S.C. § 1631, the Court further finds that transfer of this action to the Southern
District of New York is in the interests of justice.1 Transfer will allow this action to
proceed against all Defendants in one case, and avoid unwarranted piecemeal
litigation. See Sierra Club v. Two Elk Generation Partners, Ltd., 646 F.3d 1258, 1272
(10th Cir. 2011) (noting societal interest in avoiding piecemeal litigation). Vacating the
Dismissal Order and transferring the case also ensures that this action will be resolved
on the merits, and avoids any potential statute of limitations issues. See Phillips v. Ill.
Cent. Gulf R.R., 874 F.2d 984, 990 (5th Cir. 1989) (noting that dismissal without
prejudice can result in a case being barred by statute of limitations).
III. CONCLUSION
For the reasons set forth above, the Court ORDERS as follows:
1.

Plaintiff’s Motion for Relief from Order of Dismissal Pursuant to Fed. R. Civ. P.
60(b) and Transfer to the Southern District of New York Pursuant to 28 U.S.C.
§ 1631 (ECF No. 165) is GRANTED;

2.

The Court’s April 30, 2013 Order Granting Defendants’ Motion to Dismiss (ECF
No. 163) is VACATED to the extent it dismissed the LV Defendants from this
action. The Court’s ruling that the LV Defendants are not subject to personal
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Defendant Waytech contends that transfer to the Southern District of New York is not
appropriate because its only contact with New York is its relationship with the LV Defendants.
(ECF No. 171 at 8.) However, depending on the significance of this relationship, it could suffice
to give the New York courts general jurisdiction over Waytech. Moreover, it is undisputed that
the LV Defendants reside in New York, that Waytech has conducted business with them, and
that this litigation relates to that transaction. A single transaction can be sufficient to establish
specific personal jurisdiction over an entity. See Rambo v. Am. S. Ins. Co., 839 F.2d 1415,
1418 (10th Cir. 1988) (“In proper circumstances, even a single letter or telephone call to the
forum state may meet due process standards.”). Thus, the Court does not find that New York
is so obviously lacking personal jurisdiction over Waytech as to influence the determination of
whether transfer is in the interests of justice.

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jurisdiction in the District of Colorado is unaffected;
3.

The Clerk shall RESTORE as party-Defendants the following entities: LV
Administrative Services, Inc., Laurus Master Fund, Ltd., Laurus Capital
Management, LLC, Valens Capital Management, LLC, and Valens Investment
Advisors, L.P.;

4.

The above-captioned action is TRANSFERRED in its entirety to the Southern
District of New York in accordance with 28 U.S.C. § 1631; and

5.

The Clerk shall transmit the record.
Dated this 29th day of January, 2014.
BY THE COURT:

William J. Martínez
United States District Judge

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