Arrow Electronics, Inc. v. Deco Lighting, Inc.

Filing 29

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE by Magistrate Judge Kristen L. Mix on 10/5/18 re 8 MOTION to Dismiss. The Court respectfully RECOMMENDS that the Motion 8 beDENIED. (lgale, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 18-cv-01100-RM-KLM
ARROW ELECTRONICS, INC.,
Plaintiff,
v.
DECO LIGHTING, INC., a division of Deco Enterprises, Inc.,
Defendant.

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
ENTERED BY MAGISTRATE JUDGE KRISTEN L. MIX
This matter is before the Court on Defendant’s Motion to Dismiss [#8]1 (the
“Motion”). Plaintiff filed a Response [#9] in opposition to the Motion, and Defendant filed
a Reply [#13]. The Motion has been referred to the undersigned for a recommendation
regarding disposition pursuant to 28 U.S.C. § 636(b)(1)(A) and D.C.COLO.LCivR
72.1(c)(3). See [#20]. The Court has reviewed the Motion, Response, Reply, the entire
case file, and the applicable law, and is sufficiently advised in the premises. For the
reasons set forth below, the Court respectfully RECOMMENDS that the Motion [#8] be
DENIED.
I. Background
The well-pled facts of the Complaint [#1] are construed in a light most favorable to

1

“[#8]” is an example of the convention the Court uses to identify the docket number
assigned to a specific paper by the Court’s case management and electronic case filing system
(CM/ECF). This convention is used throughout this Recommendation.

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Plaintiff. Barnes v. Harris, 783 F.3d 1185, 1191-92 (10th Cir. 2015). Plaintiff is a New York
Corporation with its principal place of business in Colorado. Compl. [#1] ¶ 6. Plaintiff is a
global provider of products, services, and solutions to industrial and commercial users of
electronic products, components, and enterprise computing solutions. Id. ¶ 12. Defendant
is a California company organized and existing under the laws of the State of California and
has its principal place of business in California. Id. ¶ 7. The parties entered into a Logistic
Services Agreement (the “Agreement”) dated February 15, 2016. Id. ¶ 1. Under the
Agreement, Defendant appointed Plaintiff to provide logistic services in support of
Defendant’s business of manufacturing and distributing various lighting products
(“Products”). Id. ¶ 2.
Pursuant to the Agreement, Plaintiff acquired Products that Defendant ordered, and
Plaintiff facilitated the movement of those Products from Chinese factories to Defendant’s
customers. Id. ¶ 3. The Agreement required Plaintiff to pay for and acquire title to the
Products Defendant ordered. Agmt. [#1-1] ¶¶ 10, 13. Plaintiff was then required to arrange
for its freight carrier to deliver the Products to a port in China before shipping them to Los
Angeles, California, and trucking them to its warehouse in Reno, Nevada. Agmt. [#1-1] ¶¶
1-2, 4, 13.2 Thereafter, Plaintiff stored the Products at its warehouse until Defendant
requested Plaintiff to deliver the Products to Defendant’s customers, at which point Plaintiff
invoiced Defendant in accordance with the Agreement. Id. ¶ 10. Defendant agreed to pay
Plaintiff for its logistics services no later than ninety days from receipt of invoices. Id. ¶¶

2

Impact Prods. v. Impact Prods., LLC, 341 F. Supp. 2d 1186, 1189 (D. Colo. 2004).
(explaining that the Court may also consider affidavits and other written material submitted by the
parties).

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7, 10.
Plaintiff alleges that in 2017, Defendant began to default on its obligation under the
Agreement to pay for products and services, and Plaintiff refused to provide further
services under the Agreement without advance payment. Compl. [#1] ¶ 35. By letter dated
February 27, 2018, Plaintiff notified Defendant that Plaintiff was owed approximately
$5,159,000. Id. ¶ 37. Plaintiff further alleges that despite Defendant’s obligations under the
Agreement and notice of the outstanding balance, Defendant has refused to pay for and
take delivery of Products. Id. ¶ 47. As a result, Plaintiff commenced this action on May 8,
2018.
Plaintiff asserts three claims against Defendant. First, Plaintiff asserts a claim for
breach of contract. Id. ¶¶ 42-52. Second, Plaintiff asserts a claim for promissory estoppel.
Id. ¶¶ 53-59. Finally, Plaintiff asserts a claim for unjust enrichment. Id. ¶¶ 60-66. On
the first claim, Plaintiff requests that the Court enter judgment awarding damages in favor
of Plaintiff in the approximate amount of $5,159,000, plus attorney’s fees, costs, contractual
interest, and statutory interest. Id. ¶ 67(a). On claim two, Plaintiff requests that the Court
enter judgment awarding damages in its favor in the approximate amount of $5,159,000,
plus applicable fees, costs, and statutory interest. Id. ¶ 67(b). On claim three, Plaintiff
seeks an award of restitution in an amount exceeding $3,229,000, plus applicable fees,
costs, and statutory interest. Id. ¶ 67(c).
In response to the Complaint [#1], Defendant filed the present Motion [#8] seeking
dismissal pursuant to Fed. R. Civ. P. 12(b)(2) or to transfer venue pursuant to Fed. R. Civ.
P. 12(b)(3). Defendant asserts that the Court lacks personal jurisdiction over it and, even
if the Court determines that it has personal jurisdiction over Defendant, the Central District
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of California is a more appropriate venue for this action. Id. at 9-10.
II. Standard of Review
A.

Fed. R. Civ. P. 12(b)(2)
The Court analyzes an argument that the Court lacks personal jurisdiction under

Fed. R. Civ. P. 12(b)(2). Plaintiff bears the burden of establishing personal jurisdiction over
Defendant. Behagen v. Amateur Basketball Ass’n of the United States, 744 F.2d 731, 733
(10th Cir. 1984). Before trial, Plaintiff need only make a prima facie showing of jurisdiction.
Id. The Court accepts the well-pled allegations (namely the plausible, nonconclusory, and
nonspeculative facts) of the operative pleading as true to determine whether Plaintiff has
made a prima facie showing that Defendant is subject to the Court’s personal jurisdiction.
Dudnikov v. Chalk & Vermillion Fine Arts, Inc., 514 F.3d 1063, 1070 (10th Cir. 2008). The
Court “may also consider affidavits and other written materials submitted by the parties.”
Impact Prods., Inc. v. Impact Prods., LLC, 341 F. Supp. 2d 1186, 1189 (D. Colo. 2004).
However, any factual disputes are resolved in Plaintiff’s favor. Benton v. Cameco Corp.,
375 F.3d 1070, 1074-75 (10th Cir. 2004).
Exercise of personal jurisdiction over a nonresident defendant must satisfy the
requirements of the forum state’s long-arm statute as well as constitutional due process
requirements. Doe v. Nat’l Med. Servs., 974 F.2d 143, 145 (10th Cir. 1992). In addition
to personal jurisdiction, the Court must first consider whether it has jurisdiction over the
subject matter and the parties against whom judgment is sought. Dennis Garberg &
Assocs., Inc., v. Pack-Tech Int’l Corp., 115 F.3d 767, 772 (10th Cir. 1997); Williams v. Life
Sav. & Loan, 802 F.2d 1200, 1002-03 (10th Cir. 1986). Colorado’s long-arm statute “is to
be interpreted as extending jurisdiction of our state courts to the fullest extent permitted by
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the due process clause of the United States Constitution.” Mr. Steak, Inc. v. Dist. Court In
& For Second Judicial Dist., 574 P.2d 95, 96 (Colo. 1978). Therefore, if jurisdiction is
consistent with the due process clause, Colorado’s long-arm statute authorizes jurisdiction
over a nonresident defendant. See id. Under the due process clause of the Fourteenth
Amendment, personal jurisdiction may not be asserted over a party unless that party has
sufficient “minimum contacts” with the state, so that the imposition of jurisdiction would not
violate “traditional notions of fair play and substantial justice.” Helicopteros Nacionales De
Columbia, S.A. v. Hall, 466 U.S. 408, 414 (1984) (quoting Int’l Shoe Co. v. Washington, 326
U.S. 310, 316 (1945)).
B.

Fed. R. Civ. P. 12(b)(3)
The Court considers a motion for improper venue under Fed. R. Civ. P. 12(b)(3) and

analyzes an argument for change of venue under 28 U.S.C. § 1404(a). Pursuant to §
1404(a), a District Court may transfer any civil action to any other district or division where
it might have been brought or to any district division to which all parties have consented for
the convenience of the parties and witnesses and in the interest of justice. 28 U.S.C. §
1404(a). Ҥ 1404(a) is intended to place discretion in the District Court to adjudicate
motions for transfer according to an ‘individualized case-by-case consideration of
convenience and fairness.’” Stewart Org. v. Ricoh Cor., 487 U.S. 22, 29 (1988) (quoting
Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)). A court’s assessment of convenience
under § 1404(a) is discretionary. Galvin v. McCarthy, 545 F. Supp. 2d 1176, 1181 (D.
Colo. 2008). However, unless the balance is strongly in favor of the movant, the plaintiff’s
choice of forum should rarely be disturbed. Id.
A party moving to transfer a case pursuant to § 1404(a) bears the burden of
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establishing that the existing forum is inconvenient. Chrysler Credit Corp. v. Cty. Chrysler,
Inc., 928 F. 2d 1509, 1516 (10th Cir. 1991). There are several factors that a court may
consider in determining whether to transfer a case under § 1404(a). These include the
plaintiff’s choice of forum; the accessibility of witnesses and other sources of proof,
including the availability of compulsory process to ensure attendance of witnesses; the cost
of making the necessary proof; questions as to the enforceability of a judgment if one is
obtained; the relative advantages and obstacles to a fair trial; difficulties that may arise from
congested dockets; the possibility of the existence of questions arising in the area of
conflict of laws; the advantage of having a local court determine questions of local law; and
all other considerations of practical nature that may make a trial easy, expeditious and
economical. Texas Gulf Sulphur Co. v. Ritter, 371 F.2d 145, 147 (10th Cir. 1967).
III. Analysis
A.

Personal Jurisdiction
Defendant contends that Plaintiff cannot meets its burden of demonstrating that this

Court has general or specific jurisdiction over Defendant, and therefore the exercise of
personal jurisdiction over Defendant in Colorado does not comport with due process.
Motion [#8]. Defendant argues that this Court does not have general jurisdiction over
Defendant because Defendant has never had any contacts with the State that could be
characterized as “continuous and systematic.” Id. at 9. To support this argument,
Defendant contends that it has no registered agent here, has never held a meeting here,
has never had an office here, has never employed anyone here, and has never maintained
any business infrastructure, such as bank accounts, machinery, or phone lines, here. Id.
at 7. Plaintiff does not contend that Defendant is subject to general jurisdiction in the State.
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Response [#9] at 5. However, Plaintiff does contend that the Court may exercise specific
jurisdiction over a nonresident defendant when the claims against the Defendant arise out
of significant activities which Defendant purposefully directed at residents of the forum.
Response [#9] at 7. Plaintiff maintains that Defendant’s actions are significant and
purposefully directed at the State of Colorado. Compl. [#1] ¶ 10. Specifically, Plaintiff
maintains that Defendant negotiated the Agreement and a subsequent Amendment with
Plaintiff’s personnel in Colorado; appointed Plaintiff to provide logistics services under the
Agreement; and communicated with Plaintiff’s personnel in Colorado throughout the
negotiation and performance of the Agreement. Id. Plaintiff also maintains that even if
Defendant never visited Colorado or performed work here, its conduct still demonstrates
more than “random, fortuitous, or attenuated contacts” with Colorado. Id.
In determining whether the Court may enter an order in this case, the Court must
first consider whether it has jurisdiction over the subject matter and the parties against
whom judgment is sought. Subject matter jurisdiction here is governed by 28 U.S.C.
§1332(a), which provides in pertinent part that “[t]he district court shall have original
jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of
$75,000, exclusive of interest and costs and is between citizens of different states.” The
Complaint alleges that Plaintiff is a New York corporation with its principal place of business
in Colorado and that Defendant is a California corporation with its principal place of
business in California. Compl. [#1] ¶¶ 6-7. The damages sought by Plaintiff for
Defendant’s alleged breach of the Agreement total well above the $75,000 threshold. Id.
¶ 37. Hence, the parties are diverse and the amount in controversy exceeds the statutory
minimum. Pursuant to 28 U.S.C. § 1332(a), the Court may exercise subject matter
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jurisdiction over this dispute.
Plaintiff affirmatively agrees that the Court does not have general jurisdiction over
Defendant. Response [#9] at 5 n.3. Specific jurisdiction may be asserted if a defendant
has “purposefully directed” its activities toward the forum state, and if the lawsuit is based
on injuries which “arise out of” or “relate to” the defendant’s contacts with the state. Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985). “Because a state’s sovereignty is
territorial in nature, a defendant’s contacts with the forum state must be sufficient that,
notwithstanding its lack of physical presence in the state, the state’s exercise of sovereignty
over it can be described as fair and just.” Dudnikov, 514 F.3d at 1070. To implement this
principle, courts typically make three inquiries: (1) whether the defendant purposefully
directed its activities at the forum state or residents of the forum state; (2) whether the
plaintiff’s injury arose from those purposefully directed activities; and (3) whether exercising
jurisdiction would offend traditional notions of fair play and substantial justice. Id.
Thus, Plaintiff must provide sufficient facts to demonstrate that Defendant
purposefully directed its activities at Colorado or residents of Colorado. Id. To this end,
Plaintiff alleges that Defendant purposefully directed its activities towards Colorado by
availing itself of the privilege of conducting business with Plaintiff, a Colorado-based
company, in order to, in part, sell products to Colorado residents. Response [#9] at 7.
Furthermore, Plaintiff argues that the Court has jurisdiction over Defendant because this
lawsuit is based on injuries arising out of the parties’ business arrangement. Id.
With respect to the first inquiry, the Court finds that Plaintiff has shown that
Defendant directed activities toward the residents of Colorado and thus “purposefully
availed [itself] of the protection and benefits of the laws” of Colorado. United States v.
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Botefuhr, 309 F.3d 1263, 1272 (10th Cir. 2002). While a contract with an out-of-state party
alone does not establish sufficient minimum contacts, courts look to prior negotiations,
contemplated future consequences, the terms of the contract, and the parties’ actual
course of dealing to determine when a defendant has purposefully established minimum
contacts with the forum through execution of a contract. See Burger King, 471 U.S. at 479.
A defendant’s deliberate creation of a “continuing obligation” with the forum state has also
been identified as a factor constituting purposeful availment. Id. at 473. Here, Defendant
entered into an Agreement with Plaintiff, a Colorado-based company, as well as a
subsequent amendment to that Agreement. Compl. [#1] ¶ 1. Pursuant to the Agreement,
Plaintiff received shipping instructions from Defendant via Purchase Order(s) and Plaintiff
delivered the Products according to Defendant’s directed designation. Agmt. [#1-1] ¶ 7.
Defendant corresponded with Plaintiff’s personnel in Colorado regarding the Agreement
and Amendment on scores of occasions by mail and electronic mail, and Defendant sent
formal notices in accordance with the Agreement to Plaintiff’s personnel in Colorado.
Compl. [#1] ¶ 10. Defendant negotiated the Agreement and Amendment with Plaintiff’s
personnel in Colorado; communicated with Plaintiff’s personnel in Colorado throughout the
negotiation and performance of the Agreement; appointed Plaintiff to provide it with logistic
services; to deliver Products on its behalf, including to Colorado customers; and Plaintiff’s
performance of the Agreement and Amendment, including testing of Defendant’s Products,
was supervised and conducted in part from Colorado. Id. Pursuant to the Agreement, the
parties agreed Plaintiff would designate Defendant’s Product stored in its warehouse as
non-cancelable, non-returnable (“NC/NR”), meaning that Defendant could not terminate,
cancel, reschedule, or return the Products because the Products posed a financial liability
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to Plaintiff if not purchased by Defendant within the agreed time frame. Compl. [#1] ¶ 25.
In addition, Defendant agreed to pay accrued interest, as a penalty, on past due invoices
of 1.5% per month. Agmt. [#1-1] ¶ 10-11. Based on these ongoing obligations, the Court
finds that Defendant has created continuing obligations with the forum state. In other
words, Defendant has sufficiently availed itself of the benefits and protections of Colorado
and has directed numerous activities toward the forum state and one of its residents, i.e.,
Plaintiff. If Defendant deliberately created continuing obligations with the forum state, then
Defendant has availed itself of the privilege of conducting business there. Found for
Knowledge in Dev. v. Interactive Design Consultant, LLC, 234 P.3d 673 (Colo. 2010).
With respect to the second inquiry, taking the allegations of the Complaint as true,
the Court finds that Plaintiff has shown that Defendant’s activities directed toward Colorado
have given rise to this suit. A court has specific jurisdiction over a Defendant when the
injuries triggering litigation arise out of and are related to activities that are significant and
purposefully directed by the Defendant at the residents of the forum state. Archangel
Diamond Corp. v. Lukoil, 123 P.3d 1187, 1194 (Colo. 2005). In a broad sense, this dispute
arises from Defendant’s contractual relationship with Plaintiff, an activity connected to
Colorado in the ways described above. In a narrower sense, the injury allegedly suffered
by Plaintiff from Defendant defaulting on its payment obligations is likewise felt by a
Colorado company. In either level of abstraction, the injuries allegedly suffered by Plaintiff
were proximately caused by Defendant’s activities directed toward Colorado. Without
commenting on the legitimacy of Plaintiff’s claims, the Court finds based on these
considerations that Plaintiff has sufficiently alleged that its injuries arose from Defendant’s
contacts with Colorado.
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With respect to the third inquiry, the Court finds that the exercise of personal
jurisdiction in this case does not offend traditional notions of fair play and substantial
justice. Because the Court has found that Plaintiff has sufficiently alleged that Defendant
purposefully availed itself of Colorado’s laws, and that Plaintiff’s injuries arose from
Defendant’s activities aimed toward Colorado, Plaintiff has pled a prima facie case for
personal jurisdiction. The Court can exercise jurisdiction over Defendant in this case
unless exercising jurisdiction would offend traditional notions of fair play and substantial
justice. Dudnikov, 514 F.3d at 1070. With minimum contacts established, it is incumbent
on Defendant to “present a compelling case that the presence of some other considerations
would render jurisdiction unreasonable.” Id. at 1080. Several factors are considered when
determining if exercising jurisdiction offends traditional notions of fair play and substantial
justice: “the burden on the defendant; . . . the forum state’s interest in adjudicating the
dispute; . . . the plaintiff’s interest in obtaining convenient and effective relief; . . . the
interstate judicial system’s interest in obtaining the most efficient resolution of
controversies; and the shared interest of the several States in furthering fundamental
substantive social policies. . . .” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286,
292 (1980). The Court addresses each of these factors in turn.
Defendant argues that litigating the case in Colorado would be more costly because
not only will Defendant have to fly all of its witnesses from California to Colorado, Plaintiff
will also likely need to fly two of its employee representatives to Colorado. Motion [#8] at
14.

Furthermore, Defendant maintains that its most critical witnesses will include its

President, CEO, CFO, Vice President of Sales, and Purchasing Manager. Motion [#8] at
14. Defendant is a small company relative to Plaintiff and the group of individuals
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mentioned above represents all of Defendant’s executive team.

Id.

According to

Defendant, by contrast Plaintiff is a large international corporation and none of its upper
management will likely be called to testify. Id. As a result, Defendant argues that litigating
in Colorado would work a significant hardship on Defendant because all of its management
personnel would be absent from its headquarters, whereas Plaintiff’s operations would
suffer little. Id. However, “[i]t is only in highly unusual cases that inconvenience will rise
to the level of constitutional concern. . . . [I]n this age of instant communication, and
modern transformation, the burdens of litigating in a distant forum have lessened.” Peay
v. Bellsouth Med. Assistance Plan, 205 F.3d 1206, 1212-13 (10th Cir. 2000). Defendant
corresponded with Plaintiff’s personnel in Colorado regarding the Agreement and
Amendment on several occasions by mail, electronic mail, and telephone. Compl. [#1] ¶
10. Further, Colorado has a legitimate interest in presiding over the dispute because
Plaintiff’s principal place of business is located in Colorado and this suit arises out of
Defendant’s contacts with the forum. However, the Court notes that the choice-of-law
provisions in the Agreement require the application of California law. Agmt. [#1-1] ¶ 15.
Despite this, Colorado has a significant interest in providing its residents with a forum
where they can seek redress for injuries caused by out-of-state actors. These factors
weigh in favor of exercising specific jurisdiction over Defendant in Colorado.
This dispute may be litigated in Colorado because Plaintiff resides in Colorado and
the alleged injury arose due to Defendant’s contacts with Colorado. Archangel, 123 P.3d
at 1194. The inconvenience and cost of litigating out-of-state are no small burdens;
however, they do not amount to unconstitutional burdens barring an exercise of personal
jurisdiction, especially when coupled with the legitimate counteracting concerns of Plaintiff.
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Accordingly, the Court concludes that it has personal jurisdiction over Defendant.
B.

Venue Transfer
The Court next addresses Defendant’s argument to transfer venue to the Central

District of California. The transfer of pending civil cases from one district to another is
governed by 28 U.S.C. § 1404(a). This subsection requires the Court to determine that
transfer is necessary for convenience of the parties and witnesses, as well as to further the
interests of justice. The burden of establishing that the suit should be transferred is on the
movant. Texas Gulf Sulphur Co. v. Ritter, 371 F.2d 145, 147 (10th Cir. 1967). Section
1404(a) grants the court discretion to adjudicate motions for transfer. Chrysler Credit
Corp., 928 F.2d at 1516.
Among the factors the Court may consider include the plaintiff’s choice of forum; the
accessibility of witnesses and other sources of proof, including the availability of
compulsory process to ensure attendance of witnesses; the cost of making the necessary
proof; questions as to the enforceability of a judgment if one is obtained; the relative
advantages and obstacles to a fair trial; difficulties that may arise from congested dockets;
the possibility of the existence of questions arising in the area of conflict of laws; the
advantage of having a local court determine questions of local law; and all other
considerations of a practical nature that may make a trial easy, expeditious and
economical. Texas Gulf Sulphur Co., 371 F.2d at 147; Chrysler Credit Corp., 928 F. 2d
at 1516.
In support of its Motion [#8], Defendant contends that several factors strongly
support a transfer of venue: the accessibility of witnesses, the cost of litigation, the
difficulties that may arise from a congested docket, and the applicable law governing the
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dispute. Id. at 10-14. Defendant also contends that Plaintiff’s choice of forum should be
given less weight. Id.
1.

The Accessibility of Witnesses

The convenience of the witnesses is the most important factor in deciding a motion
under § 1404(a). Emp’rs Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1169 (10th
Cir. 2010). “To demonstrate inconvenience, the movant must identify the witnesses and
their locations; ‘indicate the quality or materiality of the testimony’; and ‘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. (citing
Cook v. Atchison, Topeka & Santa Fe Ry. Co., 816 F. Supp. 667, 669 (D. Kan. 1993)); see
also Palace Expl. Co. v. Petroleum Dev. Co., 316 F.3d 1110 (10th Cir. 2003).
Defendant argues that most or all of the individuals who may be deposed or called
as witnesses to testify are located in California. Motion [#8] at 4. Defendant has identified
seven anticipated witnesses, all of whom reside in California. Id. at 4-5. These witnesses
include four employee representatives involved in the negotiation and performance of the
Agreement and three other employees who witnessed the alleged damage caused by
Plaintiff’s misconduct. Defendant’s employee representatives involved in the negotiations
and performance of the Agreement are Sam Sinia (CEO), Ben Pouladain (President), Craig
Allen (CFO), and Richard De La Rossa (Purchasing). Id. Defendant’s employees who
witnessed the alleged damage caused by Plaintiff’s misconduct are Steve Schwartz (VP
of Sales), Peter Cheng (“Cheng”) (Customer Service), and Ivan Guerrero (Operations). Id.
However, Mr. Cheng, one of Defendant’s key witnesses, is no longer an employee of
Defendant. Id. As such, Mr. Cheng is not subject to compulsory process in Colorado and
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has little incentive to travel to Colorado for trial. Defendant asserts that it would be at a
severe disadvantage if it is only able to prove its case at a jury trial through deposition
testimony. Id. at 12. According to Defendant, in additional to these seven witnesses, two
of Plaintiff’s employees, Suzy Borland (“Borland”) and Lara Riker (“Riker”), who were
involved in negotiating and implementing the Agreement, are also based in California. Id.
at 5.
On the other hand, Plaintiff asserts that the witnesses in this case are split between
California and Colorado, and transfer would only shift Defendant’s inconvenience to
Plaintiff. Response [#9] at 10. Plaintiff has identified at least nine witnesses who worked
for it during the relevant period and whose testimony would be relevant in interpreting the
Agreement. Id. Plaintiff’s potential witnesses all reside in Colorado. Id. These individuals
are Cheryl Bachman, Charles Cobb, David Demona, Denika Dwyer, Kristina Dobyns
(“Dobyns”), Ali Hassan, Bruce Jones (“Jones”), Thomas Leffler, and Robert Montini. Id. at
11. In addition, Plaintiff notes that two of its potential witnesses, Ms. Dobyns and Mr.
Jones, are no longer employees but reside in Colorado and are subject to compulsory
process here, but not in California. Id.
While Defendant has identified its potential witnesses and their location, has given
some indication as to the materiality of their testimony, and has indicated that deposition
testimony would be unsatisfactory, Defendant has not shown that any witness is unwilling
to come to Colorado or that the use of compulsory process would be necessary. Plaintiff
has identified nine potential witnesses who reside in Colorado, as opposed to Defendant’s
seven witnesses who reside in California. However, the extent to which convenience will
be weighed depends more on the materiality of the prospective witnesses’ testimony rather
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than the number of prospective witnesses. Unlike Defendant, Plaintiff has not addressed
the materiality of its witnesses’ testimony, as opposed to the mere relevance of their
testimony. Emp’rs Mut., 618 F.3d at 1169. Accordingly, this factor weighs slightly in favor
of transfer.
2.

Cost of Litigation

Defendant asserts that the cost to both parties of making the necessary proof
available and the waste of time incurred in transporting witnesses to Colorado are greater
if this case is adjudicated in Colorado. Motion [#8] at 14. Defendant points out that it will
need to fly all of its witnesses from California to Colorado, which is more than a onethousand-mile journey. Id. Defendant further asserts that Plaintiff will likely need to fly its
employee representatives, Ms. Borland and Ms. Riker, to Colorado if they are chosen to
serve as witnesses. Furthermore, Plaintiff is an international corporation. Relative to
Plaintiff, Defendant is a small company and litigating in Colorado would work a greater
financial hardship on Defendant as opposed to Plaintiff.
Additionally, Defendant argues that litigating this case in Colorado would significantly
impact its ability to run its business at the most basic level, whereas Plaintiff would suffer
very little. Id. at 14-15. Because it is a small company and its most critical witnesses will
include its President, CEO, CFO, Vice President of Sales, and Purchasing Manager, trial
of the case would leave Defendant’s headquarters bereft of management-level employees.
Id. In contrast, none of Plaintiff’s upper management is likely to be called to trial, and
therefore, according to Defendant, litigating in Colorado would pose a significantly greater
financial hardship for Defendant relative to Plaintiff. Id. However, Defendant does not
explain why all management-level employees would need to be present in Colorado
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throughout a trial. Based on these considerations, the Court finds that this factor weighs
slightly in favor of transfer.
3.

The Applicable Law Governing the Dispute

In a diversity action, courts prefer that the action to be adjudicated by a court sitting
in the State that provides the governing substantive law. Emp’rs Mut., 618 F.3d at 1169.
However this factor receives less weight when the case involves relatively simple legal
issues. Scheidt v. Klein, 956 F.2d 963, 965 (10th Cir. 1992).
Defendant argues that the Central District of California is a more suitable venue
because under the Agreement all claims and recovery in this case are governed by
California law. Motion [#8] at 12; see Compl. [#1] ¶¶ 52, 59, 66. Additionally, Defendant’s
claim for breach of implied warranty of non-infringement is to be interpreted under
California Commercial Code § 2312. Defendant asserts that, because this Court will have
to look to both California common law and statutes in adjudicating this dispute, a Colorado
court will by nature have less insight into the applicable law. Motion [#8] at 12-13. Plaintiff
rebuts this argument by noting that any disadvantage the Court may experience in
interpreting California’s Commercial Code is mitigated by the fact that Colorado has an
identical provision in its own commercial code.3 Response [#9] at 14. Defendant argues
3

Compare Cal. Comm. Code § 2312(3):

Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind
warrants that the goods shall be delivered free of the rightful claim of any third person by
way of infringement or the like[,] but a buyer who furnishes specifications to the seller must
hold the seller harmless against any such claim which arises out of compliance with the
specification.
With Colo. Rev. Stat. § 4–2–312(3):
Unless otherwise agreed, a seller who is a merchant regularly dealing in goods of the kind

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that even though the statutory language is similar, its interpretation will require an
evaluation of California case law which would be more readily performed by a California
court. Reply [#13] at 5.
Defendant’s argument that a California court is in a better position to adjudicate
disputes necessitating the interpretation of its laws has some merit. The fact that the
parties agreed that the Agreement would be construed and enforced in accordance with
the laws of the State of California weighs in favor of transfer. Agmt. [#1-1] ¶ 15. However,
this factor is less significant because federal judges are qualified to apply state law and
because a breach of contract claim is a relatively simple legal issue. Emp’rs Mut., 618 F.3d
at 1169. Therefore the Court finds that this factor weighs only slightly in favor of transfer.
4.

Difficulties that Arise from a Congested Docket

When evaluating the difficulties of court congestion, the most relevant statistics are
the median time from filing to disposition, median time from filing to trial, pending cases per
judge, and the average weighted filings per judge. REO Sales v. Prudential Ins. Co. of
Am., 925 F. Supp. 1491, 1495 (D. Colo. 1996). Defendant argues that the Central District
of California has a less congested docket than the District of Colorado. Motion [#8] at 12.
Defendant cites the Federal Court Management Statistics from March 2018, noting that civil
cases in the Central District of California were disposed of roughly ten weeks earlier than
those in Colorado and went to trial earlier by about twenty-two weeks. Id. at 13-14 (citing

warrants that the goods shall be delivered free of the rightful claim of any third person by
way of infringement or the like, but a buyer who furnishes specifications to the seller must
hold the seller harmless against any such claim which arises out of compliance with the
specifications.

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Ex. D [#8-4]). Defendant asserts that transfer to California would relieve pressure on
Colorado’s more congested docket and would allow the parties to resolve the dispute more
quickly. Based on these statistics, the Central District of California has a less congested
docket than the District of Colorado, and therefore, the Court finds that this factor weighs
slightly in favor of transfer.
5.

The Plaintiff’s Choice of Forum

“[U]nless the balance is strongly in favor of the movant the Plaintiff’s choice of forum
should rarely be disturbed.” Scheidt, 956 F.2d at 965 (quoting William A. Smith Contracting
Co. V. Travelers Indem. Co., 467 F.2d 662, 664 (10th Cir. 1972)). Defendant asserts that
Plaintiff’s choice of forum should receive less weight because Plaintiff miscasts the
deference afforded a plaintiff’s choice as essentially determinative of the issue and
sidesteps the factors that make Colorado a significantly less convenient forum. Reply [#13]
at 4-5. Specifically, Defendant argues that Plaintiff has failed to show any nexus between
its claim and Colorado other than its residence. Id. at 13. To support this argument,
Defendant notes that a majority of events giving rise to this action occurred in or near the
Los Angeles area, the Agreement was negotiated by Defendant from California, and the
vast majority of the witnesses reside in California. Motion [#8] at 10-11. However,
according to Plaintiff, there is a substantial connection between this claim and Colorado
aside from its residence here.

Plaintiff points to the fact that the Agreement and

Amendment were received and approved by Plaintiff’s personnel in Colorado; Defendant
requested delivery of its products to Colorado customers; Plaintiff’s performance of the
Agreement and Amendment, including testing of Defendant’s products, was conducted in

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Colorado; Defendant corresponded with Plaintiff in Colorado regarding the Agreement and
Amendment on a number of occasions; and Defendant sent formal notices under the
Agreement to Plaintiff’s personnel in Colorado. Compl. [#1] ¶ 10. Based on these
considerations, the Court finds that this factor weighs in favor of Plaintiff.
The Court is unaware of another case in which these five factors have weighed as
determined here. Nonetheless, although four of the factors discussed above weigh slightly
in favor of transfer, this is not the “strong” showing required by law to disturb Plaintiff’s
choice of forum. Scheidt, 956 F.2d at 965. Plaintiff’s choice of forum receives less
deference if the Plaintiff does not reside in the District. Emp’rs Mut., 618 F.3d at 1167
(citing Four Corners Nephrology Assocs., P.C. v. Mercy Med. Ctr. of Durango, 464 F. Supp.
2d 1095, 1098 (D. Colo. 2006)). Courts also accord less weight to the Plaintiff’s choice of
forum when the facts giving rise to the dispute have no material relation or significant
connection to the Plaintiff’s chosen forum. Id. (citing Cook, 816 F.Supp. at 669). Here,
Plaintiff is a resident of the District of Colorado and the facts giving rise to the dispute have
a significant connection to Plaintiff’s chosen forum. Defendant has the burden of showing
that the suit should be transferred and unless the evidence and circumstances of the case
are “strongly” in favor of transfer, the Plaintiff’s choice of forum should not be disturbed.
Texas Gulf Sulphur Co., 371 F.2d at 147. Having carefully considered the relevant factors,
the Court finds that Defendant has not met is burden of showing that the Plaintiff’s chosen
forum is inconvenient. “Merely shifting the inconvenience from one side to the other . . .
is not a permissible justification for a change in venue.” Scheidt, 956 F.2d at 966.
Accordingly, the Court respectfully recommends that the Motion be denied as to the
request to transfer venue to the Central District of California.
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IV. Conclusion
For the foregoing reasons, the Court respectfully RECOMMENDS that the Motion
[#8] be DENIED.
IT IS HEREBY ORDERED that pursuant to Fed. R. Civ. P. 72, the parties shall have
fourteen (14) days after service of this Recommendation to serve and file any written
objections in order to obtain reconsideration by the District Judge to whom this case is
assigned. A party’s failure to serve and file specific, written objections waives de novo
review of the Recommendation by the District Judge, Fed. R. Civ. P. 72(b); Thomas v. Arn,
474 U.S. 140, 147-48 (1985), and also waives appellate review of both factual and legal
questions. Makin v. Colo. Dep’t of Corr., 183 F.3d 1205, 1210 (10th Cir. 1999); Talley v.
Hesse, 91 F.3d 1411, 1412-13 (10th Cir. 1996).

A party’s objections to this

Recommendation must be both timely and specific to preserve an issue for de novo review
by the District Court or for appellate review. United States v. One Parcel of Real Prop., 73
F.3d 1057, 1060 (10th Cir. 1996).

Dated: October 5, 2018

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