FIMCO Inc v. Funk
Filing
31
MEMORANDUM OPINION AND ORDER denying 12 Motion to Change Venue. Signed by Judge Leonard T Strand on 12/5/16. (djs)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
FIMCO, INC.,
No. C16-4109-LTS
Plaintiff,
vs.
MEMORADUM OPINION AND
ORDER ON MOTION TO
TRANSFER VENUE
CHAD FUNK,
Defendant.
___________________________
I.
INTRODUCTION
This case is before me on a motion (Doc. No. 12) to transfer venue filed by
defendant Chad Funk. Plaintiff FIMCO, Inc. (FIMCO), has filed a resistance (Doc. No.
21) and Funk has filed a reply (Doc. No. 28). Neither party requested oral argument
and, in any event, I find that oral argument is not necessary. See N.D. Ia. L.R. 7(c).
The motion is ready for decision.
II.
RELEVANT FACTUAL AND PROCEDURAL HISTORY
FIMCO, an agricultural equipment sales company, is incorporated in Iowa and
has its principal place of business in South Dakota. Funk, a former FIMCO employee,
has been a citizen of Nebraska at all times relevant to this case.
Funk’s employment with FIMCO began in September 2013. On September 16,
2013, the parties entered into a non-compete and confidentiality agreement (the
Agreement).
Funk signed the Agreement in Nebraska.
Among other things, the
Agreement requires Funk to refrain, for a period of one year following the termination
of his employment, from (1) accepting employment with any entity that competes with
FIMCO within a defined geographic area and (2) soliciting the FIMCO customers with
whom he worked. The Agreement contains a South Dakota choice-of-law clause but does
not contain a forum-selection provision.
As a FIMCO employee, Funk called on FIMCO customers in both Iowa and
Nebraska. On February 16, 2016, Funk’s employment with FIMCO ended. Soon
thereafter, Funk began working for Heartland Ag, a company that sells agricultural
sprayers and competes directly with FIMCO. Heartland Ag is a Nebraska corporation
with headquarters in Grand Island, Nebraska. As a Heartland AG employee, all of
Funk’s duties are performed in Nebraska and he only calls on customers located in
Nebraska.
FIMCO filed this action in the Iowa District Court for Woodbury County on July
14, 2016. The state court petition (Doc. No. 3) asserts claims of breach of contract,
misappropriation of trade secrets and breach of fiduciary duty. FIMCO alleges that Funk
used FIMCO’s confidential information in violation of the Agreement. FIMCO also
alleges that Funk’s employment with Heartland Ag and his contact with his previous
FIMCO customers in Nebraska constitute breaches of the Agreement.
On August 17, 2016, Funk filed a notice (Doc. No. 2) of removal to this court
pursuant to 28 U.S.C. § 1446 on the basis of diversity jurisdiction. Doc. No. 2. On
August 24, 2016, Funk filed an answer (Doc. No. 5) denying FIMCO’s claims and
alleging various affirmative defenses. Funk then filed his present motion requesting a
transfer of venue to the District of Nebraska.
III.
APPLICABLE STANDARDS
28 U.S.C. § 1404(a) provide that “[f]or the convenience of the 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 or to any district or division
to which all parties have consented.” 28 U.S.C. § 1404(a). “The statute ‘was drafted
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in accordance with the doctrine of forum non conveniens, permitting transfer to a more
convenient forum, even though the venue is proper.” In re Apple, Inc., 602 F.3d 909,
912 (8th Cir. 2010) (quoting Van Dusen v. Barrack, 376 U.S. 612, 634 n. 30 (1964) (in
turn quoting Revisor's Note, H.R. Rep. No. 80–308, at A132 (1947), and H.R. Rep.
No. 79–2646, at A127 (1946)). Courts must consider “three general categories of factors
. . . when deciding a motion to transfer: (1) the convenience of the parties, (2) the
convenience of the witnesses, and (3) the interests of justice.” Terra Int’l, Inc. v. Miss.
Chem. Corp., 119 F.3d 688, 691 (8th Cir. 1997). However, a court is not limited to
those three categories and must engage in a “case-by-case evaluation of the particular
circumstances at hand and a consideration of all relevant factors.” Id.
“[F]ederal courts give considerable deference to a plaintiff's choice of forum.”
Fru-Con Const. Corp. v. Controlled Air, Inc., 574 F.3d 527, 540 (8th Cir. 2009) (quoting
Terra Int'l, Inc., 119 F.3d at 695). The party seeking transfer bears the burden of
showing that the balance of factors “strongly” favors the movant. See K-V Pharm. Co.
v. J. Uriach & CIA, S.A., 648 F.3d 588, 597 (8th Cir. 2011) (quoting Gulf Oil Corp. v.
Gilbert, 330 U.S. 501, 508 (1947) (“[U]nless the balance is strongly in favor of the
defendant, the plaintiff's choice of forum should rarely be disturbed.”)).
IV.
A.
DISCUSSION
Is the Proposed New Venue Proper?
Venue of an action may be transferred only to “any other district or division where
it might have been brought.” 28 U.S.C. § 1404(a). Funk contends that FIMCO could
have brought this action in the District of Nebraska. FIMCO agrees. See Doc. No. 211 at 4 n.3. However, FIMCO faults Funk for failing to “identify the division he claims
would be more convenient.” Id. at 4. Funk responds by noting that the entire state of
Nebraska consists of one federal district court, which is not statutorily divided into
separate divisions. See 28 U.S.C. § 107 (“Nebraska constitutes one judicial district.
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Court shall be held at Lincoln, North Platte, and Omaha.”). By contrast, for example,
the Northern and Southern Districts of Iowa are statutorily divided into various divisions
on a county-by-county basis. See 28 U.S.C. § 95. I find that Funk’s request to transfer
venue is as specific as possible and meets the Section 1404(a) requirements.
B.
The “Convenience” Factors
In balancing the convenience factor, the Court may consider:
(1) the convenience of the parties, (2) the convenience of the witnesses—
including the willingness of witnesses to appear, the ability to subpoena
witnesses, and the adequacy of deposition testimony, (3) the accessibility to
records and documents, (4) the location where the conduct complained of
occurred, and (5) the applicability of each forum state's substantive law.
Terra Int'l, Inc., 119 F.3d at 697.
1.
Convenience of Parties
Funk contends that the District of Nebraska is a more convenient forum for the
parties because the complained of actions occurred in Nebraska and Funk is a Nebraska
resident. FIMCO contends that the current forum, Sioux City, Iowa, is more convenient
for the parties because (a) FIMCO’s headquarters are located in Dakota Dunes, South
Dakota, which is just across the border from Sioux City, and (b) the Sioux City
courthouse is closer to Funk’s own resistance than are any of the courthouses in the
District of Nebraska.
I agree with FIMCO’s mileage calculations and find that this factor weighs against
transfer. As a matter of pure geography, the courthouse in Sioux City is more convenient
for both parties.
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2.
Convenience of Witnesses
In considering the convenience of witnesses, “the Court must focus on non-party
witnesses, since ‘it is generally assumed that witnesses within the control of the party
calling them, such as employees, will appear voluntarily in a foreign forum.’” Cosmetic
Warriors Ltd. v. Abrahamson, 723 F. Supp. 2d 1102, 1106 (D. Minn. 2010) (quoting
Austin v. Nestle USA, Inc., 677 F. Supp. 2d 1134, 1138 (D. Minn. 2009)). Thus, while
FIMCO points out that all of its employee-witnesses work in nearby Dakota Dunes, South
Dakota, that fact is of limited relevance.
As for non-party witnesses, Funk argues that they include (a) representatives of
his new employer, Heartland Ag, and (b) customers with whom Funk has allegedly
contacted in violation of the Agreement. Funk contends that all such witnesses reside in
Nebraska and are outside this court’s subpoena power.1 FIMCO does not deny that the
likely non-party witnesses reside in Nebraska but argues (a) that Heartland Ag is based
in Iowa and (b) that some of the non-party witnesses reside closer to Sioux City than to
any courthouse in the District of Nebraska.
In contending that Heartland Ag is based in Iowa, FIMCO relies on a Heartland
Ag website indicating that the company not only sells products in Iowa but actually has
its main office in Ames, Iowa. See Doc. No. 21-1 at 10 (citing a website located at
http://heartlandagequipment.com/about/ (the First Website)). Funk responds by accusing
FIMCO of citing to “a website for a legal entity distinct from Heartland Ag, Inc.” Doc.
No. 28 at 2. Funk further claims:
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Under the Federal Rules of Civil Procedure, a subpoena generally cannot command a person
to attend a trial, hearing or deposition that is more than “100 miles of where the person resides,
is employed, or regularly transacts business in person.” Fed. R. Civ. P. 45(c)(1)(A). An
exception exists if the location of the trial, hearing or deposition is “within the state where the
person resides, is employed, or regularly transacts business in person” and attendance would not
cause the person to “incur substantial expense.” Fed. R. Civ. P. 45(c)(B)(ii).
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[t]he entity cited by Plaintiff does not employ Funk and has no relevance to
this case. Heartland Ag, Inc., the entity that employs Funk, maintains a
different website, which clearly denotes that its headquarters are in Grand
Island, Nebraska.
Id. (citing a website located at http://heartlandag.net/about.htm (the Second Website).
To put it mildly, comparing the two websites does not help Funk. The First
Website states that the Heartland Ag operation in Grand Island, Nebraska, is a “branch
office/warehouse” and indicates that the company’s “main facilities are located in Ames,
Iowa.” The Second Website identifies the same street address and telephone numbers
for the Grand Island operation that are referenced in the First Website. The design, color
scheme and logos are virtually identical as between the two websites. In combination,
the websites strongly suggest exactly what the First Website states: Heartland Ag is
based in Ames, Iowa, and operates a “branch office/warehouse” in Grand Island,
Nebraska. Funk provides no evidence supporting his contention that the Heartland Ag
with whom he is employed is a “legal entity distinct from” the Heartland Ag that has its
“main facilities” in Ames, Iowa. Absent such evidence, I must agree with FIMCO that
Funk is employed in Nebraska by an entity based in Iowa.
This finding does not automatically tilt this factor in FIMCO’s direction, as
FIMCO has not identified any Heartland Ag employees based in Iowa as potential
witnesses. Instead, FIMCO notes that the distance from Grand Island to Sioux City is
not significantly greater than the distance from Grand Island to any courthouse in the
District of Nebraska. FIMCO also states that the customers with whom Funk is alleged
to have had improper contact are located closer to Sioux City than to any of the Nebraska
courthouses. Doc. No. 21-1 at 9-10.
FIMCO is correct in noting that the relative distances at issue are not notably
different. This District and the District of Nebraska are adjacent. Comparing travel
times and distances does not tip this factor one way or the other. As Funk points out,
however, the non-party Nebraska witnesses can be compelled to attend trial in the District
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of Nebraska but not in this District. This is because the exception to the “100 mile” rule
applies only if a witness is commanded to appear “within the state where the person
resides, is employed, or regularly transacts business in person.”
Fed. R. Civ. P.
45(c)(1)(B)(ii). Thus, the parties will have the opportunity to compel the appearance of
non-party witnesses who reside in Nebraska at any courthouse in the District of Nebraska,
but not at the courthouse in Sioux City, Iowa.
Notwithstanding this fact, Funk has failed to make a “convincing showing that the
necessary witness testimony cannot be adequately presented by deposition, either read
into the record from a transcript, or in the form of a videotaped deposition played for the
jury.” Terra Intern., Inc., 922 F. Supp. at 1360-61 (citing Scheidt v. Klein, 956 F.2d
963, 965 (10th Cir. 1992), and Moses v. Bus. Card Exp., Inc., 929 F.2d 1131, 1138 (6th
Cir. 1991)). Moreover, in general, a party seeking to transfer an action for convenience
of the witnesses ‘must specify clearly, typically by affidavit, the key witnesses to be
called and their location and must make a general statement of what their testimony will
cover.’” Seneca Companies, Inc. v. Becker, 134 F. Supp. 3d 1148, 1157 (S.D. Iowa
2015) (quoting GreatAmerica Leasing Corp. v. Avery Air Conditioning/Heating & AAbaca Servs., Inc., No. 11-CV-66-LRR, 2012 WL 443586, at *8 (N.D. Iowa Feb. 10,
2012) (in turn citing Charles A. Wright, Arthur R. Miller & Edward H. Cooper, 15
Federal Practice and Procedure § 3851, at 425 (3d ed. 2007)). Funk did not satisfy this
requirement.
In short, Funk makes a valid point concerning subpoena power. However, he has
not shown that this issue cannot be overcome, nor has he established the need for or value
of the non-party witnesses at issue. As such, I am unable to find that this factor weighs
in favor of transfer.
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3.
Access to Records and Documents
Funk argues that because FIMCO’s claims relate to Funk’s employment with
Heartland Ag, any documents related to the case would most likely be located at
Heartland Ag’s principal office building in Grand Island, Nebraska. FIMCO argues that
the venue of this case has little impact on the parties’ access to records and documents,
as the parties are entitled to subpoena relevant documents from non-parties and to require
that those documents be produced at any location with 100 miles from where the
documents are kept. Fed. R. Civ. P. 45(c)(2)(B). I agree that the ability to obtain
documents is not dependent on whether this case proceeds in Iowa or Nebraska. This
factor does not weigh in favor of transfer.
4.
Location of the Conduct
There is no dispute that Funk’s alleged violations of the Agreement have occurred
in Nebraska. While FIMCO points out that the conduct at issue occurred relatively close
to the courthouse in Sioux City (in comparison to the federal courthouses in Nebraska),
that is not the test. This factor weighs in favor of transfer.
5.
Applicable Substantive Law
As noted above, the Agreement includes a South Dakota choice-of-law clause.
Funk has presented no coherent legal argument as to why that clause will not be enforced.
If, for some reason, the clause cannot be enforced, both Iowa and Nebraska apply the
Restatement (Second) of Conflicts of Laws in determining what substantive state law
applies. See, e.g., Bendzak v. Midland Nat’l Life Ins. Co., 440 F. Supp. 2d 970, 983
(S.D. Iowa 2006) (“The Iowa Supreme Court has adopted the Second Restatement of
Conflicts to govern choice-of-law questions.”); Mertz v. Pharmacists Mut. Ins., Co., 625
N.W.2d 197, 201 (Neb. 2001) (applying the Restatement to determine what law applies
regarding the enforceability of a non-compete agreement).
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Under the Restatement, in an action for breach of contract the court must apply
“the local law of the state which, with respect to that issue, has the most significant
relationship to the transaction and the parties.” Restatement (Second) of Conflicts of
Laws, § 188(1). This includes consideration of the following contacts:
(a)
(b)
(c)
(d)
(e)
the place of contracting,
the place of negotiation of the contract,
the place of performance,
the location of the subject matter of the contract, and
the domicil, residence, nationality, place of incorporation and place
of business of the parties.
Id., § 188(2).
Under this “most significant relationship” test, I find that Nebraska law would
almost surely apply in the absence of the South Dakota choice-of-law provision. It is
virtually impossible to conclude, based on the existing record, that Iowa law might
somehow apply. Thus, while it seems highly probable that this dispute will be governed
by South Dakota law, Nebraska law is the next-most-likely choice. This factor, then,
weighs slightly in favor of transfer to the District of Nebraska.
C.
The “Interests of Justice” Factors
Relevant factors affecting the “interests of justice” include:
(1) judicial economy, (2) the plaintiff's choice of forum, (3) the comparative
costs to the parties of litigating in each forum, (4) each party's ability to
enforce a judgement, (5) obstacles to a fair trial, (6) conflict of law issues,
and (7) the advantages of having a local court determine questions of local
law.
Terra Int'l, 119 F.3d at 696.
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1.
Judicial Economy
This factor is neutral. This case is at an early stage. Any discovery conducted to
date will be applicable to the claims and defenses at issue regardless of which federal
judicial district serves as the forum.2
2.
Plaintiff’s Choice of Forum
This factor weighs against transfer.
As noted earlier, “federal courts give
considerable deference to a plaintiff's choice of forum.” Fru-Con Const. Corp., 574
F.3d at 540. Of course, this court was not the plaintiff’s “choice of forum,” as FIMCO
commenced this action in an Iowa state court. Funk, by exercising his statutory right to
remove this case to this court, has already (properly) interfered with FIMCO’s chosen
forum. Nonetheless, the fact that FIMCO selected an Iowa forum, rather than a Nebraska
one, is entitled to deference.
3.
Comparative Litigation Costs
This factor is neutral. Neither party suggests that the costs of litigating this case
in the adjacent District of Nebraska would be meaningfully different than they will be in
this District.
4.
Ability to Enforce a Judgment
This factor is neutral, as the judgment of one federal district court may be
registered and enforced in a different judicial district with the same force. See 28 U.S.C.
§ 1963.
2
In his reply, Funk notes that this District has a heavy docket and suggests that the District of
Nebraska is “more able to absorb this case.” Doc. No. 28 at 3. While it is true that this District
is currently experiencing a high caseload per judge, Funk provides no information about the
caseload in the District of Nebraska.
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5.
Obstacles to Fair Trial
This factor is neutral. Neither party suggests that a fair trial will not occur in
either forum.
6.
Conflict of Law Issues and the Advantages of Having a Local Court
Determine Questions of Local Law.
As set forth in Section IV(B)(V), it appears that South Dakota law will govern this
dispute in light of the Agreement’s choice-of-law clause. The federal courts of Iowa and
Nebraska are equally capable of construing and applying South Dakota law. If the choiceof-law clause does not control, for some reason, then it is likely that Nebraska law will
apply under the Restatement’s “most significant relationship” test. Because there appears
to be no viable argument, at least at this stage of the case, for invalidating the
Agreement’s selection of South Dakota law, this factor weighs slightly in favor of
transfer.
D.
Summary
The party seeking transfer bears the burden of showing that the balance of factors
“strongly” favors the movant. K-V Pharm. Co., 648 F.3d at 597. Funk has not come
close to making such a showing. Most of the relevant factors are neutral, which is hardly
surprising when comparing adjacent federal judicial districts. While a few factors weigh
in favor of transfer, others weigh against transfer. Ultimately, the current venue of this
action is not only within Funk’s former sales territory for FIMCO, but it is the federal
court point that is closest to both FIMCO’s headquarters and Funk’s residence. Under
these circumstances, FIMCO’s choice of an Iowa forum will not be disturbed.
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V.
CONCLUSION
For the reasons set forth herein, plaintiff Chad Funk’s motion (Doc. No. 12) to
transfer venue is denied.
IT IS SO ORDERED.
DATED this 5th day of December, 2016.
________________________________
LEONARD T. STRAND
UNITED STATES DISTRICT JUDGE
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