Great Lakes Paper Stock Corporation et al v. Buffalo Recycling Enterprises, Inc.

Filing 23

ORDER denying 9 defendant's Motion to Dismiss or to Transfer Venue. Signed by District Judge George Caram Steeh (MBea)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

GREAT LAKES PAPER STOCK
CORPORATION et al.,
Plaintiffs,
CASE NO. 13-CV-14112
HONORABLE GEORGE CARAM STEEH

v.
BUFFALO RECYCLING
ENTERPRISES LLC,
Defendant.
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ORDER DENYING DEFENDANT’S MOTION
TO DISMISS OR TO TRANSFER VENUE (Doc. 9)
This breach of contract action arises out of defendant Buffalo Recycling Enterprises’
(“Buffalo Recycling”) alleged failure to pay for certain goods and services in the amount of
approximately $361,000. Now before the court is Buffalo Recycling’s motion to dismiss for
improper venue, or alternatively, to transfer to the Western District of New York pursuant
to 28 U.S.C. § 1404(a). Oral argument was heard on February 5, 2013. For the reasons
set forth below, Buffalo Recycling’s motion shall be denied.
I. Factual Background
Plaintiffs are three Michigan corporations: Great Lakes Paper Stock Corporation,
GLR of Huron, and GLR of New York (collectively “Plaintiffs”). Buffalo Recycling operates
a multi-million dollar recycling plant in Buffalo, New York. Plaintiffs allege that Buffalo
Recycling breached its agreements to pay for management services they provided to
Buffalo Recycling including invoicing, payroll management, bill payment and check cutting,
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reporting, banking and human resources services. Plaintiffs maintain that they provided
most of these services in Michigan. Plaintiffs also seek to recover for their assumption and
payment of certain debts owed by Buffalo Recycling to third-parties. Plaintiffs filed a fourcount complaint alleging: (1) breach of contract, (2) unjust enrichment, (3) quantum meruit,
and (4) promissory estoppel.
Buffalo Recycling operates a multi-million dollar recycling facility in Buffalo, New
York. As part of those activities, Buffalo Recycling entered into an operating agreement
and membership purchase agreement with individual persons, and some of those persons
are owners and principals of the plaintiff-corporations, while others were members of
Buffalo Recycling. None of the corporate plaintiffs themselves, however, were parties to
those agreements.

The agreements contain forum selection clauses establishing

jurisdiction in New York courts. Specifically, the operating agreement dated September
5, 2008, establishes jurisdiction in Erie County, New York (Doc. 9, Ex. C at 9), and the
membership purchase agreement dated March 3, 2011, establishes that suit must be
brought in state court in the County of Niagra, New York or in the United States District
Court for the Western District of New York. (Doc. 9, Ex. D at 14). Both agreements call
for the application of New York law. As none of the plaintiffs were parties to the above
referenced agreements, plaintiffs contend those agreements are inapplicable.
Plaintiffs contend that the contracts at issue were negotiated in Michigan, involved
performance in Michigan, and all of the witnesses reside in Michigan. Buffalo Recycling,
on the other hand, contends that the events giving rise to this lawsuit arise out of the
formation and operation of the recycling facility in New York, defendants do not maintain
a place of business in Michigan nor own property in Michigan, and its witnesses reside in
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New York. Buffalo Recycling argues that venue is improper in Michigan, or in the
alternative, that venue should be transferred to the United States District Court for the
Western District of New York for the convenience of the parties and witnesses pursuant to
28 U.S.C. § 1404(a).
II. Analysis
A.

Subject Matter Jurisdiction
On January 10, 2014, this court ordered plaintiffs to show cause in writing why this

case should not be dismissed for lack of diversity jurisdiction, as it appeared possible that
plaintiff GLR of New York maintained its principal place of business in New York which
would destroy complete diversity.

In their Complaint, plaintiffs identify the place of

incorporation and principal place of business for each corporate plaintiff and defendant with
the exception of plaintiff GLR of New York, for whom they state only: “Plaintiff GLR of New
York, Inc. is a Michigan corporation, transacting business in Roseville, Michigan.” (Doc.
1, ¶ 3). The New York State Department of State Business Entity Information Records
identify GLR of New York’s principal executive office to be located in North Tonawanda,
New York. (Doc. 9, Ex. B). In Hertz Corp. v. Friend, 559 U.S. 77 (2010), the Supreme
Court held that the phrase “principal place of business” as used in § 1332(c)(1) refers to
a corporation's “nerve center.” Id. at 92-93. Specifically, the Court explained:
We conclude that ‘principal place of business' is best read as referring to the
place where a corporation's officers direct, control, and coordinate the
corporation's activities. It is the place that Courts of Appeals have called the
corporation's ‘nerve center.’ And in practice it should normally be the place
where the corporation maintains its headquarters-provided that the
headquarters is the actual center of direction, control, and coordination, i.e.,
the ‘nerve center,’ and not simply an office where the corporation holds its
board meetings (for example, attended by directors and officers who have
traveled there for the occasion).
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Id. at 92-93. Plaintiffs filed a response to the court’s show cause order, supported by
affidavit, stating that Michigan is the “nerve center” as (1) its CEO, CFO, vice president,
secretary and treasurer are based in and operate out of Roseville, Michigan and all are
Michigan residents; (2) all corporate decision making regarding logistical and financial
matters occur in Roseville, Michigan; (3) all budgeting, financial reporting, invoice approval,
check cutting and signing, computer software, server, website, bank financing, legal affairs,
engineering, insurance, payroll and benefits, sales support and training occur in Roseville,
Michigan; and (4) all GLR of New York employees working in New York do so under the
direction and control of GLR of New York’s director of operations based in Roseville.
Buffalo Recycling responds that GLR of New York has a manager on site in New York who
retains the title “President,” and that GLR of New York has employees located in New York.
Based on the record now before this court, it appears that the principal place of
business of GLR of New York is in Michigan, and that this court does in fact have diversity
jurisdiction.

Should further factual development prove otherwise, this case may be

dismissed for lack of subject matter jurisdiction at such time.
B.

Motion to Dismiss for Improper Venue
Buffalo Recycling has moved to dismiss on the grounds that this court lacks venue.

In a diversity case, venue is determined according to 28 U.S.C. § 1391(b), which provides:
(b) Venue in general.--A civil action may be brought in-(1) a judicial district in which any defendant resides, if all defendants are
residents of the State in which the district is located;
(2) a judicial district in which a substantial part of the events or omissions giving
rise to the claim occurred, or a substantial part of property that is the subject of
the action is situated.
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28 U.S.C. § 1391(b). Buffalo Recycling argues that it resides in New York where it
owns a recycling plant, and thus venue lies only in New York. Plaintiffs respond that
venue is proper here pursuant to § 1391(b)(2) because the cause of action arose in this
district, and pursuant to § 1391(b)(1), because Buffalo Recycling resides in this district.
Buffalo Recycling contends that venue lies in the Western District of New York and thus
should be dismissed or transferred. Venue may lie in more than one district. Venue is
proper here under § 1391(b)(2) and (b)(1). The court analyzes these two prongs for
establishing venue below.
1.

Section 1391(b)(2) – Cause of Action Arises in this District

Plaintiffs contend that a substantial part of the events or omissions giving rise to
this dispute occurred in this district, thus giving rise to venue under § 1391(b)(2).
Specifically, plaintiffs allege that the parties negotiated their agreement during in person
meetings in Michigan for goods and services to be performed in Michigan including
invoicing, payroll management, bill payment and check cutting. Buffalo Recycling has
not refuted these allegations but contends that because services involved a New York
recycling plant, they should be governed by New York law as required under the
operating and membership purchase agreements. Plaintiff corporations were not
parties to either agreement, and thus they are irrelevant to the court’s analysis. Venue
here is proper under § 1391(b)(2).

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2.

Section 1391(b)(1) – Personal Jurisdiction

Venue here is also proper under § 1391(b)(1). A corporation is deemed to
“reside” in any district in which the defendant is subject to the court’s personal
jurisdiction. 28 U.S.C. § 1391(c). Plaintiffs contend that this court has personal
jurisdiction over Buffalo Recycling based on Michigan’s long-arm statute, MCL §
600.715(1), as the dispute arises out of acts involving the “transaction of any business
within the state,” and under Michigan’s general personal jurisdiction statute, MCL §
600.711. In order to determine whether personal jurisdiction exists over a nonresident
defendant, the court considers three factors: “[f]irst the defendant must purposefully
avail [itself] of the privilege of conducting activities within the forum state; second, the
cause of action must arise from the defendant’s activities there; and third, the acts of the
defendant or consequences caused by the defendant must have a substantial enough
connection with the forum state to make its exercise of jurisdiction over the defendant
fundamentally fair.” Cole v. Mileti, 133 F.3d 433, 436 (6th Cir. 1998) (citations omitted).
All three elements are easily met here. Buffalo Recycling does not dispute that it
traveled to Michigan numerous times for in person meetings with plaintiffs, and
negotiated with plaintiffs telephonically while they resided in Michigan for contractual
services to be performed in Michigan. Thus, Buffalo Recycling purposefully availed
itself of the privilege of conducting business within Michigan. While Buffalo Recycling
claims the services involved its New York recycling plant, it does not seriously dispute
that the management services plaintiffs provided, including banking and human
resource services, were rendered in Michigan. Finally, the exercise of jurisdiction here
is fundamentally fair because Buffalo Recycling purposefully availed itself of this forum
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and the cause of action arose directly from contractual services performed here. Under
these circumstances, plaintiffs have easily shown that this court has limited personal
jurisdiction over Buffalo Recycling. Id. Having shown that venue is proper in this
district, both because the cause of action arises out of the activities of the parties in this
forum, and because this court has at least limited personal jurisdiction over Buffalo
Recycling, the court turns now to the question of whether the action should be
transferred for the convenience of the parties and witnesses pursuant to 28 U.S.C. §
1404(a).
C.

Motion to Transfer pursuant to 28 U.S.C. § 1404(a)
Buffalo Recycling moves to transfer this case to the Western District of New York

pursuant to 28 U.S.C. § 1404(a) which provides:
(a) For the convenience of parties and witnesses, in the interest of justice, a
district court may transfer any civil action to any other district or division where it
might have been brought or to any district or division to which all parties have
consented.
28 U.S.C. § 1404(a). “District courts have wide discretion to transfer an action under 28
U.S.C. § 1404(a) in order to prevent waste of time, energy and money, and to protect
litigants, witnesses and the public against unnecessary inconvenience and expense.”
Grand Kensington, L.L.C. v. Burger King Corp., 81 F. Supp. 2d 834, 836 (E.D. Mich.
2000) (citation omitted). However, a court “should give deference to a plaintiff’s choice
of venue.” Id. (citation omitted). “When a defendant moves to change the forum, he
must overcome the presumption that the plaintiff has chosen the proper forum.” Id.
(citation omitted).

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In order to transfer a case to another district, the movant must first show that the
case could have been brought in the transferee district. Kepler v. ITT Sheraton Corp.,
860 F. Supp. 393, 398 (E.D. Mich. 1994) (citation omitted). Buffalo Recycling has easily
met its burden of proving venue is proper in the Western District of New York as there is
no question it “resides” in that district where it maintains its corporate offices and
operates its recycling plant. 28 U.S.C. § 1391(b)(1). Once it has been determined that
the case could have been filed in the transferee district, the district court considers the
following factors to determine whether to transfer a case:
(1) the convenience of witnesses; (2) the location of relevant documents and
relative ease of access to sources of proof; (3) the convenience of the parties, (4)
the locus of the operative facts; (5) the availability of process to compel the
attendance of unwilling witnesses; (6) the relative means of the parties; (7) the
forum’s familiarity with the governing law; (8) the weight accorded the plaintiff’s
choice of forum; and (9) trial efficiency and the interests of justice, based on the
totality of the circumstances.
Overland, Inc. v. Taylor, 79 F. Supp. 2d 809, 811 (E.D. Mich. 2000) (citation omitted).
The movant bears the burden of demonstrating, by a preponderance of the evidence,
that “fairness and practicality strongly favor the forum to which transfer is sought.” Audi
AG v. D’Amato, 341 F. Supp. 2d 734, 749 (E.D. Mich. 2004) (citation omitted). Transfer
is not warranted when doing so will merely shift the inconvenience from one party to
another. Wayne County Employees’ Retirement Sys. v. MGIC Invest. Corp., 604 F.
Supp. 2d 969, 975 (E.D. Mich. 2009). The court considers each factor below.
1.

The convenience of witnesses

Plaintiffs maintain that all of their witnesses reside in Michigan. Defendant
responds that many of plaintiff’s corporate officers traveled to New York in connection
with the operation of the recycling facility, and that its witnesses reside in New York.
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The fact that plaintiffs’ owners traveled to New York with some frequency does not
mean that New York would be a convenient forum for them when they have made their
homes in Michigan. This factor appears neutral.
2.

The location of relevant documents and the relative ease of access
to sources of proof

Plaintiffs posit that their documents are located in Michigan while Buffalo
Recycling posits that its records are located in New York. Buffalo Recycling also argues
this factor favors transfer because plaintiffs have a related corporation, North
Tonawanda, whose operations are located in Buffalo, New York. North Tonawanda is
not a party to this lawsuit, and Buffalo Recycling has not shown how its corporate
records are relevant to the instant dispute. Given the ease by which documents may be
transferred by e-mail and otherwise, this factor appears neutral.
3.

The convenience of the parties

Plaintiffs argue that it will be convenient for representatives of Buffalo Recycling
to travel to Michigan as they did so to arrange for goods and services in the contracts at
issue here. Buffalo Recycling argues that it will be convenient for representatives of
plaintiffs to travel to New York as they did so many times to visit their recycling plant.
Once again, this factor appears neutral.
4.

The locus of the operative facts

Plaintiffs contend that the source of the dispute is Michigan where the goods and
services were to be provided. Buffalo Recycling, on the other hand, contends that the
situs of the dispute is New York where the recycling plant was located. Viewing the
facts in the light most favorable to the plaintiffs, this factor appears neutral.
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5.

The availability of process to compel the attendance of unwilling
witnesses

Buffalo Recycling contends that its employees and third-party vendors are
located in New York and thus, New York subpoenas would be required to secure the
testimony of unwilling witnesses. Plaintiffs respond that procedures exist within the
federal system to compel unwilling witnesses to appear and, in any event, nothing
suggests Buffalo Recycling’s witnesses will be recalcitrant. This factor favors transfer.
6.

The relative means of the parties

Buffalo Recycling maintains that it is a new struggling business, while plaintiffs
are long established businesses. Plaintiffs respond that Buffalo Recycling is operating a
$14 million recycling facility while they are merely three small Michigan corporations
struggling because Buffalo Recycling has failed to pay them for services rendered. This
factor appears neutral.
7.

The forum’s familiarity with the governing law

Buffalo Recycling argues that New York law applies based on the operating and
member purchase agreements. Plaintiffs were not parties to those agreements. While
some of the owners of plaintiff corporations were signatories on those agreements, a
corporation is recognized by the law as a separate entity and it is for this very reason,
that parties incorporate. Even if New York law were to apply, this is a straightforward
breach of contract case. Buffalo Recycling has not shown that there is anything unique
about New York contract law that would make it difficult for this court to adjudicate the
instant dispute. This factor appears neutral.

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8.

The weight accorded the plaintiff’s choice of forum

Buffalo Recycling argues that plaintiffs’ choice of forum should not be given any
deference because the operating and membership purchase agreements contain forum
selection clauses calling for jurisdiction solely in New York. Those agreements are
irrelevant; however, as they are not the basis for plaintiffs’ breach of contract claims
here, and the corporate plaintiffs were not parties to those agreements. “[A] plaintiff’s
choice of forum will be given substantial deference.” D’Amato, 341 F. Supp. 2d at 74950. This factor weighs against transfer.
9.

Trial efficiency and the interests of justice, based on the totality of
the circumstances.

Buffalo Recycling states, “[i]n the event the Defendant brings third party cross
claims against the owners of Plaintiffs, judicial economy, the convenient administration
of justice and the interest to avoid inconsistent outcomes in different forums all favor
transfer of this case to New York.” It is unclear how cross-claims would involve a
different forum, but if Buffalo Recycling means that it anticipates filing a related case in
New York, the issue of transfer of venue of either suit to the other forum could be
addressed at such a time as the issue becomes ripe. On balance, nothing suggests
that transfer at this juncture would serve the interests of trial efficiency or other interests
of justice. “The balance of convenience, considering all the relevant factors should be
strongly in favor of a transfer before such will be granted.” Jamhour v. Scottsdale Ins.
Co., 211 F. Supp. 2d 941, 946 (S.D. Ohio 2002). As of this date, Buffalo Recycling has
failed to meet its burden here. Discovery may affect this analysis if litigation in New

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York and putative claims and defenses in this court overlap posing risks to the efficient,
fair administration of this case that currently do not exist.
CONCLUSION
For the reasons stated above, Buffalo Recycling’s motion to dismiss for improper
venue or to transfer venue (Doc. 9) hereby is DENIED WITHOUT PREJUDICE.
IT IS SO ORDERED.
Dated: February 6, 2014
s/George Caram Steeh
GEORGE CARAM STEEH
UNITED STATES DISTRICT JUDGE

CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
February 6, 2014, by electronic and/or ordinary mail.
s/Marcia Beauchemin
Deputy Clerk

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