Dunne, Jr. v. Resource Converting, LLC et al
MEMORANDUM AND ORDER DENYING MOTION TO TRANSFER: IT IS HEREBY ORDERED that defendants' motion to transfer (ECF No. 55 ) is denied. The court will proceed to issue its Case Management Order and to set a hearing on the pending motions to dismis s. IT IS FURTHER ORDERED that a status conference and oral argument on the currently pending motion to dismiss is set for January 13, 2017, at 10:00 am. ( Status Conference set for 1/13/2017 10:00 AM in Courtroom 17N before Magistrate Judge David D. Noce.). Signed by Magistrate Judge David D. Noce on 12/6/2016. (CLO)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
TOM DUNNE, JR.,
RESOURCE CONVERTING, LLC,
SEBRIGHT PRODUCTS, INC.,
NEWWAY GLOBAL ENERGY, LLC,
JERRY FLICKINGER, and
No. 4:16 CV 1351 DDN
MEMORANDUM AND ORDER
DENYING MOTION TO TRANSFER
This action is before the court on the motion of defendants Resource Converting,
LLC, Tim Danley, and Rick Kersey to transfer this action to the United States District
Court for the Southern District of Iowa. (ECF No. 55). Following the hearing held on
November 30, 2016, the court denies defendants’ motion to transfer the case.
In his judicial complaint plaintiff Tom Dunne alleges the following facts. In May
2015, defendant Gary Brinkmann contacted Dunne to sell him certain license agreements.
(ECF No. 1, ¶ 16). These agreements would authorize and obligate plaintiff to acquire
for resale “PAD systems” developed by defendants Resource Converting, LLC; Sebright
Products, Inc.; and JWR, Inc., and sold by defendant NewWay Global Energy, LLC. (Id.
at ¶ 17). The PAD systems are devices that would purportedly convert municipal solid
waste into renewable fuels. (Id. at ¶ 16). The systems were advertised to plaintiff as
“using proven and tested technology to create a homogenous dried fuel stock that can be
converted into different forms of energy.” (Id. at ¶ 19). Defendant Jerry Flickinger gave
plaintiff a “budgetary quote for a single line processing system to take municipal solid
waste and prepare it for conversion to fuel,” stating a single system was “capable of
processing 250 tons per day.” (Id. at ¶ 20). Brinkmann and Flickinger allegedly assured
plaintiff repeatedly of the PAD systems’ proven function and the substantial value of the
license agreements. (Id. at ¶ 21).
Plaintiff alleges that defendants Brinkmann, Flickinger, Danley, and Kersey
solicited payment from him for the PAD systems and license agreements, and that they
employed high-pressure sales pitches. (Id. at ¶ 22). As a result of defendants’ assurances
and representations, plaintiff entered into license agreements with Resource Converting
in August 2015 and made an initial payment of $400,000 with an additional payment of
$600,000 to be made in November 2015. (Id. at ¶¶ 22-24). Between May and October
2015, plaintiff and defendants met with many individuals in Missouri to solicit the sale
and purchase of the PAD Systems. (ECF No. 77, Ex. A, ¶ 6). Between August and
November 2015, plaintiff insisted on seeing a demonstration of an operational PAD
system. (ECF No. 1, ¶ 25). Brinkmann, Kersey, and Flickinger showed plaintiff a
partially assembled piece of non-functioning equipment in a building located in Iowa,
stating that it had previously been in operation but was being prepared for relocation. (Id.
at ¶ 25). Defendants were never able to show plaintiff a working PAD system. (Id. at ¶¶
28-30). On December 1, 2015, defendants demanded full payment of the remaining
$600,000 due from plaintiff. (Id. at ¶ 29). In June 2016, defendant Brinkmann stated to
plaintiff that the PAD Systems never functioned as promised. (Id. at ¶ 30).
The license agreements contain a section captioned, 12.5 Governing Law, that
provides, “[t]he sole jurisdiction and venue for actions related to the subject matter hereof
shall be the State of Iowa and U.S. Federal courts located in Iowa. Both parties consent
to the jurisdiction of such courts . . . [.]” (Id., Ex. B. § 12.5). On June 20, 2016, counsel
for plaintiff submitted a demand letter to Brinkmann, Resource Converting, Sebright,
JWR, NewWay, Kersey, and Danley, demanding return of the $400,000 paid by plaintiff
and threatening legal action if the sum was not repaid by June 30, 2016. (ECF No. 77,
Ex. E). Resource Converting filed a breach of contract claim against Dunne on June 30,
2016 in Iowa state court. (Id. at Ex. F). On August 19, 2016, Dunne removed that case
to the United States District Court for the Southern District of Iowa and also commenced
the instant action in this district court.
MOTION TO TRANSFER
Defendants Resource Converting, LLC, Tim Danley, and Rick Kersey move to
transfer this action to the federal district court for the Southern District of Iowa pursuant
to 28 U.S.C. § 1404 or, in the alternative, to transfer or dismiss the action for improper
venue under Fed. R. Civ. P. 12(b)(3). (ECF No. 55). Defendants invoke the first-filed
rule, the forum selection clause in the license agreements, and the equitable factors to be
considered under § 1404.
District courts determining whether to grant a motion to transfer under § 1404(a)
must consider three statutory factors: “1) the convenience of the parties; 2) the
convenience of the witnesses; and 3) the interest of justice.” Dube v. Wyeth LLC, 943 F.
Supp.2d 1004, 1007 (E.D. Mo. 2013). “In general, federal courts give considerable
deference to a plaintiff's choice of forum and thus the party seeking a transfer under
section 1404(a) typically bears the burden of proving that a transfer is warranted.” Terra
Int'l, Inc. v. Miss. Chem. Corp., 119 F.3d 688, 695 (8th Cir. 1997).
The convenience of the parties, witnesses, and the interest of justice weigh in
favor of keeping this case in this district, where plaintiff commenced it. While the
license agreements at issue provide that “[t]he sole jurisdiction and venue for actions
related to the subject matter hereof shall be [in Iowa],” (ECF No. 77, Ex. C. § 12.5), a
forum selection clause is but one factor a court considers in deciding whether or not to
transfer a case—albeit a significant factor. Terra Int'l, Inc., 119 F.3d at 696 (citing
Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1955)). The parties’ contractual
selection of the state of Iowa as the venue for dispute litigation relates primarily to the
statutory prong of the “convenience of the parties:”
The other factors—the convenience of witnesses and the interest of
justice—are third party or public interests that must be weighed by the
district court; they cannot be automatically outweighed by the existence of
a purely private agreement between the parties. Such an agreement does not
obviate the need for an analysis of the factors set forth in § 1404(a) and
does not necessarily preclude the granting of the motion to transfer.
Plum Tree, Inc. v. Stockment, 488 F.2d 754, 757–58 (3rd Cir. 1973).
The statutory factors weigh heavily in favor of keeping the case in this district.
First, the convenience of the witnesses would be better served by keeping the case in this
district, rather than transferring it to Iowa. Plaintiff has identified over twenty St. Louisarea residents who are witnesses to sales calls he allegedly made in this area with
defendants between April and November 2015. (ECF No. 77, Ex. D). These non-party
witnesses would likely be outside the 100-mile subpoena power of the federal district
court in the Southern District of Iowa. See Fed. R. Civ. P. 45(b)(2). While these St.
Louis-area witnesses might be deposed at a location convenient to them, the majority of
plaintiff’s witnesses would be presented by deposition rather than in live testimony.
Defendants’ non-party witnesses outside of the Eastern District of Missouri’s 100-mile
limit are described as likely to be employees of the defendants, who may be personally
interested in the case outcome, and who may be more likely to appear in person to testify
in this district. If the case were transferred to Iowa, multiple independent witnesses
would be inconvenienced by appearing in person for trial, while it is not apparent that any
independent witness would be inconvenienced were the case to stay in this district.
The interest of justice weighs heavily against transfer. While the agreements
between plaintiff and Resource Converting contain a state-wide Iowa venue provision,
the eight other remaining defendants have no such agreement. See 28 U.S.C. § 1391 (a).
Thus, venue for plaintiff’s claims against these defendants would not necessarily be
proper in the Southern District of Iowa, because not all of them are Iowa residents.
Further, plaintiff argues that only one event related to the claim allegedly occurred there,
the display of equipment to plaintiff, and it is unclear whether any of the remaining
defendants would be subject to the court’s personal jurisdiction there. See 28 U.S.C. §
1391(b). The interests of judicial economy and the avoidance of splitting claims weigh
heavily toward denying transfer.
Finally, in considering the convenience of the parties, eight of the defendants did
not agree to an Iowa-wide forum selection clause. Five defendants are residents of
Michigan, Texas, or Wisconsin, for whom litigating in either Iowa or Missouri is likely
equally inconvenient. The citizenship of the remaining defendants is not clear. (See ECF
No. 96). For plaintiff, it would be more convenient to litigate in Missouri. Resource
Converting has not described any substantial harm it might suffer by litigating this case in
this court. Given the strong countervailing factors, defendants’ reliance on the forum
selection clause is insufficient to warrant transfer. See Terra Int'l, Inc., 119 F.3d at 695.
After weighing the relevant factors, the court concludes that this case should
remain in this district court.
IT IS HEREBY ORDERED that defendants’ motion to transfer (ECF No. 55) is
denied. The court will proceed to issue its Case Management Order and to set a hearing
on the pending motions to dismiss.
IT IS FURTHER ORDERED that a status conference and oral argument on the
currently pending motion to dismiss is set for January 13, 2017, at 10:00 am.
/S/ David D. Noce
UNITED STATES MAGISTRATE JUDGE
Signed on December 6, 2016.
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