U.S. Commodity Futures Trading Commission v. Reisinger et al

Filing 28

MEMORANDUM OPINION - The Court finds Reisinger's motion to transfer venue 15 should be granted. An order on the motion to dismiss 18 is deferred to the transferee Illinois District Court. Ordered by Senior Judge Lyle E. Strom. (TEL)

IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEBRASKA
U.S. COMMODITY FUTURES
TRADING COMMISSION,

)
)
)
Plaintiff,
)
)
v.
)
)
GRACE ELIZABETH REISINGER
)
and ROF CONSULTING, LLC,
)
)
Defendants.
)
)
______________________________)

8:11CV233

MEMORANDUM OPINION

This matter is before the Court on the motions of
defendant Grace Elizabeth Reisinger (Reisinger) to transfer venue
pursuant to 28 U.S.C. § 1404(a) (Filing No. 15) and to dismiss
pursuant to Federal Rules of Civil Procedure 9(b) and 12(b)(6)
(Filing No. 18).

Reisinger seeks to change venue from this

district to the United States District Court for the Northern
District of Illinois (“Illinois District Court”).
Plaintiff U.S. Commodity Futures Trading Commission
(the “Commission”) has previously filed another action wherein
Reisinger is a defendant, CFTC v. New World Holdings, LLC, et
al., No. 1:10CV4557, in the Illinois District Court (“the
Illinois Case”) (Filing No. 16, at 1).

The Illinois Case is

ongoing.
In this action, the Commission opposes both of
Reisinger’s motions.

Having reviewed the motions, the parties’

briefs and evidentiary submissions, and the applicable law, the

Court finds Reisinger’s motion to transfer venue should be
granted.

An order on the motion to dismiss is deferred to the

transferee Illinois District Court.1
I.

Factual Background.

The Commission is a federal regulatory agency, with its
headquarters in Washington, D.C.

The attorneys who are

prosecuting this case have their offices at the headquarters in
Washington, D.C.

The Commission has an office in Chicago,

Illinois, but no office in Nebraska.
Defendant Reisinger lives in Grand Island, Nebraska.
From her home in Grand Island, Reisinger operates “a branch
office of New World Holdings, LLC, a Chicago-based introducing
commodity broker” (Ex. 1, Filing No. 15, at 1), which is the
subject of the Illinois Case already before the Illinois District
Court.
Defendant ROF Consulting, LLC (“ROF”) was “an Alaska
limited liability company with principal place of business in
North Carolina" (Filing No. 16, at 2).

ROF was organized by

Larry Alan Matthews (now residing in Charlotte, North Carolina),
James Green (now residing in San Diego, California), and Nancy

1

“When an action is transferred, it remains in the posture
it was in and all further proceedings in the action merely are
referred to and determined by the transferee tribunal, leaving
untouched whatever already has been done in the transferor
court.” 15 Charles Alan Wright, Arthur R. Miller & Edward H.
Cooper, Federal Practice and Procedure § 3846 (3d ed. 2007).
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Dadey (Reisinger’s mother, now deceased) (Filing No. 16, at 2-3).
Reisinger was a manager and “controlling person” of ROF (Filing
No. 1, at 4).

Reisinger resigned as a member of ROF on April 16,

2008 (Ex. 1, Filing No. 15, at 5).

ROF was dissolved on February

2, 2009 (Filing No. 16, at 2).
On June 29, 2011, the Commission filed a complaint
praying for “injunctive and other equitable relief and for
penalties under the Commodity Exchange Act” (the “Act”) (Filing
No. 1, at 1).

The complaint lists six counts alleging violations

of the Act, including failure to register as a community pool
operator, failure to lawfully file exemption notices, failure to
furnish account statements and annual reports, and three counts
of fraud.
II.

Applicable Law.

The change of venue statute reads as follows: “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.”
U.S.C. § 1404(a).

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“The statutory language reveals three general

categories of factors that courts must consider 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 v. Mississippi Chem. Corp., 119 F.3d 688, 691 (8th
Cir. 1997).

However, a district court is not limited to

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consideration of only “these enumerated factors.

Instead, courts

have recognized that such determinations require a case-by-case
evaluation of the particular circumstances at hand and a
consideration of all relevant factors.”

Id.

In any event,

“[T]here is no exhaustive list of specific factors to consider.”
Id.
III.

Discussion.

Here, Reisinger claims that the Northern District of
Illinois is a district where the action “might have been
brought,” as required by section 1404(a) (Filing No. 15, at 1).
The Commission does not dispute this claim.

Instead, the

Commission states, “[T]he convenience of the parties and
witnesses, the interests of justice, and the local interests of
this District [of Nebraska] favor denying Reisinger’s Motion and
keeping this litigation in the District of Nebraska” (Filing No.
22, at 2).
A.

Convenience of the Parties.
The Commission is headquartered in Washington, D.C.,

and has a branch office in Chicago.

The Commission notes that

its undersigned counsel work out of the Washington, D.C., office.
Without further elaboration, the Commission concludes,
“Therefore, the Northern District of Illinois is a less
convenient venue to the Commission than the District of Nebraska”
(Filing No. 22, at 7).

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Although Reisinger lives in Grand Island, Nebraska, she
“will voluntarily appear as a witness at the trial of the case”
in the Illinois District Court (Ex. 1, Filing No. 26, at 1).

The

Court understands Reisinger’s motion to change venue to focus on
factors other than her own geographic convenience.

Nevertheless,

Reisinger does claim that Chicago would be more convenient for
her because she already has Illinois counsel representing her in
the Illinois Case.
The only remaining members of defendant ROF at the time
it dissolved live in North Carolina and California.
With regard to the parties’ convenience in accessing
records and documents, Reisinger points out that the National
Futures Association, located in Chicago, “will have relevant
documents concerning the disputed filing” (Filing No. 16, at 6).
Reisinger also claims that records of three named brokerage firms
relevant to the action are located in Chicago (Filing No. 16, at
6).
On the other hand, the Commission alleges, “All of
[Reisinger’s] business records, together with the e-discovery
contained within the computers she used to operate her fraudulent
scheme, are located in the District of Nebraska” (Filing No. 22,
at 1).

Yet Reisinger claims that she “has already made extensive

production of documents to plaintiff in its pre-filing
investigation and in the pending case in Illinois” (Filing No.

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25, at 5).

The Commission does not claim that it has had any

difficulty obtaining documents from Reisinger.
The Court finds that the convenience of the parties
does not support venue in the District of Nebraska.
B.

Convenience of the Witnesses.
“Convenience of the witnesses is a primary, if not the

most important, factor in considering a motion under § 1404(a).”
Biometics, LLC v. New Womyn, Inc., 112 F. Supp. 2d 869, 876 (E.D.
Mo. 2000).

However, the “sheer numbers of witnesses will not

decide which way the convenience factor tips.”

Terra, 119 F.3d

at 696.
Reisinger identifies seven named individuals and one
organization, all based in Chicago, that are “primary potential
witnesses” (Filing No. 16, at 3-4; Filing No. 25, at 5).

The

Commission names several “primary witnesses who are anticipated
to testify”:

Reisinger and her Nebraska counsel; unnamed

“corporate designees of the banks used by Reisinger,” located in
Nebraska; one witness from Chicago; and one witness each from
Long Beach, California, San Diego, California, and Charlotte,
North Carolina (Filing No. 22, at 7-8).
In addition, the Commission states that various pool
participants, none of whom reside in the United States, may be
called as witnesses (Filing No. 22, at 8).

The Court notes that

there is no international airport in Nebraska.

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The Court is

aware that there are a few direct flights from Washington, D.C.,
into Omaha.

Nevertheless, airline travel from most cities is

easier into Chicago than it is into Omaha.

The Commission also

suggests that the action might be transferred to Lincoln,
Nebraska, which would offer even fewer flights than Omaha, or
would add another hour’s drive to the trip to Omaha.
The Court finds that Chicago is a more convenient
location than either Omaha or Lincoln, Nebraska, for a large
majority of the potential witnesses named by Reisinger and the
Commission.
C.

Interests of Justice.
“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, 119 F.3d at 695.

“It is also true that a party seeking transfer bears the burden
of showing that the balance of § 1404(a) factors ‘strongly’
favors the alternative forum.

But these presumptions may carry

somewhat less weight when, as here, the plaintiffs do not reside
in the district in which they sued.”

Schoemann ex rel. Schoemann

v. Excellus Health Plan, Inc., 447 F.Supp. 2d 1000, 1004
(D.Minn.,2006) (citations omitted).
The Commission is headquartered in Washington, D.C.,
and has an office in Chicago, but it has no presence in Nebraska.

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The Court finds the Schoemann court’s argument persuasive that
the plaintiff Commission’s choice of forum should “carry somewhat
less weight.”

D.

Schoemann, 447 F.Supp. at 1004.

Local Interests of the District of Nebraska.
In this case, the Commission points out that “the Act

provides that the Commission may bring actions to enforce its
provisions in the district ‘wherein the act or practice occurred,
is occurring, or is about to occur’” (Filing No. 22, at 10
(quoting 7 U.S.C. § 13a-1(e))).

Yet, in its entirety, 7 U.S.C.

§ 13a-1(e) states:
Any action under this section may
be brought in the district wherein
the defendant is found or is an
inhabitant or transacts business or
in the district where the act or
practice occurred, is occurring, or
is about to occur, and process in
such cases may be served in any
district in which the defendant is
an inhabitant or wherever the
defendant may be found.
7 U.S.C. § 13a-1(e).

Thus, the statute provides for more

flexibility in choice of venue than the Commission’s brief would
indicate.
In its brief, the Commission states that “from at least
February 28, 2005 to October 26, 2009 Defendant Reisinger
operated a fraudulent scheme and [a] commodity pool . . . from
her home office in Grand Island,” citing paragraphs 1 and 16 of

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the complaint (Filing No. 22 at 2).

Paragraph 1 of the complaint

does not refer to the location of Reisinger’s alleged activity.
Paragraph 16 merely identifies the Commission; presumably the
Commission meant paragraph 17.

Paragraph 17 again mentions that

Reisinger lives in Grand Island.

It also states,

Reisinger, together with ROF,
operated the [commodity pool] from
her residence in Nebraska utilizing
an account at a futures commission
merchant . . . located in Chicago,
Illinois. During the time
Reisinger committed the violations
of the Act and Commission
Regulations, she was registered as
an associated person . . . of
Chicago Illinois introducing broker
. . . New World Holdings, LLC . . .
and acted as its branch manager.
(Filing No. 1, at 6).

If anything, the Commission provides a

stronger case for the Northern District of Illinois than for the
District of Nebraska.
Similarly, in its brief, the Commission cites
paragraphs 43-51 of the complaint, but the alleged activities in
those paragraphs have no geographical indicia (Filing No. 22, at
3 (citing Filing No. 1, at 12-14)).

However, elsewhere in its

complaint, the Commission alleges that Reisinger and ROF
“regularly conducted business in Chicago, Illinois by utilizing
[a futures commission merchant] in Chicago, and attending
business meetings in Chicago, among other things” (Filing No. 1,
at 11).

This statement establishes that Reisinger “transacts

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business” in the Northern District of Illinois, so that venue
there would comply with the venue statute of the Act, 7 U.S.C.
§ 13a-1(e).
The Commission does state that “nearly $500,000 in
funds belonging to participants in the [commodity pool] remain on
deposit in the District of Nebraska.

No participant funds are

located within the Northern District of Illinois” (Filing No. 22,
at 2).

However, the only detailed transfer of funds made by a

pool participant as identified by the Commission’s index of
evidence was “a total of $249,918.91 to the Bank of America
account of the Law Office of Mr. Caffray,” who the Commission has
located in Long Beach, California (Ex. 1, Filing No. 23, at 5 and
Filing No. 22 at 8).
The Commission also includes evidence of a wire
transfer request for $5,065 from ROF’s commodity pool account at
a Nebraska bank to Nancy Dadey (Ex. 1, Filing No. 23, at 17).
Similarly, the Commission includes as evidence an email noting
the transfer of $3,000 from ROF “to Nebraska” to fund a new
account for ROF’s commodity pool (Ex. 1, Filing No. 23, at 18).
Finally, the Commission states that Reisinger received monthly
statements from ROF’s commodity pool fund account at her
residence in Nebraska (Filing No. 1, at 19).

Yet the pool fund

account itself was with a futures commission merchant located in
Chicago.

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In sum, other than the two smaller transfers above and
the receipt of monthly statements, the Commission does not
identify any particular transactions that took place in Nebraska,
nor does it identify any pool participants who live in Nebraska.
The Commission does not identify why the District of Nebraska
would have any particular local interest in the action, other
than the fact that funds remain on deposit in Nebraska.

The

Commission repeatedly infers that because Reisinger engaged in
activities while her place of business was located in Nebraska,
the activities must have occurred in Nebraska, but the Commission
provides scant evidence supporting this inference.

In its brief,

the Commission makes general claims that the alleged activities
occurred in Reisinger’s home.

In spite of this, the only two

interactions cited by the Commission between Reisinger and a
particular pool participant allegedly occurred in Australia and
“the United States” (Ex. 1, Filing No. 23, at 4-5).

Reisinger

claims that the meeting in “the United States” took place in
Chicago (Filing No. 25, at 5).
The Court notes that the Commission chose the venue of
the Illinois District Court for the Illinois Case wherein
Reisinger is already a defendant (Filing No. 16, at 1).

The

Court finds that for the convenience of the parties and the
witnesses and in the interest of justice, Reisinger’s motion to
transfer the action to the Illinois District Court should be

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granted.

A separate order will be entered in accordance with

this memorandum opinion.
DATED this 24th day of October, 2011.
BY THE COURT:
/s/ Lyle E. Strom
____________________________
LYLE E. STROM, Senior Judge
United States District Court

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