TransFirst Group Inc et al v. Magliarditi et al
Memorandum Opinion and Order denying 14 Motion to Dismiss filed and 18 Motion to Dismiss/Lack of Jurisdiction. Francine Magliarditi, DFM Holdings, Ltd., and DFM Holdings, LP for lack of personal jurisdiction, the court hereby transfers thi s action insofar as it relates to these Defendants to the District Court for the District of Nevada pursuant to 28 U.S.C. § 1631. The court transfers this action as it relates to Defendants Mr. Magliarditi, the Trust Defendants, and the Shell Company Defendants to the District Court for the District of Nevada pursuant to 28 U.S.C. § 1404(a). (Ordered by Judge Sam A Lindsay on 2/15/2017) (epm) [Transferred from Texas Northern on 2/16/2017.]
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
TRANSFIRST GROUP, INC. f/k/a
TransFirst Holdings, Inc., et al.,
DOMINIC J. MAGLIARDITI;
FRANCINE MAGLIARDITI, in her
individual capacity, and as trustee of
FRM TRUST, DJM IRREVOCABLE
TRUST and the FANE TRUST; ATM
ENTERPRISES, LLC; DII CAPITAL,
INC.; DFM HOLDINGS, LTD.; DFM
HOLDINGS, LP; DII PROPERTIES
LLC; and SPARTAN PAYMENT
Civil Action No. 3:16-CV-1918-L
MEMORANDUM OPINION AND ORDER
On February 9, 2017, the court issued a memorandum opinion and order finding that
Plaintiffs had established a prima facie case that the court has personal jurisdiction over
Defendants Dominic Magliarditi (“Mr. Magliarditi”); Francine Magliarditi, as sued in her capacity
as trustee of FRM Trust, DJM Irrevocable Trust, and Fane Trust (the “Trust Defendants”); DII
Capital, Inc., ATM Enterprises, LLC, and Spartan Payment Solutions, LLC (the “Shell Company
Defendants”). See Mem. Op. & Order 14 (Doc. 32). The court also stated: “Whether [it] has
personal jurisdiction over Mrs. Magliarditi, sued in her individual capacity, DFM Holdings, Ltd.,
and DFM Holdings, LP, will be addressed in a separate order, which will also address the
remainder of Defendants’ arguments presented in their respective motions.” Id. at 14-15. After
Memorandum Opinion and Order - Page 1
careful consideration of the motions, pleadings, record, and applicable law, the court finds that it
lacks personal jurisdiction over Mrs. Magliarditi, as sued in her individual capacity (“Mrs.
Magliarditi”), as well as DFM Holdings, Ltd. and DFM Holdings, LP (the “Partnership
Defendants”). Rather than dismiss Mrs. Magliarditi and the Partnership Defendants for lack of
personal jurisdiction, and for the reasons set forth below, the court determines that this case should
be transferred to the District of Nevada for the convenience of the parties and witnesses and in the
interest of justice pursuant to 28 U.S.C. §§ 1631 and 1404(a).
Factual and Procedural Background
The 2006 Action & Entry of Judgment Against Dominic Magliarditi
Plaintiffs are TransFirst Group, Inc. f/k/a TransFirst Holdings, Inc. (“Transfirst”), a
Delaware corporation with its principal place of business in Hauppauge, New York; and two
Delaware limited liability companies, TransFirst Third Party Sales, LLC and Payment Resources
International, LLC, whose sole member is TransFirst. Plaintiffs have a judgment in the amount of
$4,486,725 against Defendant Mr. Magliarditi. The judgment was obtained in a separate lawsuit
brought by Plaintiffs against Mr. Magliarditi and others in 2006. See TransFirst Holdings, Inc., et
al. v. Dominic J. Magliarditi, et al., Case No. 3:06-CV-2303-C, in the United States District Court
for the Northern District of Texas (the “2006 Action”).1 Following a three-week bench trial in
2009, the Honorable Jorge A. Solis adjudged Mr. Magliarditi and other entities liable for mail and
wire fraud in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and
found that Mr. Magliarditi had lied under oath in sworn interrogatory responses and affidavits. On
The court takes judicial notice of the docket sheet and filings in the 2006 Action. See Taylor v.
Charter Med. Corp., 162 F.3d 827, 830 (5th Cir. 1998); see also Fed. R. Evid. 201. Further, on May 2,
2016, following the retirement of the Honorable Chief Judge Jorge A. Solis, the 2006 Action was transferred
to the docket of the Honorable Sam R. Cummings, Senior United States District Judge.
Memorandum Opinion and Order - Page 2
August 30, 2011, Judge Solis entered a final judgment and, after several amendments, on April 22,
2013, entered the Third Amended Final Judgment (the “Judgment”) against Mr. Magliarditi and
the other entities and in favor of Plaintiffs in the amount of $4,486,725.
In June 2014, the United States Court of Appeals for the Fifth Circuit affirmed the
Judgment. TransFirst Holdings Inc. v. Magliarditi, 574 F. App’x 345 (5th Cir. 2014). Between
entry of the Judgment, and continuing until the present, Plaintiffs have sought to uncover Mr.
Magliarditi’s assets and to enforce the Judgment in this District, as well as in California and
Nevada. Among other things, a postjudgment discovery dispute between Plaintiffs and Mr.
Magliarditi was referred to Magistrate Judge Paul D. Stickney who, on August 6, 2015, overruled
Mr. Magliarditi’s objections to postjudgment discovery requests, sanctioned him, and ordered him
to travel to Texas at his own expense to testify in a postjudgment deposition in the magistrate
judge’s chambers in Dallas, which took place on September 16, 2015. That litigation is ongoing,
as evidenced by recent docket entries in 2016 and 2017.
The Current Lawsuit
On June 30, 2016, Plaintiffs filed this lawsuit against judgment debtor Mr. Magliarditi, as
well as new Defendants who were not parties to the 2006 Action, namely, Mrs. Magliarditi, the
Trust Defendants, the Shell Company Defendants, and the Partnership Defendants, alleging that
Mr. Magliarditi fraudulently transferred assets to Mrs. Magliarditi and the other Defendants in an
effort to frustrate Plaintiffs’ ongoing efforts to collect on the Judgment.
In Plaintiffs’ First Amended Complaint (“Complaint” or “Compl.”) (Doc. 11), Plaintiffs
allege that, to date, Mr. Magliarditi has only paid $62 toward the Judgment. Plaintiffs allege that
Mr. Magliarditi and Mrs. Magliarditi “are working together to defraud Plaintiffs and prevent them
from collecting on the Judgment by hiding and transferring assets through the use of a labyrinth
Memorandum Opinion and Order - Page 3
of layered shell companies and trusts [which are] shams, existing for no reason other than to hide
assets, defraud Transfirst, and otherwise act as the alter ego of [Mr. Magliarditi].” Id. at 2. Seeking
to unwind the alleged fraudulent transfers and to hold Mrs. Magliarditi, the Trust Defendants, the
Shell Company Defendants, and the Partnership Defendants liable for the Judgment entered in the
2006 Action, Plaintiffs assert the following causes of action: (1) fraudulent transfers under the
Texas Uniform Fraudulent Transfer Act (“TUFTA”), Tex. Bus. & Com. Code §§ 24.006(b) and
24.005(a); (2) unjust enrichment; and (3) alter ego, alleging that Mrs. Magliarditi, as sued in her
individual capacity, the Trust Defendants, the Shell Company Defendants, and the Partnership
Defendants “are alter-egos of [Mr. Magliarditi] and, therefore, they should be held jointly and
severally liable with [him] on the Judgment.” Compl. at 2-3. Plaintiffs seek compensatory
damages, restitution, punitive and exemplary damages, attorney’s fees, injunctive relief,
appointment of a receiver, and any other relief to which they are entitled. Id. at 30-31.
The Pending Motions and the Court’s February 9, 2017 Ruling (Doc. 32)
Defendants have moved to dismiss the Complaint on a variety of grounds, including for
lack of personal jurisdiction, improper venue, and for failure to state a claim; or, alternatively, they
request that the court strike portions of the Complaint and direct Plaintiffs to file more
particularized averments with regard to the fraudulent conveyance claim pursuant to Federal Rule
of Civil Procedure 12(e). On February 9, 2017, the court issued a memorandum opinion and order
finding that, contrary to Defendants’ arguments in their pending motions to dismiss, Plaintiffs had
established a prima facie case that the court has personal jurisdiction over Defendants Mr.
Magliarditi, the Trust Defendants, and the Shell Company Defendants. See Mem. Op. & Order 14
(Doc. 32). The court also stated: “Whether [it] has personal jurisdiction over Mrs. Magliarditi, as
sued in her individual capacity, DFM Holdings, Ltd., and DFM Holdings, LP, will be addressed
Memorandum Opinion and Order - Page 4
in a separate order, which will also address the remainder of Defendants’ arguments presented in
their respective motions. Id. at 14-15.
Legal Standards for Rule 12(b)(2) - Lack of Personal Jurisdiction
On a motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of
establishing a prima facie case for the court’s jurisdiction over a nonresident defendant. See Ham
v. La Cienega Music Co., 4 F.3d 413, 415 (5th Cir. 1993); Stuart v. Spademan, 772 F.2d 1185,
1192 (5th Cir. 1985). When the court rules on the motion without an evidentiary hearing, the
plaintiff may establish personal jurisdiction by presenting a prima facie case that personal
jurisdiction is proper, id.; proof by a preponderance of the evidence is not required. International
Truck and Engine Corp. v. Quintana, 259 F. Supp. 2d 553, 556 (N.D. Tex. 2003) (citing WNS, Inc.
v. Farrow, 884 F.2d 200, 203 (5th Cir. 1989)). The court may determine the jurisdictional issue
by receiving affidavits, interrogatories, depositions, oral testimony, or any combination of the
recognized methods of discovery. Stuart, 772 F.2d at 1192. Uncontroverted allegations in a
plaintiff’s complaint must be taken as true, and conflicts between the facts contained in the parties’
affidavits must be resolved in favor of the plaintiff. Bullion v. Gillespie, 895 F.2d 213, 217 (5th
Cir. 1990). After a plaintiff makes his prima facie case, the burden then shifts to the defendant to
present “a compelling case that the presence of some other consideration would render jurisdiction
unreasonable.” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985).
A federal court has jurisdiction over a nonresident defendant if the state long-arm statute
confers personal jurisdiction over that defendant, and if the exercise of jurisdiction is consistent
with due process under the United States Constitution. Ruston Gas Turbines, Inc. v. Donaldson
Co., Inc., 9 F.3d 415, 418 (5th Cir. 1993). Because the Texas long-arm statute extends to the limits
of federal due process, Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990), the court must
Memorandum Opinion and Order - Page 5
determine whether (1) the defendants have established “minimum contacts” with the forum state;
and, (2) whether the exercise of personal jurisdiction over the defendants would offend “traditional
notions of fair play and substantial justice.” Ruston Gas, 9 F.3d at 418 (citing International Shoe
Co. v. Washington, 326 U.S. 310, 316 (1945)).
The “minimum contacts” prong is satisfied when a defendant “purposefully avails itself of
the privilege of conducting activities within the forum state, thus invoking the benefits and
protections of its laws.” Burger King, 471 U.S. at 475. The nonresident defendant’s availment
must be such that the defendant “should reasonably anticipate being haled into court” in the forum
state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). This test “ensures
that a defendant will not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or
‘attenuated’ contacts, or of the ‘unilateral activity of another party or a third person.’” Burger
King, 471 U.S. at 475 (citations omitted). The “minimum contacts” prong of the inquiry may be
subdivided into contacts that give rise to “specific” personal jurisdiction and those that give rise to
“general” personal jurisdiction. Marathon Oil Co. v. A.G. Ruhrgas, 182 F.3d 291, 295 (5th Cir.
1999). Specific jurisdiction is only appropriate when the nonresident defendant’s contacts with
the forum state arise from, or are directly related to, the cause of action. Helicopteros Nacionales
de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984). The exercise of general personal
jurisdiction is proper when the nonresident defendant’s contacts with the forum state, even if
unrelated to the cause of action, are continuous, systematic, and substantial. Id. at 414 n.9.
In evaluating the second prong of the due process test, the court must examine a number
of factors in order to determine fairness and reasonableness, including: (1) the defendant’s burden;
(2) the forum state’s interests; (3) the plaintiff’s interest in convenient and effective relief; (4) the
judicial system’s interest in efficient resolution of controversies; and (5) the state’s shared interest
Memorandum Opinion and Order - Page 6
in furthering social policies. Asahi Metals Indus. Co. v. Superior Court, 480 U.S. 102, 112 (1987).
As noted above, “once minimum contacts are established, a defendant must present ‘a compelling
case that the presence of some consideration would render jurisdiction unreasonable.’” Eviro
Petroleum, Inc. v. Kondur Petroleum, 79 F. Supp. 2d 720, 725 (S.D. Tex. 1999) (quoting Burger
King, 471 U.S. at 277). In fact, “[o]nly in rare cases . . . will the exercise of jurisdiction not
comport with fair play and substantial justice when the nonresident defendant has purposefully
established minimum contacts with the forum state.” Id. (quoting Guardian Royal Exch.
Assurance, Ltd. v. English China Clays, P.L.C., 815 S.W.2d 223, 231 (Tex. 1991)).
Defendants move to dismiss Mrs. Magliarditi and the Partnership Defendants for lack of
personal jurisdiction. The court now addresses whether Plaintiffs have met their burden of
presenting a prima facie case for the exercise of personal jurisdiction over these three Defendants.
Personal jurisdiction over Mrs. Magliarditi and the Partnership Defendants is premised on
(i) the theory that they have engaged in intentional conduct designed to cause harm in Texas,
namely, a scheme to defraud Plaintiffs out of money owed them under the Judgment; and (ii)
various piercing-the-corporate-veil theories, including alter ego and sham to perpetrate fraud on
Plaintiffs. The court first addresses Plaintiffs’ argument that the court has specific personal
jurisdiction over Mrs. Magliarditi, as sued in her individual capacity, and the Partnership
Defendants based on their alleged participation in a tortious scheme to defraud Plaintiffs and defeat
their ability to collect amounts owed under the Judgment.
Memorandum Opinion and Order - Page 7
1. Minimum Contacts Analysis
Plaintiffs argue that even though Mrs. Magliarditi and the Partnership Defendants may be
participating in this alleged scheme from Nevada, this does not place them beyond this court’s
reach, as the harm they are causing is being felt in Texas. In advancing this argument, Plaintiffs
rely on Calder v. Jones, 465 U.S. 783 (1984), which, as interpreted by the Fifth Circuit, held that
“an act done outside the state that has consequences or effects within the state will suffice as a
basis for jurisdiction in a suit arising from those consequences if the effects are seriously harmful
and were intended or highly likely to follow from the nonresident defendant’s conduct.” Guidry
v. U.S. Tobacco Co., 188 F.3d 619, 628 (5th Cir. 1999) (citing Calder, 465 U.S. at 789-90).
Plaintiffs also reference this court’s application of Calder in Sourcing Management, Inc. v.
Simclar, Inc., 118 F. Supp. 3d 899, 910-11 (N.D. Tex. 2015) (Lindsay, J.); and applied by the Fifth
Circuit in Dontos v. Vendomation NZ Ltd., 582 F. App’x 338, 344-45 (5th Cir. 2014), and Mullins
v. TestAmerica, Inc., 564 F.3d 386, 402 (5th Cir. 2009). See Pls.’ Resp. Br. 4-6 (Doc. 27).
Plaintiffs contend that these cases provide the legal authority to allow this court to exercise
personal jurisdiction over these three Defendants. The court disagrees.
Plaintiffs’ reliance on Sourcing Management, Dontos, and Mullins is misplaced, and their
interpretation of these cases is unduly expansive and goes far beyond what those courts held. In
Sourcing Management, the court concluded that the plaintiff “made a prima facie showing that
[defendant] established minimum contacts with Texas sufficient for [it] to exercise specific
jurisdiction over [defendant]” when the defendant “intentionally impaired [plaintiffs’] ability to
collect on its Texas judgment . . . by colluding to transfer [another defendants’] assets via a private
foreclosure sale.” 118 F. Supp. 3d at 911. In Dontos, the Fifth Circuit reversed the district court
and held that personal jurisdiction over out-of-state defendants was present where plaintiff alleged
Memorandum Opinion and Order - Page 8
that defendants participated in a scheme to fraudulently transfer assets to prevent a Texas creditorplaintiff from collecting a pre-existing Texas judgment in violation of TUFTA. 582 F. App’x at
348. In Mullins, the Fifth Circuit upheld the district court’s exercise of personal jurisdiction over
a nonresident defendant that had no other contacts with Texas except for its involvement in a
fraudulent transfer scheme that affected “a known, major creditor in Texas whose right to payment
arises out of contracts that share a strong connection with Texas.” 564 F.3d at 402.
There is a notable distinction between this case, on the one hand, and Sourcing
Management, Dontos, and Mullins, on the other hand. Each of those cases involved plaintiffs that
were Texas residents, and this, among other things, created a connection to Texas aside from the
judgment issued in a Texas court. Sourcing Management involved a Texas creditor attempting to
collect on its Texas Judgment. 118 F. Supp. 3d at 910. Dontos involved transfers that impaired
the rights of a Texas resident. In explaining its reason for exercising personal jurisdiction, the
court in Dontos stated: “[W]hen a nonresident defendant receives Texas property or a Texas
contract, for the purpose of defrauding a Texas resident, the nonresident defendant is subject to
suit in Texas courts.” 582 F. App’x at 347 (citing Retamco Operating, Inc. v. Republic Drilling
Co., 278 S.W.3d 333, 341 (Tex. 2009)). In Mullins, the “debtor-creditor relationship between [the
parties] [was] centered in Texas.” 564 F. 3d at 402. The plaintiff in Mullins was a Texas creditor,
the conduct that thwarted payment occurred in Texas, and the parties’ business relationship
contract was governed by Texas law; therefore, the case involved multiple contacts with Texas
separate from the judgment.
In this case, there are no allegations that the fraudulent transfers occurred in Texas or
involved any Texas entities. According to the Complaint, the individuals and entities that allegedly
participated in the transfers are domiciled in Nevada, and Plaintiffs that are unable to recover on
Memorandum Opinion and Order - Page 9
the Judgment are domiciled in Delaware and New York. While Transfirst had a principal place of
business in Dallas, Texas, when it initiated the 2006 Action alleging RICO violations, Transfirst
has since moved its principal place of business to Hauppauge, New York. The only connection to
Texas that Plaintiffs have is the Judgment issued in the 2006 Action. Plaintiffs have failed to cite
any case to support their argument that the Judgment itself, without more, is sufficient to allow the
court to exercise personal jurisdiction over out-of-state defendants who were not parties to the
underlying action in which the Judgment was issued.
In sum, Plaintiffs have failed to establish a prima facie case that Mrs. Magliarditi and the
Partnership Defendants have sufficient minimum contacts with Texas such that the exercise of
personal jurisdiction over them would be proper. See Burger King, 471 U.S. at 475. Accordingly,
the court now turns to Plaintiffs’ alternative theory of personal jurisdiction.
2. Alter-Ego Analysis
As an alternative to the traditional minimum contacts analysis, Plaintiffs argue that
personal jurisdiction may be exercised over Mrs. Magliarditi and the Partnership Defendants
because they are alter egos of Mr. Magliarditi. In moving to dismiss, Defendants contend that,
with regard to Mrs. Magliarditi, “Plaintiffs cite no authority that one person can be the alter ego of
another person for purposes of asserting personal jurisdiction.” Defs.’ Br. 6 (Doc. 19) (original
emphasis). As to the Partnership Defendants, Defendants contend that “the alter ego theory does
not apply to partnerships and thus cannot be the basis for personal jurisdiction over a limited
partnership[.]” Id. at 7 (Doc. 19). The court agrees.
The Fifth Circuit has recognized that personal jurisdiction may be established over an
individual or corporation through a piercing-the-corporate-veil or alter-ego theory. See Patin v.
Memorandum Opinion and Order - Page 10
Thoroughbred Power Boats, Inc., 294 F.3d 640, 653 (5th Cir. 2002). As the Fifth Circuit explained
[F]ederal courts have consistently acknowledged that it is compatible with due process for
a court to exercise personal jurisdiction over an individual or a corporation that would not
otherwise be subject to personal jurisdiction in that court when the individual or
corporation is an alter ego or successor of a corporation that would be subject to personal
jurisdiction in that court. The theory underlying these cases is that, because the two
corporations (or the corporation and its individual alter ego) are the same entity, the
jurisdictional contacts of the one are the jurisdictional contacts of the other for the purposes
of the International Shoe due process analysis.
Patin, 294 F.3d at 653. “Further, the piercing-the-corporate-veil test for attribution of contacts,
i.e., personal jurisdiction, is less stringent than for liability.” Ingenious Invs., Inc. v. Bombart,
2006 WL 1582080, at *3 (N.D. Tex. Jan. 20, 2006) (McBryde, J.) (internal quotation marks and
The alter-ego doctrine permits a court to disregard the corporate fiction under certain
circumstances to hold an individual liable for the debts of a corporation or to hold a corporation
liable for the debts of an individual. See Leon, Ltd. v. Albuquerque Commons P’ship, 862 S.W.2d
693, 707 (Tex. App.—El Paso 1993, no writ). Traditional veil-piercing uses the alter-ego doctrine
to break through corporate formalities and include the assets of a shareholder or other corporate
insider as assets of a corporation. See In re Moore, 379 B.R. 284, 291 (Bankr. N.D. Tex. 2007).
Reverse veil-piercing, at issue in this case, “is a common law doctrine recognized in many states,
including Nevada and Texas, that renders the assets of a corporation liable for the debts of a
corporate insider based on a showing that the corporate entity is actually the alter ego of the
individual.” Clapper v. American Realty Investors, Inc., 2015 WL 3504856, at *9 (N.D. Tex. June
3, 2015) (Fitzwater, J.) (and cases cited therein). Nevada courts have held that “[i]t is particularly
appropriate to apply the alter ego doctrine in ‘reverse’ when the controlling party uses the
Memorandum Opinion and Order - Page 11
controlled entity to hide assets or secretly to conduct business to avoid a pre-existing liability of
the controlling party.” LFC Mktg. Grp., Inc. v. Loomis, 116 Nev. 896, 903 (Nev. 2000). Under
Nevada law, courts consider the following factors as indicative of the existence of an alter-ego
relationship: “commingling of funds; (2) undercapitalization; (3) unauthorized diversion of funds;
(4) treatment of corporate assets as the individual’s own; and (5) failure to observe corporate
formalities.” LFC Mktg. Grp., 116 Nev. at 904 (citation omitted). Nevada courts, however, have
emphasized that “[t]here is no litmus test for determining when the corporate fiction should be
disregarded; the result depends on the circumstances of each case.” Id. (citation omitted).
While courts have extended veil-piercing doctrines to corporations and limited liability
companies, as Defendants correctly note (see Defs.’ Br. 7 (Doc. 19)), the alter-ego theory does not
apply to partnerships and thus cannot be invoked as the basis for personal jurisdiction over the
Partnership Defendants. See Skidmore Energy, Inc. v. KPMG, LLP, 2004 WL 3019097, at *5
(N.D. Tex. Dec. 28, 2004); Pinebrook Prop., Ltd. v. Brookhaven Lake Prop. Owners Ass’n, 77
S.W.3d 487, 499-500 (Tex. App.—Texarkana 2002, pet. denied). In addition, the court agrees
with Defendants that one person cannot be the alter ego of another person for purposes of imputing
one individual’s contacts with the forum to another individual who otherwise lacks those contacts.
Otherwise stated, there can be no corporate fiction to disregard in connection with Plaintiffs’
allegations that Mrs. Magliarditi is the alter ego of Mr. Magliarditi. Accordingly, as to Mrs.
Magliarditi and the Partnership Defendants, Plaintiffs have failed to establish a prima facie case
for the exercise of personal jurisdiction under the alter-ego doctrine.2
Further, Plaintiffs, in their response to Defendants’ motion to dismiss, fail to respond to
Defendants’ argument that the alter-ego doctrine does not apply to partnerships and that an individual
cannot be the alter ego of another individual, as there is no corporate fiction to be disregarded. Accordingly,
Plaintiffs have conceded these points. See Kellam v. Metrocare Servs., 2013 WL 12093753, at *3 (N.D.
Memorandum Opinion and Order - Page 12
Transfer to the District of Nevada under 28 U.S.C. §§ 1631 and 1404(a)
The court in now confronted with the question of whether to dismiss Mrs. Magliarditi and
the Partnership Defendants for lack of personal jurisdiction, as Defendants request, and force
Plaintiffs to pursue the same case in two different courts, or to exercise its discretion, and transfer
this action to the District of Nevada pursuant to 28 U.S.C. §§ 1631 and 1404(a), where Plaintiffs
will be able to pursue their fraudulent transfer and alter-ego claims against all Defendants in one
forum. For the reasons that follow, the court concludes that a transfer is warranted.
1. Transfer of Plaintiffs’ Suit Against Mrs. Magliarditi and the Partnership
Defendants under 28 U.S.C. § 1631
Once a district court determines it lacks personal jurisdiction over a defendant, it has the
option of dismissing the action or transferring it to any district in which it could have been brought.
See 28 U.S.C. § 1631. Section 1631 provides, in relevant part:
Whenever a civil action is filed in a court . . . and that court finds that there
is a want of jurisdiction, the court shall, if it is in the interest of justice, transfer such
action or appeal to any other such court in which the action or appeal could have
been brought at the time it was filed . . . and the action . . . shall proceed as if it had
been filed in . . . the court to which it is transferred on the date upon which it was
actually filed in . . . the court from which it is transferred.
28 U.S.C. § 1631.
The court, thus, must first determine whether Plaintiffs’ action could originally have been
brought in the District of Nevada. Defendants, all alleged to be residents of Nevada, concede that
the District of Nevada “is a district in which this action might otherwise have been brought[,]” and
that venue is proper in the District of Nevada. See Magliarditi’s Am. Rule 12 Mot. Dis. ¶15 (Doc.
14); Defs.’ Rule 12 Mot. Dis. 11 (Doc. 19). Plaintiffs do not argue that the action could not have
Tex. May 31, 2013) (Plaintiffs abandoned claims when they failed to respond to arguments made in a
motion to dismiss.).
Memorandum Opinion and Order - Page 13
been brought there. Further, all Defendants reside in Nevada and a substantial part of the alleged
facts giving rise to the causes of action occurred in Nevada. Therefore, the court concludes that
this action could have been brought in the District of Nevada. See generally 28 U.S.C. §1391(b).
Second, the court must ask whether transferring the action against Mrs. Magliarditi and the
Partnership Defendants would be in the interest of justice. The court concludes that transferring
the case would avoid any prejudice to Plaintiffs of potential statute of limitations problems and
would allow Plaintiffs to avoid the unnecessary expense associated with filing a new civil action.
Moreover, transfer will not cause any undue burden to Defendants Mrs. Magliarditi and the
Partnership Defendants. They do not argue that litigating this case in Nevada would impose an
unwarranted hardship, nor could they, as the case would be tried in a state where they conduct
business, reside, are subject to personal jurisdiction, and where the events alleged in the Complaint
occurred. Finally, transfer to the District of Nevada, where this action could have originally been
brought, imposes no greater burden on that district, as Plaintiffs would have to refile their lawsuit
in that district were the court to dismiss Mrs. Magliarditi and the Partnership Defendants for lack
of personal jurisdiction.
One court in this judicial district has noted that “it is not clear that the court can transfer a
case under § 1631 when the court lacks personal jurisdiction.” See Orix Pub. Fin. v. Lake Cnty.
Hous. & Redev. Auth., 2011 WL 3628958, at *8 (N.D. Tex. Aug. 16, 2011) (Fitzwater, J.) (citations
omitted). While the court recognizes that some federal courts limit § 1631 to transfers where the
transferor court lacks subject matter jurisdiction, absent a decision by the Fifth Circuit to the
contrary, the court, consistent with the weight of authority, agrees with those courts that interpret
§ 1631 according to its plain meaning to apply when a court lacks either personal or subject matter
jurisdiction. See, e.g., Federal Home Loan Bank v. Moody’s Corp., 821 F.3d 102, 119 (1st Cir.),
Memorandum Opinion and Order - Page 14
cert. denied, 137 S. Ct. 304 (2016), abrogated on other grounds by Lightfoot v. Cendant Mortg.
Corp., 137 S. Ct. 553 (2017) (holding that § 1631 should be interpreted “broadly to permit transfer
when there is a lack of either personal or subject matter jurisdiction”); Roman v. Ashcroft, 340
F.3d 314, 328 (6th Cir. 2003) (concluding that “§ 1631 . . . applies to federal courts identifying
any jurisdictional defect, regardless of whether it involves personal or subject matter
jurisdiction.”); Island Insteel Sys., Inc. v. Water, 296 F.3d 200, 218 n.9 (3d Cir. 2002) (stating that
a district court “ha[s] authority” under § 1631 to transfer an action over which it “lack[s] in
personam jurisdiction.”); Ross v. Colo. Outward Bound Sch., Inc., 822 F.2d 1524, 1526-27 (10th
Cir. 1987) (same); see also Hill v. U.S. Air Force, 795 F.2d 1067, 1068-70 (D.C. Cir. 1986)
(considering whether a district court lacking personal jurisdiction over nonresident defendant
abused its discretion by failing to transfer a cause under § 1631 to a district court with personal
jurisdiction); Johnson v. Woodcock, 444 F.3d 953, 954 n.2 (8th Cir. 2006) (“[W]e affirm the
district court’s dismissal [for lack of personal jurisdiction] even though the court was empowered
by 28 U.S.C. § 1631 to transfer the action to another court to cure lack of jurisdiction.”).
This court is baffled by the authority that holds or suggests that 28 U.S.C. § 1631 pertains
to subject matter jurisdiction but not personal jurisdiction. The statute makes no such distinction.
It is clear on its face and allows a court to transfer a civil action to any other court in which the
action or appeal could have been brought. The statute does not place or include any limitation or
restriction as to the type of jurisdiction. It is unambiguous, that is, the statute is not capable of
more than one reasonable interpretation.
Some courts have referred to the legislative history in holding that the statute applies only
to subject matter jurisdiction; however, the legislative history is quite beside the point when there
is no ambiguity in the statute. As the Supreme Court aptly and succinctly stated, “[T] he
Memorandum Opinion and Order - Page 15
authoritative statement is the statutory text, not the legislative history or any other extrinsic
material. Extrinsic materials have a role in statutory interpretation only to the extent they shed a
reliable light on the enacting Legislature’s understanding of otherwise ambiguous terms.” Exxon
Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 568 (2005). Also, as the application of the
plain meaning of § 1631 does not lead to an “absurd result,” Congress’s intent is of no moment
and cannot be considered by a court in interpreting a statute. Lamie v. United States Trustee, 540
U.S. 526, 534 (2004) (citations omitted).
Congress has been writing statutes for over three hundred years, and if it had intended for
§ 1631 to apply to subject matter jurisdiction only, its members certainly had the intellect and
capacity to limit the statute’s applicability to subject matter jurisdiction; however, it did not do so.
No court should engage in judicial overreaching to interpret and “write in” a limitation or exclusion
that is repugnant to the statute’s clearly stated text.
Further, if § 1631 only referred to subject matter jurisdiction, it would have minimal utility.
This is so because a district court lacking subject matter jurisdiction, in most instances, dismisses
an action that was originally filed in federal court, and remands an action if it is one that was
removed from state court to federal court. This court has never transferred a case when it lacked
subject matter jurisdiction, except those involving a successive or second habeas petition pursuant
to 28 U.S.C. § 2244(b)(3)(A). See Henderson v. Haro, 282 F.3d 862, 864 (5th Cir. 2002).
Finally, dismissal of a case, as opposed to transfer, will require a plaintiff to incur new
filing fees and other costs, and a dismissal could raise issues regarding limitations. The court can
think of no logical reason why a district court that lacks personal jurisdiction should not be allowed
to transfer an action to another court, rather than dismiss it, under such circumstances. A narrow
Memorandum Opinion and Order - Page 16
interpretation that § 1631 only applies to subject matter jurisdiction is plainly contrary to the text
of the statute and does not promote judicial economy.
For all of these reasons, the court concludes that it has the authority, in the interest of
justice, to transfer an action when it lacks personal jurisdiction and will transfer this action insofar
as it relates to Mrs. Magliarditi and the Partnership Defendants to the United States District Court
for the District of Nevada pursuant to 28 U.S.C. § 1631.3
2. Transfer of Remainder of Case Pursuant to 28 U.S.C. § 1404(a)
Prior to severing the action against Mrs. Magliarditi and the Partnership Defendants and
transferring it to the District of Nevada under 28 U.S.C. §1631, the court must address whether the
remainder of the case should be transferred to the District of Nevada under 28 U.S.C. § 1404(a),
which provides 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 may have been
brought.” The purpose of Section 1404(a) “is to prevent the waste ‘of time, energy and money’
and ‘to protect litigants, witnesses and the public against unnecessary inconvenience and
expense[.]” Van Dusen v. Barrack, 376 U.S. 612, 616 (1964) (quoting Continental Grain Co. v.
Barge FBL–585, 364 U.S. 19, 26, 27 (1960)). Though Defendants did not seek a transfer of venue,
the court may nevertheless transfer venue sua sponte. See Jarvis Christian College v. Exxon Corp.,
845 F.2d 523, 528 (5th Cir. 1988) (holding that district court may sua sponte transfer action
In the alternative to transfer under 28 U.S.C. §1631, the court holds that, for the reasons set forth
below (see infra Sec. III.B.2), transfer of Plaintiffs’ action against Mrs. Magliarditi and the Partnership
Defendants is proper under 28 U.S.C. § 1404(a). See Aguacate Consol. Mines v. Deeprock, Inc., 566 F.2d
523, 524 (5th Cir. 1978) (construing “the discretionary transfer language of §1404(a) to permit transfer for
the convenience of the parties and in the interest of justice of cases with proper venue even if no personal
jurisdiction existed in the transferring court.”) (citation omitted).
Memorandum Opinion and Order - Page 17
pursuant to 28 USC § 1404(a)); Mills v. Beech Aircraft Corp., 886 F.2d 758, 761 (5th Cir. 1989)
(“Such transfers [under section 1404(a)] may be made sua sponte.”); Franklin v. GMAC Mortgage,
2013 WL 2367791, at *1 (N.D. Tex. May 30, 2013) (“The Court may . . . issue a Section 1404(a)
transfer order sua sponte.”) (Fitzwater, J.). When deciding whether to transfer venue, discretion
must be exercised according to an “individualized, case-by-case consideration of convenience and
fairness.” Van Dusen, 376 U.S. at 622. A court has “broad discretion in deciding whether to order
a transfer.” In re Volkswagen of Am., Inc., 545 F.3d 304, 311 (5th Cir. 2008) (en banc)
In determining whether to transfer the action, the court considers “all relevant factors to
determine whether or not on balance the litigation would more conveniently proceed and the
interests of justice be better served by transfer to a different forum.” Peteet v. Dow Chemical Co.,
868 F.2d 1428, 1436 (5th Cir. 1989) (internal quotations and citations omitted). In applying
section 1404(a), a district court is to first determine “whether the judicial district to which transfer
is sought would have been a district in which the claim could have been filed.” In re Volkswagen
AG, 371 F.3d 201, 203 (5th Cir. 2004) (“Volkswagen I”) (citing In re Horseshoe Entm’t, 337 F.3d
429, 432 (5th Cir. 2003)). Once this initial determination is made, a district court:
turn[s] to the language of § 1404(a), which speaks to the issue of “the convenience
of parties and witnesses” and to the issue of “in the interest of justice.” The
determination of “convenience” turns on a number of private and public interest
factors, none of which [is] given dispositive weight. The private concerns include:
(1) the relative ease of access to sources of proof; (2) the availability of compulsory
process to secure the attendance of witnesses; (3) the cost of attendance for willing
witnesses; and (4) all other practical problems that make trial of a case easy,
expeditious and inexpensive. The public concerns include: (1) the administrative
difficulties flowing from court congestion; (2) the local interest in having localized
interests decided at home; (3) the familiarity of the forum with the law that will
govern the case; and (4) the avoidance of unnecessary problems of conflict of laws
of the application of foreign law.
Memorandum Opinion and Order - Page 18
Id. (citations omitted). In a § 1404(a) analysis, a plaintiff’s choice of forum “should be respected”
unless “the transferee venue is clearly more convenient.” Volkswagen II, 545 F.3d at 315. A
plaintiff’s choice of forum, however, is not an independent factor within the § 1404(a) analysis.”
Id. at 314 n.10. “Although a plaintiff’s initial choice of forum is entitled to deference, the degree
of deference is higher when he has chosen his home forum. Conversely, when a plaintiff is not a
resident of the chosen forum, or when the operative facts underlying the case did not occur in the
chosen forum, a court gives less deference to a plaintiff’s choice.” Franklin, 2013 WL 23677791,
at *2 (quoting Rimkus Consulting Grp., Inc. v. Balentine, 693 F. Supp. 2d 681, 690-91 (S.D. Tex.
Thus, the court first considers whether venue is proper in the District of Nevada. For the
reasons already discussed, Defendants have conceded, and the court has found, that venue is proper
in the District of Nevada. Accordingly, this action is eligible to be transferred to the District of
Nevada at the court’s discretion if, after considering the public and private interest factors, the
court concludes that “on balance the litigation would more conveniently proceed and the interests
of justice be better served by transfer to a different forum.” Peteet, 868 F.2d at 1436.
In this case, while some of the § 1404(a) factors are neutral as between this court and the
District of Nevada, those factors that favor the District of Nevada, on balance, strongly favor
transfer to the District of Nevada, and no factor actually favors maintaining this case in the
Northern District of Texas. First, Plaintiffs have failed to allege any facts suggesting that any,
much less a substantial part, of the events giving rise to their fraudulent transfer claims occurred
in Texas, or that any of the property allegedly transferred is situated in Texas. While the Judgment
was entered in the 2006 Action in the Northern District of Texas, a judgment is not a res, and is
Memorandum Opinion and Order - Page 19
entitled to full faith and credit in all states once properly filed in a state by the judgment creditor.
See U.S. Const. art IV, § 1.
Second, Plaintiff TransFirst is a Delaware corporation with its principal place of business
in Hauppauge, New York. As already noted, a plaintiff’s choice of forum is entitled to less
deference when the chosen forum is not his home forum, as in this case. See Rimkus Consulting,
693 F. Supp. 2d at 690-91. Additionally, for a company with its principal place of business in
New York, it is no less convenient for Plaintiffs to litigate this action in the District of Nevada
than it would be to litigate in this judicial district. Insofar as Plaintiffs’ counsel who are located in
Dallas, Texas, the court notes that the convenience of counsel is improper and irrelevant in
considering whether to transfer venue under § 1404(a). Volkswagen I, 371 F.3d at 206.
Third, as all Defendants reside in Nevada, and the acts and omissions giving rise to
Plaintiffs’ fraudulent transfer claims occurred in Nevada, the court concludes that it would likely
be more convenient for witnesses if the action were transferred to the District of Nevada and access
to sources of proof would likely be more readily available in the District of Nevada.
Finally, the court finds that transfer to the District of Nevada is in the interest of justice, as
it will allow Plaintiffs to pursue their claims against all Defendants in a single forum, thereby
avoiding the potential risks of inconsistent judgments, piecemeal litigation in separate judicial
districts, and the inefficiencies and burdens inherent in having nearly identical and overlapping
actions proceeding in two separate judicial district courts.
Accordingly, for the convenience of the parties and in the interest of justice, the court will
transfer this action as it relates to Defendants Mr. Magliarditi, the Trust Defendants, and the Shell
Company Defendants to the United States District Court for the District of Nevada pursuant to 28
U.S.C. § 1404(a).
Memorandum Opinion and Order - Page 20
For the reasons herein stated, the court finds that it lacks personal jurisdiction over Francine
Magliarditi, as sued in her individual capacity, DFM Holdings, Ltd., and DFM Holdings, LP.
Rather than dismiss Francine Magliarditi, DFM Holdings, Ltd., and DFM Holdings, LP for lack
of personal jurisdiction, the court hereby transfers this action insofar as it relates to these
Defendants to the District Court for the District of Nevada pursuant to 28 U.S.C. § 1631. The
court transfers this action as it relates to Defendants Mr. Magliarditi, the Trust Defendants, and
the Shell Company Defendants to the District Court for the District of Nevada pursuant to 28
U.S.C. § 1404(a). In light of the court’s ruling, the court need not address the remaining grounds
for dismissal set forth in Defendants’ respective motions to dismiss (see Docs. 14, 18), and the
motions are hereby denied without prejudice. The clerk of the court shall effect this transfer in
accordance with the usual procedure.
It is so ordered this 15th day of February, 2017.
Sam A. Lindsay
United States District Judge
Memorandum Opinion and Order - Page 21
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