Phelps et al v. Stomber et al

Filing 22

MEMORANDUM AND ORDER granting 10 Motion to Transfer Case filed by Alneil Associates, Daniel Bergman and Michael Gad, D.J. Wu: The motion to transfer is GRANTED. (Docket # 10.) The Clerk is directed to transfer the action to the United States District Court for the District of Columbia. (Signed by Judge P. Kevin Castel on 12/14/2011) (ab)

USDSSDNY
DOCUMENT
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

ELECTRONICALLY FILED
DOC #: _ _ _ _---,..
DATE FILED:

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DJ. WU, et al.,
Plaintiffs,

11 Civ. 7271 (PKC)

-againstMEMORANDUM AND ORDER
JOHN CRUMPTON STOMBER, et al.,
Defendants.

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P. KEVIN CASTEL, District Judge:
This action was filed on September 1, 2011 in the Supreme Court of the State of
New York, New York County, and removed to this Court on October 14. (Docket # 1.) The
Complaint purports to bring claims under New York and Dutch law on behalf of shareholders in
the Carlyle Capital Corporation ("CCC").
Plaintiffs move, pursuant to 28 U.S.C. § 1404, to transfer this action to the United
States District Court for the District of Columbia, where three previously filed actions raise
similar claims against CCC and affiliated persons and entities. See Phelps et at. v. Stomber et
al., 11 Civ. 1142 (ABJ) (D.D.C.); Phelps v. Carlyle Capital Corp., 11 Civ. 1143 (ABJ) (D.D.C.);
Glaubach v. Carlyle Capital Corp., 11 Civ. 1523 (ABJ) (D.D.C.) (the "District of Columbia
Actions"). Judge Amy Berman Jackson, U.S.DJ., has consolidated the three cases, and issued a
Memorandum Opinion appointing lead plaintiffs and lead counsel to pursue claims brought
under the Securities E)(change Act of 1934. 11 Civ. 1142 (D.D.C.) (Docket # 22, 37).
Defendants contend that plaintiffs' sole rationale for commencing a New York action was to
make an end-run around the District of Columbia statutes of limitations, reflecting an
impermissible effort to "expand their legal rights," and that the complaint should be dismissed as
duplicative. Curtis v. Citibank, N.A., 226 F.3d 133, 140 (2d Cir. 2000).

2

DISCUSSION

Pursuant to 28 U.S.C. § 1404(a), "[f]or the convenience of parties and witnesses,
in the interest ofjustice, a district court may transfer any civil action to any other district or
division where it might have been brought." In the event that jurisdiction "may be proper in
more than one forum" and an action is one of "two competing lawsuits," the Second Circuit has
held that "considerations ofjudicial administration and conservation of resources" favor transfer
to the first-filed forum. First City Nat'l Bank & Trust Co. v. Simmons, 878 F.2d 76, 79 (2d Cir.
1989);

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New York Marine & Gen'l Ins. Co. v. Lafarge North America, Inc., 599 F.3d 102,

112 (2d Cir. 2010) ("The first-filed rule states that, in determining the proper venue, '[w]here
there are two competing lawsuits, the first suit should have priority."') (quoting D.H. Blair & Co.
v. Gottdiener, 462 F.3d 95, 105 (2d Cir. 2006)).
"[T]he first-filed rule does not constitute an invariable mandate," however, and is
a rebuttable presumption. Emp'rs Ins. of Wausau v. Fox Entm't Grp.. Inc., 522 F.3d 271, 275
(2d Cir. 2008). "Special circumstances," such as manipulative or deceptive behavior, may weigh
against transfer to the first-filed jurisdiction. New York Marine, 599 F.3d at 112-13. A
"balancing of the conveniences" may also weigh against transfer. rd. at 113.
Because there is no disagreement that the actions are factually related, the
plaintiffs' motion to transfer is granted. It is in the interest ofjudicial administration and
conservation of resources for these actions to be in the same tribunal. Emp'rs Ins. of Wausau,
522 F.3d at 274-75; Rabbi Jacob Joseph Sch. v. Province of Mendoza, 342 F. SUpp. 2d 124, 131
(E.D.N.Y. 2004) ("Denial of transfer would result in duplicative actions in which two federal
judges would preside over the same basic claim, wasting judicial resources, requiring the parties
to unnecessarily expend more time and expense, and risking potentially inconsistent results.").

3
To the extent that the defendants oppose this motion, they assert that transfer
should be denied as futile because this action is duplicative to the District of Columbia Actions,
and amounts to an end-run around the District of Columbia statutes of limitations. Defendants
do not otherwise challenge the appropriateness of transfer. (See Def. Mem. at 2 ("If ... the
Court does not see the duplicative nature of plaintiffs' claims as a reason to reject their request to
transfer the case, Defendants do not otherwise oppose plaintiffs' motion to transfer without
prejudice to these and other defenses.").) The defendants' contention that they have a
meritorious dispositive motion does not constitute a special circumstance that defeats the firstfiled rule. Such arguments should be raised in the transferee forum, which has the greatest
familiarity with the previously filed actions and is better positioned to weigh whether plaintiffs'
allegations are duplicative and reflective of procedural gamesmanship.
CONCLUSION
The motion to transfer is GRANTED. (Docket # 10.) The Clerk is directed to
transfer the action to the United States District Court for the District of Columbia.
SO ORDERED.
Dated: New York, New York
December 14, 2011

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P. Kevin Castel
United States District Judge