SGM Holdings LLC et al v. Andrews et al
OPINION & ORDER re: 20 MOTION to Dismiss OR, ALTERNATIVELY, TO TRANSFER THE MATTER TO THE WESTERN DISTRICT OF TENNESSEE. filed by Karl Schledwitz, A James Andrews, Richard Gaines. CONCLUSION: For the foregoing reasons, Defendants m otion to dismiss for lack of personal jurisdiction, improper venue, and failure to state a claim, and, in the alternative to transfer the action to the Western District of Tennessee, is denied. The Clerk is directed to close the motion at Docket 20. SO ORDERED. (Signed by Judge Paul A. Crotty on 1-12-17) (mov)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
SGM HOLDINGS LLC, SYNDICATED
GEO MANAGEMENT CORPORATION,
RICHARD FEATHERLY, LAWRENCE
FIELD, and PREMIER NATURAL
15 Civ. 8142 (PAC) (HBP)
OPINION & ORDER
A. JAMES ANDREWS, RICHARD GAINES,
and KARL SCHLEDWITZ,
HONORABLE PAUL A. CROTTY, United States District Judge:
Plaintiffs SGM Holdings LLC, Syndicated Geo Management Corporation, Richard
Featherly, Lawrence Field, and Premier Natural Resources LLC ("Plaintiffs") bring this action
against Defendants A. James Andrews, Richard Gaines, and Karl Schledwitz ("Defendants")
pursuant to N.Y. Jud. Law§ 487 based on allegedly deceitful statements made to this Court in
DNV Investment Partnership v. SGM Holdings LLC, 15 Civ. 1255 (PAC) (HBP) (S.D.N.Y.).
Defendants move to dismiss for lack of personal jurisdiction, improper venue, and failure to state
a claim, and, in the alternative, move to transfer the action to the Western District of Tennessee.
Defendants' motion to dismiss or transfer is denied.
Defendants are counsel for the plaintiffs in DNV Investment Partnership v. SGM
Holdings LLC, 15 Civ. 1255 (PAC) (HBP) (S.D.N.Y.) ("DNV Action"). The DNV Action was
initially filed in the United States District Court for the Western District of Tennessee. The
defendants in the DNV Action filed a motion to dismiss, to strike the jury demand, and to change
venue. DNV Action, Dkt. 26. District Judge Sheryl H. Lipman granted the defendants' motion
to change venue and transferred the action to this Court by order dated February 13, 2015. DNV
Action, Dkt. 46.
After the transfer, the defendants in the DNV Action requested permission to re-file the
motion to dismiss and to strike the jury demand. DNV Action, Dkt. 49. The plaintiffs filed a
letter with this Court in opposition, requesting that "the Court accept the Motions to Dismiss and
Responses thereto as filed in the Western District of Tennessee and set this matter for oral
argument on those motions." DNV Action, Dkt. 59 at 2. The letter also attached the Second
Amended Complaint. DNV Action, Dkt. 59-1. Defendants all signed the letter and the Second
Amended Complaint. DNV Action, Dkt. 59, 59-1.
Plaintiffs allege in this action that Defendants made "multiple knowingly false and
deceptive factual allegations" to the Court in the DNV Action. Compl. if 2.
Defendants argue that venue is improper in this district. 28 U.S.C. § 1391(b) provides in
relevant part that venue is proper for a civil action in "(1) a judicial district in which any
.defendant resides, if all defendants are residents of the State in which the district is located," and
"(2) a judicial district in which a substantial part of the events or omissions giving rise to the
Defendants argue that venue is only proper in a district court in Tennessee because all
Defendants are residents of Tennessee. They cite Dashman v. Peter Letterese & Assocs., Inc.,
where the court held that "when venue is proper in a district pursuant to § 13 91 (b)( 1) because all
defendants reside in the same state, venue does not lie elsewhere pursuant to § 139l(b)(2)." 999
F. Supp. 553, 554 (S.D.N.Y. 1998). The Court declines to adopt the holding in Dashman and
instead joins the courts that have concluded that§ 1391(b)(l) and§ 139l(b)(2) provide
independent and alternative bases for venue. See, e.g., LMD. USA, Inc. v. Sha/it, 92 F. Supp. 2d
315, 316-17 (S.D.N.Y. 2000); Hall v. South Orange, 89 F. Supp. 2d 488, 492-93 (S.D.N.Y.
Defendants also argue that venue is improper pursuant to § 13 91 (b)(2) based on the
location of the events and omissions leading up to the filing of the submissions in the DNV
Action. But what gives rise to this action is the filing of the allegedly deceptive statements in
this Court, not what Defendants did to prepare to make the allegedly deceptive statements. Thus,
venue is proper in this district pursuant to § 1391(b)(2).
Finally, Defendants request that the Court transfer venue to the Western District of
Tennessee pursuant to 28 U.S.C. § 1404(a). The resolution of the DNV Action will take place in
this district and will likely bear heavily on the merits of the instant action. And with respect to
the DNV Action, as Judge Lipman noted, "much of the proof in the case is likely to be located in
and around New York City, as are many of the parties." Dkt. 46 at 15. The Court therefore
declines to exercise its discretion to transfer pursuant to 28 U.S.C. § 1404(a).
Defendants contend that the action must be dismissed for lack of personal jurisdiction.
Under N.Y. C.P.L.R. § 302(a), a court "may exercise personal jurisdiction over any nondomiciliary ... who in person or through an agent ... transacts any business within the state," so
long as the plaintiffs "cause of action aris[ es] from" that "transact[ion]." Licci v. Lebanese
Canadian Bank, SAL, 673 F.3d 50, 60 (2d Cir. 2012). "[T]he overriding criterion necessary to
establish a transaction of business is some act by which the defendant purposefully avails
[himself] of the privilege of conducting activities within New York." Id. at 61 (citing Ehrenfeld
v. Bin Mahfouz, 9 N.Y.3d 501, 508 (2007)). Defendants purposefully availed themselves of the
privilege of conducting activities within New York by knowingly filing in this Court a lettersigned by all Defendants-which attached the Second Amended Complaint-also signed by all
Defendants. That act also gave rise to the instant action. The Court therefore may exercise
personal jurisdiction over Defendants.
Failure to State a Claim
Defendants' contention that Plaintiffs have failed to state a claim is meritless. Plaintiffs
have adequately pleaded that Defendants intended to deceive the Court by plausibly alleging that
Defendants made knowingly false and deceptive statements to the Court in the DNV Action.
Further, to the extent a "chronic, extreme pattern of legal delinquency" is an element of a claim
pursuant to N.Y. Jud. Law§ 487, see Amalfitano v. Rosenberg, 533 F.3d 117, 123 (2d Cir. 2008)
(noting split in New York authority), Defendants have repeatedly filed papers with the Court
premised on the allegations in the Second Amended Complaint in the DNV Action. And
Plaintiffs also allege that the Second Amended Complaint in the DNV Action is replete with
knowingly false and deceptive allegations.
For the foregoing reasons, Defendants' motion to dismiss for lack of personal
jurisdiction, improper venue, and failure to state a claim, and, in the alternative to transfer the ·
action to the Western District of Tennessee, is denied. The Clerk is directed to close the motion
at Docket 20.
Dated: New York, New York
January 12, 2017
United States District Judge
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