Pence v. GEE Group, Inc.
Filing
44
MEMORANDUM OPINION: re: 30 MOTION to Transfer Case filed by GEE Group, Inc. For the reasons stated above, the defendants have made a meritorious motion to transfer this case in its entirety. The Court will delay issuing the order of transfer, how ever, until after March 2, 2017, to allow plaintiff to seek a stay in the event he seeks review of this Opinion and Order pursuant to Federal Rule of Civil Procedure 72(a) and chooses to make a motion for a stay pending that review. In the absence of an order granting such a stay, however, the Court will direct the Clerk, by separate order issued after March 2, 2017, to effectuate the transfer. (Signed by Magistrate Judge Gabriel W. Gorenstein on 2/16/2017) (ama)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------------------------------------X
STEPHEN B. PENCE,
:
16 Civ. 6589 (GBD) (GWG)
Plaintiff,
:
MEMORANDUM OPINION
-v.-
:
:
GEE GROUP, INC. f/k/a GENERAL
EMPLOYMENT ENTERPRISES, INC.
:
Defendant.
:
---------------------------------------------------------------X
GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE
In this lawsuit, plaintiff Stephen B. Pence has brought claims against defendant GEE
Group, Inc. (“GEE”), for which Pence formerly served as chairman, seeking indemnification for
attorney’s fees and other expenses. GEE has moved to dismiss under the doctrine of forum non
conveniens, or, in the alternative, to transfer the case to the Northern District of Illinois under 28
U.S.C. §§ 1404(a) or 1406(a).1 For the reasons stated below, the motion to transfer the case
pursuant to 28 U.S.C. § 1404(a) is granted.
1
See Notice of Motion, filed Oct. 28, 2016 (Docket # 30); Declaration of Michael P.
Regan in Support of Defendant’s Motion to Dismiss Plaintiff’s Amended Complaint, or
Alternatively, to Transfer, filed Oct. 28, 2016 (Docket # 31); Declaration of Dennis W. Baker,
filed Oct. 28, 2016 (Docket # 32) (“Baker Decl.”); Declaration of Alex P. Stuckey in Support of
Motion to Dismiss, filed Oct. 28, 2016 (Docket # 33) (“Stuckey Decl.”); Memorandum of Law
in Support of Defendant GEE Group Inc.’s Motion to Dismiss the Amended Complaint or,
Alternatively, to Transfer, filed Oct. 28, 2016 (Docket # 34) (“Def. Mem.”); Affidavit of Stephen
B. Pence in Opposition to Defendant GEE Group, Inc.’s Motions to Dismiss or Transfer, filed
Nov. 14, 2016 (Docket # 40) (“Pence Aff.”); Memorandum of Law in Opposition to Defendant
GEE Group, Inc.’s Motions to to [sic] Dismiss or Transfer, filed Nov. 14, 2016 (Docket # 41)
(“Pl. Mem.”); Declaration of Michael P. Regan in Further Support of Defendant’s Motions to
Dismiss, filed Dec. 2, 2016 (Docket # 42); Reply Memorandum of Law in Further Support of
Defendant GEE Group, Inc.’s Motions to Dismiss the Amended Complaint or, Alternatively, to
Transfer, filed Dec. 2, 2016 (Docket # 43) (“Def. Reply”).
I. BACKGROUND
A. Pence’s Connection to GEE
Pence is an attorney who has worked in private practice in Louisville, Kentucky since
late 2007. Pence Aff. ¶¶ 2-3. During 2009, Pence worked for W. Anthony Huff and regularly
traveled with Mr. Huff to New York City in connection with his work. Id. ¶ 4. During one of
these trips, Pence met with representatives of GEE, including Dennis W. Baker, a former
director of the company. Id. ¶¶ 5-6; Baker Decl. ¶ 8.
GEE is a temporary staffing agency, providing “direct hire, contract, and contract-to-hire
services.” Stuckey Decl. ¶ 3. Although GEE is incorporated in Illinois, “senior management
runs the company from Jacksonville, Florida and Tampa, Florida.”2 Id. ¶ 2. In 2009, GEE
sought an outside investor, a role that Pence eventually filled by purchasing a majority of GEE’s
shares using a company he controlled called PSQ. Baker Decl. ¶¶ 7, 14-15; Pence Decl. ¶ 8.
Pence was then elected as GEE’s Chairman of the Board, serving from July 2009 to November
2010. Stuckey Decl. ¶ 7.
B. The Indemnification Agreement
As of June 30, 2009, GEE’s bylaws provided that it would indemnify all of its directors
and officers who are sued in connection with their positions at GEE. See By Laws of General
Employment Enterprises, Inc., As Amended Effective June 30, 2009 (attached as Ex. A. to
Stuckey Decl.) (“Bylaws”) Art. VIII § 1. The Bylaws provide:
The corporation shall, to the fullest extent to which it is empowered to do so by
The Illinois Business Corporation Act of 1983 or any other applicable laws . . .
2
GEE considers Florida its “principal place of business” for jurisdictional purposes. See
Memorandum of Law in Support of Defendant GEE Group, Inc.’s Motion to Dismiss the
Amended Complaint Under Rule 12(b), filed Oct. 28, 2016 (Docket # 39) at 9.
2
indemnify any person who was or is a party or is threatened to be made a party to
any threatened, pending[,] or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she is or
was a director or officer of the corporation . . . against all expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
Id. The Bylaws also declare that this provision is “a contract between the corporation and each
director or officer who serves in any such capacity at any time while this article is in effect.” Id.
Art. VIII § 2.
On July 9, 2009, Pence signed an Indemnity Agreement with GEE. Pence Aff. ¶ 14;
Minutes, dated July 9, 2009 (attached as Ex. B to Stuckey Decl.); Indemnity Agreement, dated
July 9, 2009 (attached as Ex. 2 to Amended Complaint for Declaratory Relief and Damages,
filed Oct. 14, 2016 (Docket # 25) (“Am. Compl.”)) (“Indemnity”). Pence was attending a board
meeting in Oakbrook Terrace, Illinois at the time. Pence Aff. ¶ 14; Minutes. The Indemnity
states that GEE will “attempt” to maintain liability insurance for those serving it and its
subsidiaries, and that although GEE’s Charter and Bylaws and Illinois law provide for
indemnification rights, these rights are “not exclusive.” See Indemnity at Recitals; accord id.
¶ 17(a) (“The rights of indemnification and to receive advancement of Expenses as provided by
this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at
any time be entitled under applicable law, the Charter, the Company’s Bylaws, any agreement, a
vote of stockholders or a resolution of directors, or otherwise.”). The Indemnity recites that
“[Pence] does not regard the protection available under [GEE’s] Charter, Bylaws, and insurance
as adequate . . . and may not be willing to serve as an officer or director without adequate
protection.” Id. at Recitals. The Indemnity promises indemnification for Pence for expenses
3
incurred in legal proceedings in which he is “a party or participant.” Id. ¶¶ 3-6. The Indemnity
also includes the following choice of law and forum selection clause:
This Agreement and the legal relations among the parties shall be governed by,
and construed and enforced in accordance with, the laws of the Stale of Illinois,
without regard to its conflict of laws rules. . . . [GEE] and [Pence] hereby
irrevocably and unconditionally: (a) agree that any action or proceeding arising
out of or in connection with this Agreement shall be brought only in an Illinois
Court; (b) consent to submit to the jurisdiction of an Illinois Court for purposes of
any action or proceeding arising out of or in connection with this Agreement; (c)
waive any objection to the laying of venue of any such action or proceeding in an
Illinois Court; and (d) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in an Illinois Court has been brought in an
improper or inconvenient forum, or is subject (in whole or in part) to a jury trial.
Id. ¶ 23. The Indemnity defines “Illinois Court” as “the Circuit Court of the Eighteenth Judicial
District of the State of Illinois or another federal or state court of competent jurisdiction.” Id.
¶ 2(e). Oakbrook Terrace, where the Indemnity was signed, is located in Dupage County.
Dupage County is in the Eighteenth Judicial Circuit. See 705 Ill. Comp. Stat. 35/1.
C. Pence’s Costs Incurred and Indemnity Requests
At some point thereafter, the United States Attorney’s Office for the Southern District of
New York began a criminal investigation that resulted in the filing of a criminal complaint in
2010 against the president of a bank where GEE had an account. Pence Decl. ¶ 17; Letter from
Gregory Bartko, Esq., dated Apr. 26, 2010 (attached as Ex. 3 to Am. Compl.) (“Bartko Letter”).
In an April 26, 2010, letter from GEE’s General Counsel to an insurer, GEE’s General Counsel
stated that Pence incurred expenses during that investigation for which he claimed
indemnification. See Bartko Letter. That letter stated: “pursuant to GEE’s Bylaws, as amended
November 19, 2007, GEE has an obligation under Article VII of those Bylaws to indemnify Mr.
Pence for the costs of his defense, including the advancement of attorneys’ fees necessary to
engage counsel to represent him.” Id. The letter was sent from Atlanta, Georgia, to Rolling
4
Meadows, Illinois, with a copy sent to Pence by email. See id. Pence’s complaint alleges that
he relied on the Bartko Letter when he hired counsel to represent him in connection with a
criminal investigation. Am. Compl. ¶ 70. However, GEE has not indemnified Pence for any of
these expenses. Id. ¶ 71.
On September 9, 2015, the Securities and Exchange Commission (“SEC”) filed a civil
complaint against Pence. See Complaint and Jury Demand, filed Sept. 9, 2015 (Docket # 1), in
SEC v. Pence, No. 15 Civ. 07077 (GBD) (GWG) (S.D.N.Y.) (“SEC Compl.”). The complaint
concerns some of Pence’s actions during his service as chairman of GEE, and includes charges
of fraudulent conduct in violation of Exchange Act § 10(b), 15 U.S.C. § 48j(b), and Rule 10b-5,
17 C.F.R. § 240.10b-5, and making materially false or misleading statements to an accountant in
violation of Exchange Act Rule 13b2-2, 17 C.F.R. § 240.13b2-2. SEC Compl. ¶¶ 70-71, 73-75.
Although Pence sought indemnification from GEE to defend these charges, Am Compl. ¶¶ 3855; Pence Decl. ¶ 17, GEE refused to indemnify him or provide advancements of costs, Am.
Compl. ¶ 55; Stuckey Decl. ¶ 11.
D. Procedural History
Pence’s original complaint in this action was filed on August 19, 2016. It contained a
claim seeking a declaratory judgment that GEE is legally obligated to indemnify Pence and a
claim for damages resulting from GEE’s alleged breach of the Indemnity. See Complaint for
Declaratory Relief and Damages, filed Aug. 19, 2016 (Docket # 1) ¶¶ 52-58. GEE then filed a
motion to dismiss the complaint, arguing that this Court lacked personal jurisdiction, that venue
was improper, and that the complaint failed to state a claim.3 At the same time, it filed a separate
3
See Notice of Motion, filed Sept. 26, 2016 (Docket # 12); Declaration of Alex P.
Stuckey in Support of Motion to Dismiss, filed Sept. 26, 2016 (Docket # 13); Declaration of
5
motion to dismiss the case pursuant to the forum non conveniens doctrine or, in the alternative,
for an order transferring the case to the Northern District of Illinois under 28 U.S.C. § 1404(a).4
In response, Pence filed an amended complaint. See Am. Compl. The claims in the amended
complaint consist of a claim for a declaratory judgment that Pence is entitled to be indemnified
under GEE’s bylaws, id. ¶¶ 57-60; a breach of contract claim for breach of the Indemnity, id.
¶¶ 62-67; and a claim for promissory estoppel based on the Bartko Letter, id. ¶¶ 69-72.5 GEE
then filed the instant motion seeking dismissal or transfer of Pence’s amended complaint.
II. DISCUSSION
GEE moves for transfer under 28 U.S.C. §§ 1404(a) or 1406(a) to the United States
District Court for the Northern District of Illinois, or, in the alternative, for dismissal or transfer
under the common law doctrine of forum non conveniens.
Michael P. Regan in Support of Defendant’s Motion to Dismiss Plaintiff’s Claim, filed Sept. 26,
2016 (Docket # 14); Memorandum of Law in Support of Defendant GEE Group, Inc.’s Motion
to Dismiss the Complaint Under Rule 12(b), filed Sept. 26, 2016 (Docket # 15) (“Def. Dismiss
Mem.”); Supplemental Declaration of Alex P. Stuckey in Support of Motion to Dismiss, filed
Oct. 11, 2016 (Docket # 24). The motion to dismiss included an argument that the complaint
should be dismissed under Fed. R. Civ. P. 12(b)(6) based on the forum-selection clause. See
Def. Dismiss Mem. at 10-13.
4
See Notice of Motion, filed Sept. 26, 2016 (Docket # 16); Declaration of Michael P.
Regan in Support of Defendant’s Motion to Dismiss Plaintiff’s Complaint, or, in the Alternative,
Motion to Transfer, filed Sept. 26, 2016 (Docket # 17); Memorandum of Law in Support of
Defendant GEE Group, Inc.’s Motion to Dismiss the Complaint or, Alternatively, to Transfer,
filed Sept. 26, 2016 (Docket # 18).
5
At a conference on October 17, 2016, two days after filing his amended complaint,
Pence’s counsel stated that he would not pursue claims under the Indemnity if this Court found
the forum selection clause was mandatory. See generally Pl. Mem. at 23 n.10. Pence has since
reconsidered that position and stated that he will not forgo enforcement of his rights under the
Indemnity. Id. He also states that he intends to amend his complaint to add a claim for specific
performance under section 20(e) of the Indemnity. Id. at 23-24 n.10.
6
28 U.S.C. § 1404(a) provides: “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 or to any district or division to which all parties have
consented.” In Atlantic Marine Construction Co. v. United States District Court for the Western
District of Texas, 134 S. Ct. 568 (2013), the Supreme Court held that
Section 1404(a) is merely a codification of the doctrine of forum non conveniens
for the subset of cases in which the transferee forum is within the federal court
system; in such cases, Congress has replaced the traditional remedy of outright
dismissal with transfer.
Id. at 580 (citations omitted). Here, GEE seeks transfer to the United States District Court for
the Northern District of Illinois, which is “within the federal court system.” See id. Thus,
Atlantic Marine mandates that we analyze GEE’s application exclusively under 28 U.S.C.
§ 1404(a).
GEE contends that the forum non conveniens doctrine — rather than section 1404(a) —
applies because the contract at issue permits suit to be brought either in federal court or in state
court and, according to GEE, in such circumstances, the rule quoted above from Atlantic Marine
does not apply. Def. Mem. at 6. To support this argument, GEE points to a passage from
Atlantic Marine stating that “the appropriate way to enforce a forum-selection clause pointing to
a state or foreign forum is through the doctrine of forum non conveniens.” 134 S. Ct. at 580
(emphasis added). We disagree with GEE’s analysis. Here, the forum selection clause does not
require that suit be brought in a state forum; rather it requires that it be brought in either a state
or federal forum. See Indemnity ¶¶ 2(e), 23 (requiring suit in “the Circuit Court of the
Eighteenth Judicial District of the State of Illinois or another federal or state court of competent
jurisdiction.”). Whatever ambiguity might be discerned in Atlantic Marine’s phrasing of its rule
7
is dispelled by the facts of Atlantic Marine itself. The forum selection clause construed in
Atlantic Marine, like the clause at issue here, permitted suit to be brought either in state or
federal court. See 134 S. Ct. at 575 (“[A]ll disputes between the parties shall be litigated in the
Circuit Court for the City of Norfolk, Virginia, or the United States District Court for the Eastern
District of Virginia, Norfolk Division.”) (citation and internal quotation marks omitted).
Nonetheless, Atlantic Marine analyzed the propriety of the transfer exclusively under 28 U.S.C.
§ 1404(a) rather than the common law doctrine of forum non conveniens. Other courts have
similarly applied section 1404(a) to situations where a forum selection clause allows suit to be
brought in either a federal or state court, and where, as here, the party seeks a transfer to a
federal court. See, e.g., Food Mktg. Merch., Inc. v. Cal. Milk Processor Bd., 2015 WL 3893508,
at *1, *3 (S.D.N.Y. May 7, 2015); Bny Mellon, N.A. v. Lyell Wealth Mgmt., LLC, 2016 WL
7377235, at *2-3 (S.D.N.Y. Dec. 8, 2016). Accordingly, we analyze GEE’s motion only under
section 1404(a) and not under the doctrine of forum non conveniens.
A. Law Governing Motions to Transfer to Another Judicial District Under § 1404(a)
In deciding whether to transfer a case from one judicial district to another, a court first
examines whether the case could have been brought in the other district. See, e.g., ICICI Bank
Ltd. v. Essar Glob. Fund Ltd., 2017 WL 122994, at *6 (S.D.N.Y. Jan. 12, 2017); Herbert Ltd.
P’ship v. Elec. Arts Inc., 325 F. Supp. 2d 282, 285 (S.D.N.Y. 2004); In re Nematron Corp. Sec.
Litig., 30 F. Supp. 2d 397, 400 (S.D.N.Y. 1998). Pence does not contest that this case could
have been brought in the Northern District of Illinois. Thus, we do not discuss this question
further.
If the case could have been brought in the other district, a court then examines a number
of factors, commonly referred to as “private” and “public-interest” factors. Id. The Second
8
Circuit has listed the following factors as appropriate for consideration in determining whether to
grant a motion to transfer venue:
(1) the plaintiff’s choice of forum, (2) the convenience of witnesses, (3) the
location of relevant documents and relative ease of access to sources of proof, (4)
the convenience of parties, (5) the locus of operative facts, (6) the availability of
process to compel the attendance of unwilling witnesses, and (7) the relative
means of the parties.
N.Y. Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102, 112 (2d Cir. 2010) (citation
and internal quotation marks omitted). Courts in this district have also considered “(8) the
forum’s familiarity with the governing law, and (9) trial efficiency and the interest of
justice . . . .” Fellus v. Sterne, Agee & Leach, Inc., 783 F. Supp. 2d 612, 618 (S.D.N.Y. 2011);
accord Tlapanco v. Elges, 2016 WL 4992590, at *3 (S.D.N.Y. Sept. 15, 2016); AIG Fin. Prods.
Corp. v. Pub. Util. Dist. No. 1, 675 F. Supp. 2d 354, 368 (S.D.N.Y. 2009). “There is no rigid
formula for balancing these factors and no single one of them is determinative. Instead,
weighing the balance is essentially an equitable task left to the Court’s discretion.” Citigroup
Inc. v. City Holding Co., 97 F. Supp. 2d 549, 561 (S.D.N.Y. 2000) (citations and internal
quotation marks omitted).
“The calculus changes, however, when the parties’ contract contains a valid forumselection clause.” Atlantic Marine, 134 S. Ct. at 581. Because “a valid forum-selection clause
[should be] given controlling weight in all but the most exceptional cases,” id. (alteration in
original) (quoting Stewart Org. v. Ricoh Corp., 487 U.S. 22, 33 (1988)), the Supreme Court has
altered the usual section 1404(a) analysis for this situation in three ways:
First, the plaintiff’s choice of forum merits no weight. Rather, as the party
defying the forum-selection clause, the plaintiff bears the burden of establishing
that transfer to the forum for which the parties bargained is unwarranted. . . .
9
Second, a court evaluating a defendant’s § 1404(a) motion to transfer based on a
forum-selection clause should not consider arguments about the parties’ private
interests. When parties agree to a forum-selection clause, they waive the right to
challenge the preselected forum as inconvenient or less convenient for themselves
or their witnesses, or for their pursuit of the litigation. A court accordingly must
deem the private-interest factors to weigh entirely in favor of the preselected
forum. . . . As a consequence, a district court may consider arguments about
public-interest factors only. . . .
Third, when a party bound by a forum-selection clause flouts its contractual
obligation and files suit in a different forum, a § 1404(a) transfer of venue will
not carry with it the original venue’s choice-of-law rules — a factor that in some
circumstances may affect public-interest considerations.
Id. at 581-82 (emphasis added) (citations omitted); accord Bent v. Zounds Hearing Franchising,
LLC, 2015 WL 7721838, at *3 (S.D.N.Y. Nov. 30, 2015).
Because the section 1404(a) analysis is substantially different if a forum selection clause
applies, we turn next to the question of whether any of Pence’s claims are governed by the forum
selection clause contained in the Indemnity.
B. Forum Selection Clause
As to whether a forum selection clause applies, the Second Circuit has held that a
forum-selection clause is “presumptively enforceable” if the moving party can demonstrate that:
(1) the clause was “reasonably communicated to the party resisting enforcement”; (2) the clause
is mandatory, rather than permissive, in nature; and (3) the clause encompasses the plaintiff’s
claims. See Phillips v. Audio Active Ltd., 494 F.3d 378, 383 (2d Cir. 2007). If these conditions
are satisfied, the clause must be enforced unless the party opposing transfer makes a “sufficiently
strong showing that enforcement would be unreasonable or unjust, or that the clause was
invalid.” Martinez v. Bloomberg LP, 740 F.3d 211, 221 (2d Cir. 2014) (quoting Phillips, 494
F.3d at 383-84).
10
Pence does not contest that the clause was reasonably communicated to him — nor could
he given that it was contained in a contract he signed and, he was sufficiently sophisticated to
understand it. As for whether the clause encompasses any of the claims in this lawsuit, Pence
similarly does not contest that his claim for breach of the Indemnity agreement, Am. Compl. ¶¶
62-67, would be subject to the forum selection clause if it were enforced.
We thus examine next whether the Indemnity’s forum selection clause is mandatory. We
apply Illinois law in interpreting the Indemnity because the Second Circuit has held that the law
specified in the parties’ agreement containing a forum selection clause governs the interpretation
(as opposed to the enforcement) of the forum selection clause. See Martinez, 740 F.3d at
217-18. Here, the Indemnity expressly states that “[t]his Agreement and the legal relations
among the parties shall be governed by, and construed and enforced in accordance with, the laws
of the State of Illinois, without regard to its conflict of laws rules.” Indemnity ¶ 23.
Under Illinois law, “an indemnity agreement is a contract and is subject to contract
interpretation rules.” Va. Sur. Co. v. N. Ins. Co. of N.Y., 866 N.E.2d 149, 153 (Ill. 2007) (citing
Mountbatten Sur. Co. v. Szabo Contracting, Inc., 812 N.E.2d 90, 100 (Ill. 2004)). “The cardinal
rule is to give effect to the parties’ intent, which is to be discerned from the contract language. If
the contract language is unambiguous, it should be given its plain and ordinary meaning.” Id.
(citing Cent. Ill. Light Co. v. Home Ins. Co., 821 N.E.2d 206, 213 (Ill. 2004)). The parties’
intent is not determined, however, by viewing a clause or provision of the contract in isolation,
or by looking at detached portions. Thompson v. Gordon, 948 N.E.2d 39, 47 (Ill. 2011) (citing
Gallagher v. Lenart, 874 N.E.2d 43, 58 (2007)). Rather, the contract “must be construed as a
whole, viewing particular terms or provisions in the context of the entire agreement.” Matthews
11
v. Chi. Transit Auth., 51 N.E.3d 753, 776 (Ill. 2016) (citations omitted). If the language of the
contract is susceptible to more than one meaning, a court may consider extrinsic evidence to
determine the parties’ intent. Thompson, 948 N.E.2d at 47 (citing Gallagher, 874 N.E.2d at 58).
Read by itself, paragraph 23 is clearly a mandatory forum selection clause inasmuch as it
states that “any action or proceeding arising out of or in connection with [the Indemnity] shall be
brought only in an Illinois Court.” Indemnity ¶ 23 (emphasis added); see, e.g., Schwarz v.
Sellers Mkts, Inc., 812 F. Supp. 2d 932, 936 (N.D. Ill. 2011) (“A forum selection clause is
mandatory where its ‘language is obligatory’ and ‘clearly manifests an intent to make venue
compulsory and exclusive.’”) (quoting Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972
F.2d 753, 756 (7th Cir. 1992)). Indeed, Pence does not contest that this clause is a mandatory
forum selection clause. The dispute arises because the Indemnity, in a separate paragraph,
defines “Illinois Court” as “the Circuit Court of the Eighteenth Judicial District of the State of
Illinois or another federal or state court of competent jurisdiction.” Indemnity ¶ 2(e) (emphasis
added). Pence argues that this language means that suit may be brought in another federal or
state court of competent jurisdiction anywhere in the United States. Pl. Mem. at 18-19. GEE
argues that it means suit may be brought only in another federal or state court of competent
jurisdiction in Illinois. Def. Mem. at 10-12.
We agree with GEE that the Indemnity can only rationally be read to require suit in a
federal or state court located in Illinois. The phrasing of paragraph 23 — which contains the
actual forum selection clause — reflects an unambiguous intention to limit suit to an “Illinois
Court.” The intent of that paragraph would be destroyed were we to interpret the term “Illinois
Court” to mean a court anywhere in the United States. Such a conclusion could only be
characterized as “absurd” — a result that must be avoided. Suburban Auto Rebuilders, Inc. v.
12
Associated Tile Dealers Warehouse, Inc., 902 N.E.2d 1178, 1190 (Ill. 2009) (“Courts will
construe a contract reasonably to avoid absurd results.”) (citation omitted). It would also violate
the principle that “[a] contract must be interpreted as a whole. Sentences are not isolated units of
meaning, but take meaning from other sentences in the same document.” Quality Oil, Inc. v.
Kelley Partners, Inc., 657 F.3d 609, 613-14 (7th Cir. 2011) (citation and internal punctuation
omitted) (construing Illinois law). Thus, beyond the absurdity of defining an “Illinois Court” to
mean a non-Illinois court, our interpretation preserves the intention reflected in the mandatory
language of the forum selection clause: that is, that “any action . . . shall be brought only in an
Illinois Court.” If we were to follow Pence’s reading, the parties’ plain intention as reflected in
paragraph 23 to limit their selection of forum would be eliminated. See Thompson, 948 N.E.2d
at 47 (under Illinois law, “primary objective” of contract interpretation “is to give effect to the
intention of the parties”) (citation omitted).
Pence urges that the phrase “another federal or state court of competent jurisdiction” has
“no geographic limitation” and thus that the Court should not “add” one. Pl. Mem. at 18. But
Pence does not explain how we could interpret the phrase as containing no geographic limitation
and maintain fidelity to the parties’ intention as expressed in paragraph 23, which contains the
operative language. In fact, to accept Pence’s interpretation would make clause “(a)” of
paragraph 23 meaningless and unnecessary, and would violate the canon of interpretation that a
contract should be construed to give effect to all its provisions. See Martindell v. Lake Shore
Nat’l Bank, 154 N.E.2d 683, 689 (Ill. 1958) (a contract “is to be construed as a whole, giving
meaning and effect to every provision thereof, if possible, since it will be presumed that
everything in the contract was inserted deliberately and for a purpose”) (citation omitted); accord
Bruno Benedetti & Sons, Inc. v. O’Malley, 464 N.E.2d 292, 297 (Ill. App. Ct. 1984).
13
This reading of the Indemnity becomes all the more obvious if we imagine that paragraph
23 had been written as follows: “‘Illinois Court’ shall mean any federal or state court of
competent jurisdiction.” Had the provision been so drafted, it would be beyond dispute that the
parties did not intend to define “Illinois Court” to refer to any federal or state court in the United
States but rather were referring to any federal or state court in Illinois. This reading would be
correct because we can imagine that the drafters of the definition might have reasonably
assumed that it was not necessary to repeat the limiting phrase “in Illinois,” given that the
provision was itself a definition of “Illinois Court.” With this in mind, we do not see why the
naming of a specific court in Illinois in the definition — that is, “the Circuit Court of the
Eighteenth Judicial District of the State of Illinois”— should change the analysis. Thus, the
drafters of paragraph 2(e) could have reasonably concluded that an additional limiting phrase,
such as “in Illinois,” was unnecessary.
Pence urges that if we find the phrase “another federal or state court of competent
jurisdiction” to be ambiguous, we should construe the term against GEE because it was the
contract’s drafter. Pl. Mem. at 21. We accept that “any ambiguity in the terms of a contract
must be resolved against the drafter of the disputed provision.” Dowd & Dowd, Ltd. v. Gleason,
693 N.E.2d 358, 368 (Ill. 1998) (citation omitted). However, this rule only applies when there is
an ambiguity. See id; Covinsky v. Hannah Marine Corp., 903 N.E.2d 422, 427 (Ill. App. Ct.
2009) (citations omitted). Here, there is no reasonable interpretation of paragraph 2(e) that
would expand the definition of an “Illinois Court” to a court outside of Illinois.
Accordingly, we conclude that the forum selection clause is mandatory. Pence has not
made a showing that enforcement of the clause is “unreasonable or unjust, or that the clause was
invalid.” Martinez, 740 F.3d at 217 (citation omitted). We thus turn next to an analysis of the
14
motion to transfer the Indemnity claim under section 1404(a).
C. Section 1404(a) Analysis of the Indemnity Claim
As discussed above, if the forum selection clause is mandatory, the plaintiff’s choice of
forum carries no weight in the section 1404(a) analysis and a court does not consider private
interests. Atlantic Marine, 134 S. Ct. at 581-82. The factors the Supreme Court identified as
non-private, or “public,” consist of “the administrative difficulties flowing from court
congestion; the local interest in having localized controversies decided at home; [and] the
interest in having the trial of a diversity case in a forum that is at home with the law.” Id. at 581
n.6 (alteration in original) (citation and internal quotation marks omitted). The party acting in
violation of the forum-selection clause “bear[s] the burden of showing that public-interest factors
overwhelmingly disfavor a transfer.” Id. at 583.
Pence recognizes that, in the event the forum selection clause is found to be mandatory as
to the Indemnity claim, we must not consider any “private” factors. Pl. Mem. at 22. Yet his
only argument that the Indemnity claim should not be transferred relies exclusively on his
argument that hearing the case in Illinois would “create inconvenience to Mr. Pence” — a matter
that cannot be considered under Atlantic Marine — and that the transfer would “needlessly
waste judicial resources” because his claims for indemnification on a theory of promissory
estoppel and under the Bylaws would remain in New York. Id. at 23. This latter argument,
however, assumes that these other two claims must remain in New York. Pence never explains
why they must remain in New York. And, as discussed in the next section, these claims are
transferrable under section 1404(a).
Thus, Pence has not met his burden of showing that the public-interest factors
“overwhelmingly disfavor a transfer.” Atlantic Marine, 134 S. Ct. at 583. Accordingly, the
15
claim under the Indemnity must be transferred to United States District Court for the Northern
District of Illinois.
D. Section 1404(a) Analysis of the Claim Under the Bylaws and for
Promissory Estoppel
GEE argues that the remaining claims — under the Bylaws and for promissory estoppel
— are governed by the broad language of the forum selection clause. See Indemnity ¶ 23 (“any
action or proceeding arising out of or in connection with this Agreement shall be brought only in
an Illinois Court”) (emphasis added). Pence disputes this reading of the forum selection clause.
See Pl. Mem. at 24-26. We do not address GEE’s argument, however, because even if Pence is
correct, these claims must still be transferred under section 1404(a).
Because we assume arguendo that the forum selection clause does not apply to these
claims, we examine all the section 1404(a) factors — both public and private.
1. Trial Efficiency and the Interest of Justice
Concerns of trial efficiency and the interest of justice weigh overwhelmingly in favor of
transfer because the Indemnity claim must be transferred as a result of the forum selection
clause. The Bylaws and promissory estoppel claims rely on essentially the same facts as the
claim under the Indemnity. See Am. Compl. ¶¶ 56, 61, 68. All three of the claims seek the same
relief: that is, advancement or reimbursement of Pence’s attorney’s fees and other expenses for
some or all of the proceedings he has been sued in (or a declaration that he is entitled to
reimbursement). See id. ¶¶ 60, 62, 71. It would be wasteful in the extreme if discovery and trial
of these matters were to be duplicated in two different districts.6 Courts have routinely
6
In addressing the question of whether the forum selection clause should be applied at
all, Pence argued that the case brought against him in New York by the SEC and the instant case
involve similar facts. See Pl. Mem. at 23-24. We reject this argument. The SEC case involves
16
recognized this principle in granting transfers under section 1404 where related claims were
already proceeding in another district or had to be transferred to another district pursuant a forum
selection clause. See, e.g., Bent v. Zounds Hearing Franchising, LLC, 2016 WL 153092, at *6
(S.D.N.Y. Jan. 12, 2016); McCusker v. hibu PLC, 2015 WL 1600066, at *5 (E.D. Pa. Apr. 8,
2015); APA Excelsior III L.P. v. Premiere Techs., Inc., 49 F. Supp. 2d 664, 673 (S.D.N.Y.
1999); Pendleton Enters. v. Iams Co., 851 F. Supp. 1503, 1506 (D. Utah. 1994); Savin v. CSX
Corp., 657 F. Supp. 1210, 1214 (S.D.N.Y. 1987). Thus, this factor weighs heavily in favor of
transfer.
2. Locus of Operative Facts
In contract cases, the locus of operative facts examines “where the contract was
negotiated or executed, where it was to be performed, and where the alleged breach occurred.”
Fteja v. Facebook, Inc., 841 F. Supp. 2d 829, 842 (S.D.N.Y. 2012) (citation and internal
quotation marks omitted); accord Royal & Sun All. Ins. v. Nippon Express USA, Inc., 2016 WL
4523885, at *5 (S.D.N.Y. Aug. 18, 2016). If, however, “the main cause of action raised in the
complaint was a breach of contract action arising from the defendant’s [performance of the
contract],” then “the locus of operative facts [is] where the contract was performed, not where it
was proposed and negotiated.” Billing v. Commerce One, Inc., 186 F. Supp. 2d 375, 378
(S.D.N.Y. 2002) (citation omitted). “Although choice of law analysis must conclude that one
particular jurisdiction’s law applies, venue analysis may determine that there are several loci of
allegations that Pence violated securities laws; it makes no mention of arrangements between
GEE and Pence regarding indemnification. Pence does not identify any issues that will be
litigated in the SEC case that will also be litigated in the instant case.
17
operative facts.” Adams v. Key Tronic Corp., 1997 WL 1864, at *4 n.1 (S.D.N.Y. Jan. 2, 1997)
(citation omitted).
Here, the causes of action center on the failure of GEE to advance or pay money to Pence
to cover his attorney’s fees and expenses — not the negotiation of the contract or the creation of
the Bylaws. The Court views the causes of action under the Bylaws as having several loci of
operative facts. The decision not to indemnify Pence, according to GEE’s Chief Operating
Officer and President, was made “principally in Florida.” Stuckey Decl. ¶¶ 1, 11. The source of
the potential reimbursement is GEE, whose offices are located in Florida. Id. ¶ 2. The benefit of
the payment inures to Pence, who is located in Kentucky. Am. Compl. ¶ 2. The attorneys who
generated or are generating the expenses allegedly subject to reimbursement are located in New
York. See Bartko Letter; Answer to Complaint and Defenses, filed Feb. 4, 2016 (Docket # 16),
in SEC v. Pence, No. 15 Civ. 07077 (GBD) (GWG) (S.D.N.Y.), at 16 (listing Pence’s defense
counsel’s address as New York, New York).
The claim for promissory estoppel has little connection to New York inasmuch as the
Bartko Letter was sent from Atlanta, Georgia, to Rolling Meadows, Illinois, copying Pence (who
lives in Kentucky) via email. See Bartko Letter.
Given the fact that New York is at best one of several loci of operative facts, this factor
provides little reason to deny transfer.
18
3. Forum’s Familiarity with the Governing Law7
Pence has not argued that New York law applies to his claims under the Bylaws or for
promissory estoppel. The Bylaws will presumably be construed in accordance with Illinois law,
given that they emanate from an Illinois company and their indemnification article refers to
indemnification occurring “to the fullest extent to which [GEE] is empowered to do so by The
Illinois Business Corporation Act of 1983.” Bylaws Art. VIII § 1. A federal court in Illinois
will be more familiar with the governing law and thus this factor favors transfer.
4. Plaintiff’s Choice of Forum
“A plaintiff’s choice of forum is generally entitled to considerable weight and should not
be disturbed unless the balance of the factors is strongly in favor of the defendant. Where the
factors are equally balanced, the plaintiff is entitled to its choice.” Berman v. Informix Corp., 30
F. Supp. 2d 653, 659 (S.D.N.Y. 1998) (citations omitted); accord In re Warrick, 70 F.3d 736,
740-41 (2d Cir. 1995) (per curiam) (“[Plaintiff’s] choice of venue [is] entitled to substantial
consideration.”) (citation and internal quotation marks omitted). However, “plaintiffs’ choice of
forum is accorded less weight where the plaintiffs’ chosen forum is neither their home nor the
place where the operative facts of the action occurred.” Dwyer v. Gen. Motors Corp., 853 F.
Supp. 690, 694 (S.D.N.Y. 1994) (citation omitted); accord Emp’rs Ins. of Wausau v. News
Corp., 2008 WL 4443899, at *3 (S.D.N.Y. Sept. 29, 2008) (“[W]here the plaintiff has chosen a
forum that is neither the district of its residence, nor the locus of the operative facts in the case,
7
The Court notes that this factor is generally given little weight, as “federal courts
commonly apply state substantive law, which may not be the law of the state in which the
federal court sits.” Freeplay Music, LLC v. Gibson Brands, Inc., 2016 WL 4097804, at *5
(S.D.N.Y. July 18, 2016) (internal quotation marks omitted) (quoting Kwik Goal, Ltd. v. Youth
Sports Publ’g, Inc., 2006 WL 1517594, at *4 (S.D.N.Y. May 31, 2006)); accord Am. Eagle
Outfitters, Inc. v. Tala Bros. Corp., 457 F. Supp. 2d 474, 479 (S.D.N.Y. 2006).
19
this choice is given considerably less weight.”) (citations omitted). Here, Pence resides in
Kentucky, not the Southern District of New York. As already discussed, the loci of operative
facts in this case include several places other than New York. Therefore, this factor does not
weigh in favor of denying transfer.
5. Convenience of the Parties and Non-Party Witnesses
“The convenience of parties and witnesses is considered the essential criteri[on] under
the venue statute.” In re Nematron Corp. Sec. Litig., 30 F. Supp. 2d 397, 400 (S.D.N.Y. 1998)
(internal quotation marks omitted) (quoting Cento Grp., S.P.A. v. OroAmerica, Inc., 822 F.
Supp. 1058, 1060 (S.D.N.Y. 1993)); accord AGCS Marine Ins. Co. v. Associated Gas & Oil Co.,
775 F. Supp. 2d 640, 647 (S.D.N.Y. 2011); Seltzer v. Omni Hotels, 2010 WL 3910597, at *2
(S.D.N.Y. Sept. 30, 2010); Hernandez v. Graebel Van Lines, 761 F. Supp. 983, 988 (E.D.N.Y.
1991). The convenience of witnesses, in particular, is often cited as the most important factor.
See, e.g., Tlapanco, 2016 WL 4992590, at *4; SEC v. Comm. on Ways & Means of the U.S.
House of Representatives, 161 F. Supp. 3d 199, 227 (S.D.N.Y. 2015); Larew v. Larew, 2012 WL
87616, at *4 (S.D.N.Y. Jan. 10, 2012). “In evaluating this factor, the court should ‘look beyond
the quantity of witnesses and assess the quality of the testimony to be offered.’” DealTime.com
Ltd. v. McNulty, 123 F. Supp. 2d 750, 755 (S.D.N.Y. 2000) (quoting Am. All. Ins. Co. v.
Sunbeam Corp., 1999 WL 38183, at *6 (S.D.N.Y. Jan. 28, 1999)). Accordingly, the movant
“must clearly specify the key witnesses to be called and must make a general statement of what
their testimony will cover.” Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 218 (2d Cir. 1978)
(citations omitted), overruled on other grounds by Pirone v. MacMillan, Inc., 894 F.2d 579, 58586 (2d Cir. 1990); accord Liberty Mut. Ins. Co. v. Fairbanks Co., 17 F. Supp. 3d 385, 396
(S.D.N.Y. 2014). Nevertheless, “a specific showing is required only when the movant seeks a
20
transfer solely ‘on account of the convenience of witnesses.’ . . . [If the movant] seeks a transfer
‘on account of’ several factors, his failure to specify key witnesses and their testimony is not
fatal.” Connors v. Lexington Ins. Co., 666 F. Supp. 434, 455 (E.D.N.Y. 1987) (emphasis in
original) (quoting Factors Etc., 579 F.2d at 218); accord Larew, 2012 WL 87616, at *4.
Because neither GEE nor Pence has listed what witnesses it will seek to call at trial, let
alone their locations, the Court is unable to analyze the issue of convenience for the witnesses.
As for convenience to the parties, however, the factor weighs somewhat in favor of transfer. The
Northern District of Illinois is seemingly convenient for GEE, as it holds meetings there. See
Bylaws Art. II § 3 (naming the corporation’s registered office in Illinois as the default location
for annual meetings); Stuckey Decl. ¶ 9 (noting that July 9, 2009, Board of Directors meeting
took place in Illinois). Pence is not located in the Southern District of New York, which means
either district would offer equal inconvenience for him.8 See, e.g., GE Capital Franchise Fin.
Corp. v. Cosentino, 2009 WL 1812821, at *4 (W.D.N.Y. June 25, 2009) (“[T]ransfer would not
shift Defendant’s inconvenience to Plaintiff, nor would it substantially add to Plaintiff’s
inconvenience, because Plaintiff, an Arizona-based corporation, would have to travel regardless
of the venue.”). Accordingly, the convenience of the parties favors transfer.
6. Location of Relevant Documents and Ease of Access to Sources of Proof
“In an era of electronic documents, easy copying and overnight shipping, this factor
assumes much less importance than it did formerly. Furthermore, the location of documents is
entitled to little weight unless [the movant] makes a detailed showing of the burden it would
8
We note that the courthouse for the Eastern Division of the Northern District of Illinois
in Chicago is approximately 300 miles from Jefferson County, Kentucky, where Pence lives and
practices law. The Southern District of New York is approximately 750 miles from Jefferson
County.
21
incur absent transfer.” Larew, 2012 WL 87616, at *5 (alteration in original) (internal quotation
marks omitted) (quoting Seltzer, 2010 WL 3910597, at *4); accord Tlapanco, 2016 WL
4992590, at *5 (“The location of relevant documents and the ease of access to sources of proof is
mostly a neutral factor, in light of the technological age in which we live, where there is
widespread use of, among other things, electronic document production.”) (citation and internal
quotation marks omitted). Accordingly, the Court considers this factor neutral.
7. Availability of Process to Compel Attendance of Unwilling Witnesses
Pursuant to Federal Rule of Civil Procedure 45(c)(1)(A), a court generally cannot issue a
subpoena that would compel a non-party witness to travel more than 100 miles or out of state.
Neither party has listed witnesses, let alone any non-party witnesses, who may need to be
subpoenaed. Thus this factor does not affect our analysis. Tlapanco, 2016 WL 4992590, at *6
(citing EasyWeb Innovations, LLC v. Facebook, Inc., 888 F. Supp. 2d 342, 354 (E.D.N.Y.
2012)).
8. Relative Means of the Parties
Neither party has suggested that this factor has any bearing on the analysis.
9. Summary
While a few factors counsel slightly against transfer, most of the factors are either neutral
or strongly favor transfer. More importantly, it would be extremely wasteful to litigate nearly
identical claims in two separate fora. The question of efficiency so obviously dictates a transfer
in this matter that we conclude that the two remaining claims must also be transferred pursuant
to 28 U.S.C. § 1404(a).
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