Szulik et al v. TAG Virgin Islands, Inc. et al
Filing
61
ORDER granting Plaintiffs' and TAG Defendants' Motion to Transfer Venue to the Southern District of New York; denying 20 TAG Defendants' Motion to Dismiss only as it pertains to personal jurisdiction and venue and denying their Motio n to Transfer Venue to the District of Connecticut; denying 26 Defendant Feiner's Motion to Dismiss only as it pertains to personal jurisdiction and venue and denies his 59 Motion for Leave to File a Memorandum in Opposition; and denying a s moot 60 Plaintiffs' Motion for Leave to File a Reply. The court transfers Plaintiffs' entire case to the Southern District of New York. All pending motions not expressly granted or denied in this order remain pending, to be resolved by the United States Court for the Southern District of New York.Signed by Chief Judge James C. Dever III on 3/9/2012. (Sawyer, D.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No.5:10-CV-585-D
MATTHEW J. SZULIK, individually and as )
trustee of the KAITLIN SZULIK TRUST, )
the BRENDAN SZULIK TRUST, and the )
KEENAN SZULIK TRUST, KYLE M.
)
SZULIK, and RAYMOND W. SZULIK,
)
Plaintiffs,
v.
TAG VIRGIN ISLANDS, INC.
(formerly Taurus Advisory Group, LLC),
JAMES S. TAGLIAFERRI, PATRICIA
CORNELL, and BARRY B. FEINER,
Defendants.
)
)
)
)
)
)
)
)
)
)
)
ORDER
On December 23, 2010, Matthew Szulik filed a complaint on behalf ofhimself and his family
(collectively, "Szuliks" or "plaintiffs") against TAG Virgin Islands, Inc. ("TAG"), James S.
Tagliaferri ("Tagliaferri"), and Patricia Cornell ("Cornell") (collectively, "TAG defendants").
Compl. [D.E. 1]. The complaint also alleged claims against Barry B. Feiner ("Feiner"). Id. On
March 4, 2011, the TAG defendants moved to dismiss for lack ofjurisdiction, improper venue, and
failure to state a claim for which r~liefcan be granted [D.E. 20], and filed a supporting memorandum
[D.E.21]. On March 30, 2011, Feiner filed his own motion to dismiss, asserting lack of personal
jurisdiction, improper venue, and failure to state a claim for which relief can be granted [D.E. 26].
Feiner also submitted a supporting memorandum [D.E. 28]. Both motions to dismiss also contained
motions to strike [D.E. 20, 26]. On April 14, 2011, the Szuliks requested leave to conduct
jurisdictional discovery [D.E. 30]. On April 15, 2011, the court referred that motion to Magistrate
Judge Webb [D.E. 31], who denied it on May 2, 2011 [D.E.38]. Thereafter, on August 3, 2011, the
Szuliks filed memoranda opposing the motions to dismiss and the motions to strike [D.E. 47-48].
On August 22, 2011, both the TAG defendants and Feiner replied [D.E. 50-51]. On January 12,
2012, the court ordered the parties to submit supplemental filings regarding two specific issues [D.E.
52]. The parties filed their supplemental memoranda on January 19,2012 [D.E. 53-55]. The next
day, Feiner moved to strike portions of the Szuliks' supplemental brief [D.E. 56]. On January 23,
2012, the TAG defendants moved to join Feiner's motion to strike [D.E. 57]. On February 10,2012,
the Szuliks filed a memorandum in opposition to the motion to strike. PIs.' Mem. Opp'n Second
Mot. Strike [D.E. 58]. In that memorandum, the Szuliks asked the court to transfer all claims against
all defendants to the Southern District of New York. Id. 3-5. On February 13, 2012, Feiner
requested leave to file a memorandum opposing transfer to the Southern District ofNew York [D .E.
59]. On February 22,2012, the Szuliks sought leave to file a reply to Feiner's memorandum [D.E.
60]. As explained below, the court grants the Szuliks' request to transfer this case to the Southern
District ofNew York.
I.
After first meeting approximately twenty· five years ago, Matthew Szulik and Tagliaferri
became close friends. CompI." 18-19. Matthew Szulik and his family also became close friends
with Cornell. Id. , 20. Because ofthese personal relationships, the Szuliks regarded Tagliaferri and
Cornell as trusted advisors. Id.' 21. Indeed, the friendships fostered a professional relationship.
On March 25, 1996, the Szuliks entered into an Investment Management Agreement ("IMA") with
TAG, the company of which Tagliaferri and Cornell were managing directors. Id.' 22; see also
CompI., Ex. A ("IMA"). The agreement provided that TAG would "manage the investment of all
cash, securities, and other assets comprising the investment portfolio placed under" the company's
supervision. IMA, 1. The agreement authorized TAG "without further approval by, or notice to,
the [Szuliks], to make all investment decisions concerning the [P]ortfolio and to make purchases,
sales, and otherwise effect transactions in stocks, bond[ s], and other securities in the [p]ortfolio on
behalf of the" Szuliks. Id. So that TAG could "render efficient services," the IMA required the
2
Szuliks to "notify [TAG] of any and all changes in [their] ... investment objectives ...." Id. For
TAG's services, the Szuliks paid an annual fee of one percent of the assets under management.
Compl.
~
23.
TAG representatives first signed the lMA at TAG's Connecticut office. See PIs.' Mem.
Opp'n [D.E. 48], Ex. A ("Szulik Aff.") ~ 7. TAG then mailed the signed lMA to the Szuliks'
Raleigh, North Carolina residence, where the Szuliks signed the IMA. Id. ~~ 4-7. Only TAG and
the Szuliks were party to the lMA. See lMA page 4. Cornell signed the agreement, but only in her
representative capacity as one of TAG's managing directors. See id. Connecticut law governs the
lMA. Id.
~
10.
When signing the lMA, the Szuliks' primary investment objective "was preservation of
capital and conservative growth to be achieved primarily through investment in blue-chip stocks and
bonds." CompI.
~
25. The Szuliks communicated this objective to Tagliaferri and Cornell. Id.
During the life ofthe lMA, the Szuliks had numerous meetings with Tagliaferri and Cornell.
Szulik Aff.
~
8. At these meetings, the Szuliks discussed the management of their assets and
investments. Id. Although Matthew Szulik and Tagliaferri occasionally met in New York or
Connecticut, most of the meetings between the Szuliks and the TAG defendants occurred at the
Szuliks' Raleigh, North Carolina home. Id. The Szuliks also communicated with Tagliaferri and
Cornell in other ways.
For example, Matthew Szulik "exchanged hundreds of emails with
Tagliaferri," many of which Matthew Szulik sent from or received in Raleigh, North Carolina. Id.
~
9. Matthew Szulik also communicated with Tagliaferri and Cornell by telephone from Raleigh,
North Carolina, and Tagliaferri and Cornell sent written correspondence to the Szuliks' Raleigh,
North Carolina home. Id.
After operating under the lMA for approximately ten years, relations between the Szuliks and
the TAG defendants soured. After mid-2006 and without notice to the Szuliks, TAG liquidated
some ofthe Szuliks' "more conservative investments" and reinvested the proceeds "in suspect, high
3
risk, illiquid securities, as well as real estate and personal loan instruments ...." CompI. ~ 29. The
allegedly inappropriate investments include (1) securities issued by Conversion Services
International, Inc. ("Conversion Services"); (2) a loan to Scott Newman, then-CEO of Conversion
Services, secured by allegedly worthless Conversion Services equities; (3) corporate bonds, equities,
and other assets ofInternational Equine Acquisitions Holdings, Inc. ("lEAH"); (4) a note from Paseo
de la Reforma Partners, LLC, secured by a deed of trust on property in Mexico City, Mexico; (5)
Protein Polymer Technologies, Inc. ("PPTI") securities; (6) a personal loan to Andrew Cohen; (7)
a loan to Peter Neary (''Neary,,)l secured by a mortgage on residential property in Miami Beach,
Florida; (8) a personal loan to Marvin Ceder; and, (9) a loan to 1920 Bel Air, LLC ("1920 Bel Air"),
secured by a deed oftrust on residential property in Los Angeles, California. See id. ~~ 32-53. The
Szuliks allege that, in exchange for investing in lEAH securities, the TAG defendants took
$1,630,000 in illegal kickbacks. ld.
~
37-38,54----62.
The Szuliks allege that Feiner, an attorney licensed to practice law in New York, was
involved in some of the improper investments and in the kickback scheme. Specifically, Feiner
purportedly represented all parties when facilitating an extension of a loan that TAG made to PPTI
using the Szuliks' money. ld. ~~ 44, 72-73. Feiner also purportedly represented the Szuliks with
respect to a stock purchase from Conversion Services, drafted the mortgage documents used in the
Neary loan, and "was substituted as trustee with respect to [the] deed of trust" used to secure the
1920 Bel Air investment. ld.
~
47, 74, 76-77. Finally, Feiner drafted the convertible note
agreements and performed other services that allowed the TAG defendants to take kickbacks from
IEAH. ld. ~ 75. The Szuliks, however, have never met with or spoken to Feiner, or engaged him
as legal counsel. See id. ~~ 72-74, 77; Szulik Aff.
~
12-13.
The Szuliks allege that TAG loaned the money to Wilms low, LLC, of which Neary was a
managing member, but that the loan was really for Neary. Compi. ~ 47.
I
4
Beginning in 2008, Matthew Szulik became "concerned with the ... composition of [his
family's] portfolio ...." Compl. ~ 79. Because occasional statements that he received from
Tagliaferri were "incomplete and unintelligible," Matthew Szulik began calling Tagliaferri. rd.
Often, Tagliaferri did not answer or return Matthew Szulik's calls. rd. In September 2008, the
Szuliks hired a new investment advisor and instructed the TAG defendants to refrain from making
new investments without the Szuliks' express consent and to liquidate some existing investments.
rd. ~ 81. After investigation, the Szuliks' new investment advisor concluded that "many of the
companies invested in were far too risky [and] illiquid, and the investments did not take into account
the Szuliks' short- and long-term needs." Id. ~ 82. In April 2009, the Szuliks met with Tagliaferri
and Cornell at the Szuliks' home. rd.
~
84. At that meeting, the Szuliks expressed their concerns
about how TAG had invested their funds. Id. "The TAG Defendants offered no explanation [for
their conduct] and subsequently failed to return phone calls or provide requested information." rd.
In July 2009, the Szuliks terminated the IMA. Id.
~
85. In February 2010, the Szuliks received
copies of invoices from one of the TAG defendants' former attorneys. Id. ~ 89. Those invoices
showed kickbacks TAG had received from lEAH. Id.
The Szuliks assert ten claims against the TAG defendants, three claims against Feiner, and
a civil conspiracy claim against all defendants. See generally id. ~~ 90-173. 2 Both the TAG
defendants and Feiner have moved to dismiss all claims. TAG Defs.' Mot. Dismiss [D.E. 20];
Feiner's Mot. Dismiss [D.E. 26]. The TAG defendants and Feiner ask the court to dismiss the
claims, inter alia, for lack of personal jurisdiction and for improper venue. TAG Defs.' Mot.
Plaintiffs assert the following claims against the TAG defendants: (1) constructive
fraudlbreach of fiduciary duty; (2) request for an accounting; (3) violation of SEC Rule 10b-5; (4)
violation of the Investment Advisers Act of 1940; (5) violation of the North Carolina Investment
Advisers Act; (6) fraud; (7) negligence; (8) negligent misrepresentation; (9) breach of the implied
covenant of good faith and fair dealing; (10) breach of contract; and, (11) conspiracy. See Compl.
~~ 90-152, 165-69. Plaintiffs assert the following claims against Feiner: (1) legal malpractice; (2)
aiding and abetting a breach of fiduciary duty; (3) conspiracy; and, (4) fraud. See id. ~~ 153-73.
2
5
Dismiss; Feiner's Mot. Dismiss; see also TAG Defs.' Mem. Supp. Mot. Dismiss [D.E. 21] 6-14;
Feiner's Mem. Supp. Mot. Dismiss [D.E. 28] 3-9. The TAG defendants also move to transfer the
case to the District of Connecticut, whereas Feiner moves for outright dismissal. See TAG Defs.'
Mot. Dismiss; Feiner's Mot. Dismiss; TAG Defs.' Mem. Supp. Mot. Dismiss 14-17; Feiner's Mem.
Supp. Mot. Dismiss 8-9. In opposition, the Szuliks maintain that this court has personal jurisdiction
over all defendants and that the Eastern District of North Carolina is a proper venue as to all
defendants. PIs.' Mem. Opp'n [D.E. 48] 9-19. Alternatively, the Szuliks initially requested that,
rather than dismiss the complaint as to the TAG defendants for improper venue, "this case be
transferred to the District of Connecticut in the interests ofjustice ... or that [the Szuliks] be given
an opportunity to amend their complaint to address any deficiencies." Id. 19 n.9. The Szuliks did
not, however, address the possibility that the court could dismiss the complaint against Feiner for
lack ofpersonal jurisdiction or for improper venue. In its January 12, 2012 order, the court directed
the parties to address these possibilities.
On January 19, 2012, the parties responded. The Szuliks requested that, in lieu ofdismissal,
the court sever the claims against Feiner and transfer those claims to the Southern District of New
York. See Pis.' Suppl. Mem. [D.E. 53] 4-7. The Szuliksrequested that the claims against the TAG
defendants remain in the Eastern District ofNorth Carolina. See id. The TAG defendants conceded
personal jurisdiction and venue in the Southern District ofNew York and requested that, ifthe court
transferred venue, the court transfer the case to either the Southern District of New York or the
District of Connecticut. TAG Defs.' Suppl. Mem. [D.E. 54] 1-4. Feiner asked that the court not
transfer venue, but instead dismiss the Szuliks' claims against him. Feiner's Suppl. Mem. [D.E. 55]
1-6. OncetheTAGdefendantsconcededpersonaljurisdictionintheSouthern District ofNew York,
the Szuliks asked the court to transfer the entire case to that district. Pis.' Mem. Opp'n Second Mot.
Strike 3-5.
The court addresses only the motions to dismiss for lack of personal jurisdiction and for
6
improper venue, and the motions to transfer venue to the Southern District ofNew York 3 In doing
so, the court ftrst analyzes whether it can exercise personal jurisdiction over the TAG defendants and
over Feiner, and whether the Eastern District of North Carolina is a proper venue as to the TAG
defendants and as to Feiner. The court then assesses whether it should transfer venue to the Southern
District of New York
II.
A.
Federal Rule ofCivil Procedure 12(b)(2) allows a defendant to move to dismiss a complaint
for lack of personal jurisdiction. See Fed. R. Civ. P. 12(b)(2). To defeat a Rule 12(b)(2) motion,
a plaintiff typically must prove by a preponderance of the evidence that the court can exercise
personal jurisdiction. See Combs v. Baker, 886 F.2d 673, 676 (4th Cir. 1989). But when the court
rules on the motion without an evidentiary hearing, the plaintiff need only establish a prima facie
case. Id. When determining whether the plaintiff has met this burden, courts resolve all factual
disputes and draw all reasonable inferences in the light most favorable to the plaintiff. Id.; see Mylan
Labs .. Inc. v. Akzo. N.V., 2 F.3d 56, 60 (4th Cir. 1993). Here, the court is deciding the defendants'
Rule 12(b)(2) motions without conducting an evidentiary hearing. Thus, the Szuliks need only
present a prima facie case of personal jurisdiction.
The TAG defendants and Feiner have both moved to dismiss for lack ofpersonal jurisdiction.
The court addresses each motion separately.
1.
The TAG defendants contend that the court lacks personal jurisdiction over them, whether
3 Although neither the Szuliks nor the TAG defendants have formally moved to transfer
venue to the Southern District of New York, the court interprets their requests to transfer venue to
the Southern District of New York as formal motions for such transfer. See Dee-K Enters .. Inc. v.
Heveaftl Sdn. Bhd., 985 F. Supp. 640, 645n.15 (E.D. Va. 1997); TAG Defs.' Suppl. Mem. 1-3; PIs.'
Mem. Opp'n Second Mot. Strike 3-5.
7
that jurisdiction is pursuant to section 78aa ("section 78aa") ofthe Securities Exchange Act of 1934
(,,1934 Act") or the North Carolina long-arm statute. TAG Defs.' Mem. Supp. Mot. Dismiss 6-13;
TAG Defs.' Reply [D.E. 51] 1-6.
Section 78aa provides a basis for a court's exercising personal jurisdiction over a defendant.
See 15 U.S.C. § 78aa(a). However, before doing so, a court must ensure that the complaint alleges
a valid 1934 Act claim. For example, a court must ensure that the plaintiffs claims are not time
barred. Pursuant to the Sarbanes-Oxley Act, a plaintiff must bring 1934 Act claims within "2 years
after the discovery of the facts constituting the violation," or within "5 years after such violation,"
whichever is earlier. 28 U.S.C. § 1658(b).
Here, the Szuliks raise two claims under the 1934 Act: (1) a violation of the Act's section
lO(b) ("section 1o(b)") , 15 U.S.C. § 78j, and, (2) a violation of the corresponding Securities
Exchange Commission ("SEC") Rule lOb-5 ("Rule 10b-5"), 17 C.F.R. § 240.l0b-5. The Szuliks
base these claims on the TAG defendants' failure to disclose the kickback arrangement between the
TAG defendants and lEAH. See Compl. " 103-12; PIs.' Mem. Opp'n 30-31. Whether the alleged
violations occurred within five years of the Szuliks' filing the complaint is not in issue. The parties
agreed to toll any statute of limitations that had not expired before July 1,2010. See TAG Defs.'
Reply 4 nA. That agreement encompassed the five-year statute of limitations for the Szuliks' 1934
Act claims. The parties instead dispute whether the Szuliks discovered the facts giving rise to the
alleged violations more than two years before filing suit. See TAG Defs.' Mem. Supp. Mot. Dismiss
26-28; Pis.' Mem. Opp'n 29-32.
The Supreme Court addressed the two-year statute of limitations in Merck & Co.. Inc. v.
Reynolds, 130 S. Ct. 1784 (2010). The Court held that the two-year limit does not begin to run until
either the plaintiff actually discovered or a reasonably diligent plaintiff would have discovered the
facts-including "the fact of scienter"-constituting the securities law violation. Id... at 1789-90.
Expounding on the "reasonably diligent plaintiff," the Supreme Court expressly rejected inquiry
8
notice as the relevant standard. Id. at 1797-98.4 A defendant must do mqre than merely show that
the plaintiff "possesse[d] a quantum of information sufficiently suggestive of wrongdoing that he
should conduct a further inquiry." Id. at 1797 (quotation omitted).
The TAG defendants contend that the two-year statute oflimitations on the Szuliks' section
1O(b) and Rule 10b-5 claims began to run no later than mid-2008. TAG Defs.' Mem. Supp. Mot.
Dismiss 27-28. The TAG defendants first assert that the Szuliks knew of the fraud more than two
years before they sued. Id. In support, the TAG defendants cite a statement from the Szuliks'
complaint alleging that "Matthew Szulik learned of[the TAG defendants '] use ofhis funds [to invest
in 1920 Bel Air] when he was served with a complaint issued out of the Bankruptcy Court for the
District ofNevada in or around February 2007." Id. 27 (quotation omitted, emphasis removed); see
Compl. , 53. The TAG defendants also cite a statement from the Szuliks' memorandum in
opposition to the motions to dismiss, which states that the TAG defendants began making "risky,
fraudulent, and unsuitable investments" in mid-2006. TAG Defs.' Reply 4 (quotation omitted,
emphasis removed); see PIs.' Mem. Opp'n 1.5 Neither statement supports the TAG defendants'
argument. In fact, the TAG defendants' focus on whether the Szuliks should have known that TAG
4 Oddly, the TAG defendants appear to rely on inquiry notice as a basis for their motion to
dismiss. TAG Defs.' Mem. Supp. Mot. Dismiss 27. The TAG defendants cite Merck, noting that
it "clarifie[s]" when section 1O(b)' s two-year statute of limitations begins to run. Id. 26; see also
TAG Defs.' Reply 4-5. But they then ignore the Court's holding and cite legal propositions
expressly disavowed in Merck. See TAG Defs.' Mem. Supp. Mot. Dismiss 26. The TAG
defendants' block quotation from Merck is particularly troubling. See id. The quotation provides
the first two sentences ofa three-sentence paragraph comprising the core ofthe Court's holding; the
omitted third sentence was the Court's actual holding. See Merck, 130 S. Ct. at 1798. That the TAG
defendants failed to acknowledge the precedential import of that sentence suggests-most
charitably-a fundamental misunderstanding of Merck.
:; Based on this quotation alone, the TAG defendants argue that the statute of limitations
began running "prior to December 2007." TAG Defs.' Reply 4. The TAG defendants, however, rip
the quotation from its context. The allegation in the quotation was based on the Szuliks' pre
litigation investigation and does not indicate facts actually known to the Szuliks in mid-2006. See
Compl. " 78-89; PIs.' Mem. Opp'n 1,4-7. Accordingly, the statement does not help the TAG
defendants.
9
was investing the Szuliks' money in contravention oftheir wishes betrays a basic misunderstanding
ofthe Szuliks' section 10(b) and Rule IOb-5 claims. Compare Compl." 102-12, with TAG Defs.'
Mem. Supp. Mot. Dismiss 26-28, and TAG Defs.' Reply 3-5. The Szuliks premise the alleged
section I O(b) and Rule IOb-5 violations on the TAG defendants' kickback arrangement with lEAH
and their subsequent failure to disclose that arrangement. See Compl. " 102-12. Neither statement
that the TAG defendants cite concerns the lEAH kickback arrangement, and thus neither is relevant
to the court's inquiry. The TAG defendants simply have not shown that the Szuliks discovered the
alleged fraud more than two years before filing the complaint.
Alternatively, the TAG defendants argue that a reasonably diligent person would have
discovered the fraud more than two years before the Szuliks sued. TAG Defs.' Reply 4-5.
Supporting this contention, the TAG defendants rely on two pieces ofevidence. First, in December
2007, Matthew Szulik began reviewing statements from TAG that listed the allegedly improper
investments. rd. 4. Those statements, the TAG defendants contend, would have shown a reasonably
diligent person that TAG was not investing the Szuliks' funds in blue-chip securities. Id. Second,
the Szuliks read a May 29,2008 New York Times article "detailing certain facts" about lEAH's
CEO, Michael Iavarone ("Iavarone"). TAG Defs.' Mem. Supp. Mot. Dismiss 27. Specifically, the
article detailed securities fraud perpetrated by one oflavarone' s former employers, and disclosed that
the National Association of Securities Dealers had fined Iavarone and suspended him from selling
securities. See Compl." 55-57; Compl., Ex. C ("May 29,2008 New York Times article"); TAG
Defs.' Mem. Supp. Mot. Dismiss 27. Based on these facts, the TAG defendants argue that a
reasonably diligent person would have discovered the TAG defendants' alleged fraud no later than
mid-2008.
TAG Defs.' Mem. Supp. Mot. Dismiss 27; TAG Defs.' Reply 4-5. The TAG
defendants' evidence, however, is unpersuasive. Again, the Szuliks' section lOeb) and Rule lOb-5
claims are predicated on the TAG defendants' kickback arrangement with lEAH. Whether the
Szuliks knew or should have known about other improper investments is irrelevant. The TAG
10
defendants therefore have not demonstrated that a reasonably diligent plaintiff would have
discovered the alleged section 10(b) and Rule IOb-5 violations more than two years before the
Szuliks filed suit.
A review ofthe pleadings confirms these conclusions. None ofthe facts in the complaint or
in the parties' memoranda suggest that the Szuliks knew, or that a reasonably diligent plaintiffwould
have known, about the lEAH kickback scheme before the Szuliks received incriminating statements
in February 2010. When the Szuliks first became concerned with their portfolio, they placed several
telephone calls to TAG and met with both Tagliaferri and Cornell. See Compi. ~~ 79-88. But TAG
employees rebuffed the Szuliks at every tum. See id. Stifled in their investigations, the Szuliks
hired a new investment advisor in September 2008. Id. ~ 81. That new advisor further investigated
the Szuliks' portfolio. Id. ~ 82. She discovered that "many of the companies invested in were far
too risky [and] illiquid, and [that] the investments did not take into account the Szuliks' short- and
long-term needs." Id. She did not, however, discover that TAG had entered into a kickback
arrangement with lEAH. See id. In April 2009, and with growing concerns, the Szuliks met with
Tagliaferri and Cornell at the Szuliks' Raleigh, North Carolina home. Id. ~ 84. At that meeting, the
Szuliks asked about TAG's use of the Szuliks' funds and "raised concerns with certain individuals
associated with several of these investments . . . ." Id. Tagliaferri and Cornell "offered no
explanation and subsequently failed to return phone calls or provide requested information." Id. The
Szuliks, in short, were unable to uncover the facts constituting the alleged violations until February
20 I 0, when the Szuliks received statements revealing the TAG defendants' kickback arrangement.
See id. ~ 89. Accordingly, the two-year statute oflimitations began to run no earlier than February
2010. Because the Szuliks filed their complaint on December 23,2010, the Szuliks' section 1O(b)
and Rule IOb-5 claims are timely.
Having determined that the Szuliks' section I O(b) and Rule IOb-5 claims are timely, the court
next addresses whether it has personal jurisdiction over the TAG defendants pursuant to section
11
78aa. The 1934 Act permits service of process "in any ... district of which the defendant is an
inhabitant or wherever the defendant may be found." 15 U.S.C. § 78aa(a). This nationwide service
of-process provision grants district courts nationwide personal jurisdiction. When "Congress has
authorized nationwide service of process by federal courts under specific federal statutes, so long
as the assertion of jurisdiction over the defendant is compatible with due process, the service of
process is sufficient to establish the jurisdiction of the federal court over the person of the
defendant." Hogue v. Milodon Eng'g. Inc., 736 F.2d 989,991 (4th Cir. 1984).
Section 78aa confers on federal district courts personal jurisdiction over any defendant that
has minimum contacts with the United States. E.g., Busch v. Buchman. Buchman & O'Brien. Law
Firm, 11 F.3d 1255, 1258 (5th Cir. 1994); United Liberty Life Ins. Co. v. Ryan, 985 F.2d 1320, 1330
(6th Cir. 1993); Sec. Investor Prot. Com. v. Vigman, 764 F.2d 1309, 1315-16 (9th Cir. 1985);
Fitzsimmons v. Barton, 589 F.2d 330, 332-34 (7th Cir. 1979); Mariash v. Morrill, 496 F.2d 1138,
1142-43 (2d Cir. 1974); First Fin. Say. Bank. Inc. v. Am. Bankers Ins. Co. ofFla.. Inc. (Inre Conner
Bonds Litig.), No. 88-33-CIV -5, 1988 WL 110054, at *14 (E.D.N.C. July 21, 1988) (unpublished);
accord ESAB Om.. Inc. v. Centricut. Inc., 126 F.3d 617,626-27 (4th Cir. 1997) (interpreting a
similarly worded nationwide service-of-process provision-18 U.S.C. § 1965(d}-as granting
nationwide personal jurisdiction over any defendant that has minimum contacts with the United
States). Exercising such personal jurisdiction comports with the Due Process Clause of the Fifth
Amendment, regardless of a defendant's contacts with a specific forum state.
See,~,
Busch, 11
F.3d at 1258; United Liberty, 985 F.2d at 1330; Vigman, 764 F.2d at 1315-16; Fitzsimmons, 589
F.2d at 332-34; Mariash, 496 F.2d at 1142-43; accord Med. Mut. of Ohio v. deSoto, 245 F.3d 561,
566-68 (6th Cir. 2001); ESAB Gtp., 126 F.3d at 626-27. If a defendant is located in the United
States, that defendant will almost always have minimum contacts with the United States sufficient
to allow a federal court to exercise personal jurisdiction.
See,~,
Busch, 11 F.3d at 1257-58;
United Liberty, 985 F.2d at 1330; Vigman, 764 F.2d at 1315-16; Fitzsimmons, 589 F.2d at 332-34;
12
Mariash, 496 F.2d at 1143; accord deSoto, 245 F.3d at 568; ESAB Om., 126 F.3d at 627. "[W]hen
the defendant is located within the United States, he must look primarily to federal venue
requirements for protection from onerous litigation, because it is only in highly unusual cases that
inconvenience will rise to a level of constitutional concern ...." ESAB Grp., 126 F.3d at 627
(quotation and citations omitted).
Here, TAG, Tagliaferri, and Cornell are all located in the United States. TAG was formerly
a Connecticut corporation, TAG Defs.' Mem. Supp. Mot. Dismiss 11, and is currently "organized
under the laws of the United States Virgin Islands with its principal place of business ... [in] St.
Thomas, [United States Virgin Islands]." CompL
~
12. Tagliaferri's principal residence is either
in Connecticut or in the United States Virgin Islands, and Cornell's principal residence is in
Connecticut. Id.
~~
13-14. Furthermore, each defendant has transacted significant business in the
United States. See, U, id. ~~ 3-5,22-62,67-68, 70, 84-89; TAG Defs.' Mem. Supp. Mot. Dismiss
3-5,9-12. The TAG defendants' minimum contacts with the United States are sufficient to allow
this court to exercise personal jurisdiction over them.
Accordingly, the court has personal
jurisdiction over TAG, Tagliaferri, and Cornell pursuant to section 78aa. In light ofthis conclusion,
the court need not address whether the North Carolina long-arm statute reaches the TAG defendants.
2.
As for Feiner, the Szuliks do not allege that Feiner violated any securities law. See Compl.
~~
153-73; accord PIs.' Mem. Opp'n 9-11 (arguing that section 78aa confers personal jurisdiction
over the TAG defendants only). Thus, section 78aa does not confer personal jurisdiction over
Feiner. Rather, the Szuliks must demonstrate that North Carolina's long-arm statute, in accordance
with the Due Process Clause, confers on this court personal jurisdiction over Feiner. Cf. Pis.' Mem.
Opp'n 11-17.
The North Carolina long-arm statute extends personal jurisdiction over out-of-state
defendants in all cases in which the Due Process Clause permits. See Dillon v. Numismatic Funding
13
Corp., 291 N.C. 674, 676, 231 S.E.2d 629, 630-31 (1977); Centuty Data Sys .. Inc. v. McDonald,
109 N.C. App. 425,427,428 S.E.2d 190, 191 (1993). To determine whether the North Carolina
long-arm statute reaches a particular defendant, courts analyze whether the defendant has sufficient
minimum contacts with North Carolina such that "maintenance ofthe suit does not offend traditional
notions offair play and substantial justice." Int'1 Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)
(quotation omitted); see Dillon, 291 N.C. at 676-80,231 S.E.2d at 630-33.
Courts recognize two types of personal jurisdiction: general and specific. See Goodyear
Dunlop Tires Operations. S.A. v. Brown, 131 S. Ct. 2846,2851 (2011). Here, the Szuliks allege
only that the court has specific jurisdiction over Feiner. See PIs.' Mem. Opp'n 11-17.6
When assessing specific personal jurisdiction, courts consider three factors: "(1) the extent
to which the defendant has purposefully availed itself ofthe privilege of conducting activities in the
[forum] state; (2) whether the plaintiffs' claims arise out ofthose activities directed at the state; and
(3) whether the exercise ofpersonal jurisdiction would be constitutionally 'reasonable.'" Carefirst
of Md., Inc. v. Carefirst Prewancy Ctrs .. Inc., 334 F.3d 390,397 (4th Cir. 2003); see Burger King
Corp. v. Rudzewicz, 471 U.S. 462, 474-77 (1985). When analyzing the first two elements, courts
consider only the defendant's activities. See Burger King, 471 U.S. at 472-78. In keeping with this
principle, a plurality of the Supreme Court has held that "[t]he substantial connection between the
defendant and the forum State necessary for a finding ofminimum contacts must come about by an
action ofthe defendant purposefully directed toward the forum State." Asahi Metal Indus. Co .. Ltd.
v. Super. Ct. of Cal., 480 U.S. 102, 112 (1987) (plurality opinion) (citations omitted, emphasis
removed).
A court may exercise general personal jurisdiction over a defendant if the defendant has
"continuous and systematic contacts" with the forum state. See Brown, 131 S. Ct. at 2853-57
(quotation omitted). Feiner's uncontested declaration makes clear that his contacts with North
Carolina are neither continuous nor systematic. Feiner's Mot. Dismiss, Att. 1 ("Feiner Decl.") ~~
4-9. Accordingly, this court may not exercise general personal jurisdiction over Feiner. See Brown,
131 S. Ct. at 2853-57.
6
14
Feiner has not purposefully availed himself ofthe privilege ofconducting activities in North
Carolina. Feiner does not and has not resided in North Carolina. Feiner Decl. ~~ 4-5. Feiner is
admitted to practice law in New York only. Id. ~ 4. He has not, does not, and cannot practice law
in North Carolina. See id. ~~ 4, 6. He has never been a member of a law firm having a North
Carolina office and does not have any other business or property interests in the state. Id.
Additionally, Feiner has never met or communicated with the Szuliks, never given investment or
legal advice to the Szuliks, and, until this litigation, never sent to North Carolina any documents or
communications concerning the matters alleged. Id.
mr 7-9.
Feiner simply has not conducted any
activities in North Carolina, and therefore has not purposefully availed himself of the privilege of
doing so.
Nor do the SzuUks' claims against Feiner arise from Feiner's contacts with North Carolina.
Although the TAG defendants engaged in investment activities in North Carolina, and although
Feiner may have drafted documents and otherwise assisted the TAG defendants in those investment
activities, Feiner performed all ofhis work outside North Carolina. See id.
mr 4,6-9. The activities
that occurred in North Carolina resulted exclusively from the TAG defendants' actions. As such,
the TAG defendants' North Carolina investment activities do not provide a basis for exercising
specific personal jurisdiction over Feiner. See World-Wide Volkswagen Com. v. Woodson, 444
U.S. 286,297 (1980). Moreover, only Feiner's actions are relevant to the court's analysis. See
Asahi Metal, 480 U.S. at 108-12; Burger King, 471 U.S. at 472-78.
In light ofthe record, exercising specific personal jurisdiction over Feiner would violate the
Due Process Clause. See Lolavar v. de Santibanes, 430 F.3d 221, 226-27 (4th Cir. 2005); Allison
v. Lomas, 387 F. Supp. 2d 516, 521 (M.D.N.C. 2005). Thus, the North Carolina long-arm statute
does not reach Feiner, and the court lacks personal jurisdiction over him.
In opposition to this conclusion, the Szuliks make two arguments. First, they contend that
Feiner conspired with the TAG defendants to defraud the Szuliks, and that "a conspiracy theory can
15
provide the means of showing sufficient contacts with a particular forum to authorize in personam
jurisdiction." PIs.' Mem. Opp'n 16. Second, the Szutiks contend that the "effects test" allows the
court to exercise personal jurisdiction over Feiner. Id. 16-17.
As for the Szuliks' conspiracy theory, the Fourth Circuit has "approved the exercise oflong
arm jurisdiction pursuant to [a] conspiracy theory ...." McLaughlin v. McPhail, 707 F.2d 800,807
(4th Cir. 1983) (per curiam); see also Lolavar, 430 F.3d at 229. However, a plaintiff must "make
a threshold showing, inter alia, that a conspiracy existed and that the defendants participated
therein." McLaughlin, 707 F.2d at 807. Mere allegations of a conspiracy will not suffice. See
Lolavar, 430 F.3d at 229. A civil conspiracy requires proof that (1) two or more persons agreed to
commit an unlawful act, (2) a member ofthe conspiracy committed an overt act in furtherance ofthe
agreement, and, (3) the overt act injured the plaintiff. See Gutierrez v. Mass. Bay Transp. Auth., 437
Mass. 396, 415, 772 N.E.2d 552,568 (2002); see also Macomber v. Travelers Prop. & Cas. Corp.,
277 Conn. 617,635-36,894 A.2d 240,254-55 (2006); Muse v. Morrison, 234 N.C. 195, 198,66
S.E.2d 783, 784-85 (1951).7
The Szuliks have not alleged sufficient facts to show that a civil conspiracy involving Feiner
existed.
See,~,
Bin Xu v. Univ. ofN.C. at Charlotte, No. 3:08CV403-RLV, 2010 WL 5067423,
at *6 (W.D.N .C. Dec. 6,2010) (unpublished); Chabad Lubavitch ofLitchfield Cnty.. Inc. v. Borough
of Litchfield, No. 3:09-CV-1419 (JCH), 2010 WL 2977125, at *2-3 (D. Conn. July 21, 2010);
Marchand v. Town of Hamilton, Civil Action No. 09-10433-LTS, 2009 WL 3246607, at *2, 8 (D.
Mass. Oct. 5,2009); Barnett v. Carbeny, Civil No. 3:08cv714 (AVC), 2009 WL 902396, at * 11-12
(D. Conn. Mar. 30, 2009), affd, 420 F. App'x 67 (2d Cir. 2011) (unpublished). Accordingly, this
7 The court assumes, without deciding, that Massachusetts law governs all tort-based claims
in this case. See generally Harco Nat' I Ins. Co. v. Grant ThorntonLLP, 698 S.E.2d 719 (N.C. App.
2010), cert. denied, 706 S.E.2d 235 (2011). However, the facts alleged in the Szutiks' complaint
also fail to support the existence of a civil conspiracy involving Feiner under North Carolina or
Connecticut law.
16
conspiracy-based theory ofjurisdiction fails.
As for the Szuliks' effects argument, when a defendant commits intentional, hannful acts
against a plaintiff, and when those acts are expressly aimed at the plaintiff s state of residence, that
state can exercise personal jurisdiction over the defendant. See Calder v. Jones, 465 U.S. 783,
788-90 (1984). That the defendant otherwise lacks contacts with the forum state is of no moment.
Id. "Calder thus stands for the proposition that a court may exercise personal jurisdiction over a non
resident defendant who acts intentionally to cause hann to a resident's legally protected interest,
knowing that such conduct will cause hann at the victim's domicile to personal or property interests
located there." Musselwhite v.
Inn Learning Works. Inc., No. 2:97CV460, 1997 WL 34588522,
at *3 (M.D.N.C. Oct. 17, 1997) (unpublished). However, the effects test requires a defendant to
expressly aim his actions at the forum state. See Calder, 465 U.S. at 789; see Fiore v. Walden, 657
F.3d 838, 849-53 (9th Cir. 2011); cf. ESAB Om., 126 F.3d at 625.
The Szuliks do not allege sufficient facts suggesting that Feiner expressly aimed any action
at North Carolina. Therefore, the effects test does not permit this court to exercise personal
jurisdiction over Feiner.
B.
The TAO defendants and Feiner also have moved to dismiss the Szuliks' complaint under
Federal Rule of Civil Procedure 12(b)(3) for improper venue. When subject matter jurisdiction is
based on both diversity ofcitizenship and the presence ofa federal question-as is the case here, see
Compl. , 16--venue is proper in
(1) a judicial district where any defendant resides, if all defendants
reside in the same State, (2) a judicial district in which a substantial
part of the events or omissions giving rise to the claim occurred, ...
or (3) a judicial district in which any defendant may be found, ifthere
is no district in which the action may otherwise be brought.
17
28 U.S.C. § 1391(b).8 The Szuliks contend that the Eastern District of North Carolina is a proper
venue under section 1391(b)(2). CompI.' 17.
Under section 1391 (b)(2), venue may be proper in more than one jurisdiction. See Mitrano
v. Hawes, 377 F.3d 402,405 (4th Cir. 2004). The relevant inquiry is whether substantial activities
occurred in the forum district such that venue is proper there. Id. "[T]hat substantial activities took
place in district B does not disqualify district A as [a] proper venue as long as 'substantial' activities
took place inA, too." Hardee's Food Sys.. Inc. v. Beardmore, 169 F.RD. 311, 316 (E.D.N.C. 1996)
(quotation omitted). In fact, "district A should not be disqualified even if it is shown that the
activities in B were more substantial, or even the most substantiaL" Id. (quotation omitted). When
assessing whether substantial activities occurred in the forum district, courts focus on "the entire
sequence of events underlying the claim." Mitrano, 377 F.3d at 405 (quotation omitted).
As for the TAG defendants, venue is proper in the Eastern District ofNorth Carolina. The
Szuliks signed the IMA in this district. 9 The Szuliks were the last party to sign the contract. See
[D.E. 30], Att. 4 ("Partially Executed IMA") & Att. 5 ("Fully Executed IMA"); Szulik Aff. " 5-7.
Thereafter, the TAG defendants communicated and met with the Szuliks in this district. CompI."
24, 78-79, 83-85; Szulik Aff. ,,8-10. In some ofthese communications and meetings, the TAG
defendants allegedly omitted or misstated information, giving rise to at least some of the Szuliks'
claims. See,~, Compi. "96--130, 136--41. Thus, substantial acts and omissions giving rise to
On December 7,2011, Congress amended section 1391 (b). See Federal Courts Jurisdiction
and Venue Clarification Act of2011, Pub. L. No. 112-63, § 202, 125 Stat. 758, 763 (2011). The
amended language does not appear to apply retroactively to pending cases, and therefore is not used
in this order. See id. § 205, 125 Stat. at 764-65; Denver & Rio Grande W. RR. Co. v. Bhd. ofRR
Trainmen, 387 U.S. 556, 563 (1967). But the court need not, and does not, resolve the question of
retroactivity because the amended language of section 1391 (b) is substantively identical to the text
that it replaced. Compare 28 U.S.C. § 1391 (b), with 28 U.S.C. § 1391(b) (2006) (amended 2011).
g
The parties dispute where the Szuliks signed the IMA. Compare Pis.' Mem. Opp'n 13 n.3,
with TAG Defs.' Mem. Supp. Mot. Dismiss 11. At this stage of the proceedings, the court must
draw all reasonable inferences in the Szuliks' favor. Thus, the court finds (for purposes ofthis order)
that the Szuliks signed the IMA in Raleigh, North Carolina.
9
18
the Szuliks' complaint occurred in the Eastern District of North Carolina, making this district a
proper venue as to the TAG defendants.
As for Feiner, venue is not proper in the Eastern District ofNorth Carolina. Feiner has never
visited this district to meet with the Szuliks. Feiner Decl. ~ 7; Szulik Aff. ~ 12. Before this dispute,
Feiner had never sent to or received from North Carolina any communications relevant to the matters
alleged. Feiner Decl. ~ 7. Likewise, Feiner has not given the Szuliks any investment or legal advice,
and the Szuliks have never retained him as their attorney. Id. ~~ 8-9. To the extent that Feiner
worked for the TAG defendants, Feiner performed his work in New York or Connecticut. See id.
~~
4, 6--9; Szulik Aff. ~~ 12-13. Indeed, all of the claims brought against Feiner arise from his
actions performed outside the Eastern District of North Carolina. See Compl. ~~ 153-73. As to
Feiner, the Eastern District of North Carolina is not a proper venue.
III.
Having determined that personal jurisdiction exists and that venue is proper in the Eastern
District of North Carolina as to the TAG defendants only, the court now considers whether to
dismiss the claims against Feiner, sever and transfer the claims against Feiner, or transfer the entire
case.
A
When venue is improper in the district where a case was filed, a district court may "dismiss,
or if it be in the interest ofjustice, transfer such case to any district or division in which it could have
been brought." 28 U.S.C. § 1406(a). The statute thus establishes a two-part inquiry. The court first
must determine whether the case could have been brought in another district. If so, the court must
determine whether the interest of justice warrants a transfer of venue to that other district. See
Convergence Techs. (USA), LLC v. Microloops Corp., 711 F. Supp. 2d 626, 640-41 (RD. Va.
2010).
The Szuliks could have brought their claims against Feiner in the Southern District of New
19
York. Feiner lives in Harrison, New York, which is located in Westchester County, part of the
Southern District ofNew York. See28U.S.C. § 112(b);FeinerDecl. '4. Had the Szuliksoriginally
sued Feiner in that district, venue would have been proper under 28 U.S.C. § 1391 (b)(1). The
district court also would have had personal jurisdiction over Feiner. See N.Y.C.P.L.R. § 301; Int'l
Shoe, 326 U.S. at 316. The issue then becomes whether this court should, in the interest ofjustice,
transfer the claims against Feiner to the Southern District of New York.
Section 1406(a) provides an equitable tool intended to "remov[e] whatever obstacles may
impede an expeditious and orderly adjudication of cases and controversies on their merits."
Goldlawr. Inc. v. Heiman, 369 U.S. 463, 466-67 (1962). A court should interpret section 1406(a)
broadly to effectuate its broad remedial purpose. Seeid.; Porterv. Groat, 840 F.2d255, 257-58 (4th
Cir. 1988). Indeed, the Fourth Circuit has held that section "1406(a) ... authorizes the transfer of
a case to any district, which would have had venue ifthe case were originally brought there, for any
reason which constitutes an impediment to a decision on the merits in the transferor district but
would not be an impediment in the transferee district." Porter, 840 F.2d at 258. The decision to
transfer venue pursuant to section 1406(a) rests within the sound discretion ofthe district court. See
Nichols v. G.D. Searle & Co., 991 F.2d 1195, 1201 (4th Cir. 1993); Staley v. Homeland. Inc., 368
F. Supp. 1344, 1348 (E.D.N.C. 1974).
Exercising that discretion, the court finds that the Eastern District of North Carolina is an
improper venue as to Feiner, and that the court lacks personal jurisdiction over him. Both procedural
deficiencies are "impediment[s] to a decision on the merits in the transferor district ...." Porter,
840 F.2dat258; see also id. at 257-58 (collecting cases); accord 28 U.S.C. § 1406(a); Goldlawr, 369
U.S. at 466-67; Carefirst ofMd.. Inc. v. Carefirst Urgent Care Ctr.. LLC (In re Carefirst of Md..
Inc.), 305 F.3d 253, 255-56 (4th Cir. 2002); Jenkins v. Albuquerque Lonestar Freightliner. LLC, 464
F. Supp. 2d 491,494 (E.D.N.C. 2006); Regent Lighting Com. v. Am. Lighting Concept. Inc., 25 F.
Supp. 2d 705, 713 (M.D.N.C. 1997). As they relate to Feiner, then, both prerequisites to a transfer
20
ofvenue under section 1406 are met. Accordingly, the court may transfer the Szuliks' claims against
Feiner to the Southern District ofNew York.
Opposing this conclusion, Feiner argues that the Szuliks "knew that there were no facts
justifying asserting jurisdiction over the [d]efendants' persons or laying venue in North Carolina."
Feiner's Suppl. Mem. 6. Instead, the Szuliks, "in bad faith, brought the action in a [d]istrict to harass
the [d]efendants with litigation in a remote forum." Id. According to Feiner, the Szuliks' obvious
mistakes regarding personal jurisdiction and venue warrant dismissal rather than transfer. See id.
3-6.
Feiner's argument fails. District courts may deny a section 1406 motion to transfer and
instead dismiss a defendant outright when "the plaintiffs attorney could reasonably have foreseen
that the forum in which he/she filed was improper." Nichols, 991 F.2d at 1201 (collecting cases).
But that is not this case. As discussed, the court has personal jurisdiction over the TAG defendants
and venue in this district is proper as to them. When the Szuliks filed their complaint, they believed
that Feiner was an integral part of a larger conspiracy involving the TAG defendants and a scheme
to defraud the Szuliks.
See,~,
CompI." 4, 7, 30, 47,53,62, 72-77, 153-73; PIs.' Mem. Opp'n
5, 7, 16, 34-43. Indeed, the Szuliks alleged that Feiner was instrumental in executing the TAG
defendants' kickback scheme with lEAH and that Feiner represented both the Szuliks and the TAG
defendants when negotiating securities and loan transactions that violated the lMA. CompI." 4,
47,53,62, 72-77,153-73. Furthermore, the Szuliks believed that the economic effects ofFeiner's
alleged wrongdoing occurred in the Eastern District of North Carolina, where the Szuliks reside.
PIs.' Mem. Opp' n 16-17. Based on those beliefs, the Szuliks raised credible, albeit unavailing,
arguments about personal jurisdiction and venue. See id. 16-18; Pis.' SuppI. Mem. 2-4; Pis.' Mem.
Opp'n Second Mot. Strike 3. That the court ultimately rejected those arguments is of no moment.
The Szuliks' beliefs concerning Feiner were reasonable, and their conduct was far short of the
"obvious error[s]" that might justify dismissal. Nichols, 991 F.2d at 1201; see Estate of Bank v.
21
Swiss Valley Fanns. Co., 286 F. Supp. 2d 514, 515-16, 521-22 (D. Md. 2003); Dee-K Enters., 985
F. Supp. at 645-46.
Even if the Szuliks did make obvious errors regarding personal jurisdiction and venue as to
Feiner, such errors would not obligate the court to dismiss, rather than transfer, the claims against
Feiner. Nichols, 991 F.2d at 1202 n.6; Estate of Bank, 286 F. Supp. 2d at 522; Dee-K Enters., 985
F. Supp. at 645-46. Indeed, "[r]ather than dismissing for improper venue, courts favor finding that
it is in the interest ofjustice to transfer venue." Harleyv. Chao, 503 F. Supp. 2d 763,774 (M.D.N.C.
2007); see Goldlawr, 369 U.S. at 466-67; Porter, 840 F.2d at 257-58; Gov't of Egypt Procurement
Office v. MIV ROBERT E. LEE, 216 F. Supp. 2d 468,473-74 (D. Md. 2002); Jennings v. Entre
Computer Ctrs .. Inc., 660F. Supp. 712, 714 (D. Me. 1987).10 Accordingly, the court rejects Feiner's
arguments and transfers the Szuliks' claims against him to the Southern District of New York.
B.
Having decided to transfer the Szuliks' claims against Feiner to the Southern District ofNew
York, the court now determines whether to sever those claims from the rest of the case or to also
transfer the Szuliks' claims against the TAG defendants to the Southern District of New York.
Jurisdiction and venue in the Eastern District of North Carolina are proper as to the TAG
defendants. Thus, the court first considers transfer of venue as to them under 28 U.S.C. § 1404.11
Section 1404 permits a district court to transfer "any civil action to any other district ... where it
might have been brought" if such transfer is "[t]or the convenience of [the] parties and witnesses,
10 Some district courts hold that transfer is generally favored unless ''there is evidence that
a case was brought in an improper venue in bad faith or to harass defendants ...." MIV ROBERT
E. LEE, 216 F. Supp. 2d at 473; see,~, LaFerney v. Citizens Bank ofE. Tenn., No. CV 210-169,
2011 WL 4625956, at *2 (S.D. Ga. Sept. 30, 2011)(unpublished); Palmerv. Dau, No. 6:1O-cv-248
Orl-19KRS, 2010 WL 2740075, at *2 (M.D. Fla. July 12, 2010) (unpublished). There is no evidence
of bad faith or harassment in this case.
II When venue and personal jurisdiction are proper in the filing district, transfer of venue is
still possible under section 1406. See Porter, 840 F.2d at 257-58; Jenkins, 464 F. Supp. 2d at 494.
22
[or] in the interest ofjustice ...." 28 U.S.C. § 1404(a),u The court begins by asking whether the
case could have been brought in the proposed transferee district. If so, the court must then decide
whether to transfer venue. See Dacar v. Saybolt LP, No. 7:1O-CV-12-F, 2011 WL 223877, at *2
(E.D.N.C. Jan. 24, 2011) (unpublished); Blue Mako. Inc. v. Minidis, 472 F. Supp. 2d 690, 703
(M.D.N.C. 2007); Datasouth Computer Corp. v. Three Dimensional Techs .. Inc., 719 F. Supp. 446,
450-51 (W.D.N.C. 1989).
When determining whether the first prerequisite of section 1404(a) is met, courts must
independently find that personal jurisdiction and venue would have been proper in the proposed
transferee district if the plaintiff had originally filed there. See Hoffman v. Blaski, 363 U.S. 335,
340-44 (1960). Here, the Szuliks could have originally sued all defendants in the Southern District
ofNew York. That district would have had personal jurisdiction over Feiner as an in-state resident,
and over the TAG defendants pursuant to the nationwide service ofprocess provision in 15 U.S.C.
§ 78aa(a). Venue would have been proper under 28 U.S.C. § 1391(b)(3). Thus, the Szuliks have
met the first prerequisite for a section 1404(a) transfer of venue to the Southern District of New
York.
Next, the court must decide whether to transfer the case. See Dacar, 2011 WL 223877, at
*2; Blue Mako, 472 F. Supp. 2d at 703; Datasouth, 719 F. Supp. at 450-51. Courts consider several
factors when determining whether to transfer venue:
OnDecember7,2011, Congress amended section 1404(a). See Federal Courts Jurisdiction
and Venue Clarification Act § 204. The amended statute provides that "[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 or to any district or division to which all
parties have consented." 28 U.S.C. § 1404(a). The amended language does not appear to apply
retroactively to pending cases, and therefore is not used in this order. See Federal Courts Jurisdiction
and Venue Clarification Act § 205; Denver & Rio Grande, 387 U.S. at 563; Ex parte Collett, 337
U.S. 55, 71 (1949). But the court need not, and does not, resolve the question ofretroactivity. Both
the current and former texts ofsection 1404(a) permit district courts to transfer venue to any district
in which the case could have been brought originally. Compare 28 U.S.C. § 1404(a), with 28 U.S.C.
§ 1404(a) (2006) (amended 2011).
12
23
(1) the plaintiff s initial choice of forwn; (2) relative ease of access to sources of
proof; (3) availability of compulsory process for attendance of unwilling witnesses,
and the cost of obtaining attendance of willing and unwilling witnesses; (4)
possibility ofa view ofthe premises, ifappropriate; (5) enforceability ofa judgment,
if one is obtained; (6) relative advantage and obstacles to a fair trial; (7) other
practical [considerations] that make a trial easy, expeditious, and inexpensive; (8)
administrative difficulties of court congestion; (9) local interest in having localized
controversies settled at home; (10) appropriateness in having a trial of a diversity
case in a forwn that is at home with the state law that must govern the action; and
(11) avoidance of unnecessary problems with conflicts of laws.
Charles v. Bradley, No. 5:08-CV-124-F, 2009 WL 1076771, at *2 (E.D.N.C. Apr. 21, 2009)
(unpublished); see Dacar, 2011 WL 223877, at *3; Blue Mako, 472 F. Supp. 2d at 703; Datasouth,
719 F. Supp. at 450-51. In balancing these factors, "the district courts have substantial discretion
to decide" whether to transfer venue. Datasouth, 719 F. Supp. at 450; see also Stewart Org .. Inc. v.
Ricoh Corp., 487 U.S. 22,29 (1988); Brock v. Entre Computer Ctrs.. Inc., 933 F.2d 1253, 1257 (4th
Cir. 1991); S. Ry. Co. v. Madden, 235 F.2d 198,201 (4th Cir. 1956); Jenkins, 464 F. Supp. 2d at
493.
When comparing the Eastern District of North Carolina and the Southern District of New
York, factors two, three, five, six, ten, and eleven are roughly in equipoise. Factor four is irrelevant.
The court therefore focuses on factors one, seven, eight, and nine. On balance, those factors favor
transferring the Szuliks' claims against the TAG defendants to the Southern District ofNew York.
As for factor one, although the Szuliks initially chose to sue in the Eastern District ofNorth
Carolina, they did so believing that the court could exercise personaljurisdiction over and that venue
would be proper as to all defendants. See PIs.' Mem. Opp'n 9-19. When the court suggested that
personal jurisdiction and venue as to Feiner were improper in this district, and when the TAG
defendants conceded jurisdiction and venue in the Southern District of New York, the Szuliks
requested that the court transfer the entire case to the Southern District of New York. See Pis.'
Mem. Opp'n Second Mot. Strike 3-5. The Szuliks' initial choice offorwn therefore does not weigh
against transferring this case. Indeed, their willingness to litigate in the Southern District of New
York weighs heavily in favor of transferring venue to that district.
24
Factor seven likewise strongly supports transferring the Szuliks' claims against the TAG
defendants to the Southern District ofNew York. The Szuliks' claims against Feiner and the TAG
defendants are intertwined and arise largely from the same facts. They involve many of the same
securities transactions and the same third parties. See CompL ~~ 47,53,62, 71-77, 153-73. The
Szuliks even allege that Feiner was an integral part of a larger conspiracy orchestrated by the TAG
defendants to defraud the Szuliks. See id. ~~ 165-69. Resolving the Szuliks' claims against Feiner
will likely require the same witnesses and the same documentary evidence needed to litigate the
Szuliks' claims against the TAG defendants. Requiring the Szuliks to pursue claims against Feiner
in the Southern District of New York while simultaneously pursuing claims against the TAG
defendants in the Eastern District of North Carolina would be inefficient and would waste time,
effort, and judicial resources. These considerations strongly support transferring this entire case to
the Southern District of New York. Indeed, "[t]o permit a situation in which two cases involving
... the same issues are simultaneously pending in different District Courts leads to the wastefulness
oftime, energy and money that § 1404(a) was designed to prevent." Cont'l Grain Co. v. Barge FBL
585,364 U.S. 19,26(1960); see Gen. Tire & Rubber Co. v. Watkins, 373 F.2d 361, 369-70 (4th Cir.
1967) (en bane); Buckland v. Maxim Healthcare Servs .. Inc., No. C 10-5145 SBA, 2011 WL
4404126, at *1-2 (N.D. Cal. Sept. 20, 2011) (unpublished); Convergence Techs., 711 F. Supp. 2d
at 642-43. Thus, factor seven weighs heavily in favor oftransferring the Szuliks' claims against the
TAG defendants to the Southern District of New York.
As for factor eight, this court's docket is quite congested. The Eastern District of North
Carolina is a very busy federal district court on a case-per-judge basis, and has more pending cases
per judge and more weighted filings per judge than the Southern District of New York. Although
the Southern District of New York is busy, its docket is less congested than this court's docket.
Thus, transferring all ofthe Szuliks' claims to the Southern District ofNew York will permit a more
expeditious resolution of the case.
25
Finally, factor nine weighs slightly against transferring this case. The Szuliks were North
Carolina residents at all times relevant to this case. See Szulik Aff. ~~ 2-7. Their home is in the
Eastern District of North Carolina, and they signed the lMA in this district. See id. ~~ 4-7. They
also had several face-to-face meetings and other communications with Tagliaferri and Cornell in the
district. Compl. ~~ 24,78-79,83-85; SzulikAff. ~~ 8-lOY At least some ofthe misstatements and
omissions giving rise to this case occurred during these meetings and communications. See,~,
Compl. ~~ 78-89,96-130, 136-41. Thus, the Eastern District of North Carolina has a significant
connection to this case and an interest in providing a convenient forum for redressing the Szuliks'
grievances. Nevertheless, particularly in light of the Szuliks' willingness to litigate in the Southern
District ofNew York, factor nine alone cannot overcome the other factors that weigh heavily in favor
oftransferring the Szuliks' claims against the TAG defendants to the Southern District ofNew York.
In sum, after balancing the relevant factors that infonn the court's inquiry into the
convenience of the parties and witnesses and into the interests of justice, the court transfers the
Szuliks' claims against the TAG defendants to the Southern District of New York.
IV.
Accordingly, the court GRANTS plaintiffs' motion to transfer venue to the Southern District
ofNew York and GRANTS the TAG defendants' motion to transfer venue to the SouthernDistrict
of New York. The court DENIES the TAG defendants' motion to dismiss [D.E. 20] only as it
pertains to personal jurisdiction and venue, and DENIES the TAG defendants' motion to transfer
venue to the District of Connecticut [D.E. 20]. Likewise, the court DENIES Feiner's motion to
dismiss [D.E. 26] only as it pertains to personaljurisdiction and venue, and DENIES Feiner's motion
for leave to file a memorandum in opposition to transfer of venue to the Southern District of New
York [D.E. 59]. The court also DENIES AS MOOT plaintiffs' motion for leave to file a reply to
The TAG defendants dispute some ofthese facts. See,~, TAG Defs.' Mem. Supp. Mot.
Dismiss 3--4, 15-16. At this stage ofthe proceedings, however, all reasonable inferences are drawn
in the Szuliks' favor.
13
26
Feiner's memorandum opposing transfer of venue to the Southern District ofNew York [D.E. 60].
The court transfers plaintiffs' entire case to the Southern District ofNew York. All pending
motions not expressly granted or denied in this order remain pending, to be resolved by the United
States District Court for the Southern District of New York.
SO ORDERED. This ~ day of March 2012.
27
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