Ancient Sun Nutrition, Inc. v. Oregon Algae, LLC et al

Filing 14

ORDER denying 2 Motion to Change Venue. Signed by Magistrate Judge Dennis Howell on 09/17/10. (emw)

-DLH Ancient Sun Nutrition, Inc. v. Oregon Algae, LLC et al

Doc. 14

IN THE UNITED STATES DISTRICT COURT F O R THE WESTERN DISTRICT OF NORTH CAROLINA A S H E V IL L E DIVISION 1 :1 0 cv 1 4 0 A N C IE N T SUN NUTRITION, INC., P l a i n t if f , V s. O R E G O N ALGAE, LLC; KVB, LLC; a n d KVB, LLC, d/b/a Klamath Valley B o ta n ica ls, LLC, D efen d a n ts. _______________________________ ) ) ) ) ) ) ) ) ) ) ) )

ORDER

T H IS MATTER is before the court upon defendants' Motion to Transfer. H av in g carefully considered defendants' Motion to Transfer and reviewed the p le ad in g s , the court enters the following findings, conclusions, and Order. F IN D IN G S AND CONCLUSIONS I. B a c kg r o u n d A. T h e First Filed Action in the Western District of North Carolina

T h is action concerns the breakdown of a vendor-vendee relationship in the n a tu r a l foods business. Plaintiff is in the business of manufacturing branded

n u tritio n al products and defendants are in the business of supplying what appears to b e a very rare nutritional supplement derived from algae found only in one lake in

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Dockets.Justia.com

O reg o n . The claims asserted in this action, and the breakdown of the relationship, all a p p e a r to derive from a 2008 contract between plaintiff and defendants, which in c lu d e d requirements and specifications for the products supplied by defendants. It also appears that defendants extended to plaintiff a substantial and unsecured line of cred it with which to purchase such products. Complaint, at ¶¶ 13-14. Both the quality o f the products received by plaintiff as well the plaintiff's purported refusal to secure th e line of credit, or make payment for the allegedly defective product, are at issue. T h e thrust of the Complaint appears to concern the alleged quality of the p ro d u cts shipped, id., at ¶¶ 18-23, and that shipping non-conforming goods was in b reach of the 2008 contract. Id., at ¶ 23. Plaintiff also contends that defendants to rtu o u sly interfered with contracts it had with others by convincing non-party c o n tr ac to r s to withhold from plaintiff new product formulations which they were d e v e lo p in g for plaintiff under such contract. Id., at ¶ 25. Further, plaintiff alleges that d efen d an ts tortuously interfered with contracts it had with other vendors by making f als e statements. Id., at ¶¶ 27-32. Plaintiffs allege that defendants undertook such actio n s so as to undermine plaintiff's marketing of its most profitable products, and th ereb y gain control over the development, sale, and marketing of such products and o b tain a competitive advantage. Id., at ¶ 33. Plaintiff has asserted causes of action for b reach of contract, wrongful interference with contract, and unfair and deceptive trade

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p ractices. Id., at ¶¶ 33-38. B. T h e Second Filed Action in the District of Oregon

A f te r learning of the instant suit, defendants filed an action in the United States C o u rt for the District of Oregon against plaintiff herein and its founder, Clive Adams, fo r nonpayment of invoices for algae products. I I. D e fe n d a n t s' Motion to Transfer A. B a c kg r o u n d

A fter removing this action from the North Carolina General Court of Justice, S u p e rio r Court Division, for Buncombe County, defendants moved for discretionary tr an s f er of this matter to the District of Oregon in accordance with 28, United States C o d e, Section 1404(a). Unlike a Rule 12(b) motion, which is limited to facts

c o n tain ed in the Complaint, a motion to transfer allows for review of materials su b m itted outside the pleadings. In this case, counsel for the respective parties have p ro p erly supplied the court with well reasoned briefs as well as materials supporting th eir respective positions. A m o n g such materials are copies of email messages between top management o f plaintiff and defendants. To be frank, such emails clearly show that a very personal r ela tio n s h ip developed between these executives over the years, but that such relatio n sh ip soured for defendants when they unable to secure the substantial line of

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cred it extended to plaintiff and plaintiff purportedly failed to pay for previously d e liv e r ed product. Simultaneously, such relationship soured for plaintiff when they p u r p o r te d ly discovered through testing by outside labs that the algae products they w ere purchasing did not contain the nutritional properties represented to them by d e f en d a n ts . Such alleged failure was, apparently, doubly troublesome for plaintiff in asm u ch as it prevented them from manufacturing their nutritional products and it ex p o sed them to potential legal action by customers for making false claims. S u c h problems appear, however, only to be the tip of the iceberg, as many more in te rp e r so n a l issues appear to have formed beneath the surface. The emails reviewed ev in ce that top executives have taken the business set backs very personally and have o n numerous occasions threatened litigation. A s to the Motion to Transfer, the respective parties have briefed such motion ad m ir a b ly . The first to file rule as well as the anticipatory filing exception are the lyn ch p in to resolution of the Motion to Transfer. While initial review would lead one to believe that plaintiff raced to the courthouse to file this action based on a threat of litig atio n , review of the briefs as well as the annexed affidavits and exhibits reveals th at such is not the case. Instead, it appears that the parties attempted to engage in m ed iatio n of their dispute on multiple occasions, but that contemporaneous email in teractio n s between the executives discussed above caused such voluntary mediation

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attem p ts to founder. B. D is c u s s io n

H a v in g removed this action to this court, defendants cannot argue that the W e ste rn District of North Carolina is an improper forum for resolution of this dispute. In stead , defendants contend that this action should be transferred in accordance with 2 8 , United States Code, Section 1404(a) to the District of Oregon, where it could have b een brought originally, for the convenience of the parties and witnesses and in the in terests of justice. Section 1404(a) provides, as follows: F o r the convenience of parties and witnesses, in the interest of justice, a d istrict court may transfer any civil action to any other district or d iv isio n where it might have been brought. 2 8 U.S.C. § 1404(a). In deciding a motion to transfer venue under Section 1404(a), courts must "w eig h in the balance a number of case-specific factors." Stewart Org., Inc. v. Ricoh C o rp ., 487 U.S. 22, 29 (1988). These factors include, but are not limited to, the f o llo w in g : (1 ) (2) (3) th e plaintiff's choice of forum; relativ e ease of access to sources of proof; av ailab ility of compulsory process for attendance of unwilling witnesses, an d the cost of obtaining attendance of willing and unwilling witnesses;

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(4 ) (5) (6) (7)

p o ssib ility of a view of the premises, if appropriate; en fo rceab ility of a judgment, if one is obtained; relativ e advantage and obstacles to a fair trial; o th er practical problems that make a trial easy, expeditious, and in e x p e n s iv e ;

(8) (9) (10)

ad m in istrativ e difficulties of court congestion; lo cal interest in having localized controversies settled at home; a p p r o p riaten ess in having a trial of a diversity case in a forum that is at h o m e with the state law that must govern the action; and

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av o id an ce of unnecessary problems with conflicts of laws.

S ee Jim Crockett Promotions, Inc. v. Action Media Group, Inc., 751 F. Supp. 93 (W .D .N .C . 1990); CapitalSource Finance LLC v. B & B Contractors, Inc., 2005 WL 1 0 2 5 9 5 3 (D.Md. 2005). I n order to determine whether transfer is proper, a balance must be struck b etw een the competing interests. Unless the balance is tipped strongly in favor of the m o v in g party, Collins v. Straight, Inc., 748 F.2d 916, 921 (4th Cir. 1984), plaintiff's ch o ice of forum should not be disturbed. Upon a motion to transfer, the moving party c ar rie s the burden and the burden is heavy. Datasouth Computer Corp. v. Three D im e n s io n a l Technologies, Inc., 719 F. Supp. 446, 451 (W.D.N.C. 1989).

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A defendant carries a particularly heavy burden when it moves pursuant to [Section] 1404(a) to transfer an action from a district where venue is p r o p e r. As this court has noted previously, it is "black letter law," that "p lain tiff's choice of a proper forum is a paramount consideration in any d eterm in atio n of a transfer request, and that choice . . . should not be lig h tly disturbed." P h illip s v. S. Gumpert Co., Inc., 627 F. Supp. 725, 726-27 (W.D.N.C. 1986) (citations o m itte d ) . T h e court has carefully considered each of the eleven factors. Each factor will b e discussed below. 1. T h e Plaintiff's Choice of Forum

W h i le plaintiff argues the first to file rule mandates giving such choice great w eig h t, defendants argue that the anticipatory filing exception dictates an opposite resu lt. The court has carefully considered the memoranda of counsel as well as the ex h ib its annexed thereto. "The decision to invoke the first-filed rule is an equitable d eterm in atio n that is made on a case-by-case, discretionary basis." Nutrition & F itn e s s, Inc. v. Blue Stuff, Inc., 264 F. Supp.2d 357, 360 (W.D.N.C. 2003). D e fe n d a n ts argue that the anticipatory filing exception to that rule should be invoked b e c au s e [d]efendants made multiple attempts to mediate the dispute in order to reso lv e the financial issues between the parties. Hamilton Decl., ¶¶ 1 8 - 1 9 . Finally, on June 1, 2010, Defendants sent ASNI a demand in d icatin g that they planned to file suit against ASNI if the parties did n o t come to an agreement by June 15, 2010. Hamilton Decl., ¶ 20. This
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w as a true threat of litigation and a genuine attempt to resolve D efen d an ts' complaints against ASNI without resort to the court system. M em o ran d u m in Support, at p. 11. Plaintiff argues in response that . . . Plaintiff ASNI filed suit in Buncombe County Superior Court after m o n th s of being completely frustrated in its efforts to obtain information fro m Defendants about apparent quality problems with products being so ld by Defendants to Plaintiff. During those months, Defendants' P resid e n t made so many threats of litigation that Plaintiff became c o n v in c e d those threats were a ploy to avoid discussion of the product d e f e c ts . R e sp o n s e , at p. 3. Review of the evidentiary materials submitted reveals that

d e f e n d an ts had indeed regularly threatened plaintiff with suit; while defendants co n ten d that the June 1 threat "was a true threat of litigation," Memorandum in S u p p o rt, at p. 11, how plaintiff was to distinguish between true and mendacious th reats of litigation is left unexplained. Application of the first to file rule is a equitable consideration, Nutrition & F itn ess, Inc., and so must be the application of the anticipatory filing exception. If the ex cep tio n were to be applied in this case, potential litigants would be encouraged to m a k e continual and "untrue" threats of litigation simply to be able to invoke an ticip ato ry filing exception. Although counsel for defendants do an excellent job p a in tin g defendants as reasonable parties holding off on filing suit while attempting to mediate - - an argument which would generally be supportive of invocation of the ex cep tio n - -the emails from defendants' president disconfirm that notion. Such person
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a p p a r e ntly communicated threats the filing of litigation earlier in the year in March 2 0 1 0 which did not occur. Defendants concede as much in their Reply. Reply, at p. 3 . Defendants argue that they did not follow through with the threats because plaintiff resp o n d ed with some type of partial payment offer, settlement offer, or mediation o ffer. Id. In the final analysis, the court cannot fault plaintiff for filing this action in this d istrict as it is the district in which it has its production facilities. Affidavit of Clive A d am s, at ¶ 8. Further, the tenor of the emails sent by defendants' president would lead a reasonable person to believe that no amicable resolution could be reached with d efen d an ts, even through mediation, as the correspondence from defendants' president h a d degenerated to vulgar, personal attacks on the character of plaintiff's founder. T h e court simply cannot find that such filing in this district was anticipatory inasmuch a s plaintiff had no reason to believe that defendant's June 2010 threat was any more r e a l than the March 2010 threat. Inasmuch as defendants had previously threatened litig atio n , there is no reason not to believe that plaintiff's filed this action in this d istrict when it did for the reasons given by Mr. Adams in his affidavit. Id., at 18-19. T h e first factor weighs heavily in favor of keeping this action in this district.

2.

R e la t iv e Ease of Access to Sources of Proof

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T h e court agrees with the defendants' analysis of this factor, inasmuch as most, if not all, documents should be easily accessible by both parties electronically. The resu lts of laboratory tests on the algae products at issue can be shared electronically. T h is factor is neutral. 3. A v a ila b ility of Compulsory Process for Attendance of U n w illin g Witnesses, and the Cost of Obtaining A t te n d a n c e of Willing and Unwilling Witnesses

The court agrees with defendants that most of the witnesses concerning the q u ality issues and analysis of the product are located in the Pacific Northwest. No f o r ec as t is made as to such witnesses being unwilling to travel to the Western District o f North Carolina. It is apparent that the costs of obtaining the testimony of most w itn e s se s would be less in Oregon. This factor favors transfer. 4. P o s s ib ilit y of a View of the Premises, if Appropriate

While this court is aware that the lake from which algae is taken, the plants at w h ich such substance is processed, and labs at which substance is analyzed, are all lo cated in the Pacific Northwest, the court cannot imagine that a jury view of the p r e m is es would be required. Equally, a jury view of the plant where such raw p r o d u c ts are turned into supplements simply would be unnecessary. If any views were req u ired , such could be easily accomplished through the production of a digital film. This factor is neutral.

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5.

E n f o r ce a b ilit y of a Judgment, if One is Obtained

This factor is also neutral inasmuch as a judgment obtained in a federal court in Oregon is - - as is a judgment obtained in this court - - enforceable nationwide. 6. R ela tiv e Advantage and Obstacles to a Fair Trial

This factor is neutral in that a fair trial can be obtained in any federal court for eith er side. 7. O th er Practical Problems that Make a Trial Easy, E x p ed itio u s, and Inexpensive

There appear to be no other practical problems outside of the factors previously co n sid ered that make trial any easier here than in Oregon. This factor is neutral. 8. A d m in istra tiv e Difficulties of Court Congestion

There appears to be no significant difference in court congestion. Indeed, the civ il docket of theAsheville Division of the Western District of North Carolina is cu rren tly without a backlog. This factor is neutral. 9. L o c a l Interest in Having Localized Controversies S e tt le d at Home.

The interest in having this dispute, and any counterclaims, resolved in this d istrict is counterbalanced by nearly identical interests in the District of Oregon. W h ile it is clear that the unique raw product is harvested and process in Oregon, such p r o d u c t is turned into a product for retail sale in this district. The dispute that has

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a risen cannot be localized to either Oregon or North Carolina, as it impacts not only b u sin esses but workers in both jurisdictions. This factor is neutral. 10. A p p ro p ria ten ess in Having a Trial of a Diversity Case in a Forum that is at Home with the State Law that M u st Govern the Action

D efen d an ts contend that the breach of contract action should be governed by O reg o n law, but have pointed to no unique aspects of Oregon contract law that would b e difficult for this court to apply. On the other hand, plaintiff has also alleged

to r tio u s interference with contract, unfair and deceptive trade practices, all of which are arguably governed by North Carolina law. This factor is neutral. 11. A v o id a n ce of Unnecessary Problems with Conflicts of Law s

N o problems have been identified, making such factor neutral. *** The court, having considered all factors both quantitatively and qualitatively fin d s that one factor favors retention and one factor favors transfer. Quantitatively, i t' s a dead heat. Qualitatively, however, plaintiff's choice of forum must be given g reater weight than the costs saving that may be realized through prosecuting this actio n in Oregon. The motion will, therefore, be denied.

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ORDER IT IS, THEREFORE, ORDERED that the Motion to Transfer (#2) is D E N IE D .

Signed: September 17, 2010

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