Bui v. Armes et al

Filing 26

Order. Defendants motion to transfer venue to the District of Delaware (Doc. 13 ) granted. Defendants motion to stay proceedings (Doc. 20 ) be, and denied as moot. Judge James G. Carr on 106/2014.(G,D)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
WESTERN DIVISION

David Bui, et al.,

Case No. 3:14CV428

Plaintiff
v.

ORDER

Roy V. Armes, et al.,
Defendants

This is a shareholder derivative action brought by plaintiffs David Bui and Henry Zwang
against nominal defendant Cooper Tire & Rubber Company (Cooper) and several of its officers and
directors: Roy Armes, Bradley Hughes, Thomas Capo, Steven Chapman, John Holland, John Meier,
Cynthia Neikamp, John Shuey, Richard Wambold, and Robert Welding.
Plaintiffs allege that defendants’ breached their fiduciary duty in relation to a failed merger
transaction.
Currently, a securities class action and a shareholder derivative action, both of which involve
the same or substantially similar alleged facts and defendants, are pending in the United States
District Court for the District of Delaware.
Pending is defendants’ motion to transfer venue to the District of Delaware pursuant to 28
U.S.C. § 1404(a). (Doc. 13).

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Also pending is defendants’ motion to stay proceedings. (Doc. 20).
For the reasons that follow, I grant defendants’ motion to transfer. As a result, I dismiss
defendants’ motion to stay proceedings as moot. I dismiss it without prejudice to defendants’ right
to seek that relief in the District of Delaware.
Background
Cooper is a multi-national tire company incorporated in Delaware and headquartered in
Findlay, Ohio. In 2013, the company attempted to merge with Apollo Tyres Ltd. (Apollo), an Indian
company.
According to plaintiffs’ complaint, on June 12, 2013, Cooper and Apollo jointly announced
the proposed merger transaction, valued at approximately $2.5 billion. The press release touted
Cooper’s presence in China, which includes Cooper Changshan Tire Company, Ltd. (CCT),
Cooper’s joint venture with Changshan Group (Chengshan). Cooper did not disclose, however, that
the head of Chengshan, Chairman Che, was fiercely opposed to the merger.
As a result of the proposed merger, on June 21, 2013, workers at CCT went on strike. They
returned to work but refused to produce Cooper-branded tires. CCT also barred Cooper’s
representatives from entry into the facility and denied them access to CCT’s books and records.
Plaintiffs allege that Cooper’s proxy statement to its shareholders downplayed CCT’s
opposition and misled the shareholders on the viability of the proposed merger with Apollo.
On August 1, 2013, the United Steelworkers (USW) filed grievances challenging the
proposed merger as violating agreement between Cooper and certain local unions in Arkansas and
Ohio. In September, 2013, an arbitrator ordered Cooper to refrain from merging until USW entered
into agreements with Apollo.

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On October 4, 2013, Cooper sued Apollo for breaching the merger agreement in the
Delaware Court of Chancery. In November, 2013, the Court of Chancery denied Cooper’s demand
that Apollo close on the proposed merger. As a result, the value of Cooper’s stock plummeted.
Several days later, Cooper disclosed that it would be unable to file its Form 10-Q for the third
quarter because the CCT employees had denied Cooper access to its facility and had withheld
business and financial information.
In December, 2013, the Delaware Supreme Court dismissed Cooper’s interlocutory appeal
of the Chancery Court’s decision. On December 30, 2013, Cooper announced that it was terminating
the proposed merger.
On January 17, 2013, OFI Risk Arbitrages Inc. (OFI), a French trust fund, and Timber Hill
Inc., a Connecticut limited liability company, filed suit in the District Court of Delaware, alleging
securities law violations related to the failed Apollo merger. See OFI Risk Arbitrages, et al., v.
Cooper Tire & Rubber Company, et al., No. 1:14-cv-0068 (D. Del.).
On February 24, 2014, plaintiff Bui filed this derivative action in this district, alleging
breaches of fiduciary duty related to the merger transaction. On March 6, 2014, plaintiff Zwang filed
a similar derivative action in this district. See Zwang v. Armes, et al., No. 3:14-cv-0511 (N.D. Ohio).
On May 19, 2014, I granted an unopposed motion to consolidate the Bui and Zwang actions into
one.
On April 17, 2014, Jim Fitzgerald filed a derivative action in the District Court of Delaware,
alleging similar breaches of fiduciary duty related to the failed merger transaction. See Fitzgeralad
v. Armes, et al., No. 1:14-cv-0479 (D. Del.).

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Defendants now seek to transfer venue to the District of Delaware where the OFI and
Fitzgerald actions are currently pending.
Discussion
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.”
The Supreme Court has stated that § 1404(a) “is intended to place discretion in the district
court to adjudicate motions for transfer according to an ‘individualized, case-by-case consideration
of convenience and fairness.’” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1998) (quoting
Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)). The Court has described § 1404(a) as a “federal
housekeeping measure, allowing easy change of venue within a unified federal system.” Piper
Aircraft Co. v. Reyno, 454 U.S. 235, 254 (1981) (internal quotations and citation omitted).
To decide a motion to transfer, I conduct a two-step analysis. First, I must determine whether
the proposed venue is a district where the parties could have properly brought the action. Betco
Corp. v. Peacock, 2014 WL 809211, *9 (N.D. Ohio). Second, I determine whether the transfer
would serve the convenience of the parties and promote the interest of justice. Id.
1. The Proposed Venue is a District Where
The Parties Could Have Properly Brought The Action
First, I determine whether the proposed venue is proper under 28 U.S.C. § 1391, which states
that parties may bring a civil action in:
1) a judicial district in which any defendant resides, if all defendants are residents of the
State in which the district is located;

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2) a judicial district in which a substantial part of the events or omissions giving rise to the
claim occurred, or a substantial part of property that is the subject of the action is situated;
or
3) if there is no district in which an action may otherwise be brought as provided in this
section, any judicial district in which any defendant is subject to the court's personal
jurisdiction with respect to such action.
Additionally, 28 U.S.C. § 1401, which applies specifically to shareholder derivative actions,
states that venue is appropriate “in any judicial district where the corporation might have sued the
same defendants.”
Defendants argue that venue is proper in the District of Delaware for three reasons. First,
with regard to plaintiff Bui, the court has subject matter jurisdiction under 28 U.S.C. § 1332a
because Bui is a citizen of California, none of the defendants reside in that state, and Bui alleges an
amount in controversy in excess of $75,000. With regard to plaintiff Zwang, defendants contend that
the Delaware court has original jurisdiction under 28 U.S.C. § 1331 over his claims asserted under
§ 27 of the Exchange Act, and supplemental jurisdiction under 28 U.S.C. § 1367(a) over his other
claims.
Second, defendants argue that each of the defendants in the Bui and Zwang complaints is
subject to the personal jurisdiction of the Delaware courts under 10 Del. C. § 3114. Third,
defendants contend that venue is proper under 28 U.S.C. § 1391(b)(2) because a substantial part of
the events or omissions giving rise to the claim occurred there.
Plaintiffs argue that venue is not proper under § 1391(b)(1) because none of the real
defendants reside in Delaware and the corporation is not considered a defendant for purposes of
establishing where it might have the sued real defendants. It further contends that venue is not
proper under § 1391(b)(2) because a substantial part of the events or omissions giving rise to the

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claim did not occur in Delaware. It states that Cooper has no employees or factories in Delaware and
no board meetings took place there. It contends the only event remotely related to plaintiffs’ claims
is the trial held in Delaware Court of Chancery between Cooper and Apollo.
I find that venue is proper under § 1391(b)(2) because a substantial part of the events or
omissions giving rise to the claim occurred in the District of Delaware. This shareholder derivative
lawsuit is a result of the underlying litigation between Cooper and Apollo which occurred in the
Delaware Court of Chancery.1
The consolidated complaint references the Delaware litigation repeatedly. (Doc 16, at 2, 3,
6, 7, 14, 15, 21, 23). It alleges that as a direct and proximate result of the defendants’ actions,
Cooper has expended and continues to expend significant sums of money “incurred prosecuting the
attempt to force consummation of the merger in the Delaware litigation.” Id. at 23.
Both the Bui and Zwang complaints assert that as a result of the Delaware Court of
Chancery’s ruling denying Cooper’s request for an order requiring Apollo to close the merger,
Cooper’s stock plummeted. The consolidated complaint also references two actions occurring in the
District of Delaware and the Delaware Court of Chancery as a result of defendants’ alleged
misconduct.
While not all the events related to this shareholder lawsuit took place in Delaware, it is clear
that the Delaware litigation gave rise to a substantial part of the events for this shareholder action.
As defendants note, the Sixth Circuit has recognized that the standard for venue is substantial – not
more or most substantial:

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Even if, as plaintiffs argue, the underlying action occurred in Delaware only because of a
forum selection clause in Cooper and Apollo’s merger agreement, that fact does not diminish the
connection this action now has to Delaware.
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The fact that substantial activities took place in district B does not disqualify district A as
proper venue as long as “substantial” activities took place in A, too. Indeed, district A should
not be disqualified even if it is shown that the activities in district B were more substantial,
or even the most substantial.
First of Mich. Corp. v. Bramlet, 141 F.3d 260, 263 (6th Cir. 1998) (citation omitted).
Thus, I find the District of Delaware is a proper venue.2
2. Balancing Private- and Public- Interest Factors
The next issue is whether transfer is appropriate under § 1404(a)’s balancing test, which
permits transfer of venue “for the convenience of parties and witnesses” and “in the interest of
justice.” In making a decision, I consider “both the private interests of the litigants and the public’s
interest in the administration of justice.” Jamhour v. Scottsdale Ins. Co., 211 F. Supp. 2d 941, 945
(S.D. Ohio 2002) (citing Gulf Oil v. Gilbert, 330 U.S. 501, 508–09 (1947)).
Private interests include:
the relative ease of access to sources of proof; availability of compulsory process for
attendance of unwilling, and the cost of obtaining attendance of willing witnesses; possibility
of view of the premises, if view would be appropriate to the action; and all other practical
problems that make trial of the case easy, expeditious, and inexpensive.
Id.
Public interests include “docket congestion, the burden of trial to a jurisdiction with no
relation to the cause of action, the value of holding trial in a community where the public affected
live, and the familiarity of the court with controlling law.” Id.
The moving party has the burden of establishing the need for a transfer of venue. The balance
of facts should weigh strongly in favor of a transfer. Picker Intern., Inc. v. Travelers Indem. Co., 35

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Because I find the proposed venue is proper under § 1391(b)(2), I do not address the
parties’ other arguments regarding the first-step venue analysis.
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F. Supp. 2d 570, 573 (N.D. Ohio 1998). I ultimately, however, have discretion to grant the transfer.
Jamhour, supra, 211 F. Supp. 2d at 946.
A. Private Interests
Defendants argue that the private interests of the litigants strongly favor transfer of venue.
They contend that because both Bui and Zwang are not residents of the Northern District of Ohio
and are derivative plaintiffs, I should give their choice of forum less weight.
Defendants also contend that of the ten individual defendants, who are all likely to be the key
witness, only three of them reside in Ohio. The others reside all over the country: Colorado, Florida,
Indiana, Kansas, Michigan, and Texas.
Defendants argue that because of the closely related securities action and a nearly identical
shareholder derivative action pending in the District of Delaware, the witnesses will be unduly
burdened by managing different litigation schedules – one in Ohio and the other in Delaware. By
transferring venue, defendants contend that the Delaware district court will coordinate the schedules
in all cases to maximize efficiency and minimize inconvenience to all the parties and non-party
witnesses.
Plaintiffs also argue that this court is more convenient for the witnesses. They note that in
addition to the three defendants who live in Ohio, two live just outside of Detroit, Michigan, and are
less than an hour and a half away from this courthouse. Plaintiffs also contend that defendants have
not provided enough information about potential witnesses to indicate the level of inconvenience
for them.
Plaintiffs further argue that because of the company’s headquarters in Ohio, far more
potential witnesses will dwell within 100 miles of this court compared to Delaware should the court

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need to compel unwilling witnesses to appear. They also argue that the bulk of Cooper’s records,
meeting minutes, and memoranda are in Ohio and thus it is easier to access documents in this
district.
I find defendants’ arguments persuasive.
As defendants correctly note, I need not give additional weight to the plaintiffs’ choice of
forum because neither of them reside in Ohio. Central States, SE& SW Areas Health & Welfare
Fund v. Guarantee Trust Life Ins. Co., 8 F. Supp. 2d 1008, 1011 (N.D. Ohio 1998). Additionally,
because this a shareholder derivative action, the plaintiffs’ choice of forum is further diminished
because they are not asserting individual claims on their own behalf. See Blake v. Family Dollar
Stores, Inc., 2007 WL 1795936 (S.D. Ohio).
Plaintiffs are correct that half of the individual defendants reside in or near the Northern
District of Ohio. They fail, however, to address defendants’ argument that those same individual
defendants strongly favor a transfer despite their geographical proximity to this courthouse. Because
the individual defendants are key witnesses to this derivative action – they are allegedly at fault for
the botched merger with Apollo – I must take into account what would be convenient for them. See
RFF Family P’ship, LP v. Wasserman, 2010 WL 420014, *11 (N.D. Ohio) (finding plaintiff’s choice
of forum “less compelling” because defendants were likely to be key witnesses strongly desired to
litigate in transferee court).
As defendants’ persuasively argue, having one district court preside over several actions all
related to the same set of events is clearly preferable to the witnesses. The parties and witnesses can
more easily coordinate their schedules to minimize duplicative meetings, interviews, depositions,
etc... Thus, I find this factor strongly weighs in favor of transfer.

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To the extent that other non-party witnesses from Ohio are involved in this case, it is still
more convenient for them to go to Delaware for all related cases instead of going to Delaware for
the two actions currently there and then go through the same process again in Ohio. Additionally,
while it is true that more non-party witnesses may be in Ohio because Cooper is headquartered here,
there is no indication that any witnesses are unwilling to appear. Thus, this factor does not tip the
balance in favor of plaintiffs. Thomas v. Home Depot, U.S.A., Inc., 131 F. Supp. 2d 934, 940 (E.D.
Mich. 2001).
Finally, plaintiffs’ argument that access to documents is easier in Ohio is not persuasive.
There will be a large overlap of those documents with the documents required for the pending
Delaware actions. As a result, any burden on plaintiffs regarding document production should be
minimal.
Thus, I find the private interests strongly favor transfer of venue to the District of Delaware.
B. Public Interests
Defendants argue that several public interests strongly favor a transfer of venue. They
contend that transfer would eliminate the possibility of two courts issuing inconsistent rulings
between the Ohio and Delaware shareholder derivative actions against Cooper. They further argue
that a transfer conserves judicial resources because only one court needs to become familiar with
the same events, parties, witnesses, and legal issues.
Defendants also contend that a Delaware judge will be more familiar with Delaware
substantive law which governs this action. Finally, defendants argue that the Northern District of
Ohio’s docket is more congested per judge than in the District of Delaware.

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Plaintiffs contend that defendants’ arguments are without merit. They argue this court is
perfectly capable of interpreting Delaware law and does so regularly. They note that the docket in
this district is not too congested to handle this action. Finally, plaintiffs contend that Cooper’s ample
ties to Ohio weigh heavily in favor of denying transfer because there is great value in holding trial
in a community where the public affected live.
Again, I find that the public interests weigh strongly in favor of transfer.
Plaintiffs do not address defendants’ argument that transfer would eliminate inconsistent
rulings in the shareholder derivative actions nor do they respond to defendants’ contention that
transfer would conserve judicial resources. Both arguments are highly persuasive. Regardless of the
level of docket congestion in either district or my ability to interpret Delaware substantive law, it
is obvious that judicial economy is best served by one judge managing these related cases given that
the same defendants are involved and the same facts are alleged. E.g., Betco Corp., supra, 2014 WL
809211, at *9 (finding judicial economy was best served by having related actions in the same
district); Donia v. Sears Holding Corp., 2008 WL 2323533, *4 n.2 (N.D. Ohio) (same).
Plaintiffs’ argument that Cooper has longstanding ties to Ohio does weigh in favor of
denying transfer of venue. Cooper is headquartered in this district and has been doing business here
for one hundred years. Thousands of its employees work here.
The federal judiciary’s resources, however, are limited. Ultimately, the time, money, and
effort saved by having one judge preside over these related actions outweighs the value in holding
trial in this community despite Cooper’s strong ties here.
Thus, I find that the public interests strongly favor transfer of venue.

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Conclusion
It is, accordingly,
ORDERED THAT:
1.

Defendants’ motion to transfer venue to the District of Delaware (Doc. 13) be, and
the same hereby is granted.

2.

Defendants’ motion to stay proceedings (Doc. 20) be, and the same hereby is denied
as moot.

So ordered.

/s/ James G. Carr
Sr. U.S. District Judge

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