Informaxion Solutions Inc v. Vantus Group et al

Filing 19

ORDER denying 16 Motion to Dismiss for Failure to State a Claim; denying 16 Motion to Dismiss; denying 16 Motion to Dismiss for Lack of Jurisdiction; granting 16 Motion to Change Venue. Signed by Honorable Patrick Michael Duffy on November 10, 2015.(jmcg, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
Informaxion Solutions, Inc.,
Plaintiff,
v.
Vantus Group, Vantus Technology
Corporation, and Vantus Manufacturing
Corporation,
Defendants.

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C.A. No.: 2:15-cv-290-PMD

ORDER

This matter is before the Court on Defendants Vantus Group, Vantus Technology
Corporation, and Vantus Manufacturing Corporation’s (collectively “Defendants”) Renewed
Motion to Dismiss Plaintiff’s Complaint or, in the Alternative, Transfer Venue (ECF No. 16)
(“Motion”). For the reasons set forth herein, the Court grants Defendants’ request to transfer
venue and denies the remainder of the Motion.
BACKGROUND
On December 11, 2014, Plaintiff filed this action in the Berkeley County Court of
Common Pleas against Vantus Group, Vantus Technology Corporation (“VTC”), and Vantus
Manufacturing Corporation Systems (“VMCS”). Plaintiff’s Complaint alleges that on or about
April 9, 2014, the parties executed a Professional Services Agreement (“Agreement”) regarding
the provision of certain information technology consulting services.

The Agreement was

accompanied by a Statement of Work (“SOW”) to be performed. The Complaint also alleges
that “Plaintiff provided Defendant[s] with semi-monthly invoices as required by the Agreement,
which included hourly charges for the detailed work necessary to fulfill the Agreement and
SOW, as well as hard costs incurred (such as travel and meeting-related expenses).” (Compl.,

ECF No. 1-1, at 4.) According to Plaintiff, Defendants have failed to remit payment for even a
single invoice, despite Plaintiff’s performance of its obligations under both the Agreement and
the SOW. Plaintiff further contends that it attempted to discuss the negotiation and payment of
the outstanding invoices but that this effort proved fruitless.
Plaintiff thereafter filed suit in state court, asserting causes of action for breach of
contract, violation of the South Carolina Unfair Trade Practices Act, S.C. Code Ann. § 39-5-1020(a) et seq., and unjust enrichment. Defendants subsequently removed the present action to this
Court on January 21, 2015. On January 28, Defendants filed a motion seeking to dismiss the
Complaint pursuant to section 15-5-150 of the South Carolina Code of Laws and Rules 12(b)(2),
(5), and (6) of the Federal Rules of Civil Procedure. In the alternative, Defendants moved to
transfer this action to the United States District Court for the Eastern District of Wisconsin
pursuant to 28 U.S.C. § 1404(a). Plaintiff filed a Response on February 17, and Defendants filed
a Reply on February 26. On June 17, this Court issued an Order denying Defendants’ original
motion and ordering limited jurisdictional discovery. Upon completion of discovery, Defendants
re-filed their Motion on August 28. Plaintiff filed a Response on September 14, and Defendants
filed a Reply on September 23. This matter is now ripe for consideration.
DISCUSSION
As a court of limited jurisdiction, Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S.
375, 377 (1994), this Court must remain mindful of the fact that “[t]he validity of an order of a
federal court depends upon that court’s having jurisdiction over both the subject matter and the
parties,” Ins. Corp. of Ir. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 701 (1982) (citing
Stoll v. Gottlieb, 305 U.S. 165, 171–72 (1938); Thompson v. Whitman, 85 U.S. (18 Wall.) 457,
465 (1873)).

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A. Personal Jurisdiction
The critical issue before the Court is the propriety of exercising personal jurisdiction over
Defendants.

“Once jurisdictional discovery or an evidentiary hearing is completed, the

plaintiff’s preponderance of the evidence burden applies and the plaintiff no longer has the
benefit of favorable interpretations of pleading allegations.” Estate of Thompson v. Mission
Essential Pers., LLC, No. 1:11CV547, 2014 WL 4745947, at *2 (M.D.N.C. Sept. 23, 2014)
(citing Marx Indus., Inc. v. Chestnut Ridge Foam, 903 F. Supp. 2d 358, 362 (W.D.N.C. 2012)).
“[T]o validly assert personal jurisdiction over a non-resident defendant, two conditions must be
satisfied.” Christian Sci. Bd. of Dirs. of the First Church of Christ, Scientist v. Nolan, 259 F.3d
209, 215 (4th Cir. 2001). First, the exercise of jurisdiction must be authorized by the long-arm
statute of the forum state, and second, the exercise of personal jurisdiction must not “overstep the
bounds” of the Fourteenth Amendment’s Due Process Clause. Anita’s N.M. Style Mexican Food,
Inc. v. Anita’s Mexican Foods Corp., 201 F.3d 314, 317 (4th Cir. 2000). South Carolina’s longarm statute has been construed to be coextensive with, and reach the outer limits allowed by, the
Due Process Clause. E.g., ESAB Grp. v. Zurich Ins. PLC, 685 F.3d 376, 391 (4th Cir. 2012).
Therefore, the dual jurisdictional requirements collapse into the due process analysis. See id.
Accordingly, the scope of the inquiry is whether a defendant has “certain minimum contacts”
with the forum, such that “maintenance of the suit does not offend ‘traditional notions of fair
play and substantial justice.’” Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (citations
omitted). The analytical framework for determining whether minimum contacts exist differs
according to which species of personal jurisdiction—general or specific—is alleged.

See

generally ESAB Grp. v. Centricut, Inc., 126 F.3d 617, 623–24 (4th Cir. 1997). Here, Plaintiff
concedes that Defendants are not subject to general jurisdiction. When a cause of action arises

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out of a defendant’s contacts with the forum, a court may exercise specific jurisdiction over a
defendant that purposefully directs activities toward the forum state when the litigation results
from alleged injuries that arise out of or relate to those activities. Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 472–73 (1985).
The Fourth Circuit has developed a three-part test to determine whether the exercise of
specific personal jurisdiction in a particular case comports with due process: “‘(1) the extent to
which the defendant purposefully availed itself of the privilege of conducting activities in the
State; (2) whether the plaintiffs’ claims arise out of those activities directed at the State; and (3)
whether the exercise of personal jurisdiction would be constitutionally reasonable.’” Sonoco
Prods. Co. v. ACE INA Ins., 877 F. Supp. 2d 398, 405 (D.S.C. 2012) (quoting Consulting Eng’rs
Corp. v. Geometric Ltd., 561 F.3d 273, 278 (4th Cir. 2009)). “The requirement of purposeful
availment ‘is not susceptible to mechanical application[,]’” and courts look to several
“nonexclusive factors” to determine whether a defendant has purposefully availed itself of the
privilege of conducting activities in the forum state. Id. (quoting Consulting Eng’rs Corp., 561
F.3d at 278). Those factors are:
(1) whether defendant maintains offices or agents in the forum state;
(2) whether defendant owns property in the forum state;
(3) whether defendant reached into the forum state to solicit or initiate business;
(4) whether defendant deliberately engaged in significant or long-term business
activities in the forum state;
(5) whether the parties contractually agreed that the law of the forum state would
govern disputes;
(6) whether defendant made in-person contact with the resident in the forum state
regarding the business relationship;
(7) the nature, quality, and extent of the parties’ communications about the
business being transacted; and
(8) whether the performance of contractual duties was to occur within the forum.

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Id. at 406. After thoroughly reviewing the jurisdictional discovery conducted by the parties, it
appears that Defendants are not subject to personal jurisdiction in South Carolina. 1 Under the
first prong of the Consulting Engineers test, Defendants cannot be said to have purposefully
availed themselves of conducting activities in the forum state. Defendants have no offices or
agents in South Carolina, own no property in South Carolina, and did not reach into South
Carolina to solicit or initiate business. 2 Defendants do not appear to be engaged in significant or
long-term business activities in South Carolina, and the PSA states that the law of Virginia
would govern any disputes between the parties. Plaintiff has failed to allege a single in-person
contact by the Defendants with South Carolina, and the only evidence offered by the Plaintiff in
support of such contact is a phone call and a LinkedIn request that James Schroeder, Vantus’
President made to one of Plaintiff’s members after performance of the contract had already
begun. Finally, the performance of some contractual duties may have taken place within South
Carolina, but Plaintiff has failed to show that Defendants were aware of that fact. Because
Plaintiff has failed to show that Defendants are subject to personal jurisdiction under the first
prong of the Consulting Engineers test, the Court need not address the remaining prongs.
Accordingly, the Court turns to Defendants’ alternative Motion to Transfer Venue.
B. Venue
In the event that the Court denied their Motion to Dismiss, Defendants also moved in the
alternative to transfer venue pursuant to 28 U.S.C. § 1404(a). However, the Court notes that
section 1404(a) is more appropriate where there are no defects in venue or jurisdiction. Where

1. Because the Court lacks personal jurisdiction over Defendants, there is no need for the Court to address
Defendants’ arguments as to South Carolina’s Door Closing Statute, S.C. Code Ann. § 15-5-150. Additionally,
venue is improper here because Defendants do not reside in South Carolina and the events giving rise to Plaintiff’s
claims did not occur in South Carolina. See Stevens v. Bd. of Educ. of Kent Cty., 70 F. Supp. 3d 566, 570 (D.D.C
2014).
2. Significantly, it appears that the parties initiated the underlying contract in Georgia.

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there are such defects, 28 U.S.C. § 1406(a) is the appropriate avenue for relief. When a court is
an improper venue to hear a dispute and lacks personal jurisdiction over the defendants,
§ 1406(a) authorizes this Court to transfer the case to an appropriate venue that would have
personal jurisdiction.

See Porter v. Groat, 840 F.2d 255, 257–58 (4th Cir. 1988) (stating

§ 1406(a) authorizes transfer “to any district, which would have had venue if the 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”); Estate
of Bank v. Swiss Valley Farms Co., 286 F. Supp. 2d. 514, 522 (D. Md. 2003) (“Transfer had [sic]
been deemed proper under section 1406 when there is an obstacle—either incorrect venue,
absence of personal jurisdiction, or both—to a prompt adjudication on the merits in the forum
where originally brought.”). Additionally, any transfer made pursuant to § 1406(a) must be
made “in the interest of justice.” § 1406(a); see also Capital Bank Int’l Ltd. v. Citigroup, Inc.,
276 F. Supp. 2d 72, 78 (D.D.C. 2003) (“A transfer rather than a dismissal was in the interest of
justice when the defendants were not subject to personal jurisdiction in the transferor district, a
transfer would save the parties the time and expense of refiling the lawsuit, and the requirements
of venue and personal jurisdiction apparently would be satisfied in the transferee district.”).
“Section 1406(a) favors ‘adjudications on the merits over dismissals’ because of defects
in personal jurisdiction.” Wright v. Zacky & Sons Poultry, LLC, No. 1:14cv570, 2015 WL
2357430, at *8 (M.D.N.C. May 15, 2015) (quoting Jackson v. Leake, No. 1:05CV00691, 2006
WL 2264027, at *10 (M.D.N.C. Aug. 7, 2006)). Moreover, “[d]ismissal would result in wasteful
duplication of effort, additional filing expenses, and unnecessary delay for both parties.” Srour
v. Dep’t of Homeland Sec., No. 1:09cv762, 2009 WL 2709934, *2 (E.D. Va. Aug. 25, 2009).
Here, transfer to the Milwaukee Division of the Eastern District of Wisconsin would remove the

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impediments to adjudicating Plaintiff’s claim—improper venue and lack of personal jurisdiction
over Defendants—and is in the interest of justice. All three Defendants would be subject to
personal jurisdiction in the Eastern District of Wisconsin. 3 Venue would also be proper in that
district. Under 28 U.S.C. § 1391(b)(1), “[a] civil action may be brought in a judicial district in
which any defendant resides, if all defendants are residents of the State in which the district is
located.” For purposes of venue, a defendant entity resides “in any judicial district in which such
defendant is subject to the court’s personal jurisdiction with respect to the civil action in
question.” § 1391(c)(2). Therefore, since Defendants are subject to personal jurisdiction in the
Eastern District of Wisconsin, they are also residents of the Eastern District of Wisconsin for
purposes of venue.
“Transfer is preferred over dismissal unless evidence exists that a case was brought in an
improper venue in bad faith or in an effort to harass a defendant.” Jackson, 2006 WL 2264027,
at *10 (citing Gov’t of Egypt Procurement Office v. M.V. Robert E. Lee, 216 F. Supp. 2d 468,
473 (D. Md. 2002)). Without § 1406(a), this Court would be required to dismiss for lack of
personal jurisdiction and improper venue. However, in light of the strong preference for transfer
in lieu of dismissal and the absence of weighty countervailing considerations, 4 the Court will
transfer the present action to the Milwaukee Division of the Eastern District of Wisconsin.

3. Vantus Group “is an unincorporated entity with its principal place of business in Waukesha, Wisconsin.” (Defs.’
Mem. Supp. Mot. Dismiss or Transfer Venue, ECF No. 16-1, at 3.) Vantus Group’s sole member and officer, James
Schroeder, “resides and works in Waukesha.” (Id.) VTC and VMCS are Wisconsin corporations with their
principal places of business in Waukesha. (Id. at 4.) Waukesha falls within the Milwaukee Division of the Eastern
District of Wisconsin.
4. Plaintiff objects to a transfer of venue by citing cases that address transfer under § 1404(a). As discussed above,
§ 1406(a) is the appropriate method of transfer where a court lacks personal jurisdiction over the defendant. Thus,
the countervailing considerations presented by Plaintiff are inapposite. Here, transfer should be preferred over
dismissal because the case was not brought in an improper venue in bad faith or to harass Defendants.

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CONCLUSION
For the foregoing reasons, it is ORDERED that Defendants Motion to Transfer Venue is
GRANTED.
AND IT IS SO ORDERED.

___________, 2015
Charleston, South Carolina

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