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Gemini Investors III, L.P. v. RSG, Inc.: US District Court : CIVIL PROCEDURE - transfer to District of Nebraska; doing business in state isn't residence

Gemini Investors III, L.P.; and
Gemini Investors IV, L.P.,
Civil No. 08-5264 ADM/JJG
RSG, Inc.; R Group, Inc.; and
Randall S. Golden,
Margo S. Brownell, Esq., and Keiko L. Sugisaka, Esq., Maslon, Edelman, Borman & Brand,
LLP, Minneapolis, MN, on behalf of Plaintiffs.
W. Patrick Betterman, Esq., Law Offices of W. Patrick Betterman, Omaha, NE; and Damien A.
Riehl, Esq., and Matthew L. Woods, Esq., Robins, Kaplan, Miller & Ciresi, LLP, Minneapolis,
MN, on behalf of Defendants.
On February 20, 2009, the undersigned United States District Judge heard oral argument
on Defendants RSG, Inc. (RSG); R Group, Inc. (R Group); and Randall S. Goldens
(Golden) (collectively Defendants) Motion to Dismiss or, Alternatively, to Transfer Venue
[Docket No. 11]. For the reasons set forth below, Defendants Motion to transfer is granted.
Plaintiffs are Delaware companies that maintain offices in Minnesota. Compl. [Docket
No. 1] 2-3. RSG is a South Dakota corporation, R Group is an Iowa corporation with a place
of business in South Dakota, and Golden (an officer and director of RSG and R Group) is a
resident of South Dakota. Id. 5-7.
Defendants operated a business that designed, manufactured, distributed, and sold dump
1 Plaintiffs own 80.5% of the outstanding and issued common stock in Holdings.
Betterman Decl. [Docket No. 17] 4.
trailers, accessories, and related parts. Id. 12. The business focused primarily on one trailer,
the Sidumpr Trailer, a bidirectional dump trailer that dumps from the side. Id. In 2004 or
2005, Golden hired an investment banker to market Defendants business to potential buyers. Id.
In approximately August 2005, Plaintiffs learned about Defendants business and expressed
interest in acquiring it. Id. Over the next several months, Defendants made numerous
representations regarding the business and the Sidumpr Trailers to Plaintiffs Minnesota
employees during a telephone call and several in-person meetings in Nebraska. Id. 13-22.
Plaintiffs two Minnesota employees were involved in the due diligence into the purchase of
Defendants business, and they spoke with Defendants over the telephone and made several
visits to Nebraska for in-person meetings with Defendants. Id. 23-25. Also, Plaintiffs hired a
Minnesota company to assist in conducting the due diligence into Defendants business. Id.
In December 2005, Sidumpr Trailer Company, Inc. (STC) was incorporated in
Delaware to purchase Defendants business. Brownell Decl. [Docket No. 21], Ex. A at 1.
Shortly thereafter, Sidumpr Holdings, Inc. (Holdings) was incorporated in Delaware to be the
holding company for STC, and in January 2006, Plaintiffs invested approximately .75 million
in Holdings to finance the purchase of Defendants business.1 Id., Ex. A at 2; Compl. 28. An
asset purchase agreement was signed on January 10, 2006. Betterman Decl., Ex. 1 (Nebraska
Compl.) 5. Sometime thereafter, Plaintiffs guaranteed another approximately .2 million on
a revolving line of credit. Compl. 28. Plaintiffs allege that after the closing on the purchase of
2 The parties do not dispute the threshold question of whether Nebraska is a venue in
which the action could have originally been brought.
Defendants business, they learned that Defendants various representations during the
negotiations and due diligence were false or misleading or omitted material facts. Id. 38-39, 44;
Betterman Decl., Ex. 2 [Docket No. 19] (Nebraska Answer) Counterclaim 20-24.
On July 24, 2006, Defendants filed suit against STC in the United States District Court
for the District of Nebraska. Betterman Decl. 3. In the amended complaint in the Nebraska
action, Defendants seek damages for breach of contract, as well as a declaratory judgment that
STC has no claims against Defendants arising out of the sale of the business for indemnification
or breach of a noncompete agreement. Nebraska Compl. 10-34. STC asserted numerous
counterclaims in response, including fraudulent misrepresentation, fraudulent concealment,
fraudulent nondisclosure, and negligent misrepresentation in connection with the purchase of
Defendants business. Nebraska Answer, Counterclaim 39-63. On September 24, 2008,
Plaintiffs filed this action claiming that Defendants made fraudulent and negligent
misrepresentations regarding the business and the Sidumpr Trailers and that those
misrepresentations induced Plaintiffs to invest in Holdings to fund STCs purchase of the
Defendants seek transfer of venue pursuant to 28 U.S.C 1404(a), which provides: For
the convenience of the 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.2 In
deciding whether to grant a motion to transfer, a district court employs a three-factor balancing
test that considers (1) the convenience of the parties, (2) the convenience of the witnesses, and
(3) the interests of justice. Terra Intl Inc. v. Miss. Chem. Corp., 119 F.3d 688, 691 (8th Cir.
1997). These factors are not exclusive, and a district courts decision on a motion to transfer
require[s] a case-by-case evaluation of the particular circumstances at hand and a consideration
of all relevant factors. Id.
As an initial matter, Plaintiffs emphasize that there is a strong presumption in favor of a
plaintiffs choice of forum, and, accordingly, a defendant bears a heavy burden of overcoming
this presumption by showing that the balance of factors strongly favors transfer. See In re Nine
Mile Ltd., 692 F.2d 56, 61 (8th Cir. 1992) (holding that a plaintiffs choice of forum is generally
given presumptive weight) (overruled on other grounds). However, when the plaintiff is not a
resident of the selected forum or when the underlying events giving rise to the litigation did not
occur in the forum, courts afford a plaintiffs choice of forum significantly less deference.
Nelson v. Soo Line R.R. Co., 58 F. Supp. 2d 1023, 1026 (D. Minn. 1999) (citations omitted). In
maintaining that their choice of Minnesota as a forum is entitled to presumptive weight,
Plaintiffs repeatedly insist that they are Minnesota residents; they are not. Courts have held that
for purposes of venue, a corporate plaintiff is a resident only in the state in which it is
incorporated and the mere fact that it is doing business in a state does not render the
corporate plaintiff a resident of that state. See Rosenfeld v. S.F.C. Corp., 702 F.2d 282, 283 (1st
Cir. 1983) (collecting cases). Other courts are of the view that a a corporate plaintiff generally
is deemed to reside at its principal place of business. 17 James Wm. Moore et al., Moores
Federal Practice 111.13[1][c][i] (3d ed. 2008) (citing Waste Distillation Tech., Inc. v. Pan Am.
Res., Inc., 775 F. Supp. 759, 764 (D. Del. 1991)). Under either view, Plaintiffs are not
Minnesota residents for purposes of determining the deference afforded to their choice of forum
because they are incorporated in Delaware and their principal places of business are in
Massachusetts, not Minnesota. Betterman Decl. 8.
Nor did the underlying events that gave rise to this litigation occur in Minnesota. Rather
the underlying eventsthe alleged misrepresentations regarding the business and the Sidumpr
Trailersoccurred during a Septebmer 28, 2005 telephone call; during three meetings at STCs
principal place of business in Plainview, Nebraska (where the manufacturing plant and executive
offices are located); and in certain promotional material and historical financial statements.
Compl. 13-22; Betterman Decl. 7. Plaintiffs contend, however, that Minnesota is the
location where the underlying events occurred because (1) the September 28, 2005 telephone call
was received by Plaintiffs employees located in Minnesota and (2) Plaintiffs reliance on the
alleged misrepresentations and omissions took place in Minnesota. When misrepresentations are
the underlying events of a litigation, courts generally look to the place where the
misrepresentations were made, not the place where they were received or relied upon, to
determine where the underlying events occurred. See, e.g., In re Collins & Aikman Sec. Litig.,
438 F. Supp. 2d 392, 397 (S.D.N.Y. 2006) (holding that in determining where events occurred
for purposes of a motion to transfer venue, misrepresentations are deemed to occur in the
district where the misrepresentations are issued or the truth is withheld, not where the statements
at issue are received.) (quotation omitted); see also Lyon Fin. Servs., Inc. v. Dutt, Civ. No. 08-
4735, 2008 WL 5104686, at *3 (D. Minn. Nov. 25, 2008); Clayton v. Heartland Res., Inc., No.
3:08-cv-0513, 2008 WL 2697430, at *6 (M.D. Tenn. June 30, 2008); Vanguard Fin. Serv. Corp.
v. Johnson, 736 F. Supp. 832, 839-40 (N.D. Ill. 1990).
Because Plaintiffs do not reside in Minnesota and because the underlying events that
gave rise to this litigation did not occur in Minnesota, the Court concludes that Plaintiffs choice
of Minnesota as a forum is entitled to less deference.
A. Convenience of the Parties
In assessing the relative convenience of the parties, [t]he logical starting point . . . is a
consideration of [the parties] residences in relation to the district court chosen by the plaintiff
and the proposed transferee district. Facilitec Corp. v. Omni Containment Sys., LLC, No. Civ.
03-3187, 2003 WL 21781914, at *1 (D. Minn. July 31, 2003) (quotation omitted). None of the
parties reside in Minnesota. There is little difference in convenience for Plaintiffs, as residents
of Delaware and Massachusetts, to litigating in Nebraska or Minnesota. Likewise, as residents
of South Dakota and Iowa, it is equally convenient for Defendants to litigate in either Minnesota
or Nebraska. This does not appear to be a situation in which the request for transfer is a
transparent attempt to shift the inconvenience of litigating to the party resisting transfer. Rather,
Defendants request is grounded in the fact that Nebraska is the operative location in the
actionwhere the bulk of the witnesses and documents are located and where the alleged
misrepresentations that are at the center of this litigation were made. Defs. Mem. in Supp. of
Mot. to Dismiss or Transfer [Docket No. 16] at 29. Ultimately, the convenience of the parties
appears to be a neutral factor.
B. Convenience of the Witnesses
Defendants argue that the convenience of the witnesses favors transfer to Nebraska.
Defendants aver that the 30 individuals who have been identified as likely witnesses in the
Nebraska action will likewise be the witnesses in this action and that thirteen of them are
Nebraska residents, while only two or three are Minnesota residents. See Betterman Decl. 6.
Plaintiffs respond that the Nebraska action involves claims and issues that are not relevant to this
action and that Defendants have failed to show that the 30 witnesses in the Nebraska action will
have testimony that relates not to those claims and issues but to the claims and issues that are
also the subject of this action.
Although certain aspects of the Nebraska action are not present in this action (for
example, claims for securities violations and breach of a non-compete agreement), it would be
disingenuous to suggest that the core of the Nebraska action is materially different from this
action. This case centers on whether Plaintiffs were induced to invest in Holdings, which in turn
funded STCs purchase of Defendants business, by numerous misrepresentations and omissions
regarding Defendants business and the Sidumpr Trailers. One of the central issues (if not the
central issue) raised by the counterclaims in the Nebraska action is whether STC was induced to
purchase Defendants business by the very same misrepresentations and omissions. Compare
Compl. 12-22, 29-36 with Nebraska Answer, Counterclaim 10-14, 20-24, 26, 28. Indeed,
many of the allegations in the Complaint in this action are essentially identical to the allegations
that form the basis of the counterclaims in the Nebraska action. Defendants have asserted that
the witnesses identified in the Nebraska action will be witnesses in this action and that their
testimony will be relevant to the allegations of fraudulent and negligent misrepresentations and
omissions. And while Plaintiffs contend that Defendants have failed to sufficiently establish that
the witnesses in the Nebraska action have testimony also relevant to the claims in this action,
Plaintiffs have not stated that the testimony of the witnesses identified in the Nebraska action is
not relevant to this action.
3 A comparison of the Complaint in this action and the answer in the Nebraska action
reveals no difference in the allegations of which individuals made the misrepresentations and
which individuals received the misrepresentations. Thus, proving the misrepresentations in each
action would appear to require the same witnesses, although proving Plaintiffs damages in this
action might require different witnesses than would be required to prove STCs damages in the
Nebraska action.
For their own part, Plaintiffs claim that they have not yet determined all of the witnesses
they will call in this case but that they will certainly call three witnesses who reside in
Minnesotanamely, the two employees who worked in the Minnesota offices and a designee
from the Minnesota firm that assisted with due diligence. The alleged misrepresentations that
form the basis of the claims in this action are also the basis for the fraudulent and negligent
misrepresentation counterclaims in the Nebraska action. Discovery in the Nebraska action has
been ongoing since September 2006, and the parties have identified the witnesses they anticipate
will testify. See RSG, Inc., et al. v. Sidumpr Trailer Company, Inc., No. 8:06cv507 (D. Neb.),
docket entry nos. 135, 136, 139. Presumably, the witnesses identified in the Nebraska action
include witnesses whose testimony will be necessary to establish the allegations that Defendants
misrepresented the business and the quality of the Sidumpr Trailers. Thus, it is unclear why
Plaintiffs have yet to determine the witnesses they will need to call in this action to establish the
very same allegations of misrepresentations.3 Furthermore, one of the employees who worked in
the Minnesota offices currently resides in Michigan, rather than Minnesota. Betterman Decl.
In evaluating the convenience of the witnesses, the sheer number of witnesses will not
decide which way the convenience factor tips. Terra, 119 F.3d at 696 (quotation omitted).
Nevertheless, the information that the parties have presented tends to show that more witnesses
reside in Nebraska than in Minnesota. Mindful of the preference for live testimony, Graff v.
Qwest Commcns Corp., 33 F. Supp. 2d 1117, 1121 (D. Minn. 1999), the Court finds that the
convenience of the witnesses weighs moderately in favor of transfer.
C. Interests of Justice
When evaluating whether the interests of justice warrant transfer, courts typically
consider such factors as (1) judicial economy, (2) the plaintiffs choice of forum, (3) the
comparative costs to the parties of litigating in each forum, (4) each partys ability to enforce a
judgment, (5) obstacles to a fair trial, (6) conflict of law issues, and (7) advantages of having a
local court determine questions of local law. Terra, 119 F.3d at 696.
Defendants contend that because the Nebraska action involves the same allegations of
misrepresentations with regard to the business and the quality of the Sidumpr trailers, transfer to
allow the Nebraska court to hear both cases would further judicial economy and would avoid
inconsistent results. The Supreme Court has commented:
To permit a situation in which two cases involving precisely the same
issues are simultaneously pending in different District Courts leads
to wastefulness of time, energy and money that 1404(a) was
designed to prevent. Moreover, such a situation is conducive to a
race of diligence among litigants for a trial in the District Court each
Contl Grain Co. v. Barge FBL-585, 364 U.S. 19, 26 (1960). Courts have thus granted transfers
to districts where related actions are already pending to permit cases to be consolidated into one
proceeding. See Durabla Mfg. Co. v. Contl Cas. Co., No. 98-1596, 1998 WL 957250, at *5 (D.
Minn. Oct. 26, 1998) (collecting cases); see also Pall Corp. v. PTI Technologies, Inc., 992 F.
Supp. 196, 201 (E.D.N.Y. 1998) (It is well established that [t]ransfer is particularly appropriate
where there is a prior lawsuit pending in the transferee district involving the same facts,
4 This is not to say that after transfer, this action will necessarily be consolidated with the
Nebraska action. Rather, that is a determination to be made by the Nebraska court.
transactions, or occurrences.) (alteration in original) (quoting Levitt v. State of Maryland
Deposit Ins. Fund Corp., 643 F. Supp. 1485, 1493 (E.D.N.Y. 1986)). As discussed previously,
Plaintiffs claims in this action are dependent on proving the same misrepresentations and
omissions as those that have been alleged in the Nebraska action. The Court therefore agrees
that judicial resources would be wasted and that there would be a potential for inconsistent
results if the two actions were to proceed in different courts.4
Several other considerations typically relevant to the interests of justice do not inform the
analysis any further. As previously explained, Plaintiffs choice of forum is entitled to
significantly less deference in this case. The comparative costs to the parties of litigating in each
forum appears to be neutral, and the parties do not contend that there would be any difficulty in
enforcing a judgment in either forum or that there are any conflict of law issues. In addition,
regardless of which states laws end up governing the claims, courts can just as easily apply the
law of another state as easily as their own. Clergy Fin., LLC v. Clergy Fin. Servs., Inc., ___ F.
Supp. 2d ___, 2009 WL 397443, at *6 (D. Minn. 2009) (quotation omitted).
Plaintiffs raise two final points. First, Plaintiffs contend that the interests of justice do
not favor transfer because Minnesota has an interest in providing a forum for its residents to
adjudicate its residents claims. Pls. Mem. in Oppn to Mot. to Dismiss [Docket No. 20] at 35.
However, as previously explained, Plaintiffs are not Minnesota residents. Neither are
Defendants for that matter. Second, Plaintiffs contend that transferring this action is
inappropriate because the Nebraska action has been ongoing since July 2006, the deadline for
expert reports and pretrial disclosures has passed, discovery recently closed, pretrial submissions
soon will be due, and trial is set to begin on June 15, 2009. Id. at 37-38. But Plaintiffs argument
assumes that this action will be consolidated with the Nebraska action, which is a question that
will not be decided until after the transfer. Also, as Defendants persuasively argue, Plaintiffs
have been well-aware of the Nebraska action since its inception in July 2006 and yet waited until
September 2008 to file this action. Thus, the Court finds hollow the argument that the Nebraska
action is too far progressed to warrant transfer.
The interests of justice is often viewed as the most important factor. See Nelson v.
Master Lease Corp., 759 F. Supp. 1397, 1402 (D. Minn. 1991). This case is no different. While
the convenience of the parties is neutral and the convenience of the witnesses weighs only
moderately in favor of transfer, the interests of justicemost importantly, judicial economy and
the concern for avoiding potentially inconsistent resultsstrongly favors transferring this action
to the District of Nebraska. The Nebraska court is well positioned to decide whether to
consolidate this action with the pending action that involves some of the same core issues
regarding the alleged misrepresentations. The Court finds that Defendants have carried their
burden of showing that transfer to the District of Nebraska is warranted. In light of this decision,
the Court declines to rule on Defendants Motion for dismissal.
Based upon the foregoing, and all the files, records, and proceedings herein, IT IS
1. Defendants Motion to Dismiss or, Alternatively, to Transfer Venue [Docket No. 11]
is GRANTED as to transfer of venue; and
2. Venue shall be transferred to the United States District Court for the District of
s/Ann D. Montgomery
Dated: March 20, 2009.


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