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Butikofer v. Nygren

United States District Court, D. Utah, Central Division

December 12, 2016

JESS BUTIKOFER, an individual; BEN HULSE, an individual; TREVOR JONES, an individual, Plaintiffs,
v.
GREGORY NYGREN, an individual; ROBERT DOUG CARDON, an individual; RYAN BUCHANAN, an individual, Defendants.

          MEMORANDUM DECISION AND ORDER DENYING DEFENDANTS' MOTION TO TRANSFER VENUE UNDER 28 U.S.C. § 1404(a)

          DAVID NUFFER DISTRICT JUDGE

         Contents

         BACKGROUND ............................................................................................................................ 1

         DISCUSSION ................................................................................................................................. 3

         Plaintiff's Choice of Forum Is Given Deference ................................................................ 4

         Defendant Has Not Met Its Burden of Showing Inconvenience ......................................... 8

         Transfer to Arizona Would Merely Shift Certain Costs to the Plaintiff ........................... 11

         There Is No Question Regarding the Enforceability of a Judgment ................................. 12

         There Are No Relative Advantages or Obstacles to a Fair Trial in Utah ......................... 12

         Arizona Has a More Congested Docket ............................................................................ 12

         Utah's Conflict of Law Test Will Determine Which State's Law Will Apply ................. 13

         There Is a Slight Interest in Having a Court Sitting in Arizona Preside Over an Action Addressing an Issue of Local Law ...... 14

         Balancing of the Factors Weighs Against Transfer .......................................................... 15

         ORDER ......................................................................................................................................... 15

         BACKGROUND

         Jess Butikofer, Ben Hulse, and Trevor Jones (“Plaintiffs”) filed this case June 14, 2016. They allege fourteen causes of action against Gregory Nygren, Robert Doug Cardon, and Ryan Buchanan (“Defendants”)[1] which arise out of the parties' common ownership in a series of pest control companies, each of which was organized as an LLC (“the LLCs”).[2] Plaintiffs allege that the Defendants

• improperly diluted Plaintiffs' membership interests when the LLCs were transferred via asset purchase agreements;[3]
• used company funds improperly, including the use of such funds to cover personal expenses;[4]
• breached duties of good faith and loyalty by establishing a call center that diverted business from the parties' LLCs;[5] and
• improperly altered commission arrangements, thereby denying Plaintiffs of their due profits.[6]

         Subject matter jurisdiction is based on federal securities law.[7] Plaintiffs allege that venue is proper according to 28 U.S.C § 1391 because “a significant part of the events giving rise to the claims occurred in the state of Utah.”[8]

         Defendants filed a Motion to Transfer Venue (“Motion”) under 28 U.S.C. § 1404(a), claiming that “venue in Arizona is proper as it is more convenient for the majority of the parties.”[9] Defendants claim that no significant portion of the events giving rise to the claims occurred in Utah.[10] Plaintiffs filed a Memorandum in Opposition (“Opposition”), [11] to which the Defendants filed a Reply (“Reply”).[12] For the reasons stated below, the Motion is DENIED.

         DISCUSSION

         Under 28 U.S.C. § 1404, a district court may “transfer any civil action to any other district or division where it might have been brought” if doing so furthers “the convenience of parties and witnesses” and is “in the interest of justice.”[13] Although the court has “broad discretion” in deciding whether to grant such a transfer, [14] the Tenth Circuit has outlined factors that “a district court should consider.”[15] These factors include:

• the plaintiff's choice of forum;
• the accessibility of witnesses and other sources of proof, including the availability of compulsory process to insure attendance of witnesses;
• the cost of making the necessary proof;
• questions as to the enforceability of a judgment if one is obtained;
• relative advantages and obstacles to a fair trial;
• difficulties that may arise from congested dockets;
• the possibility of the existence of questions arising in the area of conflict of laws;
• the advantage of having a local court determine questions of local law; and
• all other considerations of a practical nature that make a trial easy, expeditious and economical.[16]

         The party seeking transfer bears the burden of establishing “strong evidence” and “compelling equities” in its favor.[17] The evidence must establish more than that the transferee district is “equally convenient or inconvenient.”[18] “Merely shifting the inconvenience from one side to the other . . . is not a permissible justification for a change of venue.”[19] In weighing the facts under each factor in the analysis, the facts should “weigh heavily in favor” of the movant's venue or the factor will be considered “neutral.”[20] Neutral or irrelevant factors will not assist the moving party in meeting its burden.[21]“Courts in this circuit have recognized that when reviewing a motion to transfer, ‘a court may consider evidence outside of the pleadings but must draw all reasonable inferences and resolve factual conflicts in favor of the non-moving party.'”[22]

         After considering each of the factors, transfer of this case is not appropriate.

         Plaintiff's Choice of Forum Is Given Deference

         In considering a motion to transfer venue, the plaintiff's choice of venue is given deference and “should rarely be disturbed.”[23] However, it is afforded less deference if “the facts giving rise to the lawsuit have no material relation or significant connection to the plaintiff's chosen forum, ”[24] or “if the plaintiff does not reside in the district.”[25] Applying this standard, Plaintiff's chosen forum, Utah, is given deference.

         Plaintiffs' Residence.

         One of the Plaintiffs, Jess Butikofer, resides in Utah.[26] One of the Plaintiffs, Hulse, resides in Arizona. The third Plaintiff, Jones, has his primary residence in Idaho. While the residency of two plaintiffs outside of Utah might suggest that the forum would not be given deference, [27] one of the Plaintiffs (Butikofer) does reside in Utah.[28] Thus, this is not a case where “the plaintiff does not reside in the district.”[29] Accordingly, plaintiff's choice of venue is given deference.

         Material Relation to the Forum.

To overcome the deference given the Plaintiff's choice of forum, a movant must do more than show that their chosen venue bears equal relation to the operative facts as the plaintiff's choice.[30] In Employers Mutual Casualty Co. v. Bartile Roofs, Inc., [31] the Tenth Circuit analyzed the facts giving rise to the lawsuit to see if they had a significant connection to the plaintiff's chosen forum.[32] The Tenth Circuit concluded that there was no “single, alternative venue” that would be more appropriate than the plaintiff's chosen forum.[33] Because the facts of the case occurred in multiple venues, all of which had sufficient ties, the defendant in Employers Mutual could not show that the plaintiff's choice of forum did not have “a material relation or significant connection” to the underlying facts.[34] Under these circumstances the court found that this “factor weigh[ed] against transferring the action.”[35]

         While Defendants assert that Arizona is a more appropriate venue because the LLCs “are Arizona companies operating with a principal place of business in Arizona[, ]”[36] this is an insufficient showing for transfer: Like the argument proffered by the defendants in Employers Mutual, this only establishes that the “‘locus of operative facts' approach does not generate a single, alternative venue.”[37] Instead, Defendants would need to show that plaintiff's choice of forum-Utah-does not have a material relation to the facts giving rise to the lawsuit.

         Both parties have submitted declarations that allege facts intended to support or deny a nexus to Utah. Plaintiff describes the LLCs' ties to Utah, particularly as they stem from the operation of “Homeshield of Salt Lake, ” which operated in Utah and is one of the seven Arizona LLCs.[38] On certain points, the Defendants' declarations contradict the Plaintiffs' declarations. For example, the parties' declarants disagree on the number of times Defendants travelled to Utah in the last year[39] and whether Utah or Arizona has been the central location for recruiting.[40]These factual conflicts are resolved in favor of the non-moving party.[41]

         In other instances, the parties' declarations are not in actual disagreement about the facts. For example, one of Plaintiffs declares: “In Provo, Utah, there is or was a year-round corporate training office located at 2230 N. University Parkway Ave., Suite 11E;”[42] “This facility has been treated practically as a secondary company headquarter facility for Defendants' HomeShield Pest Control and EcoShield Pest Control Companies;”[43] and “HomeShield of Salt Lake has or had a company office located in Sandy, Utah which had several employees, including a branch manager and secretaries, to conduct its business.”[44] One of Defendants declares that “[t]he Arizona Companies, including the Salt Lake City business, do not/did not have any employees at the Provo facility.”[45] However, Defendant's statement does not deny the existence of the year-round corporate training office in Provo, Utah, or the company office in Sandy. The truth of Plaintiffs' statements is not negated by the statement by the Defendant. Anyway, to the extent these statements conflict, they are resolved in favor of the non-moving party, the Plaintiffs.

         The Plaintiffs have identified other facts to show that Utah has a “significant connection” to the controversy. In their Complaint, Plaintiffs allege that Butikofer's 33.5% membership interest in Homeshield Pest Control SLC, LLC, which operated in Utah, was diluted by Defendants.[46] This fact establishes a connection to Utah. Plaintiffs also allege a breach of contract that diminished the commissions they received, including commission on sales within the state of Utah.[47] This is another connection to Utah. In addition, Plaintiffs allege that the Call Center operated in Utah and improperly diverted business away from the parties' jointly held enterprises.[48] This is also a connection to Utah.

         The pleadings and declarations show that the dispute concerns at least seven LLCs.[49]While the LLCs may have been incorporated in Arizona, [50] they conducted business in Maryland, Colorado, Utah, and Texas.[51] Plaintiffs declare that while operating the LLCs, they were “rarely, if ever, in Arizona” and “spent most of their time in the territorial boundaries of their respective companies.”[52] Each of these other venues may have a significant connection to the operative facts, but this does not diminish the material connection of Utah.

         Plaintiff's choice of forum should be given deference because one of the Plaintiffs resides in Utah and the facts giving rise to this lawsuit have a material relation to this forum. The Plaintiffs' choice of forum weighs in favor of this venue, not in favor of transfer.[53]

         Defendant Has Not Met Its Burden of ...


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