TERENCE P. KEMP, Magistrate Judge.
In this commercial case, the parties' claims and counterclaims all arise out of a prior employment relationship between Plaintiff Residential Finance Corporation and Defendant Daniel Jacobs. After Mr. Jacobs stopped working for Residential Finance, he and that company signed a supplement to his original employment agreement that called for severance payments to be made over a twelve-month period. There were other terms to this agreement, including one which required Defendant Belvedere Group, LLC, a company controlled by Mr. Jacobs, to sublease office space in North Carolina. The supplement also stated that in the event the Defendants breached "any Promise, Representation or Warranty" in the agreement, Residential was relieved of any duty to perform further and was entitled to a full refund of any money paid to Mr. Jacobs.
According to the complaint, after Residential paid $15,000 to Mr. Jacobs under the Supplemental Agreement, it discovered that Mr. Jacobs and Belvedere were in breach. As a result, it stopped making payments and filed suit in the Court of Common Pleas of Franklin County, Ohio. The case was removed to this Court based on diversity jurisdiction. Although not especially relevant to the motion addressed in this Opinion and Order, Mr. Jacobs, unaware that he had been sued in Ohio, filed suit in a North Carolina state court one day after Residential Finance filed suit in Ohio.
This Opinion and Order addresses Defendants' motion to change venue. Defendants assert that this case arose out of an employment relationship which was created in North Carolina and pursuant to which Mr. Jacobs, a North Carolina resident, worked out of an office in North Carolina; that all of the events underlying Residential Finance's breach of contract occurred in North Carolina; and that the witnesses to those events live in that State. Consequently, they ask the Court to exercise its discretion under 28 U.S.C. §1404(a) to transfer the case to the Western District of North Carolina, a judicial district in which, both parties agree, the case could have been brought. The motion to change venue is fully briefed. For the following reasons, the Court will grant Defendants' Motion to Transfer Venue to the Western District of North Carolina. (Doc. 9).
There are not an overwhelming number of facts in the record. They fall into two categories: what the Supplemental Agreement has to say about choice of law and venue, and which state — Ohio or North Carolina — has a closer contact to the operative events and the likely witnesses. The Court begins with the relevant contract language.
Although Defendants cite to provisions of both Mr. Jacobs' original employment agreement and the supplement concerning choice of law and venue, it is clear that only the latter agreement is relevant. While the first paragraph of the supplement provides that certain terms of the prior agreement remain in effect, that would be so only "unless specifically contradicted by this Agreement." Paragraph Eight then says, somewhat paradoxically, that the supplement is "subject to the terms of the May 8, 2013 Agreement, including venue and choice of law," and then completely replaces those provisions with new language. The new language retains the original choice of governing law — North Carolina — but changes mandatory venue provisions to permissive ones, allowing Mr. Jacobs to sue for breach in Mecklenburg County, North Carolina, while permitting Residential Finance to sue in Franklin County, Ohio. To quote ¶8,
Each party followed this provision when filing the two pending cases.
The remaining facts are found in two affidavits signed and filed by Mr. Jacobs
1. Mr. Jacobs lives in North Carolina and worked out of a Residential Finance office in North Carolina.
2. He signed both agreements in North Carolina.
3. He has identified eight likely witnesses in this case, all of whom are currently North Carolina residents. Most worked for Residential Finance in North Carolina. At least one is a North Carolina resident with no connection, past or present, to Residential Finance.
4. These witnesses, whom Defendants expect to depose, can testify about most of the material allegations in the amended complaint, including failure to return company property, failure to secure a refund for "NASCAR leads," payment of unauthorized bonuses to branch managers and employees, Belvedere's failure to sublease the premises described in the Supplemental Agreement, and misrepresentations allegedly made by Mr. Jacobs while employed by Residential Finance.
The parties do not seriously dispute the legal principles relating to changes of venue ordered pursuant to 28 U.S.C. §1404(a), but disagree about the way those principles should be applied here. It is worth recounting, however, before describing these general principles, the significance, if any, of the venue clauses contained in the Supplemental Agreement.
As noted above, both clauses state that suit "may" be filed in either Mecklenburg County, North Carolina, or Franklin County, Ohio, depending upon which party files suit. Such language is properly described as permissive rather than mandatory, meaning, generally, that although it permits a case to be filed in a particular jurisdiction, it does not preclude the case from being filed elsewhere.
In arguing against the transfer, Residential points to a recent Supreme Court decision considering the impact of a mandatory forum-selection language on a court's weighing of the factors involved in a motion to transfer. That decision holds that "a proper application of § 1404(a) requires that a forum-selection clause be `given controlling weight in all but the most exceptional cases.'"
In contrast with the forum-selection clause at issue in
There are, to be sure, cases suggesting that there is no functional difference between permissive forum-selection clauses and mandatory ones.
Turning now to the merits of the motion, the factors which a district court may consider in deciding a §1404(a) motion are well-summarized as follows:
First, Defendants argue that the claims arose in North Carolina. Defendants have provided evidence that Mr. Jacobs lives in North Carolina, worked out of a Residential Finance office in North Carolina, and signed both agreements in North Carolina. Defendants have also pointed to the allegations in the amended complaint describing conduct that occurred in North Carolina. (
Second, Defendants argue that the vast majority of witnesses reside in North Carolina. "The convenience of witnesses, particularly nonparty witnesses important to the resolution of the case, is often cited as the most significant factor in ruling on a motion to transfer under 28 U.S.C.A. §1404(a)." 15 C.A. Wright, A.R. Miller & E.H. Cooper,
Residential argues, but not on the basis of any affidavits or other factual submissions, that it intends to call witnesses who work for Residential and reside in Ohio. Even if that were true, "the convenience of witnesses who are employees of a party is entitled to less weight because that party can obtain their presence at trial." 15 C.A. Wright, A.R. Miller & E.H. Cooper,
Third, Defendants argue that the public interest favors the transfer of this case to North Carolina because North Carolina law controls and because North Carolina has a local interest in deciding a controversy that arose in its jurisdiction. Residential counters that no specialized knowledge of North Carolina law is required to resolve this case. The Court concludes that this factor is not entitled to much weight, but that it slightly favors transfer simply because North Carolina law will govern the resolution of any substantive legal disputes which arise.
Residential's final argument in opposition to a change of venue is that "[a] plaintiff's choice of forum is given great weight." (Doc. 12 at 3 (citing
Residential has chosen to sue in Ohio, as was its right under the parties' agreement. However, as noted above, all of the other factors in this case either moderately or strongly favor a change of venue to North Carolina. Further, because of the strong ties between the underlying events and North Carolina, and also because Residential either has or had a presence in that State (and in numerous other States besides Ohio), its choice of Ohio as the appropriate forum in which to litigate does not outweigh the reasons for transferring the case to North Carolina.
Simply put, the question in this case is whether Defendants have satisfied their burden to show that the connection of North Carolina to the events relevant to the claims, the convenience of the witnesses, and the public interests, outweigh Residential's choice of forum. The Court finds that in light of the absence of evidence connecting the litigation to Ohio, the evidence that North Carolina will be more convenient for the witnesses and they can be subpoenaed to testify there, and the fact that North Carolina law controls the substantive legal issues in the case, the public and private interests strongly outweigh Residential's choice of forum. Because that is true, the Court will grant the motion to change venue.
For the foregoing reasons, Defendants' Motion to Transfer Venue to the Western District of North Carolina (Doc. 9) is granted. This case shall be transferred to the Western District of North Carolina upon the expiration of the 14-day period for filing motions to reconsider, if none are filed, or upon affirmance of the order by the District Judge, should that occur.
Any party may, within fourteen days after this Order is filed, file and serve on the opposing party a motion for reconsideration by a District Judge. 28 U.S.C. § 636(b)(1)(A), Rule 72(a), Fed. R. Civ. P.; Eastern Division Order No. 14-01, pt. IV(C)(3)(a). The motion must specifically designate the order or part in question and the basis for any objection. Responses to objections are due fourteen days after objections are filed and replies by the objecting party are due seven days thereafter. The District Judge, upon consideration of the motion, shall set aside any part of this Order found to be clearly erroneous or contrary to law.
This order is in full force and effect even if a motion for reconsideration has been filed unless it is stayed by either the Magistrate Judge or District Judge. S.D. Ohio L.R. 72.3.