GREENWICH LIFE SETTLEMENTS v. VIASOURCE FUNDING GR

e not involved in the earlier lawsuit . . . only when the precluded party's interests have been represented in a previous lawsuit."; " Res judicata may bar non-parties to earlier litigation not only when there was a formal arrangement for representation in . . . the earlier action but also when the interests involved in the prior litigation are virtually identical to those in later litigation."); Expert Elec., Inc. v. Levine, 554 F.2d 1227, 1233 (2d Cir. 1977) ("[O]ne whose interests were adequately represented by another vested with the authority of representation is bound by the judgment, although not formally a party to the litigation."). "There is no bright line rule as to whether privity exists for res judicata purposes. . . . The core question is whether the parties' incentives to pursue [the] lawsuit were substantially similar." Mosdos Chofetz Chaim, Inc. v. Vill. of Wesley Hills, 701 F. Supp. 2d 568, 586 n.ll (S.D.N.Y. 2010) (citations and internal quotation marks omitted). With respect to the third and final prong of res judicata, in considering whether claims asserted in a subsequent suit were, or could have been, raised in a prior proceeding, courts look to "`whether the same transaction or connected series of transactions is at issue, whether the same evidence is needed to support both claims, and whether the facts essential to the second were present in the first.'" Monahan, 214 F.3d at 289 (quoting NLRB v. United Techs. Corp., 706 F.2d 1254, 1260 (2d Cir. 1983) (Kearse, J.)).

B. Application

The Court holds that the New York and New Jersey state actions, which were dismissed with prejudice, do not bar the instant litigation. As a threshold matter, ViaSource's motion to dismiss on res judicata grounds is not procedurally defective, as Greenwich contends. (See Pl.'s Opp'n 19-20 (arguing that ViaSource's motion to dismiss on res judicata grounds effectively is a flawed Rule 56 summary judgment motion because discovery is not complete and there is no 56.1 statement).) "[T]he defense of res judicata . . . may be brought, under appropriate circumstances, either via a motion to dismiss or a motion for summary judgment." Sassower v. Abrams, 833 F. Supp. 253, 264 n. 18 (S.D.N.Y. 1993) (Leisure, J.). Here, where ViaSource preserved its res judicata defense by including it as an affirmative defense in its Verified Answer and Counterclaim to Greenwich's Corrected Amended Complaint, raising it on a motion to dismiss is proper. (See Answer ¶ 78 ("The plaintiffs' claims, if any, are barred by res judicata and collateral estoppel.").)

Although procedurally proper, ViaSource's res judicata defense fails on the merits because ViaSource cannot establish the second prong of res judicata — that the previous lawsuits involved Greenwich or someone in privity with Greenwich such that the prior state court dismissals with prejudice bar the claims that Greenwich now brings against ViaSource. Monahan, 214 F.3d at 285. First, Greenwich was not a party to either the New York or New Jersey state action. Second, Greenwich is not in privity with Legacy, the plaintiff in the New York and New Jersey state actions, for res judicata purposes. ViaSource fails to demonstrate that Legacy's interests "in the prior litigation are virtually identical to" Greenwich's interests in the instant litigation. Chase Manhattan, 56 F.3d at 345. In its New York state action, Legacy alleged that "ViaSource breached the Purchase Agreement by willfully instructing the Insurer to obstruct performance of the Purchase Agreement" and sought, solely on its own behalf, compensatory damages in the amount of $151,838, punitive damages, and attorneys' fees. (See Answer Ex. F ¶¶ 20-28.) Legacy's complaint did not mention any third-party beneficiaries to the Purchase Agreement, including Greenwich, nor did it state that it was representing an interest in the Weller Policy other than its own. Moreover, Greenwich did not vest Legacy "`with the authority of representation'" in Legacy's prior state actions.Monahan, 214 F.3d at 285 (quotingAlpert's Newspaper, 876 F.2d at 270). In comparison to Legacy's complaint, Greenwich now asserts a third-party beneficiary claim, solely on its own behalf, for compensatory damages "not less than $1,200,000" and punitive damages of $5,000,000 for ViaSource's alleged breach of contract, breach of the covenant of good faith and fair dealing, tortious interference with contract, tortious interference with business relations, and unjust enrichment. (Compl. ¶¶ 32-60.) Based on the pleadings, Greenwich's interests are not "virtually identical" to Legacy's interests in the New York state action, Chase Manhattan, 56 F.3d at 345, and "the parties' incentives to pursue" each lawsuit are not "substantially similar." Mosdos, 701 F. Supp. 2d at 586

n. 11 (citations and internal quotation marks omitted). Therefore, Greenwich could not have been "`adequately represented by'" Legacy in the prior state actions. Monahan, 214 F.3d at 285 (quoting Alpert's Newspaper, 876 F.2d at 270). For these reasons, ViaSource's motion to dismiss Greenwich's claims on res judicata grounds is denied.

II. Legacy Is Not an Indispensable Party Under Rule 19

ViaSource moves, pursuant to Rule 12(b)(7), to dismiss the Corrected Amended Complaint for failure to join a party under Rule 19. ViaSource contends that Legacy is a necessary and indispensable party to the claims at issue here because Legacy averred "that it was the sole purported owner of the [Weller] Policy under its alleged agreement with ViaSource" and "Legacy dealt with ViaSource, throughout, as if it were the sole party in interest." (Def.'s Mem. 10.) ViaSource also contends that dismissal is appropriate under Rule 19(c) because Greenwich "breached its obligations to identify Legacy Benefits, and to either join Legacy or justify non-joinder." (Def.'s Mem. 10.) Greenwich opposes ViaSource's Rule 12(b)(7) motion on the grounds that it is procedurally improper, that full relief can be awarded among the existing parties, and that Legacy's absence "will not impair any of Legacy's interests" because Legacy "has relinquished any claims it might have against ViaSource" through the settlement and dismissals with prejudice of the prior state actions between Legacy and ViaSource. (Pl.'s Opp'n 15-17.)

A. Legal Standard Under Rule 19

The burden of demonstrating that a party is necessary rests with the moving party. See Bodner v. Banque Paribas, 114 F. Supp. 2d 117, 137 (E.D.N.Y. 2000); King v. Pine Plains Cent. Sch. Dist., 918 F. Supp. 772, 782 (S.D.N.Y. 1996). Rule 19 "sets forth a two-step test for determining whether the court must dismiss an action for failure to join an indispensable party." Viacom Int'l, Inc. v. Kearney, 212 F.3d 721, 724 (2d Cir. 2000) (Sotomayor, J.); see also Bodner, 114 F. Supp. 2d at 137. "First, the court must determine whether an absent party . . . qualifies as a `necessary' party under Rule 19(a)." Viacom, 212 F.3d at 724. If a court determines that the criteria set forth in Rule 19(a) is met, it "must order" the absent party to be joined. Fed.R.Civ.P. 19(a)(2). Where joinder of that party is not feasible, the court must proceed to the second step and consider under Rule 19(b) "whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed." Id. 19(b); see also Jota v. Texaco, Inc., 157 F.3d 153, 162 (2d Cir. 1998); Bodner, 114 F. Supp. 2d at 137. "Only where the Court makes a finding that a party is necessary will it continue to the second inquiry. . . ." Bodner, 114 F. Supp. 2d at 137; see also Temple v. Synthes Corp., Ltd., 498 U.S. 5, 8, 111 S.ct. 315, 112 L. Ed. 2d 263 (1990) (per curium); Ryan v. Volpone Stamp Co., Inc., 107 F. Supp. 2d 369, 387 (S.D.N.Y. 2000).

Under Rule 19(a), an absent party is necessary to a litigation if (A) "the court cannot accord complete relief among existing parties," or (B) the absent party "claims an interest relating to the subject of the action and is so situated that disposing of the action in [that party's] absence may" either "(i) as a practical matter impair or impede [the absent party's] ability to protect the interest or (ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest." Fed.R.Civ.P. 19(a)(1); see also Johnson v. Smithsonian Inst., 189 F.3d 180, 188 (2d Cir. 1999). "[T]he substantial risk of inconsistent obligations must becaused by the nonparty's absence in the case."Mastercard Int'l Inc. v. Visa Int'l Serv. Ass'n, Inc., 471 F.3d 377, 388 (2d Cir. 2006) (emphasis in original). "The possibility of different damage awards is not sufficiently `inconsistent' to invoke the protection of the Rule." Davidson Well Drilling, Ltd. v. Bristol-Myers Squibb Co., 09 Civ. 1431, 2009 WL 2135396, at *4 (S.D.N.Y. July 16, 2009) (citation and internal quotation marks omitted)).

B. Application

As a threshold matter, the Court holds that ViaSource has not waived its right to bring a motion to dismiss on grounds of failure to join an indispensable party because it preserved this objection by asserting it as an affirmative defense in its Verified Answer to Greenwich's Corrected Amended Complaint. (See Answer ¶ 64 ("The Complaint must be dismissed as Plaintiffs failed to name all necessary parties."); see also Fed.R.Civ.P. 12(h)(2)(A) (permitting failure to join a party to be raised in a pleading).)

For ViaSource to prevail on its motion to dismiss for failure to join an indispensable party, it first must establish that Legacy is a necessary party under Rule 19(a) and, if so, that Legacy's joinder is infeasible. ViaSource fails to meet its burden of proving that Legacy is a necessary party under Rule 19(a). ViaSource does not demonstrate that "the court cannot accord complete relief among existing parties." Fed.R.Civ.P. 19(a)(1)(A). Greenwich, should it prevail, can obtain complete relief from ViaSource. Likewise, should ViaSource prevail on its counterclaims for fraud, it can obtain full relief from Greenwich. (See Answer 18 ¶ 109 (requesting relief on its counterclaims for the "malicious and fraudulent actions of Greenwich" in an amount "not less than $1,000,000").) To the extent that Legacy has information relevant to this action, it is discoverable through third-party discovery methods and is insufficient to confer "necessary party" status on Legacy.See, e.g., S S Mach. Corp. v. Gen. Motors Corp., No. 93 Civ. 3237, 1994 WL 529867, at *5 (S.D.N.Y. Sept. 28, 1994) (declining to find a non-party necessary to the litigation where pertinent information in the non-party's possession could be uncovered through "ordinary discovery").

ViaSource also fails to show that Legacy "claims an interest relating to the subject of the action" such that disposition of this action in Legacy's absence may impede Legacy's ability to protect its interest. Fed.R.Civ.P. 19(a)(1)(B). To the contrary, ViaSource acknowledges that Legacy's interest in the attempted sale of the Weller Policy was resolved through the settlement and dismissals with prejudice of its lawsuits with ViaSource. (See Def.'s Mem. 7 ("Legacy's claims under its purported contract were dismissed and extinguished . . . in two courts.").) ViaSource further fails to demonstrate that it will be "subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations" if Legacy is not joined in this action. Fed.R.Civ.P. 19(a)(1)(B); see also Yonofsky v. Wernick, 362 F. Supp. 1005, 1024 (S.D.N.Y. 1973) (stating that where a non-party has no interest in the outcome of a matter, there cannot be a "`substantial risk' that a party will incur multiple or inconsistent obligations by virtue of the failure to join" that non-party). ViaSource alleges that Legacy is a necessary party because it represented itself as the sole party in interest, never mentioned an assignment or a third-party beneficiary, and concealed Greenwich's interest in the Weller Policy. (Def.'s Mem. 10-11.) While these arguments may be relevant to ViaSource's defense against Greenwich's third-party beneficiary claims, they do not satisfy the requirements of Rule 19(a). Because ViaSource has not demonstrated that Legacy is a necessary party under Rule 19(a), the Court need not address whether Legacy's joinder is feasible under Rule 19(b).

The Court also rejects ViaSource's argument that dismissal is appropriate under Rule 19(c) because Greenwich "breached its obligations to identify Legacy Benefits, and to either join Legacy or justify non-joinder." (Def.'s Mem. 10.) Rule 19(c) requires a party "asserting a claim for relief" to state "(1) the name, if known, of any person who is required to be joined if feasible but is not joined; and (2) the reasons for not joining that person." Fed.R.Civ.P. 19(c). "While failure to comply with Rule 19(c) may lead the court to dismiss [a] plaintiff's claims, a plaintiff who honestly believes that there are no outsiders who need to be joined will not be penalized." S S Mach., 1994 WL 529867, at *4. "Dismissal would only be warranted where a necessary party was hidden from the defendant, preventing complete and fair adjudication." Id. at *6. In this case, dismissal is not warranted under Rule 19(c) because Greenwich did not hide Legacy's existence, but rather articulated its relationship with Legacy in paragraph three of its Corrected Amended Complaint, and discussed it in detail throughout the Complaint. (See generally Compl.)

For these reasons, ViaSource's motion to dismiss Greenwich's claims for failure to join and indispensable party is denied.

III. Venue is Proper in the Southern District of New York

ViaSource moves to transfer venue to the District of New Jersey, should the Court not dismiss this action. ViaSource contends that venue lies in New Jersey, not New York, because: (1) Greenwich's claims involve wrongdoing in New Jersey that should be adjudicated in the New Jersey courts; (2) a subsequently-filed action by ViaSource against Legacy is pending in New Jersey state court; (3) the dismissals of the prior New York and New Jersey state actions voided the contract between Legacy and ViaSource, which contains a New York forum selection clause; (4) Legacy's failure to deliver the Purchase Agreement to ViaSource after Legacy signed it and Legacy's "fraudulent alteration" of certain documents renders void the Purchase Agreement and the forum selection clause therein; and (5) even if the Purchase Agreement between Legacy and ViaSource were valid, it does not bind ViaSource to litigate disputes "with Greenwich in New York." (Def.'s Mem. 12-17 (emphasis in original).) In opposition, Greenwich proffers several arguments for why venue lies in New York: (1) ViaSource waived its improper venue argument; (2) ViaSource contracted to adjudicate any disputes in New York; (3) Greenwich's choice of forum must be given deference; (4) the claims at issue arose in New York and non-party witnesses are located in this state; and (5) New York's strong public policy militates in favor of adjudicating claims in New York where the parties so agree. (Pl.'s Opp'n 3, 8, 15-16.)

The Court need not resolve the validity of the Purchase Agreement and the forum selection clause therein at this stage of the litigation because, as discussed below, venue is proper in the Southern District of New York irrespective of the forum selection clause in the Purchase Agreement.

A. Waiver of Defense of Improper Venue

ViaSource preserved its improper venue defense by asserting it as an affirmative defense in its Verified Answer and Counterclaim to Greenwich's Corrected Amended Complaint. (See Answer ¶ 72 ("The Complaint must be dismissed as . . . venue is improper.");see also Fed.R.Civ.P. 12(h)(1)(B) (permitting defense of improper venue to be raised in a responsive pleading or by motion).) Thus, Greenwich's argument that ViaSource may not seek to transfer venue is without merit. The substantive question, therefore, is whether ViaSource contracted to litigate the instant dispute in New York and, if not, whether the Southern District of New York nonetheless is a proper venue on independent grounds. The Court holds that even if the Purchase Agreement, and the forum selection provision therein, is unenforceable, venue in this District is proper under 28 U.S.C. § 1391 and 28 U.S.C. § 1404(a).

B. Law Governing Motions to Transfer Venue

"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." 28 U.S.C. § 1404(a). "Venue may be proper in more than one district." Arch Specialty Ins. Co. v. Entm't Specialty Ins. Servs., Inc., No. 04 Civ. 1852, 2005 WL 696897, at *7 (S.D.N.Y. Mar. 24, 2005); see also Bates v. C S Adjusters, Inc., 980 F.2d 865, 867 (2d Cir. 1992). "For purposes of venue," a corporate defendant "reside[s] in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced." 28 U.S.C. § 1391(c).

Because ViaSource conducts business in New York County, (see Compl. ¶ 6; Answer ¶ 6), it is subject to personal jurisdiction in the Southern District of New York, which encompasses New York County. See N.Y. C.P.L.R. § 302(a) ("[A] court may exercise personal jurisdiction over any non-domiciliary . . . who in person or through an agent: 1. transacts any business within the state or contracts anywhere to supply goods or services in the state. . . .").

"The decision whether to transfer a case from one judicial district to another is a two-part inquiry." Beckerman v. Heiman, No. 05 Civ. 5234, 2006 WL 1663034, at *3 (S.D.N.Y. June 16, 2006); see also In re Nematron Corp. Sec. Litig., 30 F. Supp. 2d 397, 400 (S.D.N.Y. 1998). "First, the court must determine whether the case sought to be transferred could have been brought in the proposed transferee court." Beckerman, 2006 WL 1663034, at *3; see also In re Nematron, 30 F. Supp. 2d at 400. "Second, the court must decide whether transfer is warranted for the convenience of parties and witnesses, and in the interest of justice." Beckerman, 2006 WL 1663034, at *3; see also In re Nematron, 30 F. Supp. 2d at 400. Here, there is no dispute that this action could have been brought in the District of New Jersey because ViaSource, the only defendant in this case, resides in New Jersey. See 28 U.S.C. § 1391(a)(1) ("A civil action wherein jurisdiction is founded only on diversity of citizenship may . . . be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State. . . ."); Compl. ¶ 6; Answer ¶ 6. Therefore, only the second part of the inquiry is at issue.

"A transfer should not be granted `absent a clear cut and convincing showing by defendant that the balance of convenience weighs strongly in favor of the transferee court. . . .'"Hubbell Inc. v. Pass Seymour, Inc., 883 F. Supp. 955, 962 (S.D.N.Y. 1995) (quoting Star Lines, Ltd. v. Puerto Rico Mar. Shipping Auth., 442 F. Supp. 1201, 1207 (S.D.N.Y. 1978)). The burden is on the defendant, when it is the moving party, to make a "clear and convincing showing that the balance of convenience favors defendants['] choice" of venue. Id.; see also Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 218 (2d Cir. 1978),abrogated on other grounds by Pirone v. MacMillan, Inc., 894 F.2d 579 (2d Cir. 1990). The following factors should be considered in evaluating a motion to transfer venue: (1) the convenience of witnesses; (2) the availability of process to compel the attendance of unwilling witnesses; (3) the convenience of the parties; (4) the locus of operative facts; (5) the location of relevant documents and relative ease of access to sources of proof; (6) the relative means of the parties; (7) the forum's familiarity with the governing law; (8) the weight accorded the plaintiff's choice of forum; and (9) trial efficiency and the interests of justice, based on the totality of circumstances.Elec. Workers Pension Fund, Local 103, I.B.E.W. v. Nuvelo, Inc., Nos. 07 Civ. 975, 07 Civ. 1229, 07 Civ. 1777, 07 Civ. 1953, 2007 WL 2068107, at *3 (S.D.N.Y. July 17, 2007). "`The convenience of the witnesses and the parties are generally considered as the most important factors in a transfer application.'" Id. (quoting D'Anton Jos, S.L. v. Doll Factory, Inc., 937 F. Supp. 320, 323 (S.D.N.Y. 1996)); see also Hubbell, 883 F. Supp. at 962 ("The core determination under § 1404(a) is the center of gravity of the litigation, a key test of which is the convenience of witnesses.").

C. Application

ViaSource has not shown clearly and convincingly that the District of New Jersey is a more convenient venue than the Southern District of New York. See Hubbell, 883 F. Supp. at 962;Star Lines, 442 F. Supp. at 1207. Nowhere does ViaSource discuss how litigating this action in the District Court of New Jersey would be more convenient to the parties and witnesses. ViaSource is the only party in this case that resides in New Jersey. Legacy, a key witness in this case, is incorporated and maintains its principal place of business in New York. (See Answer Ex. F ¶ 4.) Also, ViaSource itself is present in this District, as it conducts business in New York County and at least one member of the limited liability company is a citizen of New York. (See Compl. ¶¶ 6-7; Answer ¶¶ 6-7.) ViaSource has not proffered any information regarding any other potential witnesses in this case.

ViaSource also fails to demonstrate that the locus of operative facts took place in New Jersey, rather than New York, or that the relevant documents are located in New Jersey. See Freeman v. Hoffmann-La Roche Inc., No. 06 Civ. 13497, 2007 WL 895282, at *2 (S.D.N.Y. Mar. 21, 2007) (granting motion to transfer venue to the District of New Jersey where "substantial operative facts and events took place in New Jersey," defendants and one of two plaintiffs were New Jersey residents, and "[d]efendants list several potential witnesses . . . who `are all resident in New Jersey.'" (citation omitted)). ViaSource does not allege that it does not have the means to travel from New Jersey to New York, and mere inconvenience is insufficient to warrant transfer. See Arch Specialty, 2005 WL 696897, at *8 ("Plaintiff's choice of forum should not be disturbed merely because of the inconvenience of travel to Defendants or because this lawsuit could have been brought in [another state].").

The remaining factors that the Court has considered likewise do not merit transfer. ViaSource relies on an action that it brought against Legacy in New Jersey state court after Greenwich filed the instant action in support of transferring venue. However, ViaSource's subsequent action, which was brought in New Jersey state court rather than the District of New Jersey, was dismissed without prejudice six months after it was filed for "lack of prosecution." (See Haddad Suppl. Aff. Ex. A.) ViaSource contends that "[t]he courts of New Jersey have an interest" in this action because Legacy, by failing to disclose Greenwich's identity, committed a fraud on the courts in New Jersey, which "[t]he courts in New Jersey should be able to vindicate" to preserve "the integrity of their proceedings." (Def.'s Mem. 12, 17.) However, ViaSource does not point to any purportedly falsified documents that Legacy submitted to a New Jersey court. Rather, the allegedly fraudulent documents were submitted by Legacy to the New York state court as exhibits to Legacy's complaint. (See Answer Ex. F ¶¶ 14-15 (Legacy discussing the change of ownership forms, attached as Exhibit B to Legacy's complaint, which ViaSource now contends were fraudulently altered by Legacy).) Thus, if ViaSource's allegations of fraud are true, the courts of New York, rather than New Jersey, have a greater interest in addressing those claims.

For these reasons, ViaSource has failed to demonstrate clearly and convincingly "`that the balance of convenience weighs strongly in favor of'" transferring this case to the District of New Jersey. Hubbell, 883 F. Supp. at 962 (quoting Star Lines, 442 F. Supp. at 1207). Accordingly, ViaSource's motion to transfer venue is denied.

CONCLUSION

For the foregoing reasons, ViaSource's motion to dismiss the Corrected Amended Complaint on grounds of res judicata is DENIED, ViaSource's motion to dismiss the Corrected Amended Complaint for failure to join an indispensable party, Legacy, is DENIED, and ViaSource's motion to transfer this action to the United States District Court for the District of New Jersey is DENIED. The Clerk of Court is asked to close docket number 18.

SO ORDERED.

New York, New York

October 4, 2010