RUO-FANG LO v. CHANG

CARL BARBIER, District Judge

Before the Court is the Rule 12(b) Motion to Dismiss for Lack or Personal Jurisdiction, or, alternatively, Motion to Transfer Under 28 U.S.C. § 1404(a) , filed by defendants, Daniel and Julia Chang ("the Changs"). Rec. Doc. 3. Plaintiff's oppose the motion. The motion, set for hearing on February 4, 2004, is before the Court on briefs without oral argument.

This is an action commenced by plaintiffs under the Securities and Exchange Act of 1934 and Mississippi state law to recover monies that they allege are due them by defendants as a result of alleged fraudulent activities by defendants in connection with the start up, operation, and stock re-purchase of a closely-held corporation, CLS investments, which operated a Mississippi hotel. Plaintiff's reside in Jefferson Parish, Louisiana; defendants reside in Pass Christian, Mississippi. The hotel owned by the corporation is located in Mississippi, and the stock re-purchase agreement was executed in Mississippi.

In connection with the motion, defendants have submitted affidavits indicating that any contacts with the plaintiffs which occurred in Louisiana were purely social, and not related to the business, that no CLS meetings were ever held in Louisiana, and that any CLS discussions held in Louisiana were "tangential and immaterial." Daniel Chang's Supp. Aff., ¶¶ 4 8, Defendants' Reply, Exh. 1.

Plaintiff's have submitted countervailing affidavits attesting to the following:

• On February, 8, 1998, the Changs visited plaintiff Paggy Lee at Five Happiness in New Orleans, to persuade her to purchase 12.5% of CLS stock for $100,000;

• On February 11, 1998, the Changs returned to Five Happiness to collect the Lee's $50,000 partial payment for the stock, and exchanged a receipt for th cash.

• In 1998, the Changs telephoned Rose Lo, in this district, to persuade her to purchase a 12.5% company interest.

• In 1998, the Changs made additional business-related visits to New Orleans, occasionally accompanied by CLS' contractor and banker.

• On November 26, 1998, the Changs held a business meeting with the plaintiffs in Metairie, at the home of Sidney Lee's sister.

• In early 1999, the Changs held another business meeting with Rose Lo and Paggy Lee, at Lo's Metairie home.

• On May 9, 2000, the Changes called Rose Lo and Paggy Lee to solicit a $20,000 business emergency loan, and traveled to Metairie the same day to collect the funds.

• In 2002, the Changs called Rose Lo to negotiate a purchase price for her and her husband's CLS shares. The sale agreements provide that they be interpreted under Louisiana law.

Affidavits of P. Lee and R. Lo, Plaintiff's' Opp., Exhs. 1 2. In the instant motion, defendants move to dismiss this action, arguing that they do not have sufficient contacts with Louisiana for this Court to exercise personal jurisdiction over them. In the alternative, they claim that under 28 U.S.C. § 1404(a), this matter should be transferred to Mississippi in the interest of the convenience of witnesses and parties. Plaintiff's oppose the motion, arguing that facts set forth above in their affidavits establish the minimum contacts to support specific jurisdiction over defendants, and that 28 U.S.C. § 1404 (a) does not apply to this action. For the reasons which follow, the Court finds that the Changs' motion should be denied.

I. Motion to Dismiss

Federal courts in a diversity action may exercise personal jurisdiction over a defendant to the extent permitted by the law of the forum state.Alpine View Co. v. Atlas Copco A.B., 205 F.3d 208, 214 (5th Cir. 2000); FED. R. CIV. F. 4(e)(1). Louisiana's long-arm statute authorizes the exercise of personal jurisdiction to the extent allowed by the Due Process Clause of the Fourteenth Amendment. Louisiana Revised Statutes § 13:3201; Fox v. Board of Supervisors of Louisiana State, 576 So.2d 978, 983 (La. 1991). Accordingly, in the case before it, the Court must determine if this Court's exercise of personal jurisdiction over the Changs would violate due process.

The exercise of personal jurisdiction over a nonresident defendant comports with due process when "(1) that defendant has purposefully availed himself of the benefits and protections of the forum state by establishing minimum contacts with the forum state, and (2) the exercise of jurisdiction over that defendant does not offend traditional notions of fair play and substantial justice." Id. at 215 (citations and internal quotation marks omitted); International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154 (1945). "`Minimum contacts' can be established either through contacts sufficient to assert specific jurisdiction, or contacts sufficient to assert general jurisdiction." Alpine View, 205 F.3d at 215.

In this case, plaintiffs appear to concede that grounds for the exercise of general jurisdiction do not exist; thus, the Court must determine whether plaintiffs' allegations meet the test for this Court's exercise of specific jurisdiction. Specific jurisdiction is present when a nonresident defendant has "purposefully directed its activities at the forum state and the litigation results from alleged injuries that arise out of or relate to those activities." Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174 (1985)) (internal quotations omitted). In resolving this question, the Court considers whether plaintiffs have brought forward sufficient evidence to establish a prima facie case supporting jurisdiction. Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d 865, 868 (5th Cir. 2001) (citations omitted). "[C]onflicts between the facts contained in the parties' affidavits must be resolved in the plaintiff's favor for purpose of determining whether a prima facie case for personal jurisdiction exists." Bullion v. Gillespie, 695 F.2d 213, 217 (5th Cir. 1990) (citations omitted).

In this case, all of the relevant facts surrounding the Changs' contacts with this state are controverted by the parties' countervailing affidavits (although Daniel Chang ultimately admitted that CLS discussions occurred in this district, qualifying them as "tangential and immaterial"). In the posture presented, the Court is required to resolve the controverted allegations in plaintiffs' favor. Accordingly, for purposes of this inquiry, the Court accepts as true the allegations of Paggy Lee and Rose Lo contained in their affidavits filed in connection

Minimum contacts are present

Those allegations establish a prima facie case sufficient to support the exercise of specific jurisdiction in this case. Based on the plaintiffs' allegations, it would appear that the requisite minimum contacts are present: the Changs personally solicited Lee's purchase of 12.5% of CLS stock in New Orleans, collected the payment therefor in New Orleans, telephoned this district to solicit a stock purchase by Rose Lo, made business-related visits to New Orleans in the company of the CLS contractor and banker, and held business meetings in this district. Assuming these facts are true, the Court finds that the Changs purposefully directed activities to the forum state, and the instant litigation results from alleged injuries arising out of or related to those activities.

Assertion of jurisdiction is fair and reasonable

The plaintiffs having established the requisite minimum contacts between the defendants and this state, "the burden of proof shifts to the defendant[s] to show that the assertion of jurisdiction is unfair and unreasonable." Central Freight Lines Inc. v. APA Transport Corp., 322 F.3d 376, 384 (5th Cir. 2003) (citations omitted). "The defendant must make a `compelling case.'" Id., quotingBurger King, 471 U.S. at 477, 105 S.Ct. 2174. In making a determination of whether the exercise of jurisdiction is fair and reasonable, courts consider: "(1) the burden on the nonresident defendant of having to defend itself in the forum; (2) the interests of the forum state in the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in the most efficient resolution of controversies; and (5) the shared interests of the states in furthering fundamental social policies." Id. (citations omitted). In their papers filed in connection with the instant motion, defendants do not specifically address these factors. However, the Court's review of the record and the memoranda of the parties does not suggest that the burden on defendant in defending the suit here would be great, and plaintiffs certainly have an interest in obtaining convenient and effective relief. Louisiana certainly has an interest in redressing securities violations against its citizens, especially when material parts of the alleged fraud take place within the state as alleged here. Finally, there is no evidence that exercising jurisdiction over defendants would be inefficient or would offend the interests of Mississippi in furthering its social policies. Accordingly, the Court finds that in addition to the fact that defendants' contacts with this forum are sufficient to support specific jurisdiction over them in this case, the Court's exercise of that jurisdiction does not offend traditional notions of fair play and substantial justice. Put another way, at least on the basis of the conduct alleged, defendants should not be surprised to be haled in to court in this district, and their motion to dismiss for lack of personal jurisdiction must be denied.

II. Motion to Transfer Under 28 U.S.C. § 1404(a)

Defendants also urge that this matter should be transferred to Mississippi for the convenience of witnesses and in the interest of justice. See 28 U.S.C. § 1404(a). Plaintiff's argue, relying on Hilqeman v. National Ins. Co. of America, 547 F.2d 293, (5th Cir. 1977), that because this matter was brought under the Securities Exchange Act of 1934 ("the Act"), 15 U.S.C. § 78a et seq., the specific venue provision of the Act rather than the general provision of 1404(a) applies. Under section 27 of the Act, a "suit or action to enforce any liability or duty created by [the Securities Exchange Act of 1934] or rules and regulations thereunder, or to enjoin any violation of such chapter or rules and regulations" may be brought in the district where "any act or transaction constituting the violation occurred." 15 U.S.C. § 78aa. See Leroy v. Great Western United Corp., 443 U.S. 173, 181-82, 99 S.Ct. 2710, 2715 (1979). Arguing that acts or transactions constituting the violation alleged herein occurred in this district, plaintiffs suggest that venue lies only in this district.

Title 28 U.S.C. § 1404 (a) analysis required

However, notwithstanding the applicability of section 27 of the Act, 28 U.S.C. § 1404 "applies to actions governed by special venue provisions, including the special venue provisions of the federal securities statutes." Securities and Exchange Commission v. Savoy Industries, Inc., 587 F.2d 1149, 1153 (D.C. Cir. 1978), cert. denied by Zimmerman v. Securities and Exchange Commission, 440 U.S. 913, 99 S.Ct. 1227 (1979), citing Ex parte Collett, 337 U.S. 55, 58-59, 69 S.Ct. 944(1949);Continental Grain Co. v. Barge FBL-585, 364 U.S. 19, 80 S.Ct. 1470 (1960) (other citations omitted). Thus, while this district may indeed be a proper venue for this action pursuant to the Act, the case may also be subject to transfer for reasons of convenience under 1404(a).

Under 1404(a), "[f]or the convenience of parties, witnesses and in the interest of justice," courts may transfer an action "to any other district or division where it might have been brought." In determining whether transfer is proper under § 1404(a), courts generally consider the factors articulated by the United States Supreme Court in Gulf Oil Corp. v. Gilbert, 330 U.S. 505, 508, 67 S.Ct. 839, 843 (1947). These factors include both "private interest" and "public interest" factors. Id. The private interest factors are: (1) "the relative ease of access to sources of proof;" (2) "availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses;" (3) "possibility of view of premises, if view would be appropriate to the action;" and (4) "all other practical problems that make trial of a case easy, expeditious and inexpensive." The public interest factors to be considered are: (1) the administrative difficulties created by court congestion; (2) the "local interest in having localized controversies decided at home;" (3) the interest in "having the trial of a diversity case in a forum that is at home with the state law that must govern the case;" (4) the unfairness of burdening citizens in an unrelated forum with jury duty; and (5) the interest in avoiding unnecessary problems in conflict of laws, or in the application of foreign law. Id. at 509, 67 S.Ct. at 843. As an additional public interest factor, courts consider judicial economy — that is, whether a transfer would avoid duplicative litigation and prevent waste of time and money. Van Dusen v. Barrack, 376 U.S. 612, 616, 84 S.Ct. 805, 809 (1964). Finally, "while neither conclusive nor determinative," in this circuit "the plaintiff's choice of forum is clearly a factor to be considered." In re Horseshoe Entertainment, 337 F.3d 429, 434-35 (5th Cir. 2003).

The burden of proof in a motion to transfer is on the moving party.Karim v. Finch Shipping Co., Ltd., 94 F. Supp.2d 727 (E.D. La.2000), citing In re Air Crash Disaster Near New Orleans, 821 F.2d 1147 (5th Cir. 1987) (vacated and remanded on other grounds);see also, Time, Inc. v. Manning, 366 F.2d 690, 698 (5th Cir. 1966). As proof, the movant must provide affidavits containing admissible evidence (i.e., non-hearsay). Conclusory allegations are not sufficient — the moving party must identify the key witnesses to be called and present a generalized statement of what their testimony would include. Al Copeland Enterprises, Inc. v. Mowen, 1992 WL 300771, *2 (E.D. La., Oct.6, 1592); see also, Heller Financial, Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1293 (7th Cir. 1989).

Application of private interest factors

Upon application of the Gilbert factors to the instant case, the Court concludes that the Changs have failed to carry their burden of showing that this matter should be transferred to the Southern District of Mississippi. With respect to the question of the "the relative ease of access to sources of proof," the Court finds that it's probably a draw between the two districts. While movants suggest that financial professionals who will be called to testify are located in Gulfport, Mississippi, the plaintiffs and witnesses that they would call (to substantiate events at the Five Happiness and Metairie meetings, for example) are in Louisiana. Any documents located in Mississippi can be easily transported to New Orleans. As for the "availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses," plaintiffs have demonstrated that the likely Mississippi witnesses are within the 100-mile subpoena power of this Court, and the cost of driving from the Mississippi coast to this district is de minimis. As for the possibility of viewing the premises, there is no indication that that will be necessary to resolving this case. Finally, the movant has pointed to no other substantial practical problems that would make trial of this case in Mississippi significantly easier, expeditious, or less expensive.

Application of public Interest factors

To address the public interest factors, the parties have made no showing regarding the relative congestion of the two courts, but this Court's docket is such that the parties can receive a trial date essentially as soon as they are ready to try the case. Moreover, the same contacts that support personal jurisdiction in this matter give this district a sufficiently proper stake in the resolution of this matter such that there is a local interest in the controversy being decided here, and doing so would not unfairly burden the citizens of this district with jury duty. Finally, the Eastern District of Louisiana is the forum chosen by plaintiffs, and that choice is clearly entitled to some deference.

In sum, in this case neither side has demonstrated that one of the two available venues is significantly more convenient, and given that plaintiffs' choice is entitled to some deference and defendants bear the burden of proof on the propriety of transfer, defendants' motion to transfer should be denied.

Accordingly,

IT IS ORDERED that the Rule 12(b) Motion to Dismiss for Lack or Personal Jurisdiction, or, alternatively, Motion to Transfer Under 28 U.S.C. § 1404(a) , filed by defendants, Daniel and Julia Chang (Rec. Doc. 3) should be and is hereby DENIED.