CONSUMERS GAS & OIL v. Farmland Industries

• Decision Date: 16 November 1992
• Docket Number: Civ. A. No. 92-F-1394.
• Citation: 815 F. Supp. 1403
• Parties: CONSUMERS GAS & OIL, INC., a Colorado farm cooperative in liquidation, on behalf of itself and others similarly situated, Plaintiffs, v. FARMLAND INDUSTRIES, INC., et al., Defendants.
• Court: U.S. District Court — District of Colorado

815 F. Supp. 1403

CONSUMERS GAS & OIL, INC., a Colorado farm cooperative in liquidation, on behalf of itself and others similarly situated, Plaintiffs, v. FARMLAND INDUSTRIES, INC., et al., Defendants.

Civ. A. No. 92-F-1394.

United States District Court, D. Colorado.

November 16, 1992.

COPYRIGHT MATERIAL OMITTED

Kirk Rider, Yeulin V. Willett, Younge & Hockensmith, P.C., Grand Junction, CO, Richard G. Sander, Robert J. Potrykus, Jr., Popham, Haik, Schnobrich & Kaufman, Ltd., Denver, CO, Frank A. Taylor, Popham, Haik, Schnobrich & Kaufman, Minneapolis, MN, for plaintiffs.

G. Stephen Long, Daniel F. Wake, Coghill & Goodspeed P.C., Denver, CO, Alvin D. Shapiro, Kansas City, MO, for defendants.

ORDER REGARDING MOTIONS

SHERMAN G. FINESILVER, Chief Judge.

This case involves class action claims for Defendants' alleged failure to properly retire capital credits held by Plaintiff and others similarly situated. Jurisdiction is based on 28 U.S.C.A. § 1331 (West Supp.1992). This matter comes before the Court on Defendants Motion to Transfer Venue and Supporting Authorities under 28 U.S.C.A. § 1404(a) (West 1976); Defendants' Motion to Strike Class Action Allegations and Supporting Authorities under Fed.R.Civ.P. 23 (West 1992); Defendant's Motion to Dismiss with Supporting Authorities and Defendant Farmland's Motion to Dismiss Amended Complaint with Additional Supporting Authorities under Fed.R.Civ.P. 12 (West 1992); Individual Defendants' Motion to Dismiss Amended Complaint under Fed.R.Civ.P. 12 (West 1992); Motion to Quash Purported Service of Process on Them under Fed. R.Civ.P. 4; and Additional Supporting Authorities; and Motion for Award of Costs pursuant to Fed.R.Civ.P. 4 (West 1992). These issues have been fully briefed by the litigants. For the reasons stated below, the Motion to Transfer Venue is DENIED, Motion to Strike Class Action Allegations is HELD IN ABEYANCE, Defendant's Motion to Dismiss with Supporting Authorities and Defendant Farmland's Motion to Dismiss Amended Complaint with Additional Supporting Authorities are GRANTED IN PART and DENIED IN PART; Individual Defendants' Motion to Dismiss Amended Complaint, Motion to Quash Purported Service of Process on Them, and Additional Supporting Authorities is GRANTED IN PART and DENIED IN PART; Plaintiff's Sixth, Seventh, Eighth, Ninth, Tenth, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth, Seventeenth, Eighteenth, Nineteenth, and Twentieth Claims for Relief in its Amended Complaint-Class Action are DISMISSED; and the Motion for Award of Costs is GRANTED.

I. BACKGROUND

Plaintiff Consumers, the putative class representative, is a farm cooperative which was organized and exists under the laws of the State of Colorado.¹ It is currently in liquidation. Defendant Farmland is a farm cooperative which assists farmers in marketing their products. Farmland is owned by farm cooperatives like Consumers. Plaintiff brings this suit on behalf of itself and other "farm cooperatives which have dissolved or are in liquidation for money that is allegedly owed to them by the Defendants." Amended Complaint — Class Action at 1.

Farmland has approximately 1,300 member cooperatives. More than half of Farmland's members are located in Kansas, Missouri, Nebraska, Iowa and Oklahoma. The other half of Farmland's members are located in the remainder of states in which Farmland conducts business: Colorado, Wyoming, New Mexico, Montana, Utah, Idaho, North Dakota, South Dakota, Oregon, Texas, Minnesota, Wisconsin, Arkansas, Kentucky, Indiana and Illinois. Approximately 45 member cooperatives are located in Colorado.

When Consumers was an active Farmland member, its ownership interest in Farmland was evidenced by common stock which had voting rights. According to the membership agreement, Farmland is required to distribute any profits it may generate to Farmland members with which it did business during a particular year. To date, Farmland has neither retired the non-voting capital credits of Consumers, some of which was earned in the late 1960's, nor capital credits of the other local class cooperatives which comprise the putative class. Plaintiffs make the following claims: securities violations, racketeering, breach of fiduciary duty, conversion, breach of contract, promissory estoppel, unjust enrichment, intentional interference with contractual obligations, negligence, conspiracy, and a claim for punitive damages. Defendants have not answered, but have filed the motions discussed above.

II. CHANGE OF VENUE

28 U.S.C.A. § 1404(a) (West 1976) provides "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." This statute vests us with the discretion to transfer cases to other districts to prevent unnecessary inconvenience and expense. Van Dusen v. Barrack, 376 U.S. 612, 616, 84 S.Ct. 805, 809, 11 L.Ed.2d 945 (1964); In re Air Crash Disaster at Stapleton Int'l Airport, 720 F.Supp. 1455, 1458 (D.Colo.1988).

A. WHERE ACTION COULD HAVE BEEN BROUGHT

An initial issue is whether this action could have been brought in the United States District Court for the District of Kansas or Western District of Missouri, the districts where Defendant seeks to transfer venue. In re Dow Co. "Sarabond Prods." Liab. Litig., 664 F.Supp. 1403, 1404 (D.Colo.1987).

Jurisdiction in this action is not based solely upon diversity of citizenship. 28 U.S.C.A. § 1391(b) (West Supp.1992) provides that in a civil action where jurisdiction is not based solely upon diversity, the action may be brought in "(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, ... or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought."

Here, the Defendants do not all reside in Colorado. Under 28 U.S.C.A. § 1391(c) (West Supp.1991), a corporate defendant resides in any judicial district in which it is subject to personal jurisdiction. Although Defendant Farmland is incorporated in Kansas, it is authorized to do business in Colorado. Therefore, Defendant Farmland resides in Kansas, Colorado and any other state in which it is authorized to do business, for purposes of determining venue. Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 112, 107 S.Ct. 1026, 1032, 94 L.Ed.2d 92 (1987); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 2183, 85 L.Ed.2d 528 (1985); Hanson v. Denckla, 357 U.S. 235, 252, 78 S.Ct. 1228, 1239, 2 L.Ed.2d 1283 (1958); International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). Plaintiff has also sued other Defendants who do not reside in Colorado. For example, Defendant James L. Rainey is a resident of Oklahoma and Defendant Cleberg resides in Missouri. We consider the application of 28 U.S.C.A. §§ 1391(b)(2) and (3) to determine where venue is proper because all of the defendants do not reside in the same State.

In 28 U.S.C.A. § 1391(b)(2), the "in which claim arose" language has been omitted in favor of the purported much clearer test of where a substantial part of the events giving rise to the claim occurred. See Sidco Indus., Inc. v. Wimar Tahoe Corp., 768 F.Supp. 1343, 1346 (D.Or.1991). Substantial events may occur in more than one State making venue proper in more than one district. Id. It is clear that a substantial part of the events giving rise to this lawsuit occurred in any jurisdiction where Defendant allegedly failed to redeem cooperative members' shares. Therefore, venue is proper in Colorado, Kansas or Missouri because Defendant operates in each of these States and allegedly failed to pay various cooperative members residing in each of these States. There are several equitable factors to be considered on the question of whether a change of venue is appropriate.

B. EQUITABLE FACTORS

The moving party bears the burden to prove that the action should be transferred. Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1515 (10th Cir.1991). The Court may consider several factors in this analysis, including (i) Plaintiff's choice of forum; (ii) the accessibility of witnesses and other sources of proof, including the availability of compulsory process; (iii) the costs of making the necessary proof; (iv) questions as to the enforceability of judgment; (v) relative advantages and obstacles to a fair trial; (vi) difficulties that may arise from congested dockets; (vii) any potential conflict of laws questions; (viii) the advantage of having a local court determine questions of local law; and (ix) other practical considerations. Chrysler, 928 F.2d at 1516 (quoting Texas Gulf Sulphur Co. v. Ritter, 371 F.2d 145, 147 (10th Cir.1967)); Midwest v. Phoenix Leasing Corp., No. 91-F-1000, slip op. at 3 (D.Colo. Sept. 26, 1991).

We hold that Plaintiff's claim should remain in the District of Colorado. The putative class consists of all those Farmland members who have dissolved or are in liquidation. It has not been established that because the majority of Farmland's members reside in Kansas, Missouri, Nebraska, Iowa and Oklahoma that the majority of Plaintiff class members will reside in those states. It is represented that Plaintiff class members are by definition financially weak. Therefore, it will potentially place an undue burden on Plaintiffs to require them to travel to Kansas or Missouri for court hearings and meetings.

Considerations of accessibility of witnesses and other sources of proof also weigh in favor of maintaining this lawsuit in the District of Colorado. Defendant argues that Plaintiff asserts claims for fraud. As such, Defendant claims that individual Plaintiffs will be required to prove the elements of fraud. Consequently, individualized...