Bmj Foods Puerto Rico v. Metromedia Steakhouses

• Decision Date: 16 April 2008
• Docket Number: Civil No. 08-1098 (GAG/BJM).
• Citation: 562 F.Supp.2d 229
• Parties: BMJ FOODS PUERTO RICO, INC., Plaintiff v. METROMEDIA STEAKHOUSES COMPANY, L.P. and Puerto Rico Ponderosa, Inc., Defendants.
• Court: U.S. District Court — District of Puerto Rico

562 F.Supp.2d 229

BMJ FOODS PUERTO RICO, INC., Plaintiff v. METROMEDIA STEAKHOUSES COMPANY, L.P. and Puerto Rico Ponderosa, Inc., Defendants.

Civil No. 08-1098 (GAG/BJM).

United States District Court, D. Puerto Rico.

April 16, 2008.

COPYRIGHT MATERIAL OMITTED

Carlos A. Valldejuly-Sastre, Ubaldo M. Fernandez-Barrera, O'Neill & Borges, San Juan, PR, for Plaintiff.

Rossell Barrios-Amy, Goldman Antonetti & Cordova, San Juan, PR, for Defendants.

OPINION AND ORDER

BRUCE J. McGIVERIN, United States Magistrate Judge.

Defendants Metromedia Steakhouses Company, L.P. ("Metromedia") and Puerto Rico Ponderosa, Inc. ("P.R. Ponderosa") move to transfer venue to the Northern District of Texas pursuant to 28 U.S.C. § 1404(a). (Docket No. 8). Plaintiff BMJ Foods Puerto Rico, Inc. ("BMJ Foods") opposes, and further moves to remand the case to the courts of the Commonwealth of Puerto Rico for lack of subject matter jurisdiction pursuant to 28 U.S.C. § 1447(c). (Docket No. 14), These non-dispositive matters were referred to me for resolution by the presiding district judge. See 28 U.S.C. § 636(b)(1)(A); Delta Dental of Rhode Island v. Blue Cross & Blue Shield of Rhode Island, 942 F.Supp. 740 (D.R.I.1996) (magistrate judge has authority to resolve motion to remand); Shenker v. Murasky, 1996 WL 650974 (E.D.N.Y.1996) (motion to transfer venue is non-case-dispositive matter). For the reasons that follow, the motion to remand is denied, and the motion to transfer is granted.

Background

This dispute, which arises out of several franchise agreements that govern the operation of Ponderosa Steakhouse restaurants in Puerto Rico, is the subject of a case filed in the Northern District of Texas ("Texas case") and a case filed in Puerto Rico ("Puerto Rico case").

On December 6, 2007, Metromedia filed suit against BMJ Foods in the Northern District of Texas, alleging BMJ Foods withheld fees in breach of the franchise agreements. Shortly thereafter, Metromedia sent BMJ Foods a notice of the lawsuit and request for waiver of service of summons. In January of 2008, and in response to concerns raised by the Texas court regarding its jurisdiction, Metromedia filed two amended complaints to clarify the citizenship of its limited partners.

Before the Texas complaint was amended, however, BMJ Foods, on January 3, 2008, filed the present Puerto Rico case against Metromedia and P.R. Ponderosa in the courts of the Commonwealth of Puerto Rico. In the Puerto Rico case, BMJ Foods alleges breach of the same franchise agreements at issue in the Texas case, as well defendants' violation of Puerto Rico's Act 75, 10 L.P.R.A. § 278, et seq. P.R. Ponderosa was served with process in the Puerto Rico case the same day it was filed. Defendants subsequently removed the Puerto Rico case to this court, invoking subject matter jurisdiction based on diversity of citizenship pursuant to 28 U.S.C. § 1332(a)(1).

BMJ Foods, defendant in the Texas case, moved to dismiss that case for alleged lack of personal and subject matter jurisdiction, arguing that it did not have sufficient minimum contacts with Texas and that there was no diversity of citizenship because both it and P.R. Ponderosa were corporate citizens of Puerto Rico. In the alternative, BMJ Foods moved to transfer the Texas case to Puerto Rico under the "first-to-file" rule, arguing that even though the Texas case was the first to be filed, the Puerto Rico case was the first in which jurisdiction was established over the subject matter and the parties. The Texas court rejected all of BMJ Food's arguments in a decision handed down on March 26, 2008. (Docket No. 17, Exh. A). BMJ Foods subsequently answered the complaint in the Texas case and submitted a counterclaim containing essentially the same factual allegations and causes of action it alleges in the Puerto Rico case. (Docket No. 21, Exh. 1).

Pending before this court are arguments that are legally and factually similar to those already addressed in the Texas case: first, BMJ Foods seeks to remand the Puerto Rico case to the Commonwealth courts due to an alleged lack of complete diversity among the parties; and second, Metromedia and P.R. Ponderosa seek to transfer the Puerto Rico case to the Northern District of Texas, citing the "first-to-file" rule. Both issues are addressed below.

BMJ Foods's Motion to Remand

BMJ Foods argues that there is no complete diversity of the parties and that the case therefore must be remanded for lack of subject matter jurisdiction. See 28 U.S.C. § 1447(c) ("If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded."). In particular, BMJ Foods alleges that there is no diversity because it is a citizen of Puerto Rico and that P.R. Ponderosa's principal place of business, contrary to what defendants alleged in the notice of removal, is also Puerto Rico.

"Diversity of citizenship exists only when there is complete diversity, that is, when no plaintiff is a citizen of the same state as any defendant." Gabriel v. Preble, 396 F.3d 10, 13 (1st Cir.2005). For diversity purposes, a corporation is a citizen of both the state where it is incorporated and the state where it has its principal place of business. 28 U.S.C. § 1332(c)(1). Once the jurisdictional allegations are challenged, the party asserting diversity has the burden of establishing those allegations with competent proof. Media Duplication Servs., Ltd. v. HDG Software, Inc., 928 F.2d 1228, 1235 (1st Cir.1991).

The First Circuit follows two tests for determining a corporation's principal place of business: the "nerve center" test and the "locus of operations" test. Díaz-Rodríguez v. Pep Boys Corp., 410 F.3d 56, 59 (1st Cir.2005). The "nerve center" test applies to corporations without physical operations or with complex, far-flung activities, and focuses on the place from where the corporation's activities are controlled, whereas the "locus of operations" test searches for the location of actual physical operations of a corporation. Id.

Under either test, P.R. Ponderosa has established, through submission of an affidavit by Robert J. Hoffman, president of Ponderosa Steakhouses, a division of Metromedia, that its principal place of business is Texas. In his affidavit, Mr. Hoffman attests that Ponderosa is headquartered in Piano, Texas, where it maintains its accounting, culinary development, franchise administration, and marketing departments, as well as its executive offices. Mr. Hoffman further attests that P.R. Ponderosa keeps its files at its headquarters in Piano, Texas, and that in lieu of stationing a full-time consultant in Puerto Rico, P.R. Ponderosa offers BMJ Foods a monetary credit that is administered by the accounting department in Texas. (Docket No. 8-3). P.R. Ponderosa's annual statement filed with the Puerto Rico Department of State further indicates that its officers and directors all are located in Texas, and that it conducted no operations and had no assets in Puerto Rico during 2005 and 2006. (Docket No. 14-5). Although BMJ Foods contends that P.R. Ponderosa is only authorized to do business in Puerto Rico, and is not authorized to business in Texas, it has not put forth any evidence that P.R. Ponderosa has any physical presence in Puerto Rico or administers its business from Puerto Rico. Accordingly, the motion to remand for lack of subject matter jurisdiction is denied.

Motion to Transfer Venue

Defendants Metromedia and P.R. Ponderosa argue that venue should be transferred because a similar action was first filed in Northern District of Texas and because that district provides the more convenient forum.

Section 1404(a) of Title 28 provides that "[f]or 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." "In addition to the convenience of parties and witnesses, the factors to be considered by the court include the availability of documents; the possibility of consolidation; and the order in which the district court obtained jurisdiction." Coady v. Ashcraft & Gerel, 223 F.3d 1, 11 (1st Cir.2000), citing Cianbro Corp. v. Curran-Lavoie, Inc., 814 F.2d 7, 11 (1st Cir.1987). Where identical actions are proceeding concurrently in two federal courts, the first filed action is generally preferred in a choice-of-venue decision. Coady, 223 F.3d at 11. However, the burden of proof rests with the party seeking transfer; there is a strong presumption in favor of the plaintiffs choice of forum. Id, citing Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). Moreover, "[w]here the overlap between the two suits is nearly complete, the usual practice is for the court that first had jurisdiction to resolve the issues and the other ...