Defazio v. Hollister Employee Share Ownership

• Decision Date: 23 February 2005
• Docket Number: No. CIV S-04-1358LKK.,CIV S-04-1358LKK.
• Citation: 406 F.Supp.2d 1085
• Parties: James P. DeFAZIO, Plaintiff, v. HOLLISTER EMPLOYEE SHARE OWNERSHIP TRUST, et al., Defendants.
• Court: U.S. District Court — Eastern District of California

Page 1085

406 F.Supp.2d 1085

James P. DeFAZIO, Plaintiff, v. HOLLISTER EMPLOYEE SHARE OWNERSHIP TRUST, et al., Defendants.

No. CIV S-04-1358LKK.

United States District Court, E.D. California.

February 23, 2005.

Lynn Hubbard, Scottlynn J. Hubbard, IV, Law Office of Lynn Hubbard III, Chico, CA, for Plaintiff.

James D. Adducci, Marshall L. Blankenship, Adducci, Dorf, Lehner, Mitchell and Blankenship, L. Andrew Brehm, Michael B. Roche, Schuyler, Roche and Zwirner, Chicago, IL, William A. Gould, Jr., Daniel Lawrence Baxter, Wilke, Fleury, Hoffelt, Gould & Birney, LLP, Sacramento, CA, for Defendants.

ORDER

KARLTON, Senior District Judge.

Plaintiff, James P. DeFazio, brings this action against the defendants Hollister, Inc., Hollister Employee Share Ownership Trust ("Plan" or "Hollishare"), John Dickinson Schneider, Inc. ("JDS"), Samuel Brilliant, James A Karlovsky, James McCormack, Richard Zwirner, and Does 1-10, alleging violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001. This matter is before the court on the defendants' motions to transfer venue and to dismiss. I decide the motions based on the papers and pleadings filed herein and after oral argument.

I. COMPLAINT

This case concerns plaintiffs community property share of his former wife's vested interest in HolliShare, the Hollister Employee Share Ownership Trust ("Plan"), an employee profit-sharing plan governed by ERISA.

Upon plaintiff's separation from his former wife, Kathleen J. Ellis ("Ellis"), on January 16, 1998, the Superior Court of California entered an order which awarded plaintiff a community property share of Ellis' vested benefits in the Plan she participated in while an employee of Hollister. The Superior Court ordered that the plaintiff, as an alternate payee¹ of the Plan, have his interest held in a "segregated account" and credited with a "Proportionate share of earnings, interest, gains, losses and expenses allocated to ... [Ellis'] account from each full plan year from January 1, 1998 to the date of segregation." First Amended Complaint ("FAC"), Exh. E at 2.

On June 20, 2002, Hollister, HolliShare's administrator, created and transferred over to plaintiffs segregated account $905,798. The Superior court retained jurisdiction over plaintiff's share in the entire amount up to $1,500,000, pending resolution of child support and property settlement issues between plaintiff and Ellis. Id. Plaintiff alleges that he was entitled to request distribution for any amount in excess of the $1,500,000 at any time and in any form permitted by the terms of the Plan.

Plaintiff alleges that the defendants breached their fiduciary duties under ERISA by failing to act in the interest of his and other plan participants and beneficiaries. Specifically, he contends that the defendants engaged in a prohibited transaction because it purchased employer stock for inadequate consideration. According to plaintiff, HolliShare improperly provided its parent company, JDS, a right of first refusal to buy shares, and sold them at "book-value"² instead of fair market value. He also claims that, as an "alternate payee," he has received only a low-yield commercial paper rate of interest on his Plan account, rather than the benefit of the approximately 22% annual appreciation in the book value of JDS stock. FAC ¶ 18, n. 12. Finally, plaintiff alleges that Hollister violated ERISA by distributing payments from the segregated account to Ellis, her attorney, and his children according to a domestic relations order, which, plaintiff asserts, is invalid.

II. MOTION TO TRANSFER VENUE

A. STANDARDS FOR TRANSFER PURSUANT TO 28 U.S.C. § 1404(a)

Section 1404(a) of Title 28 provides that "[f]or the convenience of the 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." Although Congress drafted § 1404(a) in accordance with the doctrine of forum non conveniens, it was intended to be a revision rather than a codification of the common law. Piper Aircraft v. Reyno, 454 U.S. 235, 253, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981); Norwood v. Kirkpatrick, 349 U.S. 29, 32, 75 S.Ct. 544, 99 L.Ed. 789 (1955). Thus, a § 1404(a) transfer is available "upon a lesser showing of inconvenience" than that required for a forum non conveniens dismissal. Norwood, 349 U.S. at 32, 75 S.Ct. 544.

The burden is upon the moving party to show that transfer is appropriate. Commodity Futures Trading Commission v. Savage, 611 F.2d 270, 279 (9th Cir.1979); see also Los Angeles Memorial Coliseum Comm. v. National Football League, 89 F.R.D. 497, 499 (C.D.Cal.1981) aff'd, 726 F.2d 1381, 1399 (9th Cir.1984). Nonetheless, the district court has broad discretion "to adjudicate motions for transfer according to an `individualized, case-by-case consideration of convenience and fairness.'" Jones v. GNC Franchising, Inc., 211 F.3d 495 (9th Cir.2000) (quoting Stewart Org. v. Ricoh Corp., 487 U.S. 22, 30, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988)); see Westinghouse Elec. Corp. v. Weigel, 426 F.2d 1356, 1358 (9th Cir.1970).

Generally, the court affords plaintiffs choice of forum great weight. Lou v. Belzberg, 834 F.2d 730, 739 (9th Cir.1987) cert. denied, 485 U.S. 993, 108 S.Ct. 1302, 99 L.Ed.2d 512 (1988). However, when judging the weight to be given to plaintiff's choice of forum, consideration must be given to the respective parties' contact with the chosen forum. Id. "If the operative facts have not occurred within the forum and the forum has no interest in the parties or subject matter," plaintiffs choice "is entitled only minimal consideration." Id. Moreover, when a plaintiff brings a derivative suit or represents a class, the named plaintiff's choice of forum is given less weight. Id.

Although § 1404(a) partially displaces the common law doctrine of forum non conveniens, that doctrine's considerations are helpful in deciding a § 1404(a) motion. Decker Coal Co. v. Commonwealth Edison, 805 F.2d 834, 843 (9th Cir. 1986). Accordingly, the district court should consider both private and public interest factors affecting the convenience of the forum. Id. at 843 (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981)); see Stewart Org., 487 U.S. at 30, 108 S.Ct. 2239. Private factors include:

[t]he relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to the action; and all other practical problems that make trial of a case easy, expeditious and inexpensive.

Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 91 L.Ed. 1055, (1947). Public factors include:

the administrative difficulties flowing from court congestion; the `local interest in having localized controversies decided at home; the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action; the avoidance of unnecessary problems in conflict of laws, or in the application of foreign law; and the unfairness of burdening citizens in an unrelated forum with jury duty.

Piper Aircraft, 454 U.S. at 241 n. 6 (quoting Gulf Oil Corp., 330 U.S. at 509, 67 S.Ct. 839). In sum, the factors to be considered in determining whether a motion to transfer should be granted are: (1) the plaintiff's choice of forum; (2) the convenience of the parties; (3) the convenience of the witnesses; and (4) the interests of justice. Los Angeles Mem'l Coliseum Comm., 89 F.R.D. at 499

As a threshold matter, all parties agree that, under 28 U.S.C. § 1391 and ERISA, 29 U.S.C. § 1132(e)(2), both this district and the Northern District of Illinois are proper venues.³ Defs' Br. in Supp. of Mot. at 3; Pl's Oppo. at 4. Below, I examine the merits of defendants' motion.

B. ANALYSIS

1. Plaintiff's Choice of Forum

In this circuit, a plaintiff's choice of forum is generally granted great weight, Lou v. Belzberg, 834 F.2d at 739, especially in ERISA cases, Jacobson v. Hughes Aircraft Co., 105 F.3d 1288, 1301 rev'd and remanded on other grounds, Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 119 S.Ct. 755, 142 L.Ed.2d 881 (1999).

Despite the general rule, defendants contend that, in this case, plaintiff's choice of forum deserves little weight because the operative facts have no material connection with the chosen forum. Defs' Br. in Supp. of Mot. at 7-8. To support their contention, defendants argue that any breach of fiduciary duty occurred at the Libertyville, Illinois headquarters, and argue that the action is in this forum solely as a "fortuitous" consequence of the plaintiff's divorce from a former Hollister employee. Id. at 3-4. I cannot agree that there are no contacts with this forum.

The account in question came into being as a result of orders issued by the Superior Court of California. No fiduciary relationship existed between the parties until those orders. While the creation of the account is not at issue, the nature of, administration and compliance with the California issued orders are at the crux of this action.

Defendants also argue that because the plaintiff's claim could have been brought by any of the other "Hollishare plan participants in their home state," the plaintiff's choice "is entitled no deference." Defs' Mot. at 8 (citing Koster v. (American) Lumbermens Mutual Cas. Co., 330 U.S. 518, 524-25, 67 S.Ct. 828, 91 L.Ed. 1067) (plaintiff's choice of forum carries less weight in a derivative action.) Defendants' argument is not persuasive. In the matter at bar, a significant aspect of plaintiff's complaint relates to his personal interests in the proper administration of his alternate payee account.

I conclude that the court must accord significant weight to plaintiff's choice of forum.

2. Convenience of the Parties

Defendants argue that Illinois is a...