Jth Tax, Inc. v. Lee

• Decision Date: 02 April 2007
• Docket Number: Civil Action No. 2:06cv486.
• Citation: 482 F.Supp.2d 731
• Parties: JTH TAX, INC. d/b/a Liberty Tax Service, Plaintiff, v. Ronald LEE, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

Page 731

482 F.Supp.2d 731

JTH TAX, INC. d/b/a Liberty Tax Service, Plaintiff, v. Ronald LEE, Defendant.

Civil Action No. 2:06cv486.

United States District Court, E.D. Virginia, Norfolk Division.

April 2, 2007.

Vanessa Mercurio Szajnoga, Liberty Tax Service, Virginia Beach, VA, for Plaintiff.

Ronald Lee, Rock Island, IL, pro se.

MEMORANDUM ORDER

REBECCA BEACH SMITH, District Judge.

This matter comes before the court on defendant Ronald Lee's ("Lee") motion to transfer venue from the Eastern District of Virginia to the Central District of Illinois pursuant to 28 U.S.C. § 1404(a). For the reasons set forth below, Lee's motion to transfer venue is DENIED.

I. Facts and Procedural Background

This lawsuit arises out of plaintiff JTH Tax, Inc.'s ("JTH")¹ termination of Lee's five franchise agreements. JTH, the franchisor, is a Delaware corporation, with its headquarters and principal place of business in Virginia Beach, Virginia. JTH specializes in franchising tax preparation businesses throughout the United States. Lee, the franchisee, is an individual, who resides in Rock Island, Illinois.

In March 2002, Lee began investigating business opportunities on the Internet and requested franchise information from JTH. During his investigation, Lee attended a JTH seminar in Virginia Beach, Virginia, on May 3112002, and June 1, 2002, where John Hewitt ("Hewitt"), Chief Executive Officer of JTH, and other officers and employees of JTH promoted franchise opportunities. At the seminar, Lee met privately with Hewitt, where they discussed Lee's potential purchase of JTH franchises. Following this meeting, JTH provided Lee with JTH's Uniform Franchise Offering Circular and Franchise Agreement. Based upon his investigation and interaction with JTH, Lee submitted a franchise application on June 13, 2002. After gaining approval from JTH, Lee purchased five JTH franchises between 2002 and 2005. Specifically; on July 24, 2002, Lee purchased JTH territories in Iowa, known as IA011, IA012, and IA013; on August 16, 2002, Lee purchased an additional JTH territory in Iowa, known as IA007; and on July 1, 2005, Lee purchased a JTH territory in Illinois, known as ILL103. With each of these purchases, JTH and Lee entered into franchise agreements, which outlined the responsibilities and obligations of each party. These five agreements were identical, except for the territory descriptions. Because Lee resides in Illinois, JTH attached an "Illinois Addendum" to each agreement. This addendum expressly eliminated the choice-of-law provisions and forum-selection clauses, which generally appear in JTH agreements.²

Lee operated his five tax preparation businesses without any major incident until mid-to-late 2005, when the relationship between JTH and Lee began to deteriorate. JTH alleges that Lee owed it money pursuant to the franchise agreements. As a result, on June 16, 2006, JTH sent Lee a notice to cure for failure to pay the money, which was thirty days past due. According to JTH, after Lee received this letter, he still failed to cure, the breach and instead "began to exude strange behavior." Compl. at 3. More specifically, on June 29, 2006, Lee sent JTH a mock "notice to cure," along with invoices asserting that JTH owed money to Lee. Id. Because of Lee's failure to cure, JTH notified Lee by letter that it had terminated Lee's five franchise agreements as of August 10, 2006. In regards to this termination, JTH alleges that Lee has refused to abide by post-termination obligations, which were specified in the franchise agreements.³ JTH contends that) Lee violated the post-termination provisions in the franchise agreements by retaining JTH client files, Operations Manual, and telephone numbers, and by operating three tax preparation businesses named "U.S. Tax Service" at the same locations where JTH used to be located. JTH contends that Lee violated the covenant not to compete and covenant not to solicit provisions contained in the franchise agreements. JTH further alleges that Lee has continued to list his business under JTH's federally registered trademarks and has even attempted to disguise the operation of these businesses by listing his wife, Terri Lee, as the owner.

On August 29, 2006, JTH filed a two-count complaint, alleging trademark infringement, in violation of the Lanham Act, 15 U.S.C. 1114 et seq. (count I), and breach of contract (count II), seeking both monetary and injunctive relief. JTH states that jurisdiction is based on both federal question and diversity of citizenship. In addition, JTH simultaneously filed a motion for a preliminary injunction.⁴ Thereafter, on September 11, 2006, Lee was personally served; however, he did not respond within the required time limit.⁵ Thus, on January 25, 2007, JTH filed a motion for default judgment. At JTH's request, the Clerk entered default against Lee on January 30, 2007.

On February 8, 2007, Lee, proceeding pro se, filed a motion to transfer venue under 28 U.S.C. § 1404(a), which the Clerk filed subject to defect for being late. On February 14, 2007, Lee filed his answer to JTH's complaint, which the Clerk also filed subject to defect for being late. Lee also filed a timely response to JTH's motion for default judgment at this time. On February 20, 2007, JTH responded to Lee's motion to transfer venue. On March 7, 2007, Lee filed a motion for leave to file a counterclaim, which asserted state law claims related to the franchise agreements.⁶

On March 7, 2007, this court held a hearing on all outstanding matters. After hearing argument from the parties, the court (1) lifted the entry of default against Lee; (2) lifted the defects and filed Lee's motion to transfer venue and answer; (3) granted Lee's motion for leave to file a counterclaim; (4) found JTH's motion for default judgment to be moot; (5) ordered JTH's motion for a preliminary injunction to be consolidated with a hearing on the merits; and (6) took Lee's motion to transfer venue under advisement, giving each party ten days to Me supplemental briefs. After this hearing, Lee filed an additional memorandum in support of his motion to transfer venue, on March 14, 2007. Likewise, on March 20, 2007, JTH filed its supplemental memorandum in opposition to Lee's motion. JTH also filed a number of affidavits in opposition to transfer. Accordingly, Lee's motion to transfer venue is now ripe for review.

II. Analysis⁷

Section 1404(a) 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." 28 U.S.C. § 1404(a). The decision of whether to transfer an action under § 1404(a) is committed to the sound discretion of the district court. In re Ralston Purina Co., 726 F.2d 1002, 1005 (4th Cir.1984); Verosol B.V. v. Hunter Douglas, Inc., 806 F.Supp. 582, 592 (E.D.Va.1992). In applying this statute to the facts at hand, this court "must make two inquiries: (1) whether the claims might have been brought in the transferee forum; and (2) whether the interest of justice and convenience of the parties and witnesses justify transfer to that forum." Koh v. Microtek Int'l, Inc., 250 F.Supp.2d 627, 630 (E.D.Va.2003).

A. Venue in Transferee Forum

Lee requests that this court transfer venue to the Central District of Illinois. As an initial matter, this "court must determine whether the proposed transferee court is one in which the action originally may have been brought." BHP Int'l Inv., Inc. v. OnLine Exch., Inc., 105 F.Supp.2d 493, 498 (E.D.Va.2000); see Blackhawk Indus., Inc. v. Bonis, 238 F.Supp.2d 748, 749 (E.D.Va.2003). Venue is proper in a civil action, where jurisdiction is not based solely on diversity of citizenship, in any "judicial district where any defendant resides, if all defendants reside in the same State." 28 U.S.C. § 1391(b)(1). Because the parties acknowledge that Lee resides in Illinois and is thus subject to personal jurisdiction therein, this court finds that there is no question that JTH could have originally filed this action in Illinois. Accordingly, this court finds that venue would be proper in the Central District of Illinois and that this action meets the initial eligibility criteria for transfer set forth in 28 U.S.C. § 1404(a).

B. Balance of § 1404(a) Convenience and Justice Factors

Next, the court must determine whether transfer would be for the convenience of the parties and witnesses and in the interest of justice. Blackhawk Indus., Inc., 238 F.Supp.2d at 750. In deciding whether to grant transfer pursuant to § 1404(a), this court must consider "the following four factors: (1) the plaintiff's [initial] choice of venue; (2) witness convenience and access; (3) the convenience of the parties; and (4) the interest of justice." Precision Franchising, LLC v. Coombs, No. 1:06CV1148, 2006 WL 3840334, at *2 (E.D.Va. Dec. 27, 2006); Corry v. CFM Majestic Inc., 16 F.Supp.2d 660, 666 (E.D.Va.1998). The movant bears the burden of showing that transfer is proper. Cognitronics Imaging Sys. v. Recognition Research Inc., 83 F.Supp.2d 689, 696 (E.D.Va.2000). The movant must also demonstrate that transfer does more than merely "shift the inconvenience" to the other party. DMP Corp. v. Fruehauf Corp., 617 F.Supp. 76, 77 (W.D.N.C.1985).

1. plaintiff's Choice of Venue

"The initial choice of forum, from among those possible under the law, is a privilege given to the plaintiff." Koh v. Microtek Int'l, Inc., 250 F.Supp.2d 627, 633 (E.D.Va.2003). "To overcome that privilege, a movant `bears the burden of demonstrating that the balance of convenience among the parties and witnesses is strongly in favor of the forum to which transfer is sought.'" Id. (quoting Medicenters of Am., Inc. v. T & V Realty & Equip. Corp., 371 F.Supp. 1180, 1184 (E.D.Va.1974)); see Beam Laser Sys., Inc. v. Cox Commc'ns, Inc., 117 F.Supp.2d 515, 519 (E.D.Va.2000). Accordingly, the "[p]laintiff's choice of venue...