Orb Factory, Ltd. v. Design Science Toys, Ltd.

• Decision Date: 19 May 1998
• Docket Number: No. 96 Civ. 9469(RWS).,96 Civ. 9469(RWS).
• Parties: The ORB FACTORY, LTD., a Canadian corporation, Plaintiff, v. DESIGN SCIENCE TOYS, LTD., a New York corporation; and DOES 1-20, inclusive, Defendants, v. NOVA DESIGN GROUP, LTD., a New York corporation; Regis McCann, an individual; and DOES 1-20, inclusive, Counterclaim Defendants.
• Court: U.S. District Court — Southern District of New York

6 F.Supp.2d 203

The ORB FACTORY, LTD., a Canadian corporation, Plaintiff, v. DESIGN SCIENCE TOYS, LTD., a New York corporation; and DOES 1-20, inclusive, Defendants, v. NOVA DESIGN GROUP, LTD., a New York corporation; Regis McCann, an individual; and DOES 1-20, inclusive, Counterclaim Defendants.

No. 96 Civ. 9469(RWS).

United States District Court, S.D. New York.

May 19, 1998.

COPYRIGHT MATERIAL OMITTED

DuBoff & Ross, Portland, OR (Leonard D. DuBoff, of counsel), Salon, Marrow & Dyckman, New York City (Michael H. DuBoff, of counsel), for Plaintiffs.

John James Dalton, Rhinebeck, NY, for Defendants.

Regis A. McCann, West Hurley, NY, pro se.

OPINION

SWEET, District Judge.

Defendant Design Science Toys, Ltd. ("DST") has moved to transfer this action to the United States District Court for the Northern District of New York ("Northern District") pursuant to 28 U.S.C. § 1406(a) on the grounds that venue is improperly laid in the United States District Court for the Southern District of New York ("Southern District"), or, alternatively, pursuant to 28 U.S.C. § 1404(a) on the grounds that the transfer is required for the convenience of the parties and in the interests of justice.

For the reasons set forth below, the motion is denied.

The Parties

The Orb Factory, Ltd. ("Orb") is a Canadian corporation that engages in the business of designing, producing, marketing, and selling toys, jewelry, and other products fashioned from manipulable metal wire, such as stainless steel. Orb's principal place of business is in Halifax, Nova Scotia.

DST is a New York corporation that manufactures toys. Its postal address is Tivoli, New York, which is in the Southern District, but, according to DST, its place of business is physically located in Columbia County, New York, which is in the Northern District.

Relevant Third Parties

Counterclaim defendant Nova Design Group, Ltd. ("Nova") is a subsidiary of Orb. It is located in Ulster County, New York.

Counterclaim defendant Regis A. McCann ("McCann"), a natural person, is a key employee of Nova and lives in the Northern District. McCann previously worked for DST. McCann is the plaintiff in the civil action Regis A. McCann v. Design Science Toys, Ltd. et al, Civ.A. No. 96 CV 1224, in the Northern District.

Prior Proceedings

Orb filed its initial complaint in the Southern District on December 17, 1996. Its First Amended Complaint ("Complaint") was filed on February 2, 1997. DST filed an Answer on February 5, 1997, and two Amended Answers, one on February 26, 1997, and the other on June 30, 1997.

DST filed its notice of motion to transfer this action to the Northern District on February 20, 1998. The motion was heard and deemed fully submitted on April 1, 1998.

The Facts

Orb's Complaint filed in the Southern District of New York contains the following claims against DST: trademark infringement, unfair competition and false designation of origin, common law unfair competition, dilution in violation of CLS Gen.Bus. Law § 368-d, breach of fiduciary duty, and account stated.

Two of the toys/jewelry that Orb designs, markets, and sells are the Celestial Orb and the Celeste Pendant. Orb is the owner of the trademarks Celestial Orb and Celeste Pendant and has used the trademarks in interstate commerce at least as early as 1992.

The crux of Orb's Complaint alleges that DST began using the mark Heaven's Orb, in the Southern District and in interstate commerce, in connection with the design, production, marketing, and sale of a product identical or substantially similar to Orb's product that bears the trademark Celestial Orb. Likewise, Orb states that DST's use of the mark Heaven's Pendant is in connection with a product identical or substantially similar to Orb's product bearing the trademark Celeste Pendant. Orb contends that such use was without the consent or authorization of Orb.

DST's counterclaims include breach of contract, unjust enrichment and quantum meruit damages, breach of fiduciary duty, unfair competition, trade dress infringement, defamation, dilution in violation of Gen.Bus.Law § 368-d, and conversion.

This is not the only litigation with which DST is currently involved. On or about May 15, 1996, DST commenced an action in New York State Supreme Court, Dutchess County, against McCann, alleging unfair competition, theft and use of DST's confidential information and trade secrets, interference with business relations and contracts, wrongful disclosure of proprietary trade secrets and information, conversion of royalties, breach of contract, violation of fiduciary duty, conspiracy to unfairly compete, and conversion. McCann's attempt to remove the state action to federal court was denied on the grounds that no exclusively federal cause of action existed. The state action was stayed pending the Northern District case discussed below. Ultimately, after DST's motion to dismiss in the Northern District case was denied, the state action was dismissed without prejudice.

Before the instant action was filed, while the state action was pending, McCann commenced a civil action against DST in the Northern District alleging patent infringement, inducement to infringe, interference with prospective employment, interference with business relationships, breach of fiduciary duty, and request for declaratory judgment that McCann did not violate the rights of DST as alleged in DST's state court complaint. DST's counterclaims are similar to those it made in the action at issue. McCann makes no claim regarding Orb or Nova.

Discussion

I. Motion to Transfer Venue Under § 1406(a) Is Denied

Where a suit is filed in federal court in a district in which venue is improper, and a timely and sufficient objection to the defect is raised, a change of venue may be made under 28 U.S.C. § 1406(a) which provides:

The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.

28 U.S.C. § 1406(a). A transfer under § 1406(a) is based not on the inconvenience of the transferor forum but on the impropriety of that forum. If a party's objection to venue, however, is not timely and sufficient, or if the party has waived the right to object to venue, transfer under 1406(a) is improper and unwarranted. See Manley v. Engram, 755 F.2d 1463, 1467 (11th Cir.1985). This is so because "[u]nlike the matter of jurisdiction venue was (and remains) a privilege personal to each [party], which can be waived, and is waived ... unless timely objection is interposed." Concession Consultants, Inc. v. Mirisch, 355 F.2d 369, 371 n. 1 (2d Cir.1966); see Manley, 755 F.2d at 1468 (noting that venue "is merely a privilege of the parties, and defects of venue may be waived by the parties").

Assuming arquendo that venue was improperly laid in the Southern District in the first instance, Rule 12(h)(1)(B) of the Federal Rules of Civil Procedure provides that the defense of improper venue is waived if it is neither raised in a pre-answer motion nor included in a responsive pleading or an amendment thereto permitted by Rule 15(a) to be made as a matter of course. DST did not file a Rule 12 motion before answering, nor did it raise the defense of improper venue in its verified answer. In fact, DST alleged proper venue in the Southern District both in its Answer and Amended Answer and Counterclaim.¹ Additionally, both of these pleadings state, ten times to be exact, that DST's principal place of business is in the Southern District.

DST claims that this was a mistake. DST's counsel affirms that he assumed the listed postal address for DST, Tivoli, New York (which is in the Southern District), coincided with DST's actual place of business. According to DST, it is in fact physically located in Columbia County (which is in the Northern District). This mistake, asserts DST's counsel, "was predicated upon the rural, upstate New York practicalities concerning post office addresses which do not correlate to actual, physical locations." (Affirmation of John James Dalton, Esq., Supp. Def.'s Mot. to Transfer at 6.)

DST further contends, but has presented no proof, that Orb's choice of venue in the Southern District was a deliberate attempt to double DST's legal fees and defense costs, as DST is also defending an action in the Northern District. DST's claim that it discovered the mistake and/or conspiracy only recently, over one full year after DST waived any objection to venue, is unpersuasive. Over the course of that year, numerous court appearances have been made in this district and progress has been made in the case.

Given that DST failed to interpose a timely objection to venue in that it did not file a motion under Rule 12(b) or raise the defense of improper venue in its verified answer, any objection to venue has been waived. See Mirisch, 355 F.2d at 371; Leif Hoegh & Co. v. Alpha Motor Ways, Inc., 534 F.Supp. 624, 625-26 (S.D.N.Y.1982).

Once objections to venue are waived, any defect in venue is cured, and the benefits of a § 1406(a) transfer for lack of venue are no longer available. Still, DST may move, as it did here, for transfer under § 1404(a) which applies to claims for which venue is proper in this district.² See Saferstein v. Paul, Mardinly, Durham, James, Flandreau & Rodger, P.C., 927 F.Supp. 731, 737 (S.D.N.Y.1996). As discussed below, however, § 1404(a) also fails to warrant transfer of this action to the Northern District of New York.

II. Motion to Transfer Venue Under § 1404(a) Is Denied

A. Legal Standard Under § 1404(a)

Section 1404(a) provides that:

For 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.

28 U.S.C. 1404(a). This section is a statutory recognition of the common law doctrine...