Sky Technologies Partners v. Midwest Research

• Decision Date: 21 December 2000
• Docket Number: No. 2:00-CV-719.,2:00-CV-719.
• Citation: 125 F.Supp.2d 286
• Parties: SKY TECHNOLOGY PARTNERS, LLC, Plaintiff, v. MIDWEST RESEARCH INSTITUTE, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

125 F.Supp.2d 286

SKY TECHNOLOGY PARTNERS, LLC, Plaintiff, v. MIDWEST RESEARCH INSTITUTE, et al., Defendants.

No. 2:00-CV-719.

United States District Court, S.D. Ohio, Eastern Division.

December 21, 2000.

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Richard Michael Clark, Columbus, OH, for plaintiff.

Paul Alan Wolfla, Squire, Sanders & Dempsey, Columbus, OH, Michael W. Rhodes, Lathrop & Gage, Kansas City, MO, for defendants.

OPINION AND ORDER

HOLSCHUH, District Judge.

This is a diversity action, removed to this Court, in which plaintiff asserts claims of breach of contract, promissory estoppel, fraud and conversion in connection with the alleged agreement that plaintiff would develop and operate a web site to auction specialty chemicals, for which plaintiff was to receive a 10 percent equity interest in the new company. This matter is now before the Court on defendants' motion to dismiss for improper venue under 28 U.S.C. § 1406(a) or, in the alternative, to transfer this action to the United States District Court for the Western District of Missouri pursuant to 28 U.S.C. § 1404(a), and for a more definite statement.

I. Background

Plaintiff, SKY Technology Partners, LLC ["SKY"], is a Kansas limited liability company with its principal place of business in Columbus, Ohio.¹ Complaint, ¶ 1. SKY is in the business of designing and marketing e-commerce systems. Id. Plaintiff names as defendants Midwest Research Institute ["Midwest"] and Chemfinet, Inc. ["Chemfinet".]² Midwest is a Missouri nonprofit company with its principal place of business in Kansas City, Missouri. Id., ¶ 2. Midwest is in the business of providing applied research and technical services to businesses and government, including services in the field of chemical sciences. Id. Chemfinet is a Delaware corporation with its principal place of business in Kansas City, Missouri. Id., ¶ 3. Chemfinet is in the business of operating an internet trading company to match buyers and sellers of fine and custom chemicals. Id.

Plaintiff alleges that, in August 1999, Midwest approached SKY regarding the possibility of forming a joint venture to create a new business enterprise. Id., ¶ 4. This enterprise, Chemfinet, would develop and operate a web site to auction specialty chemicals. Id., ¶ 5. According to plaintiff, Midwest would contribute the initial funding for expenses, expertise in chemical sciences and sponsorship of the new venture, while SKY would contribute its expertise in internet business strategy and web site development and design. Id. Plaintiff alleges that it expressed interest in forming such a venture with Midwest and submitted a proposal whereby SKY would design and develop a sophisticated interactive web site. Id., ¶ 6. The proposal provided that, under Phase I, SKY would begin the process of design and development of the web site, including development of the business logic, architecture and the screen shots of the site. Id., ¶ 7. The proposal provided for a flat fee of $30,000 for completion of Phase I, which plaintiff contends is a rate much lower than market value for similar services. Id., ¶ 8. Under plaintiff's proposal, plaintiff would then develop a prototype of the web site with a level of functionality suitable for presentation to potential investors. Id., ¶ 9. This Phase II would also include development, programming, and text content on the site. Id. SKY proposed to charge an hourly fee of $80.00 per hour in connection with Phase II of the venture, which plaintiff contends would merely cover its costs. Id. Plaintiff also proposed that it would take a 25 percent equity interest in the newly formed Chemfinet. Id.

According to plaintiff, Midwest agreed to the monetary terms of SKY's proposal but offered only a 10 percent equity interest in Chemfinet, which SKY accepted. Id., ¶ 10. Plaintiff contends that it not only began developing the site, but began bringing in possible sources of funding, making presentations in conjunction with Midwest, and introducing persons to Midwest who were ultimately hired as the first president and vice president of Chemfinet. Id., ¶¶ 10-11.

Plaintiff further alleges that Midwest and SKY had planned to unveil the web site at the INFORMEX Conference and Symposium, which was attended by representatives of companies and agencies in the chemical industry. Id., ¶ 12. Plaintiff contends that it completed the development and programming of the web site in time for the scheduled launch of the Chemfinet site in February 2000, despite last-minute changes by Midwest and Midwest's failure to deliver the text content of the site in a timely manner. Id., ¶ 11.

SKY noticed that no one accessed the site during the INFORMEX conference. Id., ¶ 13. After the conference, SKY learned that defendants had retained another company, MHE, to program the prototype web site that SKY had developed and designed. Id., ¶ 14. According to plaintiff, defendants used this alternate site for the launch of Chemfinet at the INFORMEX conference. Id., ¶ 15. Plaintiff contends that defendants decided to retain MHE to develop this alternative site in January 2000. Id., ¶ 16. Plaintiff also alleges that neither Midwest nor Chemfinet have paid SKY its fees, which total $202,191.00. Id., ¶ 17. Chemfinet has also failed to issue stock to SKY, and Midwest has failed to cause Chemfinet to issue such stock. Id. Lastly, the alternate web site, which plaintiff alleges was based on technology owned by, and stolen from, SKY, is currently published on the internet. Id., ¶ 18.

On May 16, 2000, plaintiff commenced this action in the Court of Common Pleas for Franklin County, Ohio. On June 26, 2000, defendants removed the action to this Court.

II. Venue

Defendants moves to dismiss this action for improper venue. Under the general venue statute, 28 U.S.C. § 1391(a)(2), a plaintiff may file a diversity action "in any forum where a substantial part of the events or omissions giving rise to the claim arose; this includes any forum with a substantial connection with the plaintiff's claim." First of Michigan Corp. v. Bramlet, 141 F.3d 260, 263 (6th Cir. 1998). According to plaintiff, much of the work on the site development occurred in Ohio. Tomaszewski Affidavit attached to Plaintiff's Memorandum contra Defendants' Motion to Dismiss or Transfer and for More Definite Statement, ¶ 10. Under these circumstances, and in light of the fact that the current venue statute was intended to broaden the former law governing venue in diversity cases, First of Michigan Corp., 141 F.3d at 263, this Court concludes that venue in this district is proper and that defendants' motion for dismissal for improper venue is without merit.

Defendants also ask, in the alternative, that the Court transfer venue under 28 U.S.C. § 1404(a) to the Western District of Missouri because that district is a more convenient forum. Even in cases where venue is proper, a court may entertain a motion to transfer if there exists a better forum for the resolution of the dispute between the parties. See Martin v. Stokes, 623 F.2d 469, 474 (6th Cir.1980) ("the application of § 1404(a) [is limited] to the transfer of actions commenced in a district court where both personal jurisdiction and venue are proper"); Great Lakes Bancorp v. Holbrock, No. 95-CV-72666-DT, 1996 WL 426439, at * 5 (E.D.Mich. Feb.29, 1996).

A. Standard for Transfer to a More Convenient Forum

Defendants contend that transfer of venue to the Western District of Missouri is appropriate pursuant to 28 U.S.C. § 1404(a), which 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." The threshold consideration under § 1404(a) is whether venue would be proper in the United States District Court for the Western District of Missouri. An action "might have been brought" in a transferee court if:

a. The court has jurisdiction over the subject matter of the action

b. Venue is proper there, and

c. The defendant is amenable to process issuing out of the transferee court.

Continental Grain Co. v. Barge F.B.L.-585, 364 U.S. 19, 80 S.Ct. 1470, 4 L.Ed.2d 1540 (1960); Neff Athletic Lettering Co. v. Walters, 524 F.Supp. 268, 271 (S.D.Ohio 1981). There is no dispute that plaintiff could have brought this action in the Western District of Missouri because both defendants reside in that district and because the business relationship between plaintiff and defendants originated there.

Once it is determined that the case "could have been brought" in the transferee court, the factors to be considered under § 1404(a) are similar to those weighed by courts in determining forum non conveniens motions; however, transfers pursuant to § 1404(a) may be granted "upon a lesser showing of inconvenience." Norwood v. Kirkpatrick, 349 U.S. 29, 32, 75 S.Ct. 544, 99 L.Ed. 789 (1955). The plaintiff's choice of forum is to be given considerable weight. See Hanning v. New England Mutual Life Ins. Co., 710 F.Supp. 213, 214 (S.D.Ohio 1989); Artisan Development, Div. of Kaiser Aetna v. Mountain States Development Corp., 402 F.Supp. 1312, 1314 (S.D.Ohio 1975).

The moving party has the burden of demonstrating that the case should be transferred to a different forum. Courts are to consider both the private interest of the litigants and the public's interest in the administration of justice. Gulf Oil v. Gilbert, 330 U.S. 501, 508-09, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). The litigants' interests include:

The 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 the premises, if view would be appropriate to the action; and all other practical problems that make trial of the case easy, expeditious, and inexpensive.

Id. at 508, 67 S.Ct. 839. Public interests include docket...