Wilshire Credit v. Barrett Capital Management

• Decision Date: 16 July 1997
• Docket Number: No. 96-CV-129H.,96-CV-129H.
• Citation: 976 F.Supp. 174
• Parties: WILSHIRE CREDIT CORPORATION, Plaintiff, v. BARRETT CAPITAL MANAGEMENT CORPORATION, Barrett Capital Leasing Corporation, Barrett Capital Corporation, and Barry P. Korn, Defendants.
• Court: U.S. District Court — Western District of New York

976 F.Supp. 174

WILSHIRE CREDIT CORPORATION, Plaintiff, v. BARRETT CAPITAL MANAGEMENT CORPORATION, Barrett Capital Leasing Corporation, Barrett Capital Corporation, and Barry P. Korn, Defendants.

No. 96-CV-129H.

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

July 16, 1997.

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Michael E. Ferdman, Hiscock & Barclay, LLP, Buffalo, NY, for Plaintiff.

Thomas F. Knab, Saperston & Day, P.C., Buffalo, NY, for Defendants.

DECISION AND ORDER

HECKMAN, United States Magistrate Judge.

The parties have consented to have the undersigned conduct any and all further proceedings in this case, including the entry of final judgment, in accordance with 28 U.S.C. § 636(c). Defendants have moved to dismiss the complaint pursuant to Rule 12(b) of the Federal Rules of Civil Procedure on the grounds that (1) the action is barred by the statute of limitations, and (2) plaintiff has chosen an improper venue. In the alternative, defendants move for an order transferring this case to the District Court for the Southern District of New York pursuant to 28 U.S.C. § 1404(a) in the interests of justice and for the convenience of the parties and witnesses. For the reasons that follow, defendants' motions to dismiss are denied and defendants' motion to transfer venue is granted.

BACKGROUND

On February 26, 1996, plaintiff commenced this action in the District Court for the Western District of New York. Plaintiff claims that this court has jurisdiction pursuant to 28 U.S.C. § 1331 based on diversity of citizenship. According to the complaint, plaintiff is an Oregon corporation with its principal place of business in Portland, Oregon. Defendants Barrett Capital Management Corporation (Barrett Management), Barrett Capital Leasing Corporation (Barrett Leasing), and Barrett Capital Corporation (Barrett Capital) are Delaware corporations, each with its principal place of business located in Mamaroneck, New York. Defendant Barry P. Korn resides in Westchester County, New York, and is or was the principal of Barrett Management, Barrett Leasing and Barrett Capital. Mamaroneck and Westchester County are located in the Southern District of New York.

Plaintiff is seeking the repayment of loans made to Barrett Leasing Corporation, which is now out of business. Plaintiff is asserting its claim against the other corporate defendants on the theory that they are alter egos of Barrett Leasing and of Barry P. Korn. The history of the loans at issue is as follows.

From April 30, 1986 through November 30, 1986, Barrett Leasing received a series of commercial loans from Empire Federal Savings Bank of America (Empire Bank) (Item 1, ¶¶ 28, 32, 35, 39, 42, 45 & 48; Item 7, Affidavit ¶ 9, Exs. A-G). The loans in dispute originated out of Empire Bank's White Plains office in the Southern District of New York (Id., Affidavit ¶¶ 12-13; Item 14, ¶ 6). During the course of his relationship with Empire Bank, Barry P. Korn engaged in communications with Empire representatives in both White Plains and Buffalo regarding the notes (Item 7, ¶ 13; Item 14, ¶¶ 5-17). The last payment Barrett Leasing made to Empire Bank was remitted on or about December 21, 1989 (Item 7, ¶ 14).

In September 1990, the Department of Treasury appointed the Resolution Trust Corporation (RTC) as receiver of Empire Bank (Item 13, p. 3). The RTC succeeded to "all rights, titles, powers and privileges" of Empire Bank and assumed control of Empire's assets, including the notes at issue, pursuant to the provisions of the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), 12 U.S.C. § 1821(d)(A) (Item 8, p. 1). Plaintiff claims that in 1994, it became the assignee of the RTC as to the notes from Barrett Leasing (Item 1, ¶¶ 2, 9). Plaintiff is now seeking the balance allegedly due on the notes, plus interest from January 1, 1990.

DISCUSSION

I. Motions to Dismiss or Transfer for Improper Venue.

A. Improper Venue -28 U.S.C. § 1391.

Defendants assert two alternative grounds in support of dismissal for improper venue. First, defendants contend that none of the defendants reside in the Western District of New York. In addition, defendants claim that none of the events giving rise to plaintiff's claim occurred in the Western District. The venue provision applicable to plaintiff's claims is 28 U.S.C. § 1391, which provides, in pertinent part, as follows:

(a) A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, [or] (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred....

....

(c) For purposes of venue under this chapter, a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced. In a State which has more than one judicial district and in which a defendant that is a corporation is subject to personal jurisdiction at the time an action is commenced, such corporation shall be deemed to reside in any district in that State within which its contacts would be sufficient to subject it to personal jurisdiction if that district were a separate State....

28 U.S.C. § 1391(a), (c).

Plaintiff contends that Barrett Leasing, a corporate defendant, was subject to the personal jurisdiction of the Western District of New York when this matter was commenced and therefore "resides" in this district for purposes of 28 U.S.C. §§ 1391(a)(1) and (c). In addition, plaintiff maintains that a substantial part of the events giving rise to its claims occurred in this district, and that venue is proper under § 1391(a)(2) as well.

Since New York State has more than one federal judicial district, this action is properly brought in the Western District only if Barrett Leasing's contacts would be sufficient to subject it to personal jurisdiction if the Western District were a separate state. In assessing the sufficiency of a corporate defendant's "contacts" under 28 U.S.C. § 1391 in a diversity case, federal law, rather than New York law, applies. Bicicletas Windsor v. Bicycle Corp. of America, 783 F.Supp. 781 (S.D.N.Y.1992) (citing PI, Inc. v. Valcour Imprinted Papers, Inc., 465 F.Supp. 1218, 1222 (S.D.N.Y.1979) ("`[w]hat constitutes "doing business" for purposes of venue is governed by federal law, even though, in a diversity case, it is state law which determines whether a corporation is "doing business" in the state for purposes of jurisdiction."') (citations omitted); Sterling Television Presentations, Inc. v. Shintron Co., 454 F.Supp. 183, 189 (S.D.N.Y.1978)).

Since any state may exercise personal jurisdiction over a defendant to the extent that the defendant's contacts with the state are sufficient to comport with due process requirements, it follows that a due process analysis should be employed in assessing a corporate defendant's contacts with one district in a multidistrict state. Smehlik v. Athletes and Artists, Inc., 861 F.Supp. 1162, 1169-70 (W.D.N.Y.1994). This, in turn, implicates the "minimum contacts" test established by International Shoe Company v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), which requires that a defendant's contacts with the forum be such that maintenance of the action does not offend traditional notions of fair play and substantial justice.

In other words, a defendant must have fair warning that a particular activity may subject him or her to the jurisdiction of a foreign forum. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1985). The fair warning requirement is satisfied if the defendant purposely directs activities at residents of that forum. Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958) (citations omitted). This analysis ensures that a defendant will not be haled into a jurisdiction solely as a result of "random," "fortuitous," or "attenuated" contacts. Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774, 104 S.Ct. 1473, 1478, 79 L.Ed.2d 790 (1984). Thus, the Due Process Clause "allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit." World-Wide Volkswagen Corp., supra, 444 U.S. at 297, 100 S.Ct. at 567.

Federal courts are divided on the issue of which party carries the burden of proof on a motion to dismiss for improper venue. Some conclude that venue involves a privilege that is personal to the defendant and that an objection to venue is properly treated as an affirmative defense. Under this analysis, the defendant has the burden of establishing that venue is improper. Other courts have placed the burden on the plaintiff, reasoning that it is plaintiff's obligation to institute the action in a permissible forum. See James Wm. Moore et al., Moore's Federal Practice ¶ 110.01[5][d] (3d ed.1997); Wright & Miller, Federal Practice and Procedure; Civil 2d § 1352. This distinction seems somewhat futile, however, given that a motion to dismiss may be granted either where the plaintiff fails to make a prima facie showing that venue is proper or where the defendant demonstrates a defect in venue.

In the present action, plaintiff asserts that Empire Bank made a total of eleven loans to Barrett Leasing, and that notes 5 through 11 are currently in dispute. Plaintiff has submitted the affidavit of Ernest A. Curto, who was employed at Empire Bank's corporate offices in Buffalo from 1985 through 1990, to support its claim that venue is proper in the Western District of New York (Item 14). The affidavit and supporting exhibits indicate that Ernest Curto of Empire's Buffalo office and Paul Cambreleng of the...