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Shwartz v. Khodr

United States District Court, N.D. Mississippi, Greenville Division

January 19, 2017

MICHAEL L. SHWARTZ, PLAINTIFF
v.
HICHAM KHODR, DEFENDANT

          ORDER

          Michael P. Mills, JUDGE

         This cause comes before the court on the motion of defendant Hicham Khodr, pursuant to Fed.R.Civ.P. 12(b)(2), to dismiss this action for lack of personal jurisdiction over him, or to dismiss and/or transfer pursuant to Fed.R.Civ.P. 12(b)(3) and/or 28 U.S.C. § 1404(a). With regard to the venue issue, defendant raises two alternative arguments, the first being that the Northern District of Mississippi represents an improper venue within the meaning of 28 U.S.C. § 1391 and the second being that, even assuming that this district represents a proper venue under § 1391, this case should still be transferred to the Eastern District of Louisiana in the interests of justice and for the convenience of the parties, based on § 1404(a). As discussed below, this court concludes that plaintiff has managed to defeat defendant's personal jurisdiction and improper venue arguments but that the unique procedural circumstances of this case make the argument for transferring it to the Eastern District of Louisiana under § 1404(a) a compelling one. This court will therefore grant defendant's motion to transfer this action to the Eastern District of Louisiana but deny his motions to dismiss.

         In the court's view, there is one basic fact which allows plaintiff to defeat the personal jurisdiction and § 1391 venue arguments raised by defendant in this case. That fact is that, as defendant concedes, he and his attorneys flew by chartered jet to Grenada, Mississippi on June 23, 2006 and July 11, 2006 to negotiate the sale of the Camellia Grill restaurant located on Carrolton Avenue in New Orleans. These Mississippi negotiations bore fruit, and, on August 9 and 11, 2006, an Act of Cash Sale and Bill of Sale were executed by Shwartz and his companies, Camellia Grill and CGH as Seller, and by Khodr on behalf of his companies, RANO, LLC and Uptown Grill, LLC (“Uptown Grill”) as Purchasers, for $490, 000 and $10, 000 respectively.

         The 2006 Bill of Sale, in particular the issue of whether it encompassed only the New Orleans restaurant or whether it also included associated trademarks, has given rise to no less than six separate lawsuits between plaintiff and defendant in state and federal courts in Louisiana. These Louisiana actions were all filed before this one, and this raises obvious concerns about whether this case is barred by res judicata. It is well established that res judicata “bars the litigation of claims that either have been litigated or should have been litigated or should have been raised in an earlier suit.” Comer v. Murphy Oil USA, Inc., 839 F.Supp.2d 849, 855 (S.D.Miss. 2012), aff'd, 718 F.3d 460 (5th Cir. 2013) (citing In re Southmark Corp., 163 F.3d 925, 934 (5th Cir. 1999)).

         While the res judicata issues in this case strike this court as being serious ones, they do not negate the fact that defendant's act of flying to Grenada with counsel to negotiate an important business transaction is one which leaves a rather large footprint in this district, for personal jurisdiction and venue purposes. Moreover, granting all reasonable inferences to the allegations of plaintiff's amended complaint, it does appear to raise a plausible connection between the trips to Grenada and the claims asserted therein. In his brief, plaintiff notes that:

Shwartz advances five district causes of action all stemming from Khodr's fraudulent behavior during contract negotiations in Mississippi, which is [sic] clearly detailed in the First Amended Complaint: (1) common law fraud, (2) unjust enrichment, (3) conversion, (4) fraudulent misrepresentation, and (5) negligent misrepresentation. The common law fraud claim, fraudulent misrepresentation, and negligent misrepresentation claims are all clearly based upon Khodr's fraudulent behavior and misrepresentations to Shwartz during the contract negotiations in Mississippi.

[Plaintiff's brief at 18-19].

         Thus, plaintiff alleges that defendant committed fraud and other actionable torts during the Mississippi negotiations, most notably by including language in the 2006 Bill of Sale referring to “trademarks.” Plaintiff alleges that this language represented a legal trojan horse of sorts which would later allow defendant to argue that he purchased not only (as plaintiff contends) the New Orleans restaurant, but also trademark rights to the restaurant. Plaintiff claims that the trademark rights were intended to be dealt with solely by a separate License Agreement signed in New Orleans on August 27, 2006, and he further argues that the reference to “trademarks” in the Bill of Sale was merely a “placeholder.” [Amended complaint at 14]. While defendant disputes many of the allegations in plaintiff's complaint, this court is required to show deference to them, in ruling upon the instant Rule 12(b)(2) and 12(b)(3) motions. Plaintiff provides a full and persuasive response to defendant's personal jurisdiction and improper venue arguments in his briefing, and these issues seem clear enough that this court will simply note its agreement that the Mississippi negotiations sufficed 1) to create specific personal jurisdiction over defendant under both constitutional principles and under Mississippi's long arm statute, and 2) to establish that “a substantial part of the events or omissions giving rise to the claim occurred” in Mississippi, within the meaning of § 1391.

         While the court thus concludes that defendant's motions to dismiss are not well taken, it believes, for the reasons discussed below, that he has a much more compelling argument for transfer based on § 1404(a). Moreover, unlike with the personal jurisdiction and improper venue issues, plaintiff has failed to make a persuasive case as to why this case should not be transferred to the Eastern District of Louisiana in the “interests of justice and the convenience of the parties.” A § 1404(a) motion to transfer venue requires a two-part inquiry: (1) whether the action to be transferred might have been brought in the transferee court; and (2) whether considering the convenience of the parties and witnesses and the interest of justice, a transfer is appropriate. See In re Volkswagen AG (Volkswagen I), 371 F.3d 201, 203 (5th Cir. 2004). “Section 1404(a) is intended to place discretion in the district court to adjudicate motions for transfer according to an individualized, case-by-case consideration of convenience and fairness.” Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988).

         Under federal law, venue is proper: (1) in a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located; (2) in a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or (3) if there is no district in which an action may otherwise be brought, any judicial district in which any defendant is subject to the court's personal jurisdiction. See 28 U.S.C. § 1391(b). Where a party is able to establish this threshold requirement-that the transferee court lies within a district where the action “might have been brought”-the court must then turn to step two, which requires the court to determine whether the movant has shown the convenience of the parties and witnesses and the interest of justice counsel in favor of transfer. See Volkswagen I, 371 F.3d at 203.

         The Fifth Circuit has held that the determination of convenience relies on a number of public and private interest factors. See Action Indus., Inc. v. U.S. Fid. & Guar. Co., 358 F.3d 337, 340 (5th Cir. 2004). The private interest factors include, but are not limited to, (1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all other practical problems that make trial of a case easy, expeditious, and inexpensive. See In re Volkswagen of Am., Inc. (Volkswagen II), 545 F.3d 304, 315 (5th Cir. 2008) (en banc). The public interest factors include, but are not limited to, (1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflict of laws or in the application of foreign law. Id. Importantly, these factors are neither exhaustive nor exclusive, and no single factor is dispositive. Id. (emphasis added). Moreover, when considering a motion to transfer pursuant to § 1404(a), the plaintiff's choice of forum is generally “highly esteemed” and entitled to great weight, particularly when his choice of forum is his own home state, as in the present case. Paul v. International Precious Metals Corp., 613 F.Supp. 174, 178-79 (S.D.Miss. 1985).

         In considering these § 1404(a) factors here, this court initially notes that it is undisputed that Louisiana might have served as a proper venue for this action. That leaves as the determinative § 1404(a) factor whether “considering the convenience of the parties and witnesses and the interest of justice, a transfer is appropriate.” As discussed below, this court concludes that the “interest of justice” strongly supports a transfer of this action to the Eastern District of Louisiana, but it will first address the “convenience of the parties” factors, even though some of the non-exclusive factors stated above are arguably less relevant to this case than the interest of justice considerations. In so stating, this court notes that this case presently finds itself in a very unusual procedural posture, in which, before the litigation of the actual claims in this case may proceed, plaintiff will have to surmount what appear to be very serious arguments that his claims should have been raised in prior Louisiana litigation and are thus barred by res judicata. Moreover, as discussed below, it seems clear that the Eastern District of Louisiana is in a far better position than this court to accurately determine, at a minimum of expense to the parties, whether the claims asserted in this case are ones which should have been raised in prior litigation.

         It appears to this court that some of the specific venue factors quoted above, instructive though they may be, were not designed to deal with a case which finds itself in the unusual procedural posture present here. Having said that, the court does find that many of the private interest factors, such as the relative ease of access to sources of proof, the cost of attendance for willing witnesses and “all other practical problems that make trial of a case easy, expeditious, and inexpensive” do favor transferring this action to the Eastern District of Louisiana. In so stating, this court notes that both parties' arguments regarding the merits of the res judicata issue and a related motion for Rule 11 sanctions filed by defendant largely involve their own descriptions and characterizations of the litigation which has already occurred in Louisiana. These descriptions could not be more diametrically opposed. For example, in his Rule 11 motion, defendant argues that:

Now, Shwartz has filed a new, duplicative, and harassing suit asking this Court to adjudicate issues already adjudicated by the Fifth Circuit and currently pending before the Eastern District of Louisiana. This suit is wholly inappropriate and rises to the level of sanctionable activity, ...

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