Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-02727/USCOURTS-cand-3_05-cv-02727-4/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

HEALTHTRAC CORPORATION, a Nevada

Corporation

Plaintiff,

v.

CATERPILLAR INC., a Delaware Corporation

Defendants.

 /

No. C 05-2727 MHP

MEMORANDUM AND ORDER

Re: Defendant’s Motion to Transfer

Venue

On July 5, 2005, plaintiff Healthtrac Corp. filed a complaint and request for injunctive relief

in this court, alleging generally that defendant Caterpillar Inc. has made improper use of plaintiff’s

proprietary business information. Defendant timely answered plaintiff’s complaint. Now before the

court is defendant’s motion to transfer venue to the Central District of Illinois pursuant to 28 U.S.C.

section 1404(a). Having considered the parties’ submissions and arguments, the court enters the

following memorandum and order. 

BACKGROUND

This action arises from the claim, generally, that defendant’s “Healthy Balance” employee 

health management program is based on plaintiff’s proprietary health risk assessment tools. Because

the instant motion is directed solely at the issue of venue, the following summary of the background

to the parties’ dispute focuses on the jurisdictional facts and procedural history relevant to venue.

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I. Jurisditional Facts

Plaintiff Healthtrac Corp. is a Nevada corporation that provides population health

management services to organizations, including large corporations. Complaint ¶¶ 1, 7. Healthtrac

Corp. is the operating corporation of Healthtrac, Inc., a Canadian corporation. Id. at ¶ 1. Healthtrac

Corp.’s principal place of business is located in Redwood City, California, and was previously

located in Menlo Park, California. Sharpless Decl. ¶ 5. Plaintiff’s population health management

programs use statistical modeling to predict healthcare costs and assess health risks for target

populations. Complaint ¶ 14. Plaintiff states that these health management programs are proprietary

and confidential, and that they are shared with clients under contractual agreements containing

confidentiality clauses. Id. at ¶ 22. Plaintiff and defendant entered into two contracts—one in 1997

for a term of five years, and another in 2002—under which plaintiff customized and administered its

programs in connection with defendant’s “Healthy Balance” program. Sharpless Decl. ¶ 9–10. 

According to Edward W. Sharpless, Healthtrac Corp.’s president and chief executive officer, during

the entire time plaintiff and defendant had a business relationship, plaintiff administered and

continued to develop its programs from its California offices. Id. at ¶ 7. 

Defendant Caterpillar Inc. is a Delaware corporation headquartered in Peoria, Illinois. Taylor

Decl. ¶ 3. Caterpillar designs and manufactures heavy construction equipment. Def.’s Answer ¶ 7. 

In 1996, defendant initiated a health promotion program called the “Healthy Balance” program. 

Taylor Decl. ¶¶ 4, 8. Defendant began negotiations to use plaintiff’s programs as part of the

“Healthy Balance” program in 1996, and the relationship between the two companies lasted until

February 2004. Id. at ¶¶ 8, 10, 13. In 2001, defendant submitted two provisional patent applications

seeking patents in connection with the “Healthy Balance” program. Id. at ¶ 16. In 2003, defendant

conducted a request for proposal process and retained a Peoria, Illinois company, Advanced 

Information Services, Inc., to develop computer software for the “Healthy Balance” program. Id. at

¶ 20. Defendant states that the “Healthy Balance” program was developed at and is managed from

its headquarters in Peoria, Illinois. Grannis Decl. ¶ 4. 

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II. Procedural History

On July 5, 2005, plaintiff filed a complaint and request for injunctive relief in this court,

alleging generally that Caterpillar has made improper use of plaintiff’s proprietary business

information. The complaint states six claims: (1) breach of contract; (2) misappropriation of trade

secrets; (3) violation of the California Uniform Trade Secrets Act (“UTSA”) and the Illinois Trade

Secrets Act (“ITSA”); (4) breach/misuse of confidential relationship; (5) conversion; and (6) breach

of fiduciary duty. Defendant timely answered plaintiff’s complaint, and on August 24, 2005 moved

to transfer venue to the Central District of Illinois pursuant to 28 U.S.C. section 1404(a).1 Defendant

argues that plaintiff’s choice of forum should be given little deference and that venue should be

transferred for the convenience of parties and witnesses and in the interest of justice. Plaintiff

opposes defendant’s arguments and additionally asserts that defendant, a large employer in Peoria,

would be advantaged by a trial in the Central District of Illinois. 

LEGAL STANDARD

A motion to transfer venue to another federal district court may be brought under 28 U.S.C.

section 1404(a), which 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 first step of the inquiry under section 1404(a)

requires the court to determine whether venue would be appropriate in the transferee district. 28

U.S.C. § 1404(a); see also Goodyear Tire & Rubber Co. v. McDonnell Douglas Corp., 820 F. Supp.

503, 506 (C.D. Cal. 1992). If so, the court must then consider whether the criteria set forth in section

1404(a) favor adjudicating the plaintiff’s claims in that forum. See Goodyear, 820 F. Supp. at 506. 

The Ninth Circuit has characterized the section 1404(a) criteria as calling for an

“individualized, case-by-case consideration of convenience and fairness.” Jones v. GNC

Franchising, Inc., 211 F.3d 495, 498 (9th Cir. 2000), cert. denied, 531 U.S. 928 (2000) (quoting

Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988)). As part of this individualized

consideration, a district court may consider multiple factors, including (1) the location where the

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relevant agreements were negotiated and executed; (2) the state that is most familiar with the

governing law; (3) the plaintiff’s choice of forum; (4) the respective parties’ contacts with the forum;

(5) the contacts relating to the plaintiff’s cause of action in the chosen forum; (6) the differences in

the costs of litigation in the two forums; (7) the availability of compulsory process to compel

attendance of unwilling nonparty witnesses; (8) the ease of access to sources of proof; and, (9) any

relevant public policy of the forum state. Id. at 498–99 (citing Stewart, 487 U.S. at 29–31 and Lou v.

Belzberg, 834 F.2d 730, 739 (9th Cir. 1987), cert. denied, 485 U.S. 993 (1988)). Defendant bears the

burden of showing that the balance of the convenience and justice factors strongly weighs in its

favor. See Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir. 1986). “If

the balance . . . weighs strongly in favor of transfer, the [c]ourt may accord less deference to a

plaintiff’s chosen forum.” Flexible Funding, LLC v. Iron Mountain Info. Mgmt., Civil No. 05-02082

JSW, 2005 U.S. Dist. WL 2431241, at *2 (N.D. Cal. Sept. 30, 2005) (White, J.). 

DISCUSSION

Defendant seeks to transfer these proceedings to the Central District of Illinois, where

defendant maintains its corporate headquarters. There is no dispute that the Central District of

Illinois is an appropriate venue for this action. See 28 U.S.C. § 1391(c) (defining a corporate

defendant’s residence for venue purposes as “any judicial district in which it is subject to personal

jurisdiction at the time the action is commenced”). Thus, the sole question is whether “the

convenience of the parties and witnesses” and “the interest of justice” strongly favor litigation of this

action in Illinois rather than in California. See 28 U.S.C. § 1404(a). Defendant argues that

plaintiff’s choice of forum should be given little deference because the action finds its “center of

gravity” in Illinois, sources of proof are more easily accessed in Illinois, the convenience of

witnesses favors litigation in Illinois, and the availability of compulsory process favors transfer. 

Defendant also argues that the Central District of Illinois is more likely to be familiar with the law at

issue, has a superior interest in resolving plaintiff’s claims, and is in a superior position to monitor

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any injunctive relief imposed. Plaintiff opposes each of defendant’s arguments and also asserts that

defendant would have an advantage if the action were tried in the Central District of Illinois. 

There is a strong presumption in favor of plaintiff’s choice of forum, in particular when the

chosen forum is plaintiff’s place of residence. See Lou, 834 F.2d at 739; cf. Ririe v. Claritas Corp.,

Civil No. 89-3731 MHP, 1990 U.S. Dist. LEXIS 7718, at *7 (N.D. Cal. Apr. 27, 1990) (Patel, J.)

(holding that “where the forum chosen is neither plaintiff’s domicile nor defendant’s place of

business, nor is there a significant connection with the subject matter,” plaintiff’s choice of forum is

discounted). Plaintiff’s principal place of business is located within the Northern District of

California. Thus, a strong presumption weighs in favor of plaintiff’s choice of forum. Defendant

argues, however, that plaintiff’s choice of forum should be given less deference based on the balance

of the convenience and justice factors.

A. Location of the Events Giving Rise to the Claim

Defendant argues that the events giving rise to plaintiff’s claim and constituting the claim’s

“center of gravity”—namely the development of the “Healthy Balance” program—took place in the

Central District of Illinois, not in the Northern District of California. See Teknekron Software Sys.,

Inc. v. Cornell Univ., Civil No. 93-20122 SW, 1993 U.S. Dist. LEXIS 21337, at *20 (N.D. Cal. 

June 14, 1993) (Williams, J.). Specifically, defendant asserts that Peoria, Illinois is the location

where the contracts between the parties were negotiated and performed, where the alleged breaches

and misappropriations occurred, and where the relevant witnesses and documents are found. See

Def.’s Motion to Transfer at 9. Plaintiff counters that it negotiated and performed its contractual

obligations from its California offices, and that the majority of its witnesses and all of its documents

are found in California. See Sharpless Decl. ¶¶ 7–13. Although it does appear that any alleged

breaches or misappropriations by defendant took place in the Central District of Illinois, the record 

reflects a “significant connection with the subject matter” in the Northern District of California. Cf.

Ririe, Civil No. 89-3731 MHP, 1990 U.S. Dist. LEXIS 7718, at *7. The court finds that plaintiff’s

choice of forum should be given no less deference due to the fact that events giving rise to the claims

took place in the Central District of Illinois as well as in the Northern District of California. Nor is it 

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in the interest of justice to deny plaintiff’s choice of forum based solely on the location of

defendant’s alleged wrongdoing.

B. Location of Records

Defendant also asserts that it will be more convenient to litigate the instant action in Illinois

because Caterpillar’s “Healthy Balance” program records, computer systems, and patent applications

are located there. Plaintiff does not dispute that these sources of proof are in Illinois, but counters by

asserting that Healthtrac’s schematics, computer programs, documents relating to intellectual

property, and records of the contract and dealings with Caterpillar are located in Healthtrac’s

California offices. See Sharpless Decl. ¶ 11. Because it appears that significant sources of proof

may be located in both Illinois and California and “a transfer is not appropriate merely to shift the

inconvenience from one party to another,” the court finds that this factor does not weigh in favor of

transferring the action to the Central District of Illinois. Teknekron, Civil No. 93-20122 SW, 1993

U.S. Dist. LEXIS 21337, at *21. 

C. Convenience of the Parties

In analyzing the convenience of a forum, the court may also consider the parties’ relative

ability to afford the expenses of litigating in that forum. See Jumara v. State Farm Ins. Co., 55 F.3d

873, 879 (3d Cir. 1995). At the motion hearing held on October 17, 2005, plaintiff represented that

it is a very small company, having just five employees. Defendant, in contrast, is a large multinational corporation with thousands of employees. Plaintiff has indicated that a transfer to the

Central District of Illinois would lead to a burdensome increase in its fees and expenses attributable

to the cost of travel to and from that forum. This likely outweighs the proportional savings to

defendant. See Dwyer v. General Motors Corp., 853 F. Supp. 690, 694 (S.D.N.Y. 1994) (denying

transfer because defendant was better able to absorb added expense than plaintiff). In short, while

transfer may increase defendant’s convenience, it would come at a distinct cost to plaintiff. As

previously stated, transfer is not appropriate if it simply shifts the inconvenience in this manner. See

Teknekron, Civil No. 93-20122 SW, 1993 U.S. Dist. LEXIS 21337, at *21. 

 

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D. Convenience of Witnesses and Availability of Compulsory Process

Convenient access to witnesses is an important factor in considering whether to transfer

venue. See Ririe, Civil No. 89-3731 MHP, 1990 U.S. Dist. LEXIS 7718, at *10. The determination,

however, is not solely focused on the number of witnesses in each location, but rather on “the

materiality and importance of the anticipated witnesses’ testimony” and then on their convenience to

the forum. Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1335–36 (9th Cir. 1984), cert. denied, 471

U.S. 1066 (1985). Defendant asserts that most of the relevant witnesses—including fourteen current

Caterpillar employees, two former Caterpillar employees, and one employee of Advanced

Information Services, Inc.—live in or around the Central District of Illinois. Grannis Decl., Exh. A. 

Defendant has further provided brief individualized descriptions of each potential witness’s relevant

knowledge. Id. Plaintiff, on the other hand, asserts that nearly all the witnesses it intends to

call—including three current and nine former Healthtrac employees—live in the Northern District of

California. Staropoli Decl. ¶ 8. Plaintiff also states generally that each of its witnesses will testify to

one or more of a list of several matters related to this action. Pl.’s Opposition at 6. At the motion

hearing on October 18, 2005, plaintiff stated that although it does not anticipate that it will call all

nine of the former employees listed, it anticipates calling at least six former employees, several of

whom were allegedly laid off as a result of losing the Caterpillar account. These former employees

include Jason Scoggins, former chief operating officer; Helen Kan, former vice president for client

services; Laura Krohn, former client services account manager; and John Hoban, former vice

president of sales. The testimony of Healthtrac employees involved in the sale of services to

Caterpillar will likely be important in establishing Healthtrac’s case. 

Thus, although it appears that a trial in the Northern District of California may inconvenience

more witnesses than a trial in the Central District of Illinois, the majority of the inconvenienced

witnesses are defendant’s employees and could be compelled to testify. It appears that three nonparty witnesses reside in the Central District of Illinois, and that at least six non-party witnesses

reside in the Northern District of California. Therefore, although the overall convenience of the

witnesses may weigh in favor of defendant, the availability of compulsory process favors plaintiff. 

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E. Local Knowledge and Interest

Finally, defendant argues that the Central District of Illinois is likely to be more familiar with

the law at issue, have a superior interest in resolving plaintiff’s claims, and be in a superior position

to monitor any injunctive relief imposed. With respect to the applicable law, it appears that both

California and Illinois law may govern different parts of plaintiff’s claims. There are two contracts

at issue; the 1997 contract is governed by Illinois law, and the 2002 contract is governed by

California law. See Complaint Exh. 2 at 10; Complaint Exh. 4 at 13. Defendant argues that the

litigation will focus on the 1997 contract, because it lasted for five years and was in effect when the

patent applications were filed. Def’s Motion to Transfer at 11. Plaintiff meanwhile argues that the

2002 contract is of particular significance due to new intellectual property provisions. Complaint ¶

48. There are also two trade secrets acts at issue: California’s UTSA and Illinois’s ITSA. Thus, the

applicable law in this case comes from both states, and neither party has definitively demonstrated

that one forum would be better suited to interpret the law involved. Likewise, because plaintiff’s

principal place of business is in the Northern District of California and defendant’s principal place of

business is in the Central District of Illinois, both fora have an interest in resolving plaintiff’s claims. 

Furthermore, should the court impose any kind of injunctive relief, it has no reason to doubt that the

enjoined party—wherever it may have its principal place of business—would be fully cooperative. 

Thus, the court finds these factors to be neutral. 

In summary, because the majority of factors weigh in favor of retaining plaintiff’s choice of

forum, the court finds that defendant has not met its burden of demonstrating that the convenience of

parties and witnesses and the interest of justice strongly favor transfer of the instant action to the

Central District of Illinois. 28 U.S.C. § 1404(a). Specifically, it is appropriate to give deference to

plaintiff’s choice of forum here, where plaintiff’s place of residence is in the Northern District of

California, plaintiff is smaller, the nature of the allegations are that defendant’s conduct has nearly

destroyed plaintiff’s business, the number of non-employee witnesses favors plaintiff, and plaintiff is

less able to sustain the financial burden associated with travel.

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CONCLUSION

For the reasons stated above, the court DENIES defendant’s motion to transfer venue to the

United States District Court for the Central District of Illinois.

IT IS SO ORDERED.

Dated: 10/26/2005 

MARILYN HALL PATEL

District Judge

United States District Court

Northern District of California

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1. On September 26, 2005, plaintiff filed a reply and opposition to defendant's motion to transfer

venue. In support of the opposition, plaintiff filed declarations by C. Curtis Staropoli on September

27, 2005, and by Edward W. Sharpless on October 3, 2005. Defendant replied to plaintiff’s

opposition on October 3, 2005, and additionally filed objections to and moved to strike the

declarations as being untimely filed under Local Rule 7-3(a). The court declined to strike the

declarations from the record, and granted defendant leave to file a supplemental reply addressing any

issues raised by the declarations. Defendant filed a supplemental reply on October 13, 2005.

ENDNOTES

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