Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-07840/USCOURTS-cand-3_06-cv-07840-2/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 28:1332 Diversity-Stockholders Suits

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A third defendant, Vizions, Inc. (“Vizions”), has not responded to the complaint, and

is in default.

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MICHAEL D. GASTON, et al.,

Plaintiffs,

 v.

MATTHEW H. GOTTESMAN, et al.,

Defendants /

No. C-06-7840 MMC

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANTS’

MOTION TO TRANSFER OR DISMISS;

VACATING HEARING

Before the Court is the “Motion to Transfer for Convenience (28 U.S.C. § 1404(a));

or in the Alternative, to Dismiss for Improper Venue, or, in the Alternative, to Transfer for

Improper Venue (28 U.S.C. § 1406(a)),” filed February 8, 2007 by defendants Matthew H.

Gottesman and Michael J. Gottesman (hereinafter “individual defendants”).1 Plaintiffs

Michael D. Gaston and Douglas Gaston have filed opposition, to which the individual

defendants have replied. Having considered the papers filed in support of and in

opposition to the motion, the Court deems the matter appropriate for decision on the

papers, VACATES the hearing scheduled for April 13, 2007, and rules as follows.

BACKGROUND

In their complaint, plaintiffs, who are both citizens of California, allege they are

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shareholders in and directors of Vizions, and that the individual defendants, who are both

citizens of Arizona, are also shareholders in and directors of Vizions. (See Compl. ¶ 27.) 

Plaintiffs also allege that defendant Vizions is incorporated in Delaware and has its

principal place of business in Arizona. (See id.)

Plaintiffs allege the individual defendants made false representations to plaintiffs and

breached their fiduciary duties to Vizions by engaging in such acts as recommending that

Vizions hire individuals who have been unable to complete projects on a timely basis (see

Compl. ¶¶ 5-6), refusing to sign “corrective documents” concerning Vizions’s “corporate

documents,” (see Compl. ¶ 10), accepting “investors’ money without the approval of the

Board of Directors,” (see Compl. ¶ 16), refusing to “us[e] programming expertise outside of

Arizona” to alleviate a “programming bottleneck,” (see Compl. ¶ 20), failing to advise

potential investors of “adverse” conditions of Vizions’s business, (see Compl. ¶ 21), and

“squandering of prospective investors’ funds,’ (see Compl. ¶ 46).

DISCUSSION

By the instant motion, the individual defendants seek to dismiss or to transfer the

action to the District of Arizona, based on improper venue, or to transfer to the District of

Arizona for convenience.

A. Dismissal or Transfer for Improper Venue

The complaint alleges “[v]enue is proper in [the Northern District of California]

pursuant to 28 U.S.C. § 1391(b) because the actual and threatened injury and damage at

issue are taking place and have taken place in the [ ] Northern District of California.” (See

Compl. ¶ 28.) Section 1391(b) pertains, however, to actions “wherein jurisdiction is not

founded solely on diversity of citizenship,” see 28 U.S.C. § 1391(b); the Court’s jurisdiction

over the instant action is founded solely on diversity of citizenship, (see Compl. ¶ 27). 

Moreover, the subsection of § 1391 applicable to diversity actions, specifically, § 1391(a),

does not provide that venue is proper in any district where “injury and damage” occurs, but

rather, e.g., where “a substantial part of the events or omissions giving rise to the claim

occurred,” see 28 U.S.C. § 1391(a) (emphasis added). The individual defendants do not

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The Court need not resolve herein the issue of whether, if the Northern District were

a state, Vizions has sufficient contacts therewith for purposes of establishing venue. As

noted, Vizions is in default and, as such, has waived the issue of the sufficiency of venue. 

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challenge the sufficiency of the pleadings, however. Rather, the individual defendants

contend, venue as to the claims alleged against them is lacking because the corporate

defendant, Vizions, is not subject to personal jurisdiction in this District. See 28 U.S.C.

§ 1391(c) (providing proper venue for action against corporation is district where, if district

were separate state, corporation would be subject to personal jurisdiction).

The specific ground asserted by the individual defendants is not persuasive. 

Assuming, arguendo, Vizions is not subject to personal jurisdiction in this District,2

 the

result would be a dismissal of the claims against Vizions for improper venue, not the claims

against the individual defendants, who, as noted, have not challenged the theory on which

venue with respect to the individual defendants is alleged. See, e.g., PI, Inc. v. Quality

Products, Inc., 907 F. Supp. 752, 755, 765 (S.D. N.Y. 1995) (considering arguments made

by each defendant in support of motions to dismiss for lack of proper venue; dismissing

some, but not all, defendants and claims for lack of proper venue).

Accordingly, the individual defendants have not shown they are entitled to dismissal

or transfer of the instant complaint on the ground of lack of proper venue.

B. Transfer for Convenience

"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." 28 U.S.C. § 1404(a). 

Here, the action “might have been brought” in the District of Arizona, because each

defendant is alleged to be a citizen of Arizona. See 28 U.S.C. § 1391(a) (providing

diversity action properly venued in “district where any defendant resides, if all defendants

reside in the same State”).

With respect to the issue of convenience, the Court finds, for the reasons stated by

the individual defendants, that the District of Arizona is a more convenient forum. In

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The only exception appears to be a Vizions bank account with a balance of $75.08,

on deposit with a California branch of Wells Fargo. (See Michael Gaston Decl. Ex. N.)

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particular, as the individual defendants point out, (1) the challenged acts of corporate

management by the individual defendants occurred in Arizona, the principal place of

Vizions’s business, (2) Sam Trejo and Sam Douglas, the consultants whose hiring plaintiffs

challenge herein, reside and performed work for Vizions in Arizona, (3) Ronald McCormick,

Sandra McCormick, Susan Peediyakkal, and David Lopez, investors whom plaintiffs allege

were provided with insufficient information by the individual defendants, all reside in

Arizona, (4) Vizions’s corporate records are located in Arizona,3

 (5) Vizions is authorized to

conduct business in Arizona and is not authorized to conduct business in California, and (6)

plaintiffs’ choice of forum is entitled to little deference, given that the majority, if not

overwhelming majority, of the operative facts of asserted mismanagement and defrauding

of Vizions and its shareholders occurred in Arizona. See Jones v. GNC Franchising, Inc.,

211 F. 3d 495, 498 (9th Cir.) (setting forth factors to be considered on motion to transfer for

convenience, including plaintiffs’ choice of forum, situs of operative facts from which

plaintiffs’ claims arise, and location of witnesses and other sources of proof), cert. denied,

531 U.S. 928 (2000); Pacific Car and Foundry Co. v. Pence, 403 F. 2d 949, 954 (9th Cir.

1968) (holding where operative facts from which plaintiff’s claim arise do not occur in

chosen forum, plaintiff’s choice not accorded usual degree of deference).

Plaintiff argues the above factors are outweighed by the fact that plaintiffs reside in

California, and that Vizions has outside counsel, specifically, Thomas French and Torrie

Nute, whose office is located in this District. The Court disagrees. First, with respect to

plaintiffs’ convenience, given the parties agree that plaintiffs and the individual defendants

will be witnesses, and each such party having asserted he and/or his business interests will

be inconvenienced by having to travel to Arizona or this District for court proceedings, this

factor is neutral. Second, although plaintiffs represent that Vizions’s outside counsel

currently is in possession of funds that may or may not belong to Vizions, and are awaiting

instructions from the Board of Directors as to the disposition of such funds, plaintiffs fail to

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state the nature of any testimony such counsel would offer, as well as the relevance of

such testimony to the claims alleged herein, and such relevance is not apparent from the

complaint.

Accordingly, the Court will transfer plaintiffs’ claims against the individual defendants

to the District of Arizona, pursuant to § 1404(a).

Further, because § 1404(a) “only authorizes transfer of an entire action, not

individual claims,” see Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F. 2d 1509,

1518 (10th Cir. 1991), the Court also will transfer to the District of Arizona plaintiffs’ claims

against Vizions. Although, pursuant to Rule 21 of the Federal Rules of Civil Procedure, a

district may retain “a portion of a pending action” by severing such portion prior to

effectuating a transfer, see id. at 1519, here, a severance of plaintiffs’ claims against

Vizions is not warranted because the effect thereof may well be piecemeal litigation and

inconsistent results, see, e.g. Old Colony Ventures I, Inc. v. SMWNPF Holdings, INc., 918

F. Supp. 343, 350 (D. Kan. 1996) (holding factors to consider in determining whether

severance is proper are “convenience of the parties, avoiding prejudice, promoting

expedition and economy” and “separability of law and logic”) (citing cases).

CONCLUSION

For the reasons stated, defendants’ motion to dismiss or transfer for improper venue

or to transfer for convenience is hereby GRANTED in part and DENIED in part as follows:

1. Plaintiff’s complaint is hereby TRANSFERRED to the District of Arizona, pursuant

to 28 U.S.C. § 1404(a); and

2. In all other respects, the motion is hereby DENIED.

IT IS SO ORDERED.

Dated: April 13, 2007 

MAXINE M. CHESNEY

United States District Judge

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