Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-02469/USCOURTS-cand-4_06-cv-02469-4/pdf.json

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

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

APPLIED ELASTOMERICS, INCORPORATED, a

California corporation,

Plaintiff,

v.

Z-MAN FISHING PRODUCTS, INCORPORATED,

a South Carolina corporation,

Defendant.

 /

No. C 06-2469 CW

ORDER DENYING

DEFENDANT'S

MOTION TO

TRANSFER VENUE

Defendant Z-Man Fishing Products, Incorporated moves for a

transfer of venue to the District of South Carolina. Plaintiff

Applied Elastomerics, Incorporated opposes this motion. The matter

was decided on the papers. Having considered all of the papers

filed by the parties, the Court denies Defendant's motion to

transfer venue.

BACKGROUND

As explained in the Court's prior order denying Defendant's

motion to dismiss for lack of personal jurisdiction, Plaintiff is a

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United States District Court

For the Northern District of California

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1

The factual background of this case is described in the

Court's August 10, 2006 order. 

2

California corporation, located in South San Francisco. It invents

and patents certain chemical compositions, composites and articles

made from these compositions and composites. Many of its patents

concern gel polymers. Plaintiff commercializes its technology by

licensing its patents, proprietary technology and know-how to third

parties and provides consulting services to third parties. 

Plaintiff's president, John Chen, handles all of the business

aspects of commercializing the technology he invents and develops. 

Mr. Chen's wife, Judy Chen, is Plaintiff's secretary and treasurer. 

The Chens are Plaintiff's only two employees.

Defendant is a South Carolina corporation. It develops and

manufactures fishing lure components and fishing lures for major

lure manufacturers. Since Defendant's inception, its operations

have been exclusively in South Carolina. Defendant has twenty-one

employees, none of whom reside in California.1

In July, 2001, Plaintiff and Defendant entered into a patent

and technology license agreement. Mr. Chen, on behalf of

Plaintiff, executed the agreement on July 18, 2001, in California. 

The agreement was then sent to South Carolina. Mike Shelton, on

behalf of Defendant, executed the agreement six days later.

Between June, 2001 and February, 2004, Defendant sent to

Plaintiff royalty payments owed under the license agreement. 

Plaintiff claimed that these payments were not sufficient to cover

the full amount of minimum royalties due pursuant to the license

agreement. On April 7, 2006, Plaintiff brought this suit for

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United States District Court

For the Northern District of California

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breach of contract and breach of the covenant of good faith and

fair dealing.

Defendant filed a motion to dismiss, contending that it does

not have sufficient minimum contacts with California to allow this

Court to exercise personal jurisdiction over it. On July 13, 2006,

the day before Plaintiff timely filed its opposition to the motion,

Defendant filed a complaint against Plaintiff in the District of

South Carolina. The complaint contains twenty-one claims,

including fraud, breach of the license agreement, misappropriation

of trade secrets, tortious interference with contractual relations,

conversion and numerous declaratory relief claims. 

On August 10, 2006, the Court denied Defendant's motion to

dismiss, finding that Defendant had the necessary minimum contacts

to provide this Court with specific jurisdiction over it.

Defendant then filed its answer and twelve counterclaims, all of

which are also alleged in the complaint Defendant filed in South

Carolina. Defendant's twelve causes of action are (1) breach of

the license agreement for failure to provide formulations covered

by Plaintiff's patent rights; (2) breach of the license agreement

for failure to maintain exclusivity; (3) breach of the covenant of

good faith and fair dealing; (4) fraud in the inducement;

(5) negligent misrepresentations; (6) fraud in the execution;

(7) declaratory judgment of no breach of contract by Defendant, due

to lack of consideration resulting from Plaintiff's failure to

provide Defendant with a formula within the scope of Plaintiff's

patent rights and/or that worked for its intended purpose;

(8) declaratory judgment of no breach of contract by Defendant, due

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For the Northern District of California

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to lack of consideration resulting from Plaintiff's failure to

maintain exclusivity; (9) declaratory judgment of no breach of

contract by Defendant because Defendant's performance under the

license agreement is excused by Plaintiff's prior material breach

of the license agreement in failing to provide Defendant with a

formula within Plaintiff's patent rights and/or that was

appropriate for its intended use; (10) declaratory judgment of no

breach of contract by Defendant because Defendant's performance

under the license agreement is excused by Plaintiff's prior

material breach of the license agreement in failing to maintain

exclusivity; (11) declaratory judgment of no breach of contract by

Defendant for failure to pay royalties because of non-infringement;

and (12) restitution for unjust enrichment.

Defendant now requests that the Court transfer this case to

the federal district court in South Carolina, where it can be

consolidated with the case Defendant brought there. After

Defendant filed its motion to transfer, Plaintiff filed a motion to

dismiss ten of Defendant's counterclaims, which is scheduled to be

heard on November 3, 2006. Plaintiff has also filed in the

District of South Carolina a motion to stay, dismiss or transfer

venue.

DISCUSSION

Title 28 U.S.C. § 1404(a) provides as follows: "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." Plaintiff concedes

that this action could have been brought in the District of South

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Carolina. Thus, the Court need only consider the convenience of

the parties and witnesses and the interest of justice.

The statute identifies three basic factors for district courts

to consider in determining whether a case should be transferred: 

(1) convenience of the parties; (2) convenience of the witnesses;

and (3) the interests of justice. 28 U.S.C. § 1404(a). The Ninth

Circuit provides other factors the court may consider: ease of

access to the evidence; familiarity of each forum with the

applicable law; feasability of consolidation of other claims; any

local interest in the controversy; relative court congestion and

time of trial in each forum; location where the relevant agreements

were negotiated and executed; the parties' contacts with forum;

difference in the costs of litigation in the two forums; and

availability of compulsory process to compel attendance of

unwilling non-party witnesses. Decker Coal Co. v. Commonwealth

Edison Co., 805 F.2d 834, 843 (9th Cir. 1986); Jones v. GNC

Franchising, Inc., 211 F.3d 495, 498-99 (9th Cir. 2000). Another

factor the Ninth Circuit has identified is the plaintiff's choice

of forum. See Securities Investor Protection Corp. v. Vigman, 764

F.2d 1309, 1317 (9th Cir. 1985). The Securities Investor court

held that, unless the balance of the § 1404(a) factors "is strongly

in favor of the defendants, the plaintiff's choice of forum should

rarely be disturbed." Id.; see also Decker Coal, 805 F.2d at 843

("defendant must make a strong showing . . . to warrant upsetting

the plaintiff's choice of forum"). 

The burden is on the defendant to show that the convenience of

parties and witnesses and the interest of justice require transfer

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United States District Court

For the Northern District of California

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to another district. See Commodity Futures Trading Comm'n v.

Savage, 611 F.2d 270, 279 (9th Cir. 1979). Defendant contends that

it has met its burden and thus this case should be transferred to

the District of South Carolina. Plaintiff disagrees. 

I. Plaintiff's Choice of Forum

As noted above, there is a strong presumption in favor of a

plaintiff's choice of forum. There are situations, however, where

a plaintiff's choice of forum is accorded little weight. See,

e.g., Pacific Car & Foundry Co. v. Pence, 403 F.2d 949, 954 (9th

Cir. 1968) ("If the operative facts have not occurred within the

forum of original selection and that forum has no particular

interest in the parties or the subject matter, the plaintiff's

choice is entitled only to minimal consideration."). Defendant

contends that Plaintiff's choice of forum is entitled to minimal

deference because the "center of gravity" of this case is in South

Carolina, not the Northern District of California.

Some courts in this district, and others, have applied the

"center of gravity" test. See, e.g., Teknekron Software Systems,

Inc. v. Cornell Univ., 1993 WL 215024, *7 (N.D. Cal. 1993) (finding

that because the action's center of gravity was in New York, where

the allegedly infringing products were designed and where almost

all the allegedly infringing activity occurred, the plaintiff's

choice of forum was only entitled to limited deference). The Ninth

Circuit, however, has not. Defendant's reliance on Pacific Car is

unavailing. Pacific Car provides that the plaintiff's choice of

forum is entitled to minimal consideration if the operative facts

did not occur within the plaintiff's chosen forum and if the chosen

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For the Northern District of California

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forum has no particular interest in the parties or the subject

matter. Here, as discussed in the Court's August 10, 2006 order,

the operative events occurred in this district as well as in South

Carolina. Plaintiff is a California corporation located in this

district. California has an interest in litigation concerning its

residents, especially in a situation, such as this case, where the

agreement at issue contains California choice-of-law and California

dispute resolution provisions.

Like Pacific Car, Williams v. Bowman, 157 F. Supp. 2d 1103

(N.D. Cal. 2001), another case Defendant cites in support of its

argument that Plaintiff's choice deserves little deference,

bolsters Plaintiff's position, not Defendant's. The court in

Williams stated that deference to a plaintiff's chosen forum is

substantially reduced "where the plaintiff does not reside in the

venue or where the forum lacks a significant connection to the

activities alleged in the complaint." Id. at 1106. Here, as

discussed above, Plaintiff resides in the Northern District of

California, and this district has a significant connection to the

activities alleged both in Plaintiff's complaint and Defendant's

counterclaims. Indeed, all action, or inaction, by Plaintiff of

which Defendant complains occurred in this district. Thus, even

if, as Defendant contends, Plaintiff's complaint addresses only a

small portion of the total dispute between the parties, this

district maintains a significant connection based on the

allegations in Defendant's counterclaims. 

Therefore, the Court concludes that Plaintiff's choice of

forum merits substantial deference.

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United States District Court

For the Northern District of California

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2As Defendant notes, Plaintiff brought this action against

Defendant, not InterTech Group or billionaire Jerry Zucker; thus,

the Court does not consider the financial standing of InterTech

Group or Mr. Zucker. See Everest Capital Ltd. v. Everest Funds

Management, LLC, 178 F. Supp. 2d 459, 468 (S.D.N.Y. 2002) (noting

that, in determining the parties' financial resources, the court

would not speculate as to the possible use of personal or thirdparty resources). 

8

II. Remaining Factors

Defendant contends that, even if the Court concludes that

Plaintiff's choice of forum is entitled to substantial weight, the

balance of the other factors strongly outweighs any weight given to

Plaintiff's choice of forum. 

A. Convenience of the parties 

It will be inconvenient for Defendant to litigate this matter

in this district. Defendant notes that it has experienced severe

financial difficulties. It provides the Court with its financial

information in terms of sales and profit for a number of years.2

Defendant has been trying to work its way out of a financial hole

that it claims resulted from its relationship with Plaintiff. It

states that it would disrupt its business if its management,

approximately one-third of its total work force, were forced at the

same time to be out of the office and in California. 

But it would also be inconvenient for Plaintiff to litigate

this matter in South Carolina. Plaintiff notes that it has one

employee, Mr. Chen, who runs its day-to day-affairs. Therefore,

while the temporary absence of a core group of Defendant's

employees would leave other employees to manage daily operations,

Mr. Chen's absence would leave only Mrs. Chen, who has no

significant responsibility for the day-to-day workings of the

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business. Plaintiff notes that, in both 2004 and 2005, it operated

at a net loss; it expects its annual income to be negative for 2006

as well. 

Although Plaintiff may be slightly less inconvenienced by

having to litigate this case in South Carolina than Defendant would

be by having to litigate it in California, Plaintiff would still be

inconvenienced, a fact Defendant does not deny. To transfer this

case to the District of South Carolina would simply be transferring

the inconvenience of one party to the other party. See STX, Inc.

v. Trik Stik, Inc., 708 F. Supp. 1551, 1556 (N.D. Cal. 1988) ("If

the gain to convenience to one party is offset by the added

inconvenience to the other, the courts have denied transfer of the

action."). Thus, this factor does not weigh in favor of transfer.

B. Convenience of the witness

The convenience of witnesses is often the most important

factor in deciding whether to transfer an action. Bunker v. Union

Pacific Railroad Co., 2006 WL 193856, *2 (N.D. Cal. 2006). The

parties identify twenty-five witnesses. Only two of those

witnesses reside in California: Mr. Chen and Dr. Marianna F. Asaro,

a scientist knowledgeable concerning the testing done on behalf of

Plaintiff on potentially infringing products in the fishing lure

field. The remaining witnesses are seven current employees of

Defendant located in South Carolina; seven third-party witnesses

located in South Carolina; and nine third-party witnesses located

outside of South Carolina in Oklahoma, Texas, Louisiana, Ohio,

Illinois, North Carolina, Tennessee and Georgia.

Plaintiff contends that litigating in South Carolina would be

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3

Plaintiff objects to the declarations, including Mr.

Shelton's, that were filed with Defendant's reply. It correctly

notes that new evidence should not be introduced on reply. 

Nonetheless, the Court has considered these declaration in denying

Defendant's motion to transfer.

10

burdensome for its key witness, Mr. Chen, for the reasons discussed

above and because Mr. Chen's doctor recommended that, to protect

his hearing, he should avoid high and low frequency sounds,

including those made by airplane engines. Mr. Chen also states

that he has been reluctant to fly since September 11, 2001. But,

as Defendant notes, he admits that in the last five years he has

made two trips that involved flying to his destination. Defendant

contends that it would be inconvenient for its key witness and

client representative, Mr. Shelton, to testify in California. Mr.

Shelton states that, due to a back condition, his doctor has

restricted him from sitting for longer than two hours at a time.3

These problems appear to be in equipoise. The Court, however,

discounts any inconvenience to the parties' other employees, whom

the parties can compel to testify. STX, 708 F. Supp. at 1556

(discounting inconvenience to party's witnesses when they are

employees who can be compelled to testify).

There is only one non-party witnesses in this district.

Plaintiff does not state whether Dr. Asaro would be willing to

testify in South Carolina. There are sixteen non-party witnesses

residing in South Carolina or another State close to South

Carolina. All of these witnesses may not testify at trial. 

Nonetheless, the majority of non-party witnesses reside in South

Carolina or a State close to South Carolina. 

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Thus, the Court finds that the convenience of witnesses weighs

in favor of transfer. 

C. Availability of compulsory process 

As noted above, there is only one non-party witness located in

this district, but there are seven non-party witnesses located in

South Carolina. Plaintiff argues that this factor still does not

weigh in favor of transfer because the third-party witnesses

probably would testify willingly. Two of those witnesses, however,

have stated that they would prefer to have no involvement with this

case and that they will not come to California to testify. For

example, Ms. Wauhop, Defendant's former president who had

interactions with Mr. Chen before she retired, states that she has

no intention of voluntarily testifying and that she would not

travel to California because, among other reasons, she is the sole

caregiver of her ninety-three old mother, whom she will not leave

for any extended period of time. If this case were transferred to

South Carolina, the court there could compel those two witnesses,

and the other five non-party witnesses, if necessary, by way of the

court's subpoena power. Another court in this district has noted

that "live testimony is preferable to depositions." Geo. F. Martin

Co. v. Royal Ins. Co. of Am., 2004 WL 1125048, *3 (N.D. Cal. 2004). 

And, like in Geo. F. Martin, "transfer of this action would allow

for live testimony of important witnesses." 

Thus, the Court finds that this factor too weighs in favor of

transfer.

D. Access to evidence

Physical and documentary evidence is located both in this

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4

Defendant relies on Woodward v. Seghers, 2006 WL 2130745

(N.D. Cal. 2006). Although not noted by Plaintiff, the order

states that it is not designated for publication and may not be

cited.

12

district and in District of South Carolina. As Defendant

acknowledges in its reply, this factor is neutral.

Thus, the Court finds that this factor does not weigh in favor

of transfer.

E. Familiarity of each forum with the applicable law

The license agreement provides that disputes arising out of or

related to the agreement shall be governed by California law,

unless the dispute concerns a patent. Any dispute concerning a

patent shall be determined by the law of the country in which the

patent was granted. 

Defendant argues that this factor does not weigh against

transfer because the District of South Carolina is equally capable

of adjudicating patent law issues and breach of contract issues

involving California law.4

 This factor, however, does not ask

whether a court is equally capable, rather it focuses on the

familiarity of each forum with the applicable law. Defendant does

not dispute that a court in the Northern District of California is

more familiar with California law. 

Thus, the Court finds that this factor weighs against

transfer.

F. Feasability of consolidation of other claims

At least one district court in the Ninth Circuit has noted,

"The feasibility of consolidation is a significant factor in

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deciding a transfer motion." Cambridge Filter Corp. v. Int'l

Filter Co., Inc., 548 F. Supp. 1308, 1312 (D. Nev. 1982); see also

A.J. Industries, Inc. v. U.S. Dist. Ct., 503 F.2d 384, 389 (9th

Cir. 1974). Defendant contends that, because this case can be

consolidated with the South Carolina case, this factor heavily

favors transfer. But, in its moving papers, it fails to note that

the South Carolina case could also be consolidated with this case. 

Furthermore, as Plaintiff points out, this action was filed more

than three months earlier than Defendant's action in South

Carolina. The Ninth Circuit instructs that the first-to-file rule

promotes efficiency and "'should not be disregarded lightly.'” 

Alltrade, Inc. v. Uniweld Products, Inc., 946 F.2d 622, 625 (9th

Cir. 1991) (quoting Church of Scientology v. United States Dep't of

the Army, 611 F.2d 738, 750 (9th Cir. 1979)); see also Manuel v.

Convergys Corp., 430 F.3d 1132, 1135 (11th Cir. 2005) ("Where two

actions involving overlapping issues and parties are pending in two

federal courts, there is a strong presumption across the federal

circuits that favors the forum of the first-filed suit under the

first-filed rule."). 

Thus, the Court finds that this factor weighs against

transfer.

G. Local interest in the controversy

Both California and South Carolina have an interest in this

action. As the Court held in its prior order, California has a

strong interest in seeing that its residents are provided an

effective means of redress when deprived of the benefits of their

contractual bargain. South Carolina has the same interest. This

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factor is neutral. See Royal Queentex Enterprises v. Sara Lee

Corp., 2000 WL 246599, *8 (N.D. Cal. 2000) (finding that when both

forums have a significant interest, this factor does not weigh in

favor of transfer).

Thus, the Court finds that this factor does not weigh in favor

of transfer.

H. Parties' contacts with forum

Both parties had contacts with both forums. Neither party's

contacts are substantially more extensive then the other party's. 

This factor is also neutral. The Court finds that this factor does

not weigh in favor of transfer.

I. Relative court congestion and time of trial in each forum

Defendant notes that, for the year ending on September 30,

2005, there were 396 pending actions per judge in the District of

South Carolina compared to 468 pending actions per judge in this

district. See Creason Decl., Ex. C. The median time from filing

to trial during that period was twenty-two months in the District

of South Carolina and twenty-eight months in this district. Id. 

Plaintiff does not dispute that this district is more

congested than the District of South Carolina or that, as a whole,

cases go to trial more quickly in the District of South Carolina

than in this district. Rather, Plaintiff points out that "these

kinds of considerations should play a role in venue shifting

analysis only if the backlogs in the two courts are so totally

disproportionate that it is obvious that time to trial would be

radically longer in the court initially selected by plaintiff." 

Linear Tech. Corp. v. Analog Devices, Inc., 1995 WL 225672, *4

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(N.D. Cal. 1995) (stating that the "plaintiff's choice of forum

should be displaced by a court's perception about speed of access

to trial in another jurisdiction only in the most extraordinary

circumstances"). 

Here, the backlogs are not totally disproportionate. Six

additional months' wait before going to trial is not radically

longer. Thus, the Court finds that this factor does not weigh in

favor of transfer.

J. Location where the agreement was negotiated and executed 

As noted above, Mr. Chen signed, on behalf of Plaintiff, the

license agreement in this district. The agreement was then sent to

South Carolina where it was signed, on behalf of Defendant, by Mr.

Shelton. The agreement was negotiated in California and South

Carolina. Thus, the Court finds that this factor does not weigh in

favor of transfer. 

K. Difference in the costs of litigation in the two forums

Defendant notes that litigation in this district would be more

expensive than litigation in the District of South Carolina due to

the cost of arranging for the attendance of willing witnesses. As

discussed above, only Dr. Asaro and Mr. Chen are located in this

district. But, as Plaintiff points out, the cost of witness travel

is likely to be a negligible expense compared with the expense of

legal fees. Nonetheless, the Court finds that this factor weighs

slightly in favor of transfer.

III. Balancing of Factors

Two factors weigh in favor of transfer; one factor weighs

slightly in favor of transfer. But the majority of the factors do

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5

Defendant's request for judicial notice (Docket No. 29),

however, is GRANTED.

16

not weigh in favor of transfer; indeed, two factors weigh against

transfer. Defendant fails to meet its burden of establishing that

the balance of inconveniences weighs heavily in favor of transfer

to the District of South Carolina. As noted above, Plaintiff's

choice of forum merits substantial deference. Because the balance

of the section 1404 factors does not weigh strongly in favor of

Defendants, Plaintiff's choice of forum will not be disturbed.

CONCLUSION

 For the foregoing reasons, Defendant's Motion to Transfer

Venue (Docket No. 28) is DENIED.5 

IT IS SO ORDERED.

Dated: 10/6/06 

CLAUDIA WILKEN

United States District Judge

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