UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
July 28, 1978
TERUKUNI KAIUN KAISHA, LTD., Plaintiff,
C. R. RITTENBERRY AND ASSOCIATES, INC., Defendants
The opinion of the court was delivered by: CARTER
Defendant C.R. Rittenberry and Associates, Inc. ("Rittenberry") moves, under F.R.Civ.P. 12(b)(2) and (3) and 28 U.S.C. § 1406(a), for dismissal or transfer of the action to the Northern District of Oklahoma on the grounds that the court lacks personal jurisdiction over the defendant and that venue is improper in this district, or alternatively, under 28 U.S.C. § 1404(a), for transfer to Oklahoma on the grounds that the convenience of parties and witnesses and the interest of justice so require.
It is unnecessary to resolve defendant's contentions regarding jurisdiction and venue because, for the reasons discussed below, the action should be and is transferred under the discretionary provisions of 28 U.S.C. § 1404(a).
Terukuni Kaiun Kaisha, Ltd. ("Terukuni") is a Japanese corporation with an office in Tokyo. Its business is, or was,
the operation of oil tankers in world trade, and as part of that business, it chartered or subchartered its vessels on a time charter (long-term) basis to other entities. Rittenberry is an Oklahoma corporation with its office in Tulsa, Oklahoma. It is a middleman in the domestic and international oil markets, buying from producers and selling to refiners. It is also involved in the transportation of some of the oil it purchases, and when the transportation is across oceans, it charters tankers on a spot charter (short-term) basis. In support of its motion, Rittenberry submits the affidavit of Bruce Kahler, the president of K & E Transport Lines, Ltd. ("K & E"), discussed below, and a former and perhaps present employee of Rittenberry. Kahler asserts that in 1972 and 1973 it was his responsibility to secure spot charters for Rittenberry. In 1973, according to Kahler, he became convinced that the market rates for spot charters were going to increase, which would make it profitable to secure tankers on a long-term basis and recharter them short-term at a higher rate. In order to take advantage of this prospect, a new corporate entity, K & E, was established in May, 1973. K & E is a Liberian corporation headquartered in the same offices as Rittenberry in Tulsa.
On June 14, 1973, pursuant to this plan, K & E chartered the tanker Paloma Del Mar from plaintiff for a three year period. But in the fall of that year, as a consequence of the Arab oil embargo, the bottom fell out of the spot charter market. Assertedly as a result, in November, 1974, K & E breached its contract with Terukuni and returned the Paloma Del Mar to plaintiff. Kahler also claims that at that time, K & E had become insolvent due to heavy losses and ceased to do business altogether.
Pursuant to the charter party, Terukuni instituted arbitration proceedings against K & E in New York, and on September 28, 1976, the arbitrators awarded Terukuni $12,137,546.31. By order dated February 28, 1977, Judge Cannella of this court confirmed the award and directed judgment for Terukuni against K & E for the sum of $12,430,842.64 (the amount of the arbitration award plus interest).
On February 3, 1978, according to plaintiff, K & E filed a petition in bankruptcy in the Northern District of Oklahoma. Plaintiff, thus stuck with a massive judgment in its favor against an insolvent organization, instituted the present action on March 10, 1978.
Terukuni's complaint alleges in essence that K & E is a sham corporation, without a true identity of its own, established by Rittenberry so that it could carry on its business of spot chartering tankers through an underfunded shell, thereby isolating Rittenberry from any of the risks of its new enterprise. The primary thrust of the complaint is that Rittenberry is responsible for the judgment against K & E, presumably on the theory that it is appropriate to pierce the corporate veil between the two corporations under the circumstances in this case.
Plaintiff demands judgment against Rittenberry for the same amount as the judgment against K & E granted by Judge Cannella.
The Motion to Transfer
"The burden of persuasion regarding the appropriateness of a discretionary transfer lies with the movant." Star Lines, Ltd. v. Puerto Rico Maritime Shipping Authority, 442 F. Supp. 1201, 1207 (S.D.N.Y. 1978) (Carter, J.).
In this case, defendant has met that burden.
In terms of the interests of the parties themselves, it is obvious that it would be far more convenient to litigate this matter in Oklahoma than here. As noted, plaintiff is a foreign corporation, and to the extent that any of its employees or records will play a part in the trial of this action, it will not be significantly more difficult for plaintiff to transport these employees or records to Tulsa, where the District Court for the Northern District of Oklahoma sits, than to New York.
On the other hand, Rittenberry is an Oklahoma corporation with its principal and perhaps only office in Tulsa. Further, there is no indication in the record that its employees travel extensively in the course of performing defendant's business. Litigating this suit in New York would be an obvious inconvenience to Rittenberry.
Consideration of the witnesses who will be called and the documents that will be put into evidence also dictates that the action should be transferred. This suit is an attempt to impose upon Rittenberry a liability incurred by its at least nominally distinct subsidiary, K & E. There is no issue in this case concerning the formation per se of the underlying contract between Terukuni and K & E, nor about the contract's performance, nor about its breach, nor about the damages resulting to Terukuni from that breach. The issue is whether the relationship between Rittenberry and K & E is such that it is appropriate, under the applicable standards, that Rittenberry be held responsible for the obligations nominally undertaken by K & E. This action will thus focus almost exclusively on the business dealings and corporate structures of the two entities, and the interrelationship between them. The vast majority of the evidence bearing on this issue is located in Tulsa. Both corporations are headquartered there. All their records are there; indeed, Kahler asserts that all of K & E's records are in the possession of the trustee in bankruptcy in the proceeding in Tulsa. None of these corporations' employees, who could testify about the realities of the day-to-day interrelationship between the companies, are known to be in New York, while many reside in Tulsa. In addition, Rittenberry points out that its auditors and the bank that both it and K & E use are in Tulsa. Many of these potential witnesses are beyond the subpoena power of this court, but would be subject to the jurisdiction of the court in Tulsa -- an important factor in the determination of a transfer motion. See, e.g., Commercial Solvents Corp. v. Liberty Mutual Insurance Co., 371 F. Supp. 247, 250 (S.D.N.Y. 1974) (Stewart, J.); Glickenhaus v. Lytton Financial Corp., 205 F. Supp. 102, 105-06 (D. Del. 1962). And whether the compulsion of a court is necessary to secure the testimony of these witnesses, it is nonetheless clear that trial of this action in New York would generate far more inconvenience than trial in Tulsa, for it is highly unlikely that the issue in this case could be determined without consideration of most if not all these sources of evidence.
The only evidence located in New York that bears on the issue of the case is the testimony and records of Joseph Conigliaro, an employee of Charles R. Weber Co. ("Weber"). Weber, it appears from the papers, is a New York charter broker firm which acts as an intermediary between lessors and lessees of vessels, or perhaps as an "agent" of one of the parties in securing a charter through contact with a different broker representing the other party. Both Rittenberry and K & E used the offices of Conigliaro for much if not all of their chartering activity. Conigliaro has testified extensively in a supplementary proceeding relating to the enforcement of Terukuni's judgment against K & E, discussed above, and in Nippon Yusen Kaisha, Ltd. v. C.R. Rittenberry & Associates, Inc., No. 75 Civ. 936-IH (C.D. Cal., filed March 17, 1975), an action which Terukuni alleges was brought by another judgment creditor of K & E. Plaintiff argues that Conigliaro's testimony demonstrates the true nature of the Rittenberry-K & E relationship and shows K & E to be the sham corporation that plaintiff claims it to be.
There is no doubt that Conigliaro's testimony would be highly relevant to this case and that plaintiff intends to rely heavily upon it. But however critical the testimony may be, the convenience of this one witness simply does not outweigh the fact that all other potential sources of testimonial and documentary proof are to be found in or near Tulsa.
The trial of this action would be both more convenient and less costly if it were had in Oklahoma. Terukuni does rightly point out that Conigliaro could not be compelled to give live testimony in Tulsa.
The desirability of live testimony is not to be underestimated. Nonetheless, the difficulty in this case appears to be more theoretical than real, for Conigliaro is apparently willing to testify voluntarily outside New York, as the deposition he gave in Nippon Yusen Kaisha, Ltd. v. C.R. Rittenberry & Associates, Inc., supra, was taken in Los Angeles, California. See Affidavit of Raymond Connell in opposition to defendant's motion, Ex. C. In view of this circumstance, the fact that some witnesses will be beyond the subpoena power of the court wherever the trial may be held, see note 9 supra, and the fact that Conigliaro's testimony could, if necessary, be secured by deposition in New York, consideration of the convenience and availability of witnesses and documents, on balance, favors transfer to Tulsa.
One other circumstance indicates the propriety of transfer. There is a substantial question whether C.R. Rittenberry is subject to the jurisdiction of this court.
Terukuni attempts to predicate jurisdiction on several theories. First, plaintiff argues that Rittenberry has consented to suit in New York in light of the fact that its subsidiary, K & E, consented to the entry in New York of the judgment that this suit is based upon. Second, Rittenberry is said to be "doing business" in New York so that it is subject to suit here on any cause of action, N.Y.C.P.L.R. § 301 (McKinney), because it used Weber, the charter broker in New York, to secure most of its tanker charters. Lastly, it is urged that this suit "arises from" a Rittenberry "transaction of business" here, N.Y.C.P.L.R. § 302(a)(1) (McKinney), on the ground that the underlying Terukuni-K & E charter was negotiated through the offices of Weber and that Rittenberry is responsible for the acts of the K & E "shell".
There is a serious question about the theoretical soundness of each of these jurisdictional arguments.
Moreover, even if these arguments are conceptually sound, significant discovery and/or a hearing would be required before any of them could be accepted.
Thus, if the action is not transferred, it will be necessary for the parties and the court to expend substantial efforts on a preliminary issue that would be absent from an action in Oklahoma. In addition, since jurisdiction in New York is problematic, these efforts may well turn out to be wasted ones, as the result could be that the action must be dismissed or transferred anyway. Prosecution of this action in Oklahoma sooner rather than later will avoid this risk of squandered energies. See Clayton v. Swift & Co., 132 F. Supp. 154 (E.D. Va. 1955). See also Phillips v. Baker, 121 F.2d 752, 756 (9th Cir.), cert. denied, 314 U.S. 688, 86 L. Ed. 551, 62 S. Ct. 301 (1941). Under these circumstances, transfer, which would obviate the jurisdictional difficulty, would serve the interest of justice.
Because the interests of the parties, witnesses and justice would be advanced by suit in Oklahoma, it is appropriate to transfer this action there. There is no question but that the action "might have been brought" in the Northern District of Oklahoma, 28 U.S.C. § 1404(a), as venue is proper and jurisdiction exists there since Rittenberry is headquartered in Tulsa. Consequently, the action is transferred to the Northern District of Oklahoma.
IT IS SO ORDERED.
ROBERT L. CARTER U.S.D.J.