United States District Court, Southern District of New York
August 23, 1990
NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., PLAINTIFF,
MARIO TURTUR, JR., DEFENDANT. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA., PLAINTIFF, V. CHRIS TURTUR AND STEPHEN P. TURTUR, D/B/A C & S JOINT VENTURE, DEFENDANTS.
The opinion of the court was delivered by: Stanton, District Judge.
National Union Fire Insurance Company of Pittsburgh, Pa.
("National Union"), an issuer of financial guarantee bonds,
sues to enforce indemnity agreements between itself and limited
partners in a tax shelter limited partnership, and to enforce
its rights as subrogee on the limited partners' promissory
notes which it honored on their behalf.
National Union had issued a bond which guaranteed, to the
limited partnership and to the bank which financed the limited
partnership, that the limited partners would make all of their
capital contributions represented by the promissory notes. When
the limited partners stopped making their required
contributions, National Union made them on their behalf. Now it
seeks reimbursement, under the indemnity agreements defendants
gave it at the time it guaranteed their payments, and as
subrogee on the notes on which they defaulted.
The defendant limited partners, Mario, Chris, and Stephen
Turtur move to transfer these actions to the United States
District Court for the Southern District of Texas under
28 U.S.C. § 1404(a). National Union moves to compel discovery.
The motion to transfer is granted. The motion to compel
discovery is denied without prejudice.
National Union, a Pennsylvania corporation, has its principal
place of business in New York City and does business in many
states, including Texas. The Turturs are residents of Texas.
In December 1982 the Turturs purchased limited partnership
interests in American National Associates 367 ("ANA"), a New
York limited partnership. ANA was one of several computer
equipment leasing limited partnerships organized by one Barry
Trupin. Rothschild Registry International Inc. ("Rothschild"),
an entity Trupin controlled, was ANA's general partner. The
purchase price for Mario Turtur's interest consisted of an
initial cash payment of $28,000 and promissory notes ("notes")
for $429,000. The purchase price for Chris and Stephen Turtur's
interest consisted of an initial cash payment of $9,600 and
notes for $143,000.
The notes were assigned to La Salle National Bank (the "Bank")
in return for loans of working capital which the Bank made to
ANA. To induce the Bank to make the loans and accept assignment
of the notes, the Turturs obtained National Union's guarantee
of payment of their notes.
In return, the Turturs executed indemnity agreements in which
they agreed to reimburse National Union for any payments it
made on their behalf. The indemnity agreements contain
permissive forum selection clauses:
Any action or proceeding of any kind against the Undersigned
arising out of or by reason of this Indemnification . . .
Agreement may be brought in any state
or federal court of competent jurisdiction in any County in the
State of New York, in addition to any other court in which such
action might properly be brought.
The Turturs made the first two payments on their notes, but
failed to make the third payments which were due on March 15,
1985. National Union made those payments to the Bank on the
Turtur's behalf. In October 1985 National Union commenced
actions against Mario Turtur, No. 85 Civ. 8024, and Chris and
Stephen Turtur, No. 85 Civ. 8025 (the "'85 actions"), to
recover those amounts.
The Turturs did not make the fourth and fifth payments on their
notes, which were due on March 15, 1986 and 1987. National
Union again paid the Bank on their behalf. In May 1989 National
Union commenced actions against Mario Turtur, No. 89 Civ. 3427,
and Chris and Stephen Turtur, No. 89 Civ. 3428 (the "'89
actions"), to recover the amount it paid the Bank.
Both the '85 and '89 actions (collectively referred to as the
"New York actions") seek reimbursement under the terms of the
indemnity agreements, and by subrogation to the Bank's rights
under the Turturs' notes.
In 1987 National Union moved for summary judgment in the '85
actions. The Turturs, in opposition, argued that the private
placement memorandum ("PPM") they had received in connection
with their ANA investment, and an accountant's report and legal
opinion included with the PPM, misrepresented the tax
advantages and other economic benefits that they would realize
from their investment, and that National Union was aware of
those misrepresentations.*fn1 This court granted summary
judgment on National Union's claim for reimbursement under the
indemnity agreement, and denied summary judgment on its claim
for reimbursement as subrogee on the notes. [1987 Transfer
Binder] Fed.Sec.L.Rep. (CCH) ¶ 93,765, 1988 WL 48695 (S.D.
N YMay 6, 1988), rearg. denied, [Current] Fed.Sec.L.Rep.
(CCH) ¶ 93,979, 1988 WL 87297 (S.D.N.Y. Aug. 10, 1988). The
Turturs appealed. The Court of Appeals reversed the grant of
summary judgment on National Union's claim for reimbursement
under the indemnity agreement, and affirmed the denial of
summary judgment on its claim for reimbursement as subrogee on
the notes. 892 F.2d 199 (2d Cir. 1989). The Court of Appeals
remanded the cases to this court for further proceedings. Id.
While National Union's summary judgment motion was pending
before this court, the Turturs commenced an action in a Texas
state court (the "Texas action") against National Union, ANA,
Trupin, Rothschild, the accounting firm that prepared the
report included with the PPM (Cornick, Garber & Sandler
("Cornick")), the law firm that prepared the legal opinion
included with the PPM (Stein, Bliablias & McGuire), and others,
seeking rescission of their investments and damages. Turtur v.
Rothschild Registry International, Inc. et al., No. 87-60477
(Harris County Dist.Ct., filed Dec. 29, 1987). As in the New
York actions, the Turturs allege that the PPM contained
misrepresentations about the tax advantages and other economic
benefits that they would realize from their investment in ANA.
Cornick removed the case to the United States District Court
for the Southern District of Texas, on the basis that the
citizenship of the parties was diverse. See 28 U.S.C. § 1441(a).
Cornick then agreed to remand the case to the Texas
state court. Accordingly, United States Magistrate Karen Brown
remanded the case. When National Union objected to the remand,
Magistrate Brown vacated it. The Turturs then moved to set
aside the Magistrate's vacatur of the remand. That motion is
The Turturs now move to transfer the New York actions to the
Southern District of Texas. National Union moves to compel
28 U.S.C. § 1404(a) provides: "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."
The threshold question is whether the action could have been
brought in the transferee forum in the first place. Shutte v.
Armco Steel Corp., 431 F.2d 22 (3d Cir. 1970), cert. denied,
401 U.S. 910, 91 S.Ct. 871, 27 L.Ed.2d 808 (1971). The Turturs
are Texas residents. National Union sues for over
$10,000.*fn2 Thus, since citizenship is diverse, there is
federal subject matter jurisdiction, 28 U.S.C. § 1332, and
venue in the Southern District of Texas where the Turturs
reside would be proper under 28 U.S.C. § 1393(a).
The indemnity agreements did not establish New York as the
exclusive forum for litigation, but rather as a permissible
forum, leaving the action subject to transfer. Credit Alliance
Corp. v. Crook, 567 F. Supp. 1462, 1464-65 (S.D.N.Y. 1983);
Coface v. Optique Du Monde, Ltd., 521 F. Supp. 500, 507
As movants, the Turturs bear the burden of establishing the
propriety of transferring these cases. Factors Etc., Inc. v.
Pro Arts, Inc., 579 F.2d 215, 218 (2d Cir. 1978), cert.
denied, 440 U.S. 908, 99 S.Ct. 1215, 59 L.Ed.2d 455 (1979).
The pertinent factors to be considered in determining whether
transfer is proper include
(1) the convenience of the parties; (2) the convenience of
material witnesses; (3) the availability of process to compel
the presence of unwilling witnesses; (4) the cost of obtaining
willing witnesses; (5) the relative access to sources of proof;
(6) where the events at issue took place; (7) the practical
problems indicating where the case can be tried more
expeditiously and inexpensively; and (8) the interests of
justice in general.
Cain v. New York State Board of Elections, 630 F. Supp. 221,
226 (E.D.N.Y. 1986); see also Schneider v. Sears, 265 F. Supp. 257,
263 (S.D.N.Y. 1967).
The Turturs state:
The basis for this motion to transfer venue is that, because of
the overlap of the issues raised in these cases and an action
commenced by the Turturs that is pending in the Southern
District of Texas, all the evidence here will necessarily
duplicate the evidence in the Texas action, so that, absent
transfer, all the witnesses and parties will be required to
testify at two separate depositions about the same events
involving the same parties and to provide document discovery on
two separate occasions. If, on the other hand, this action is
transferred to Texas, which is the only jurisdiction in which
all the parties are present, discovery can be consolidated or,
at the minimum, coordinated, so as to avoid duplicative
Defendants' Reply Memorandum of Law, pp. 1-2.
The presence of related litigation in the transferee forum
weighs heavily in favor of transfer, since litigation of
related claims in the same tribunal results in "more efficient
conduct of pretrial discovery, saves witnesses time and money
in both trial and pretrial proceedings, and avoids duplicative
litigation and inconsistent results, thereby eliminating
unnecessary expense to the parties while at the same time
serving the public interest." Nieves v. American Airlines,
700 F. Supp. 769, 773 (S.D.N.Y. 1988), citing Levitt v. State
of Maryland Deposit Insurance Fund Corp., 643 F. Supp. 1485
(E.D.N.Y. 1986); see also Berg v. First American Bankshares,
Inc., 576 F. Supp. 1239, 1243 (S.D.N.Y. 1983); Bolton v.
Tesoro Petroleum Corp., 549 F. Supp. 1312, 1317 (E.D.Pa. 1982).
Accordingly, "as a general proposition, cases should be
transferred to the district where related actions are pending."
Securities and Exchange Commission v.
First National Finance Corp., 392 F. Supp. 239, 241 (N.D.Ill.
National Union argues that these actions should not be
transferred because (1) the forum selection clauses in the
indemnification agreements should be enforced, (2) its
underwriting and claims departments files relative to this
litigation are in New York, Affidavit of Irving V. Goldstein,
sworn to May 18, 1990, ¶ 9, (3) most of the witnesses it would
call are located in New York, id. at ¶¶ 7-8, and (4) many of
the events at issue occurred in New York.
Those arguments have some force. However, the overwhelming
reality is that absent transfer of these actions, there will be
two litigations in different fora involving the same parties
and issues. In both the New York and Texas actions, the Turturs
allege that the PPM fraudulently misrepresented the tax
advantages and other economic benefits that they would realize
from their investment in ANA, and that National Union was aware
of those misrepresentations. The parties who allegedly
committed the fraud are defendants in the Texas action.
Separate litigations in different fora would result in
duplicative discovery, pre-trial and trial proceedings,
witnesses testifying twice about the same issues, and a waste
of the parties' and the courts' resources. Moreover, they may
lead to inconsistent results. On the other hand, transfer of
the New York actions would allow coordinated discovery,
pre-trial and trial proceedings, and for resolution of National
Union's and the Turturs' claims in one forum, where those who
allegedly committed the fraud are present.
Accordingly, transfer of the New York actions to the Southern
District of Texas is warranted.
Defendants' motion to transfer these actions to the United
States District Court for the Southern District of Texas is
granted. Plaintiff's motion to compel discovery is denied