The opinion of the court was delivered by: CEDARBAUM
This is an action arising out of the purchase of certain Indiana corporations. Plaintiffs assert claims under RICO in addition to common law claims of fraud and breach of contract. Defendants move, pursuant to 28 U.S.C. § 1404(a) and 28 U.S.C. § 1406(a), to dismiss this federal question action for improper venue, or, in the alternative, to transfer it to the Northern District of Indiana. All of the defendants reside in Indiana. The issue addressed by both sides is whether 28 U.S.C. § 1391(b)(1) limits venue to the federal district in which any defendant resides in a case in which all of the defendants reside in the same state. For the reasons that follow, defendants' motion is granted to transfer the action to the Northern District of Indiana.
28 U.S.C. § 1391(b), the general venue statute for federal question cases, provides:
A civil action wherein jurisdiction is not founded solely on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought (emphasis added).
The purpose of statutorily specified venue is to protect defendants against the risk that a plaintiff will select an unfair or inconvenient place of trial. Leroy v. Great Western United Corp., 443 U.S. 173, 183-84, 61 L. Ed. 2d 464, 99 S. Ct. 2710 (1979). Accordingly, venue statutes should be construed narrowly, so as to prevent a plaintiff from simply selecting the place of trial which bests suits his or her convenience. See Leroy, 443 U.S. at 184.
Prior to 1966, under § 1391(b), venue was proper in federal question cases only in a defendant's state of residence. Act of June 25, 1948, ch. 646, 62 Stat. 869, 935 (1948). This old law created venue gaps. For example, in a case involving multiple defendants residing in different districts, no venue lay in federal court. See Brunette Machine Works, Ltd. v. Cecum Indus., 406 U.S. 706, 710 n.8, 32 L. Ed. 2d 428, 92 S. Ct. 1936 (1972).
The 1966 amendment to 28 U.S.C. § 1391 closed this type of venue gap by authorizing venue "in the judicial district where all defendants reside, or in which the claim arose." Pub. L. No. 89-714, § 1, 80 Stat. 1111 (1966); see Brunette, 406 U.S. at 710 n.8 (purpose of the 1966 amendment was to close the venue gap). By a 1990 amendment, the language was changed from "in which the claim arose," to "in which a substantial part of the events or omissions giving rise to the claim occurred." Pub. L. No. 101-650, Tit. III, § 311, 104 Stat. 5089, 5114 (1990).
Courts in this Circuit have consistently held that the "claim arose" language inserted into the statute in 1966-- and since amended to "in which a substantial part of the events . . . occurred"-- was not aimed at expanding venue generally, but was intended only to fill the venue gap discussed above. Under this view, if all the defendants reside in the same state, there is no venue gap to fill, and the portions of the venue statute that filled the historical gap by adding alternative places for trial do not come into play. See Canaday, 598 F. Supp. at 1148; Welch Foods, Inc. v. Packer, 1994 U.S. Dist. LEXIS 16974, 1994 WL 665399 at *2 (W.D.N.Y. 1994); NOW Plastics, Inc. v. HPT Plastics, Inc., 1990 U.S. Dist. LEXIS 3942, 1990 WL 301521 at *2 (S.D.N.Y. 1990); Gaymar Indus. v. Grant, 1988 WL 129365 at *3 (W.D.N.Y. 1988); Southern Marine Research, Inc. v. Jetronic Indus., 590 F. Supp. 1192, 1194 (D.Conn. 1984).
Plaintiffs argue that Canaday was wrongly decided, and that in a case in which all the defendants reside in the same state, 28 U.S.C. § 1391(b)(1) and § 1391(b)(2) provide two independent and alternative bases for venue from which a plaintiff may choose in its absolute discretion.
Courts which have adopted the interpretation urged by plaintiffs
ignore the narrow purpose of the 1966 amendment as explained in Leroy. Leroy notes that the 1966 amendment was designed to close the venue gaps that existed under earlier versions of the statute and teaches that "so long as the plain language of the statue does not open the severe type of 'venue gap' that the amendment giving plaintiffs the right to proceed in the district where the claim arose was designed to close, there is no reason to read it more broadly on behalf of plaintiffs." Leroy, 443 U.S. at 184, 184 n.17.
The 1990 amendment to 28 U.S.C. § 1391 does not alter this analysis. In addition to broadening the "claim arose" language, the 1990 amendment added subsection three to 28 U.S.C. § 1391(b). The amended text makes this new subsection-- 28 U.S.C. § 1391(b)(3)-- subordinate to the first two subsections by furnishing a new ground for venue only "if there is no district in which the action may otherwise be brought." Pub. L. No. 101-650, Tit. III, § 311, 104 Stat. 5089, 5114 (1990). Contrary to plaintiffs' assertions, the fact that Congress made 28 U.S.C. § 1391(b)(3) subordinate to the ...