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APA EXCELSIOR III L.P. v. PREMIERE TECHNOLOGIES

May 19, 1999

APA EXCELSIOR III L.P., APA EXCELSIOR III OFFSHORE L.P., APA/FOSTIN PENNSYLVANIA VENTURE CAPITAL FUND, CIN VENTURE NOMINEES LIMITED, STUART A. EPSTEIN, AND DAVID EPSTEIN, PLAINTIFFS,
v.
PREMIERE TECHNOLOGIES, INC., BOLAND T. JONES, PATRICK G. JONES, GEORGE W. BAKER, SR., EDUARD J. MAYER, AND RAYMOND H. PIRTLE, JR., DEFENDANTS.



The opinion of the court was delivered by: Schwartz, District Judge.

OPINION AND ORDER

This action arises out of a merger between Premiere Technologies, Inc. ("Premiere") and Xpedite Systems, Inc. ("Xpedite"). Pursuant to a merger agreement, Premiere purchased all of the outstanding stock of Xpedite, and Xpedite shareholders received newly-issued Premiere stock in return. Plaintiffs, major shareholders in Xpedite at the time of the Premiere/Xpedite merger, initiated the present action against defendants after the Premiere stock that they had received drastically decreased in value. Plaintiffs allege violations of federal securities laws, negligent misrepresentation, and breach of contract.

Defendants move the Court to transfer this action to the Northern District of Georgia pursuant to 28 U.S.C. § 1404(a) or, in the alternative, to dismiss the action pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated herein, Defendants' motion to transfer the action is GRANTED. The Court declines to rule on Defendants' motion to dismiss.

FACTUAL BACKGROUND

Xpedite, prior to its merger with Premiere, was based in New Jersey and was a "leading provider of enhanced fax services . . . and discounted international fax services." (Plaintiffs' Memorandum of Law in Opposition to Motion to Transfer ("Pl. Mem.") at 2.) Premiere was a provider of integrated communications services. Id. Premiere became interested in a merger with Xpedite in 1997 and eventually offered to purchase Xpedite with newly-issued Premiere stock that would be, based on Premiere's value at that time, valued at $34 per share of Xpedite stock. Id. Prior to the execution of a merger agreement between Xpedite, Premiere, and Premiere's acquisition subsidiary (the "Merger Agreement"),*fn1 Defendants insisted that Plaintiffs sign certain stockholder agreements (the "Stockholder Agreements").*fn2 Plaintiffs signed the Stockholder Agreements on November 13, 1997, and the Merger Agreement was executed on the same date. (Pl.Mem. at 2.)

Section 10.14 of the Merger Agreement provides that the parties to the Agreement consent to jurisdiction in the Southern District of New York, and will not attempt to defeat or deny that jurisdiction by motion or otherwise. Merger Agreement § 10.14. The Stockholder Agreements contain a venue provision requiring the parties to submit to the jurisdiction of the Court of Chancery in the State of Delaware. (Stockholder Agreements § 6.11(b).) Neither party contends that this action should have proceeded in Delaware, and in the instant motion plaintiffs rely exclusively upon the venue provision of the Merger Agreement. (Pl.Mem. at 4.)

On or about January 28, 1998, Premiere filed a Form S-4 Registration Statement and Prospectus (the "January Prospectus") with the Securities and Exchange Commission for the issuance of Premiere Common stock to Xpedite shareholders pursuant to the terms of the Merger Agreement. The January Prospectus did not make any projections or predictions with respect to future financial performance. (Defendants' Memorandum of Law in Support of Motion to Dismiss ("Def.Mot.Dis.Mem.") at 5.) Xpedite's shareholders approved the Premiere merger on February 27, 1998. (Complaint ¶ 64.)

On June 10, 1998, Premiere announced that it was experiencing various difficulties with its business and was expecting to report an after-tax loss for the quarter ending June 30, 1998. (Complaint ¶ 69.) On that date, and in response to this announcement, Premiere's stock fell twenty-eight percent, from $14.4375 per share to $10.375 per share. (Complaint ¶ 71.) Within four months after the approval of the Merger Agreement, the total value of Premiere stock exchanged for plaintiffs' 30% of Xpedite decreased in value from $87 million to $27 million. (Plaintiff's Memorandum of Law in Opposition to Motion to Dismiss (Pl.Mot.Dis.Mem.) at 9.)

Plaintiffs subsequently filed the instant action, alleging that, in connection with their conduct during the negotiation, execution, and approval of the Merger Agreement, Defendants are liable to them for (1) violations of §§ 11, 12(2), and 15 of the Securities Act, codified as 15 U.S.C. § 77k, 77l(a)(2), and 77o; (2) negligent misrepresentation; and (3) breach of contract.

Twenty-two related actions have been filed against Defendants in the Northern District of Georgia. (Defendants' Motion to Transfer, Exhibits 1, 2.) These actions were filed five months before the current action (the "New York Action") and have been consolidated before the Honorable Judge Owen Forrester.*fn3 Id. A proposed sub-class in the Consolidated Atlanta Action expressly includes former shareholders of Xpedite. Id. Additionally, a former Xpedite shareholder is a proposed class representative. Id. Plaintiffs in the Consolidated Atlanta Action allege non-disclosure and misrepresentation with respect to many of the same facts complained of by plaintiffs in this action. The first Amended Consolidated Class Action Complaint attached plaintiffs' complaint (the "New York Complaint") as an exhibit and stated that several of its allegations were derived from it. (Defendants' Motion to Transfer, Exhibit 3, at 45). The Second Amended Consolidated Class Action Complaint (the "Atlanta Complaint"),*fn4 filed in the Consolidated Atlanta Action on February 5, 1999, continues to reference the New York Complaint. (Atlanta Complaint ¶ 105 n. 1).

DISCUSSION

28 U.S.C. § 1404(a) ("§ 1404(a)") provides that "[f]or the convenience of the 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 purpose of § 1404(a) is to avoid "waste of time, energy and money and to protect litigants, witnesses and the public against unnecessary inconvenience and expense." Van Dusen v. Barrack, 376 U.S. 612, 616, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964) (internal citations omitted). A district court maintains broad discretion in deciding whether to transfer a case "in the interest of justice." See Filmline (Cross-Country) Productions, Inc. v. United Artists Corp., 865 F.2d 513 (2d Cir. 1989). The moving party, however, bears the "burden of making out a strong case for transfer." Id. at 521 (internal citations omitted).

Factors that are relevant to a determination of whether a § 1404(a) transfer motion should be granted are: "(1) the place where the operative facts occurred; (2) the convenience to parties; (3) the convenience of witnesses; (4) the relative ease of access to sources of proof; (5) the availability of process to compel attendance of unwilling witnesses; (6) the plaintiff's choice of forum; (7) the forum's familiarity with the governing law; and (8) trial efficiency and the interests of justice." Brown v. Dow Corning Corp., No. 93 Civ. 5510(AGS), 1996 WL 257614, *2 (S.D.N.Y. May 15, 1996) (citing Viacom Int'l, Inc. v. Melvin Simon Prods., Inc., 774 F. Supp. 858, 867-68 (S.D.N Y 1991) (citations omitted)). Other key considerations are the existence of a forum selection clause, see Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988), and the pendency of related actions in the transferee district, see, e.g., Durham Prods., Inc. v. Sterling Film Portfolio, Ltd., 537 F. Supp. 1241, 1243 (S.D.N.Y. 1982).*fn5

The overriding consideration in this case is the existence of twenty-two previously-filed and now consolidated actions in the Northern District of Georgia. Although a forum selection clause existed in the Merger Agreement between Premiere and Xpedite, the Court concludes that either this clause is not binding or ...


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