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February 14, 2000


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


Plaintiff ZPC 2000, Inc. ("ZPC") brings this action against defendant SCA Group, Inc. ("SCA") and its principal shareholder, George R. Stout ("Stout"), alleging various causes of action, including misappropriation of trade secrets, breach of contract, and four causes of action under the Illinois Limited Liability Company Act, 805 Ill. Comp. Stat. §§ 180/15-3(b), 15-3(d), 15-20, and 40-15. Defendants move to dismiss the complaint for lack of personal jurisdiction and for improper venue pursuant to Federal Rules of Civil Procedure 12(b)(2) and (3), and 28 U.S.C. § 1406. In the alternative, defendants move for transfer of venue to the Northern District of Illinois, pursuant to 28 U.S.C. § 1404.*fn1 Plaintiff opposes each of these motions and, in the alternative, moves for transfer to the District of South Carolina under § 1404.*fn2 For the reasons set forth below, defendants' motion is granted to the extent that the action is transferred to the United States District Court for the Northern District of Illinois in the interest of justice. In all other respects, both sides' motions are otherwise denied.


According to plaintiffs complaint, both ZPC and SCA are consulting companies that entered into discussions in late 1997 or early 1998 to determine if they "could join forces to offer information technology services."*fn3 Comp. ¶ 9.*fn4 Plaintiff alleges that in order to facilitate these preliminary discussions, both sides entered into an "Exchange of Confidentiality and Proprietary Information and Non Disclosure Agreement" (the "NDA"). However, defendants dispute ever having entered into such an agreement (see Aff. of Stout of Sept. 20, 1999, attached to defendants' September 21, 1999 Notice of Motion, ¶ 13), and plaintiff has been unable to produce a signed and dated copy (see NDA, attached to plaintiff's October 28, 1999 Notice of Cross Motion as "Exhibit D").*fn5 The name printed on the alleged agreement to sign on behalf of SCA is that of R.J. Bartholomew, a South Carolina "representative" of SCA who only later acquired an interest in SCA ZPC Solutions. Comp. ¶¶ 9, 17; Pl. Mem. at 21.

Plaintiff alleges that pursuant to the agreement, ZPC disclosed to SCA its proprietary "O²R² methodology," which "enables a user to compile computer source code" and therefore more effectively maintain, analyze and translate computer programs. Comp. ¶¶ 13-14. "Soon after," SCA and ZPC agreed to enter into a formal business relationship and, indeed, formed a limited liability company named SCA ZPC Solutions, L.L.C. under the laws and procedures of the State of Illinois in February of 1998. Comp. ¶¶ 15-16. However, by May of 1998, the relationship between the principals of SCA and ZPC began to deteriorate, culminating in a serious dispute over financing around mid-March of 1999. See, generally, Comp. ¶¶ 22-26. However, ZPC's principal, Zoltan P. Ceross ("Ceross"), continued to solicit business for the joint venture through this entire period. See Letter from Ceross to George H. Levine of March 5, 1999, attached to plaintiff's Notice of Cross Motion as "Exhibit F." In May of 1999, though, Stout directed Ceross to cease contact with any of the company's clients and to return all company credit cards and property. Comp. ¶ 28. On behalf of ZPC, Ceross instituted this action on August 18, 1999, seeking damages for defendants' allegedly wrongful acts.


District courts have broad discretion in formulating the appropriate procedures to be followed in deciding a motion to dismiss for lack of personal jurisdiction and venue. See Credit Lyonnais Securities (USA), Inc. v. Alcantara, 183 F.3d 151, 153 (2d Cir. 1999); Baby Boom Gifts, Inc. v. Luv N' Care, Ltd., No. 98 Civ. 8615, 1999 WL 825609, at *1 (S.D.N.Y. Oct. 15, 1999). Although some courts have held that a federal court must have subject matter jurisdiction before issuing an order to transfer venue, there is no similar requirement for personal jurisdiction. Garrel v. NYLCare Health Plans, Inc., 1999 WL 459925 at *7 (S.D.N.Y. June 29, 1999). As a result, we need not decide defendants' personal jurisdiction motion because, even assuming arguendo that we were to find that this Court has no personal jurisdiction over the defendants, we could still order the case to be transferred to a more convenient forum in the interests of justice under either § 1404 or § 1406. See Stein v. Microelectronic Packaging, Inc., 1999 WL 540443, at *7 (S.D.N Y July 26, 1999); Garrel, 1999 WL 459925 at *7; Malone v. Commonwealth Edison Co., 2 F. Supp.2d 545, 547 (S.D.N.Y. 1998). We therefore proceed to the analysis of the parties' competing motions with respect to venue.*fn6

A. § 1406 — Improper Venue

Defendants argue in the first instance that this case should be dismissed as having been brought in an improper venue. See Fed.R.Civ.P. 12(b)(3). Section 1406(a) of Title 28 of the United States Code provides that "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought."

Section 1391(a) of Title 28, the federal venue statute, in turn provides three bases for venue in cases such as this one, where this Court's subject matter jurisdiction "is founded only on a diversity of citizenship." The first two bases do not apply to this case since both sides essentially concede (1) that defendant Stout does not reside in New York (Comp. ¶ 3), and (2) that no "substantial part of the events or omissions giving rise to the claim occurred" in the Southern District of New York. 28 U.S.C. § 1391(a). As a result, the determination of whether venue in this district is proper must be governed by § 1391(a)(3), which provides for venue in a "judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may be otherwise brought."

Once an objection to venue has been raised, the plaintiff bears the burden of establishing that venue is proper. Fine Foods International L.P. v. North America Fine Foods Inc., No. 99 Civ. 1062, 1999 WL 1288681, at *4 (S.D.N.Y. Nov. 12 1999) (citing D'Anton Jos, S.L. v. Doll Factory, Inc., 937 F. Supp. 320, 321 (S.D.N.Y. 1996)). Since we assume personal jurisdiction solely for the purpose of this venue determination, to establish that venue lies here, ZPC must demonstrate that under 28 U.S.C. § 1391(a)(3) "there is no [other] district in which the action may be otherwise brought."

Plaintiff has attempted to meet this burden by pointing to the forum selection provision of the Non Disclosure Agreement that it allegedly entered into with SCA. Comp. ¶ 10. According to Paragraph 9 of the unsigned version of the NDA produced by plaintiff, the parties had agreed that, "[t]he Court of New York [sic] shall be competent in the first instance to decide on any disputes between the parties with regard to this agreement." NDA ¶ 9. However, there are strong reasons to believe that this provision does not control the forum selection of this action.

First, without a "clear finding" that both parties consented to the NDA's forum selection provision, it would be "premature" for a court to find venue where it would not otherwise lie. See Evolution Online Systems, Inc. v. Koninklijke PTT Nederland N.V., 145 F.3d 505, 509 (2d Cir. 1998). Plaintiff's failure to produce a signed copy of the NDA and SCA's refusal to acknowledge that they signed it raise grave doubts as to its applicability. ZPC "is a corporation organized and existing" in South Carolina (Comp. ¶ 1), and defendants are residents of Illinois (Comp. ¶¶ 2-3). It is certainly not readily understandable why SCA would have consented to commit itself to a New York forum.

Second, even if we were to find the clause binding, the NDA would appear to have become inoperative under its own terms. Plaintiff alleges that the agreement was entered "[i]n connection with [the parties'] preliminary discussions." Comp. ¶ 10. See also NDA ¶ 2.2 ("The Receiving party shall use the Proprietary Information that the other disclosed solely for the purpose of exploring the possibility to co-operate [sic] in relation with . . . the O²R² and Cosmos services. . . .") (emphasis added). It is quite another matter to say that the NDA controls the terms of the parties' subsequent fully-consummated decision to found and incorporate SCA ZPC Solutions. The NDA provides that it "shall not apply to information that . . . is approved for release or use by written authorisation [sic] of the disclosing party." NDA ¶ 5. It is not tenable that SCA ZPC Solutions would have been created had ...

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