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
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 ...