United States District Court, Southern District of New York
June 1, 2000
KOREA EXPRESS USA, INC., PLAINTIFF,
K.K.D. IMPORTS, INC. AND NATIONSBANC COMMERCIAL CORPORATION, DEFENDANTS.
The opinion of the court was delivered by: Buchwald, District Judge.
OPINION AND ORDER
Plaintiff Korea Express USA, Inc. ("Plaintiff" or "Korea
Express") brings this contract action to recover unpaid freight
charges. Currently pending before the Court is a motion to
dismiss the complaint by defendant Nationsbanc Commercial
Corporation ("Nationsbanc") on the grounds of lack of subject
jurisdiction and improper venue.*fn1 In brief, Nationsbanc
alleges that since there is no maritime contract between itself
and plaintiff, there is no admiralty or maritime jurisdiction.
Alternatively, Nationsbanc argues that venue is improper in the
Southern District of New York because of the case's stronger
connection to New Jersey. For the reasons discussed below,
Nationsbanc's motion to dismiss is denied. However, we find that
plaintiff has not established that venue lies in the Southern
District of New York and, moreover, in the interest of justice
order the case to be transferred to the District of New Jersey.
Plaintiff Korea Express is a New Jersey corporation that
"operat[es] as a duly tariffed and bonded non-vessel-operating
common carrier." Plaintiffs Amended Complaint ("Am.Comp.") ¶ 3.
Currently, it seeks to recover $40,315.00 in freight charges
from defendant KKD,*fn2 a company that contracted with Korea
Express for the shipment of cargo between Asia and the United
States. Nationsbanc, a Georgia corporation, is a heavily secured
investor in KKD. Since KKD is apparently insolvent, Korea
Express is also proceeding against Nationsbanc on the theory
that Nationsbanc exercised a degree of control over KKD
sufficient to confer it with the status of a presumptive owner.
See Pl. Mem. at 7-15 (citing, inter alia, A/S
Dampskibsselskabet Torm v. Beaumont Oil Ltd., 927 F.2d 713 (2d
Nationsbanc provided financing to KKD through a July 3, 1996
"Letter of Credit." Pl. Mem. Ex. F. In return, KKD signed a July
3, 1996 "Factoring Agreement," which provided, in relevant part,
that KKD would:
grant [Nationsbanc] a security interest in all of
[KKD's] present and future accounts, instruments,
contract rights, chattel, paper, documents and
general intangibles, (whether arising before or after
termination of this Agreement) and all returned,
repossessed, and reclaimed goods, and books and
records relating thereto, to secure all of [KKD's]
Obligations [to Nationsbanc]. [KKD] further sell[s]
and assign[s] to [Nationsbanc] all [KKD's] title
and/or interest in the goods (unless released by
[KKD]) represented by Receivables as well as goods
returned by or repossessed from Customers, all of
[KKD's] rights against third parties with respect
thereto; [KKD] will cooperate with [Nationsbanc] in
exercising any rights with respect to the goods.
Pl. Mem. Ex. B, ¶ 5. The Factoring Agreement grants to
Nationsbanc a power of attorney to "receive, open, and dispose
of all mail addressed to [KKD] pertaining to Receivables" and to
endorse KKD's name on any "notes, acceptances, checks, drafts,
money orders, and other evidences of payment of receivables that
may come into [Nationsbanc's] possession." Id. ¶ 4.
Nationsbanc acted almost immediately to protect its interests
under the Factoring Agreement. Most importantly, on July 9,
1996, Nationsbanc had KKD's president sign an additional
instrument, which informed the warehouse holding its goods that
it had granted to Nationsbanc "a security interest in all of our
present and future inventory" and requested that the warehouse
send a monthly letter to Nationsbanc confirming the amount of
the inventory and honor any instructions related to the goods
issued by Nationsbanc. Pl. Mem. Ex. G. Throughout 1997 and 1998,
KKD apparently met part of its obligations to Nationsbanc by
assigning at least some of its receivables directly to the bank.
Id. Exs. H, I.
Between February 1, 1999 and March 31, 1999, KKD contracted
with Korea Express to convey cargo from various ports in Asia to
the United States. As is customary shipping arrangements, the
terms entered into between KKD and Korea Express are included in
the bills of lading for the various shipments. Pl. Mem. Ex. A.
The bills clearly read:
IN ACCEPTING THIS BILL OF LADING, the Shipper,
Consignee, Holder hereof, and Owner of the goods,
agree to be bound by all of its stipulations,
exceptions and conditions, whether written, printed
or stamped on the front or back herepf [sic], as well
as the provisions of the above Carrier's published
Trade Rules and Regulations, as fully as if they were
all signed by the Shipper, Consignee, Holder or
Owner. . . .
Id. The bills listed KKD as the "Consignee" and several Asian
companies as "Shipper/Exporter." Id. They in no way referred
to Nationsbanc. Id.
Despite this spate of activity, KKD defaulted on its
obligations to Nationsbanc in April of 1999. Defendant's Notice
of Motion ("Def.Mot."), Ex. O. KKD's president, Seong D. Park
("Park"), signed a "Surrender and Abandonment of Collateral" on
April 7, 1999. Id. Among other things, KKD acknowledged its
debt to Nationsbanc in the amount of $27,107,572 plus interest.
Id. Pursuant to Nationsbanc's secured position vis à vis
KKD, the document granted to Nationsbanc "all rights of
possession in and to" KKD's "inventory, accounts, equipment,
general intangibles, contract rights, books and records, chattel
paper, leases and other personal property." Id.
Three weeks later, on April 20, 1999, officers of Korea
Express visited the offices of KKD in order to demand payment
for outstanding freight charges. Affidavit of Seong D. Park,
dated March 24, 2000, appended to Pl. Mem. as Ex. E. ("Park
Aff."). At that time, Park "informed [them] that Korea Express
would have to look to Nationsbanc for payment since Nationsbanc
was the owner of the goods [that Korea Express had shipped] and
because KKD did not have any control over the goods or payment."
Nationsbanc's counsel subsequently provided Korea Express with
copies of the relevant security agreements, confirming its
rights to the goods. Aff. of Stephen C. Pascal, dated Oct. 11,
1999 ("Pascal Aff."), ¶ 4.
Korea Express filed its initial complaint ("Comp.") in this
suit on July 14, 1999, alleging contract claims against both KKD
and Nationsbanc. It asserted maritime jurisdiction pursuant to
an "in rem lien for unpaid freight." Comp. ¶ 12. However, in
August, Nationsbanc's attorney wrote to counsel for KKD
asserting the basic proposition that since Korea Express had
surrendered possession of the goods, it could "not enforce a
maritime lien for freight on that cargo." Letter of Stephen C.
Pascal, dated August 10, 1999, appended to Def. Mot. as Ex. C.
As a result, plaintiff amended its complaint on September 27,
1999 to withdraw its claim of jurisdiction based on a maritime
lien and, instead, to assert general maritime jurisdiction.
Korea Express also added claims of quantum meruit and unjust
Nationsbanc brought its instant motion to dismiss on October
11, 1999. Pursuant to a November 12, 1999 Order, the Court
interrupted the briefing schedule to allow Korea Express an
opportunity to explore reasonable avenues of discovery relating
to the jurisdictional controversy. The parties completed their
briefing April 18, 2000.
A. Subject Matter Jurisdiction
In considering a motion to dismiss for lack of subject matter
jurisdiction, we accept as true all material factual allegations
in the complaint. Atlantic Mutual
Insurance Co. v. Balfour Maclaine Int'l, Ltd., 968 F.2d 196,
198 (2d Cir. 1992). Under Rule 12(b)(1) of the Federal Rules of
Civil Procedure, the plaintiff need only make a prima facie
showing of subject matter jurisdiction at this stage of the
proceedings. Robinson v. Overseas Military Sales Corp.,
21 F.3d 502, 507 (2d Cir. 1994). "However, argumentative inferences
favorable to the party asserting jurisdiction should not be
drawn." Id. (citing Norton v. Larney, 266 U.S. 511, 45 S.Ct.
145, 69 L.Ed. 413 (1925)). We may also consider evidence outside
the pleadings, such as affidavits. See Maritima Petroleo E
Engenharia LTDA v. Ocean Rig 1 AS, 78 F. Supp.2d 162, 165-66
(S.D.N.Y. 1999) (citing Antares Aircraft, L.P. v. Federal
Republic of Nigeria, 948 F.2d 90 (2d Cir. 1991)).
Section 1333(1) of Title 28 of the United States Code grants
federal district courts subject matter jurisdiction over "[a]ny
civil case of admiralty or maritime jurisdiction." The Supreme
Court has made it clear that courts are to look to the purpose
behind this grant of jurisdiction in determining its boundaries.
Exxon Corp. v. Central Gulf Lines, Inc., 500 U.S. 603, 608,
111 S.Ct. 2071, 114 L.Ed.2d 649 (1991). In that regard, the
"fundamental interest giving rise to maritime jurisdiction is
the `protection of maritime commerce.'" Id. (internal
If a cause of action based in contract law is brought into
federal court upon a claim of admiralty or maritime
jurisdiction, then the focus must be on "the nature and subject
matter of the contract, as whether it is a maritime contract,
having reference to maritime service or maritime transactions."
Id. (quoting In Insurance Co. v. Dunham, 78 U.S. 1, 11 Wall.
1, 20 L.Ed. 90 (1870)). Specifically, "courts should look to the
subject matter of the  contract and determine whether the
services performed under the contract are maritime in nature."
Id. at 612, 111 S.Ct. 2071. A court may also sustain admiralty
jurisdiction over non-maritime elements of a case where such
elements are either "incidental to a primarily maritime purpose"
or inseparable without prejudice to the rest of the claims.
Sirius Insurance Co. (UK) Ltd. v. Collins, 16 F.3d 34, 36 (2d
Cir. 1994). Thus, the first relevant set of contracts, Korea
Express's bills of lading, Pl. Mem. Ex. A, are clearly maritime
in nature and naturally give rise to Korea Express's claim over
In contrast, Nationsbanc argues that since there is no
maritime contract between itself and plaintiff and since its
contract with KKD, the Factoring Agreement, is not maritime in
nature, the case against Nationsbanc should be dismissed. To
this end, Nationsbanc offers a vigorous defense to plaintiffs
claim on the merits. However, Nationsbanc did not bring its
motion under Federal Rule of Civil Procedure 12(b)(6), which
could allow the Court to dismiss this claim for failure to state
a claim for which relief may be granted. Instead, Nationsbanc
brought its motion pursuant to 12(b)(1) for a lack of subject
matter jurisdiction, which places upon plaintiff a far more
minimal burden. Plaintiffs claim, under Beaumont Oil, 927 F.2d
at 719-20, that Nationsbanc stepped into the shoes of KKD by
taking possession of the goods shipped is inseparable from
plaintiffs claim against KKD for the purposes of subject matter
jurisdiction. Whether or not plaintiff is ultimately able to
prevail on its claim of establishing liability on the part of
question posed by plaintiffs claim is directly relevant to the
protection of maritime commerce. Therefore, plaintiff has met
its minimal burden of establishing maritime subject matter
We caution however, that this finding does not reflect any
evaluation of plaintiffs substantive case. Indeed, Nationsbanc
might well be advised to renew its argument on the merits in a
proper motion for summary judgment.
B. Improper Venue
Nationsbanc next argues 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." District courts have broad discretion in
formulating the appropriate procedures to be followed in
deciding a motion to dismiss for lack of 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,
Because this case is in admiralty, the appropriate venue
statute is 28 U.S.C. § 1391(b) which mandates that a case not
founded solely on diversity of citizenship may be brought only
in (1) a district where any defendant resides if they all reside
in the same state; (2) a district where a substantial part of
the events giving rise to the claim took place; or (3) a
district where any defendant may be found, if there is no other
district where the case may be brought.
Section 1391(b)(1) is inapplicable because plaintiff has not
made any allegations relevant to any presence that Nationsbanc
might have in New York. The complaint merely states that
Nationsbanc "is a corporation with an address" in Atlanta,
Georgia. Id. ¶ 5. Similarly, § 1391(b)(2) does not control
because Korea Express is entirely a New Jersey corporation, Am.
Comp. ¶ 3, and KKD operated out of Carlstadt, New Jersey, "from
1996 to May 1999," Park Aff. ¶ 1. Moreover, KKD apparently
sought its financing from Nationsbanc through its Georgia
offices. See Pl. Mem. Ex. B. Although the bills of lading
indicate that New York is the "place of delivery," Pl. Mem. Ex.
A, there is no evidence that they ever reached New York. Indeed,
the evidence is to the contrary, that the goods have been and
continue to be stored in KKD's warehouse in New Jersey. See
Pl. Mem. Ex. G; Pascal Aff. ¶ 12. As a result, Southern District
of New York has no "substantial" connection to this claim.
Plaintiff apparently relies on § 1391(b)(3)'s grant of venue
in a district "in which any defendant may be found, if there is
no other district in which the action may otherwise be brought."
Specifically, plaintiff points to the choice of forum provision
of the bills of lading which designates the "Federal Courts of
the United States in the city of New York" for "suits against
the carrier." Am. Comp. ¶ 6; Pl. Mem. Ex. K. Plaintiff maintains
that this provision "contemplates that all parties . . . would
avail themselves of [this district] if a dispute arose." Pl.
Mem. at 24. However, this argument is without merit. The
provision clearly is limited to suits "against the carrier" and
does not in any way limit the venue of suits by the carrier. As
a result, the action may have been brought elsewhere.
Based on the pleadings, venue in this district is therefore
improper, and the Court is authorized to transfer the case to a
district in which it may have been brought. Le Blanc v.
Cleveland, 899 F. Supp. 149, 150 (S.D.N.Y. 1995). Here, we find
that the case may have been brought in the District of New
Jersey since that is the apparent location where
"a substantial part of the events . . . giving rise to the claim
In addition, even if we were to find venue in this district to
be proper, we would still find that a transfer to the District
of New Jersey is appropriate as in the best "interests of
justice" under § 1404. Section 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 may have been brought." The
purpose of 1404(a) is to "`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) (quoting Continental Grain Co. v. Barge FBL-585,
364 U.S. 19, 26-27, 80 S.Ct. 1470, 4 L.Ed.2d 1540 (1960)). At a
minimum, New Jersey has a far stronger connection to this suit
than the Southern District of New York.
Among the factors a court should consider in determining a
question of venue are: (1) the place where the operative facts
took place; (2) the convenience of the parties; (3) the
convenience of the witnesses; (4) the location of relevant
documents and the relative ease of sources of proof; (5) the
forum's familiarity with the governing law and the weight
accorded; (6) the availability of process to compel unwilling
witnesses; and (7) the plaintiffs choice of forum. JVC
Professional Products, Co. v. HT Electronics, Inc., No. 99 Civ.
3425, 1999 WL 1080280, at *1 (S.D.N.Y. Dec. 1, 1999).
Of the factors, only one, plaintiffs choice of forum, clearly
favors venue in New York. Balanced against that are: the
location of the operative facts, the convenience of the parties,
and the convenience of potential witnesses. As discussed above,
most, if not all, of the operative facts occurred in New Jersey
or Georgia. As a result, the greatest number of potential
witnesses are likely to be located outside the Southern District
of New York. Since Korea Express and KKD operate [or operated]
out of New Jersey, New Jersey is a more convenient forum.
Finally, Nationsbanc has also expressed a clear preference for
New Jersey. See Pascal Aff. ¶ 12.
The remaining factors are, at most, neutral. Although many of
KKD's records are apparently stored in New York, see
Declaration of Henry P. Gonzalez, dated Mar. 28, 2000, appended
to Pl. Mem. as Ex. L, the goods themselves and many more related
documents are located in New Jersey. New Jersey's district
courts are as familiar as New York's with the tenets of
admiralty law. And both state's district courts have equivalent
process to compel unwilling witnesses. As a result, we find that
defendants have made a "clear-cut showing" that transfer to the
District of New Jersey is in the best interest of justice.
For the foregoing reasons, defendant's motion to dismiss for
lack of jurisdiction is denied. However, in the interests of
justice, the Clerk of the Court is directed to transfer this
action to the District of New Jersey.
IT IS SO ORDERED.