The opinion of the court was delivered by: Sweet, District Judge.
Plaintiff DealTime.com Ltd. ("DealTime") has moved to dismiss
the Fourth and Fifth Counterclaims of Defendant Robert J. McNulty
("McNulty") for failure to state a claim upon which relief may be
granted, pursuant to Rule 12(b)(6), Fed. R.Civ.P. Also pending is
McNulty's motion to transfer the case to the Central District of
California, Southern Division, pursuant to 28 U.S.C. § 1404(a).
For the reasons set forth below, McNulty's motion to transfer is
denied, and DealTime's motion to dismiss is granted.
DealTime is a corporation organized under the laws of Israel,
with a principal place of business in Israel. Among other
enterprises, DealTime provides a free comparison online shopping
service that lists online merchants, auctions, classifieds and
group buying sites that offer products matching its users'
McNulty is a resident of Newport Beach, California who founded
several internet retailing businesses, and briefly served as a
consultant and outside director to DealTime.
This action arises out of McNulty's alleged failure to disclose
pertinent facts to DealTime before it accepted him as a
consultant and outside director. Specifically, DealTime alleges
that McNulty never advised that he has been the subject of
several Securities and Exchange Commission ("SEC") investigations
and an SEC civil enforcement action, is a named defendant in
several pending lawsuits alleging federal and state securities
law violations, and is allegedly under a contractual obligation
with a major computer manufacturer not to work for, consult for,
or become a five percent investor in any company that does
business on or through the internet without prior approval.
McNulty met twice with DealTime executives prior to February
1999, once in California and once in New York, where they
discussed possible mutually beneficial business ventures. At a
lunch with DealTime executives in New York on February 22, 1999,
McNulty wrote a check for $250,000 as an "equity investment" in
DealTime. In the subsequent weeks, DealTime informed McNulty that
although the Series "B" DealTime shares that had been discussed
on February 22, 1999 were no longer available, McNulty would be
"made whole" by receiving stock options at the Series B pricing
level in connection with a Board of Directors and consulting
Under this restructured deal, McNulty would receive 500,000
DealTime adjusted dividend stock options in Dealtime for his
investment, approximately 357,143 of which were presently
exercisable to convert McNulty's equity investment, with the
remainder exercisable over his three-year term as a consultant
and outside director. During the restructuring of the deal,
DealTime's President and CEO, Daniel Ciporin ("Ciporin"), made at
least two trips to California to meet with McNulty and others.
The parties memorialized the agreement by a letter executed in
May of 1999, but backdated to February 22, 1999 (the
"Agreement"), which made no reference to any vesting schedule for
the 500,000 options.
Approximately three weeks after the Agreement was signed, on
June 7, 1999, McNulty arrived at a DealTime Board of Directors
meeting only to discover that he was no longer a member of the
Board, because the controversy about McNulty's prior
investigation by the SEC had created problems for DealTime's
ongoing financing efforts.
In response to McNulty's subsequent inquiries about the
remaining options that had not yet been issued to him, DealTime's
General Counsel e-mailed McNulty a statement to the effect that:
Since you already paid $250,000, we will treat this
as an exercise of the option as to 357,143 shares and
will issue them by resolution of the board at its
August 12 meeting, and I will have a warrant to give
you which will cover the remaining 142,857 options
that remain unexercised.
Def. Trans. Mtn. Ex. G (July 14 Katzen e-mail). And, at the
August 12, 1999 meeting, the Board adopted the following
When McNulty further pursued the question of the remaining
shares, he was informed that his options had never vested because
his involvement with DealTime had been terminated. In May of
2000, after repeated attempts to receive the balance of options,
McNulty advised DealTime's general counsel that he was prepared
to file a lawsuit if the options were not forthcoming. McNulty's
attorney sent another letter to the same effect on May 9, 2000.
After suggesting that they explore non-litigation resolutions,
Dealtime notified McNulty of its own potential legal claims and
filed this action the same day, on May 22, 2000.
DealTime seeks, inter alia, rescission of the contract and a
declaratory judgment that it was not responsible to pay McNulty
the balance of 142,857 stock options now claimed due. McNulty
contends that he did disclose all relevant information about the
SEC investigations and construes this action as a preemptive
strike DealTime filed in order to avoid issuing the balance of
stock due under the agreement. McNulty filed six counterclaims,
the fourth and fifth of which assert common law fraud and federal
By motion of July 13, 2000, DealTime sought to dismiss these
claims as duplicative of McNulty's breach of contract
counterclaims. McNulty filed a response on August 22, 2000, and
DealTime filed a reply brief on September 12, 2000. The motion
was deemed fully submitted on September 27, 2000.
Meanwhile, McNulty filed a transfer motion on September 7,
2000, alleging that the case was more properly brought in the
Central District of California, where he resides. DealTime
responded on September 29, 2000, and McNulty replied on October
6, 2000. The motion was deemed fully submitted upon oral argument
on October, 11, 2000.
I. The Standard for Transfers Under Section 1404(a)
Section 1404(a) of Title 28 of the United States Code provides
in relevant part that:
for the convenience of 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.
28 U.S.C. § 1404(a). This section is a statutory recognition of
the common law doctrine of forum non conveniens as a facet of
venue in the federal courts. See DiRienzo v. Philip Services
Corp., 232 F.3d 49 (2d Cir. 2000); Wilshire Credit Corp. v.
Barrett Capital Management Corp., 976 F. Supp. 174, 180 (W.D.N Y
1997). Section 1404(a) strives "to prevent the 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) (citation and internal quotations omitted); see Ferens v.
John Deere Co., 494 U.S. 516, 522, 110 S.Ct. 1274, 108 L.Ed.2d
"`[M]otions for transfer lie within the broad discretion of the
courts and are determined upon notions of convenience and
fairness on a case-by-case basis.'" Linzer v. EMI Blackwood
Music Inc., 904 F. Supp. 207, 216 (S.D.N.Y. 1995) (quoting In re
Cuyahoga Equip. Corp., 980 F.2d 110, 117 (2d Cir. 1992))
(citing Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22,
29, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988)); see Piper Aircraft
Company v. Reyno, 454 U.S. 235, 257, 102 S.Ct. 252, 70 L.Ed.2d
419 (1981). The burden of demonstrating the desirability of
transfer lies with the moving party. See, e.g., Hubbell Inc. v.
Pass & Seymour, Inc., 883 F. Supp. 955, 962 (S.D.N.Y. 1995).
In determining whether transfer is warranted, courts generally
consider several factors, including: (1) the convenience of
witnesses, (2) the convenience of the parties, (3) the locus of
operative facts, (4) the availability of process to compel the
attendance of unwilling witnesses, (5) the location of relevant
documents and the relative ease of access to sources of proof,
(6) the relative means of the parties, (7) the forum's
familiarity with the governing law, (8) the weight accorded the
plaintiff's choice of forum, and (9) trial efficiency and the
interest of justice, based on the totality of the circumstances.
See Dostana Enterprises LLC v. Federal Express Corporation, No.
00 Civ. 0747(RWS), 2000 WL 1170134, *2 ...