United States District Court, S.D. New York
May 12, 2004.
UNITED STATES OF AMERICA, Plaintiff -v.- NATURE'S FARM PRODUCTS, INC., DENNIS CHOI, PETER PIZZO, RAVINE FOODS, INC., ALIMENTS HERITAGE, INC., and THE BANK OF CHINA, NEW YORK BRANCH, Defendants
The opinion of the court was delivered by: SIDNEY STEIN, District Judge
OPINION & ORDER
Defendants Nature's Farm Products, Inc., Dennis Choi, and Peter Pizzo
(collectively, the "NFP defendants") have moved to transfer this action
for the convenience of the parties and witnesses and in the interest of
justice pursuant to 28 U.S.C. § 1404(a) to the Northern District of
California. The NFP defendants have also moved, pursuant to Fed.R. Civ.
P. 12(b)(6), to dismiss the government's second claim alleging that the
defendants conspired to defraud the government in violation of the False
Claims Act, 31 U.S.C. § 3729 et seq. Because, as set forth below, a
transfer of this action to the Northern District of California would
serve the convenience of the parties and witnesses and the interest of
justice within the meaning of 28 U.S.C. § 1404(a), the NFP defendants'
motion to transfer this action is granted.
A. The Parties
Nature's Farm is a California corporation with its principal place of
business in California. Choi and Pizzo are residents in the Northern District of
California. Choi was the President of Nature's Farm and Pizzo was its
Vice-President. Defendants Ravine Foods, Inc. ("Ravine"), a canning
corporation, and Aliments Heritage, Inc. ("Heritage")*fn1, a
distributor, are Canadian corporations. The Bank of China is a
corporation organized and existing under the laws of the People's
Republic of China with a branch located in the Southern District of New
York. The New York branch of that bank ("BOCNY") was a defendant in this
litigation prior to the Court's approval of a settlement agreement
resolving the claims in this action and the subsequent entry of a
judgment against BOCNY on February 19, 2004.
B. Procedural Background
This action was commenced in 2000, when relator Huangyan Import &
Export Corporation filed a complaint seeking to recover on behalf of the
United States government for violations of the False Claims Act,
31 U.S.C. § 3732(a). For the next three years the government periodically
requested that the Court extend the seal that covered the action in order
for the government to continue its investigation into the allegations in
the complaint. In October 2003, the government moved to intervene as a
party, to lift the seal, and to dismiss Huangyan Import & Export
Corporation as the relator. It also proposed a settlement with BOCNY for
this Court's approval. In January 2004, this Court granted the
government's motion to dismiss the relator. The following month, a
hearing was held on the fairness, reasonableness and adequacy of the
government's proposed settlement with BOCNY and that settlement was
subsequently approved. The NFP defendants then filed a motion to transfer
this action to the Northern District of California, pursuant to 28 U.S.C. § 1404(a), and to dismiss
the second claim in the complaint. Ravine filed a motion to dismiss the
complaint, which the NFP defendants also joined in part.
C. The Alleged Conspiracy
The following facts are as alleged in the complaint filed by the
government in October 2003. In 1998 the International Trade
Administration of the Department of Commerce issued a Final Determination
that certain brine mushrooms that were being exported from Chile to the
United States by the Chilean branch of Nature's Farm were being sold at
less than fair value, and it ordered United States customs to raise the
duty imposed on those mushrooms to 148.51% of declared value as an
"antidumping duty." (Compl. ¶ 15). In response to the imposition of
these antidumping duties, the NFP defendants allegedly developed a scheme
to avoid paying U.S. duties by shipping the mushrooms to Mexico and
Canada, re-packing them into cans, and then shipping the canned
mushrooms, improperly labeled as products of Canada or Mexico, into the
U.S. market. (Compl. ¶ 18).
In August 1998, Pizzo allegedly contacted Heritage, a Canadian
importer, and Ravine, a Canadian canning corporation, concerning the
scheme. (Compl. ¶ 26). In October of 1998, the government contends that
an "Agency Agreement" relating to the mushrooms was signed by Pizzo,
Philip Hirst, President of Heritage, and Ravine's Plant Manager Peter
Quattrociocchi. (Compl. ¶ 29). This agreement allegedly specified that
Nature's Farm would provide Chilean mushrooms for processing, Ravine
would pack the mushrooms into cans, and Heritage would provide a
Certificate of Origin and other shipping documents. (Id.). The government
contends that defendants submitted false information about the origin of the mushrooms at the Canadian border by
representing that the mushrooms originated in Canada, when they had in
fact been grown elsewhere. (Compl. ¶ 35-37).
The government also contends that Choi made repeated requests to BOCNY
for approval of a credit extension and explained the details of this
importation plan to support his requests. (Compl. ¶ 16-25). At a
February 12, 1999 meeting at the BOCNY office in midtown Manhattan, Choi
and BOCNY personnel allegedly discussed the "modus operandi" of the
scheme. (Compl. ¶ 49-52; Exh. H at 1). BOCNY approved an extension of
Nature's Farm credit, and in exchange Choi agreed to provide more
information to BOCNY on the mushroom importation scheme so that Cheedi
Chen, general counsel to BOCNY, could assess the legality of the
arrangement. (Compl. ¶ 49-52, Exh. H).
The government asserts that the NFP defendants knew that this scheme
was illegal and attempted to conceal it. It supports that allegation by
pointing out that in March 1999, Choi indicated he knew of the illegality
of the mushroom importation when he wrote to a BOCNY General Manager as
follows: "I am certain that the Bank is not acting as the policeman for
U.S. petitioners in the anti-dumping action and therefore, it is not
necessary to get into legal issues with Ravine Foods, a Canadian
company." (Compl. ¶ 59; Exh. I.). The government further alleges that
the NFP defendants knew of the illegality of their conduct because on
April 13, 1999, Bart Fisher of the law firm Porter, Wright, Morris &
Arthur ("PWM&A") wrote to Nature's Farm, Choi, and Pizzo "strongly
advis[ing] [Nature's Farm] to import only moderate amounts of mushrooms
to the U.S. to avoid any unwanted attention to this transaction." (Compl.
¶ 69; Exh. L). Nature's Farm and Choi have sued PWM&A in a separate action in the
Northern District of California regarding this advice.
Further, the government alleges that the NFP defendants took various
steps to conceal their illegal importation scheme, including the creation
of a new company to import the mushrooms, Horley Trading Company,
Limited, with an identical address to that of Nature's Farm. (Compl.
Plaintiffs have requested that this Court transfer this action pursuant
to 28 U.S.C. § 1404(a), which allows a district court to transfer an
action for "the convenience of parties and witnesses" and "in the
interest of justice" to another judicial "district or division where it
might have been brought." 28 U.S.C. § 1404(a); see e.g. In re Cuyahoga
Equipment Corp., 980 F.2d 110, 117 (2d. Cir. 1992). Such a grant is
within the discretion of the district court. (Id.).
A. Defendants' Burden
In order to prevail on a motion to transfer pursuant to section
1404(a), the moving party bears the burden of establishing that the
convenience of parties and witnesses and the interest of justice will be
better served by transfer to another forum. See Nabisco, Inc. v. Brach's
Confections, Inc., No. 00 Civ. 5875, 2000 WL 1677935, at *3 (S.D.N.Y.
Nov. 6, 2000); Toy Biz, Inc. v. Centuri Corp., 990 F. Supp. 328, 330
(S.D.N.Y. 1998); Christina Canada Inc. v. Wior Corp., 702 F. Supp. 461,
464 (S.D.N.Y. 1988). "That burden is heavy: `unless the balance is
strongly in favor of the defendant, the plaintiff's choice of forum
should rarely be disturbed.'" Id. at 463 (quoting Gulf Oil Corp. v.
Gilbert 330 U.S. 501, 508 (1947)). While the plaintiffs choice of forum
is "entitled to substantial consideration," Warrick v. General Elec. Co. (In re
Warrick), 70 F.3d 736, 741 (2d Cir. 1995) (quoting A, Olnick & Sons v.
Dempster Bros., Inc., 365 F.2d 439, 444 (2d Cir. 1966)), "[t]he emphasis
that a court places on plaintiff's choice of forum diminishes where the
facts giving rise to the litigation bear little material connection to
the chosen forum." Fontana v. E.A.R., 849 F. Supp. 212, 215 (S.D.N.Y.
Here, because plaintiff's selected forum the Southern District of New
York has only a slight or "tenuous" connection to the operative facts
of the litigation, as set forth below, "plaintiffs' selection of [the]
forum has an artificial quality that entitles a court to give it less
weight." Id.; see also Anadigics, Inc. v. Raytheon Co., 903 F. Supp. 615,
616 (S.D.N.Y. 1995); Coker v. Bank of America 984 F. Supp. 757, 766
(S.D.N.Y. 1997) (collecting cases). Thus, the emphasis normally placed on
plaintiff's choice of forum is lessened in this instance.
B. Transfer Pursuant to Section 1404(a): "Convenience" and "Interest of
"The prerequisite to evaluating the propriety of a transfer is whether
there is a transferee forum available with proper jurisdiction and
venue." Bristol-Myers Squibb Co. v. Andrx Pharmaceuticals, LLC, No. 03
Civ. 2503, 2003 WL 22888804 at *2 (S.D.N.Y. December 5, 2003) (citing
Alfadda v. Fenn, 159 F.3d 41, 54 (2d Cir. 1998)). That prerequisite is
met in this action as venue and jurisdiction are proper in the Northern
District of California.
Once a finding has been made that the proposed transferee forum has
jurisdiction and venue exists there as well, a court should assess the
"convenience" and "fairness" of a transfer. The court considers factors
such as "(1) convenience of the witnesses; (2) location of relevant
documents and the relative ease of access to sources of proof; (3) locus of operative facts; (4) convenience of the parties; (5)
availability of process to compel attendance of unwilling witnesses; (6)
relative means of the parties; (7) forum's familiarity with the governing
law; (8) weight accorded a plaintiff's choice of forum; and (9) trial
efficiency and the interests of justice based on the totality of the
circumstances." Bristol-Myers, 2003 WL 22888804 at *2 (citing Kiss My
Face Corp. v. Bunting, No. 02 Civ. 2645, 2003 WL 22244587, at *1
(S.D.N.Y. 2003); Telebrands Corp. v. Wilton Indus., Inc., 983 F. Supp. 471,
477 (S.D.N.Y. 1997). An evaluation of the convenience arid fairness of
granting a transfer should be based on an "individualized, case-by-case
consideration of convenience and fairness." Id. (citing In re Cuyahoga
Equip. Corp., 980 F.2d at 117). The Court shall now turn to a
consideration of each of the relevant factors.
1. The Convenience of the Parties
"The convenience of the parties and witnesses is generally the most
important factor for a court to consider when deciding whether a change
of venue is proper." Bristol-Myers, 2003 WL 22888804 at *3; Telebrands
Corp. v. Wilton Industries. Inc., 983 F. Supp. 471, 477 (S.D.N.Y.,
1997). "However, the costs and burdens should not merely be shifted from
one party to the other." Id.
When considering the convenience of the parties "[t]he logical and
relevant starting point is a consideration of the residence of the
parties." Wine Markets Int'l v. Bass, 939 F. Supp. 178, 182
(E.D.N.Y.1996). The defendants have shown that a trial in the Northern
District of California would be more convenient for the two parties
Dennis Choi and Peter Rizzo who reside in the San Francisco area. The
government responds that "[i]f it was convenient for defendants to
conduct financial dealings here, it is convenient for them to litigate
here," (Reply to Motion to Dismiss p. 12). Although there is some merit to this contention, it is not sufficient to rebut the
defendants' showing that it is more convenient for them to litigate where
they reside and do business.
Plaintiff claims that a transfer would be inconvenient for it, as "the
Government and the BOC[NY] are both located in the Southern District of
New York." (Opp. To Mot. p. 12). However, neither the government's nor
the BOCNY's presence in New York properly weighs against transfer. BOCNY
is no longer a defendant in this action and therefore its convenience, at
least as a party, is not relevant. Although the government attorneys
assigned to this matter are located in this district, the United States
government clearly also has attorneys resident in the Northern District
of California. See Bionx Implants, Inc. v. Biomet, Inc., No. 99 Civ.
740, 1999 WL 342306, at *4 (S.D.N.Y. May 27, 1999) ("[C]onvenience of
counsel is not a consideration in the transfer analysis.").
All parties reside in the Northern District of California except for
the Canadian defendants who reside in locations that will require travel
for litigation regardless of whether the forum is in New York or
California. Because the relevant parties reside in California, and
transfer would aid the California-based parties without causing a
significant disadvantage to plaintiff, Biomet, at *4, this factor weighs
in favor of transfer. U.S. ex rel. Gervae v. Payne and Poland, Inc., No.
01 Civ. 0383, 2003 WL 23185881 (W.D.Wis. July 14, 2003).
2. Location of the Documents and Sources of Proof
Nature's Farm states that the vast majority of documents to be produced
by all parties in this action are located in California and the
government has not contended otherwise. The location of documents in this
action is "entitled to little weight unless the defendant makes a detailed showing as to the burden it would incur absent
transfer." Royal Ins. Co. of America v. Tower Records, Inc., 2002 WL
31385815, at *6 (S.D.N.Y. Oct 22, 2002). Although there has been no such
showing in this action, and therefore the Court presumes that in this
"era of photocopying, fax machines and Federal Express" the documents can
be relocated to New York without undue expense, see Bristol-Myers, 2003
WL 22888804, at *3 (quoting Coker, 984 F. Supp. at 766); see also
Constitution Reinsurance Corp. v. Stonewall Ins. Co., 872 F. Supp. 1247,
1251 (S.D.N.Y. 1995), the fact that the majority of documents are in
California weighs slightly in favor of transfer. See e.g. Matra et
Manurhin v. Int'l Armament Co., 628 F. Supp. 1532, 1534 (S.D.N.Y. 1986)
(transferring action from New York to Virginia because defendants'
documents were located in Virginia).
3. Locus of Operative Facts
The locus of operative facts is "traditionally an important factor to
be considered in deciding where a case should be tried." Bristol-Myers,
2003 WL 228804, at *3 (quoting Royal Ins. Co., 2002 WL 31385815, at *3).
Nature's Farm and defendants Choi and Rizzo are the alleged conspirators
and makers of false records, and those acts allegedly originated at the
California headquarters of Nature's Farm.
While the government relies on SEC v. Lybrand, No. 00 Civ 1387, 2000 WL
913894, at *6 (S.D.N.Y. 2000) to maintain that the locus of operative
facts weigh in favor of keeping the case in the Southern District of New
York, that reliance is misplaced. In Lybrand, the locus of operative
facts weighed in favor of retaining the case in the Southern District of
New York because "the transactions that constituted the core of the
fraudulent scheme," as alleged by the plaintiff, were undertaken in New
York. Id. Here, however, the transactions that constituted the core of the allegedly
fraudulent scheme were undertaken by the NFP Defendants in California and
Canada. The government directs the Court to only two actions alleged by
the government to have taken place in New York: (1) Choi traveled to the
Southern District of New York to obtain money from Bank of China New York
to fund the fraudulent scheme, and (2) "the funding decisions which made
the alleged conspiracy possible occurred in this district." (Compl.
18-23, 25, 41-42, 48, 49-52, 60, 62-64; Exh. H). The remaining operative
facts all occurred in Buffalo, New York, in Detroit, Michigan or in
Canada. Thus, the locus of operative facts favors a transfer to
California where the bulk of the operative facts occurred; the Southern
District of New York has a much weaker connection to the facts of this
4. Convenience of the Witnesses
The government does argue that the convenience of the witnesses would
be served by litigation in this forum but fails to list any actual
witnesses who will appear and who require the forum to be in the Southern
District of New York. Schechter v. Tauck Tours, Inc., 17 F. Supp.2d 255,
261 (S.D.N.Y. 1998). ("A party seeking or opposing transfer must identify
the witnesses by name and summarize their testimony."). The government
merely lists witnesses who are in close proximity to New York City. For
the purposes of this analysis, the Court "dismisses from consideration
the convenience of witnesses who are located outside both the current and
transferee forums." Bristol-Myers, 2003 WL 22888804 at *3; Wechsler v.
Macke Int'l Trade, Inc., No. 99 Civ. 5725, 1999 WL 1261251, at *6
(S.D.N.Y. 1999). Therefore, the convenience of the Canadian entities is
not relevant. Similarly, the proximity of members of the law firm
PWM&A, who are defendants in a related action in the Northern District of
California, is not relevant as their location in Washington, D.C.
requires travel regardless of the forum chosen. Wechsler, 1999 WL 1261251
at *6 (holding that the convenience of witnesses who live outside the
districts of both the transferee and current court is irrelevant).
Accordingly, this factor is neutral.
5. Ability to Compel Unwilling Witnesses
No party has set forth any witnesses who would refuse to appear in
either forum; therefore, this factor is neutral.
6. Relative Means of the Parties
The NFP defendants have indicated that they will not be able to sustain
the expenses of litigating in the Southern District of New York. Both the
government and the NFP defendants agree that defendant Nature's Farm is
in bankruptcy. (Opp. Brief at 7; Mem. Supp. Mot. Transfer p. 6).
Defendants Choi and Pizzo also claim that they have "limited financial
resources," (Reply Mot. Transfer p. 6), and that their need to "retain
local counsel in New York to try this action in New York over a
substantial period of time will strain the resources of the California
defendants." (Mot. Transfer p. 7). However, Choi and Pizzo fail to
support their claims of financial hardship with any evidence.
Nevertheless, due to the financial circumstances of Nature's Farm, this
factor favors transfer to California.
7. Forum's Familiarity with Governing Law
The forum's familiarity with the governing law favors neither the
Southern District of New York nor the Northern District of California
because the False Claims Act is a federal statute and "any district court
may handle [a federal case] with equal skill." Bristol-Myers, 2003 WL 22888804 at *4. The analysis of a court's
familiarity with governing law is usually reserved for motions to
transfer an action involving state law claims to a court that may have
more familiarity with the applicable state law. Transatlantic Reinsurance
Co. v. Continental Ins. Co., No. 03 Civ. 3227, 2003 WL 22743829, at *5
(S.D.N.Y. Nov. 20, 2003). This action is entirely based on federal law
and therefore this factor is neutral.
8. Plaintiff's Choice of Forum
"Attention must always be paid to the eighth factor `the weight
accorded the plaintiff's choice of forum' for `unless the balance is
strongly in favor of the defendant, the plaintiff's choice of forum
should rarely be disturbed.'" Bristol-Myers, 2003 WL 22888804, at *5
(quoting Amersham Pharmacia Biotech, 11 F. Supp.2d at 730 (citing Ford
Motor Co. v. Ryan, 182 F.2d 329, 330 (2d Cir. 1950)). However, as set
forth above, in this action, the importance of plaintiff's choice of
forum is greatly diminished for two reasons.
First, the plaintiff is the federal government, which is no more a
resident of the Southern District of New York than it is of the Northern
District of California. Because the United States government can
adequately litigate in multiple fora, "while its choice [of forum] is
properly granted significant weight, it is not a choice that deserves the
same level of deference as does a choice by a plaintiff to bring an
action in her home district." United States v. Klearmn, 82 F. Supp.2d 372,
375 (E.D. Pa.1999); see also U.S. ex rel. Gervae v. Payne and Doland,
Inc., 2003 WL 23185881, at *3. Thus, this factor would weigh only
slightly against transfer. Second, as set forth above, the forum selected by plaintiff for this
action has a substantially weaker connection to the operative facts of
the litigation than the proposed transferee forum does. See e.g. Fontana
v. E.A.R., 849 F. Supp. 212, 215 (S.D.N.Y.1994). The government contends
that because venue rests upon a specific venue provision in the False
Claims Act, rather than the venue provision set forth in 28 U.S.C. § 1391,
plaintiff's choice of forum is entitled to greater deference.
31 U.S.C. § 3732(a); U.S. ex rel. Vallejo v. Investronica, Inc.,
2 F. Supp.2d 330, 336 (W.D.N.Y., 1998); United States ex. rel.
Thistlethwaite v. Dowty Woodville Polymer, Ltd., 110 F.3d 861 (2d Circ.
1997). However, even if that were true, in this action plaintiff's
selected forum has such a relatively weak connection to the operative
facts of the litigation, that even a heightened deference for plaintiff's
forum selection does not support the selection of the Southern District
of New York.
In this case, because (1) venue is proper in both jurisdictions, (2)
the government can adequately litigate this in either forum, and (3) the
selected forum has a weak connection to the operative facts of the
litigation, the government's choice of venue does not weigh heavily
9. Trial Efficiency and the Interest of Justice Based on the Totality of
The government argues that venue should not be transferred because this
Court has already developed a familiarity with the facts and the parties
in this case, and the government's counsel has already devoted three
years to this matter. The government is correct that this Court has
familiarity with this action through ruling on a motion to dismiss the
relator and to approve a settlement, but this Court has not had an
opportunity to rule on the merits of this case, see Huangyan Import
& Export Corp. v. Nature's Farm Products, Inc., 2000 WL 1224814 99 Civ. No. 9404 (S.D.N.Y. Aug. 29, 2000)
and U.S. ex rel. Huangyan Import & Export Corp. v. Nature's Farm
Products, No. 00 Civ. 6593, 2004 WL 74310 (S.D.N.Y. Jan. 15, 2004). The
focus of the litigation has been such matters as the role of the relator
in the action and the fairness of the settlement with BOCNY.
Moreover, a transfer to the Northern District of California would not
needlessly delay this action. Although the case commenced in 2000, no
complaint was filed by the government as opposed to the relator until
late in 2003. Accordingly, this litigation is still in the early stages,
which weighs in favor of a transfer of venue. Pratt v. Rowland,
769 F. Supp. 1128, 1133 (N.D. Cal. 1991). In addition, "the `interests of
justice' are not served by imposing travel inconvenience and significant
expense on individual litigants for the convenience of the United States
government." Cohen v. U.S., 1999 WL 294777, *1 (E.D.N.Y. 1999).
Last, Nature's Farm and Choi have a related action pending in
California against PWM&A. The presence of a related case in the
transferee forum is a strong reason to transfer venue, See e.g., Blanning
v. Tisch, 378 F. Supp. 1058, 1061 (E.D.Pa.1974); see also Craft-Bilt
Mfg. Co. v. Patio Enclosures, Inc., No. 92 Civ. 0545 1992 WL 81402 (E.D.
Pa. April 20, 1992), at *1; Ballard Medical Prods, v. Concord Lab.,
Inc., 700 F. Supp. 796, 801 (D. Del. 1988). Transferring this case to the
Northern District of California will serve judicial economy in that the
two cases will be related. In addition, California's substantive law
apparently governs the case involving PWM&A, and it would not serve
judicial economy to maintain such a case in New York. It is in the interests of judicial economy to avoid a duplication of efforts and
costs and to have these two lawsuits proceed in the same forum.
The NFP defendants have satisfied their burden of showing that transfer
would be for the convenience of the parties and in the interest of
justice. Because this action is transferred to the Northern District of
California, this Court declines to rule on the NFP defendants' motion to
dismiss the second claim and Ravine's motion to dismiss the complaint
against it. See Eisenberg v. Wachovia Bank, N.A., No. 00 Civ. 7910, 2001
WL 30452, at *1 (S.D.N.Y. Jan.11, 2001): see also Matra Et Manurhin v.
Int'l Armament Co., 628 F. Supp. 1532, 1533 (S.D.N.Y. 1986). Therefore,
for the reasons set forth above, this action is transferred to the
Northern District of California.