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Quan v. Computer Sciences Corp.

January 7, 2008


The opinion of the court was delivered by: James Orenstein, Magistrate Judge


Federico Quan ("Quan"), Walter Gray ("Gray"), Don Tyrone Ballard ("Ballard"), and Jeanine L. Shamaly ("Shamaly") brought this putative class action against Computer Sciences Corporation ("CSC"), CSC's Retirement and Employee Benefits Plans Committee (the "Committee"), and several members of CSC's Board of Directors (some of whom also sit on the Committee), seeking certain relief associated with losses sustained by CSC's retirement fund -- and the plaintiffs' individual retirement accounts -- as a result of improperly backdated stock options that CSC allegedly granted to company executives. Docket Entry ("DE") 6 (Amended Complaint) ¶¶ 2-4. On March 19, 2007, the defendants requested a pre-motion conference in anticipation of asking the court to transfer the case to the venue in which CSC has its principal place of business. DE 8. The Honorable Carol B. Amon, United States District Judge, granted the defendants leave to file their motion and, with the parties' consent, referred it to me for decision. See Electronic Order dated March 21, 2007; DE 10 at 2. Having considered the parties' written submissions and oral arguments, for the reasons set forth below, I now grant the defendants' motion and order the case to be transferred to the Central District of California.

I. Background

CSC is a Nevada corporation, with its principal place of business in California, that provides information and technology services worldwide. DE 13 (Declaration of [Defendants' Counsel] Lee G. Dunst in Support of Defendants' Motion to Transfer) ("Dunst Dec.") ¶ 2; DE 18 (Declaration of Susan M. Howell) ("Howell Dec.") ¶ 4. CSC employs approximately 87,000 people, of whom 44,500 work in the United States. Of its domestic employees, approximately 3,000 work in California and approximately 35 work in the Eastern District of New York. Howell Dec. ¶¶ 3, 5.

CSC maintains a benefits plan for qualifying employees, known as the Matched Asset Plan (the "Plan"), that the Committee administers out of CSC's headquarters in El Segundo, California. Amended Complaint ¶¶ 32, 33; Dunst Dec. ¶ 8; Howell Dec. ¶ 7. Participants divert a portion of their pay to the Plan and direct the Plan to purchase investments from among various options, including CSC stock. Amended Complaint ¶¶ 33, 35. According to the plaintiffs, from December 31, 1998 through June 23, 2006, CSC matched a certain percentage of its employees' initial contributions to the Plan, and for most employees that matching contribution was invested in CSC stock. Amended Complaint ¶¶ 24, 36.

Plaintiff Quan filed the original complaint in this action, on behalf of himself and a class of Plan participants, alleging that CSC improperly backdated stock options -- for the purchase of an enormous amount of CSC stock -- and then granted those stock options to Defendants Honeycutt and Level as part of their executive compensation packages. Plaintiffs Gray, Ballard, and Shamaly joined those allegations when they entered the lawsuit by means of the Amended Complaint. See DE 1 (Complaint) ¶¶ 3, 37, 41; see also Amended Complaint ¶ 49. The plaintiffs assert that the backdating caused the price of CSC's stock to drop, which lowered the value of the retirement savings of Plan participants whose accounts held CSC stock. Amended Complaint ¶¶ 37, 39-40. They go on to claim that the defendants breached their fiduciary duties by means of both the backdating practices themselves and the failure to disclose those practices to Plan participants, and that the defendants are therefore liable to Plan participants under the Employee Retirement Income Security Act, 28 U.S.C. § 1001 et seq. ("ERISA"). Amended Complaint ¶¶ 1, 74-103.

Soon after the plaintiffs filed the Amended Complaint in this district, the defendants began the process of seeking to have the case transferred to the Central District of California. DE 8. At the time, CSC's backdating of stock options was also the subject of a number of pending shareholder derivative complaints that had been filed in the latter district and consolidated under the caption, In re Computer Sciences Corp. Derivative Litig., lead docket no. CV 06-5288 (MRP) (Ex) (the "California Action"). See DE 8; DE 12 (Defendants' Memorandum of Law) ("Memo.") at 4-5, 9-10; DE 16 (Defendants' Reply Memorandum of Law) ("Reply") at 1-3. Subsequently, but before the parties argued the instant motion, the California Action was dismissed. See DE 21; DE 22 Ex. A (Order granting CSC's motion to dismiss).

It was also apparently the case, at the time this case began, that the United States Attorney's Office in the Eastern District of New York was conducting a criminal investigation into the backdating of executive stock options by companies around the country, including CSC (the "USAO investigation"). See DE 15-2 (Declaration of Edwin J. Mills) ("Mills Dec.") ¶ 10 & Ex. G. I do not know if that investigation continues (and the answer would not affect the result I now order), but I will assume that it does for the purposes of the following analysis.

II. Discussion

"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). A party seeking such transfer must establish that venue is proper in the transferee forum and must also make a "clear cut showing" that transfer is warranted. In re Hanger Orthopedic Group, Inc. Sec. Litig., 418 F. Supp. 2d 164, 168 & n.3 (E.D.N.Y. 2006) (citing Blass v. Capital Int'l Sec. Group, 2001 WL 301137, at *4 (E.D.N.Y. Mar. 23, 2001); O'Hopp v. ContiFinancial Corp., 88 F. Supp. 2d 31, 34-35 (E.D.N.Y. 2000)); see also Chong v. Healthtronics, Inc., 2007 WL 1836831, at *11 (E.D.N.Y. June 20, 2007) ("The moving party bears the burden of making a 'clear and convincing showing' that there should be a transfer of venue.") (citing Int'l Sec. Exch., LLC v. Chicago Bd. Options Exch., Inc., 2007 WL 1541087, at *2 (S.D.N.Y. May 24, 2007)).

Because the parties agree that this case could properly have been filed in the Central District of California, DE 10 at 2, I need only decide whether the defendants have made a clear-cut showing that a transfer is warranted. In making that decision, I must weigh several factors, none of which is dispositive: (1) the plaintiffs' choice of forum; (2) the convenience of witnesses; (3) the convenience of the parties; (4) the locus of operative facts; (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) availability of process to compel the attendance of unwilling witnesses; and (9) trial efficiency and the interests of justice. See Zaitsev v. State Farm Fire & Cas. Co., 2005 WL 3088326, at *1 (E.D.N.Y. Nov. 17, 2005); see also D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 106-07 (2d Cir. 2006). I discuss each in turn below.

Plaintiffs' Choice of Forum. Courts generally accord considerable deference to a plaintiff's choice of forum and avoid overriding it in the absence of other factors that clearly favor transfer. Chong, 2007 WL 1836831, at *11 (internal citations omitted); Imagine Solutions, LLC v. Medical Software Computer Sys., Inc., 2007 WL 1888309, at *13 (E.D.N.Y. June 28, 2007) (citing Berman v. Informix Corp., 30 F. Supp. 2d 653, 659 (S.D.N.Y. 1998)); GLMKTS, 2004 WL 2434717, at *4 (the plaintiff's choice should not be disturbed where the factors are in equipoise). However, the particular circumstances of a case can undermine the rationale for such deference. Thus, the plaintiff's choice of forum has less weight where the plaintiff does not reside in the chosen forum or where there is little connection between that forum and the circumstances at issue in the litigation. In re Hanger, 418 F. Supp. 2d at 170 (citing Cali v. East Coast Aviation Servs., Ltd., 178 F. Supp. 2d 276, 292 (E.D.N.Y. 2001)); Zaitsev, 2005 WL 3088326, at *3; see also Chong, 2007 WL 1836831, at *11 (plaintiff's choice of home forum entitled to less deference where the jurisdiction had no other connection to the litigation). Likewise, a plaintiff who sues as a class representative rather than solely for her own benefit is entitled to less deference in her choice of forum. Jones v. Walgreen, Co., 463 F. Supp. 2d 267, 274 (D. Conn. 2006) (citing In re Warrick, 70 F.3d 736, 741 & n.7 (2d Cir. 1995)).

All of those circumstances are present here. First, none of the four named plaintiffs resides in this district or its home state of New York. Indeed, two of them -- Ballard and Shamaly -- reside in the state of California to which the defendants would have me transfer their case. Amended Complaint ΒΆΒΆ 10, 11. Second, there is no identified connection between the circumstances at issue in this litigation and the Eastern District of New York. Third, the named ...

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