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Marrone v. Teleservices Group

May 28, 2008


The opinion of the court was delivered by: Platt, District Judge.


Before the Court is defendants Adiletta, Collins and Pron's (collectively "Individual Defendants") motion to transfer venue of this matter to the United States District Court for the District of New Jersey "for referral to that District's Bankruptcy Division."

For the following reasons, defendants' motion is DENIED.

In August 2000, defendant Teleservices Group, Inc. ("TSG") was incorporated in New Jersey for the purpose of purchasing various distressed telecommunications companies. Defendants Adiletta and Collins were directors and officers of TSG while defendant Pron was the corporation's controller. Plaintiffs were the legal and equitable owners of 100% of the no par common stock known as Tel@Net Information Systems Corp. ("Tel@Net"). In August 2000, defendants Adiletta and Collins, acting on behalf of TSG, purchased plaintiffs' interest in Tel@Net.

Pursuant to the contract of sale between plaintiffs and defendants, TSG gave plaintiffs a promissory note secured by Tel@Net stock. In or around June 2002, TSG went out of business.

On October 30, 2002, plaintiffs filed their Complaint in this action asserting claims against TSG as well as the Individual Defendants. On or about March 6, 2003, defendant TSG filed a voluntary petition for bankruptcy in the United States Bankruptcy Court for the District of New Jersey. On March 25, 2003, plaintiffs each filed proofs of claim in the TSG bankruptcy proceeding. On June 3, 2003, this Court issued an Order staying further proceedings in the instant case pending resolution of the bankruptcy case. Subsequently, on October 21, 2003, the TSG bankruptcy trustee initiated an adversary proceeding on behalf of the corporation which asserts causes of action against, inter alia, the Individual Defendants.

The Individual Defendants now seek an Order transferring this action to the District Court of New Jersey for referral to the United States Bankruptcy Court for the District of New Jersey. In support of their motion, defendants contend that the instant case presents claims substantially identical to those in the adversary proceeding and, as a result, both actions should be addressed by one court.

The Individual Defendants further claim that all proceedings related to a bankruptcy action should be litigated in the bankruptcy court thereby negating the presumption favoring plaintiffs' choice of forum. Additionally, defendants state that by filing proofs of claim in the bankruptcy action, plaintiffs' claims in this proceeding have become "core proceedings" subject to the jurisdiction of the bankruptcy court. Furthermore, defendants claim that since their alleged misfeasance occurred in New Jersey where TSG is headquartered and where its bank accounts are located, venue is proper in that state. Finally, defendants state that the relative locations of the parties, witnesses and documents as well as the convenience of the witnesses favors transfer to New Jersey.

Plaintiffs oppose defendants request to transfer venue and argue that they are entitled to their choice of forum. Additionally, plaintiffs are New York residents and the negotiations with regard to the Individual Defendants' purchase of plaintiffs' Tel@Net stock, including defendants' allegedly fraudulent representations, took place in New York. Furthermore, plaintiffs claim that the documents and witnesses relevant to this case are located in New York and that there is little or no hardship or inconvenience in having defendants, witnesses and documents brought to the Eastern District of New York. Plaintiffs also allege that discovery is complete and request that the Court put this matter on the trial calendar.

In addition, plaintiffs claim that the Individual Defendants delay in making the instant motion, i.e., in excess of four and one-half years since the commencement of this action and four years since TSG filed for bankruptcy, weighs against the transfer of venue in this matter

Plaintiffs also argue that defendants' motion should be denied because this action is not a proceeding in bankruptcy. Instead, the claims made against the Individual Defendants are direct claims whereas the adversary proceeding brought by the trustee is derivative in nature and any proceeds from that lawsuit will inure to TSG's entire creditor body.

Plaintiffs further state that the filing of proofs of claim in the bankruptcy proceeding does not confer that Court with jurisdiction over them so that it could hear plaintiffs' direct claims against the Individual Defendants. Finally, plaintiffs seek a jury trial, which is not available in the bankruptcy court.

Pursuant to 28 U.S.C. § 1404(a), "[f]or 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."*fn1 "District courts have broad discretion in making determinations of convenience under Section 1404(a) and notions of convenience and fairness are considered on a case-by-case basis." D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 106 (2d Cir. 2006) (citing In re Cuyahoga Equip. Corp., 980 F.2d 110, 117 (2d Cir. 1992)).

The moving party bears the burden of demonstrating that a transfer of venue is appropriate and "must establish (1) that 'the action to be transferred is one that might have been brought in the district to which the movant seeks to have it transferred,' and (2) that the 'convenience of parties and witnesses and the interests of justice favor transfer.' " G. Angel ...

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