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Blechman v. Ideal Health

November 2, 2009


The opinion of the court was delivered by: Joanna Seybert, U.S.D.J.


SEYBERT, District Judge

Pending before the Court is a motion to transfer venue made by Defendants Ideal Health, Inc., Todd Stanwood, Scott Stanwood, Louis DeCaprio, Infobroker, Inc., UIX, LLC, and United InfoXchange, LLC (collectively, "Defendants"). For the reasons that follow, the Court GRANTS Defendants' motion.


Defendant, Ideal Health, Inc. ("Ideal"), is organized under the laws of the State of Nevada and maintains its only office in Byfield, Massachusetts. Ideal is engaged in the business of direct marketing of health care products. Louis DeCaprio, Scott Stanwood, and Todd Stanwood (collectively, "Individual Defendants") founded Ideal, and each presently owns twenty-three percent of the issued and outstanding shares of the company. Although they are corporate officers and devote all of their professional efforts to its business operations, the Individual Defendants receive no direct compensation from Ideal. However, two entities owned by the Individual Defendants--Infobroker, Inc. ("Infobroker") and UIX L.L.C.--provide management services to Ideal. Ideal pays InfoBroker and UIX fees for these services, which benefits the Individual Defendants.

In March 2007, Ideal hired Plaintiff Dean Blechman ("Blechman") to serve as its Chief Executive Officer pursuant to the terms of a written Employment Agreement. The Employment Agreement provided for Blechman to be paid a monthly salary of $15,000 and for Ideal to issue him a number of shares so that he would own ten percent of the then issued and outstanding shares of the Company.*fn1 On or about May 24, 2001, the Individual Defendants and all of the then existing Ideal shareholders executed a Shareholders Agreement ("Shareholders Agreement"). The Shareholders Agreement provided that the Individual Defendants would be entitled to exercise certain "Founders' Rights," including the right to remain on the Board of Directors and to approve specified extraordinary corporate actions such as a public offering of the Company's stock. The Shareholders Agreement clearly provides that Plaintiff is a "Founder"*fn2 for all purposes.

In February, 2008, Blechman resigned, following a dispute with the Defendants over his performance. Ideal and Blechman executed a Separation Agreement and General Release ("Severance Agreement") setting forth the terms upon which Blechman would resign.*fn3 Defendants allege that following the separation, Blechman acted in such a manner so as to jeopardize Ideal's contract with Donald Trump ("Trump Transaction"). Accordingly, the Individual Defendants, along with Infobroker and UIX, commenced litigation in the United States District Court for the District of Massachusetts (the "Massachusetts Action") on May 14, 2009. In the Massachusetts action, Ideal seeks a declaratory judgment that (1) Blechman is not entitled to the issuance of any additional stock, (2) there is no basis to Blechman's challenges to the Trump Transaction or the manner in which it was structured, and (3) Blechman does not have any right to remain on the Board. DeCaprio, Todd and Scott Stanwood, Infobroker and UIX also seek a declaratory judgment that (4) the Amended Shareholders Agreement did transfer any rights in Infobroker and UIX to Blechman or, alternatively, (5) reforms the Amended Shareholders Agreement to reflect the true intent and understanding of the parties that Blechman does not have any interest, ownership or otherwise, in Infobroker and/or UIX. (DeCaprio Verification, Exhibit F.)

On May 20, 2009, Blechman commenced the instant action in the New York State Supreme Court, Suffolk County, against Ideal, the Individual Defendants, Infobroker and UIX. Defendants removed the case on June 19, 2009. Blechman seeks (1) a declaratory judgment stating that he has a right to the issuance of additional equity so that his ownership interest in Ideal, Infobroker, and UIX equals the individual holdings of the Individual Defendants. (Compl. ¶¶ 31-83); (2) the imposition of a constructive trust on any distributions made by Ideal, Infobroker, and UIX to the Individual Defendants from 2007 through the present; (3) recovery under a theory of unjust enrichment to recover his portion of those alleged distributions; (4) an accounting of any distributions Infobroker or UIX made to the Individual Defendants and of any payments Ideal made to these companies; and (5) to inspect corporate records of Ideal, Infobroker, and UIX.

On June 26, 2009, Defendants filed their motion to transfer venue pursuant to 28 U.S.C. § 1404(a). Alternatively, Defendants move to dismiss the First and Fourth through Seventh Causes of Action for failure to state a claim upon which relief can be granted.


I. Transfer

Pursuant to 28 U.S.C. § 1404 and the First-Filed Rule Prior to reaching the merits of Defendants' motion to dismiss, the Court must address the threshold matter of whether this forum is the proper venue for hearing this dispute. Adam v. Jacobs, 950 F.2d 89, 92 (2d Cir.1991). Accordingly, the Court will consider whether, in light of 28 U.S.C. § 1404 and the first filed rule, this action is properly before it.

Section 1404(a) states 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." See 28 U.S.C. § 1404(a). The goal of Section 1404(a) "is to prevent 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) (quoting Cont'l Grain Co. v. Barge FBL-585, 364 U.S. 19, 26-27, 80 S.Ct. 1470, 4 L.Ed. 2d 1540 (1960)) (internal quotation marks omitted).

Generally, to grant a transfer pursuant to 28 U.S.C. ยง 1404(a), the Court engages in a two-pronged inquiry. See Frasca v. Yaw, 787 F. Supp. 327, 330 (E.D.N.Y. 1992). First, the court asks whether the action sought to be transferred is one that "might have been brought" in the district court in which the movant seeks to have the case litigated. Frasca, 787 F. Supp. at 330; Kroll, 244 F. Supp. 2d at 102. "If the proposed venue is proper, the court then considers whether the transfer will serve the convenience of witnesses and parties and is in the interests of justice." Kroll, 244 F. Supp. 2d at 102. When analyzing the second prong, the court looks to several factors, including the (1) convenience of the parties; (2) convenience of witnesses; (3) relative means of the parties; (4) locus of operative facts and relative ease of access to sources of proof; (5) attendance of witnesses; (6) the weight accorded the plaintiff's choice of forum; (7) calendar congestion; (8) the desirability of having the case tried by the forum familiar with the substantive law to be applied; (9) practical difficulties; and (10) trial efficiency and how best to serve the interests of justice, based on an assessment of the totality of material circumstances. See Neil Bros., 425 F. Supp. 2d at 327-28; see also Lighting World, Inc. v. Birchwood Lighting, Inc., No. 01-CV-4751, 2001 U.S. Dist. LEXIS 16981, at *10 (S.D.N.Y. Oct. 16, 2001). None of these factors are singularly dispositive; rather, the Court weighs all the factors in making its ...

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