The opinion of the court was delivered by: William M. Skretny Chief Judge United States District Court
Plaintiffs Edward Simon, Randy Simon, and Ojochal Holdings, Inc.,
formerly known as Edward Graphic Supplies, Ltd., bring this action
against Defendants Anthony Foley, Laura Foley, Converting Solutions,
Inc., and TRI-X, Inc. (Docket No. 1.) Defendants have filed a motion
to dismiss and for change of venue (Docket No. 13).*fn1
For the reasons discussed below, Defendants' motion will be
granted insofar as Defendants seek transfer of venue to the United
States District Court for the Middle District of Florida. Defendants'
motion to dismiss will be denied without prejudice.
The individual litigants in this case are all related. Plaintiff Edward A. Simon is the father of Plaintiff Randy E. Simon and Defendant Laura Foley. (Compl. (Docket No. 1) ¶¶ 1, 8; E. Simon Aff. (Docket No. 3) ¶ 5.) Laura Foley is married to Defendant Anthony J. Foley. (Compl. ¶¶ 4, 7; E. Simon Aff. ¶ 5.)
Edward and Randy Simon are citizens and residents of Ontario, Canada. (Compl. ¶ 1.) They are the sole shareholders of Plaintiff Ojochal Holdings, Inc., formerly known as Edward Graphic Supplies, Ltd ("Edward Graphics"). (Compl. ¶ 1; E. Simon Aff. ¶ 2.) Edward Graphics is a Canadian corporation that manufactured and sold printing products. (Compl. ¶ 2.)
Anthony and Laura Foley are residents of Florida. (Compl. ¶ 7.) They are the sole Directors and Officers of Defendant Converting Solutions, Inc. ("CSI"), a New York corporation formed by Edward Simon, Randy Simon, and Anthony Foley. (Compl. ¶¶ 7, 13, 16.) Anthony Foley is the President of CSI and Laura Foley is the Secretary. (Compl. ¶ 17; E. Simon Aff. ¶ 5.) The Foleys are also both salaried employees of CSI. (Compl. ¶¶ 19, 21; E. Simon Aff. ¶ 10.)
CSI was formed in July of 2004 to operate as the United States sales entity for Edward Graphics. (Compl. ¶¶ 4, 18; E. Simon Aff. ¶ 3.) Anthony Foley is the record owner of all 100 issued shares of CSI, but he holds two-thirds of those shares in trust for Edward and Randy Simon (one-third for each) under the terms of a written trust agreement (Docket No. 1, Ex. 2). (Compl. ¶¶ 6, 14, 15; E. Simon Aff. ¶ 4.) As part of this suit, Edward and Randy Simon each claim equitable and beneficial ownership of their one-third stake in CSI. (Compl. ¶ 6.)
Lastly, Laura Foley is also the sole shareholder of Defendant TRI-X, Inc., a Florida corporation that does business throughout the United States. (Compl. ¶¶ 9, 47.) Anthony Foley is an officer and employee of TRI-X. (Compl. ¶ 10.)
2. The Business Relationship Between Edward Graphics and CSI
CSI was Edward Graphics' sales agent in the United States. (Compl. ¶¶ 4, 18; E. Simon Aff. ¶ 3.) The relationship was governed by a Management Services Agreement entered into on September 7, 2004 (Docket No. 1, Ex. 3). (Compl. ¶ 22.) When CSI sold a product in the United States, it notified Edward Graphics of the sale. (Compl. ¶ 23.) Edward Graphics would then locate, sort, package, and ship the order directly to CSI's customer. (Compl. ¶ 23; E. Simon Aff. ¶ 6.) Edward Graphics would also invoice the order, directing the customer to remit payment to CSI. (Compl. ¶ 23; E. Simon Aff. ¶¶ 6, 7.)
CSI received all customer payments and deposited the funds into its Florida bank account. (Compl. ¶ 23; E. Simon Aff. ¶ 7.) It then paid Edward Graphics for the products shipped, the shipping costs, and any additional costs associated with the order through an "inter-company account." (Compl. ¶¶ 25, 26; E. Simon Aff. ¶ 8.) It appears that Edward Graphics did not have its own source of funding. (Compl. ¶ 55; E. Simon Aff. ¶ 9.) Rather, it monitored CSI's financial and sales accounts via Internet access, and was dependent on blank checks pre-signed by Laura Foley and drawn on CSI's Florida bank account to pay its operating expenses. (Compl. ¶¶ 23, 55; E. Simon Aff. ¶ 9.)
The two companies successfully carried on in this manner until sometime in 2005. (Compl. ¶ 47.) At that time, the Simons were negotiating the sale of Edward Graphics so that Edward Simon could retire. (Compl. ¶ 37.) The Simons were also attempting to sell their interests in CSI to the Foleys, but they could not reach an agreement. (Compl. ¶ 38.)
On May 2, 2006, the Simons sold Edward Graphics to Jacobs and Thompson, Inc. (Compl. ¶ 39.) Included in the sale was an accounts receivable due to Edwards Graphics from CSI for $279,619 CAD. (Compl. ¶ 39.) It was expected that CSI would pay this receivable to Jacobs and Thompson after it collected various outstanding invoices from its customers. (Compl. ¶ 45.) The sale agreement also included a consultant position for Randy Simon, and the continued use of CSI as Edward Graphics' United States sales arm. (Compl. ¶¶ 40, 44.)
Meanwhile, on November 7, 2005, Anthony and Laura Foley formed TRI-X. (Compl. ¶ 47; E. Simon Aff. ¶ 13.) At the time, the Simons were unaware that the Foleys started this company. (Compl. ¶ 48.) According to the Complaint, Edward and Randy Simon now believe that the Foleys formed TRI-X to fraudulently deplete CSI's assets and sever its business relationship with Edward Graphics in light of the pending sale to Jacobs and Thompson. (Compl. ¶¶ 46, 48.)
As an example of the fraudulent acts the Simons attribute to the Foleys, they cite an April 10, 2006, invoice from TRI-X to CSI in the amount of $125,000 for "Advertising, Marketing, Sales training fee for fiscal 2005" (appended to the Complaint as Exhibit G). (Compl. ¶ 50; E. Simon Aff. ¶ 14.) The Simons maintain that this is a false and fraudulent invoice, and that TRI-X, which employed only the Foleys, never performed any work for CSI. (Compl. ¶ 51; E. Simon Aff. ¶ 12.) They further allege that the Foleys fraudulently issued a check from CSI to TRI-X for $30,000 as partial payment on this invoice. (Compl. ¶ 52; E. Simon Aff. ¶ 15.) In short, the Simons allege that the Foleys used TRI-X to fraudulently funnel money and assets out of CSI and into their own hands. (E. Simon Aff. ¶ 12.)
The Simons allegedly learned of this transaction while performing a routine check of CSI's accounts. (Compl. ¶ 53.) Upon this discovery, the Simons immediately notified the Foleys and CSI's Florida bank that they disputed this invoice and opposed money being drawn on the CSI corporate account under the auspices of making partial payment on the invoice. (Compl. ¶ 53.) Moreover, fearing that they were being defrauded, the Simons contacted CSI's customers and requested that they send their payments directly to Edward Graphics, instead of to CSI. (Compl. ¶ 55.) They also tried to use the blank, pre-signed checks that Laura Foley had provided. (Compl. ¶ 55.) In response, the Foleys sent notices to CSI's customers in April of 2006 warning them of a "Fraud Alert," and advising that requests to change the address to which they should make payments to CSI was a "fraud scam." (Compl. ¶ 58.) The Foleys also stopped payment on the blank checks in the Simons' possession and changed the passwords on CSI's accounts to eliminate the Simons' access. (Compl. ¶ 60; E. Simon Aff. ¶ 16.) Edward and Randy Simon also aver that the Foleys have since transferred all of CSI's assets, including goodwill, customer lists, supplier lists, etc., to TRI-X. (Compl. ¶¶ 63, 75; E. Simon Aff. ¶ 22.) And despite continued demands for payment, the Foleys refuse to pay the $279,619 CAD due to Jacobs and Thompson as the new owners of Edward Graphics. (Compl., ¶ 64; E. Simon Aff., ¶ 11.)
The Simons maintain that at the time they were "shut out" of CSI (in April of 2006), CSI had accounts receivables valued at $300,617 USD. (Compl. ¶ 67.) It also had $62,464 USD in its Florida operating account (even after the payment of the $30,000 to TRI-X). (Compl. ¶ 68; E. Simon Aff. ¶ 17.) Moreover, it had $52,161 USD worth of printing-blade inventory stored in a warehouse in Buffalo, New York. (Compl. ¶¶ 5, 69, 71.) Nonetheless, as of the filing of ...