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CLUB ASSISTANCE PROGRAM, INC. v. ZUKERMAN

November 29, 1984

CLUB ASSISTANCE PROGRAM, INC., PLAINTIFF,
v.
JACK J. ZUKERMAN, ET AL., DEFENDANTS.



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

MEMORANDUM OPINION AND ORDER

This Court's September 10, 1984 memorandum opinion and order (the "Opinion," 594 F. Supp. 341) (1) denied as untimely the motion of defendants Jack Zukerman ("Zukerman"), William Feldstein, Jr. and Murray Scheer to transfer venue under Fed.R.Civ.P. ("Rule") 12(b)(3) and (2) granted in part and denied in part defendants' Rule 12(b)(2) motion to dismiss the various counts of the Complaint.*fn1 Now defendants move under 28 U.S.C. § 1404(a) ("Section 1404(a)") for transfer to the Central District of California. For the reasons stated briefly in this memorandum opinion and order, the motion is granted.

Nature of the Case*fn2

Defendants are officers and directors of Delaware Genesis, Inc. ("Genesis"), a Los Angeles-based company "in the business of warehousing, marketing, and selling weight control products, diets, food packages, behavior modification programs, and other health related plans and items" (Complaint ¶ 6). On May 27, 1983 Genesis, acting through defendants, entered into an agreement (the "Contract") with Club Assistance Program, Inc. ("CAP") for marketing-consultant services to help promote sales of Genesis' products in Illinois. Since that time Genesis has not paid CAP all money due, or delivered any of the Genesis stock to which CAP is entitled, under the Contract. On February 29, 1984 Genesis filed a petition for Chapter 11 bankruptcy reorganization in the Central District of California.

CAP claims defendants are responsible for Genesis' incomplete performance of the Contract because they looted, and generally took unreasonable profits from, Genesis. CAP asserts defendants acted against it specifically in an effort to hide their wrongdoing by deliberately misinterpreting the Contract, then by lulling CAP into a false sense of security by misrepresenting to CAP that Genesis would be able to pay its debts.

After the Opinion, CAP remains with three surviving claims. They charge defendants with having:

    1. violated the Racketeer Influenced and Corrupt
  Organizations Act ("RICO"), 18 U.S.C. § 1961-1968 (Count I);
    2. tortiously interfered with the Contract by inducing
  Genesis to breach it (Count II); and
    3. committed fraud by (a) looting Genesis and (b)
  misrepresenting its financial condition to CAP (Count III).

Section 1404(a) Transfer

Section 1404(a) permits transfer "[f]or the convenience of parties and witnesses, in the interest of justice," to any district where an action "might have been brought." Because defendants are California domiciliaries, this action could unquestionably have been brought in the Central District of California (28 U.S.C. § 1391(a)). There is similarly no doubt the action should be transferred there.

Section 1404(a) calls for a balancing exercise, with the burden on defendants to show a significant tipping in their favor. Among the relevant factors are those described in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947) for deciding forum non conveniens cases. But (despite CAP's erroneous assertion to the contrary*fn3) this Court may grant transfers more freely under Section 1404(a) than under the older forum non conveniens doctrine. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 253, 102 S.Ct. 252, 264, 70 L.Ed.2d 419 (1981); Norwood v. Kirkpatrick, 349 U.S. 29, 30-32, 95 S.Ct. 544, 545-46, 99 L.Ed. 789 (1955).

Only one factor weighs in CAP's favor here: its choice of an Illinois forum. As this Court reconfirmed in Associated Mills, Inc. v. Rush Hampton Industries, Inc., 588 F. Supp. 1164, 1165-66 (N.D.Ill. 1984), that choice is simply one factor among many to be considered. Associated Mills, however, went on to echo the teaching of Norwood, 349 U.S. at 32, 75 S.Ct. at 546 that plaintiff's forum selection is significantly less weighty under Section 1404(a) than under forum non conveniens.

Here CAP's choice of forum is heavily outweighed by considerations of the convenience of witnesses*fn4 and (less importantly) the location of relevant documents. CAP's case is based entirely on actions that took place in California in the context of Genesis' business operations. Genesis' sole office is in California and all of its employees and outside accountants reside there (Zukerman Aff. ¶¶ 2-8). If defendants in fact looted Genesis, they did so in California before California witnesses. They took California assets and concealed their looting from California accountants by means of California documents. Their asserted misrepresentations of Genesis' financial condition took place during two long-distance calls (with Zukerman on one end of the telephone line — in ...


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