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SO-COMM, INC. v. REYNOLDS

April 29, 1985

SO-COMM, INC., AN OHIO CORPORATION, PLAINTIFF,
v.
DAVID L. REYNOLDS AND PAUL E. HANSON, DEFENDANTS.



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

MEMORANDUM ORDER

Before the Court is defendants' motion to dismiss for improper venue or, in the alternative, to transfer the case to the United States District Court for the Southern District of Ohio. For reasons stated herein, defendants' motion to dismiss is denied and defendants' motion to transfer is granted.

I. FACTS

So-Comm's business is the construction, marketing and operation of cable television systems. Reynolds is one of the three directors of So-Comm. Hanson is the controller of Clermont Satellite Services, Inc. ("CSS"), an Ohio corporation that contracted with So-Comm in 1983 to construct cable systems and to perform certain management services. Reynolds is the controlling shareholder, director and officer of CSS.

The following facts are assumed true for purposes of this motion. In 1983, Reynolds obtained cable television franchises for a number of municipalities and townships in Clermont County, Ohio. After acquiring these franchises, Reynolds proved unable to develop them because he lacked sufficient capital. He therefore decided to sell the franchises. A broker of investment opportunities in the cable communications industry residing in Illinois put Reynolds in contact with Terrell Isselhard of Chicago. On several occasions, Reynolds visited Chicago to discuss the cable system franchises with Isselhard and Isselhard's law partner, Clement J. Carroll. Isselhard and Carroll are also directors of So-Comm.

At these meetings, Reynolds made various representations to Isselhard and Carroll about the franchise and number of Ohio "house counts" available. The organizations responsible for undertaking the "house counts" were RCH Cable Marketing, and CSS, both Ohio Corporations. Reliance on the "house count" information was important in securing a loan agreement with the Huntington National Bank of Northeast Ohio and in forming two related Illinois partnerships, the Clermont Cablevision Investment Limited Partnership and the Clermont Cablevision Operating Partnership. The partnerships were to acquire and invest in the Ohio cable system franchises and So-Comm was to benefit from the loan agreement.

In mid July, Isselhard undertook an investigation of Reynolds' and Hanson's representation of the franchise area "house counts," which were allegedly overestimated. The results of that investigation, among other things, eventually led to this lawsuit. Another suit is pending between So-Comm and Reynolds and Hanson in an Ohio state court. That case is No. 84-CV-0764 in the Clermont County Court of Common Pleas involving allegations of common law fraud.

Defendants move this Court to dismiss this action for improper venue or, in the alternative, to transfer this case to the United States District Court for the Southern District of Ohio pursuant to 28 U.S.C. § 1404 (a).

II. DISCUSSION

A. Venue

Under the "weight of contacts" test, applied to determine proper venue under both 18 U.S.C. § 1965 (a) and 28 U.S.C. § 1391 (b), the Court finds that the Northern District of Illinois has sufficient contacts with the underlying cause of action and consequently venue in this district is proper. See Follett College Stores Corp. v. Fernandez, 587 F. Supp. 1051 (N.D.Ill. 1984).

Section 1391(b), 28 U.S.C. provides, in part, that an action such as the present one (where jurisdiction is not based solely upon diversity of citizenship) may be brought "in the judicial district in which the claim arose." Id. Venue for RICO claims may be grounded upon section 1391(b). Farmers Bank of the State of Delaware v. Bell Mortgage Corp., 452 F. Supp. 1278, 1280-81 (D.C.Del. 1978). Venue for RICO claims may also be grounded upon 18 U.S.C. § 1965. Venue under 18 U.S.C. § 1965 states:

  any civil action or proceeding under this chapter
  against any person may be instituted in the district
  court of the United States for any district in which
  such person,

  resides is ...

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