United States District Court, Northern District of Illinois, E.D
April 29, 1985
SO-COMM, INC., AN OHIO CORPORATION, PLAINTIFF,
DAVID L. REYNOLDS AND PAUL E. HANSON, DEFENDANTS.
The opinion of the court was delivered by: Bua, District Judge.
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.
Plaintiff So-Comm, Inc. brings this action under the Racketeer
Influenced and Corrupt Organizations Act ("RICO") predicated
on fraud in the sale and subsequent financing of cable television systems
in Clermont County, Ohio. So-Comm is an Ohio corporation with its
principal place of business in Ohio. The defendants David L. Reynolds and
Paul E. Hanson are both residents of Ohio, work in Ohio, and have no
business or property in Illinois.
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
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).
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
resides is found, has an agent, or transacts his
Venue for So-Comm's RICO act claim is proper in this district under both
28 U.S.C. § 1391 (b) and 18 U.S.C. § 1965.
According to the complaint and affidavits submitted by the parties,
Reynolds sold his cable franchises to Illinois investors. Two Illinois
agents, both residents of Illinois, conducted the franchise operations
for Reynolds. Once contact was established by his agents, Reynolds
visited Chicago on several occasions to discuss the progress of the
franchises with Isselhard and Carroll. Also, two Illinois partnerships,
the Clermont Cablevision Investment Limited Partnership and the Clermont
Cablevision Operating Partnership, were established in Illinois to
acquire and operate the cable franchises. Furthermore, negotiations
concerning the sale of the cable franchises took place in Illinois.
The negotiations contained various representations that Reynolds made
to Isselhard and Carroll. Some of these representations were crucial to
the forming of the Illinois partnerships and to Isselhards' decision to
negotiate a loan agreement for So-Comm with the Huntington National Bank
of Northeast Ohio. Therefore, since Reynolds made several trips to
Illinois which, in part, gave rise to this suit, this Court finds that
So-Comm's RICO claim "arose" in Illinois for purposes of
28 U.S.C. § 1391 (b). Additionally, because defendants had "agents"
in Illinois and "transacted affairs" in Illinois, this Court finds that
venue is also proper under 18 U.S.C. § 1965 (a).
The Court distinguishes the facts of Follett College Stores Corp. v.
Fernandez, 587 F. Supp. 1051 (N.D.Ill. 1984), from the facts of this
case. In Follett, this Court found that "[a)lthough the various
defendants may have made numerous trips into this district, Follett does
not allege or support the proposition that these trips relate directly to
the subject matter of this suit." Id. at 1053. Consequently, in Follett,
this Court found that ". . . the chosen forum lack[ed] significant
contacts with the underlying cause of action." Id.
In this case, however, So-Comm alleges specifically that Reynolds'
trips to Illinois related directly to this RICO action. Hence, this Court
finds that the chosen forum, the Northern District of Illinois, has
sufficient contacts with the underlying cause of action for purposes of
18 U.S.C. § 1965 (a) venue and 28 U.S.C. § 1391 (b) venue.
Defendants' motion to dismiss is therefore denied.
In order to meet § 1404(a) requirements, the movant must establish
"(1) that venue is proper in the transferor district; (2) that the
transferor court has the power to transfer the case (that is that the
transferee court is in a district `where it might have been brought');
and (3) that the transfer is for the `convenience of the parties and
witnesses in the interest of justice.'" Hotel Constructors, Inc. v.
Seagrave Corp., 543 F. Supp. 1048, 1050 (N.D.Ill. 1982).
Venue is proper in this district for the reasons stated above.
Additionally, this action could have been brought in the United States
District Court for the Southern District of Ohio, which has proper venue
and jurisdiction, because defendants reside in Clermont County, Ohio.
Exhibit A to Reynolds' Affidavit, at ¶ s 5 and 6. Accordingly,
requirements (1) and (2) are met. This Court now turns to requirement
1. Convenience of the Parties
Before granting a motion to transfer, the Court must consider the
convenience of the parties, convenience of the witnesses and the
interests of justice, while giving weight to plaintiff's choice of
forum. Yet, the Court gives less weight to plaintiff's choice of forum in
a motion to transfer than a motion to dismiss for forum non conveniens.
Cunningham v. Cunningham, 477 F. Supp. 632, 634 (N.D.Ill. 1979).
Furthermore, the plaintiff's choice of forum is entitled to less
consideration when he is not a resident of the forum district. Pesin v.
Goldman, Sachs & Co., 397 F. Supp. 392 (S.D.N.Y., 1975). See also New
Images Inc. v. Travelers Indem. Co., 536 F. Supp. 58 (E.D.Pa., 1981).
plaintiff's choice of forum, for purposes of this motion to transfer, is
but one factor for the Court to consider. General Signal Corp. v. Western
Electric Co., 362 F. Supp. 878, 880 (N.D.Ill. 1973).
In this case, Reynolds and Hanson are residents of the Southern
District of Ohio. Both defendants are employed in Ohio. So-Comm is a
corporation organized and existing under the laws of the state of Ohio
which maintains its sole place of business in Clermont County, Ohio.
Therefore, transfer of the case from the Northern District of Illinois to
the Southern District of Ohio would pose no inconvenience to any party
and, in fact, would be more convenient for all parties.
2. Convenience of the Witnesses and Interests of Justice
In analyzing the convenience of witnesses, this Court must consider not
only the number of potential witnesses, but also the nature and quality
of their testimony in relationship to the issues of the case.
Environmental Services Inc. v. Bell Lumber and Pole Co., 607 F. Supp. 851,
854 (N.D.Ill. 1984). In this case, the majority of witnesses and bulk of
the documentary evidence are located in Ohio, except for two shareholders
of So-Comm, Isselhard and Carroll, who reside in Illinois. Plaintiff's
racketeering claims concern both the "house counts" in Clermont County
Ohio, conducted by two Ohio marketing firms, and the financing
arrangement with the Huntington Bank of Ohio. Since neither the marketing
firms nor the Huntington Bank are parties to this case, their employees
are beyond the subpoena power of this Court.
Additionally, the organizations that undertook the "house counts" in
connection with the marketing of the cable systems are RCH Cable
Marketing, and Clermont Satellite Services, Inc., both located in Ohio.
These organizations are not parties to this litigation and their ten
employees, two of which already have given depositions and four others
that have promised depositions, are beyond the subpoena power of this
Court. There are no Illinois witnesses with knowledge of the Ohio "house
count" figures. Moreover, the basis for plaintiff's racketeering claims
concerns financing alleged to have been fraudulently obtained from the
Huntington Bank of Cleveland, Ohio. That bank is also not a party to this
case. The loan agreement was negotiated, executed and performed in Ohio.
The bank officer responsible for that account is a resident of Ohio and
beyond the subpoena power of this Court. Consequently, transferring this
action to the United States District Court for the Southern District of
Ohio would serve the convenience of the witnesses.
Therefore, it is in the interest of justice and for the convenience of
the witnesses that this suit be transferred to the United States District
Court for the Southern District of Ohio. The Ohio forum is clearly more
convenient for the majority of witnesses involved in this litigation.
Additionally, the compulsory process, assuring attendance of unwilling
witnesses, is available to more witnesses in the Ohio forum.
For the reasons stated above, defendants' motion to dismiss is denied
and defendants' motion to transfer to the United States District Court
for the Southern District of Ohio is granted.
IT IS SO ORDERED.
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