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Jones v. InfoCure Corporation

November 08, 2002

DAVID JONES AND SUSAN JONES, PLAINTIFFS-APPELLANTS,
v.
INFOCURE CORPORATION, ET AL., DEFENDANTS-APPELLEES.



Appeals from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. IP01-0670 C--John D. Tinder, Judge.

Before Rovner, Diane P. Wood, and Williams, Circuit Judges.

The opinion of the court was delivered by: Diane P. Wood, Circuit Judge

ARGUED MAY 13, 2002

David and Susan Jones, former owners of PRISM Data Systems, Inc. (PRISM) entered into a contract to sell PRISM to defendant InfoCure Systems, Inc., in exchange for shares of InfoCure. Unfortunately, the value of InfoCure stock took a nose-dive after the closing date of the transaction. Believing that they had been cheated, the Joneses filed suit for damages, rescission, and an injunction against InfoCure and two of its officers (to whom we refer collectively as InfoCure), alleging breach of contract, common law fraud, and violation of the Indiana securities laws. The district court found that a clause in the agreement stipulating that it would be governed by Georgia law was enforceable; it therefore dismissed the claims based on Indiana securities law and denied the Joneses' request for a preliminary injunction. It then transferred the remaining claims to the Northern District of Georgia. On this appeal, the Joneses have attempted to challenge the merits of the district court's choice of law decision, the transfer order, and the court's denial of their requested preliminary injunction. We conclude that only the ruling on the preliminary injunction request is properly before us, and as to that, we conclude that the district court did not abuse its discretion. The rest of the Joneses' arguments can be presented in due course to the district court in Georgia.

I.

David and Susan Jones started a successful Indiana corporation, PRISM, that provided computer systems for ophthalmologists and other medical practices. In October 1999, one of InfoCure's officers approached Susan at a trade show and told her that InfoCure was interested in acquiring PRISM. The two sides began serious discussions, which culminated in an Agreement and Plan of Merger that the parties signed on December 28, 1999. Under that agreement, InfoCure promised to pay $5,000,000 for PRISM in the form of InfoCure common stock. The number of shares needed to meet the $5,000,000 price tag was to be calculated using the average stock price over the 20-day period prior to the closing. As it happened, during that time, the shares neared an all-time high; not long afterward, their value plummeted.

Unhappy about the result of the deal, which left them with shares representing a fraction of the $5,000,000 they had expected to gain in exchange for their company, the Joneses brought this action in the Boone County Superior Court, in Indiana. In it, they alleged among other things that InfoCure violated Indiana securities laws. Relying on the diversity jurisdiction of the federal court (because the Joneses were both citizens of Indiana, InfoCure is a Delaware corporation with its principal place of business in Georgia, the individual defendants were citizens of Alabama and Connecticut, and the amount alleged exceeded $75,000), InfoCure removed the case to the federal district court for the Southern District of Indiana. Once in federal court, InfoCure then moved to dismiss the action, or in the alternative to have it transferred to the Northern District of Georgia under 28 U.S.C. § 1404(a). The Joneses moved for a preliminary injunction to prevent InfoCure from taking various actions that were allegedly irreparably damaging PRISM, so that the value of the company would be preserved if they succeeded on their claim for rescission.

II.

The jurisdictional posture of this case is convoluted, but it is central to our disposition of this appeal. The district court denied the Joneses' request for a preliminary injunction and entered an order transferring the case to the Northern District of Georgia on October 15, 2001. In the order, it directed the clerk of the district court "to administratively effectuate this transfer." According to the Southern District of Indiana's docket, the case was closed and transferred to Georgia on October 16, 2001. The Joneses filed their notice of appeal ten days after the transfer was effectuated. On November 8, 2001, the record was returned from the Northern District of Georgia to the Southern District of Indiana "for appeal purposes." The Joneses then filed an amended notice of appeal, including a challenge to the "order of transfer," on November 13, 2001. A review of the docket sheet for the Northern District of Georgia shows that the case is still considered open there, although as of May 8, 2002, the court appeared to be confining its actions to administrative matters, mostly having to do with attorney appearances.

The Joneses would like this court to review all three matters we identified above: the decision of the Indiana court to transfer the case to Georgia under § 1404(a), the underlying choice of law issue that influenced the court in its transfer decision, and its denial of preliminary injunctive relief. In general, appellate jurisdiction exists over orders denying preliminary injunctive relief. See 28 U.S.C. § 1292(a)(1); Stewart v. Taylor, 104 F.3d 965, 970 (7th Cir. 1997). But one question that arises is which court of appeals should exercise that jurisdiction? This case is now functionally in the Northern District of Georgia, within the Eleventh Circuit, but the order denying the injunction was entered by the court for the Southern District of Indiana, from which appeals go to this court. See 28 U.S.C. §§ 41, 1294. We discuss in a moment the consequences for our appellate jurisdiction of this sequence of events.

Jurisdiction over the transfer order and the choice of law determination that motivated it is also questionable. Normally, a decision to transfer a case from one district to another under the statutory version of forum non conveniens that is found in § 1404(a) is a non-reviewable interlocutory order. See In re Joint E. & S. Dists. Asbestos Litig., 22 F.3d 755, 761-64 & n.14 (7th Cir. 1994). The Joneses invite this court to take a form of pendent appellate jurisdiction over the transfer order, piggy-backing on the undeniably proper appeal from the denial of the preliminary injunction. InfoCure agrees that we have jurisdiction over the preliminary injunction ruling, but it argues that there is no basis for our review of the transfer order or associated matters. (It has also made a perfunctory challenge to the plaintiffs' allegation of more than $75,000 in controversy, but we find that to be frivolous on these facts.)

III.

Generally speaking, a district court relinquishes all jurisdiction over a case when it is transferred to another district court. See In re Joint E. & S. Dists. Asbestos Litig., 22 F.3d at 761-64 & n.14. The question for us is whether, as the court of appeals with jurisdiction over the transferor court, we similarly lose jurisdiction over orders entered by the district court prior to or contemporaneous with the transfer. Most cases have implicitly held that appeals from orders granting or denying preliminary injunctions properly go to the court of appeals encompassing the transferor court's district, distinguishing the appealability of the injunction order from that of the transfer order. See, e.g., United States Aluminum Corp. v. Kawneer Co., Inc., 694 F.2d 193, 195 (9th Cir. 1982); Emerson Elec. Co. v. Black & Decker Mfg. Co., 606 F.2d 234, 237 (8th Cir. 1979); Codex Corp. v. Milgo Elec. Corp., 553 F.2d 735, 737 (1st Cir. 1977).

Some courts, however, have held that a § 1404(a) transfer ends the jurisdiction of both the transferor court and the corresponding appellate court at the moment when the motion has been implemented and the case has been docketed by the transferee court. See Lou v. Belzberg, 834 F.2d 730, 733 (9th Cir. 1987); In re Sosa, 712 F.2d 1479, 1480 (D.C. Cir. 1983); In re Nine Mile Ltd., 673 F.2d 242, 243 (8th Cir. 1982); In re Southwestern Mobile Homes, Inc., 317 F.2d 65, 66 (5th Cir. 1963); Drabik v. Murphy, 246 F.2d 408, 409 (2d Cir. 1957). These courts, however, seem more ...


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