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Hewitt Associates, L.L.C. v. Enron Creditors Recovery Corp.

August 20, 2008

HEWITT ASSOCIATES, L.L.C., PLAINTIFF,
v.
ENRON CREDITORS RECOVERY CORP., F/K/A ENRON CORP. DEFENDANT.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Defendant Enron Creditors Recovery Corp.'s ("Enron") motion to transfer. For the reasons stated below, we grant Enron's motion to transfer.

BACKGROUND

Plaintiff Hewitt Associates LLC ("Hewitt") alleges that in 2001, Hewitt was retained by Enron (at the time known as Enron Corp.) to serve as record keeper for the Enron Corp. Savings Plan ("Savings Plan") and other employee benefit plans ("Plans"). Hewitt alleges that Enron and Hewitt entered into an Administrative Services Agreement ("ASA") which included detailed provisions for the sharing and limitation of responsibility for errors and omissions in connection with work performed by Hewitt.

Hewitt alleges that Enron's financial collapse triggered a barrage of class action lawsuits filed by individual participants of the Plans. According to Hewitt, the class action plaintiffs sought judgments requiring that the Plans' fiduciaries restore the Plans' financial losses. These actions were consolidated in the United States District Court for the Southern District of Texas, and are referred to as the Tittle Action. Hewitt states that the class reached settlements with a number of defendants, whereby the defendants agreed to pay money into a settlement trust which would allocate the money according to a "Plan of Allocation" agreed to and negotiated by the parties to the Tittle Action. (Compl. Par. 21).

Hewitt alleges that on January 1, 2005, the parties first amended the ASA ("First Amended ASA") to terminate Hewitt's record keeping services, but that the contractual relationship between Hewitt and Enron remained. According to Hewitt, in 2005, Hewitt took on the role of developing a settlement allocation protocol for the Tittle Action settlement. Hewitt alleges that on July 25, 2006, Hewitt and Enron entered into a second amendment to the ASA ("Second Amended ASA") extending the term of Hewitt's services and including its role in connection with the Tittle Action allocation protocol. According to Hewitt, its role under the Second Amended ASA was to combine the data for thousands of participants in the Plans to create a unified set of data for the purpose of calculating losses.

Hewitt claims that it subsequently discovered an error in the calculation of losses for certain class members that resulted in certain class members receiving too large of a share of the settlement proceeds. Hewitt alleges that the error resulted in a misallocation of approximately $22 million among the Tittle Action class members. According to Hewitt, Enron's estimations indicate that approximately $11.2 million of the $22 million misallocation may not be recoverable. Both Enron and Hewitt allegedly executed loans so that the Tittle Action class members who were underpaid could receive just compensation without waiting for the recovery of the overpayments. Hewitt further alleges that these loans were made with Enron and Hewitt reserving their rights under the Second Amended ASA.

On November 30, 2007, Enron allegedly commenced a lawsuit against Hewitt in the United States District Court for the Southern District of Texas, Case No. 07 C 0481 ("Savings Plan Action"). Hewitt alleges that this lawsuit is currently pending and Enron asserts six claims against Hewitt, including various tort claims for negligence, professional negligence, and gross negligence arising from Hewitt's work on the Tittle Action settlement.

Hewitt alleges that Enron refuses to honor its obligations under the Second Amended ASA to indemnify Hewitt for its losses and to defend the Savings Plan's claims. Hewitt brought the instant action, pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201 et seq., asking that the court to (a) determine and adjudicate the rights and liabilities of the parties under the Second Amended ASA, (b) find and declare that Enron is obligated to indemnify Hewitt for all "losses" under the terms of the Second Amended ASA, including all past and future expenses incurred in defense of the Savings Plan's lawsuit and for the unrecovered balance of Hewitt's loan to the Savings Plan, (c) find and declare that Enron is obligated to defend third party claims brought against Hewitt, including the Savings Plan Action pending in the Southern District of Texas, (d) find and declare that Enron is obligated to indemnify Hewitt for damages that Hewitt suffered as a result of Enron's failure to mitigate damages as it claims the Second Amended ASA requires, and (e) award all further relief the court deems equitable and just. Hewitt initially filed its complaint in the Circuit Court of Lake County, Illinois. Enron removed the case to this court, pursuant to 28 U.S.C. § 1441. Enron now moves to transfer this case to the Southern District of Texas pursuant to 28 U.S.C. §1404(a) ("Section 1404(a)").

LEGAL STANDARD

Pursuant to Section 1404(a), a district court may transfer a civil action to another district if such a transfer is appropriate and if it is done "[f]or the convenience of parties and witnesses, [and] in the interest of justice. . . ." 28 U.S.C. § 1404(a). In order to transfer a case pursuant to Section 1404(a), the transferor court must first find that: (1) venue is proper in the transferor district, and (2) venue is proper in the transferee district. See Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219 (7th Cir. 1986); 28 U.S.C. § 1404(a)(stating that transfer can only be made to a district in which the action "might have been brought"). The moving party has the burden of "establishing . . . that the transferee forum is clearly more convenient." Coffey, 796 F.2d at 219.

DISCUSSION

Enron moves to transfer this action, pursuant to Section 1404(a) to the Southern District of Texas. According to Enron, venue and jurisdiction is proper both in the Northern District of Illinois and the Southern District of Texas. Enron argues that the Southern District of Texas is clearly more convenient since: (1) the Southern District of Texas has been presiding over the Tittle Action and the settlement funds involved for years, (2) every relevant fact occurred in the Southern District of Texas and every relevant witness is subject to jurisdiction in the Southern ...


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