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Gulf Coast Bank & Trust Company v. Home State Bank

November 4, 2011


The opinion of the court was delivered by: Judge Robert M. Dow, Jr.


Before the Court is Defendant's motion, brought pursuant to 28 U.S.C. § 1404(a), to transfer this case to the Western Division of the United States District Court for the Northern District of Illinois [14]. For the reasons set forth below, the Court grants Defendant's motion [14].

I. Background

On December 27, 2008, Defendant Home State Bank ("HSB"), a national banking association, executed a business loan agreement, a note, and a mortgage with Thomas Investments I, LLC and Thomas Investments II, LLC (collectively, the "Borrowers") in the principal amount of $1,530,000.00. The loan was personally guaranteed by two individuals, James L. Schaid and Samuel J. Diamond (collectively, the "Guarantors"). On January 20, 2009, HSB executed a Loan Participation Purchase Certificate and Agreement with Independent Bankers' Bank ("IBB"), by which IBB became a participant in the loan. IBB purchased 68.6275% of the loan in consideration for a payment of $1,050,000.00.

On December 18, 2009, IBB was closed by the Illinois Department of Financial and Professional Regulation, Division of Banking, and the Federal Deposit Insurance Corporation (the "FDIC") was named the receiver of IBB. The loan matured on December 27, 2009, but the Borrowers failed to repay the amount due. According to the complaint, the Borrowers have failed to repay amounts due in the Loan notwithstanding the loan's maturity, and thus are in default on the loan. On or about May 10, 2010, Plaintiff Gulf Coast Bank & Trust Company ("Gulf Coast") purchased IBB's interest in the loan from the FDIC. The FDIC executed an assignment of IBB's rights under the participation agreement, whereby Gulf Coast succeeded to all of IBB's rights under the agreement. HSB retained the right to administer the loan in the participation agreement, with certain restrictions.

According to the complaint, HSB is refusing to exercise its rights to collect on either the note or the mortgage or the personal guarantees executed by the Guarantors subsequent to the Borrowers' Default. Gulf State also alleges that HSB has refused to provide needed information despite repeated requests that it do so. On March 1, 2011, counsel for Gulf Coast wrote a demand letter to HSB in which Gulf Coast demanded that HSB either repurchase Gulf Coast's interest in the loan at a purchase price equal to the amount of the participation investment or, in the alternative, turn over all records concerning the loan and the Guarantors so Gulf Coast can assume direct administration of the loan. HSB responded in a letter dated March 8, 2011, in which it mailed loan documents to Gulf Coast.

On April 19, 2011, Gulf Coast filed a three-count complaint against HSB, asserting claims for breach of contract (Count I); breach of fiduciary duty (Count II); and declaratory judgment (Count III). In short, the complaint alleges that the borrowers have defaulted on the loan at issue, and that HSB has not taken the action required by the participation agreement. Gulf Coast is a Louisiana state chartered bank with its principal place of business and "nerve center" in New Orleans, Louisiana. HSB is an Illinois banking corporation with its principal place of business and "nerve center" in Crystal Lake, Illinois.

II. Legal Standards Governing Section 1404(a) Motions

A district court, "[f]or the convenience of parties and witnesses, in the interest of justice, may transfer any civil action to any other district court where" jurisdiction and venue would have been proper at the time the suit was initiated. 28 U.S.C. § 1404(a); Hoffman v. Blaski, 363 U.S. 335, 344 (1960) (situation at the initiation of the suit affords the critical timeframe). The moving party has the burden of establishing "that the transferee forum is clearly more convenient," based on the particular facts of the case. Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219-20 (7th Cir. 1986). The district court has the authority to "make whatever factual findings are necessary * * * to determin[e] where venue properly lies." In re LimitNone, LLC, 551 F.3d 572, 577 (7th Cir. 2008). Section 1404 has been applied to requests for intra-district transfers. See Navarrette v. JQS Property Maintenance, 2008 WL 299084, at *1 (N.D. Ill. Jan. 29, 2008).

In evaluating motions brought pursuant to Section 1404(a), the Court considers: (1) the plaintiff's choice of forum, (2) the convenience of the parties, (3) the convenience of witnesses, (4) the interests of justice, and (5) the location of the material events giving rise to the case. Roberts & Schaefer Co. v. Merit Contracting, Inc., 99 F.3d 248, 254 (7th Cir. 1996) (listing the first four statutory factors); Continental Cas. Co. v. Staffing Concepts, Inc., 2009 WL 3055374, *2-3 (N.D. Ill. Sept. 18, 2009) (same; elaborating on private- and public-interest sub-factors).*fn1

Although the statute itself lists only the first four factors, considering additional factors, such as location of the material events, is appropriate: the Seventh Circuit teaches that the specified statutory "factors are best viewed as placeholders for a broader set of considerations, the contours of which turn upon the particular facts of each case." Coffey, 796 F.2d at 219 n.3; see also Cote v. Wadel, 796 F.2d 981, 985 (7th Cir. 1986) (explaining that the broad discretion accorded the trial court is a product of the "in the interest of justice" language of the statute); Am. Commercial Lines, LLC v. Northeast Maritime Institute, Inc., 588 F. Supp. 2d 935, 945 (S.D. Ind. 2008) (observing that courts "entertain a wide variety of factors" in evaluating venue transfer motions).

The first factor, the plaintiff's choice of forum, typically is accorded significant weight. "[U]nless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed." In re Nat'l Presto Indus., Inc., 347 F.3d 662, 664 (7th Cir. 2003) (quoting Gulf Oil Corp v. Gilbert, 330 U.S. 501, 508 (1947)). The Seventh Circuit has stated, however, that the Plaintiff's choice of forum has only "minimal value where none of the conduct occurred in the forum selected by the plaintiff." Chicago, Rock Island, & Pac. R.R. Co. v. Igoe, 220 F.2d 299, 304 (7th Cir. 1955).

With regard to the second factor, courts consider the residences and resources of the parties-in essence, their "abilit[y] to bear the expense of trial in a particular forum." Von Holdt v. Husky Injection Molding Sys. Ltd., 887 F. Supp. 185, 188 (N.D. Ill. 1995). Examination of the third factor, the convenience of witnesses, emphasizes not just the raw number but "the nature and quality of the witnesses' testimony." Gueorguiev v. Max Rave, LLC, 526 F. Supp. 2d 853, 858 (N.D. Ill. 2007). Many courts state that, all other things being equal, the convenience of non-party witnesses is accorded greater weight than the convenience of party witnesses, the latter of whom have to participate (or rather, whose non-participation brings more easily administered consequences). See, e.g., First Nat'l Bank v. El Camino Resources, Ltd., 447 F. Supp. 2d 902, 913 (N.D. Ill. 2006). At the same time, a movant cannot meet its burden with only vague statements about the inconvenience imposed by the litigation on non-party witnesses: "The party seeking transfer must specify the key witnesses to be called and make a generalized statement of their testimony." Id. (citing Federated Dept. Stores, Inc. v. U.S. Bank Nat'l Assoc.,, 2001 WL 503039, *4 (N.D. Ill. May 11, 2001)); see also Am. Family Ins. ex rel. Suddarth v. Wal-Mart Stores, Inc., 2003 WL 1895390, *2 (N.D. Ill. Apr. 17, 2003) (defendant must show that the testimony of the particular witnesses is necessary to its case).

The broadly worded fourth factor, "the interest of justice," captures several considerations, including relative ease of access to sources of proofs; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing witnesses; the possibility of a view of the premises; and the state of the court calendar both in the District ...

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