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Richard Humphries v. Coppercrest Leveraged Mortgage Fund et al

February 15, 2012

RICHARD HUMPHRIES, PLAINTIFF,
v.
COPPERCREST LEVERAGED MORTGAGE FUND ET AL., DEFENDANTS.



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

MEMORANDUM OPINION AND ORDER

Before the Court is Defendants' motion [12] to dismiss or transfer Plaintiff's claims. For the reasons below, Defendant's motion [12] is granted in part. The Clerk is directed to transfer this case to the United States District Court for the District of Arizona.

I. Background

On December 7, 2010, Plaintiff Richard Humphries filed an eight count complaint against Defendants Coppercrest Leveraged Mortgage Fund, Coppercrest Management LLC, Jayne Hartley and Matthew Hartley (collectively, "Coppercrest") alleging violations of Section 11 of the 1933 Securities Act, Section 10(b) and Rule 10(b)-5 of the 1934 Securities and Exchange Act, along with several state law claims. Humphries' claims arise out of a May 1, 2006 transaction, in which he invested $50,000 into Coppercrest pursuant to a private offering memorandum. Coppercrest was formed to "make and acquire all or portions of loans secured by real estate to various persons, corporations, limited liability companies, partnerships and other entities." Plaintiff claims that he invested in Coppercrest in reliance on oral representations that:

(1) Coppercrest would use the funds raised in the offering toward investments; and (2) that the funds he invested were completely protected and secured by high quality mortgages that would have a least a 50% debt to equity ratio. He also alleges that Defendants failed to disclose that they directed Coppercrest to borrow additional secured funds from another lender bank and gave that bank priority over all other investors. In October 2009, Plaintiff made a written request to withdraw his investment, but Defendants (1) refused to return the funds, (2) claimed that the fund was winding down because of the declining real estate market, and (3) used all remaining money to pay off the line of credit.

II. Motion to Transfer

The Court begins with Defendant's motion to transfer the case to the District of Arizona. Defendant argues that Arizona is the more appropriate forum since all of the Defendants, the Plaintiff, any potential witnesses, all of the relevant evidence, and the site of all material events occurred in Arizona.

A. 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).

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 also "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 must 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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