DocketNumber： Civil No. 14-cv-3111 (MJD-TNL)
Citation Numbers： 124 F. Supp. 3d 878, 2015 U.S. Dist. LEXIS 109421, 2015 WL 4964654
Judges： Davis, Leung
Filed Date： 8/19/2015
Status： Precedential
Modified Date： 10/18/2024
ORDER
Based upon the Report and Recommendation by United States Magistrate Judge Tony N. Leung dated July 80, 2015 (ECF No. 58), along with all the files and records, and no objections to said Recommendation having been filed, IT IS HEREBY ORDERED that Defendant’s Motion to Transfer, or Alternatively, to Stay Proceedings (ECF No. 26) is DENIED.
REPORT & RECOMMENDATION
I. INTRODUCTION
This matter comes before the Court, United States Magistrate Judge Tony N. Leung, on Defendant’s Motion to Transfer, or Alternatively, to Stay the Proceedings (ECF No. 26). This motion has been referred to the undersigned for a report and recommendation to the district court, the Honorable Michael J. Davis, District Judge for the United States District Court for the District of Minnesota, under 28 U.S.C. § 636 and D. Minn. LR 72.1. (ECF No. 31.)
A hearing was held. Jeff H. Eckland of Eckland & Blando LLP appeared on behalf of Plaintiff BAE Systems. Land & Armaments L.P. (“BAE”). Sonia L. Miller-Van Oort of Sapientia Law Group and Justin M. Ganderson of McKenna Long & Aldridge LLP
Based upon the record, memoranda, and the proceedings herein, IT IS HEREBY RECOMMENDED that the Motion to Transfer, or Alternatively, to Stay the Proceedings (ECF No. 26) BE DENIED.
II. BACKGROUND
This is an action for breach of a subcontract between BAE and Ibis Tek. (Am. Compl. ¶¶ 3, 6, ECF No. 9.) Under the subcontract, Ibis Tek was to supply win
The Special Terms and Conditions required Ibis Tek to “prepare and submit cost or pricing data and supporting attachments” as well as “a Certificate of Current Cost or Pricing Data” in accordance with federal acquisition regulations. (Ex. 2 at 2.030-.031; see Am. Compl. ¶ 7.) The Special Terms and Conditions also required Ibis Tek
to indemnify and hold [BAE] harmless to the full extent of any loss, damage, or expense, including but not limited to, any price reduction in [BAE’s] prime contract with the U.S. Government or subcontract of any tier, resulting fi’om submission, by [Ibis Tek] or its lower-tier subcontractors, of cost or pricing data that were not complete, accurate, and current as certified. •
(Ex. 2 at 2.031; see ArmCompl. ¶ 8.) “In conjunction with its proposal, Ibis Tek submitted cost or pricing data and signed a Certifícate of Current Cost or Pricing Data as of August 16, 2007.” (Am.Compl. ¶ 10.)
Subsequently, the Defense Contract Audit Agency (“DCAA”) “examined Ibis Tek’s cost or pricing data related to initial pricing of the [subcontract.” (Am.Compl, ¶ 11.) The DCAA “determined that Ibis Tek overstated material, material handling, labor and overhead, and general and administrative costs as a result of its failure to submit accurate, complete, and current cost or pricing data.” (Am.Compl. ¶ 13.) In a separate report, the DCAA “determined that BAE ... overstated the negotiated subcontract costs as a direct result of Ibis Tek’s failure to submit current, accurate, and complete data to the Government.” (Am.Compl. ¶ 15.) Ibis Tek challenged the DCAA’s findings. (Am. Compl. ¶ 13.)
Ultimately, a revised demand letter was issued to BAE by the Army Contracting Officer for the Prime Contract (“Army Contracting Officer”). (Am.Compl. ¶¶ 16, 17.) “The letter adjusted the principle amount that BAE ... was indebted to the Government to indicate the correct profit percentage negotiated at the time of the award. The letter also provided details on how BAE ... was to pay the indebtedness.” (Am.Compl. ¶ 17.)
Because Ibis Tek was not in privity with the Army, Ibis Tek was not able to challenge the finding that it had submitted cost or pricing data that was not current, accurate, and complete with the Army Contracting Officer directly. (Am.Compl. ¶ 18.) BAE and Ibis Tek entered into a Sponsorship Agreement “for the purpose of allowing Ibis Tek to challenge” the cost- or-pricing-data finding. (Am.Compl. ¶ 18.) On behalf of Ibis Tek, BAE filed a claim with “the Army Contracting Officer challenging the Government’s price adjustment and demand of $2,740,910.27 for the alleged defective pricing.” (Am.Compl. ¶ 19.) The Army Contracting Officer denied the claim and the approximately $2.7 million was ultimately recouped by offset against other payments the Government owed to BAE. (Am.Compl. ¶¶ 21,26.)
In a series of communications, BAE informed Ibis Tek that the claim had been denied and requested that Ibis Tek pay BAE the approximately $2.7 million under the terms of the subcontract. (Am.Compl. ¶22.) BAE requested that Ibis Tek advise whether it planned to appeal the Army Contracting Officer’s denial and to
III. ANALYSIS
Ibis Tek has now moved that this matter be transferred to the United States District Court for the Western District of Pennsylvania pursuant to 28 U.S.C. § 1404(a), or in the alternative, stayed until resolution of the appeal before the Armed Services Board of Contract Appeals.
A. Transfer
“For the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought..,28 U.S.C. § 1404(a). “A court faced with a motion to transfer, therefore, must undertake a two-part inquiry. The initial question is whether the action may have been brought in the proposed, transferee district. If so, the Court must then consider the convenience and interest of justice factors.” Valspar Corp. v. Kronos Worldwide, Inc., 50 F.Supp.3d 1152, 1155 (D.Minn.2014) (quotation omitted). When considering “a request to transfer venue under § 1404(a)[, a court] is not limited to a determination on the pleadings. A court may consider undisputed facts presented through affidavits, depositions, stipulations, and other relevant documents.” Dial Tech., LLC v. Bright House Networks, LLC, No. 13-cv-2995 (MJD/TNL), 2014 WL 4163124, at *8 (D.Minn. Aug. 21, 2014) (citing cases).
Ibis Tek is a Pennsylvania limited liability company with its principal place of business in Butler, ' Pennsylvania. (Am. Compl. ¶ 2; Mem. in Supp. at 2,13.) Butler is located in Butler County, which is in the Western District of Pennsylvania. See County of Butler Web Map Viewer, Butler County, http://maps.co.butler.pa.us/ (last accessed July 27, 2015); Western District of Pennsylvania Area of Service, U.S. Marshals Service, http://www.usmarshals, gov/district/pa-w/general/area.htm (last accessed July 27, 2015). BAE does not appear to dispute that this action could have been brought in the Western District of Pennsylvania and, as a result, the Court proceeds to whether the relevant factors favor transfer under § 1404(a). See Klatte v. Buckman, Buckman & Reid, Inc., 995 F.Supp.2d 951, 955 (D.Minn.2014).
“[A] transfer motion requires the court to consider the convenience of the parties, the convenience of the witnesses, the interests' 'of justice, and any other relevant factors when comparing alternative venues.” Terra Int’l Inc. v. Miss. Chem. Corp., 119 F.3d 688, 696 (8th Cir.), cert. denied, 522 U.S. 1029, 118 S.Ct. 629, 139 L.Ed.2d 609 (1997); accord Dial Tech., 2014 WL 4163124, at *8; Clergy Fin., LLC v. Clergy Fin. Servs., Inc., 598 F.Supp.2d 989, 995 (D.Minn.2009). The Eighth Circuit has “declined to offer an exhaustive, list of specific factors to consider in making the transfer determination, but [has instructed] district courts [to] weigh any case-specific factors relevant to convenience and fairness to determine whether transfer is-warranted.” In re Apple, Inc., 602 F.3d 909, 912 (8th Cir.2010) (per curiam) (quotations and citation omitted); accord Toomey v. Dahl, 63 F.Supp.3d 982, 993 (D.Minn.2014); Dial Tech., 2014 WL
“Courts must be cognizant, however, that transfer motions should not be freely granted.” Id. (quotation omitted); accord Dial Tech., 2014 WL 4163124, at *9. “[F]ederal courts give considerable deference to a plaintiffs choice of forum.” Terra Int'l, 119 F.3d at 695. “A heavy burden rests with the movant to demonstrate why a case should be transferred. To satisfy that heavy burden, the movant must demonstrate that the relevant factors weigh strongly in its favor.” Klatte, 995 F.Supp.2d at 954-55 (quotations and citations omitted); accord Toomey, 63 F.Supp.3d at 993 (“The party seeking transfer must show that the balance of factors strongly favors the movant.” (quotation omitted)). “That burden may not be met simply by showing that the factors are evenly balanced or weigh only slightly in favor of transfer.” Datalink Corp. v. Perkins Eastman Architects, P.C., 33 F.Supp.3d 1068, 1077 (D.Minn.2014) (quotation omitted); accord Toomey, 63 F.Supp.3d at 993 (“Section 1404(a) provides for transfer to a more convenient forum, not a forum likely to prove equally convenient.” (quotation omitted)).
Similarly, “[m]erely shifting the inconvenience from one side to the other ... obviously is not a permissible justification for a change of venue.” Terra Int’l, 119 F.3d at 696-97 (quotation omitted). “To prevail on a motion to transfer, the movant must show that his inconvenience substantially outweighs the- inconvenience that [the] plaintiff would suffer if venue were transferred.” Nelson v. Soo Line R.R. Co., 58 F.Supp.2d 1023, 1026 (D.Minn.1999).
1. Convenience of the Parties
Ibis Tek argues that this factor weighs in favor of transfer because “[t]he inconvenience that [it] would experience by litigating this dispute in Minnesota far outweighs the inconvenience that [BAE] may experience if the venue is transferred to the Western District of Pennsylvania.” (Mem. in Supp. at 14.) Ibis Tek asserts that litigating in Minnesota will require its two highest level managers to travel to Minnesota, resulting in a “severe[] disruption]” of operations and productivity because it has no office in Minnesota. (Mem. in Supp. at 14.) Ibis Tek asserts that this burden is “significantly alleviated” if the proceedings are moved to Pennsylvania, and BAE does not face a similar burden because “a division of [BAE]’s parent company has an office” nearby. (Mem. in Supp. at 14.) Ibis Tek also asserts that, by continuing to litigate in Minnesota, it will have to incur travel expenses for witnesses who reside in Pennsylvania, and “[t]he impact of these expenses is exacerbated due to [Ibis Tek] currently operatihg in a loss position.” (Mem. in Supp. at 15.) According to Ibis Tek, “[florcing [it] to expend this money (on top of its legal fees for this litigation and the related ... appeal), further impairs [its] financial héalth and ability to defend itself against [BAE’s] breach claim.” (Pl.’s Mem. in Supp. at 15.)
BAE responds that its potential witnesses reside here in Minnesota and transfer to the Western District of Pennsylvania would force its personnel to travel. (Mem. in Opp’n at 6, ECF No. 36.) BAE asserts that Ibis Tek’s “request to transfer constitutes nothing more than a request to shift inconvenience from [Ibis Tek] to [BAE], which is improper.” (Mem. in Opp’n at 6.)
A court may consider a party’s ability to bear such expenses, i.e., a substantiated claim of financial hardship, in weighing this factor. Toomey, 63 F.Supp.3d at 993; Dial Tech., 2014 WL 4163124, at *10. In support of its claim of financial hardship, Ibis Tek has submitted a declaration from Harry Kramer, its Chief Financial Officer. (Decl. of Harry Kramer, ECF No. 28.) Kramer states:
Ibis Tek has operated at a loss during Fiscal Year 2013 and Fiscal Year 2014. During Fiscal Year 2013, Ibis Tek’s sales decreased from approximately $62 million in 2012 to approximately $42 million in 2013, resulting in a loss of approximately $4 million' in Fiscal Year 2013. As of August 31, 2014[,] Ibis Tek currently has produced approximately $23 million in revenue for Fiscal Year 2014. As of August 31, 2014[,] Ibis Tek showed a loss of approximately $200,000 for Fiscal Year 2014. The 2014 valuations are based on Ibis Tek’s most current and complete financial statements.
(Kramer Decl. ¶ 8.) The Court concludes that, while Ibis Tek is not a model of robust financial health, its sales have historically been tens of millions of dollars, and it has not “ ‘presented] convincing evidence that its financial position makes it incapable of litigating in [Minnesota]’ ” and “that litigating this matter in [Minnesota] is cost-prohibitive.” Dial Tech., 2014 WL 4163124, at *10 (quoting Koh v. Microtek Int'l, Inc., 250 F.Supp.2d 627, 639 (E.D.Va.2003)). Accordingly, the Court finds that this factor is neutral.
2. Convenience of Witnesses
“The convenience of the witnesses is an'important factor because it determines the relative ease of access to sources of proof.” Toomey, 63 F.Supp.3d at 993 (quotation omitted); see Dial Tech., 2014 WL 4163124, at *11 (convenience of witnesses generally the most important factor). “In analyzing this factor, the Court must examine the materiality and importance of the anticipated witnesses’ testimony and then determine their accessibility and convenience to the forum.” Klatte, 995 F.Supp.2d at 955 (citation and quotation omitted); accord Dial Tech., 2014 WL 4163124, at *11.
“The focus is on non-party witnesses since it is generally assumed that
Ibis Tek asserts that it plans to rely on “non-party witnesses located in or near Pittsburgh,[Pennsylvania].” (Mem. in Supp. at 17.) Ibis Tek identifies Mike Seminatore, its former Controller, and Jeff Campbell, its former Vice President of Marketing, as its non-party witnesses. (Mem. in Supp. at 10, 17; Kramer Decl. ¶¶ 9(d), (e).) Both of them are “believed” to reside in or around Butler, Pennsylvania. (Mem. in Supp. at 10; accord Kramer Deck ¶¶ 9(d), (e).) Ibis Tek asserts that both “Seminatore and Campbell interacted with [BAE], and should help demonstrate why [Ibis Tek
Ibis Tek also intends to call the DCAA auditors whose examination determined that Ibis Tek, had failed to submit accurate, complete, and. current cost or pricing data. (Mem, in, Supp. at 18.) Ibis Tek asserts that BAE “is relying in part, on the Audit Report to prove that [Ibis Tek] submitted defective cost or pricing data,” and, “[t]hrough testimony, [Ibis Tek] will demonstrate how the Audit Report is flawed—thereby undercutting a necessary predicate to [BAE’s] breach theory.” (Mem. in Supp. at 18.) These auditors are located in the Pittsburgh, Pennsylvania area. (Mem. in Supp. at 18; accord Kramer Deck ¶ 10.)
Ibis Tek states that it is unknown whether Seminatore or Campbell are willing to travel to Minnesota to participate in this litigation. (Kramer Decl. ¶ 11.) Ibis Tek states that “the DCAA auditors are not likely to be willing to travel to Minnesota given that they are adverse to [the parties] in the related appeal.” (Mem. in Supp. at 18.)
BAE also takes issue with the proposed DCAA auditor testimony. (Mem. in Opp’n at 7-8.) BAE points out that, because the DCAA auditors are Department of Defense personnel, special permission would need to be obtained before the auditors could testify.
BAE further asserts that the DCAA auditors are unnecessary as
the indemnification clause under which BAE ... brings suit does not depend on any interpretation of government contract law or the findings of the DCAA. Ibis Tek agreed to assume “entire responsibility and liability” for any “loss or legal damage” “in any manner connected with the services or work performed or goods supplied” by it.
(Mem. in Opp’n at 8.)
As noted above, the possession of material and important testimony by a non-party witness outside of the Court’s sub-' poena is an important consideration.' Datalink Corp., 33 F.Supp.3d at 1078. Ibis Tek has not, however, met its burden to show that the testimony of Seminatore and Campbell is material and important, or that it is not cumulative of other party witnesses’ testimony in this case. Ibis Tek has not even identified what Seminatore and Campbell’s testimony will entail. Ibis Tek has done nothing more than generically assert that all of its witnesses, party and non-party alike, “directly interacted with [BAE] regarding the matters underlying this litigation.” (Mem. in.Supp. at 10; accord Kramer Deck ¶¶ 9(a), (b), (c), (d), (e).)
With respect to the DCAA auditors, this Court “is hesitant to place too much weight on the prospect of [their] absence” without knowing whether they would even be permitted to participate in this matter, especially considering the odds would appear to be against it. Datalink Corp., 33 F.Supp.3d at 1078. Further, there is some credence to BAE’s argument that interpretation of the subcontract’s indemnity provisions is not dependent upon the findings of the DCAA.
3. Interests of Justice
In evaluating the interests-of-justice factor,
courts consider (1) judicial economy, (2) the plaintiffs choice of forum, (3) the comparative costs to the parties of litigating in each forum, (4) each party’s ability to enforce a judgment, (5) obstacles to a fair trial, (6) conflict of law issues, and (7) the advantages of having a local court determine local law;
Klatte, 995 F.Supp.2d at 957; accord Dial Tech., 2014 WL 4163124, at *13. Based on these considerations, this factor is essentially a wash.
There is a general presumption in favor of BAE’s choice of forum as the plaintiff, particularly given that BAE’s principal place of business is located in Minnesota, which weighs against transfer. (Am. Compl. ¶ 1; Mem. in Opp’n at 9). Datalink Corp., 33 F.Supp.3d at 1077 (“The presumption is in favor of the plaintiffs choice of forum, especially where the plaintiff resides in the district in which the lawsuit was filed.”); accord Oien, 824 F.Supp.2d at 905; see Dial Tech., 2014 WL 4163124, at *8.
The comparative-costs, obstacles-to-a-fair-trial, conflict-of-law, and interpretar tion-of-local-law considerations are neutral. The Court has already rejected Ibis Tek’s argument that its financial position makes it incapable of litigating in Minnesota and transfer to the Western District of Pennsylvania would simply shift those costs to BAE, not result in a cost savings. See Terra Int'l, 119 F.3d at 696-97. Likewise, Ibis Tek asserts that the potential need to compel non-party witnesses presents an obstacle to a fair trial if this matter remains in the District of Minnesota. (Mem. in Supp. at 20.) But, as stated above, there are likely to be challenges of subpoena power whether this matter remains in this District or is transferred to the Western District of Pennsylvania, and Ibis Tek has not marshaled a showing that the convenience-of-the-witnesses factor weighs strongly in its favor. Further, the parties agree that the federal law of government contracts and Minnesota law govern this dispute, although there appears to be disagreement as to which applies to the indemnity provisions. (Compare Mem. in Supp. at 20-21 with Mem. in Opp’n at 11.) “In any event, ... federal district courts are faced almost daily with the task of applying some state’s law other than their own, and they are capable of resolving disputes under another state’s law.” Klatte, 995 F.Supp.2d at 957 (quotation omitted); accord Datalink Corp., 33 F.Supp.3d at 1078; Clergy Fin., 598 F.Supp.2d at 995.
Therefore, given that one of the interests-of-justice considerations weighs against transfer, two weigh slightly in favor of transfer, and the remainder are neutral, the Court concludes that, on balance, the interests-of-justice factor is also neutral.
4. Conclusion
In sum, at best, Ibis Tek has only shown that the convenience-of-the-witnesses factor weighs slightly in its favor. The remaining two factors, convenience of the parties and interests of justice, are essentially neutral. This is not enough. See Toomey, 63 F.Supp.3d at 993; Datalink Corp., 33 F.Supp.3d at 1077. Ibis Tek has not met its burden to show that, based on the relevant factors and considerations, transfer is strongly favored under the circumstances. Accordingly, the Court recommends that Ibis Tek’s request to transfer this matter to the Western District of Pennsylvania be denied.
B. Stay
Should the Court deny Ibis Tek’s request that this matter be transferred, Ibis Tek alternatively requests that this matter be stayed pending resolution of the appeal before the Armed Services Board of Contract Appeals.
“ ‘[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.’ ” Cottrell v. Duke, 737 F.3d 1238, 1248 (8th Cir.2013) (quoting Landis v. N. Am. Co., 299 U.S. 248, 254, 57 S.Ct. 163, 81 L.Ed. 153 (1936)); see Sierra Club v. U.S. Army Corps of Eng’rs, 446 F.3d 808, 816 (8th Cir.2006); Lunde v. Helms, 898 F.2d 1343, 1345 (8th Cir.1990) (per curiam). ‘While the Court’s inherent power to manage its docket places this decision within the Court’s broad discretion, ‘[t]he proponent of the stay bears the burden of establishing its need.’” KK Motors, Inc. v. Brunsivick Corp., No. 98-cv-2307 (JRT/RLE), 1999 WL 246808, at *2 (D.Minn. Feb. 23, 1999) (alteration in origi
Ibis Tek argues that the Armed Services Board of Contract Appeals and this matter involve the same underlying issues as, “[i]n order to . prevail . in these proceedings, [BAE] must demonstrate (i) that [Ibis Tek] submitted defective cost or pricing data, and (i[i]) as a result, the [Government] withheld or offset certain payments otherwise due [BAE].” (Mem. in Supp. at 24.) Ibis Tek also argues that it should not have to litigate on two fronts given its financial position, and that if Ibis Tek (and consequently BAE) prevails before the Armed Services Board of Contract Appeals, this matter is moot. (Mem. in Supp. at 24-26.) Ibis Tek argues that the only harm to BAE is delayed recovery of the alleged damages. (Mem. in Supp. at 25.)
BAE counters’ that the issues in this matter and those before the Armed Services Board of Contract Appeals are “completely separate.” (Mem. in Opp’n at 12.) BAE asserts that the appeal involves “whether Ibis Tek’s cost or pricing data were, in fact, defective,” and this matter concerns “whether the [subcontract requires Ibis Tek to indemnify BAE ... for the amount it already has been charged due to Ibis Tek’s cost or pricing data submission,”, citing a separate provision of the subcontract.
Again, as stated above, the Court has already rejected Ibis Tek’s contention of financial hardship. Further, while it cannot be denied that the appeal and this matter are certainly related and will likely have some overlapping issues, the Court does not agree with Ibis Tek that the issues are identical. At the hearing, Ibis Tek itself agreed that one potential outcome of this litigation is that Ibis Tek has to indemnify BAE no matter how the appeal comes out.
IV. RECOMMENDATION
Based upon the record, memoranda, and the proceedings herein, and for the reasons stated above, IT IS HEREBY RECOMMENDED that the Motion to Transfer, or Alternatively, to Stay the Proceedings (ECF No. 26) BE DENIED.
. It appears that there might be a typographical error in this sentence as written in Ibis Tele’s brief. The original sentence reads: “Both Messrs. Seminatore and Campbell interacted with Plaintiff, and should help demonstrate why Plaintiff did not submit defective cost or pricing data—that the .information provided to Plaintiff was necessarily based on an incomplete product design and limited by the company’s capability to provide reliable financial information.” (Mem. in Supp. at 17 (emphasis added) (citation omitted).)
. BAE also points out that the DCAA auditors cannot provide "opinion or expert testimony concerning official [Department of Defense] information, subjects, or activities, except on behalf of the United States or a party represented by the Department of Justice” absent certain circumstances. 32 C.F.R. § 97.6(e). (Mem. in Opp’n at 7-8.) At the hearing, Ibis Tek stated that it would not be eliciting expert or opinion testimony from the DCAA auditors, just factual testimony.
. At the hearing, there was some argument that BAE appeared to now be relying on a different, broader indemnity provision of the subcontract than those provisions identified in the Amended Complaint. (Compare Am. Compl. ¶¶ 7, 8 with Mem. in Opp’n at 4.) The
. At first blush, Ibis Tek’s request for a stay in the alternative rather than in the first instance would seem to undercut all of its arguments that such a stay is warranted. Ibis Tek states, however, that ”[i]f this Court transfers the venue to the Western District of Pennsylvania, [Ibis Tek] will immediately move that Court to stay the proceedings for the same reasons discussed herein.” (Mem. in Supp. at 22 n. 6.)
. See supra n. 4.
. BAE asserts that Ibis Tek could have requested deferment from the Government while the appeal was pending and BAE encouraged Ibis Tek to do so. (Mem. in Opp'n at 12-13.) At the hearing, Ibis Tek stated that it was not able to request a deferral because it was not in privity with the Government, and, given that BAE is not a small business concern or claiming financial hardship, such a deferral would not likely have been granted. See generally 48 C.F.R. § 32.607-2 (deferment of collection).
. At the hearing, Ibis Tek indicated that some cases have been resolved in two years or less whereas BAE’s counsel indicated that, in his experience, appeals can take two years' or more, (see Mem. in Opp’n at 13-14).
. See supra n. 4.