Sell v. Young

Background

Nicolet Sell sued Samuel A. Young and Voltage Vessels, LLC, alleging that they made misrepresentations to induce her to invest $200,000 in Voltage Vessels. Sell alleged that she and Young developed the business idea after meeting in California, agreed to be 50/50 partners, and later agreed that Young would transfer an additional 1% ownership to her in exchange for unpaid work and a promise concerning the company’s prototype jet ski. She further alleged that Young repeatedly represented that he had incorporated the company with both of them involved in fundraising. When Sell later visited Hawaii, she allegedly discovered that the prototype did not work, her name was not on the bank account, and the operating agreement identified Young as the sole owner.

The defendants removed the case to federal court. They moved to dismiss for improper venue or, alternatively, to transfer the case to the District of Hawaii.

Venue

The court held that venue was proper in the Northern District of California under 28 U.S.C. § 1391(b)(2), which permits venue where a substantial part of the events or omissions giving rise to a claim occurred. The defendants argued that the only relevant act in California was Sell’s meeting with Young. The court rejected that characterization at the motion-to-dismiss stage. It noted that Young communicated frequently with Sell during the following 15 months while she was in California and allegedly made repeated misrepresentations, including that she owned 50% or more of the company when she allegedly owned none.

Although Young was in Hawaii when he allegedly made the representations by telephone or email, the court noted that he allegedly knew Sell lived in San Mateo, California, and that she received the messages there. The court concluded that Sell had sufficiently alleged that Young reached out to commit the alleged fraud in California. The defendants’ declarations disputed Sell’s allegations, but the court stated that those disputes concerned the heart of the allegations and were not relevant to the venue question at that stage.

Transfer to Hawaii

The defendants alternatively sought transfer under 28 U.S.C. § 1404(a), which allows transfer for the convenience of the parties and witnesses and in the interest of justice. The court considered factors including where the agreements were negotiated and executed, which state was most familiar with the governing law, Sell’s choice of forum, the parties’ contacts with each forum, litigation costs, the ability to compel nonparty witnesses, and access to evidence.

The court found that these factors did not favor Hawaii. It stated that the proposed Hawaii witnesses who worked on the prototype had little, if anything, to do with Young’s alleged misleading representations to Sell. In contrast, the relevant agreements appeared to have been initially negotiated in California, and the court gave great weight to Sell’s choice of venue in the Northern District of California.

Disposition

The court denied the defendants’ motion to dismiss or transfer venue. The opinion did not decide whether Sell would ultimately prevail on her allegations.