Convergen Energy WI LLC v. L'Anse Warden Electric Company LLC

Background

Convergen Energy WI, LLC operates a fuel-pellet manufacturing plant in Green Bay, Wisconsin. L’Anse Warden Electric Company, LLC apparently used those pellets to produce electric power. The companies had previously been owned by the same ultimate parent company, Libra Capital US, Inc. After Libra sold Convergen, Convergen and L’Anse entered into a Supply Agreement requiring Convergen to sell, and L’Anse to purchase, fuel pellets for ten additional years.

The Supply Agreement included an arbitration clause requiring disputes to be arbitrated in Madison, Wisconsin. It also required the parties to continue performing their obligations while arbitration was pending, while allowing either party to seek temporary or other interim relief. L’Anse and others later claimed that the acquisition and related agreements, including the Supply Agreement, resulted from fraud. L’Anse also allegedly stopped paying for fuel pellets that it had ordered, accepted, and consumed.

Four related matters followed: lawsuits in Wisconsin and New York, an arbitration proceeding before the American Arbitration Association, and this case. Convergen filed this case seeking temporary injunctive relief until an arbitrator was assigned, including an order requiring L’Anse to continue performing under the Supply Agreement and to pay amounts allegedly due. L’Anse removed the case to federal court and moved to transfer it to the Southern District of New York. Convergen also filed a motion for a preliminary injunction, but the court did not decide that motion because it transferred the case.

Transfer Analysis

Under 28 U.S.C. § 1404(a), a federal district court may transfer a civil case to another district where it could have been brought when convenience and the interests of justice favor transfer. The court considered both factors.

For convenience, the court considered the location and accessibility of witnesses, evidence, documents, and the events underlying the dispute. L’Anse argued that the Supply Agreement arose from negotiations and a transaction in New York, that the agreement was partly executed there, and that most witnesses and documents concerning its negotiation and enforceability were connected to Libra’s New York headquarters.

Convergen argued that the case involved only temporary enforcement of the Supply Agreement during arbitration, and that production, delivery, and nonpayment relating to the fuel pellets occurred in or concerned Wisconsin. The court concluded, however, that it would first need to consider whether the Supply Agreement and its arbitration clause were enforceable. The court found that the evidence and witnesses concerning that issue were in New York and that the entire dispute was already pending there. It therefore found that convenience favored transfer.

The court also found that the interests of justice favored transfer. The New York case was filed nearly a month before this case and had a temporary restraining order and expedited discovery concerning trade secrets. Keeping related matters in separate courts risked inconsistent decisions about whether the Supply Agreement was enforceable or should be rescinded. The court also noted that transferring the case would allow the New York court to coordinate the related disputes and would not delay consideration of Convergen’s fully briefed preliminary-injunction motion.

Convergen argued that Wisconsin law governed under the Supply Agreement’s choice-of-law provision. The court determined that this did not outweigh the benefits of having the related disputes handled in one forum. It also stated that the Southern District of New York was presumed to be more familiar with New York law, which L’Anse invoked in challenging the agreement’s enforceability.

Disposition

The court granted L’Anse’s motion to transfer. It ordered that the case be transferred to the District Court for the Southern District of New York. The court did not rule on Convergen’s motion for a preliminary injunction.