Lehrer v. J&M Monitoring, Inc.

Background

Moshe Lehrer sued J&M Monitoring, Inc. and its owner, James A. Patton. Lehrer alleged that the defendants offered him a 50% ownership interest in J&M in exchange for $115,000, along with monthly payroll payments. He alleged that he transferred $109,000 to J&M, but that the defendants failed to honor their responsibilities, removed him from J&M’s corporate bank account, concealed another corporate account, and did not provide equipment for which he had received titles.

Lehrer asserted claims for breach of contract, breach of fiduciary duty, conversion, common-law fraud, and unjust enrichment, and sought damages, fees, and an accounting of corporate records. The defendants filed an answer and later moved to dismiss for improper venue under Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1406(a). They also moved to amend their answer to add a venue objection.

Venue-objection motion and amendment

The court held that the defendants’ Rule 12(b)(3) motion was untimely because they filed it after answering the complaint. Venue is a waivable defense, and the defendants did not raise it in their answer. Their time to amend the answer as a matter of course had also expired. The court therefore held that the defendants waived their objection to improper venue.

The court denied the defendants’ motion to dismiss on venue grounds as waived. It denied the motion to amend the answer as moot because amendment could not restore the already-waived venue objection.

Venue analysis

Although the defendants had waived dismissal under Rule 12(b)(3), the court considered whether transferring the case under 28 U.S.C. § 1404(a) would be appropriate. That statute permits transfer to another federal district where the case could have been brought when transfer would promote convenience and serve the interests of justice.

The court found that the case could have been brought in the Eastern District of Kentucky because both defendants were alleged to be located there. It also found that Lehrer had not established a basis for venue in the Southern District of New York for any of his claims. The complaint and supporting affidavit did not show that substantial events underlying the contract, fiduciary-duty, conversion, accounting, theft, or unjust-enrichment claims occurred in that district. The court stated that Lehrer’s address in New York and his alleged payments made in New York were not enough, without more, to establish venue there.

For the contract claim, the court found no sufficient showing that the agreement was negotiated, performed, or breached in the Southern District of New York. For the fiduciary-duty claim, the court assumed a fiduciary duty existed solely for purposes of analyzing venue, but found no allegation that the alleged breach occurred in New York. For the remaining claims, the court found no allegations locating the defendants’ relevant conduct or the disputed property in New York.

Transfer analysis

The court weighed the factors governing transfer under § 1404(a). It gave less weight to Lehrer’s choice of New York because the court found that the case lacked significant contacts with that forum and that New York was no longer Lehrer’s home state. The court found that the operative facts were centered in the Eastern District of Kentucky and that transfer would be more convenient for both parties. The court treated the witness, documents, and related factors as neutral or not opposed to transfer, and found that the case was still at an early stage.

Disposition

The court concluded that the case should be transferred to the Eastern District of Kentucky. Its conclusion states that the defendants’ motions to amend their answer and to dismiss for improper venue were denied in part and granted in part. The court directed the Clerk of Court to terminate the pending motions and transfer the case forthwith.