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AMG INDUSTRIES CORPORATION v. LYON

November 15, 2005.

AMG INDUSTRIES CORPORATION, AMG HOLDING CORPORATION and ALLAN M. GOLDSTEIN Plaintiffs,
v.
REXFORD L. LYON Defendant.



The opinion of the court was delivered by: SEAN McLAUGHLIN, District Judge

MEMORANDUM AND ORDER OF COURT

This is an action for declaratory judgment and damages. Plaintiffs, AMG Industries Corporation ("AMG Industries"), AMG Holding Corporation and Allan M. Goldstein, have filed suit against their former lawyer, defendant Rexford L. Lyon. Plaintiffs seek a declaration that defendant is required to indemnify them if plaintiff Goldstein is found liable to defendant's wife in a proceeding currently pending in the United States District Court for the District of New Jersey, Trenton Division. Specifically plaintiffs allege that defendant, in his capacity as their lawyer breached various duties he owed plaintiffs and otherwise acted improperly by failing to disclose that defendant's wife intended to sue plaintiff Goldstein. Plaintiffs also seek compensatory and punitive damages, and the attorneys' fees they have incurred thus far in defending the New Jersey action.

Defendant has filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief may be granted. Defendant argues that there is no case or controversy that is ripe for adjudication because plaintiffs have not been held liable to his wife in the New Jersey action and, thus, have not suffered any harm. Defendant has also filed a motion to transfer pursuant to 28 U.S.C. § 1404. For the reasons that follow, we will grant defendant's motion to transfer and order that this case be transferred to the United States District Court for the District of New Jersey, Trenton Division, where related litigation is pending.

  I. BACKGROUND

  The background of this case is somewhat complicated. Lois Lyon, Rexford Lyon and Allan Goldstein used to practice law together in New Jersey. Amended Complaint at ¶ 11 (hereinafter "Compl."). In 1988, Mr. Goldstein formed AMG Industries, PLC, (hereinafter "the PLC") under the laws of Great Britain. Compl. ¶ 9. According to plaintiffs, defendant Rexford Lyon was appointed the board of directors of the PLC and was retained as legal counsel for the PLC and provided legal advice to Mr. Goldstein. Compl. ¶¶ 11 & 13. Mrs. Lyon wanted to invest $300,000 in the PLC. Compl. ¶ 11. At the time, a subscription agreement prohibited Mrs. Lyon from purchasing stock in the PLC. Id. Instead, Mrs. Lyon and Mr. Goldstein executed a warrant agreement which, inter alia, would allow Mrs. Lyon to purchase 55,835 shares of stock on demand at a nominal purchase price. Id. Plaintiffs allege that, in his capacity as corporate counsel, defendant drafted the warrant agreement between the PLC and his wife. Id. Plaintiffs further allege that plaintiff Goldstein directed defendant to keep his wife advised of any material changes to the PLC. Compl. ¶ 11.

  In 1992, the PLC underwent a corporate reorganization and swapped stock with its wholly owned subsidiary, AMG Industries, a Delaware corporation. Compl. ¶ 15. As a result, the British corporation became a subsidiary of the Delaware corporation, and the name was changed to AMG Industries. Id. Plaintiffs allege this corporate reorganization was designed and implemented by defendant. Defendant was thereafter appointed to the board of directors of AMG Industries, Inc. Compl. ¶ 16.

  On March 2, 1998, Mrs. Lyon attempted to exercise her rights under the warrant agreement and served a certified check for $558.35, the original warrant certificate, and a completed form of election to purchase on plaintiff Goldstein. Compl. ¶ 18. Plaintiff Goldstein advised Mrs. Lyon that he was still prohibited from issuing stock to her because of the subscription agreement. Id. In 2003, AMG Industries implemented a "squeeze out" merger to force certain minority shareholders to sell their equity interest to AMG Industries. Compl. ¶ 22. As a result of the merger, a new Delaware corporation, AMG Holding Corporation, was formed. Id. Plaintiffs contend that defendant did not inform them that his wife believed the warrant agreement had been breached. Id. Plaintiffs allege that, had defendant properly informed them his wife intended to sue plaintiffs, they would have purchased her shares as part of the "squeeze out" merger. Id.

  In 2004, plaintiff Goldstein, defendant and Mrs. Lyon had a meeting to discuss the warrant agreement. Compl. ¶ 24. Soon thereafter, Mrs. Lyon filed a complaint against plaintiff Goldstein in the Superior Court of New Jersey, alleging breach of the warrant agreement. Compl. ¶ 25. Mrs. Lyon did not serve the complaint on plaintiff Goldstein nor did defendant inform plaintiffs of the lawsuit. Id. Mrs. Lyon thereafter filed and served an amended complaint in state court. Plaintiff Goldstein timely removed Mrs. Lyon's complaint to the United States District Court for the District of New Jersey, Trenton Division. That case is currently pending. Compl. ¶¶ 28 & 30. On February 15, 2005, plaintiffs AMG Holding Corporation and AMG Industries filed a "Complaint for Declaratory Judgment" against defendant in this court. Thereafter, on May 18, 2005, plaintiffs filed an amended complaint adding plaintiff Goldstein and seeking declaratory judgment and damages. The gravamen of plaintiffs' complaint is that defendant should have informed plaintiffs that his wife believed that they had breached the warrant agreement and that she intended to sue them. Plaintiffs contend that, had they known of Mrs. Lyon's intentions, they would have purchased her shares in 1998 for a total of $227,248. Plaintiffs have asserted five (5) counts: breach of the fiduciary duty of loyalty (Count I); misrepresentation (Count II); negligent misrepresentation (Count III); breach of the fiduciary duty of care (Count IV); and breach of duty as legal counsel (Count V). Plaintiffs seek compensatory and punitive damages; the legal fees they have incurred thus far in defending Mrs. Lyon's cause of action in New Jersey; and a declaration that defendant is liable for any damage award to Mrs. Lyon in excess of $227,248.

  II. STANDARD OF REVIEW

  A. Motion to Dismiss

  When the court considers a Rule 12(b) (6) motion to dismiss, the issue is not whether plaintiff will prevail in the end or whether recovery appears to be unlikely or even remote. The issue is limited to whether, when viewed in the light most favorable to plaintiff, and with all well-pleaded factual allegations taken as true, the complaint states any valid claim for relief. See ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 (3d Cir. 1994). In this regard, the court will not dismiss a claim merely because plaintiff's factual allegations do not support the particular legal theory he advances. Rather, the court is under a duty to examine independently the complaint to determine if the factual allegations set forth could provide relief under any viable legal theory. 5A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1357 n. 40 (2d ed. 1990). See also Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

  B. Motion to Transfer

  Section 1404(a) provides that "[f]or the convenience of 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). This court has wide discretion "to adjudicate motions for transfer according to an `individualized, case-by-case consideration of convenience and fairness." Stewart Org. Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988). Requests for transfer under § 1404(a) may be ...


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