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Paul Green School of Rock Music Franchising, LLC v. Rock Nation

January 13, 2009

PAUL GREEN SCHOOL OF ROCK MUSIC FRANCHISING, LLC, PLAINTIFF,
v.
ROCK NATION, LLC; THE JIM AND TRISH: SMITH TRUST, 2003; BINH HOANG, AND TONY AVALON, DEFENDANTS.



The opinion of the court was delivered by: Joyner, J.

MEMORANDUM AND ORDER

Before this Court is Defendants' Motion to Dismiss and Motion to Transfer Venue (Doc. No. 10), Plaintiff's Memorandum in Response (Doc. No. 11) and Defendants' Reply (Doc. No. 12).

Background

Plaintiff, Paul Green School of Rock Music Franchising, LLC ("PGSORM"), filed this action in the Eastern District of Pennsylvania against Defendants, Rock Nation LLC, Jim and Trish Smith Trust 2003, Binh Hoang, and Tony Avalon, on September 16, 2008, alleging five counts: (I) Unfair Competition, (II) Trademark Infringement, (III) Conversion of Confidential Information, (IV) Breach of Implied-in-Fact Contract/Unjust Enrichment, (V) Misappropriation of Trade Secrets.*fn1 Plaintiff is a Pennsylvania Limited Liability Corporation located and operating in Philadelphia, PA. Defendant Rock Nation is a California Limited Liability Corporation with its principal place of business in Agoura Hills, CA. Defendant Jim and Trisha Smith Trust, 2003, is a California trust located in Oakland Park, CA and is a member of Rock Nation LLC. Defendant Bing Hoang is a citizen and resident of California and is a member of Rock Nation LLC. Defendant Tony Avalon is a citizen and resident of California and is a member Rock Nation LLC.

Plaintiff alleges that Defendants conspired with former franchisees of PGSORM to "take confidential and proprietary customer contact information, customer lesson plans, customer credit card information, the Operations Manual, and show performance agenda" and give it to Rock Nation LLC. Comp. 2. Plaintiff further alleges that all such information belongs to PGSORM and is now used by Rock Nation to compete with PGSORM in violation of Pennsylvania and Federal law. Plaintiff is engaged in arbitration with the former franchisees, Jim Smith, John and Cindy Giamurrasco, in both California and Pennsylvania regarding this matter.

This Court has jurisdiction over this action based on diversity pursuant to 28 U.S.C. § 1332, as plaintiff resides in Pennsylvania, defendants in California and the amount in controversy exceeds $75,000.00. Additionally, plaintiff claims jurisdiction pursuant to 28 U.S.C. § 1338(a) and (b), as plaintiff alleges violations of § 43 of the Lanham Act, 15 U.S.C. § 1125(a) and 15 U.S.C. §1051 et seq. The plaintiff claims venue in the matter pursuant to 28 U.S.C. § 1391(b)(2), as an action that "is not based solely on diversity" where a "substantial part of the events or omissions giving rise to the claim" occurred in the Eastern District of Pennsylvania. In their instant motion, defendants argue that the Complaint should be dismissed due to improper venue pursuant to Fed. R. Civ. P. 12(b)(3) and 28 U.S.C. § 1406(a) or, in the alternative, transferred to the Central District of California in accordance with 28 U.S.C. §§ 1406(a) or 1404(a).

Discussion

In assessing the present motion to dismiss, this Court will accept as true the allegations in the Complaint; however, we may examine facts provided outside of the Complaint to determine venue, resolving any factual conflicts in favor of the plaintiff. Fed. R. Civ. P. 12(b)(3); ProModel Corp. v. Story, No. 07-cv-3735, 2007 U.S. Dist. LEXIS 85567, 2007 WL 4124502, at *2 (E.D. Pa. Nov. 19, 2007) (citing Holiday v. Bally's Park Place. Inc., No. 06-cv-4588, 2007 U.S. Dist. LEXIS 66554, 2007 WL 2600877, at *1 (E.D. Pa. Sept. 10, 2007)).

I. § 1406(a): Improper Venue

Pursuant to 28 U.S.C. § 1406(a), the defendants bear the burden of demonstrating that venue is improper. ProModel Corp., 2007 U.S. Dist. LEXIS at *1-2; Myers v. Am. Dental Ass'n, 695 F.2d 716, 724 (3d Cir. 1982). A plaintiff's choice of venue, particularly when the plaintiff files suit in its home forum, is entitled to "considerable deference." Coppola v. Ferrellgas, 250 F.R.D. 195, 197-198 (E.D. Pa. 2008) (quoting Am. Argo Corp. v. U.S. Fid. & Guar. Co., 590 F. Supp. 1002, 1004 (E.D. Pa. 1984)). However, such a choice is generally given less deference when none of the conduct occurred in the selected forum. Coppola, 590 F.R.D. at 195 (citing Fid. Leasing, Inc. v. Metavec Corp., No. 98-cv-6035, 1999 U.S. Dist. LEXIS 6737, 1999 WL 269933, at *2 (E.D. Pa. Apr. 29, 1999)).

In challenging venue under 28 U.S.C. § 1406(a), defendants contend that the plaintiff has laid venue in the wrong district. As plaintiff in his Complaint asserted venue pursuant to 28 U.S.C. § 1338(b)(2), the venue must be a district where "a substantial part of the acts or omissions giving rise to the cause of action occurred." As laid out in Cottman Transmission Sys. v. Martino, 36 F.3d 291, 294 (3d Cir. 1994), the venue does not have to have greatest connection to the cause of action or be the "best forum" for the action, as multiple districts could be proper based on the operative facts. If a substantial part of the events or omissions did not occur in the chosen venue, then the Court may dismiss the case or, in the interest of justice, transfer the case to a proper venue. 28 U.S.C. §1406(a). The venue analysis, in accordance with §1338(b)(2), is not one of contacts with the forum, but of the location of the events and omissions that gave rise to the claim; hence, it is inappropriate to simply count contacts in order to establish venue. Cottman, 36 F.3d at 294. Instead, this Court looks at "the nature of the dispute" and, specifically, where the actions at issue took place. Id. at 295.

In support of its choice, Plaintiff asserts that venue is proper based on its claim that the defendants violated Pennsylvania law by misappropriating Pennsylvania trade secrets, giving rise to the present cause of action. Defendants counter that simply the development of the Operations Manual in Pennsylvania does not provide a substantial event giving rise to the claim and that all other events actually giving rise to the claim occurred in California, making the Eastern District an improper venue for this action.

However, in regards to trade secrets, we recognize that "[u]nlike trademarks, which seem to have no real situs, trade secrets have a situs in their state of origin." Harry Miller Co. v. Carr Chem, 5 F. Supp. 2d 295, 298 (E.D. Pa. 1998); Unix v. Berkley Software, No. 92-cv-1667, 1993 U.S. Dist. LEXIS 19505, at *31, 1993 WL 414724, at *11 (D.N.J. March 3, 1993). In this case, one of the trade secrets at issue, the Operations Manual, originated in Pennsylvania and so is located in Pennsylvania for purposes of venue. Hence, when the Operations Manual was allegedly used by Rock Nation, the secret was, in effect, misappropriated from Eastern District of Pennsylvania. The location of the trade secret, therefore, is an important part of the events giving rise to plaintiff's claim. As the test for venue requires a more in depth analysis than counting contacts, we hold that while the contact may be isolated, it is an important event giving rise to the claim and we decline to dismiss the present action for improper venue.

Having found that venue is proper in the Eastern District of Pennsylvania, we move on to an analysis of ...


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