The opinion of the court was delivered by: Stengel, J.
Paul Bockman, Yvonne Bockman, Charles Ervin, Robert N. Hubby, Kathryn P. Hubby, Joanne Podulka, Ian Richardson, and Douglas C. Schwarzwaelder filed a complaint against First American Marketing Corporation, doing business as Kaehall Estate Planning Coordinators, First American Capital Corporation, Margaret Hall, the Estate of Henry Hall, Stephen R. McCollom, Jeffrey Hall, Dennis G. Haley, Theodore C. Somerville, Darwin S. Webley, the Board of Directors of FAMC, the Board of Directors of FACC, and John and Jane Does, who were and/or are members of the Board of Directors of FAMC and FACC.
Defendants filed a motion to dismiss for improper venue. For the reasons set forth below, I will grant the motion.
A. Current Litigation Plaintiffs are shareholders of FAMC and/or FACC. Henry Hall was the Chairman of the board, treasurer, and chief executive officer of the corporations. On September 28, 2004, Mr. Hall passed away. His wife, Margaret Hall, succeeded to his ownership, interest, and control of the corporations.
The complaint alleges Stephen McCollom, Ms. Hall, the estate of Mr. Hall, and the board of directors have not acted in the best interests of the corporations or their shareholders. They have incorporated or assisted in the incorporation of an entity to compete with the corporations, paid themselves excessive salaries and other benefits, failed to make any distributions to the shareholders, invested in assets or businesses not related to the operation of the corporation, issued shares of the corporations to themselves or others for improper reasons and no or inadequate consideration, and wasted the corporations' assets.
Plaintiffs maintain Mr. Hall, Mrs. Hall, and Mr. McCollom engaged in ultra vires acts while acting in their capacities as officers, directors, and shareholders of FAMC and FACC. The acts negatively affected the corporations' financial strength, causing damage to the shareholders.
Plaintiffs next contend Mrs. Hall, Mr. McCollom, the estate of Mr. Hall, and the board of directors breached their fiduciary duty because they failed to act in the best interests of the corporations. They failed to exercise sound business judgment, and intentionally and/or negligently failed to abide by the corporations' by-laws and by applicable laws. They failed to hold elections in accordance with the by-laws and failed to provide shareholders with the required notice, disclosures, and annual reports. Plaintiffs maintain the defendants engaged in self-dealing to the detriment of the corporations and their shareholders. They have not acted in the corporations' or shareholders' best interest because they used the corporations' assets to purchase condominiums in Hawaii, even though they were not related to the corporations' business.
Plaintiffs also contend the defendants breached the fiduciary duty owed to plaintiffs by causing the waste of FAMC's corporate assets. They maintain the defendants used the corporations' profits for their own benefit, to the detriment of plaintiffs, used their positions to obtain personal benefits not enjoyed by the shareholders, and, in bad faith, never made a distribution to the shareholders.
Plaintiffs' final contention is that the defendants' acts and omissions constitute oppressive and unfair conduct and the plaintiffs are oppressed minority shareholders.
On January 14, 2005, Keith Ervin, Kimberly Ervin, James Garcia, Pauline Serfass, and Ronald Bresel filed a complaint against FAMC, FACC, Margaret Hall, and the Estate of Henry Hall. Mr. Ervin, Mrs. Ervin, Mr. Garcia, and Ms. Serfass were employees of, or independent contractors for, the corporations. Complaint, Ervin v. First Am. Marketing Corp., No. 05-00184 (E.D. Pa. filed Jan. 14, 2005). Three of the plaintiffs entered marketing agreements with the corporations, which contained a non-compete clause. The plaintiffs also were shareholders of the corporations. The plaintiffs terminated their employment relationship with the corporations on January 14, 2005. The complaint sought wages and commissions allegedly owed to the plaintiffs and also alleged the defendants committed ultra vires acts, did not act in the best interests of the corporations, and committed corporate waste. Defendants filed a motion to dismiss for lack of personal jurisdiction, which was denied. The case settled prior to trial.*fn1
Where federal subject matter jurisdiction is based solely on diversity of citizenship, 28 U.S.C. §1391(a) governs the ...