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Comrent International, LLC v. Palatini

United States District Court, Third Circuit

October 24, 2013




Plaintiffs ComRent International, LLC and Experium Technologies, LLC brought suit against defendant Lance Palatini under federal and state law for trademark infringement, misappropriation of trade secrets, and conversion of corporate assets.[1] The plaintiffs frame this dispute as being between an employer and "a disgruntled former employee who has stolen intellectual property." The defendant describes it as a dispute between Experium's shareholders. The defendant moved for dismissal for improper venue or, alternatively, transfer of venue. For the reasons set forth below, I will grant this motion and transfer the action to the Eastern District of Virginia.


Experium is a Virginia limited liability corporation, which specializes in innovative and dynamic methods for load bank testing for a variety of industries.[3] In 2009, the defendant and Clayton Taylor co-founded Experium as its sole members and owners.[4] Taylor, a resident of Maryland, owned eighty percent (80%) of Experium; the defendant, a resident of New Jersey, owned twenty percent (20%). On December 29, 2012, Taylor and the defendant entered a Second Amended and Restated Operating Agreement for Experium which reiterated their respective roles as the sole two members of Experium, their ownership interests, and Taylor's role as managing member.[5] The agreement clearly indicates that the laws of Virginia should govern the operations of Experium.[6]

At some point after December 29, 2012, Taylor transferred his ownership interests in Experium to plaintiff ComRent, making it the eighty percent (80%) owner and Managing Member of Experium.[7] The defendant objected to the appointment of ComRent as Managing Member, claiming it was inconsistent with the Operating Agreement.[8]

ComRent is a Maryland limited liability company with a principal place of business in Upper Marlboro, Maryland.[9] It is a leading provider of load bank rentals and service, with business throughout North America and abroad. In October 2009, ComRent hired the defendant to serve as a vice president of product development.[10] As part of his employment, the defendant signed a Confidentiality and Office Privacy policy requiring his non-disclosure and proper use of ComRent's proprietary information.[11] A violation of this policy could result in termination.

The plaintiffs assert that the defendant primarily worked on matters related to Experium while employed by ComRent. The relationship between ComRent and Experium at the time the defendant was hired, however, is unclear.[12] The plaintiffs describe Experium as a "ComRent-related entity, " but it does not appear that ComRent had any sort of control over Experium's assets on or before Taylor transferred his control.

As part of his employment, the defendant established an Internet location to store, access, and edit all of Experium's intellectual property and confidential commercial information through use of "Google Drive, " an online storage service.[13] He had exclusive knowledge of the username and password to access this online storage site. The plaintiffs contend that the defendant also stored information on other Internet-based storage sites and on other electronic devices aside from Google Drive.

In June 2013, ComRent hired Red Wolf Engineering as a consultant to review Experium's intellectual property "for the purpose of assisting ComRent in analyzing options for the future of Experium."[14] The defendant refused to allow Red Wolf any access to Experium's intellectual property, believing that ComRent might divest Experium of its intellectual property.[15] As a result, he was fired from ComRent on September 11, 2013. Thereafter, the plaintiffs requested that the defendant turn over all of Experium's intellectual property and confidential information. He refused.

ComRent and Experium filed suit shortly thereafter. They claim that the defendant: 1) stole the username and password needed to access Experium's corporate files, 2) is infringing upon Experium's trademark, and 3) is exercising unauthorized dominion and control over Experium's other intellectual property and confidential commercial information, including its Internet homepage, customer invoices, and equipment information.[16] Because it cannot gain access to this information, the plaintiffs claim that Experium has approximately $700, 000 in pending orders frozen.


The defendant moved to either dismiss the claim under Federal Rule of Civil Procedure 12(b)(3) for improper venue or, in the alternative, remove the suit to the Eastern District of Virginia under 28 U.S.C. §1404(a), or the doctrine of forum non conveniens. I will first discuss whether venue in this district is appropriate and then turn to the issue of forum transfer.

A. Dismissal Under Rule 12(b)(3)

Venue must generally be established for each cause of action in a plaintiff's complaint. Kravitz v. Inst. for Int'l Research, Civ. A. No. 92-5045 , 1993 WL 453457, at *3 (E.D. Pa. Nov. 5, 1993). Venue in federal question cases is appropriate in:

1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;
2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or
3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action.

28 U.S.C. §1391(b). As a result, venue may be appropriate in several districts. See Cottman Transmission Sys., Inc. v. Martino , 36 F.3d 291, 294 (3d Cir.1994).The plaintiffs' complaint alleges that venue in the Eastern District of Pennsylvania is proper because a substantial part of the events, acts, and/or omissions giving rise to this action occurred in this district, in accord with §1391(b)(2). I find little evidence to support this contention.

The nature of the litigation is important in deciding whether "substantial" events or omissions took place in a particular district. See Kalman v. Cortes, Civ. A. No. 09-684 , 646 F.Supp.2d 738, 742 (E.D. Pa. Jul. 28, 2009). The primary focus of the plaintiffs' suit is to gain exclusive control over Experium's intellectual property and confidential information in the defendant's possession.[17] The substantial events giving rise to this claim stem from Clayton Taylor's recent transfer of shareholder control in Experium to ComRent.[18] But for this transfer, it does not appear that ComRent would have an exclusive right to Experium's information or property. Thereby, substantial events determining the venue of this action would relate to this transfer of control.

While it is unclear where that transfer actually occurred, there is nothing to indicate that this event happened in Pennsylvania-given that Taylor is a Maryland resident, ComRent is a Maryland company, and Experium is a Virginia corporation. Additionally, there is nothing to indicate that the recent signing and negotiations surrounding the Second Amended Operating Agreement-which outlines the management of Experium and its assets-took place in Pennsylvania.[19] The defendant states that he signed the agreement in New Jersey. Though it is not clear where Taylor signed this agreement, it seems highly unlikely that as a Maryland resident he signed it or negotiated it in Pennsylvania.

Most importantly, the Experium corporate assets or information at issue are not located in Pennsylvania.[20] While the plaintiffs claim that the intellectual property and information being sought may be located at Experium's Pennsylvania location, the plaintiffs appear to have access to the assets at this site.[21] Furthermore, the Pennsylvania location appears to house and store loan bank equipment, not the electronic files the plaintiffs seek. Instead, the property and information the plaintiffs seek is located on the Internet or at defendant's home in New Jersey.[22]

The plaintiffs argue that venue is appropriate in Pennsylvania because they claim Experium's principal place of business is located in Bethlehem, Pennsylvania-not in Owings, Maryland as outlined in its Operating Agreement.[23] The defendant, however, claims that the principal office remains in Maryland.[24] Whether the Bethlehem location is the actual principal place of business for Experium does little to change the analysis.[25] "The test for determining venue is not the defendant's contacts' with a particular district, but rather the location of those events or omissions giving rise to the claim.'" Cottman Transmission Systems , 36 F.3d at 294.

As explained above, the substantial events giving rise to whether the plaintiffs have an exclusive right to Experium's intellectual property and confidential information do not appear to have taken place at the Bethlehem site. The defendant rarely worked at the Bethlehem site and instead worked primarily from his home in New Jersey.[26] Though the defendant may have sent correspondence related to the Pennsylvania location as part of his work, this would not be enough to establish venue in this district. See Cottman Transmission Systems , 36 F.3d at 294 ("Events or omissions that might only have some tangential connection with the dispute in litigation are not enough."); see also Loeb v. Bank of America, No. 02-CV-3833 , 254 F.Supp.2d 581, 587 (E.D. Pa. March 24, 2003)(finding that substantial correspondence with the district was "woefully insufficient" to establish venue).

Furthermore, venue is not appropriate under the other two prongs of §1391(b). Under §1391(b)(1), venue would not be proper because the defendant is a resident of New Jersey. Under §1391(b)(3), the Eastern District of Pennsylvania would only be appropriate if there were no other district in which this action could be brought.[27] However, the facts indicate that other venues are possible-namely the Eastern District of Virginia, District of New Jersey, or the District of Maryland.

Since I can find no basis for venue being proper in the Eastern District of Pennsylvania under any of the three prongs of §1391, I will turn to whether transfer of venue is proper under §1404(a).

B. Transfer of Venue under 1404(a)

Once a court determines that it lacks proper venue, it may, in the interest of justice, transfer the case to a district court in which the case could have been brought "or to any district or division to which all parties have consented." 28 U.S.C. § 1406(a), §1404(a); see also Goldlawr, Inc. v. Heiman , 369 U.S. 463 (1962). Transfer is generally appropriate, instead of outright dismissal, when the plaintiffs may be penalized by "time-consuming and justice-defeating technicalities." Goldlawr, Inc. , 369 U.S. at 467 (internal quotation marks omitted).

The defendant moves for transfer to the Eastern District of Virginia pursuant to the forum selection clause of Experium's Operating Agreement, which stipulates that disputes should be resolved according to Virginia laws.[28] While the plaintiffs' choice of forum should be afforded great weight and given "paramount consideration" regarding a change of venue, other factors may weigh more heavily than this consideration. Shutte v. Armco Steel Corp. , 431 F.2d 22, 25 (3d Cir.1970).

In deciding whether to transfer a case, a court must balance the private and public interests protected by § 1404(a). Jumara v. State Farm Ins. Co. , 55 F.3d 873, 879 (3d Cir. 1995). The private interests include the parties' preferences, whether the claim arose elsewhere, the convenience of the parties and witnesses, and the location of relevant books and records. Id . Public interests include: the enforceability of the judgment; practical considerations making trial easy, expeditious, or inexpensive; the efficiency of the relative courts in terms of case congestion; local interest in deciding local controversies at home; the public policies of the for a; and the familiarity of the trial judge with the applicable state law. Id. at 879-80 (internal citations omitted).

With regards to these factors, "a forum selection clause is treated as a manifestation of the parties' preferences as to a convenient forum." Jumara , 55 F.3d at 880. A forum selection clause is "prima facie valid and should be enforced unless enforcement is shown... to be unreasonable' under the circumstances." M/S Bremen v. Zapata Off-Shore Co. , 407 U.S. 1, 10 (1972). Though the burden of establishing the need for transfer usually rests with the defendant moving party, a valid forum selection clause shifts the burden to the plaintiff to show why it is not bound by the contractual choice of forum. Jumara , 55 F.3d at 879-80. "Thus, while courts normally defer to the plaintiff's choice of forum, such deference is inappropriate where the plaintiff has already freely contractually chosen an appropriate venue." Id. at 880. While a forum selection clause "should not receive dispositive weight, " Id., it is a significant factor that should "figure centrally in [a district court's] calculus." Stewart Org., Inc. v. Ricoh Corp. , 487 U.S. 22, 29 (1988).

The plaintiffs do not explain why the dispute is not governed by this clause and instead only assert that this claim does not arise under the Operating Agreement.[29] Yet, the plaintiffs also indicate that defendant's interest in Experium does not entitle him as minority owner to cripple the business, pointing back to the relevance of the Operating Agreement in determining the parties' rights to Experium's assets.[30] As the defendant argues, any resolution of the claims asserted by Experium will first require a court to resolve under Virginia law: the rights of the defendant with respect to Experium, the determination of who currently is the Experium managing member, and whether the circumstances presented here allow ComRent and its current management to divest the defendant as a minority shareholder of Experium's intellectual property, which he helped create. Thus, it logically follows that this suit is a dispute falling with the purview of the Operating Agreement.[31] For that reason, the Eastern District of Virginia would be a venue to which the parties have consented, their preference as members of Experium.[32]

Beyond the forum selection clause, the other private factors appear to neither weigh for or against either fora. The only party that might be inconvenienced by this change would be the defendant, since the other parties and witnesses are located in Maryland.[33] However, it is the defendant who prefers the change of forum. The relevant documents and records at issue can be accessed from any forum, as they are stored on the Internet. The remaining documents and records located at the defendant's home in New Jersey, he contends, can just as easily be transferred to Virginia as they would be to Pennsylvania.

In addition, other public interests weigh in favor of transfer to the Eastern District of Virginia. Resolution of the corporate governance issues certainly will require the application of Virginia corporate law as applied to Experium, a Virginia LLC.[34] A Virginia court will be better apt at handling the nuances of Virginia corporate law and the rights of the defendant as a minority shareholder.[35] Furthermore, a Virginia judge and jury have more of an interest in correctly interpreting Virginia corporate law than do the people of this district. Lastly, the Eastern District of Virginia is commonly known as the "rocket docket, " proving that the case will move through quickly and efficiently. This factor is important since the plaintiffs are requesting injunctive relief.

The plaintiffs contend that the transfer would harm their action because no replevin remedy is available under Virginia law.[36] Whether the plaintiffs even have a viable replevin remedy is questionable. The intellectual property being sought is allegedly contained on computers at defendant's residence in New Jersey, which he possesses under claim of right. To be successful in a replevin action, a plaintiff must show not only title, but also the exclusive right of immediate possession of the property in question. International Electronics Co. v. N.S.T. Metal Products Co., Inc. , 88 A.2d 40, 43 (Pa. 1952); Wilson v. Highway Service Marineland , 418 A.2d 462, 464 (Pa.Super. 1980). "Exclusive" right of possession means a right which excludes the defendant. It seems highly unlikely that such claim properly can be asserted here by plaintiffs. Thus, Pennsylvania replevin remedy would appear to be of little use to the plaintiffs.

The forum selection clause, along with the other private and public Jumara factors, weigh in favor of transferring this suit to the Eastern District of Virginia in the interest of fairness and justice.[37]

III. Conclusion

For the above reasons, I will grant the defendant's motion for change of venue to the Eastern District of Virginia.[38]

An appropriate Order follows.

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