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Delaware Federal Court Examines Standards for Motions to Transfer Venue

United States of America v. Energy Solutions, Inc., et al.
Case No. 16-cv-01056-GMS (United States District Court for the District of Delaware, December 21, 2016)

by Richard J. Medoff, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.ded.uscourts.gov/sites/default/files/opinions/gms/2016/
december/16-1056.pdf

United States of America v. Energy Solutions, Inc., et al. involved a civil lawsuit filed by the United States Government in the United States District Court for the District of Delaware seeking to enjoin the merger of two (2) companies, pursuant to the Clayton Act, 15 U.S.C. § 18. The Defendants subsequently filed a motion to transfer to the United States District Court for the Western District of Texas, pursuant to 28 U.S.C. § 1404(a). The Court reviewed the private and public interest factors espoused in Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995), and concluded that the Defendants failed to meet their burden of demonstrating that transfer to the Western District of Texas would serve the interests of convenience and justice. Thus, the Court denied the Defendants’ motion to transfer.

By way of factual background, on November 18, 2015, Defendants, Energy Solutions, Inc. (“ES”) and Waste Control Specialists LLC (“WCS”) (collectively, “Defendants”), executed a merger agreement, under the terms of which ES would acquire WCS. ES is a Delaware Corporation with its corporate headquarters in Salt Lake City, Utah. WCS is a Delaware Limited Liability Company with its corporate headquarters in Dallas, Texas. On November 16, 2016, the United States initiated a lawsuit against Defendants in the United States District Court for the District of Delaware, “seeking to permanently enjoin the planned acquisition and to have the acquisition adjudged a violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.” Defendants subsequently filed a Motion to Transfer Venue, pursuant to 28 U.S.C. § 1404(a), seeking to transfer the case to the United States District Court for the Western District of Texas.

The Court began its analysis by noting that, “for 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 or to any district or division to which all parties have consented.” See 28 U.S.C. § 1404(a). The Court explained that in order to resolve a motion to transfer, “a court first asks whether the action could have been brought in the proposed transferee venue and then determines whether transfer to a different forum would best serve the interests of justice and convenience.” See Smart Audio Techs., LLC v. Apple, Inc., 910 F.Supp.2d 718, 724 (D. Del. 2012). The Court further explained that, “at each step, the defendant has the burden to demonstrate that a transfer is appropriate,” and that “unless the balance of convenience of the parties is strongly in favor of the defendant, the plaintiff’s choice of forum should prevail.” See Jumara v. State Farm Ins. Co., 55 F.3d 873, 879-80 (3d Cir. 1995); Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir. 1970).

The parties did not dispute that the case could have been brought in the Western District of Texas. Accordingly, the Court proceeded to consider whether transfer to the Western District of Texas would “serve the interests of convenience and justice.” The Court noted that in resolving a motion to transfer, a court must consider “each of the various private and public interests guarded by § 1404(a),” known as “Jumara factors,” on a case-by-case basis. See Jumara, 55 F.3d at 879. The Court explained that the “private interests” may include:

[P]laintiff’s forum preference as manifested in the original choice; the defendant’s preference; whether the claim arose elsewhere; the convenience of the parties as indicated by their relative physical and financial condition; the convenience of the witnesses, but only to the extent that the witnesses may actually be unavailable for trial in one (1) of the fora; and the location of books and records (similarly limited to the extent that the files could not be produced in the alternative forum).

Id. The Court further explained that the “public interests” may include:

[T]he enforceability of the judgment; practical considerations that could make the trial easy, expeditious, or inexpensive; the relative administrative difficulty in the two (2) fora resulting from court congestion; the local interest in deciding local controversies at home; the public policies of the fora; and the familiarity of the trial judge with the applicable state law in diversity cases.

Id. at 879-880. The Court noted, however, that “the Jumara analysis is not limited to these explicitly enumerated factors, and no one (1) factor is dispositive.” Id. at 879.

Considering “the Jumara factors as a whole,” the Court found that Defendants had “not met their burden of demonstrating that the interests of justice and convenience strongly favor transfer.” See Shutte, 432 F.2d at 25. According to the Court, “Many of the factors did not weigh in favor of or against transfer,” but “only Defendants’ forum preference weighed in favor of transfer.” On this point, the Court explained that “for the defendants’ choice of forum to carry weight in the Jumara analysis, the defendants must demonstrate a legitimate and rational reason for seeking an alternative forum.” SeeIntellectual Ventures I LLC v. Altera Corp., 842 F.Supp.2d 744, 755 (D. Del. 2012). The Court noted that Defendants preferred to litigate in the Western District of Texas for several reasons, including: (1) the State of Texas was “directly involved in the facts of the case and had a significant interest in the transaction challenged in the lawsuit;” (2) the facility that was “the principal asset at issue” in the lawsuit was located in the Western District of Texas and partially owned by the State of Texas; and (3) “critical third-party witnesses, including Government and customer witnesses, were located in or near the Western District of Texas.” The Court found that Defendants’ reasons were “legitimate and rational,” and therefore, that “this factor weighed in favor of granting Defendants’ motion.”

The Court found, however, that “Defendants’ forum preference [was] eclipsed by the Government’s forum choice, which was afforded a degree of heightened deference as an individual Jumara factor.” On this point, the Court noted that “the plaintiff’s choice of a proper forum is a paramount consideration in any determination of a transfer request, and that choice should not be lightly disturbed.” See Shutte, 431 F.2d at 25. The Court explained that because of “the Clayton Act’s liberal venue requirements,” some courts “have found that the United States’ choice of forum in antitrust cases should receive heightened respect.” See 15 U.S.C. § 22 (1973) (the Clayton Act provides that “any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district whereof it is an inhabitant, but also in any district wherein it may be found or transacts business”); see also United States v. Brown University, 772 F.Supp. 241, 244 (E.D. Penn. 1991); Ferguson v. Ford Motor Co., 89 F.Supp. 45, 51 (S.D.N.Y. 1950).

Accordingly, the Court concluded that Defendants failed to meet their “burden of demonstrating that the interests of justice and convenience strongly favor transfer,” noting that “Plaintiff’s forum preference [and] the Defendants’ decision to incorporate in Delaware [were] enough to warrant keeping the case” in the District of Delaware. For the foregoing reasons, the Court denied the Defendants’ motion to transfer to the Western District of Texas.

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