Commercial Litigation and Arbitration

Venue — Internet Acts Occur Where Effects Felt — Permissive Forum Selection Clause Doesn’t Require § 1404 Transfer — Does § 1391(b)(2)’s “Events or Omissions Giving Rise to the Claim” Refer Only to Def’s Acts (Circuit Split)

Volks USA Inc. v. A2 Hosting, Inc., 2016 U.S. Dist. LEXIS 159595 (C.D. Cal. Nov. 16, 2016):


On June 15, 2016, Volks USA, Inc. ("Volks") filed this action against A2 Hosting Inc. ("A2"). On September 1, 2016, plaintiff filed the operative First Amended Complaint ("FAC") alleging eleven claims against A2, namely, (1) false advertising pursuant to the Lanham Act, 15 U.S.C. § 1125(a)(1)(B); (2) false advertising pursuant to Cal. Bus. & Prof. Code § 17500; (3) violations of the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. §§ 1030(a) et seq.; (4) computer crimes pursuant to Cal. Penal Code § 502; (5) unfair competition pursuant to California's Unfair Competition Law [*2]  ("UCL"), Cal. Bus. & Prof. Code § 17200; (6) breach of contract; (7) breach of warranty; (8) negligence; (9) trespass to chattels; (10) negligent misrepresentation; and (11) tortious interference with prospective economic advantage. The gravamen of plaintiff's complaint is that defendant improperly accessed and deleted data from a server allegedly located in California and relating to an online store operated by plaintiff.

On August 17, 2016, defendant filed a motion to change venue to the United States District Court for the Eastern District of Michigan. Dkt. 10. On September 5, 2016, plaintiff filed an opposition. Dkt. 16. On September 12, 2016, defendant filed a reply. Defendant's motion to change venue was originally scheduled for hearing on September 26, 2016, however, on September 21, 2016, the Court rescheduled the hearing for October 24, 2016. Dkt. 21.1

1   On October 17, 2016, defendant filed an untimely supplemental affidavit by Bryan Muthig, defendant's president, in support of its reply. Dkt. 26. The Court declines to consider the supplemental Muthig affidavit. See Local Rule 7-12.

On September 21, 2016, defendant filed a motion to dismiss the FAC. Dkt. 22. On October 3, 2016, plaintiff filed an opposition. Dkt. 23. On October [*3]  11, defendant filed a reply in support of its motion to dismiss. Dkt. 25.

On October 24, 2016, the Court held oral argument on both motions, focusing principally on defendant's motion to transfer. Thereafter, the Court took both motions under submission. Dkt. 27.

Having carefully considered the parties' arguments, the Court finds and concludes as follows.


Volks, Inc. is a Japanese corporation that manufactures specialized toys. FAC ¶ 8. Plaintiff is a California corporation and subsidiary of Volks, Inc. with its principal place of business in the Central District of California. Id. ¶ 1. Plaintiff operates two websites, namely, and . Id. ¶ 9. Since January 2014, plaintiffs two websites have been hosted by Caspian Services ("Caspian"), which is a business located in La Crescenta, California. Shigeta Decl. ¶ 5.

In late 2015, plaintiff decided to undertake a substantial overhaul of its web store, , and seek web hosting services from a new company. Id. ¶¶ 6, 9. While plaintiff upgraded its web hosting services, plaintiff planned to maintain its existing hosting agreement with Caspian so that it would have a backup copy [*4]  of its website data and services relating to both of its web urls. Id. ¶ 9. Plaintiff selected A2 for its new web hosting needs.

A2 is a Michigan Corporation with its headquarters and principal place of business in the Eastern District of Michigan. Plaintiff alleges that it was attracted to contract with A2 because of A2's marketing and "money back guarantee." FAC ¶ 16. Plaintiff executed a web hosting contract through A2's website, Id. ¶ 19, and, in the course of checking out, checked a box acknowledging, "I have read and agree to the Terms of Service." Id. ¶ 20. Although plaintiff appears to acknowledge it marked the aforementioned box, plaintiff alleges that it did not read the Terms of Service ("TOS") connected with its hosting contract prior to executing the contract. Id. ¶ 22.

On March 4, 2016, plaintiff contacted defendant about copying data from Caspian servers onto defendant's servers. Plaintiff alleges that its request was limited to data relating to the website and that it did not "authorize or request any services for the web store []." Id. ¶ 34. Plaintiff alleges that on March 5, 2016, defendant agreed to perform the requested task and [*5]  that defendant did perform said copying. Id. ¶ 40.

However, plaintiff alleges that defendant also improperly accessed and deleted data on Caspian servers relating to , effectively destroying the data supporting plaintiff's web store. Id. ¶¶ 45, 49. Plaintiff alleges that the destruction of its web store data has caused it to lose sales, damaged its reputation, and destroyed substantial investments it had made to improve its web store interface.


A. Legal Standards

Plaintiff argues that there are two independent reasons why this case should be transferred to the United States District Court for the Eastern District of Michigan. First, plaintiff argues that venue before this Court is improper pursuant to 28 U.S.C. § 1391 and therefore may be transferred pursuant to 28 U.S.C. § 1406 (permitting transfer of cases brought in an improper venue). In the alternative, plaintiff argues that transfer is appropriate pursuant to 28 U.S.C. § 1404.

1. 28 U.S.C. § 1406

In determining if the plaintiff's preferred venue is improper for the purposes of 28 U.S.C. § 1406, the court looks to 28 U.S.C. § 1391(b), which provides that venue is proper in:

   (1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the [*6]  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). Once a defendant has raised a timely objection to venue, the plaintiff has the burden of showing that venue is proper. Bohara v. Backus Hosp. Med. Benefit Plan, 390 F.Supp.2d 957, 960 (C.D.Cal.2005); see Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th Cir.1979). Pursuant to 28 U.S.C. § 1406(a), a district court in which venue is improper shall dismiss such case or, "if it be in the interest of justice, transfer such case to any district in which it could have been brought."

2. 28 U.S.C. § 1404

A district court where venue is otherwise proper may nonetheless transfer an action pursuant to 28 U.S.C. § 1404(a), which provides that:

   For [1] the convenience of parties and [2] witnesses, [and] [3] 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.

28 U.S.C. § 1404(a).

   A motion to transfer venue under § 1404(a) requires [*7]  the court to weigh multiple factors in its determination whether transfer is appropriate in a particular case. For example, the court may consider: (1) the location where the relevant agreements were negotiated and executed, (2) the state that is most familiar with the governing law, (3) the plaintiff's choice of forum, (4) the respective parties' contacts with the forum, (5) the contacts relating to the plaintiff's cause of action in the chosen forum, (6) the differences in the costs of litigation in the two forums, (7) the availability of compulsory process to compel attendance of unwilling non-party witnesses, and (8) the ease of access to sources of proof . . . [9] the presence of a forum selection clause is a "significant factor" in the court's § 1404(a) analysis [as is] [10] the relevant public policy of the forum state, if any.

Jones v. GNC Franchising, Inc., 211 F.3d 495, 499 (9th Cir. 2000) ("the Jones Factors"). However, "[s]ubstantial weight is accorded to the plaintiff's choice of forum, and a court should not order a transfer unless the 'convenience' and 'justice' factors set forth above weigh heavily in favor of venue elsewhere." Catch Curve, Inc. v. Venali, Inc., 2006 U.S. Dist. LEXIS 96379, *3-4, 2006 WL 4568799 (C.D. Cal. 2006).

The party seeking to transfer venue bears the burden of showing that convenience and justice require transfer. Commodity Futures Trading Comm'n v. Savage, 611 F.2d 270, 278-279 (9th Cir. 1979). The decision [*8]  to transfer lies within the sound discretion of the trial judge. See Sparling v. Hoffman Constr. Co., 864 F.2d 635, 639 (9th Cir. 1988).

B. Discussion

As an initial matter, venue appears to be proper in both the Central District of California and the Eastern District of Michigan.

1. Venue is Proper in the Central District of California

Plaintiff contends that venue is proper before this Court because "a substantial part of the events or omissions giving rise to the claim" occurred here. See 28 U.S.C. § 1391(b)(2). "Circuit courts are split on whether the statutory reference to 'events or omissions giving rise to the claim' requires courts to focus solely on defendant's activities, or to consider plaintiff's activities as well." William W. Schwarzer, A. Wallace Tashima & James M. Wagstaffe, California Practice Guide: Federal Civil Procedure Before Trial § 4:327.1 (2016). Relevant here, the Ninth Circuit has adopted the view that "the locus of the injury" is a relevant factor in determining where a substantial part of the events or omissions occurred. Myers v. Bennett Law Offices, 238 F.3d 1068, 1076 (9th Cir. 2001). Accordingly, some courts have concluded that, for purposes of venue, a defendant's acts over the internet may constitute "events and omissions" in the venue where their effects are felt. See Diesel Power Source, L.L.C. v. Crazy Carl's Turbos Inc., 2015 WL 1034231, at *9 (D. Utah Mar. 10, 2015) (for purposes of venue, defamatory product [*9]  reviews online about a company which defendant knows is in Utah 'occured' in both Tennessee, where defendant physically sat, and Utah, where defendant projected effects via the internet); Wichmann v. Levine, 2016 WL 4368136, at *3 (E.D. Cal. Aug. 16, 2016) (posts online from Virginia established venue in California).

Plaintiff alleges that an employee of defendant, acting over the internet, accessed a server operated by Caspian which is a company located in the Central District of California. Hideyoshi Decl. ¶ 5. Plaintiff alleges that, over the internet, defendant accessed plaintiff's data on said server and deleted it. For purposes of determining whether venue is proper under section 1391(b)(2), the Court concludes that the events allegedly occurring in the Central District of California, such as the loss of data stored on a server in California and the data exchange necessary to remotely delete said data, constitute a "substantial part of the events or omissions giving rise to the claim." Accordingly, venue is proper in the Central District of California and neither dismissal or transfer are mandated by 28 U.S.C. § 1406.2 3

2   "Venue and personal jurisdiction issues are independent requirements." Schwarzer et al. § 4:16. Defendant does not challenge whether this Court has personal jurisdiction [*10]  over it and the Court expresses no view as to whether these alleged events constitute sufficient contacts to establish personal jurisdiction.

3   To the extent that defendant argues venue is improper because of the venue-clause in their TOS, the Court notes that said clause appears to be a permissive rather than a mandatory venue provision. Furthermore, a motion pursuant to 28 U.S.C. 1406(a) cannot rely upon a forum-selection clause. Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S. Ct. 568, 577 (2013) (whether venue is wrong or improper depends exclusively on the application of federal venue laws, "and those provisions say nothing about a forum-selection clause"). Instead, a forum selection clause may be raised in a transfer motion pursuant to 28 U.S.C. § 1404. Id.

2. Venue Is Also Proper in the Eastern District of Michigan

Although venue is proper in the Central District of California, the Court may nonetheless transfer this action pursuant to 28 U.S.C. § 1404. To satisfy the requirements of section 1404, defendant must first demonstrate that either this action could have been brought before the District Court for the Eastern District of Michigan or plaintiff has consented to venue in the Eastern District of Michigan. See 28 U.S.C. 1404(a).

Section 1391(b)(1) provides that venue is proper in a judicial district in which any defendant resides. A corporation [*11]  resides, for purposes of venue, in any district in which it would be subject to the court's personal jurisdiction if said district were a state. 28 U.S.C. §§ 1391(c)(2).

Defendant, a Michigan Corporation, has its headquarters and principal place of business in Ann Arbor, Michigan, within the Eastern District of Michigan. Muthig Aff. ¶ 3. Accordingly, defendant is subject to personal jurisdiction in the Eastern District of Michigan and venue would also be proper there.

3. Transfer Pursuant to 28 U.S.C. § 1404

i. Convenience of the Parties and Witnesses

Regarding convenience, courts evaluate the convenience of all potential witnesses necessary to trial in a case, however, the convenience of the non-party witnesses often figures most prominently in deciding a motion to transfer. Flotsam of Cal., Inc. v. Huntington Beach Conf. & Visitors Bureau, 2007 WL 4171136 (N.D.Cal. 2007); Saleh v. Titan Corp., 361 F.Supp.2d 1152, 1161 (S.D.Cal. 2005).

Plaintiff's principal place of business appears to be in the Central District of California, FAC ¶ 1, and plaintiff avers that there are party witnesses residing here. Defendant's principle place of business and headquarters is in the Eastern District of Michigan, Muthig Aff. ¶ 3, and defendant avers that at least one party-witness resides in the Easter District of Michigan. However, plaintiff further avers that the only non-party witnesses who may [*12]  be required to testify in this action reside in the Central District of California. Specifically, during oral argument on this matter, plaintiff argued that Caspian employees, who reside in this district, will likely be necessary for trial to explain how access to their servers is controlled. Defendant does not direct the Court to any witness who might be geographically beyond the Court's subpoena power and also beyond its ability to compel its own employees' attendance at trial. Accordingly, Caspian employees are the only non-party witnesses who may be necessary to this action and they reside in the Central District of California.

Defendant next argues that access to evidence in its possession will be more convenient in Michigan. However, defendant does not direct the Court to any evidence that cannot be shared electronically or transported to the Central District of California for trial. Accordingly, this consideration is a neutral factor.

In light of the foregoing, the Court concludes that the convenience of witnesses weighs against transfer.

ii. The Interests of Justice

Having concluded that the convenience of the parties does not weigh in favor of transfer, defendant must demonstrate [*13]  some other reason this action should be transferred.

Defendant, relying on the TOS, contends that plaintiff has agreed to litigation in the Eastern District of Michigan. The venue-clause of the TOS provides that:

   The validity, interpretation, and performance of this TOS, and of the agreements and policies that apply to the Services, shall be controlled by and construed under the laws of the State of Michigan, United States of America, as if performed wholly within the state and without giving effect to the principles of conflicts of law. You agree that jurisdiction and venue are proper in the state courts located in Ann Arbor, Michigan, or the U.S. District Court for the Eastern District of Michigan located in Ann Arbor Michigan.

Opp'n Ex. L at No. 18. Furthermore, the TOS provides that, "All claims you bring against [A2] must be resolved in accordance with this TOS." Id. at No. 19.

However, as defendant acknowledged during oral argument on this matter, the forum selection clause of the TOS is permissive rather than mandatory. The "vast majority of courts" have concluded that a permissive forum selection clause does not require transfer. Lavera Skin Care N. Am., Inc. v. Laverana GmbH & Co. KG, 2014 WL 7338739, at *5 (W.D. Wash. Dec. 19, 2014). The court must apply the "traditional" transfer [*14]  analysis. Id.

Defendant next argues that resolution of this action turns upon application of Michigan law and that it should, therefore, be transferred. Although resolution of this action, as discussed below, requires application of Michigan law, district courts "regularly apply the law of states other than the forum state." Rabinowitz v. Samsung Elecs. Am., Inc., No. 14-cv-00801-JCS, 2014 WL 5422576, at *7 (N.D. Cal. Oct. 10, 2014). Accordingly, the courts' relative familiarity with the underlying law is a neutral factor.

Finally, defendant offers numerous reasons why other considerations weigh in favor of transfer. Defendant argues that it has a limited connection to this forum, that the alleged acts giving rise to plaintiff's claims did not occur in California, and that plaintiff's connection to the Central District of California is limited. Defendant's arguments are without merit. Plaintiff alleges that defendant's acts caused a foreseeable effect in this district because defendant allegedly destroyed data on servers in this district. Furthermore, plaintiff resides in this district and has its offices in this district. Having reviewed the parties' arguments regarding the respective parties' connection to each forum and the forum's [*15]  connection to this action, the Court concludes that these factors are either neutral or weigh against transfer.

Ultimately, where the relevant factors do not strongly favor transfer, "the plaintiff's choice of forum should rarely be disturbed." Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). Accordingly, defendant's motion to transfer is DENIED.


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