Nam v. Tex Net Inc

United States District Court

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

HEE SOOK NAM §

V. CIVIL ACTION NO. 3:20-CV-1132-S

TEX NET, INC.,, et al.

MEMORANDUM OPINION AND ORDER

This Memorandum Opinion and Order addresses Defendants’ Motion to Dismiss Amended

Complaint (“Motion to Dismiss”) [ECF No. 28]. Defendants move to dismiss for lack of personal

Jurisdiction under Rule 12(b)(2), failure to state a claim upon which relief may be granted under

Rule 12(b)(6), and improper venue under Rule 12(b)(3). In the alternative, Defendants move to

transfer the case to the Southern District of California pursuant to 28 U.S.C. § 1406(a), or for the

convenience of the parties, which the Court construes as a motion to transfer venue pursuant to

28 U.S.C. § 1404(a). For the following reasons, the Court DENIES IN PART and GRANTS IN

PART the Motion to Dismiss in that the Court DENIES the Motion to Dismiss for lack of personal

jurisdiction and GRANTS the motion to transfer venue.

I. PROCEDURAL BACKGROUND

This case was removed from the 44th Judicial District Court of Dallas County, Texas,

based on diversity jurisdiction. Defs. Tex Net, Inc., Theresa Surh, Gene Surh, and Thomas Ryu’s

Notice of Removal [ECF No. 1]. Shortly after removal, Thomas Ryu was terminated from the

case pursuant to an agreed stipulation of dismissal. Stip. of Dismissal as to P].’s Claims Against

Def. Thomas Ryu without Prejudice [ECF No. 9]. Plaintiff filed a motion to remand [ECF No. 7],

which the Court denied on the basis that: (1) Plaintiffs Original Petition did not state a claim

against Defendant Dae Surh, deceased, and Defendant Tex Tech Investments, Inc.;! and

(2) Defendants met their burden to show that Defendant Tex Net, Inc. was not a Texas citizen at

the time the case was filed and removed. Mem. Op. and Order [ECF No. 24]. As a result, Theresa

Surh, Gene Surh, and Tex Net, Inc, are the only remaining defendants in this case (“Defendants”).”

After obtaining leave of Court, Plaintiff filed its First Amended Petition, Application for

Temporary Restraining Order, Temporary Injunction, and Anti-Suit Injunction (“Amended

Complaint”) [ECF No. 27]. Defendants filed the Motion to Dismiss on August 28, 2020. After

obtaining multiple extensions, Plaintiff filed a response on January 11, 2021. Pl.’s Resp., and Br.

in Supp. thereof, to Defs. Tex Net, Inc., Theresa Surh, Gene Surh, and Thomas Ryu’s Mot. to

Dismiss (“Response”) [ECF No. 51]. The Motion to Dismiss is now ripe and pending before the

Court.

IH. FACTUAL BACKGROUND

This action arises out of a stock ownership dispute between Plaintiff and Defendants

Theresa Surh and Gene Surh. In 1999, Dae Surh and Theresa Surh, a married couple residing out-

of-state, created an investment scheme to purchase stock shares of Verimatrix, Inc. (“Verimatrix”),

a California corporation in which Dae Surh was a founding member, See Am. Compl. { 17.

According to Plaintiff, Dae Surh travelled to Texas to solicit investments from Plaintiff, Plaintiff's

husband, and other Texas residents (collectively, “Texas Investors”). Jd. §{[ 17-19. Under the

' Plaintiff's Original Petition and Amended Complaint lists “Tex Tech Investments, LLC” in the caption, but the body

of each document refers to “Tex Tech Investments, Inc.” The reference to Tex Tech Investments, LLC in the caption

appears to be a typographical error. In the Court’s Memorandum Opinion and Order addressing Plaintiff's motion to

remand, the Court found that Plaintiff's Original Petition did not state a claim against Tex Tech Investments, LLC.

However, given that this name appears to be an error, the Court clarifies that the Memorandum Opinion and Order

found that Plaintiff's Original Petition did not state a claim against Tex Tech Investments, Inc.

2 Plaintiff continues to assert claims against Dae Surh and Tex Tech Investments, Inc. in the Amended Complaint.

See Am. Compl. §f 5, 8. As noted, the Court previously found that Dae Surh and Tex Tech Investments, Inc. were

improperly joined because Plaintiff did not state a claim against them in the Original Petition, Mem. Op. and Order

[ECF No. 24], which was tantamount to dismissing claims against them without prejudice, see Int’l Energy Ventures

Memt., L.L.C. v. United Energy Grp. Lid., 818 F.3d 193, 209 (Sth Cir, 2016).

proposed investment scheme, Dae Surh would purchase Verimatrix shares through a holding

company for the benefit of the Texas Investors. See id. 419. Tex Net, Inc. (“Tex Net’), a Delaware

corporation, was incorporated for this purpose. See id, 99] 22-23; id., Ex. B.

In 2001, the Texas Investors made their initial investment in Verimatrix, which was

documented by a stock purchase agreement (“Stock Purchase Agreement”). Jd. J 25. Theresa

Surh signed the Stock Purchase Agreement on behalf of Tex Net. Jd. Dae Surh and Theresa Surh

did not personally acquire Verimatrix shares pursuant to the Stock Purchase Agreement, but did

acquire Verimatrix shares through Tex Net at a later date. Jd J§ 26, 45, 53. Although Theresa

Surh executed the Stock Purchase Agreement on behalf of Tex Net, Plaintiff claims that Theresa

Surh subsequently represented at a Tex Net meeting that Tex Net belonged to the Texas Investors

and acknowledged that Plaintiff, not Theresa Surh, was Tex Net’s president. See id. 29.

Over the next several years, Tex Net entered into multiple transactions with Verimatrix

pursuant to which Tex Net either loaned money to Verimatrix, acquired additional Verimatrix

shares, or acquired warrants to purchase Verimatrix shares. /d. {§ 30-55. Plaintiff executed the

agreements documenting these transactions on behalf of Tex Net, and Dae Surh or Theresa Surh

recorded each investor’s contribution on handwritten notes. fd. ff 27, 30-55, 74.

In 2005, the Texas Investors and Dae Surh transferred their Verimatrix shares held by Tex

Net to anew company incorporated in Texas, Tex Tech Investments, Inc. (“Tex Tech”). id. {] 46-

47, The transfer was documented by a stock transfer agreement, dated August 10, 2005 (“Stock

Transfer Agreement”), which Plaintiff signed on behalf of each company. /d. {| 47-48. According

to Plaintiff, it was Dae Surh’s idea to form Tex Tech and Dae Surh instructed Plaintiff to sign the

Stock Transfer Agreement on behalf of Tex Net and Tex Tech, which she did. /d. {| 46, 48; see

also id, Ex. G (Stock Transfer Agreement signed by Plaintiff as the president of both Tex Net and

Tex Tech). Plaintiff asserts that each investor’s ownership interest in Tex Net was transferred in

the same percentage to Tex Tech, except that Dae Surh transferred his ownership interest to his

son, Gene Surh, and daughter, Joanna Surh. fd. ¢ 49.

The parties continued to purchase additional Verimatrix shares through Tex Tech, Jd. 7 53.

In 2019, a company called Inside Secure purchased Verimatrix, including the Verimatrix shares

held by Tex Tech. /d § 55. Pursuant to the sale, Plaintiff asserts that each investor received

payment for their proportionate investment in Verimatrix. Jd.

After Dae Surh passed away, a disagreement arose between Plaintiff and Theresa Surh

regarding the validity of the Stock Transfer Agreement and ownership of Verimatrix shares.

See id. , 5, 66. On January 15, 2020, Theresa Surh, Gene Surh, and Tex Net sued Plaintiff, Tex

Tech, Verimatrix, and Robin Ross Cooper (Verimatrix’s president) in California secking to

invalidate the Stock Transfer Agreement (“California Lawsuit”), alleging, among other things, that

Theresa Surh was Tex Net’s president and Plaintiff was not authorized to execute the Stock

Transfer Agreement, /d J 66; id, Ex. K. According to Plaintiff, Theresa Surh also claims that,

as Tex Net’s alleged president and shareholder, she is entitled to all the shares held by Tex Net

prior to the transfer to Tex Tech. /d. § 67. Plaintiff alleges that: (1) Defendants’ claims in the

California Lawsuit are without merit and are barred by the statute of limitations; (2) Dae Surh and

Theresa Surh’s conduct constitutes fraud; (3) Defendants’ alleged misrepresentations will deprive

Plaintiff of the value of her Verimatrix investments; and (4) Plaintiff will be financially harmed

by the cost to defend against the California Lawsuit. See id. {| 68, 98, 101, 107.

Based on the foregoing allegations, Plaintiff brings the following claims: (1) fraud;

(2) unjust enrichment; and (3) money had and received. /d 4" 100-11. Plaintiff also seeks a

declaratory judgment that, among other things, the California Lawsuit is barred by the statute of

limitations. Jd. | 92. Finally, Plaintiff seeks a temporary restraining order and injunction

preventing Theresa Surh, Gene Surh, and Tex Net from taking any further action in the California

Lawsuit. Jd. 113-62.

HL. LEGAL STANDARD

A. Personal Jurisdiction

Federal Rule of Civil Procedure 12(b)(2) allows defendants to move to dismiss claims for

lack of personal jurisdiction. The plaintiff bears the burden of making a prima facie showing that

a court has personal jurisdiction over a defendant. Monkton Ins. Servs., Ltd. v. Ritter, 768 F.3d

429, 431 (5th Cir. 2014), In considering a motion to dismiss pursuant to Rule 12(b)(2), the court

must accept the plaintiff's “uncontroverted allegations, and resolve in its favor all conflicts.”

Alpine View Co. v. Atlas Copco AB, 205 F.3d 208, 215 (Sth Cir. 2000). The court may consider

“affidavits, interrogatories, depositions, oral testimony, or any combination of the recognized

methods of discovery.” Stuart v. Spademan, 772 F.2d 1185, 1192 (Sth Cir. 1985).

Because Texas’s long-arm statute extends to the limits of federal due process, this Court

has personal jurisdiction over a nonresident defendant so long as the assertion of jurisdiction

comports with the Due Process Clause of the United States Constitution. See Sangha v. Navig8

ShipManagement Private Ltd., 882 F.3d 96, 101 (Sth Cir. 2018). Personal jurisdiction can be

general or specific. See Lewis v. Fresne, 252 F.3d 352, 358 (5th Cir, 2001). General jurisdiction

allows a court to hear any claim against a nonresident defendant, and it exists when that

defendant’s “affiliations with [Texas] are so ‘continuous and systematic’ as to render them

essentially at home in [Texas].” Daimler AG v. Bauman, 571 U.S. 117, 127 (2014) (quoting

Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011)). “Establishing

general jurisdiction is ‘difficult’ and requires ‘extensive contacts between a defendant and a

forum.’” Sangha, 882 F.3d at 101-02 (quoting Johnston, 523 F.3d at 609).

“In order for a... court to exercise specific jurisdiction, ‘the suit’ must ‘aris[e] out of or

relat[e] to the defendant’s contacts with the forum.’” Bristol-Myers Squibb Co. v. Superior Court,

1378. Ct. 1773, 1780 (2017) (first alteration added) (quoting Daimler AG, 571 U.S. at 127). “Such

activity or occurrence must ‘create a substantial connection with the forum State,’” and without

such “connection, ‘specific jurisdiction is lacking regardless of the extent of a defendant’s

unconnected activities in the State.”” Jnmar Rx Sols., Inc. v. Devos, Lid., No. 18-11443, 2019 WL

4440400, at *2 (Sth Cir, Sept. 16, 2019) (first quoting Walden v. Fiore, 571 U.S, 277, 284 (2014);

and then quoting Bristol-Myers Squibb, 1378. Ct. at 1781)).

In evaluating whether due process allows the exercise of specific jurisdiction, courts

consider:

(1) whether the defendant has minimum contacts with the forum state, i.e., whether

it purposely directed its activities toward the forum state or purposefully availed

itself of the privileges of conducting activities there; (2) whether the plaintiffs

cause of action arises out of or results from the defendant’s forum-related contacts;

and (3) whether the exercise of personal jurisdiction is fair and reasonable.

Carmona v. Leo Ship Mgmt. Inc., 924 F.3d 190, 193 (Sth Cir. 2019) (quoting Seiferth □□□

Helicopteros Atuneros, Inc., 472 F.3d. 266, 271 (Sth Cir. 2006)), The minimum contacts analysis

is fact intensive, and the touchstone is “whether the defendant’s conduct shows that it ‘reasonably

anticipates being hauled into court’” in the forum state. McFadin v. Gerber, 587 F.3d 753, 759

(5th Cir. 2009) (quoting Luv N’ care, Lid. y. Insta-Mix, Inc., 438 F.3d 465, 470 (Sth Cir, 2006)).

“Because ‘specific personal jurisdiction is a claim-specific inquiry,’ ‘[a] plaintiff bringing multiple

claims that arise out of different forum contacts of the defendant must establish specific

jurisdiction for each claim.’” Inmar Rx, 2019 WL 4440400, at *3 (quoting Mcadin, 587 F.3d at

759).

Once the plaintiff demonstrates that the defendant has minimum contacts with the forum

and that the action arises out of those contacts, the burden shifts to the defendant to show that the

exercise of jurisdiction is “unfair and unreasonable.” Sangha, 882 F.3d at 102. In determining

whether the defendant has carried this burden, courts balance five factors: (1) the burden on the

nonresident defendant of having to defend itself in the forum; (2) the interests of the forum state

in the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate

judicial system’s interest in the most efficient resolution of controversies; and (5) the shared

interests of the states in furthering fundamental social policies. Jd.

B. 1406(a)

Under 28 U.S.C. § 1406(a), “[t]he district court of a district in which is filed a case laying

venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer

such case to any district or division in which it could have been brought.”

Section 1406(a) allows a transfer where the first forum chosen is improper due to

the existence of some obstacle to adjudication on the merits. Dubin v. United

States, 380 F.2d 813, 816 (Sth Cir.1967). The statute specifically refers to “laying

venue in the wrong division or district,” but a transfer can be made due to the

absence of personal jurisdiction in a district where venue is otherwise proper. See

Bentz v. Recile, 778 F.2d 1026, 1028 (5th Cir.1985). ... [A] division or district may

be “wrong” under Section 1406(a) when the original court lacks personal

jurisdiction. Id.

Herman v. Cataphora, Inc., 730 F.3d 460, 466 (Sth Cir. 2013), “The district court has broad

discretion in determining whether to dismiss or transfer a case in the interest of justice under

§ 1406(a).” LSF4 Lean Invs. L LLC v. Weingart, No. 3:06-cv-419-M, 2006 WL 2370803, at *3

(N.D. Tex. Aug. 15, 2006) (citation omitted).

Cc. 1404(a)

“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.” 28 U.S.C. § 1404(a). As a plaintiff's

original choice of forum is ordinarily entitled to some deference, the party seeking transfer must

demonstrate that the transferee venue is clearly more convenient. Jn re Volkswagen of Am., Inc.,

545 F.3d 304, 315 (Sth Cir. 2008) (en banc). The plaintiffs choice of forum is not, however, “an

independent factor within .. . the § 1404(a) analysis.” Jd 314 n.10. In applying § 1404(a), the

Court must first determine “whether the judicial district to which transfer is sought would have

been a district in which the claim could have been filed.” In re Volkswagen AG, 371 F.3d 201,

203 (5th Cir, 2004) (per curiam) (citation omitted). Once this determination is made,

{the Court] turn[s] to the language of § 1404(a), which speaks to the issue of “the

convenience of parties and witnesses” and to the issue of “in the interest of justice.”

The determination of “convenience” turns on a number of private and public

interest factors, none of which are given dispositive weight. The private concerns

include: (1) the relative ease of access to sources of proof; (2) the availability of

compulsory process to secure the attendance of witnesses; (3) the cost of attendance

for willing witnesses; and (4) all other practical problems that make trial of a case

easy, expeditious and inexpensive. The public concerns include: (1) the

administrative difficulties flowing from court congestion; (2) the local interest in

having localized interests decided at home; (3) the familiarity of the forum with the

law that will govern the case; and (4) the avoidance of unnecessary problems of

conflict of laws [or] the application of foreign law.

id. (citations omitted).

After considering “[a]ll relevant factors to determine whether or not on balance the

litigation would more conveniently proceed and the interests of justice be better served by transfer

to a different forum,” the decision to transfer venue under § 1404(a) is left to the sound discretion

of the court. See El Chico Rests. of Tex., Inc. v. Carroll, Civil Action No. 3:09-cv-2294-L, 2010

WL 2652286, at *2 (N.D. Tex. June 29, 2010) (alteration in original) (quoting Peteet v. Dow Chem.

Co., 868 F.2d 1428, 1436 (Sth Cir. 1989)).

IV. ANALYSIS

A. Personal Jurisdiction

(1) Gene Surh

Plaintiff asserts that Gene Surh is subject to specific personal jurisdiction based on the

following allegations: (1) Gene Surh is a shareholder of Tex Tech; (2) Dae Surh acted as Gene

Surh’s agent because Dae Surh transferred Gene Surh’s Tex Net shares to Tex Tech and attended

Tex Tech meetings in Texas, with Gene Surh’s consent; (3} Because Dae Surh was Gene Surh’s

alleged agent, Dae Surh’s Texas contacts should be imputed to Gene Surh; and (4) Between 2014

and 2018, Gene Surh communicated several times on behalf of Tex Tech regarding the disputed

shares, including communications directed toward Texas. Resp. 10-14. Defendants, on the other

hand, assert that Gene Surh resides in California, he does not have sufficient contacts with Texas,

and Plaintiff's claims do not arise out of Gene Surh’s alleged contacts with Texas. Defs.’ Texnet,

Inc., Theresa Surh, and Gene Surh’s Br. in Supp. of their Mot. to Dismiss Am. Compl. (“Br. in

Supp. of Mot. to Dismiss”) [ECF No. 29], 14-16, 24.

The Court finds that Gene Surh is not subject to specific personal jurisdiction for several

reasons. First, Gene Surh’s status as a Tex Tech shareholder is not sufficient to establish personal

jurisdiction. Bezner v. Poehler, Civil Action No. 3:18-cv-3060-B, 2019 WL 1514981, at *4 (N.D.

Tex. Apr. 8, 2019) (noting that it is “well understood” that an individual’s status as an officer,

director, or majority shareholder of a corporation alone is insufficient to support the exercise of

personal jurisdiction) (citation omitted).

Second, because Gene Surh’s alleged contacts with Texas, according to Plaintiff, were

made in his capacity as a Tex Tech shareholder, Tex Tech was the entity making contact with

Texas, not Gene Surh in his personal capacity. See Stuart, 772 F.2d at 1197 (noting that, as a

general rule, jurisdiction over an individual cannot be predicated on jurisdiction over a corporation

unless a basis exists for disregarding the corporate fiction). Furthermore, Plaintiff has not asserted

a basis for disregarding Tex Tech’s corporate status and imputing Tex Tech’s contacts to Gene

Surh. Petras v. Mole, Civil Action No. 3:11-cv-1402-N, 2012 WL 13103200, at *6 (N.D. Tex.

May 17, 2012) (“The party seeking to impute the corporation’s jurisdictional contacts has the

burden of proof.”) (citation omitted).

Third, despite Plaintiff's allegation that Dae Surh acted as Gene Surh’s agent with respect

to Gene Surh’s Tex Tech shares, Plaintiff does not allege facts that demonstrate an agency

relationship. Blueskygreenland Env’t Sols., LLC v. Rentar Env’t Sols., Inc., Civil Action No. 4:11-

ev-01745, 2011 WL 5553706, *4 (S.D. Tex. Nov. 14, 2011) (Conclusory assertions, without

evidence in the record, are insufficient to infer agency relationship for the purposes of establishing

personal jurisdiction.”) (citation omitted). “The critical element of an agency relationship is the

tight of control, and the principal must have the right to control both the means and the details of

the process by which the agent is to accomplish his task in order for an agency relationship to

exist.” Goodman v. Whole Foods Market, Inc., Cause No. A-05-CA-422-LY, 2006 WL 8432867,

at *6 (W.D. Tex. Sept. 26, 2006) (citation omitted). Plaintiff does not allege that Gene Surh (as

the alleged principal) had the right to control Dae Surh’s actions (as the alleged agent); rather,

from the facts alleged, it appears that Dae Surh merely gifted Gene Surh with Tex Tech shares.

Absent proof of the right to control, Plaintiff has not stated sufficient facts to demonstrate an

agency relationship between Dae Surh and Gene Surh.

Finally, Plaintiff's suit does not arise out of or result from Gene Surh’s alleged contacts

with Texas. The crux of the California Lawsuit is whether Plaintiff was authorized to execute the

Stock Transfer Agreement and whether Theresa Surh is entitied to all of the Verimatrix shares held

by Tex Net at the time of the transfer. Am. Compl. ff 66-67. The crux of the case pending in this

10

Court is whether Defendants should be enjoined from pursuing the California Lawsuit. Id. J 112-

63. The Court finds that Gene Surh’s alleged communications (on behalf of Tex Tech) regarding

his Tex Tech shares are not sufficiently related to the instant lawsuit to support the exercise of

personal jurisdiction, and, therefore, the Court finds that Plaintiff has not alleged sufficient facts

to make out a prima facie case supporting personal jurisdiction over Gene Surh.?

(2) Remaining Defendants

The Court need not consider whether Plaintiff has alleged sufficient facts to make out a

prima facie case supporting personal jurisdiction over Theresa Surh and Tex Net. Assuming

arguendo that the Court has personal jurisdiction over Theresa Surh and Tex Net, ifthe Court were

to dismiss the lawsuit against Gene Surh, Plaintiff could file her lawsuit against Gene Surh in the

Southern District of California, which would result in the same issues being litigated in two places.

This is disfavored. See Liaw Su Teng v. Skaarup Shipping Corp., 743 F.2d 1140, 1148 (Sth Cir.

1984), overruled on other grounds, In re Air Crash Disaster Near New Orleans, La. on July 9,

1982, 821 F.2d 1147 (Sth Cir. 1987) (finding courts “should not sever if the defendant over whom

jurisdiction is retained is so involved in the controversy to be transferred that partial transfer would

require the same issues to be litigated in two places”) (citation omitted). Multiple courts faced

with this situation have exercised their discretion to transfer the entire case to a district where the

lawsuit could have been brought. See, e.g., Brooks & Baker, L.L.C. v. Flambeau, Inc., Civil Action

No, 2:10-cv-[46-TIW-CE, 2011 WL 4591905, at *6 (E.D. Tex. Sept. 30, 2011) (transferring entire

action when court lacked personal jurisdiction over some, but not all, defendants); see also

Martinez v. Angel Expl., LLC, No. 2:12-CV-265, 2013 WL 1496954, at *5 (N.D. Tex. Apr. il,

3 Because Plaintiff did not meet its burden to show that Gene Surh has minimum contacts with Texas and that the

action arose out of those contacts, the Court need not consider whether Defendants demonstrated that the exercise of

jurisdiction is unfair and unreasonable. Excentus Corp. v. Success Sys., Inc., Civil Action No. 3:19-cv-0897, 2019

WL 6346476, at *7 (NLD, Tex. Nov. 26, 2019) (citation omitted).

1]

2013) (transferring entire action when venue was improper as to one defendant to avoid

unnecessary delay and expense). Thus, regardless of whether the Court has personal jurisdiction

over Theresa Surh and Tex Net, transfer of the entire action is appropriate under either 28 U.S.C.

§ 1406(a) or § 1404(a) for the reasons explained below.

B. 1406(a)

Section 1406(a) permits a court to transfer a case to any district or division in which it

could have been brought regardless of whether it has personal jurisdiction over the defendants,

Nationwide Bi-Weekly Admin., Inc. v. Belo Corp., 512 F.3d 137, 140 (Sth Cir, 2007) (citing 28

U.S.C. § 1406(a); Goldlawr, Inc. v. Heiman, 369 U.S. 463, 466 (1962)). Defendants argue that

Plaintiff could have originally filed her lawsuit in the Southern District of California, see Br. in

Supp. of Mot. to Dismiss 24, which Plaintiff does not dispute. Defendants also consent to specific

personal jurisdiction for purposes of this lawsuit in the Southern District of California. Jd at 24

n.5.

The Court agrees that Plaintiff could have originally filed suit in the Southern District of

California because both venue and jurisdiction are proper there. Under 28 § U.S.C. 1391(b)(2), a

civil action may be brought in a judicial district in which a substantial part of the events or

omissions giving rise to the claim occurred. A substantial part of the events giving rise to

Plaintiff's claims occurred in the Southern District of California because: (1) Defendants filed the

4 Moreover, Plaintiff does not address Defendants’ alternative motion to transfer venue in her Response. Accordingly,

Plaintiff has waived any objection to the motion to transfer venue. See, e.g., United Siates v. Reagan, 596 F.3d 251,

254 (5th Cir, 2010) (holding that failure to adequately brief an argument results in waiver); Black v. North Panola

School Dist., 461 F.3d 584, 588 (Sth Cir. 2006) (finding that plaintiff's failure to defend her claim in her response

to the defendant’s motion to dismiss “constituted abandonment”) (citation omitted); Arkansas v. Wilmington Tr. Nat’!

Ass'n, No. 3:18-CV-1481-L, 2020 WL 1249570, at *5 (N.D. Tex. Mar. 16, 2020) (‘Failure of a party to respond to

arguments raised in a motion to dismiss constitutes waiver or abandonment of that issue at the district court level.”).

12

California Lawsuit in the state court embraced by that district,” see Am. Compl., Ex. K; and (2) the

disputed transactions with Verimatrix occurred in that district, see id § 95 (noting the transfer of

Verimatrix shares from Tex Net to Tex Tech was ratified by Robin Ross Cooper on behalf of

Verimatrix); id., Ex. K, $4] 7-8 (noting Verimatrix’s principal place of business is in San Diego and

Robin Ross Cooper resides in San Diego). Alternatively, if there is no venue in which the action

may otherwise be brought, venue is proper in any judicial district in which any defendant is subject

to the court’s personal jurisdiction, 28 U.S.C. § 1391(b)(3). Thus, because Defendants assert that

they are subject to personal jurisdiction in the Southern District of California, Br. in Supp. of Mot.

to Dismiss 24, venue may also be proper under 28 U.S.C. § 1391(b)(3}. Accordingly, the Court

finds that the present lawsuit could have been brought in the Southern District of California.

Transfer is also appropriate in the interest of justice to avoid duplicative litigation arising from the

same transactions and events. See Taylor v. Turner Indus. Grp., LLC, Civil Action No. 2:11-cv-

57, 2011 WL 13134192, at *5 (E.D. Tex. June 20, 2011) (finding that splitting Plaintiff's claims

into multiple cases would be judicially and economically inefficient).

Cc. 1404(a)

Alternatively, Defendants argue that “the Court should transfer the case to the Southern.

District of California because that is a more convenient venue for the parties.” Br. in Supp. of

Mot. to Dismiss 24 n.4. The Court construes this argument as a motion to transfer venue pursuant

to 28 U.S.C. § 1404(a), See Walter Oil & Gas Corp. v. Teekay Shipping, 270 F. Supp. 2d 855,

859 (S.D. Tex. 2003) (construing motion to transfer venue for convenience as a motion to transfer

pursuant to 28 U.S.C. § 1404(a)). Having determined that Plaintiff's lawsuit could have been

brought in the Southern District of California, the Court must decide whether private and public

Defendants filed suit in the Superior Court of the State of California for the County of San Diego. Am, Compl., Ex.

13

concerns weigh in favor of or against the transfer. See In re Volkswagen AG, 371 F.3d at 203

(citation omitted).

The private concerns weigh in favor of transfer. Plaintiff filed her lawsuit to enjoin the

California Lawsuit and the facts and allegations contained in the Amended Complaint overlap

considerably with the facts and allegations asserted in the California Complaint. Compare Am.

Compl. with id, Ex. K (California Complaint), It is apparent that much of the evidence, witnesses,

and parties, including Gene Surh, located in California and relevant to the California Lawsuit

would also be relevant to the present case. The Court may not have jurisdiction over many of the

California witnesses to compel their attendance at trial. Further, the cost for the willing witnesses

to attend a trial in Texas would be significantly higher than for those witnesses located in

California. Therefore, the Court finds that trial would be more expeditious, and less expensive in

California.®

Finally, the public concerns also weigh in favor of transfer. Because Plaintiff’s lawsuit

centers on the California Lawsuit, involves actions that took place in California, and implicates

California residents, California has an interest in adjudicating this case. Although Plaintiff brings

her claims under Texas law, the transactional documents at issue in this case, which Plaintiff

attached to her Amended Complaint in support of her claims, are governed by California law.

Am, Compl., Ex. B (Security Agreement); id, Ex. C (Warrant to Purchase Series B Preferred

Stock); id., Ex. E (Founders Settlement Agreement and General Release); id, Ex. F (Settlement

Agreement); id., Ex. G (Stock Transfer Agreement); id, Ex. H (Verimatrix, Inc. Amended and

Restated Shareholders’ Agreement). The claims asserted in the California Lawsuit are also

® The Court also notes that a related case was transferred from this district to the Southern District of California

pursuant to 28 U.S.C. § 1406(a). See Lee v. Verimatrix, Inc,, Civil Action No. 3:19-cv-0898-B, 2019 WL 5535764

(N.D. Tex. Oct. 25, 2019) (case brought by James Pyung Lee and Plaintiff against Verimatrix, Inc., Robin Ross

Cooper, and Inside Secure regarding a dispute over Verimatrix, Inc, stock ownership).

14

brought under California law. Ex. K (California Complaint). Having weighed the private and

public factors, the Court concludes that the Southern District of California is clearly the most

convenient forum in which to litigate the parties’ dispute. Therefore, regardless of the status of

personal jurisdiction, transfer is proper under either 28 U.S.C. §§ 1406(a) or 1404(a).

V. CONCLUSION

For the foregoing reasons, the Court DENIES IN PART and GRANTS IN PART

Defendants’ Motion to Dismiss Amended Complaint [ECF No. 28]. The Court DENIES

Defendants’ Motion to Dismiss for lack of personal jurisdiction. The Court GRANTS

Defendants’ motion to transfer venue and TRANSFERS this case to the Southern District of

California, San Diego Division. As the Court exercises its discretion to transfer the case, the Court

shall not reach the remaining arguments in the Motion to Dismiss. Any unresolved issues are

respectfully deferred to the considered judgment of the transferee Court.

SO ORDERED.

SIGNED February 12, 2021.

KAREN GREN SCHOLER

UNITED STATES DISTRICT JUDGE

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