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McDorman v. D&G Properties

United States District Court, W.D. Kentucky, Paducah

November 20, 2018

MICHAEL MCDORMAN, PLAINTIFF
v.
D&G PROPERTIES., et al, DEFENDANTS

          MEMORANDUM OPINION AN ORDER

          Thomas B. Russell, Senior Judge

         This matter is before the Court upon a motion by Defendants D&G Properties (“D&G”), DGW Investments, Inc. (“DGW”), Bruce Grisham (“Grisham”), Daniel Williams (“Williams”), RB Grisham, and Jacob Stauffer (“Stauffer”)[1] to dismiss for improper venue, or in the alternative, to transfer venue to the Western District of Missouri. [R. 16]. Plaintiff Michael McDorman has filed his response [R. 19], and the Defendants have filed a reply. [R. 20]. Fully briefed, Defendants' motion is ripe for review, and for the following reasons, it is DENIED.

         I. BACKGROUND

         The factual allegations as set out in the Complaint, [R. 1] and taken as true are as follows.[2]D&G and DGW (collectively referred to herein as “Companies”) own and operate multiple Sonic Drive-In (“Sonic”) and Taco John's franchises in Missouri, Tennessee, Kentucky, Indiana, Ohio, and West Virginia. Id. at 5. DGW was formed by Tom Dunivant, Bruce Grisham, and Daniel Williams. Id. D&G was formed by Dunivant and Grisham. Id.

         In June 1996, Plaintiff met with Defendants in West Plains, Missouri and discussed his prospective employment with the Companies. Id. at 6. Defendants offered Plaintiff the job of controlling the franchises and he accepted the offer shortly thereafter. Id. As part of his employment agreement, Plaintiff would receive a 10% ownership interest in all future franchises purchased by the Companies. Id. Plaintiff acquired his first 10% ownership interest in a newly acquired franchise when Plaintiff and a separate company owned by Dunivant executed an operating agreement to establish Sonic of Malden, LLC (“The Malden Operating Agreement”). Id. at 7. Thereafter, Plaintiff and Defendants established eight additional Limited Liability Companies to control newly acquired Sonic and Taco John's franchises (“The McDorman Interest LLCs”). Id.

         Plaintiff continued to manage the operations of the McDornam Interest LLCs, as well as the franchises wholly owned and operated by D&G and DGW, until March 2016. Id. at 10. In March 2016, Dunivant was bought out of his ownership interest by the other shareholders of the Companies. Id. Upon learning of Dunivant's departure, Plaintiff notified Defendants of his desire to voluntarily withdraw from the LLCs. Id. at 11. According to the terms of the McDorman Interest LLC operating agreements, this notification triggered a buy-out of Plaintiff's ownership interests. Id.

         Defendants, however, desired to continue their business relationship with Plaintiff and set up a meeting in order to persuade Plaintiff to continue his role as Company Controller. Id. at 11-12. At the meeting, Plaintiff agreed to continue his role as Company Controller for three years (“The Amended Employment Agreement”). Id. at 12. In exchange for this commitment, Defendants agreed to purchase 50% of Plaintiff's ownership interests in the McDorman Interest LLCs immediately, and then purchase the remainder of Plaintiff's ownership interest at the conclusion of the three-year term. Id. On April 12, 2016 Defendants purchased 50% of Plaintiff's ownership interests in the McDorman Interest LLCs. Id. at 13.

         Approximately one-year into the Amended Employment Agreement, Plaintiff began to sense a lack of communication from the shareholders of the companies. Id. Because of this perceived lack of communication, on February 6, 2017, Plaintiff approached Defendants at the West Plains, Missouri office to express his frustration. Id. Defendants told Plaintiff that the shareholders had discussed the need to continue their business without Plaintiff's services. Id.

         The next day, February 7, 2017, Plaintiff and Defendants met at Defendants' office in Paducah, Kentucky. Id. At this meeting, Defendants offered Plaintiff a severance agreement and Plaintiff accepted the offer. Id. at 14. On February 21, 2017 a meeting was held to install Plaintiff's replacement, Selina Harner, as the new Director of Operations of the companies. Id. at 15. Sometime after March 14, 2017, Plaintiff received a letter sent by the law firm Husch Blackwell on behalf of Defendants notifying Plaintiff that his employment with the Companies was terminated “effective immediately.” Id.

         Plaintiff alleges that the Companies have not fulfilled their obligations under the terms of the Severance Agreement, Amended Employment Agreement, and operating agreements of the McDorman Interest LLCs. Id. at 17-22. Plaintiff further alleges that Defendants have breached their fiduciary duties. Id. at 22-24. Plaintiff also claims that he was fraudulently induced to continue his employment with the companies after he expressed his desire to retire and sell his interests in the LLCs. Id. at 24-25.

         II. LEGAL STANDARD

         Under Federal Rule of Civil Procedure 12(b)(3), a defendant may move to dismiss an action on the grounds that it was filed in an improper venue. Fed.R.Civ.P. 12(b)(3). Federal law provides that "[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." 28 U.S.C. § 1391(b)(2). "The 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." 28 U.S.C. § 1406(a). Even if venue is proper, however, "[f]or 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." 28 U.S.C. § 1404(a). "Once challenged, Plaintiff bears the burden of showing that its initial choice of venue is proper." Sechel Holdings, Inc. v. Clapp, No. 3:12-CV-00108-H, 2012 U.S. Dist. LEXIS 108298, 2012 WL 3150087, at *2 (W.D. Ky. Aug. 2, 2012) (Heyburn, J.) (citing Crutchfield v. Santos, No. 5:07-CV-94-R, 2007 U.S. Dist. LEXIS 86558, 2007 WL 4124713, at *1 (W.D. Ky. Nov. 19, 2007) (Russell, J.)). "The Court may examine facts outside the complaint but must draw all reasonable inferences and resolve factual conflicts in favor of the plaintiff." NHCLC-Seattle, LLC v. Kauffman, No. 13-12804, 2013 U.S. Dist. LEXIS 174421, 2013 WL 6474197, at *2 (E.D. Mich. Dec. 10, 2013) (quoting Audi AG & Volkswagen of Am., Inc. v. Izumi, 204 F.Supp.2d 1014, 1017 (E.D. Mich. 2002)).

         III. DISCUSSION

         a. Whether Venue is Proper.

         First, the Court must determine whether the Western District of Kentucky is a proper venue for this case. 28 U.S.C. § 1391(b)(2) provides that "[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." The Sixth Circuit has interpreted this provision to mean that "the plaintiff may file his complaint in any forum where a substantial part of the events or omissions giving rise to the claim arose; this includes any forum with a substantial connection to the plaintiff's claim." First of Michigan Corp. v. Bramlet, 141 F.3d 260, 263 (6th Cir. 1998). Accordingly, the Court need not "base[] its determination that venue [i]s improper on a single occurrence which directly gave rise to the plaintiffs' action;" rather, it must merely "consider[] whether the forum the plaintiffs chose had a substantial connection to their claim." Id. at 264. Courts applying this standard have explained that "venue may be proper in two or more districts, even though most of the events occurred in only one of the districts." NHCLC-Seattle, 2013 U.S. Dist. LEXIS 174421, 2013 WL 6474197, at *2 (E.D. Mich. Dec. 10, 2013) (quoting Capitol Specialty Corp. v. Splash Dogs, LLC, 801 F.Supp.2d 657, 671-72 (S.D. Ohio 2011)); see also IFL Grp. Inc. v. World Wide Flight Serv., Inc., 306 F.Supp.2d 709, 711 (E.D. Mich. 2004) ("Just because venue is proper in that district, however, does not entail that it is not proper in another district; 'venue may be may be proper in more than one judicial district.'” (citation omitted).

         In this case, a substantial part of the events giving rise to Plaintiff's claims arose in the Western District of Kentucky. In his complaint, Plaintiff raises multiple breach of contract claims. These claims arise from the alleged breach of the McDorman Interest LLC operating agreements, Plaintiff's Amended Employment Agreement, and Plaintiff's Severance Agreement. In a breach of contract action, both the location where the contract was entered and where Plaintiff was to perform the work under the contract is relevant. Creech v. Blue Cross & Blue Shield of Fla., Inc., No. 3:17-CV-00335-TBR, 2017 U.S. LEXIS 211286 at *9, 2017 WL 6567814 (W.D. Ky. Dec. 22, 2017). For over fifteen years, Plaintiff performed his duties as an employee of Defendants from his Paducah office. Also, Plaintiff executed several of the operating agreements that give rise to Plaintiff's claims in Paducah. Further, there were meetings relevant to the various agreements at issue in this case that occurred in Paducah. All of Plaintiff's claims arise out of his employment relationship with Defendants.

         Because Plaintiff's performance under the agreements at issue in this case occurred predominately in Paducah, Kentucky, venue ...


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