Accreditation Comm'n for Health Care, Inc. v. NextLOGiK, Inc.

ACCREDITATION COMMISSION FOR HEALTH CARE, INC., Plaintiff, v. NEXTLOGIK, INC., Defendant.

Case No. 5:20-CV-46-M

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION

August 20, 2020

OPINION AND ORDER

This matter is before the Court on Defendant NextLOGiK, Inc.'s "Motion to Dismiss or, in the alternative, Motion to Transfer Venue." [DE-31 (the "Motion").] Defendant invokes forum non conveniens, Federal Rule of Civil Procedure 12(b)(3), 28 U.S.C. § 1406(a), and 28 U.S.C. § 1404(a) in support of its Motion, arguing that venue is proper and more convenient in the United States District Court for the District of Maryland and dismissal or transfer is warranted. For the reasons set forth below, dismissal is not warranted and the Court, in its discretion, declines to transfer the case to the District of Maryland. The Motion is DENIED.

I. Factual Background

The facts alleged in the pleadings and the parties' declarations may be summarized as follows. [See DE-19 ("Amended Complaint" or "AC"); DE-32-2 (Def.'s Dec. of Ed Mooers); DE-50 (Pl.'s Dec. of Jillian Piccicuto); DE-51 (Pl.'s Dec. of Jose Domingos); DE-52 (Pl.'s Dec. of Robert Gardner).]¹

Plaintiff Accreditation Commission for Health Care, Inc. ("ACHC" or "Plaintiff") is a non-profit accreditation service provider incorporated under the laws of North Carolina with its principal office located in Cary, North Carolina. [AC ¶ 8.] Defendant NextLOGiK, Inc. ("NextLOGiK" or "Defendant") is a software-technology company incorporated in Maryland with its principal office in Columbia, Maryland. [AC ¶ 9; DE-32 at 2.] In September 2017, Plaintiff contracted with Defendant to develop, provide, and service a customized management software system to support Plaintiff's accreditation and business operations, including in this District. [AC ¶ 2; DE-49 at 13.]

A. Requests for Proposal and Contract Execution

In early 2017, Plaintiff issued a request for proposals ("RFP"), seeking vendors which could develop new management software for its business. [AC ¶ 21.] Defendant responded, and on or about April 24, 2017, representatives of NextLOGiK traveled to ACHC's Cary offices to discuss the RFP. [AC ¶ 22-23.] In May 2017, Plaintiff selected Defendant as the 'winner' of the RFP process. [AC ¶ 26.] Thereafter, the parties negotiated a contract; NextLOGiK's then-CEO signed the contract on September 5, 2017, and Plaintiff's then-Vice President of Finance and Operations executed the contract from Plaintiff's Cary offices on September 11, 2017. [AC ¶¶ 26-27.] The contract included a provision whereby the parties agreed that any dispute involving the contract "be governed by and construed in accordance with the laws of the State of Maryland." [DE-32 at 5; DE-32-1 at § 11.6.]

B. Performance of the Contract

The contract described a cooperative development process and provided that the parties would meet and discuss Plaintiff's needs so that Defendant could develop an effective software tailored to Plaintiff's business operations. [AC ¶ 31.] The parties agreed that Plaintiff could use the software and that Defendant would support Plaintiff's use thereof for a term of eight years, with three one-year renewal options. [AC ¶¶ 29, 35.]

Between October 2017 and October 2019, representatives of NextLOGiK visited ACHC's Cary offices approximately ten times to meet with Plaintiff's representatives and perform work on the contact, and ACHC visited NextLOGiK's Maryland offices once. [DE-49 at 6-7; DE-50; DE-52.] Plaintiff estimates that its employees, based in Cary, North Carolina, spent approximately 2,000 hours working on the contract between September 2017 and February 2020. [DE-49 at 6; DE-50 ¶ 12.] Defendant states that its portion of the contract performance and software development occurred at its Maryland offices, and that the software was stored on servers in Baltimore, Maryland. [DE-32 at 3-4.]

Plaintiff alleges that Defendant missed a series of performance deadlines and provided an incomplete and unsatisfactory software product. On December 27, 2019, Plaintiff sent Defendant a Notice of Breach, describing Defendant's alleged material breaches and giving Defendant thirty days to cure the same. [AC ¶ 109-10.] Defendant allegedly failed to cure the noted breaches within the thirty-day period, and Plaintiff initiated this action on February 6, 2020. [AC ¶ 111.]

II. Motion to Dismiss

In the portion of Defendant's Motion seeking dismissal, Defendant cites forum non conveniens, Federal Rule of Civil Procedure 12(b)(3), and 28 U.S.C. § 1406(a). The Court addresses each in turn.

A. Forum Non Conveniens

Defendant first cites the general proposition that "[t]he doctrine of forum non conveniens permits a court to dismiss an action over which it has jurisdiction when there is an adequate alternative forum in which the case can be more conveniently heard," and argues that the federal district court in Maryland is a more convenient alternative forum. [DE-32 at 7.]

But, the doctrine of forum non conveniens does not apply where, like here, a party seeks to transfer a case from one federal district court to another federal district court. "The common-law doctrine of forum non conveniens has continuing application [in federal courts] only in cases where the alternative forum is abroad, and perhaps in rare instances where a state or territorial court serves litigational convenience best." Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 430 (2007) (brackets in original) (citations and internal quotation marks omitted); see also Deb v. SIRVA, Inc., 832 F.3d 800, 805 (7th Cir. 2016) ("Today, the doctrine applies in the federal courts only when the other jurisdiction is a foreign one." (footnote omitted)). Defendant's Motion does not refer to any state or foreign forum; instead, Defendant refers only to transfer to the United States District Court for the District of Maryland, and the Court declines to read any other request into the Motion. [See, e.g., DE-32 at 1 ("to the United States District Court for the District of Maryland, Northern Division"), 7 ("transfer to the United States District Court for the District of Maryland"), 9 ("justify transfer to the District of Maryland"), 11 ("District of Maryland").] Instead, transfers between two federal courts are accomplished through the federal transfer statute, 28 U.S.C § 1404, which Defendant also invokes here. See Sinochem Int'l Co., 549 U.S. at 430 ("For the federal court system, Congress has codified the doctrine and has provided for transfer, rather than dismissal, when a sister federal court is the more convenient place for trial of the action." (citing 28 U.S.C. § 1404(a)). Defendant's attempt to seek this relief through forum non conveniens is denied as improper.

B. Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1406(a)

Defendant next invokes Fed. R. Civ. P. 12(b)(3) and 28 U.S.C. § 1406(a), arguing that venue is proper in the District of Maryland and that the Court should transfer the matter under § 1406(a) because the location of key witnesses and evidence "constitutes an impediment to a decision on the merits in the transferor district but would not be an impediment in the transferee district." [DE-32 at 8 (citing Porter v. Groat, 840 F.2d 255, 257-58 (4th Cir. 1988)); see also id. at 11.]

1. Legal Standard

Discussion of Fed. R. Civ. P. 12(b)(3) and 28 U.S.C. § 1406(a), however, is incomplete without reference to the applicable venue statute, here, 28 U.S.C. § 1391(b), the general federal venue statute.² These provisions provide a tripartite framework through which courts may determine whether venue is wrong or improper and whether dismissal or transfer is required. First, Fed. R. Civ. P. 12(b)(3) permits a litigant to move for dismissal when venue is "improper"; second, and similarly, § 1406(a) states that where "venue [is] in the wrong division or district" the court "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"; finally, § 1391(b), the general federal venue statute, establishes where venue is proper. In other words, Rule 12(b)(3) and § 1406(a) provide for the dismissal or transfer of an action when venue is "wrong," see § 1406(a), or "improper," see Rule 12(b)(3), and whether venue is wrong or improper is determined by the applicable federal venue statute, here, § 1391(b).

The Supreme Court, in Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, described this framework:

Section 1406(a) and Rule 12(b)(3) allow dismissal only when venue is 'wrong' or improper.' Whether venue is 'wrong' or 'improper' depends exclusively on whether the court in which the case was brought satisfies the requirements of federal venue laws . . . . This question—whether venue is 'wrong' or 'improper'—is generally governed by 28 U.S.C. § 1391. . . . When venue is challenged, the court must determine whether the case falls within one of the three categories set out in § 1391(b). If it does, venue is proper; if it does not, venue is improper, and the case must be dismissed or transferred under § 1406(a).

571 U.S. 49, 55 (2013) (footnotes omitted). Where the requirements of the federal venue statute, § 1391(b), are satisfied, dismissal pursuant to Rule 12(b)(3) and § 1406(a) is not warranted; if, instead, the venue requirements are not met, transfer or dismissal is required. See, e.g., WCC Cable, Inc. v. G4S Tech. LLC, No. 5:17-CV-00052, 2017 WL 6503142, at *5 (W.D. Va. Dec. 15, 2017) ("A court may only invoke Section 1406(a) when venue is 'wrong' under Section 1391(b)—that is, a district other than those districts in which Congress has provided by its venue statutes that the action may be brought." (citing Atl. Marine, 571 U.S. at 58) (internal quotation marks omitted)); S. Coal Corp. v. IEG PTY, Ltd., No. 2:14CV617, 2016 WL 8735622, at *2 (E.D. Va. Feb. 26, 2016) ("According to the Supreme Court, the proper analysis to...