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Kremer v. Lysich

United States District Court, D. New Jersey

June 30, 2019

SEMYON KREMER, Plaintiff,
v.
PETR LYSICH, ALEXEY LYSICH, IGOR FEDORENKO, PROTOGROUP, INC., INKVIST, INC., SMILE LAND, INC., Defendants.

          OPINION

          FREDA L. WOLFSON, U.S. CHIEF DISTRICT JUDGE

         This matter comes before the Court on Defendants' Petr Lysich (“P. Lysich”), Alexey Lysich (“A. Lysich”), Protogroup, Inc. (“Protogroup”), Inkvist, Inc. (“Inkvist”), and Smile Land Inc.'s (“Smile Land”) (collectively, “Defendants” or “Protogroup Defendants”) motion, pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(3), to dismiss the action initiated by Plaintiff Semyon Kremer (“Plaintiff”), or, in the alternative, transfer the case to the United States District Court for the Middle District of Florida - Jacksonville Division. For the following reasons, Defendant's motion to transfer is granted pursuant to 28 U.S.C. § 1404(a) and this matter is transferred to the Middle District of Florida - Jacksonville Division.

         I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

         In addressing Defendant's Motion to Dismiss, this Court must accept the allegations from Plaintiff's Complaint as true. See Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 457 (3d Cir. 2003); Dayhoff, Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d Cir. 1996)[1]. Thus, the facts recited below are taken from the Complaint and do not represent this Court's factual findings.

         The instant action is a minority shareholder oppression suit against the Protogroup Defendants and Igor Fedorenko[2] (“Fedorenko”), stemming from Plaintiff's involvement as a minority shareholder in Inkvist and Smile Land.

         In 2005, Defendant P. Lysich visited Plaintiff's New Jersey home and presented him with a business opportunity. Compl. ¶35. Plaintiff agreed to become an officer and director of any corporate entities created by P. Lysich, A. Lysich, or Fedorenko, and was to receive a salary and a certain percentage of shares of stock of any of the entities. Compl. ¶¶ 38-41. Plaintiff's role in the organization consisted of, among other things, negotiating with lenders and financial institutions, and generally providing professional services to any of Defendants' corporate entities - many of these activities were conducted from his New Jersey residence. Compl. ¶39-43.

         In 2007, Kremer, allegedly at P. Lysich's behest, incorporated Inkvist DE, a Delaware corporation which is 80% owned by Defendant Fedorenko and 20% owned by Plaintiff. Compl. ¶¶ 58-59. In July 2007, Defendant P. Lysich also allegedly instructed Plaintiff to incorporate a company in Palm Coast, Florida called “Smile Land, Inc, ” whose purpose was to engage in the purchase of land in Florida. Compl. ¶¶ 64-65. At its inception, Plaintiff received forty shares of Smile Land, equal to twenty percent of the issued shares, and Smile Land purchased slightly over four acres of land in Palm Coast, Florida with the objective of building a franchise hotel. Compl. ¶¶ 66-67. Thereafter, Plaintiff entered into negotiations with Days Inns Worldwide, a company based in Parsippany, New Jersey, to acquire a hotel for the land in Palm Coast, Florida. Compl. ¶¶ 69-71, 81. Plaintiff participated in the negotiations and subsequent management of the hotel planning from New Jersey. Id. Smile Land and Days Inns Worldwide, on December 11, 2007, entered into a franchise agreement to build a hotel in Palm Coast, Florida; the franchise agreement is governed by New Jersey law. Compl. ¶¶ 76-77.[3]

         In 2011, A. Lysich and P. Lysich invited Plaintiff to Florida to discuss Smile Land's plans, including the development of a property in Daytona Beach, Florida (“Daytona Project”). Compl. ¶¶ 89-94. Defendants informed Plaintiff that they would form a new corporation, Protogroup, to own and develop the Daytona Project, and that while Plaintiff would derive an economic benefit from Protogroup, that he would not be an official shareholder. Compl. ¶¶ 96-98. P. Lysich advised Plaintiff that he would continue to remain a minority shareholder in Smile Land, and that in addition to deriving an economic benefit, he would serve as Protogroup's Vice President, rather than, an official shareholder of record. Compl. ¶ 100 Further, Plaintiff was allegedly assured that he would continue to receive actual compensation for his work for both Smile Land and Protogroup regardless of their financial performance. Compl. ¶ 101. After the meeting, Plaintiff returned home and began working on the Daytona Project in New Jersey. Compl. ¶¶ 102-103.

         Thereafter, A. Lysich and P. Lysich, allegedly, directed Plaintiff to use Smile Land and Protogroup as aliases of one another in searching for funding for the Daytona Project. Compl. ¶ 104. According to Plaintiff, he received payments from Smile Land until December 2014, at which time the payments began to come from Protogroup. Compl. ¶¶ 109-110. Payments from Protogroup continued through September 2016. Compl. ¶ 111.

         Unbeknownst to Plaintiff, A. Lysich allegedly caused Smile Land to pay $710, 000 to Solinger Trading Company (“Solinger”), a company that would later be discovered via IRS audit to be a shell company located in the Bahamas. Compl. ¶¶ 112-115. A. Lysich allegedly prepared a back dated agreement between Smile Land and Solinger, where Solinger would receive a 1% agency fee for the purchase of international produce. Compl. ¶ 120. Plaintiff alleges that A. Lysich demanded that Plaintiff sign and backdate the agreement and provide it to the IRS, but when Plaintiff refused, his relationship with A. Lysich abruptly ended. Compl. ¶¶ 121-123.

         After refusing to carry out A. Lysich's alleged scheme, Plaintiff alleges that he stopped receiving monthly payments from Smile Land and Protogroup, and was notified that he was being removed as the director of the two entities, and stripped of his signatory powers for Smile Land. Compl. ¶¶ 124-127. Moreover, Plaintiff allegedly discovered that Protogroup broke ground on the Daytona Project and that A. Lysich had claimed that Protogroup owned the Days Inn in Palm Coast, rather than Smile Land. Compl. ¶¶ 138-139. Additionally, Plaintiff alleges that over $300, 000 had been withdrawn from Smile Land's bank account. Id. Plaintiff subsequently demanded an accounting from Defendants, regarding the withdrawn funds, but has not been provided one. Compl. ¶¶ 143-146.

         Subsequently, on March 16, 2018, Plaintiff filed the instant complaint alleging, breaches of fiduciary duty and minority shareholder oppression by Defendants A. Lysich and Fedorenko, conversion, civil conspiracy, wrongful termination, retaliatory conduct in violation of the New Jersey Conscientious Employee Act (“NJCEPA”), unjust enrichment, breach of contract claims against all Defendants, and seeking an accounting of Smile Land, Inkvist DE, and Protogroup accounts. Compl. ¶¶ 156-269. Now the Protogroup Defendants have filed the instant motion to dismiss, or in the alternative, to transfer.

         II. DISCUSSION

         Defendants move to dismiss this matter for lack of personal jurisdiction and improper venue, or alternatively, transfer of venue to the Middle District of Florida - Jacksonville Division. Def. Br. at 3. Plaintiff, while maintaining the position that personal jurisdiction exists and that venue is proper in New Jersey, also urges this Court to allow jurisdictional discovery to determine if personal jurisdiction exists over Defendants. Pl. Br. at 3, 24. Plaintiff also opposes transferring this matter to the Middle District of Florida. Pl. Br. at 19-24.

         While “[t]he question of personal jurisdiction, which goes to the court's power to exercise control over the parties, is typically decided in advance of venue . . . a court may reverse the normal order of considering personal jurisdiction and venue.” Leroy v. Great W. United Corp., 443 U.S. 173, 180 (1979). Accordingly, the Court addresses the venue issue first, and because Defendants have demonstrated that a transfer of venue is appropriate under Section 1404(a), the Court does not reach the question of whether the Individual Defendants are subject to the exercise of personal jurisdiction by this Court.

         A district court may transfer any civil action to any district where the action might have been brought in the interests of justice and for the convenience of the parties and witnesses. 28 U.S.C. § 1404(a). The function of Section 1404(a) is “to prevent the waste of ‘time, energy, and money' and to ‘protect litigants, witnesses and the public against unnecessary inconvenience and expense.'” Van Dusen v. Barrack, 376 U.S. 612, 616 (1964). The burden of establishing that transfer is warranted is borne by the moving party. Piper Aircraft Co. v. Reyno, 454 U.S. 235, 248 (1981); Ricoh v. Honeywell, Inc., 817 F.Supp. 473, 480 (D.N.J. 1993). The moving party must show that the proposed alternative forum is not only adequate, but also more convenient, than the present forum. Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995).

         Section 1391 provides the guidelines for determining where venue is appropriate. See 28 U.S.C. § 1391(a). Under Section 1391, venue is proper “in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district where a substantial part of the events or omissions giving rise to the claim occurred ..., or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought.” Id. A defendant that is a corporation is “deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced.” Id. § 1391(c). If the proposed alternative forum is appropriate, it is then within the Court's discretion to transfer the action. Jumara, 55 F.3d at 883.

         Three factors guide the Court's discretion when determining whether to grant a transfer under Section 1404(a): (1) the convenience of the parties, (2) the convenience of the witnesses, and (3) the interests of justice. Liggett Grp. Inc. v. R.J. Reynolds Tobacco Co., 102 F.Supp.2d 518, 526 (D.N.J. 2000) (citing 28 U.S.C. § 1404(a) and Jumara, 55 F.3d at 879)). These factors are not exclusive and must be applied on an “individualized analysis . . . made on the unique facts presented in each case.” Id. at 526-27 (citations omitted). The first two factors have been refined into a non-exhaustive list of private and public interests that courts should consider. See Jumara, 55 F.3d at 879-80. As set forth below, a balance of the pertinent ...


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