Cox ex rel. ING Global Real Estate Fund v. ING Investments LLC

Citations: 47 F. Supp. 3d 209; 2014 U.S. Dist. LEXIS 76998; 2014 WL 2567970Docket: Civ. No. 13-1521-SLR

Court: District Court, D. Delaware; June 6, 2014; Federal District Court

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On August 30, 2013, Jeremie Cox filed a derivative complaint against ING Investments LLC, asserting that ING breached its fiduciary duty by imposing excessive management fees on the ING Global Real Estate Fund, in violation of Section 36(b) of the Investment Company Act of 1940. The court has jurisdiction under 15 U.S.C. 80a-43 and 28 U.S.C. 1331. ING's motion to transfer the case to the District of Arizona was denied.

Cox is a shareholder of the Fund, which operates as a management investment company within the ING Mutual Funds, a Delaware statutory trust. The Fund's executive offices are in Scottsdale, Arizona, and it has no employees. A significant portion of the Fund’s shares are held by Delaware entities and residents. The Trust is organized under Delaware law and maintains a registered agent in Delaware. ING, also based in Arizona, serves as the Fund's investment manager and advisor, for which it receives fees. The Fund's board of trustees, composed of eleven independent members from various states, oversees the Fund and approves the management agreement, which is governed by Delaware law. None of the independent trustees reside in Delaware or Arizona.

Section 1404(a) of Title 28 of the United States Code empowers district courts to transfer venue for the convenience of parties and witnesses and in the interests of justice. The legal standard for motions to transfer under this statute has been extensively analyzed in case law. The court acknowledges that a defendant's state of incorporation is a legitimate venue for lawsuits and that plaintiffs generally have the right to choose their venue. The burden of proof for establishing the necessity of a transfer lies with the moving party, and courts should not lightly disturb the plaintiff's choice of venue. 

In assessing 1404(a) motions, courts consider factors beyond the three specified in the statute: convenience of parties, convenience of witnesses, and interests of justice. Relevant private interests include the plaintiff's preferred forum, the defendant’s preferences, the location where the claim arose, and the convenience of witnesses and evidence. Public interests encompass enforceability of judgments, efficiency and cost-effectiveness of the trial, administrative challenges due to court congestion, local interests in resolving controversies, relevant public policies, and the trial judge's familiarity with applicable state law in diversity cases.

The court analyzed the motion to transfer venue, emphasizing the principles of federal comity and the importance of convenience for both parties. Cox did not dispute that the action could have been initiated in the District of Arizona. The court noted that both parties had selected legitimate forums for the litigation and affirmed the principle that plaintiffs traditionally enjoy the privilege of choosing their venue. ING argued that significant events related to Cox’s Section 36(b) claim occurred in Arizona, while Cox claimed the issue has a nationwide scope under federal securities laws, relevant to all locations where shares of the Fund were held, including Delaware. 

The court referenced the Third Circuit's Jumara case, which suggests evaluating the physical and financial conditions of the parties when considering convenience. Here, ING, as a large corporation, possesses more resources than Cox, a single shareholder. Although ING pointed out that potential witnesses reside in Arizona, it did not demonstrate that any witnesses would be unavailable for trial in Delaware. Furthermore, ING's assertion that relevant documents are stored in Arizona did not establish that these documents could not be presented in Delaware.

Practical considerations indicated that a trial in Arizona would be less costly and easier for ING, but Cox’s residency remained undisclosed, leaving uncertainty about the comparative ease and expense of litigation in either forum. The court concluded that local interest is not a decisive factor since securities litigation typically involves federal law and affects national markets. The remaining public interest factors did not influence the transfer analysis.

Ultimately, ING bore the burden of proof to justify the transfer, which the court found lacking, leading to the denial of ING’s motion to transfer venue. An order was issued confirming this decision, indicating that the framework for corporate venue analysis applies similarly to the Delaware statutory trust involved in the case. The court noted ING’s prior litigation history and the standard practice for depositions, further supporting its conclusions.