On November 2, 2015, Judge Brendan L. Shannon walked a pair of litigants through the factors used in the Third Circuit to determine whether to grant a motion to transfer venue.  In the adversary proceeding Fred C. Caruso v. Fasig-Tipton Co. (In re: Revstone Industries), docketed as Adversary Case No. 14-50468, Judge Shannon issued a memorandum order (the “Opinion”) laying out, and walking the parties through, the twelve-factor test provided by the Third Circuit in Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995).  A link to the Opinion is here.

As provided by Judge Shannon, the 12-factor, non-exclusive list is as follows:  (1) plaintiff’s choice of forum, (2) defendant’s forum preference, (3) whether the claim arose elsewhere, (4) location of books and records and/ or the possibility of viewing the premises if applicable, (5) the convenience of the parties as indicated by their relative physical and financial condition, (6) the convenience of the witnesses — but only to the extent that the witnesses may actually be unavailable for trial in one of the fora, (7) the enforceability of the judgment, (8) practical considerations that would make the trial easy, expeditious, or inexpensive, (9) the relative administrative difficulty in the two fora resulting from congestion of the courts’ dockets, (10) the public policies of the fora, (11) the familiarity of the judge with the applicable state law, and (12) the local interest in deciding local controversies at home.

Judge Shannon walks through each of these factors, ultimately holding that they weigh in favor of transferring the litigation to Kentucky.  The more interesting issues arise, however, in looking at the root of this litigation.

Fasig-Tipton sold the Debtor two horses in exchange for $100,000.  Fasig-Tipton, appears (from this VERY limited information) to have been a horse buyer and trainer, who sold two horses to the Debtor, likely doing nothing wrong and with no fraudulent intention.  However, the plaintiff alleges that the Debtor’s sole manager and chairman, George S. Hofmeister, caused the transfer to be made solely for his benefit, and not for the benefit of the Debtor.    In these cases, the intent of the ‘bad actor’ is at issue, not the intent of the third-party, who is usually the defendant in these cases.

This type of fraud claim is made often in bankruptcies, particularly when single individuals have near unlimited power over a company.  The trouble for the ‘innocent’ defendant, is that recent case law has held that they are in the best position to notice questionable transactions – like when a company buys items that don’t seem to be for company use.  It is my opinion that this places an unrealistic burden on businesses to inspect any purchase paid for using a company check or credit card.  However, until the case law returns to a reasonable position, businesses with no knowledge of bankruptcy law will continue to pay the price for the personal purchases of bad-actors who have been able to reach a position of responsibility sufficient to hold a company checkbook or credit card.