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Case 0:07-cv-61753-WPD Document 60 Entered on FLSD Docket 04/04/2008 of

UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF FLORIDA

CASE NO. 07-61753-CIV-DIMITROULEAS

ELDON KADEL,LEONARD R. CLEWLEY IRAand GEORGINA C. CLEWLEY IRA,individually and on behalf of allothers similarly situated,

Plaintiff,

vs.

PATRICK S. FLOOD, et al.,

Defendants.

Magistrate Rosenbaum

ORDER GRANTING MOTION TO TRANSFER; TRANSFERRING CASE TONORTHERN DISTRICT OF GEORGIA; CLOSING CASE

THIS CAUSE is before the Court upon Defendants ' Corrected' Motion to Transfer Venue

and Memorandum in Support, filed herein on March 31, 2008. [DE-58; DE-57]. The Court has

carefully considered the Motion, Plaintiffs' Response in Opposition [DE-53], Defendants' Reply

[DE-59], and is otherwise fully advised in the premises.

I. BACKGROUND

This action stems from two securities class action complaints, that have since been

consolidated2, brought on behalf of persons who purchased or acquired HomeBanc Corporation

'On February 26, 2008 , Defendants filed a Motion to Transfer Venue [DE-46] and Memorandumin Support [DE-47]. On March 31 , 2008 , Defendants filed a Corrected Motion to Transfer [DE-58] andMemorandum in Support [DE-57], indicating that the only correction was to include the certification thatthey had conferred in good faith with Plaintiffs ' counsel pursuant to S.D . Fla. L.R. 7.1(A)(3).

2Clewley IRA v. Flood, Case No. 07-61838 was filed on December 18, 2007 [DE-1] andconsolidated with Kadel v. Flood, Case No. 07-61753 (which had been filed on November 30, 2007), on


("HomeBanc") shares of Series A Preferred and common stock. The Complaint alleges that in

the months leading up to the offering, the individual Defendants disseminated materially false

and misleading statements regarding the financial condition and future prospects of HomeBanc.

The Complaints assert violations of Sections 10(b) and 20(a) of the Securities Exchange Act of

1934 and violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933. Defendant

HomeBanc is engaged in the mortgage banking business, primarily in the southeast United

States. It has 21 store locations and 140 realtor store-in-store locations in Georgia, Florida,

North Carolina, and South Carolina. HomeBanc is incorporated in Delaware, with headquarters

located in Atlanta, Georgia and executive offices in Deerfield Beach, Florida. On August 9,

2007, HomeBanc filed a voluntary petition for Chapter 11 in the U. S. Bankruptcy Court for the

District of Delaware.

According to the Complaint, jurisdiction in the Southern District of Florida is proper as

many of the alleged actions, including the preparation and dissemination of materially false and

misleading information occurred in substantial part within the District. The Complaint further

points to the location in Florida of executive offices and to the substantial portion of HomeBanc

loans during the Class Period that originated within the District. The Complaint further states

that the Defendants have received substantial compensation in the District by way of their

business.

Defendants Flood, Race, Austin, Jobe, Manby, Patton are residents of the metropolitan

Atlanta area in Georgia. Defendant Flood was the Chief Executive Officer and Chairman of the

March 18, 2008 [DE-30 in 07-61838; DE-54 in Case No. 07-61753]. Case No. 07-61838 wasadministratively closed.

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Board of HomeBanc at all relevant times until his resignation on January 12, 2007. Defendant

Race served as the Company's Chief Executive Officer, President, Chief Operating Officer, and

Chief Financial Officer and a director at all relevant times , joining the Company in April 2002.

He also served on the Investment and Risk Management Committee. Defendant Austin served as

a director and on the Investment and Risk Management Committee, as well as on the Nominating

and Governance Committee. Defendant Jobe served as a director and Chairman of the Audit

Committe. He currently serves on the Investment and Risk Management Committee. Defendant

Manby served as a director, as well as on the Compensation Committee and Nominating and

Governing Committee. Defendant Patton served as a director and as the Chairman of the

Nominating and Governance Committee. He also served on the Compensation Committee.

Defendant Witherow, Chairman of the Board of HomeBanc since January 2007 and a

director since May 2006, is a resident of Aledo, Texas. He also served on the Investment and

Risk Management Committee, as well as the Audit Committee. Defendant Hamilton is a

resident of Largo, Florida. He served as a director of HomeBanc, as well as the Chairman of the

Compensation Committee and currently serves on the Nominating and Governance Committee.

Defendant Spiegel is a resident of Ponte Vedra Beach, Florida. He served as a director and

Chairman of the Investment and Risk Management Committee. He also served on the Audit

Committee. Defendant Phipps is a resident of Timonium, Maryland. She served as a director

and on the Audit and Compensation Committees. Defendants Flood, Witherow, Race, Austin,

Hamilton, Jobe, Manby, Patton, Spiegel, and Phipps are referred to in the Complaint as the

"Individual Defendants."

Defendants J.P. Morgan Securities are headquartered in New York. J.P. Morgan was the


underwriter of the Preferred Offering, underwriting 1,400,000 shares of the Series A stock.

Defendant A.G. Edwards & Sons' headquarters are in St. Louis, Missouri. A.G. Edwards was

also an underwriter, underwriting 600,000 shares of Series A stock. Defendant Wachovia's

headquarters are located in Charlotte, North Carolina. It is the successor in interest to the claims

against A.G. Edwards due to its May 30, 2007 agreement and plan of merger to acquire A.G.

Edwards. Defendants J.P. Morgan and A.G. Edwards are referred to in the Complaint as the

"Underwriter Defendants."

II. DISCUSSION

In the instant Motion, the individual Defendants seek to transfer the instant action to the

United States District Court for the Northern District of Georgia pursuant to 28 U.S.C. § 1404(a),

arguing that the case has only a limited connection to the Southern District of Florida and transfer

would be more convenient for the parties and witnesses and serve the interests ofjustice.

A. Standard for Transfer

28 U.S.C. § 1404(a) provides that "[for the convenience of parties and witnesses, in the

interest ofjustice, a district court may transfer any civil action to any other district or division

where it might have been brought." After determining whether the case could have been brought

in the proposed forum, courts then consider a number of factors to determine whether transfer

would be appropriate. These factors include: (1) the convenience of the parties; (2) the

convenience of the witnesses; (3) the relative ease of access to sources of proof; (4) the

availability of witnesses through compulsory process (5) the cost of obtaining the presence of

witnesses; and (6) the public interest . See e.g. , Cellularvision Tech. & Telecomms ., L.P. v.

Alltel Corp. , 508 F. Supp. 2d 1186, 1189 (S.D. Fla. 2007); Thermal Techs., Inc. v. Dade Serv.

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Cor ., 282 F. Supp. 2d 1373, 1376 (S.D. Fla. 2003); Miot v. Kechijian , 830 F. Supp. 1460, 1466

(S.D. Fla. 1993). However, "[t]he plaintiff's choice of forum should not be disturbed unless it is

clearly outweighed by other considerations." Robinson v. Giarmarco & Bill, P.C. , 74 F.3d 253,

260 (11th Cir. 1996) (quoting Howell v. Tanner, 650 F.2d 610, 616 (5th Cir. Unit B 1981), cert.

denied, 456 U.S. 918 (1982)). The defendant bears the burden, when it is the moving party, to

establish that there should be a change in forum. Thermal Techs., 282 F. Supp. 2d at 1375;

Mason v. Smithkline Beecham Clinical Labs. , 146 F. Supp. 2d 1355, 1359 (S.D. Fla. 2001).

B. Motion to Transfer to Georgia

The initial inquiry before the Court is whether the action could have initially been brought

in the transferee court. See Cellularvision , 508 F. Supp. 2d at 1188-89. The parties do not

dispute whether the action could have been originally brought in Georgia. As Defendants point

out, district courts have jurisdiction over violations of the Securities Exchange Act in districts

where the defendant is located or transacts business, as well as where the alleged violations took

place. 15 U.S.C. § 78aa (2000). HomeBanc maintains its headquarters in Atlanta, Georgia. The

individual Defendants worked for HomeBanc and the alleged false statements were issued from

there. The Underwriter Defendants are national corporations that transact business and have

offices in Georgia. Thus, the Defendants would be subject to jurisdiction, venue, and service of

process in the Northern District of Georgia. See Thermal Techs. , 282 F. Supp. 2d at 1376

(holding that action could have been brought in the Middle District of Florida as it was the

defendant's principal place of business, some of the alleged acts took place there, and the parties

did not dispute that the complaint could have been brought there, thus defendant would be

subject to jurisdiction, venue, and service of process).

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Turning to the various factors, Defendants argue that each weighs heavily in favor of

transferring to Georgia. Defendants argue that the alleged connections Plaintiffs argue exist for

the Southern District of Florida-the location of offices, the origination of loans, and the alleged

acts and transactions-also exist for the Northern District of Georgia. They assert that these

factors and the convenience of the parties and the witnesses weigh heavily in favor of transfer.

In Response, Plaintiffs argue that Defendants do not meet the heavy burden necessary to

justify a change of forum. Plaintiffs argue that HomeBanc had a substantial presence in Florida

during the Class Period, maintained executive offices within the Southern District, and a

substantial portion of the loans during the Class Period originated within the District. Plaintiffs

further argue that as HomeBanc is at present a bankrupt organization, the location of its corporate

headquarters is "largely immaterial." [Response, p. 6]. Plaintiffs further point out that the

underwriter Defendants, J.P. Morgan, A.G. Edwards, and Wachovia, are not based in Georgia,

thus they can just as easily defend the action in Florida or Georgia. However, as discussed

below, the Court finds that Defendants have met their burden and the overall balance of factors

weigh in favor of transfer.

1) Plaintiffs' Choice of Forum

First, the Court recognizes that the Southern District of Florida is Plaintiffs' choice of

forum, which is normally given substantial weight. See La Seguridad v. Transytur Line, 707

F.2d 1304, 1307 (11th Cir. 1983). However, Defendants do point out that the named Plaintiffs

do not reside in Florida . Thermal Techs. , 282 F. Supp . 2d at 1375-76. A plaintiff who has

chosen a forum that is not his home forum is only entitled to minimal deference. Cellularvision ,

508 F. Supp . 2d at 1189 (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255 -56 (1981)).

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Furthermore, Defendants argue that as the case is a class action, the named plaintiffs' choice

deserves less weight, citing to Koster v. Lumbermens Mut. Cas. Co. , 330 U.S. 518, 524 (1947);

Balloveras v. Purdue Pharma Co. , No. 04-20360, 2004 WL 1202854 at *1 (S.D. Fla. May 19,

2004); Moghaddam v. Dunkin Donuts , No. 02-60045, 2002 WL 1940724 at *3 (S.D. Fla. Aug.

13, 2002); Clement v. Pehar, 575 F. Supp. 436, 444 (N.D. Ga. 1983).

However, in Koster, the Court was addressing whether the plaintiffs chosen forum was

appropriate merely because it was his home forum. Koster, 330 U.S. at 524. In that case, there

was no connection in the case to the plaintiffs home forum, New York. Id. The convenience to

the plaintiff in litigating at home when it was a class action was not sufficient to warrant

litigation in that forum. Id. In the instant action, as Defendants themselves have pointed out,

Florida is not the home forum for the named Plaintiffs and if that were the only connection, the

balance of factors might immediately outweigh their chosen forum. However, Plaintiffs have

argued that there are strong connections to the chosen forum as HomeBanc has conducted

business in the forum, maintains offices here, some of the Defendants reside here, and that some

of the alleged wrongs took place here as well. Furthermore, in Clement, less weight was

afforded to the class action plaintiffs' chosen forum as the sole reason for selecting the forum

was because one resident plaintiff's law firm represented the class. Clement, 575 F. Supp. at

444. This also is not an issue in the present case . In Balloveras , though the Court deemed

transfer appropriate, it was because there were already related actions in the Southern District of

New York and the only connection to Florida was because the Plaintiff was a Florida resident

who had brought the action on behalf of all potential Florida plaintiffs . Balloveras , 2004 WL

1202854 at * 1. However, the court also found significant that most of the facts of the case were

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based in New York. Id. In the instant action, though the Plaintiffs have indicated the

connections to Florida, the Court finds that the greater connections and facts exist in the Northern

District of Georgia. Given that less deference is given not only when it is not the Plaintiff's

home forum, but when it is a class action, the Court finds that the location of offices in Florida

and the origination of loans in Florida is not substantial enough, given that the balance of factors,

as discussed below, weigh in favor of transfer.

2) Convenience to the Parties and Witnesses and Availability

Defendants argue that the Northern District of Georgia is far more convenient. They

point to the fact that six of the ten individual Defendants reside in Georgia. However, it is

understood that party witnesses are presumed to be willing to testify in either forum despite any

inconvenience resulting from transfer, and therefore, the main focus is on the "convenience of

non-party witnesses." Toll Bros., Inc. v. Nationwide Prop. & Cas. Ins. Co. , 2005 WL 2600207,

*4 (E.D. Pa. Oct. 13, 2005); see also George F. Martin Co. v. Royal Ins. Co. of Am. , 2004 WL

1125048, *2-3 (N.D. Cal. May 14, 2004); Queentex Enter., Inc. v. Sara Lee Corp. , 2000 WL

246599, *2 (N.D. Cal. 2000).

Defendants go on to indicate though that it may be assumed that former HomeBanc

employees, other than the Defendants, may be witnesses. They cite to Culp v. Gainsco, 2004 WL

2300426, *1 (S.D. Fla. Oct. 1, 2004) to demonstrate that in a securities litigation case, the

potential witnesses could include not only the plaintiffs and defendants, but audit committee

members, investor relations personnel, mergers and acquisitions personnel, current and prior

accounting staff, and board members. Culp v. Gainsco , 2004 WL 2300426 at *5. Plaintiffs have

indicated that there were executive offices in Florida as well, thus potentially there would be

8


witnesses who worked in those offices. However, it is far more likely that the great majority of

witnesses will be those in worked in the headquarters in Georgia, where the alleged

misrepresentations and false statements were formulated and executed. When considering this

factor, it is not so much the convenience of the witnesses but the possibility of having their

testimony at the trial that is important? Transfer may be denied "when the witnesses, although in

another district , are employees of a party and their presence can be obtained by that party."

Mason, 146 F. Supp. 2d at 1361-62 (internal citations omitted). However, in the instant action,

HomeBanc has declared bankruptcy and the relevant employees may not still be in the employ of

Defendants and thus able to be compelled. Therefore, the convenience and availability of the

witnesses weighs in favor of transfer.

3) Location of Sources of Proof

Defendants argue furthermore that HomeBanc's accounting and actuarial departments,

and thus the majority of documents, are located in Atlanta. Plaintiffs however, argue that the

location of documents and evidence is less relevant given the "proliferation of electronic

discovery and remote document review practices in modern securities class action litigation

practices." [Response, p. 7]; see also , Mason, 146 F. Supp. 2d at 1364; Oubre v. Clinical

Supplies Mgmt. , 2005 U.S. Dist. LEXIS 28877 at *9 (S.D.N.Y. Nov. 17, 2005). However, the

location of the documents and where they were prepared continues to be a factor for the Court to

3Fed. R. Civ. P. 45(b)(2) requires that a subpoena be served "at any place within the district ofthe court by which it is issued, or at any place without the district that is within 100 miles of the place ofthe deposition , hearing, trial . . ." Moreover, the Court has authority to quash any subpoena that"requires a person who is not a party or an officer of a party to travel to a place more than 100 miles fromthe place where that person resides , is employed or regularly transacts business in person . . ." Fed. R.Civ. P. 45(c)(3)(ii).

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consider. See e.g. , Culp v. Gainsco , 2004 WL 2300426 at *6 (examining the location of sources

of proof, such as where the allegedly false and misleading statements and SEC filings were

made, in determining whether transfer appropriate). Though electronic discovery may ease the

burden somewhat, the relative ease of access to the sources of proof is still greater in the

Northern District of Georgia.

4) Public Interest

The final factor for the Court to consider is the public interest. The parties do not discuss

the affect on trial efficiency and expense to the justice system, though the Court does note that

although there had previously been a similar case pending in the Northern Georgia, it has since

been dismissed.4 However, the Court further recognizes that the Georgia forum has a strong

public interest in the instant action. See Irwin v. Zila, Inc., 168 F. Supp. 2d 1294, 1297 (M.D.

Ala. 2001) (stating that a forum has an interest in demanding that its resident corporations adhere

to a level of protocol in conducting their business activities, especially when the alleged

misdeeds took place within that forum).

On point is a case Defendants cite to in support of their Motion, Moghaddam v. Dunkin

Donuts, 2002 WL 1940724 at *2 (S.D. Fla. Aug. 13, 2002), which involved a class action

brought by Florida franchise owners against Dunkin Donuts, whose headquarters are in

Massachusetts . Moghaddam, 2002 WL 1940724 at *2. In that case, the court determined that

Florida was only chosen as it was the residence of the plaintiffs and the operative facts occurred

in Massachusetts, which was also where the majority of the documentation was located. Id. at

4Harbour v. Flood, Case No. 08-CV-0027 was filed on January 4, 2008 and was dismissed onFebruary 21, 2008. [Defendants' Memorandum in Support of Transfer, p. 2].

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*4. The court further found that convenience to the party witnesses would be enhanced by

transfer to Massachusetts, as defendant had named potential witnesses and the significance of

their testimony. Id. at *3. Finally, the court also noted that the public interest of Massachusetts

tilted the balance in favor of transfer. Id. at *5. Similarly, in the instant case , though the

Plaintiffs have demonstrated that there was a connection to Florida and it was not chosen simply

as the residence of some Plaintiffs (indeed none of the named Plaintiffs reside here), the Court

finds that similar to the facts in Moghaddam, the operative facts occurred in Georgia, where

HomeBanc was headquartered, and most of the potential witnesses would be in Georgia.

Furthermore, though Florida would have a public interest in addressing any potential securities

violations that occurred within its borders, Georgia has an even greater interest in policing the

actions of its resident corporations.

Merely shifting the inconvenience from the Defendants to the Plaintiffs is not a sufficient

basis for disturbing the Plaintiffs ' choice of forum. See Robinson , 74 F.3d at 260 . However, in

the instant case, it is clear that the Northern District of Georgia is a more appropriate venue,

especially given the location of HomeBanc headquarters and thus the location of potential

witnesses and documents, as well as the location of the majority of Defendants. Furthermore, as

a class action, there is less deference to be given to the Plaintiffs' choice of forum, and even

more so as it is not their home forum, and the public interest of Georgia is greatly implicated.

Therefore, pursuant to 28 U.S.C. § 1404(a), transfer to the Northern District of Georgia is

appropriate.

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III. CONCLUSION

For the aforementioned reasons , it is hereby ORDERED AND ADJUDGED as follows:

1) Defendants' Corrected Motion to Transfer Venue and Memorandum in Support [DE-

58; DE-57] is hereby GRANTED.

2) The Clerk is directed to transfer the above-styled case to the District Court for the

Northern District of Georgia.

3) All other pending motions are denied as moot.

4) The Clerk shall close this case.

DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County, Florida, this

2nd day of April, 2008.

WILLIAM P. DTMTTROULEAS

United States District Judge

Copies furnished to:

Julie P. Vianale, Esq.

Kenneth J. Vianale, Esq.

Robert D. Zebro, Esq.

Meryl D. Edelstein, Esq.

Eric Allan Lee, Esq.

Robert W. Killorin, Esq.

Martin D. Chitwood, Esq.

Willem F. Jonckheer, Esq.

Joseph E. White III, Esq.

Maya S. Saxena, Esq.

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