Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—NDIll: FTC Act Claim Transferred to More Convenient Forum , (May 3, 2013)

By Jody Coultas, J.D.

A Federal Trade Commission Act claim filed by the FTC and a number of states against Fortune Hi-Tech Marketing, Inc. and other companies was transferred to the U.S. District Court for the Eastern District of Kentucky by the federal district court in Chicago (Federal Trade Commission v. Fortune Hi-Tech Marketing, Inc., May 1, 2013, Darrah, J.).

The FTC, the State of Illinois, the Commonwealth of Kentucky, and the State of North Carolina filed FTC Act and state consumer protection law claims against Fortune and other Kentucky companies that allegedly collectively operated an illegal pyramid scheme through the recruitment of networked Independent Representatives ("IRs") to sell products and services. Fortune moved to transfer the case to the United States District Court for the Eastern District of Kentucky.

A district court may transfer a case to any other district where it might have been brought where venue is proper, the transfer will serve the convenience of the parties and witnesses, and the transfer is in the interest of justice. Courts look at (1) the plaintiff’s initial choice of forum; (2) the situs of material events; (3) the relative ease of access to sources of proof; (4) the convenience of the parties litigating in the respective forums; and (5) the convenience of the witnesses to determine whether the transfer is convenient for the parties and witnesses.

The convenience of the parties and witness was best served by transfer of the case to the Kentucky court, according to the court. Illinois was the home forum for only half of the plaintiffs. Some courts have held that the federal government’s choice of forum is entitled to even less weight. In this case, the alleged injury was nationwide and the alleged scheme impacted victims throughout the United States and Canada. Thus, Illinois had no more connection to the case than any other state and the injury to Illinois was no more significant than injuries that occurred in any other district.

The decisions regarding the business would have been made at the corporate headquarters in Kentucky, and all the defendants were either residents of Kentucky or had their place of business in Kentucky. Therefore, the plaintiff’s initial choice of forum was not given much weight by the court. Since all of defendants and the Commonwealth were located in Kentucky, Kentucky was more convenient for all parties and witnesses.

It was in the interest of justice to transfer the case, according to the court. In analyzing the interest of justice, the court looked at traditional notions of judicial economy, the speed at which cases proceed to trial, and the courts’ familiarity with applicable law and desire to resolve controversies in their locales. The Chicago courts deal with a significantly greater number of cases than the Kentucky courts. Because the FTC Act is federal, no court would have greater knowledge than another. Kentucky had a stronger interest in resolving the dispute because it affected its local companies and citizens. There were also two class actions currently pending against the defendants in the Eastern District. Therefore, justice would be best served by a transfer.

The case is No. 13-cv-578.

Attorneys: David A. O'Toole for the Federal Trade Commission. Jose A. Lopez (Perkins Coie LLP) for Fortune Hi-Tech Marketing, Inc.

Companies: Fortune Hi-Tech Marketing, Inc.

Cases: ConsumerProtection IllinoisNews