Proper venue in a civil action

Law Lessons from Crepy v. Reckitt Benckiser et al., __ N.J. Super. __ (Law Div. 2017), Essex Cty. DOCKET NO. L-730-15 (Mitterhoff, J.S.C.), February 19, 2016:

Proper venue in a civil action is governed by Rule 4:3-2, which provides, in pertinent part, that “venue shall be laid in the county in which the cause of action arose, or in which any party to the action resides at the time of its commencement.” R. 4:3 2(a)(3).

Once venue is laid, a change in venue may be granted in the following circumstances: 1) if the venue is not laid in accordance with Rule 4:3-2; or 2) if there is a substantial doubt that a fair and impartial trial can be had in the county where venue is laid; or 3) for the convenience of parties and witnesses in the interest of justice. R. 4:3-3(a). Where venue was improperly laid, a motion for change “should be routinely granted.” Pressler & Verniero, Current New Jersey Court Rules, comment to R. 4:3-3 (2016).

When a venue selection is challenged, the party that bears the burden of demonstrating good cause for changing venue or denying the change depends on the basis of the motion. “[I]f the motion is made pursuant to Rule 4:3-3(a)(2) or (3), the movant has the burden of demonstrating good cause for the change. If the motion is made pursuant to Rule 4:3-3(a)(1), the respondent has the burden of demonstrating good cause for not making a change.” Pressler & Verniero, supra, comment to R. 4:3-3 (citation omitted).

Rule 4:3-2(b) states that, for venue purposes, a corporation is deemed to reside “in the county in which its registered office is located or in any county in which it is actually doing business.” R. 4:3-2(b). It does not address, however, where an LLC is deemed to reside for the purpose of laying venue.

In Denver & R. G. W. R. Co. v. Bhd. of R.R. Trainmen, 387 U.S. 556, 87 S.Ct. 1746, 18 L.Ed. 954 (1967) the United States Supreme Court addressed this argument in opposition to applying the then-existing federal venue rule to an unincorporated labor union. As with Rule 4:3-2(b), the federal venue rule at issue in Denver & R. G. W. R. Co. specified that a corporation be deemed to reside where it conducts business, but it failed to address the residency of unincorporated entities. In electing to extend the “doing business requirement” to an unincorporated labor union, the Court reasoned that:

It can be argued, as respondent does, that had the 1948 Congress intended the expanded definition of corporate residence to apply to labor unions and other unincorporated associations, it would have said so. But . . . saying that Congress did not intend to “change” the venue law with respect to unincorporated associations assumes a settled meaning to the prior law. This was not the case. There was no settled construction of the law in the courts in 1948, and there is none yet. Nor was there anything to indicate that Congress had considered a labor union’s residence to be in only one place or had ever intended a limited view of residence with respect to unincorporated associations.

[Denver & R. G. W. R. Co, supra, 387 U.S. at 561, 87 S.Ct. at 1749, 18 L.Ed. at 959].

In the absence of clear congressional directive, the Court held that an unincorporated labor union may be sued, “like the analogous corporate entity, wherever it is “doing business.” Id. at 561, 87 S.Ct. at 1749, 18 L.Ed. at 959.

In the absence of any clear directive from the New Jersey Court Rules, the court found that an LLC may be sued, like the analogous corporate entity, wherever it actually does business under Rule 4:3-2(b). Indeed, the policy underlying the “actually doing business” requirement is that such an entity can reasonably foresee being sued in forums where it conducts business operations. See Int’l Shoe Co. v. Wash., 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). There is therefore no reason why a business entity that benefits from extensive and systemic business conduct in Essex County may not be sued in Essex County merely because it is unincorporated. As such, the court found that the “actually doing business” requirement of Rule 4:3-2(b) applies to both incorporated and unincorporated entities.

The underlying purpose of the venue statute, which is the convenience of litigants and witnesses. Denver & R.G. W.R. Co., supra, 387 U.S. at 560, 87 S.Ct. at 1748, 18 L.Ed. at 958 (“venue is primarily a matter of convenience of litigants and witnesses”). Indeed, New Jersey’s venue statute’s requirement that either any party reside in the venue or that the underlying action occurred therein reflects this policy goal.

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