SunSouth Bank v. NashYork, LLC et al

Filing 37

OPINION AND ORDER, it is the ORDER, JUDGMENT and DECREE of the Court that the 10 motion to dismiss or transfer is granted to the extent that this case is transferred to the Northern District of Florida; directing the clerk to take appropriate steps to effect the transfer; this case is closed in this court. Signed by Honorable Judge Myron H. Thompson on 2/11/13. Furnished to calendar group & AG (terminates Final Pretrial 02/11/2014 and Non-Jury Trial 3/10/2014)(djy, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, SOUTHERN DIVISION

SUNSOUTH BANK,
Plaintiff,
v.
NASHYORK, LLC; et al.,
Defendants.

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CIVIL ACTION NO.
1:12cv918-MHT
(WO)

OPINION AND ORDER
Plaintiff SunSouth Bank brought this lawsuit seeking
to recover an outstanding debt and naming as defendants
NashYork, LLC (a debtor of the bank) and four individual
guarantors of NashYork’s loan (Dwight P. Wiles, James C.
Stroud, Herbert L. Graham, and Elliot Levine).

Subject-

matter jurisdiction is proper under 28 U.S.C. § 1332
(diversity).

The case is now before this court on the

defendants’ motion to dismiss or transfer venue from the
Middle District of Alabama to the Northern District of
Florida.

For the reasons that follow, the court will

transfer the case.

I. BACKGROUND
SunSouth Bank, which is located in Dothan, Alabama,
made a large loan to NashYork, a company organized under
the laws of Florida, for the purpose of purchasing and
developing certain property in Bay County, Florida.
part

of

the

transaction,

a

handful

of

As

NashYork’s

individual managers (including the defendants in this
case, Wiles, Stroud, Graham, and Levine) each separately
guaranteed differing portions of the loan should the
company fail to repay it.
After some time, relations between SunSouth Bank and
NashYork

soured

repayments.

and

the

company

stopped

making

loan

Three of NashYork’s managers other than the

defendants in this case (the Joseph Flom estate, Jason
Flom, and Elizabeth Yates), who also guaranteed portions
of SunSouth’s loan to NashYork, instituted a lawsuit in
a Florida state court against the bank.
essentially,
customer,

that

Ronnie

the

bank

Gilley,

conspired
to

2

They charged,
with

induce,

a

favored

fraudulently,

NashYork and themselves into transactions that were to
their detriment and the bank’s and Gilley’s benefit.
SunSouth Bank removed the case to the U.S. District Court
for the Northern District of Florida on the basis of
diversity jurisdiction, denied the allegations against
it, and counterclaimed against the individual guarantors
to

recover

guarantees.

on

NashYork’s

debt

pursuant

to

their

See Estate of Flom v. SunSouth, No. 3:12-cv-

288 (N.D. Fla. removed June 14, 2012).
Several months after the Florida case was removed to
federal court, SunSouth Bank filed this lawsuit in an
Alabama state court, seeking to recover against NashYork
for its debt and against Wiles, Stroud, Graham, and
Levine for their separate guarantees.

The defendants

removed the case to this court on the basis of diversity
jurisdiction.
Having

removed

this

case

to

this

court,

the

defendants now move to dismiss the lawsuit for lack of
personal

jurisdiction

and

3

improper

venue

or,

alternatively, to transfer the lawsuit to the Northern
District of Florida to provide that court with the option
of consolidating the suit with the pending case there.
Because this court will transfer the case, it does not
reach the personal-jurisdiction and other issues.

II. DISCUSSION
Under

28 U.S.C. § 1404(a), “For the convenience of

the parties and witnesses, in the interest of justice, a
district court may transfer any civil action to any other
district or division where it might have been brought.”
In deciding whether to transfer a case, courts weigh
numerous

factors.

Instruments,

Inc.,

See,
__

F.

Carroll

e.g.,
Supp.

2d

__,

__,

v.

Texas

2012

WL

1533785, at *1 (M.D.Ala. May 1, 2012) (Thompson, J.).
However, where the case before the court substantially
overlaps with a different case pending in another federal
court, special considerations apply.

4

“Where two actions involving overlapping issues and
parties are pending in two federal courts, there is a
strong

presumption

across

the

federal

circuits

that

favors the forum of the first-filed suit under the firstfiled rule.”

Manuel v. Convergys Corp., 430 F.3d 1132,

1135 (11th Cir. 2005) (citations omitted); see also 15
Charles Alan Wright & Arthur R. Miller, Federal Practice
&

Procedure

§

3854

n.11

(3d

applying the first-filed rule).

ed.)

(collecting

cases

For the first-filed rule

to apply, the two cases need not be identical; rather,
“[t]he crucial inquiry is one of ‘substantial overlap.’”
Save Power Ltd. v. Syntek Finance Corp., 121 F.3d 947,
950 (5th Cir. 1997).

Once a party has shown that a

substantially overlapping case is pending in another
federal court and requests that the instant case be
transferred

there,

an

objecting

party

must

show

“‘compelling circumstances’ to warrant an exception to
the first-filed rule.”

Manuel, 430 F.3d at 1135.

If

compelling circumstances are not established, the court

5

should transfer the case to the first-filed forum.

See

Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599,
606 (5th Cir. 1999) (holding that the lower court erred
by dismissing the case instead of transferring it).

The

court in the first-filed forum may, but is not required
See Fed. R. Civ. P. 42(a)

to, consolidate the cases.

(“If actions before the court involve a common question
of

law

or

fact,

the

court

may

...

consolidate

the

considerations

of

actions.”).
The

first-filed

rule

“embodies

judicial administration and conservation of resources.”
First City Nat. Bank and Trust Co. v. Simmons, 878 F.2d
76, 79 (2d Cir. 1989).

“The concern manifestly is to

avoid the waste of duplication, to avoid rulings which
may trench upon the authority of sister courts, and to
avoid piecemeal resolution of issues that call for a
uniform result.”

Cadle Co., 174 F.3d at 603 (quotation

marks and citation omitted).

6

Here, there is clear substantial overlap between this
case and the Florida lawsuit.

Both cases arise out of

the same loan and related transactions between SunSouth
Bank and NashYork.
individuals

When that loan was made, various

associated

with

NashYork

in

managerial

capacities guaranteed the loan (in separate agreements
and with respect to different amounts).

Now, the bank

seeks to recover on those transactions.

In both cases,

the key issues are the viability of the various loan and
guarantee

agreements

in

light

guarantors’ allegations of fraud.
constitute

a

sufficient

substantial overlap.

of

NashYork’s

and

These circumstances

prima-facie

showing

of

See Mfrs. Hanover Trust Co. v.

Palmer Corp., 798 F. Supp. 161, 165-168 (S.D.N.Y. 1992)
(Haight, J.) (reaching the same conclusion on similar
facts

involving

multiple

actions

to

collect

against competing claims of lender liability).

a

debt

As such,

sound judicial administration calls for this court to
transfer the case to the Northern District of Florida,

7

unless

SunSouth

showing

with

Bank

rebuts

evidence

the

that

the

substantial-overlap
two

cases

actually

materially differ or establishes that, despite the cases
substantially

overlapping,

compelling

circumstances

warrant separate adjudication.
SunSouth

Bank’s

various

transfer are not availing.
the

two

cases

do

not

arguments

for

denying

First, the bank argues that

substantially

overlap

because,

except for the bank, the parties are different.

While

that is true, that fact is not sufficiently material to
deny transfer.
required.”
SunSouth

“Complete identity of parties is not

Save Power Ltd., 121 F.3d at 951.

Bank’s

litigation

opponents

in

Although

both

cases

differ, they all stand in relation to the bank in the
same way.
various

They include NashYork (the bank’s debtor) and
guarantors

managers).
guarantors

While
“executed

of

that

SunSouth
different

debt
Bank

(all
argues

guaranties”

NashYork’s
that
and

the
“paid

different amounts to SunSouth,” Pl.’s Br. (Doc. No. 12)

8

at 5, the bank is, essentially, quibbling over minor
differences.

See Mfrs. Hanover Trust Co., 798 F. Supp.

at 167 (“[O]bsessing over slight differences between
actions does not promote judicial economy.”).

SunSouth

Bank’s assertion that the two sets of guarantors “are
only similar in that they owe money to SunSouth,” Pl.’s
Br. (Doc. No. 12) at 5, is an obvious understatement.
There appears to be no reason (and the bank has asserted
none) that guarantors in this case could not be joined
with the guarantor-plaintiffs in the Florida case.
Second, SunSouth Bank argues that the anticipated
claims defendants here have against it and the claims of
plaintiffs in the Florida case “are not identical” in
that “They are based upon different communications and
different

circumstances.”

Id.

But,

the

bank

nothing more to explain how the claims differ.

says

As has

been stated, NashYork and the guarantors have established
a prima-facie case of substantial overlap, and the burden
now lies with SunSouth Bank to rebut that showing.

9

The

bank’s vague and conclusory assertions that these cases
differ

do

not

suffice,

and

this

court

declines

the

invitation to guess what differences the bank may have
had in mind.

Moreover, the bank’s argument that the
(emphasis

added),

incorrectly states the operable legal standard.

See Save

claims

Power

“are

Ltd.,

not

121

identical,”

F.3d

at

950

id.

(“The

rule

however, require that cases be identical.

does

not,

The crucial

inquiry is one of ‘substantial overlap.’”); see also
Mfrs. Hanover Trust Co., 798 F. Supp. at 167 (“The
interests of justice require that the cases be related,
not identical.”).
Third, SunSouth Bank argues that this court should
deny transfer because the guarantor-defendants in this
case have claims against the guarantor-plaintiffs in the
Florida case relating to their comparative obligations to
repay NashYork’s debt.

Rather than being a reason to

deny transfer, as the bank argues, that fact, if true,
would

seem

to

be

a

reason

10

that

transfer

should

be

granted.

The Federal Rules of Civil Procedure favor the

efficient resolution of all related “claim[s] arising out
of the [same] transaction or occurrence” in a single
judicial
against

action,
one

including

another.

claims

See

Fed.

(crossclaims against coparties).

coplaintiffs
R.

Civ.

P.

have
13(g)

That the guarantors in

this case and the guarantors in the Florida case may have
claims against one another highlights the substantial
overlap between the two cases.
Fourth, SunSouth Bank expresses concern that, if this
case were transferred to Northern District of Florida,
the defendants may then contest that court’s personal
jurisdiction over them.
to fear as much.

But, the bank has little reason

“Because the requirement of personal

jurisdiction represents first of all an individual right,
it can, like other such rights, be waived.”

Ins. Corp.

of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456
U.S. 694, 703 (1982).

The defendants’ motion to transfer

this case to the Northern District of Florida surely

11

constitutes a waiver of any rights the defendants may
have otherwise had to avoid appearing there.
Similarly,

SunSouth

Bank

contends

that,

in

a

different case against the defendants brought in the
Northern District of Florida, the defendants argued that
the forum was inconvenient and that, according to the
bank,

this

earlier

argument

mitigates

against

now

transferring to the professedly inconvenient court.

As

the defendants point out, the court in Florida rejected
that

argument

Common

sense

and

asserted

dictates

that,

jurisdiction

over

even

defendants’

if

the

them.

initial appearances in Florida were inconvenient at that
time, now that they are already subject to jurisdiction
there, transferring this case to the same court promotes
the

goal

of

convenience

(at

least,

so

far

as

the

defendants are concerned).

While it is true that this

court

balance

“must

consider

the

of

convenience

in

weighing a motion to transfer,” Valley Enter. of Ohio LLC
v. Gainey Transp. Serv., 2008 WL 4279601, at *2 (N.D.

12

Ohio

Sept.

16,

2008)

(Wells,

J.),

SunSouth

Bank

identifies no particular hardships that outweigh all
other considerations warranting transfer under the firstfiled rule.

See Z-Man Fishing Prods., Inc. v. Applied

Elastomerics, Inc., 2006 WL 3813707, at *4 (D.S.C. Dec.
27, 2006) (Houck, J.) (“[T]he first-filed rule shifts the
burden of persuasion to [the party opposing transfer] to
demonstrate that the weight of the factors relating to
the convenience of the witnesses and parties balances in
favor of litigating the action in the second forum.”).
In sum, based on the evidence before this court, this
case appears to overlap substantially with the pending
lawsuit in Florida.

Because SunSouth Bank has not shown

otherwise and neither has it shown reason not to apply
the

first-filed

rule,

this

court

will

transfer

the

lawsuit to the Northern District of Florida.*

* The court expresses no judgment on the defendants’
arguments for dismissing or transferring this case
besides those relating to the first-filed rule.
13

***
Accordingly, it is the ORDER, JUDGMENT, and DECREE of
the court that the motion to dismiss or transfer (Doc.
No. 10), filed by defendants NashYork, LLC, Dwight P.
Wiles, James C. Stroud, Herbert L. Graham, and Elliot
Levine, is granted to the extent that this case is
transferred to the Northern District of Florida.
The

clerk

of

the

court

is

DIRECTED

to

take

appropriate steps to effect the transfer.
This case is closed in this court.
DONE, this the 11th day of February, 2013.

/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE