Laferney v. The Citizens Bank of East Tennessee et al

Filing 47

ORDER re 13 MOTION to Dismiss ; the Court orders the parties to file briefs within 14 days of the dated of this Order addressing the appropriateness of transferring this case to another district pursuant to 28 U.S.SC 1406 Signed by Chief Judge Lisa G. Wood on 7/11/2011. (csr)

in the %ntteb Atatto Martet Court
for the outjetn ViArtet of 4eorgta
jorwSbkk flibt%ton
RANDI LAFERNEY,
Plaintiff,

VS.
THE CITIZENS BANK OF EAST
TENNESSEE, TERRY MORELOCK,
and WILLIAM E. PHILLIPS,
Defendants.

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CV 210-169

ORDER

Presently before the Court is Defendants' Motion to
Dismiss. See Dkt. No. 13. For the reasons stated below, the
Court orders the parties to file briefs within 14 days of the
date of this order addressing the appropriateness of
transferring this case to another district pursuant to 28 U.S.C.
§ 1406(a).

BACKGROUND
Plaintiff Randi Laferney was managing member of Maahr
Forest, LLC, a corporation formed to develop a parcel of land in
Tennessee into a residential subdivision known as Wildwood at

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Hughes Farm. See Dkt. No. 1, at 4-5. To finance the project,
Maahr Forest obtained a loan from Washington County Bank. Under
the terms of that loan, Plaintiff was not personally liable for
any of the obligations of Maahr Forest.
Defendants Terry Morelock and William Phillips, both agents
of Defendant Citizens Bank, allegedly solicited Plaintiff to do
business with Citizens Bank, rather than continue with
Washington County Bank. Plaintiff claims that Defendants
promised her that while the prospective Citizens Bank loan would
have a lower interest rate than the Washington County Bank loan,
the two loans would be otherwise identical. Id. at 7-11.
Defendants allegedly assured Plaintiff that she would not be
personally liable for the loan and pressured her into accepting
the loan without providing her with a loan commitment letter
outlining the terms of the loan. Id. Contrary to Defendants'
alleged promises, however, the terms of the Citizens Bank loan
did, in fact, make Plaintiff personally liable for Maahr
Forest's obligations. Plaintiff claims that although she became
aware of Defendants' misrepresentations prior to signing the
loan agreement, she had by that time ended her business
relationship with Washington County Bank and had no choice but
to agree to Defendants' terms.
Maahr Forest began falling behind on its loan payments in
2009. See id. at 10. Plaintiff claims that Defendants have
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sought to foreclose on the Wildwood property. Moreover,
Plaintiff alleges that while Defendants told her that they would
adjust her loan payments, they falsely reported to national
credit reporting agencies that Plaintiff was personally late on
the payment. As a result of that report, Plaintiff has been
unable to refinance the loan.
In filing this lawsuit, Plaintiff claims that Defendants
are liable for breach of contract, misrepresentation and fraud,
violations of the federal and state RICO statutes, violations of
the Georgia Fair Business Practices Act, negligence, violations
of O.C.G.A. § 10-5-12, and defamation of credit in violation of
the federal and state Fair Credit Reporting laws. See id. at 1521. Defendants now move to dismiss. See Dkt. No. 13.

DISCUSSION
In moving to dismiss, Defendants argue, among other things,
that the Southern District of Georgia is an improper venue for
this lawsuit. See Dkt. No. 13, 13-14.
There are two possible statutory bases for venue in this
case. First, the RICO statute itself contains a special venue
provision, which applies here because Plaintiff raises a federal
RICO claim. See Long v. Sports44.com , Inc., No. 8:06-CV-2384,
2007 WL 3072405, at *5 (M.D. Fla. Oct. 19, 2007) (noting RICO's

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venue provision). That provision states,
Any civil action or proceeding under this chapter
against any person may be instituted in the
district court of the United States for any
district in which such person resides, is found,
has an agent, or transacts his affairs.
18 U.S.C. § 1965(a).
Although Plaintiff bears the "burden of proving venue" once
venue is challenged, Pritchett v. Paschall Truck Lines, Inc.,
714 F. Supp. 2d 1171, 1174 (M.D. Ala. 2010), Plaintiff makes no
reference at all to the RICO venue provision, making it
unnecessary for the Court to address it here. See Prospect
Capital Corp. v. Bender, No. 09 Civ. 826, 2009 WL 4907121, at *2
n.7 (S.D.N.Y. Dec. 21, 2009)(refusing to address possibility of
proper venue under RICO venue provision because "none of the
parties address this alternative basis for venue over the RICO
claims and because (Plaintiff] itself does not appear to premise
the propriety of venue . . . on that statute").
The general venue statute, 28 U.S.C. § 1391, provides the
other possible basis for venue in this case. The relevant
portion of the general venue statute states,
A civil action wherein jurisdiction is not
founded solely on diversity of citizenship may,
except as otherwise provided by law, be brought
only in
(1) a judicial district where any defendant
resides, if all defendants reside in the
same State,
(2) a judicial district in which a
substantial part of the events or omissions
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II

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giving rise to the claim occurred, or a
substantial part of property that is the
subject of the action is situated, or
(3) a judicial district in which any
defendant may be found, if there is no
district in which the action may otherwise
be brought.
28 U.S.C. § 1391(b). Without referring specifically to § 1391,
Plaintiff states - in the complaint's only reference to venue that "'[v]enue is proper in this Court." Dkt. No. 1, at 4.
The Court disagrees. Disregarding - for the sake of
argument - Plaintiff's failure to make any specific factual
allegations regarding venue, a review of the general venue
statute in light of the facts of this case makes clear that
venue is improper here. Section 1391(b) (1) "applies when
defendants reside in different districts of the forum state."
(888) Justice, Inc. v. Just Enter., Inc., No. 06 CV 6410, 2007
WL 2398504, at *6 (S.D.N.Y. Aug. 22, 2007). In this case, it is
beyond dispute that Defendants Morelock and Phillips do not
reside in Georgia, rendering § 1391(b) (1) inapplicable.
Section 1391(b) (2) also does not provide a basis for venue.
At most, Plaintiff establishes that (1) Defendants maintained a
website that could be accessed from Georgia,' (2) Defendants at
times corresponded with Plaintiff while she was in Georgia, and
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Plaintiff includes a screen shot of Defendant's website in an apparent
effort to demonstrate that Defendants solicit business in Georgia. The
contents of the screen shot indicate only that Defendants did, in fact,
maintain a website, but make no reference to Georgia or any state other than
Tennessee. Ironically, the website's title is 'Serving our Citizens of East
Tennessee." See Dkt. No. 14, Ex. A.
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(3) Plaintiff was a Georgia resident at the time of Defendants'
alleged conduct. Plaintiff does not allege, however, that any,
much less a substantial part, of the misrepresentations and
other failures that form the basis of this suit took place in
Georgia. Indeed, it is undisputed that the meetings and
subsequent loan closing described in this lawsuit all took place
in Tennessee. See Dkt. No. 13, 3-4. Moreover, the Wildwood
property that served as collateral for the loan is located in
Tennessee, not Georgia. Id. at 3. As a result, the Court cannot
find that venue is proper under § 1391(b) (2).
Section 1391(b) (3) is also inapplicable to this case
because that provision applies only "if there is no district in
which the action may otherwise be brought." Plaintiff has made
no showing that this action could not be brought in a different
district.
Because the Court has determined that venue is improper in
this case, the Court turns to 28 U.S.C. § 1406(a), which
provides that the "district court of a district in which is
filed a case laying venue in the wrong division or district
shall dismiss, or if it be in the interest of justice, transfer
such case to any district or division in which it could have
been brought." 2 Defendants effectively concede that this lawsuit

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Regardless of whether "the court has no personal jurisdiction, it may
correct venue and jurisdictional defects through transfer of venue pursuant

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could have been brought in the Eastern District of Tennessee.
See generally Dkt. No. 14. Nonetheless, given that the parties
have not briefed whether the interests of justice support
transfer of the case, or what other district or districts would
be proper, the Court now directs the parties to file briefs
addressing those issues within 14 days of the date of this
order.

SO ORDERED, this 11th day of June, 2011.

LISA GODBEY WOOD, CHIEF JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA

to 28 U.S.C. § 1406(a)." Leach v. Peacock, No. 2:09cv738, 2011 WL 1130596, at
*2 (M.D. Ala. March 25, 2011).
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