Ross et al v. DiGioia et al
Filing
29
ORDER AND REASONS granting in part and denying in part 14 Motion to Dismiss Case. Because venue is improper as to defendant Elite, the Court dismisses Elite from this case w/out prej. Because venue is proper as to plaintiffs claims against Digioia, the Court DENIES defendants motion as it relates to those claims. Signed by Chief Judge Sarah S. Vance on 1/10/2012. (caa, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ROBERT ROSS, ET AL.
CIVIL ACTION
VERSUS
NO: 11-1827
JOHN DIGIOIA, JR., ET AL.
SECTION: R(2)
ORDER AND REASONS
Before the Court is defendants’ motion to dismiss the
plaintiffs’ complaint for improper venue.1
Because the Court
finds that venue is improper in this district as to defendant
Elite Outdoor Kitchen, LLC, but venue is proper as to plaintiffs’
claims against defendant John Digioia, defendants’ motion is
GRANTED in part and DENIED in part.
I.
BACKGROUND
This dispute arises out of a failed real estate construction
and management agreement between plaintiffs, Lisa and Robert Ross
(the Rosses), and defendant, John M. Digioia (Digioia).
Digioia
is plaintiff Lisa Ross’s brother.
In early 2009, the Rosses and Digioia began discussing the
possibility of entering into a real estate development and
management agreement.
1
R. Doc. 14.
Plaintiffs allege that they paid for
Digioia to travel to New Orleans in order to attend a Trump
University Real Estate course in July of 2009.
The parties
discussed the details of the agreements during this and three
other visits Digioia made to New Orleans.
Plaintiffs allege that
Digioia came to New Orleans during Easter of 2009 and 2010 and
also visited in early 2011.
The general idea of the agreement
was that Digioia would select distressed properties in Florida,
the Rosses would buy the properties, and then Digioia would
repair and manage the properties.
Plaintiffs allege that Digioia
persuaded them that buying property in Orlando and allowing
Digioia to oversee the renovations would be lucrative.
Plaintiffs compensated Digioia for his services through a ten
percent general contractor fee for all property construction2 and
a ten percent management fee.
written contract.
The parties did not execute a
Plaintiffs allege that after reaching an oral
agreement with Digioia, they spent $760,000 to purchase five
properties in Orlando.
Plaintiffs then transferred the
properties to five Louisiana limited liability corporations (ABR
Investments, ABR Investments-2, ABR Investments-3, ABR
Investments-4 and ABR Investments-5) formed exclusively for this
purpose.
2
Later, this fee increased to eleven percent.
2
Plaintiffs assert that Digioia grossly mismanaged the
renovations of the properties and failed in his management duties
once construction was completed.
At the end of April 2011, the
Rosses went to Florida to inspect the properties.
Following this
trip to Florida, the Rosses terminated the management
relationship with Digioia.
Plaintiffs allege that in response,
Digioia sent them an email on July 4, 2011 that “declared war.”
They also allege that Digioia sent them an email on July 23, 2011
in which he stated that plaintiffs owed him $127,000 for
construction costs.
Digioia any money.
Plaintiffs contend that they do not owe
Moreover, they argue that at the end of the
construction period Digioia owed plaintiffs money.
plaintiffs loaned Digioia $10,000.
In 2008,
The loan note is governed by
Louisiana law and provides for repayment at a rate of $250 per
month.
Plaintiffs contend that at the end of the construction
period, Digioia still owed $2,800 of the $10,000 note.
At that
time, plaintiffs wrote Digioia a check for an additional $2,000.
Plaintiffs assert that some of Digioia’s management fees were
deducted from the balance of the loan, and that the current
outstanding balance is $3,400.
On July 28, 2011, plaintiffs filed a complaint against
Digioia and Elite Outdoor Kitchen, LLC (“Elite”) alleging unfair
and deceptive trade practices, negligent misrepresentation,
3
breach of contract, and detrimental reliance.
damages and a declaratory judgment.3
Plaintiffs seek
Defendants then filed this
motion to dismiss for improper venue pursuant to Rule 12(b)(3) of
the Federal Rules of Civil Procedure, or in the alternative, to
transfer the case to the Middle District of Florida or the Ninth
Judicial Circuit for the State of Florida.
Plaintiffs oppose the
motion.
II.
STANDARD
A. 12(b)(3) Motion to Dismiss
Federal Rule of Civil Procedure 12(b)(3) states that a party
may move the court to dismiss for “improper venue.”
P. 12(b)(3).
FED. R. CIV.
Dismissal for improper venue is governed by 28
U.S.C. § 1406.
Under that statute, “[t]he 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.”
28 U.S.C. § 1406(a).
When venue is challenged, the burden is on the plaintiff to
establish that the district he chose is a proper venue.4
3
See
R. Doc. 1.
4
The Court recognizes that the jurisprudence of federal
district courts in the Fifth Circuit on the question of which
4
Perez v. Pan American Life Ins. Co., 1995 WL 696803, at *2 (5th
Cir. Oct. 20, 1995) (citing Advanced Dynamics Corp. v. Mitech
Corp., 729 F.Supp. 519, (N.D. Tex. 1990) (“When an objection to
venue has been raised, it is the Plaintiff's burden to establish
that venue is proper in the judicial district in which the action
has been brought.”).
On a Rule 12(b)(3) motion, the court must
accept as true all allegations in the complaint and resolve all
conflicts in favor of the plaintiff.
Braspetro Oil Services, Co.
v. Modec (USA), Inc., 2007 WL 1425851, at *2 (5th Cir. 2007).
Further, in deciding whether venue is proper, the court may look
outside of the complaint and its attachments.
Ambraco Inc. v.
party bears the burden of proof on a Rule 12(b)(3) motion to
dismiss for improper venue is inconsistent. Compare LAS Enters.,
Inc. v. Accu-Systems, Inc., 2011 WL 6697043, at *4 (E.D. La. Dec.
20, 2011) (holding that the movant bears the burden of
demonstrating that venue is defective), and Halter Marine, Inc.
v. Padgett-Swann Mach. Co., Inc., 1996 WL 361528, at *4 (E.D. La.
Jun. 27, 1996) (stating that the defendant bears the burden of
proving that venue is improper), with Langton v. CBeyond Commc’n,
L.L.C., 282 F.Supp. 2d 504, (E.D. Tex. 2003)(“Once a defendant
raises a 12(b)(3) motion to dismiss for improper venue, the
burden of sustaining venue lies with the plaintiff”), and Smith
v. Forenberry, 903 F.Supp 1018, 1020 (E.D. La. 1995) (holding
that when an objection is raised, plaintiff carries the burden of
showing that venue is proper). Wright and Miller counsel that
“the better view and the clear weight of authority, is that when
an objection has been raised, the burden is on the plaintiff to
establish that the district he chose is a proper venue.” WRIGHT
& MILLER, 14D FEDERAL PRACTICE & PROCEDURE, § 3826; see also
Vaughn Med. Equip. Repair Serv., L.L.C. v. Jordan Reses Supply
Co., 2010 WL 3488244, at *4 n.3 (acknowledging the split in
authority and holding that the burden is on the plaintiff).
5
Bossclip B.V., 570 F.3d 233, 238 (5th Cir. 2009), cert. denied,
130 S.Ct. 1054 (2010).
The general rule is that venue must be established for each
cause of action.
See Tucker v. United States Dep’t of Army, 1994
WL 708661, at * 2 (5th Cir. Dec. 6, 1994) (noting the district
court’s reliance on the general rule that venue must be proper as
to each distinct cause of action); Burkitt v. Flawless Records,
2005 WL 6225822, at *3 (E.D. La. Jun. 13, 2005) (“The general
rule is that venue must be established for each separate cause of
action) (citing Beattie v. United States, 756 F.2d 91, 100 (D.C.
Cir. 1984); see also WRIGHT & MILLER, 14D FEDERAL PRACTICE &
PROCEDURE, § 3808 (“[I]n a case in which multiple claims are
joined, the general rule that has been recited in a significant
number of cases is that venue must be proper for each claim.”).
Venue must also be established for each defendant.
See Burkitt,
2005 WL 6225822, at *3 (E.D. La. Jun. 13, 2005) (holding that
venue must be established for each defendant) (citing McCaskey v.
Cont’l Airlines, Inc., 133 F.Supp. 2d 514, 523 (S.D. Tex. 2001)
(“It is well established that in a case involving multiple
defendants and multiple claims, the plaintiff bears the burden of
showing that venue is appropriate as to each claim and as to each
defendant”)); see also WRIGHT & MILLER, 14D FEDERAL PRACTICE &
PROCEDURE, § 3808 (explaining that for transactional venue, the
6
transactional district must be proper for each of the parties).
B. Venue in Diversity Cases
Because the Court’s jurisdiction in this matter is based on
diversity of citizenship, venue is proper 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 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 is subject to personal jurisdiction at
the time the action is commenced, if there is no
district in which the action may otherwise be brought.
28 U.S.C. § 1391(a).
To be a proper venue under Section
1391(a)(2), the chosen venue does not have to be the place where
the most relevant events took place, but the selected district’s
contacts still must be substantial.
McClintock v. Sch. Bd. East
Feliciana Parish, 229 Fed. Appx. 363, 365 (5th Cir. 2008)
(holding that venue was improper because “no events, let alone a
‘substantial part of the events’ occurred in the chosen
district”) (citing David D. Siegel, Commentary on 1988 and 1990
Revisions of Section 1391, in 28 U.S.C.A. § 1391 (2006)); see
also Daniel v. American Bd of Emergency Med., 428 F.3d 408, 432
(2d Cir. 2005) (explaining that venue can be appropriate in more
than one district, and “Section 1391(a)(2) does not restrict
venue to the district in which the ‘most substantial’ events or
7
omissions giving rise to a claim occurred.”).
III. DISCUSSION
A. Venue is Improper in this District as to Defendant Elite
Outdoor Kitchens, LLC
The Court finds that venue is improper in this district as
to defendant Elite.
Plaintiffs do not make any allegations
against Elite on which to predicate venue.
The only information
plaintiffs provide about Elite in their complaint is that it is
Digioia’s company.
Plaintiffs do not allege that Elite was a
party to the agreement between the Rosses and Digioia, that
Digioia acted as an agent for Elite, or that Elite had any
involvement whatsoever with the facts giving rise to plaintiffs’
claims.
Because the complaint does not assert any allegations
against Elite, the Court cannot find that a substantial part of
the events or omissions giving rise to plaintiffs claims against
Elite occurred in this district.
See 28 U.S.C. § 1391(a)(2).
Accordingly, the Court finds that venue is improper as to Elite,
and Elite is dismissed from this suit.
B. Venue is Proper in this District as to Defendant Digioia
The Court finds that venue is proper in this district for
plaintiffs’ claims against Digioia for unfair trade practices,
negligent misrepresentation, and detrimental reliance.
8
Plaintiffs assert that Digioia made the allegedly false
statements that form the basis of plaintiffs’ claims for unfair
trade practices, negligent misrepresentation, and detrimental
reliance when he was in New Orleans.
Accordingly, a substantial
part of the events giving rise to these claims occurred in this
district.
Although it is a much closer question, the Court finds that
venue is also proper in this district for plaintiffs’ breach of
contract claims against Digioia.
Venue is proper in an action
for breach of contract “at the place of performance.”
American
Carpet Mills v. Gunny Corp., 649 F.2d 1056, 1059 (5th Cir. 1981).
The Court may also consider factors such as
“where the contract
was negotiated or executed, where the contract was to be
performed, and where the alleged breach occurred.”
WRIGHT &
MILLER, 14D FEDERAL PRACTICE & PROCEDURE § 3806.1.
In this case,
the contract was performed and allegedly breached in Florida, but
plaintiffs assert that the agreement was “confected” when Digioia
was in Louisiana.
Plaintiffs assert that the parties negotiated
the specifics of the agreement during Digioia’s visits to New
Orleans.
See Sacody Techs., Inc. v. Avant, Inc., 862 F.Supp.
1152, 1157 (S.D.N.Y 1994) (“The standard set forth in §
1391(a)(2) may be satisfied by a communication transmitted to or
from the district in which the cause of action was filed, given a
9
sufficient relationship between the communication and the cause
of action.”).
Further, plaintiffs contend that Digioia performed
the contract through the use of funds originating in Louisiana.
He used a checkbook linked to a Louisiana bank account and a
credit card billed to plaintiffs’ Louisiana address to pay for
items related to the renovations of the Florida property.5
The Court finds that in this case the contract negotiations
that occurred in this district, the financing that came from this
district, and the harm felt by the plaintiffs in this district,
are sufficient to ground venue for plaintiffs’ breach of contract
claim against Digioia here.
See, e.g., Fox v. Dream Trust, 743
F.Supp. 2d 389, 396 (D.N.J. 2010) (holding that negotiations
regarding a loan conveyed through a third party to a party within
the forum was sufficient to make the forum a proper venue under
Section 1391(a)(2)); Promero v. Mammen, 2002 WL 31455970, at *8
5
Plaintiffs also cite the existence of a promissory
note executed in Louisiana as further evidence supporting their
assertion that venue is proper in this district. Plaintiffs do
not allege that the promissory note was a part of the
construction and management agreement. Indeed, the note was a
pre-existing agreement between plaintiffs and Digioia.
Accordingly, that note and any outstanding balance on that note
is not an event giving rise to plaintiffs’ breach of contract
claim, and the Court will not consider it when determining
whether venue is proper under Section 1391(a)(2).
10
(N.D. Ill. Nov. 1, 2002) (finding that a substantial portion of
events giving rise to plaintiff’s claims occurred in Illinois
when the defendant engaged in discussions related to the contract
while in Illinois, contract negotiations involved various
communications to and from Illinois and the subject of the
contract was a potential investment in Illinois); Computer
Express Int’l Ltd. v. MicronPC LLC, 2001 WL 1776162, at *4
(E.D.N.Y. Dec. 21, 2001) (determining that venue was proper under
Section 1391(a)(2) in part because numerous communications
concerning the terms of sale either originated in the district or
were made to the plaintiffs in the district); Etienne v.
Wolverine Tube, Inc., 12 F.Supp.2d 1173, 1181 (D. Kan. 1998)
(holding that venue was proper in Kansas, even though the
contract was to be performed in Alabama, when the negotiation and
execution of the contract took place through communications
directed into Kansas); but see Gulf Ins. Co. v. Glasbrenner, 417
F.3d 353, 357 n.2 (2d Cir. 2005) (explicitly declining to decide
“whether the negotiation and issuance of a contract in a given
judicial district, standing alone, is sufficient to lay venue in
that district).
Although the negotiations of the contract were
not the most substantial events giving rise to plaintiffs’
11
claims, but neither were the negotiations insubstantial.
The
Court finds that the negotiation of the contract, which occurred
in this district, bears a close relationship to plaintiffs’
breach of contract claim.
When considered in conjunction with
the financing that came from New Orleans and the financial harm
felt by the plaintiffs in this district, the Court finds that
substantial events giving rise to plaintiffs’ breach of contract
claims occurred in this district.
Venue, therefore, is proper in
the Eastern District of Louisiana for plaintiffs’ breach of
contract claim against Digioia.
C. Transfer
Defendants request a dismissal or transfer on the basis of
forum non conveniens, but this common law doctrine has limited
applicability following the enactment of Section 1404.
See
American Dredging Co. v. Miller, 510 U.S. 443, 449 n.2 (1994)
(stating that as a consequence of the enactment of Section 1404,
“the federal doctrine of forum non conveniens has continuing
application only in cases where the alternative forum is
abroad.”).
Further, the doctrine does not authorize the Court to
make a transfer to another district.
Forum non conveniens
permits a court to dismiss an action when another forum is
clearly more convenient, but it does not authorize a district
12
court to transfer the case.
Transfers from one federal district
to another are now governed exclusively by Section 1404 (when
venue is proper in the transferor district) and Section 1406
(when venue is not proper in the transferor venue).
Because the
Court has found that venue is proper in this district for
plaintiffs’ claims against defendant Digioia, the only
possibility for transfer is through Section 1404(a).
See 28
U.S.C. § 1404(a).
A district court may transfer an action to any other
district where the plaintiff could have filed suit “for the
convenience of the parties and the witnesses” when such a
transfer is “in the interest of justice.”
28 U.S.C. § 1404(a).
Although plaintiffs’ choice of forum is important, it is not
determinative.
See In re Volkswagen of America, Inc., 545 F.3d
304, 315 (5th Cir. 2008) (In re Volkswagen II) (explaining that
under Section 1404(a) the plaintiff’s choice of forum is to be
considered, but also noting that “the statute requires only that
the transfer be ‘[f]or the convenience of the parties, in the
interest of justice.’”) (citing Veba-Chemie A.G. v. M/V Getafix,
711 F.2d 1243, 1247 (5th Cir. 1983)).
The defendant moving to
transfer venue must first demonstrate that the plaintiff could
have brought the action in the transferee court initially.
13
See
Hoffman v. Blaski, 363 U.S. 335, 343-44 (1960) (“[t]he power of a
District Court under section 1404(a) to transfer an action to
another district is made to depend...upon whether the transferee
district was one in which the action ‘might have been brought’ by
the plaintiff.”); In re Volkswagen AG, 371 F.3d 201, 203 (5th
Cir. 2004) (In re Volkswagen I)(“In applying the provisions of §
1404(a), we have suggested that the first determination to be
made is whether the judicial district to which transfer is sought
would have been a district in which the claim could have been
filed.”).
The defendant must then show “good cause” for
transfer.
In re Volkswagen II, 545 F.3d at 315 (explaining that
the “good cause” burden reflects the appropriate deference to
which the plaintiff’s choice of venue is entitled); see also 28
U.S.C. § 1404(a).
To show good cause, a defendant must satisfy
the statutory requirements and clearly demonstrate that the
transferee venue is more convenient for the parties and
witnesses.
Id.
In deciding a transfer motion, the district court must
consider the private and public interest factors enunciated in
Gulf Oil Corp v. Gilbert, 330 U.S. 501, 508 (1947).
Volkswagen II, 545 F.3d at 315.
See In re
The private interest factors
include: (1) the relative ease of access to sources of proof; (2)
14
the availability of compulsory process to secure the attendance
of witnesses; (3) the cost of attendance for willing witnesses;
and (4) all other practical problems that make a trial easy,
expeditious and inexpensive.
In re Volkswagen I, 371 F.3d at 203
(citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241 (1981)).
The public interest factors are: (1) the administrative
difficulties flowing from court congestion; (2) the local
interest in having localized interest decided at home; (3) the
familiarity of the forum with the law that will govern the case;
(4) the avoidance of unnecessary problems of conflict of laws or
application of foreign law.
Id.
These Gilbert factors “are
appropriate for most transfer cases, [but] they are not
necessarily exhaustive or exclusive.”
dispositive.
Id.
Id.
Nor is any one factor
One of the most important factors in the
Section 1404(a) analysis is the inconvenience for non-party, nonexpert, non-resident witnesses.
See Hills v. Brinks, Inc., 2008
WL 243944, at *5 (E.D. La. Jan. 25, 2008) (explaining that the
availability of witnesses and the convenience of the venue for
witnesses are important factors the court should consider when
deciding whether to grant a transfer under Section 1404(a)).
The
preferred method of proof of the burden on witnesses is through
the submission of affidavits, although affidavits are not
15
required.
See In re Volkswagen II, 545 F.3d at 317, n.12
(explaining that affidavits are not required to demonstrate
inconvenience).
Because defendants have not properly moved for a transfer on
the basis of Section 1404(a), the Court will not consider the
merits of such a motion at this time.
D. Notice to Plaintiffs
Finally, plaintiffs are on notice that the Court is
disturbed by their unnecessarily prolix and unprofessional
pleadings.
The pleadings contain pages of irrelevant factual
assertions designed to poison the well, or prematurely argue the
merits, which in any event are unrelated and unnecessary to the
issue now before this Court.
These rambling pleadings with
vituperative name-calling are a burden on the Court and will not
be accepted.
Plaintiffs are directed to focus on the issues
relevant to their claims.
If plaintiffs fail to confine their
briefings to the issues at hand, the Court will shorten the page
limits applicable to further filings and consider any other
sanction that may be appropriate under the circumstances.
16
IV.
CONCLUSION
Because venue is improper as to defendant Elite, the Court
GRANTS defendants’ motion in part and dismisses Elite from this
case without prejudice.
Because venue is proper as to
plaintiffs’ claims against Digioia, the Court DENIES defendants’
motion as it relates to those claims.
New Orleans, Louisiana, this 10th day of January, 2012.
__
_________________________________
SARAH S. VANCE
UNITED STATES DISTRICT JUDGE
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