PREMIER HOSPITALITY GROUP - NEW STANTON II v. PATEL

Filing 15

MEMORANDUM OPINION on Defendant's Motion to Dismiss or Transfer. Signed by Magistrate Judge Lisa Pupo Lenihan on 08/15/17. (jer)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

PREMIER HOSPITALITY GROUP –
NEW STANTON II,
Plaintiff/Petitioner,
v.
NAINESH PATEL,
Defendant/Respondent.

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Civil Action No. 2:17-cv-00645

Magistrate Judge Lisa Pupo Lenihan
ECF No. 9

MEMORANDUM OPINION ON DEFENDANT’S
MOTION TO DISMISS OR TRANSFER

I. SUMMATION
For the reasons set forth below, the June 5, 2017 Motion to Dismiss or Transfer
filed by Defendant Nainesh Patel (“Patel”), ECF No. 9, will be denied. The August 10,
2016 Agreement of Purchase and Sale and Joint Escrow Instructions entered into by the
parties (the “Agreement”) includes “Governing Law and Venue” provisions which
clearly grant this Court exclusive federal jurisdiction “for any legal controversy
between [them] arising in connection with [said] Agreement.” ECF No. 13, Declaration
Ex. B, Section 19. The Agreement also contains facially broad “Arbitration of Disputes”
provisions requiring the binding arbitration, in the County in which the relevant real
property lies (i.e., Westmoreland County, Pennsylvania) of disputes (including
disputes/claims as to the Agreement’s “interpretation, enforceability, and the
arbitrability of disputes”). Id. at Section 11. As the relevant underlying Agreement
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provisions are not rendered a nullity by Plaintiff’s allegations, however colorable, this
Court retains specific personal jurisdiction over Plaintiff and is the exclusive federal
court forum for claims arising in connection with the Agreement. The “first-filed rule”
and Defendant’s District Court filings in California and Georgia are consequently nondeterminant to this holding. Defendant will be provided an opportunity to respond to
Plaintiff’s May 8, 2017 Petition for Rule to Show Cause Why [Defendant] Should Not be
Compelled to Submit to Arbitration (“Plaintiff’s Petition for Rule to Show Cause”) (ECF
No. 1-2) as set forth in the Court’s Order of even date herewith.

II. FACTUAL AND PROCEDURAL HISTORY OF RELATED ACTIONS
As duly summarized in Plaintiff’s Memorandum of Law in Response and
Opposition to Defendant’s Motion to Dismiss or to Transfer (“Plaintiff’s Memo in
Opposition”), ECF No. 13, this action concerns a commercial real estate transaction.
More specifically, in June, 2016 Plaintiff, a Pennsylvania limited partnership, auctioned
(through an online auctioneer) a Marriott-affiliated hotel which it owned in
Westmoreland County, Pennsylvania. ECF No. 13 at 2. When the original high bid was
withdrawn, Defendant, a Georgia resident, became the high bidder at a purchase price
of $4.83 million and executed the August 10, 2016 Agreement, but failed to timely
deposit the 10% “Earnest Money” as required. The parties exchanged further
communications detailed in their pleadings and exhibits and non-determinant to this
holding. Id. at 2-3. Subsequent to the date specified in the Agreement, on September 8,
2016, Defendant deposited the earnest money to an escrow account in the hands of the
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escrow/closing agent, Commonwealth Land Title Insurance Company, in New York,
where it remains. ECF No. 13 at 3. When the parties’ differences regarding completion
of the transaction were not resolved, Plaintiff declared Defendant in breach on October
24, 2016 and the hotel property was then sold to another purchaser. ECF No. 13 at 3-4.
On October 28, 2016, Defendant filed a lawsuit in the District Court for the
Central District of California (assertedly the location of the auction house which
arranged the electronic transaction, see ECF No. 10 at 5) and our sister Court noted the
arbitration provisions of the parties’ Agreement, dismissed Defendant’s claims against
Plaintiff for lack of personal jurisdiction, and stayed his claims against Garrison
Investment Group, LP (“Garrison”) pending the outcome of the principal parties’
arbitration.1 See Nainesh Patel v. Garrison Investment Group, LP et al., Case No. 8:16cv-1968-JLS-JCGx (C.D. Cal.) (the “California Action”); ECF No. 13, 5-6 (noting
California Court’s determination that relief sought for claims arising from
communications between Patel and Garrison regarding property is restitution of Patel’s
earnest money, which may be resolved by arbitration between Patel and Premier), ECF
No. 13-2 at 29 (Order Granting Defendants’ Motion in California Action and noting –
following summation of facts and other assertions - that “resolution of the issues
between Patel and Premier in arbitration may conclusively settle the issues between

Plaintiff attests that Garrison is an investment management entity that manages funds
that have an investment/ownership interest in Premier. See ECF No. 13 at 5, n. 1.
Defendant attests a belief that Garrison is Premier’s general partner. See ECF No. 9-2
(Complaint in the Georgia Action) at 2.
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Patel and Garrison”). Defendant voluntarily dismissed the California action. See ECF
No. 9-2 at 9.
On November 8, 2016, Plaintiff filed a demand for arbitration with Judicial
Arbitration and Mediation Services (“JAMS”), one of two arbitration entities designated
in the Agreement provisions. Defendant has assertedly refused to submit to arbitration.
See, e.g., ECF No. 13 at 6.
In early March, 2017 Defendant filed a second lawsuit in the District Court for
the Middle District of Georgia, seeking a declaration that the Agreement was never
effectively entered or rescission on the basis of fraud or mutual mistake, and seeking
damages against Garrison for fraudulent inducement. EC No. 10 at 2-3; ECF No. 9-2.
See also Nainesh Patel v. Garrison Investment Group, LP and Premier Hospitality Group
– New Stanton II, Case No. 17-cv-00045-WLS. An extension was granted in the Georgia
action for a time, apparently while the parties participated in unsuccessful May, 2017
mediation, after which Plaintiffs’ Second Motion to Dismiss for Lack of Jurisdiction and
their Second Motion to Compel Arbitration and to Stay These Proceedings, or in the
Alternative, to Transfer Venue were filed and are pending. See ECF No. 13 at 7 & n. 2;
ECF No. 1-2 at 4; Georgia Action Docket at No. 15, 16.
On May 8, 2017 Plaintiff filed, in the Court of Common Pleas of Westmoreland
County, its Petition for Rule to Show Cause regarding arbitration. Defendant removed
that State Court action on May 17, 2017 (ECF No. 1) and filed the pending Motion to
Dismiss or Transfer (ECF No. 9).

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III. ANALYSIS
Defendant contends in his Memorandum of Law in Support, ECF No. 10, that
this action should be (a) removed for lack of personal jurisdiction and/or improper
venue or (b) transferred to the District Court for the Middle District of Georgia under
the first-filed rule or as “in the interest of justice” under a 28 U.S.C. Section 1404(a)
analysis. ECF No. 10 at 1, 7.
Defendant attests that he is a resident of Georgia, owns no property in
Pennsylvania, directed no transaction-related contacts to anyone known to be within
Pennsylvania, and is not otherwise subject to general or specific jurisdiction in
Pennsylvania. ECF No. 10 at 3-4. Defendant errs, however, in that he is subject to
specific personal jurisdiction by his transaction-related actions and express contractual
consent. See Burger King Corp v. Rudzewicz, 471 U.S. 462, 479 (1985); Ins. Corp. of
Ireland, Ltd. v. Compagnie des Bauxites deGuinee, 456 U.S. 694, 703-04 (1982) (holding
that contractual submission to jurisdiction of a given court waives the right to raise
personal jurisdiction as a defense); Sam Mannino Enterprises v. John W. Stone Oil
Distrib., LLC, 26 F. Supp. 3d 482, 485 (W.D. Pa. 2014); ECF No. 13 at 12-14 (providing
thorough and correct recitation of application of the Due Process Clause, Pennsylvania’s
long-arm statute, 42 P.S.A. Section 5322(b), and case law on this point).
Similarly, Defendant attests that venue is improper because the action does not
fall within a subsection of 28 U.S.C. Section 1391(b). Here again, however, Defendant
disregards the express provisions of the executed Agreement. Further, Defendant’s
assertions of fraud in transaction-related representations, the consequences of the
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parties’ conduct on enforceability of the Agreement or entitlement to escrowed funds,
and other allegations/claims - however colorable on the face of the initial pleadings and
exhibits filed in this and other proceedings2 – do not render the Agreement’s provisions
regarding jurisdiction, venue and arbitration a nullity. Cf. Moneygram Payment Sys.,
Inc. v. Consorcio Oriental, S.A., 65 Fed. Appx. 844, 847 (3d Cir. 2003) (noting that forum
selection clause is unenforceable as result of fraud only where assent clause itself, as
opposed to contract as a whole, is product of fraud or coercion) (citing Scherk v.
Alberto–Culver Co., 417 U.S. 506, 519 n. 14, (1974)); ECF No. 10 at 11 (asserting that the
forum section clause does not control because the Agreement “never became effective”
owing to Plaintiff’s failure to formally approve the transaction within the specified
time). To the contrary, the broad arbitration provisions of this Agreement delegate
“disputes or claims” regarding its “enforceability”, as well as those regarding
“interpretation” and “arbitrability”, to arbitration. And as Defendant himself observes,
the “Subject to Confirmation Addendum” (the “Addendum”) requiring the seller’s
approval within fifteen (15) days – and as to which Defendant asserts non-compliance –
“made the transaction ‘subject to and contingent upon’ [compliance with its terms].”
Defendant’s Reply Memorandum of Law in Support of Motion to Dismiss or Transfer,
ECF No. 14 at 2 (emphasis added) ECF No. 13-2 at 10 (Addendum, stating that it
“amends and supplements” the Agreement and specifying that “the transaction [was]

See, e.g., ECF No. 9-2 (Complaint in Georgia Action) at 3-6 (asserting seller’s nondisclosures regarding additional financial obligations by Marriott hotel buyer under a
new Property Improvement Plan within Marriott’s franchise agreement rights).
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subject to, and contingent upon Seller[‘s timely approval]”). Defendant would have this
Court place the proverbial cart before the horse.3
More specifically, even if Defendant is ultimately upheld in his assertions
regarding Plaintiff’s failure to confirm/ratify (e.g., if it is determined that Plaintiff’s
subsequent letters regarding the modified terms of earnest money payment did not
constitute transactional-acceptance by the seller as required under the Addendum), the
Agreement clearly contains provisions intended to have effect. For example, it provides
for the disposition of earnest money in the alternative events of ratification or nonratification. ECF No. 13-1. See also Addendum, ECF No. 13-2 at 10 (containing
provisions for Seller’s approval or disapproval/failure, with the latter resulting in
termination of the Agreement on the specified “Decision Date” and return of Earnest
Money). Pending Defendant’s responsive pleading to the contrary, the effect of the
parties’ conduct - including, e.g., delayed deposit of escrow, post-Agreement
negotiations, and other delayed performance – on ratification and enforceability appear

Plaintiff’s assertions that this Court should rule on its Rule to Show Cause as to
arbitration prior to addressing Plaintiff’s Motion to Dismiss or Transfer also reflect
sequential confusion. The Motions recently addressed by Judge Hardiman in Silfee v.
Automatic Data Processing, Inc., 2017 WL 2544851 (3d Cir., June 13, 2017) - cited by
Plaintiff for the proposition that a District Court errs in ruling on a defendant’s Motion
to Dismiss prior to a pending Motion to Compel Arbitration – are inapposite. The
Motion to Dismiss before the Court in Silfee did not raise challenges to personal
jurisdiction or venue/transfer, and both motions were filed by the same party. In
Silfee¸the Court of Appeals held that the District Court erred in denying defendant’s
Motion to Dismiss on the basis of the merits of the plaintiff’s state law claim, prior to
ruling on its Motion to Compel Arbitration, which presented a “gateway” issue to
Court consideration of “the merits of the claim and any defenses”. ECF No. 13-3, Ex. 2
(Silfee Opinion). Cf. California Action, supra, addressing dismissal on grounds of
personal jurisdiction and not ordering arbitration.
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at this juncture to have been committed to arbitration by clear mutual intent and
consent. See ECF No. 13 at 4 (quoting Agreement provisions on “Arbitration of
Disputes”); see also, e.g., Dodds v. Pulte Home Corp., 909 A.2d 348, 350-51 (Pa. Super.
2006) (holding that fraud claims do not remove a dispute from an otherwise applicable
arbitration clause); Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1,
22-24 (1983) (noting “liberal federal policy favoring arbitration agreements” and
moving litigants “as quickly and easily as possible”). If, on the completion of responsive
pleadings as to Plaintiff’s Petition for Rule to Show Case, the matters proceed to
arbitration, this Court will retain jurisdiction pending the outcome. Should the
arbitrator then determine, e.g., that Defendant’s fraud or any other allegation is not
subject to arbitration as it did not arise out of the Agreement, this Court would have
exclusive jurisdiction as to any remaining issues. Cf., e.g., Medtronic AVE Inc. v. Cordis
Corp., 100 Fed. Ppx. 865, 869 (3d Cir. 2004) (noting “long line of cases [holding] that
arbitrability is ultimately a question for the arbitrator”).
The first-filed rule has been “grounded on equitable principles” and provides
that “in all cases of federal concurrent jurisdiction, the court which first has possession
of the subject matter must decide it.” EEOC v. Univ. of Pa., 850 F.2d 969, 971, 977 (3d
Cir. 1988). As the underlying Agreement provides exclusive jurisdiction, the first-filed
rule is in applicable. Even it were applicable, which the Court expressly finds it is not,
the Court would exercise its discretion to depart from it on the basis of Defendant’s
forum shopping and the mutual intent expressed in the Agreement. Cf. In the Matter
of the Petition of the Home Ins. Co., 908 F.Supp. 180, 182 (S.D.N.Y. 1995) (“[O]nly the
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district court where the arbitration will proceed may order arbitration.”) (cited in
Arentowicz v. Cap Gemini Ernst & Young U.S. LLC, 2004 WL 1834600, at *4 (D.N.J.
July 16, 2004)); ECF No. 13 at 16 (citing preemptive or “forum avoidance” cases).
For reasons explicated above, the Court need not further consider weighing
other private or public factors related to the potential appropriateness of a transfer of
this action to the Middle District of Georgia. Cf. Jumara v. State Farm Ins. Co., 55 F.3d
873, 878 (3d Cir. 1995); Atlantic Marine Const. Co., Inc. v. U.S. Dist. Court for W. Dist.
Tex., 134 S. Ct. 568 (2013).

IV. CONCLUSION
Accordingly, Defendant’s June 5, 2017 Motion to Dismiss or Transfer, ECF No. 9,
will be denied by Order of even date herewith and, by the same Order, Defendant will
be directed to respond to Plaintiff’s Petition for Rule to Show Cause on or before
September 14, 2017.

Dated: August 15, 2017

BY THE COURT:

/s/Lisa Pupo Lenihan
LISA PUPO LENIHAN
United States Magistrate Judge

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