Doubletree Partners LP v. Title Company et al

Filing 30

MEMORANDUM OPINION AND ORDER Granting Motion to Transfer Case Out of District. This case is tranferred to the Sherman Division of the Eastern District of Texas. Signed by Magistrate Judge Jeff Kaplan on 12/3/2008. (pad, )

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IN THE UNITED STATESDISTRICTCOURT N O R T H E R NDISTRICTOF TEXAS D A L L A S DIVISION L.P. PARTNERS. DOUBLETREE Plaintiff,
VS. LAND AMERICA AMERICAN T I T L E COMPANY. ET AL. Defendants.

$ $ $ $ $ $ $ $ $ $

NO.3-08-CV-rs47-O

M E M O R A N D U M OPINION AND ORDER
)l

have filed a motion to transferthis civil action to the ShermanDivision of the Defendants EasternDistrict of Texas. For the reasonsstatedherein, the motion is granted. I. policy issuedby DefendantLawyersTitle T h i s coveragedisputeinvolves a title insurance I n s u r a n c e Corporation ("Lawyers Title"), part of the LandAmerica family of underwriters ( " L a n d A m e r i c a " ) , to Plaintiff DoubletreePartners,L.P. ("Doubletree"). In April 2006, plaintiff land in DentonCounty,Texas,for $3.45million. purchased 36 approximately acresof undeveloped (See Not. of Removal,Exh. B, Attch. B at0l7-27; Def. App., Exh. I at 010-18). The propertywas c o n v e y e d by wananty deed subject to 11 permitted exceptionsto title, including nine specific Lawyers Title issued a e a s e m e n t s . (Def. App., Exh. 1 at 017-18). According to defendants, c o m m i t m e n t for title insuranceto plaintiff prior to closing on the property. The commitment of r e f l e c t e dthe terms on which a policy would be issuedand includeda schedule exceptionsfrom fees,and B, coverage, Schedule speciffing that the title policy would not coverloss,costs,attorney's on expenses resulting from certainencumbrances the property,including the nine specific easements

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referenced the warranty deed. (1d.,Exh. I at 003-04,I6; id,, Exh. I at 033-5I ). However,when in L a w y e r s Title issuedthe title policy in April 2006, none of the permittedexceptionslisted on the B. d e e dor commitmentwere includedin Schedule (SeeNot. of Removal,Exh. B, Attch. C at02737). Nor were the permitted exceptionsto title containedin a replacementpolicy issuedby Lawyers T i t l e in October2006. (SeeDef. App., Exh. I at004,fl 8). It was not until November2007,when plaintiff refinancedthe property and purchaseda mortgageepolicy for the benefit of the lender,that policy. (SeeNot. B on L a w y e r sTitle includedthe permittedexceptions Schedule to the mortgagee o f Removal,Exh. B, Attch. C at039-49). On March 6, 2008, plaintiff, through its attorney,wrote to LandAmerica claiming more than that by for $ 8 5 0 , 0 0 0in damages diminishedvalueto the insuredpropertycaused the encumbrances policy. (Def. App., B w e r e omitted from Schedule on the original title policy and the replacement E x h . I at 053-55). LandAmerica respondedto the demand letter on April 29,2008. While was issuedwith an incomplete policy in plaintiffs possession a c k n o w l e d g i n gthat the replacement those sameexceptionswere part of ScheduleB attachment,LandAmerica deniedthe claim because t h e commitmentallegedlyissuedprior to closing. (ld. ,Exh. I at 057-62). In a letter datedMay 23, 2 0 0 8 , counsel for plaintiff asked LandAmerica to reconsiderits position "in order to avoid l i t i g a t i o n . " (Not. of Removal, Exh. B, Attch. I at l). LandAmerica denied the request for

r e c o n s i d e r a t i o n June25,2008. (Id.,Exh. B, Attch. J). It also issueda correctedreplacement on p o l i c y that containedthe missing Schedule exceptions.(Def. App., Exh. I at006, tTl2). B judgment action againstplaintiff in the O n July l, 2008, LawyersTitle filed a declaratory S h e r m a nDivision of the EasternDistrict of Texas("the Shermanlitigation"), asking the court to d e t e r m i n ethe respectiverights and obligationsof the parties under the original title policy, the policy. (Id.,Exh. 1 at 006-07,'l]fll3- l7). After replacement r e p l a c e m e npolicy, and the corrected t

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it was served with process in the Sherman litigation, plaintiff sued Lawyers Title, various LandAmerica entities, and Cathy McMullen, a LandAmerica escrowofficer, in Texasstatecourt for breachof contract,negligence,fraud, breachof fiduciary duty, and violations ofthe TexasInsurance Code and the Texas Deceptive Trade PracticesAct. Defendantstimely removed the caseto Dallas District of Texas.rPlaintiff, who f e d e r a lcourt and filed a motion to transferthe actionto the Eastern h a sfiled a motion to remandthe caseto statecourt and a motion for leaveto join an additionalparty, opposes transfer. The venue motion has been fully briefed by the parties and is ripe for determination. II. Defendantsarguethat this caseshould be transferredunder the "first-to-fi1e" rule or, in the the a l t e m a t i v e ,because facts giving rise to the disputeoccurred in the EasternDistrict of Texas. Plaintiff countersthat the court cannot even consider the motion to transfer before it rules on the jurisdictional issuespresentedin its motion to remand. The court first addresses order in which the t h e motions must be decided. A. "While it is true that courts generally consider subject matterjurisdiction as a preliminary matter, as other federal district courts have recognized,federal courts need not decide a motion to remand a removed casebefore ruling on a motion to transfer to anotherdistrict." Huntsman Corp. 2008WL 1836384 at*3 (E.D.Tex. Apr.22,2008), Ins. Co.,No. 1:08-CV-029, v . InternationalRisk at WL 31844906 *2 n.I (E.D. La. Dec. q u o t i n gStewartv. May Dep't StoreCo.,No. 02-2772,2002
I Defendantsallege that federal subject matterjurisdiction is proper because parties are citizens ofdifferent states the exceeds a n d the amountin controversy $75,000,exclusiveof interestand costs. See28 U.S.C. $ 1332(a)(l), Although plaintiff, a Texas limited partnership,and DefendantCathy McMullen, a residentof Texas, are nominally citizens of the defendants contendthat McMullen wasimproperlyjoinedby plaintiffin orderto defeatdiversityjurisdiction. s a m estate, P l a i n t i f f denies any improperjoinder and seeksto remandthe caseto statecourt. Alternatively, plaintiff has filed a who resides Texas,asan additionaldefendant. in employee anotherLandAmerica m o t i o n forleavetojoin Sally Sherman,

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12,2002). Seealso Burse v. Purdue Pharma Co., Nos. C-04-594-SC& C-04-713-SC,2004 WL 1 1 2 5 0 5 5 *2 (N.D. Cal. May 3,2004);Gouldv. NationalLife Ins. Co.,990 F.Supp.1354,1362 at ( M . D . Ala. 1998). Deciding a motion to transfervenuebeforea motion to remand"is particularly appropriate . . . where a related suit is alreadypending in the transfereedistrict, the remand motion will not suffer any prejudice as a result of the transfer,and transfer at this juncture permits the court w h o would ultimately try the caseto rule on the remandmotion." Huntsman,2008WL 1836384at * 3 , quoting Stewart,2002 WL 31844906at *2 n.1. Under the circumstances presented here,the c o u r t electsto decidethe venuemotion beforethe remandmotion. B. Defendants contend that the "most significant fact strongly favoring transfer" is the prior judgment actionpendingin the Sherman District of Texas. (,See Division of the Eastern declaratory D e f . Mot. at 4). "Under the first-to-file rule, when relatedcasesare pending before two federal courts,the court in which the casewas last filed may refuseto hearit if the issuesraisedby the cases overlap." Cadle Co. v. Wataburger of Alice, Inc.,174 F.3d 599, 603 (5th Cir.1999) substantially judicial administration.Id. "The ( c i t i n g cases).The rule is basedon principlesof comity and sound c o n c e r nmanifestlyis to avoid the wasteof duplication,to avoid rulings which may trenchupon the resolutionof issues that call for a uniform result." a u t h o r i t yof sistercourts,and to avoid piecemeal 1985). Id.,quotingWestGulfMaritimeAss'nv.ILADeepSeaLocal24,75lF.2d,72l,729(5thCir. in P l a i n t i f f doesnot disputethat the issues this caseand the issuesin the Shermanlitigation plaintiff arguesthat the court should exerciseits discretion " s u b s t a n t i a l l yoverlap." Nevertheless, to hear the casebecausedefendantsengagedin improper forum shopping by filing a declaratory j u d g m e n t actionin anticipationofthe instantlawsuit. Onerecognized exceptionto the "first-to-fiIe" actionin anticipationof litigation by its adversary. r u l e is when apartybringsa declaratoryjudgment

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See Paragon Industries,L.P. v. Denver Glass Machinery,lnc., No. 3-07CY2183-M, 2008 WL 3 8 9 0 4 9 5at *4 (N.D. Tex. Aug. 22,2008). In suchcases, applicationof the "first-to-fi1e"rule may "deprive a potential plaintiff of his choice of forum" and "create disincentives to responsible [d.,2008WL3890495at*4,quoting litigationbyrewardingthewinnerofaracetothecourthouse." F r a n k ' s Tong Serv.,Inc. v. Grey Wolf Drilling Co., L.P., No. H-07-637,2007 WL 5186798 at*4 judgment action in a federal ( S . D . Tex. Sept. 11,2007). However, "[m]erely filing a declaratory c o u r t with jurisdiction to hear it . . . is not in itself improper anticipatorylitigation or otherwise Co. a b u s i v eforum shopping."TheSherwin-Williams v. HolmesCounty,343F.3d 383, 391 (5th Cir. judgment action in 2 0 0 3 ) (internal quotationsomitted). In deciding whethera relateddeclaratory anothervenueis an improper anticipatory suit for purposesof the "first-to-fi1e" rule, the court should in c o n s i d e r ,inter alia, whether "aparty engaged bad faith conduct,by inducing an opposingparty t o delay filing of a lawsuit, so that he could file a preemptivelawsuit." Chapa v. Mitchell,No. WL 2978396 *2 (W.D. Tex. Nov. 4, 2005),citing AmeradaPetroleum at A-05-CV-769-JN,2005 C o r p . v. Marshall,381 F.2d661,663 (5th Cir.1967). H e r e ,there is no allegation,much lessproof, of bad faith or impropermotive on the part of defendantsin filing a declaratoryjudgment action in the EasternDistrict of Texas. To the contrary, defendants waited more than five weeks after counsel for plaintiff threatenedlitigation before seekingdeclaratoryrelief. Nor is there any indication that defendantsused settlementnegotiations a s a ruse to induceplaintiff to delay the filing of its lawsuit. Cf, Chapa,2005 WL 2978396 at*2 plaintiff led defendants believe to ( d e c l i n i n gto apply "first-to-fiIe" rule wheredeclaratoryjudgment that he was committed to resolving dispute out of court); GemmyIndustries Corp. v. Blue Ridge Tex. Feb. 1,1999) (samewhere 1999WL 58785at *2 Q.{.D. D e s i g n s , f i z c .No. 3-99-CV-0008-G, , with requestto cease-and-desist plaintiff openly encouraged defendantto believe it would cooperate

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judgmentaction).Withoutevidence support recognized preparing while secretly declaratory to any to be to e x c e p t i o n the"first-to-fi1e" thecourtdetermines thisactionshould transferred the that rule, Districtof Texas.2 Sherman Divisionof the Eastern C. rule. is under U.S.C. 28 not E v e nifthe courtdoes followthe"first-to-fi1e" transfer warranted Underthatstatute: $ 1a0a(a).
in F o r the convenience partiesandwitnesses, the interestofjustice, of a district court may transfer any civil action to any other district or division where it might have beenbrought. 28 The general venuestatute, U.S.C. $ 1391,allows a plaintiff to bring suit 2 8 U.S.C. $ 1aOa(a). a g a i n s t a corporatedefendant"in any district in [a] State within which its contactswould be jurisdiction if that district were a separate State." s u f f r c i e n tto subject[the defendant]to personal often "hasthe effect of nearlyeliminatingvenue I d . g 1391(c). Noting that the generalvenuestatute restrictions in suits againstcorporations,"the Fifth Circuit has statedthat "[t]he underlying premise o f $ 1404(a)is that courts should preventplaintiffs from abusingtheir privilege under $ l39l by s u b j e c t i n g defendantsto venues that are inconvenient under the terms of $ 1404(a)." In re of V o l l r s w a g e n America,Inc., 545 F.3d 304,313 (5th Cir. 2008) (en banc). In ruling on a motion to t r a n s f e rvenue,the court first must determinewhetherthe plaintiffs claim could have beenfiled in the judicial district to which transfer is sought. Id. at 312. If venue is proper in the transferee must show "good cause"for the transfer. Id. at 315. To show "good cause," d i s t r i c t , the defendant that a transfer is "lflor the defendantmust satisff the statutoryrequirementsand clearly demonstrate

2 To the extent plaintiff arguesthat the declaratoryjudgment action should be dismissedfor lack of subject matter parties,or for any other reason,(seePlf. Resp.Br. j u r i s d i c t i o n , for failure to statea claim, for failure to join necessary at 6-7), that determination must be made by the presidingjudge in that case. See Granite State Ins. Co. v. Tandy Corp., 9 8 6 F . 2 d 9 4 , 9 6 ( 5 t h C i r . l 9 9 2 ) ; KineticConcepts,Inc.v.ConneticsCorp.,No.SA-04-CA-0237-XR,2004WL2026812 a t *3 (W.D. Tex. Sept.8,2004).

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the convenienceof partiesand witnesses,in the interestofjustice." Id. lf the defendantcannotmeet this burden, the plaintiffs choice of forum should be respected. Id.; see also I Santi, Inc. v. Great at A m e r i c a nIns. Co. of New York,No.08-895,2008WL 4809432 *l (E.D. La. Oct.31,2008). I n deciding a transfermotion, the court must considervarious private and public interest F.3d at 315. The private interestfactorsare: (l) the relative ease f a c t o r s . In re Voll<swegen,545 of to the of o f access sources proof; (2) the availability of compulsoryprocess secure attendance to witnesses;(3) the cost of attendancefor willing witnesses;and (4) all other practical problems that m a k e a trial easy, expeditious,and inexpensive. Id.; see also Von Graffenreid v. Craig,246 F . S u p p . 2 d553, 562 (N.D. Tex. 2003) (citing cases). The public interestfactors are: (l) the (2) a d m i n i s t r a t i v edifficulties flowing from court congestion; the local interestin having localized disputesresolved at home; (3) the familiarity of the forum with the law that governsthe action; and problemsof conflict of laws or in the applicationof foreign law. ( 4 ) the avoidanceof unnecessary .2d F.3d at 315; Von Graffenreid,246F.Supp at 562. While thesefactorsare I n re Voll<swagen,545 a p p r o p r i a t e for most transfer cases,they are not necessarilyexhaustive or exclusive. In re 545 V o l l < s w a g e n , F.3d at 3 15. Moreover,no single factor is entitledto dispositiveweight. 1d. Most of the relevant factors either are neutral or weigh in favor of transferring this case. N e i t h e r parfy disputesthat plaintiff could have filed this action in the EasternDistrict of Texas. part ofthe operativefactsgiving riseto plaintiffs claims,includingthe location I n d e e d ,a substantial of the property that is the subject of the title policy made the basis of this suit, are linked to that d i s t r i c t . The distancebetweenthe federal courthousesin Dallas and Plano, where the Sherman l i t i g a t i o n is pending,is less than25 miles. (SeeDef. App. at 262). Therefore,the relative easeof of a c c e s sto sourcesof proof, the availability of compulsory processto securethe attendance the will be substantially samewhether for witnesses, and the cost of attendance willing witnesses

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this caseremains in the Northern District of Texasor is transferredto the EasternDistrict of Texas. S i m i l a r l y , thereareno public interestconcerns that weigh against transfer.If anything,the localized nature of this dispute,involving property situatedin the EasternDistrict of Texas,favors transfer to that district. In its response,plaintiff offers only two reasonswhy this case should not be transferred. District of Texaswould deprivethe F i r s t , plaintiff arguesthat transfeningthis actionto the Eastern " t r u e plaintiff' of its chosenforum. (SeePlf. Resp.Br. at 7-8). Although a plaintiffs choice of forum is entitled to substantial weight, that factor has "reduced significance where most of the No. o p e r a t i v efacts occurredoutsidethe district." Baxq Corp. v. ForHealth Techs.,1nc., 3-05-CV2 2 7 4 - D , 2 0 0 6 WL 680503at *2 Q.{.D.Tex. Mar. 15,2006),quoting Minka Lighting, Inc. v. Trans at WL G l o b eImps.,Izc.,No. 3-02-CV-2538-G,2003 21251684 *1 (N.D. Tex. May 23,2003). See F.3d at 314-15. Not only is the subjectpropertylocatedin the Eastern a l s o In re Vollcswagen,545 District of Texas, but the underlying transactionclosed in that district. The title policy at issuewas p u r c h a s e das part of the closing. (See Def. App., Exh. 6 at 236). Plaintiff also points to the because mediantime from filing to the p o s s i b i l i t y of delay and prejudiceif the caseis transferred d i s p o s i t i o n in the EasternDistrict of Texas is 2.2 months longer than in the Northern District of a T e x a s . (SeePlf. Resp.Br. at 9). Even if true,this represents de minimusdelay. More significant is the fact that both casesare in the preliminary stages. Neither caseis set for trial. The presiding j u d g e in the Shermanlitigation has ordereda meetingof counselby December15,2008, and the is s u b m i s s i o nof a joint statusreport by December22,2008. A Rule l6 schedulingconference set that f o r January7,2009. This suggests the instantcasewill proceedexpeditiouslyupon transferto t h e EasternDistrict of Texas.

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that the convenienceof The court recognizesthat defendantshave not clearly demonstrated the parties and witnesses, a factor given paramount consideration by the Fifth Circuit in In re Voll<swagenfavors transfer. However, section 1404(a),by its terms, also allows a district court to , t r a n s f e ra case"in the interestofjustice." 28 U,S.C. $ la0a(a). Although the letter of the statute m i g h t suggestotherwise, "it is well established that the interestof justice is a factor . . . to be c o n s i d e r e d its orvn, and is an extremelyimportantone." l5 C. Wright, A. Miller & E. Cooper, on F e o e R A r - P R A C T I C E A N D P n o c E p U R B at246 (3ded. 2007). Seeslso Coffeyv. Vsn Dorn lron $ 3854 l 4 / o r \ r s , 7 9 6 F . 2 d 2 1 7 , 2 2 0 - 2 1 ( 7 t h C i1986)("interestofjustice"isaseparatecomponentofsection r. Freemanv. Hoffmann-LaRoche,Inc.,No. 06-CIV-13497(RMBXRLE), l a \ a @ ) transferanalysis); Inc.,No. 3-02-CVIsbell v. DM Records, 2 0 0 7 WL895282 at *3 (S.D.N.Y. Mar. 21,2007) (same); 1 4 0 8 - G , 2004 WL 1243153at *15 (N.D. Tex. Jun. 4,2004) (same). Transferis particularly where,as here,a relatedcaseinvolving the sameor similar issuesis pendingin another appropriate c o u r t . See DataTreasury Corp. v. First Data Corp., 243 F.Supp.2d 591, 594 (N.D. Tex. 2003) ( c i t i n g cases).InContinentalGrain Co. v. BargeFBL-585,364U.S. 19, 80 S.Ct. 1470,4L.Ed.zd Court observed: 1 5 4 0(1960),the Supreme involving preciselythe same T o permit a situationin which two cases issuesare simultaneouslypending in different District Courts leads of t o the wastefulness time, energyand money that $ 1404(a)was d e s i g n e dto prevent.Moreover, such a situation is conductiveto a race of diligence among litigants for a trial in the District Court each prefers. includingthe Fifth Circuit,have Grain,a numberof courts, l d . , 8 0 S.Ct.at 1474. SinceContinental court is a factor that weighs strongly in h e l d that the existenceof related litigation in a transferee f a v o r of transfer. Jarvis Christian Collegev. Exxon Corp.,845 F.2d 523, 528-29(5th Cir. 1988); at F.3d 1341(Table),1999WL 507359 *2 (Fed.Cir. Jun.25,1999); s e ealsoInre Medrad,Lnc.,215

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Coffty,796F.2daI221. Where relatedlitigation is pendingin the transferee court, the "interestof justice" may dictate transfer notwithstanding any inconvenienceto the parties and witnesses. See, PoseidonOil Pipeline Co. v. Noble at e . g . DataTreosuryCorp.,243 F.Supp.2d 594 (citing cases); D r i l l i n g (U S ) 1nc.,No. 06-5753,2007WL 1259219at*l-2 (E.D. La. Apr.26,2007) (transfening relatedcases basedon pendencyofearlier action eventhough otherprivate andpublic interestfactors d i d not weigh in favor of transfer). In this case,the "interestof justice," standingalone, favors requires a different result. transfer to the EasternDistrict of Texas. Nothing in In re Volleswagen CONCLUSION actionpendingin the EastemDistrict of Texas, I n light ofthe first-filed declaratoryjudgment and becausea substantialpart of the operative facts giving rise to plaintiffs claims, including the l o c a t i o n of the propertythat is the subjectof the title policy madethe basisof this suit, are linked to that district, the court determinesthat transfer is appropriate. Accordingly, defendants'motion to Division of the to t r a n s f e rvenue[Doc. # 3] is granted.This caseis herebytransferred the Sherman to District of Texaspursuant 28 U.S.C.$ la0a(a). Eastern

S O ORDERED. 3. D A T E D : December 2008.

S ' I ' A T E SMACISTRATE JUDGE