Kapitus Servicing, Inc v. Verma, et al.
Filing
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MEMORANDUM OPINION. Signed by District Judge Roderick C. Young on 12/19/2023. (smej, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF VIRGINIA
Richmond Division
KAPITUS SERVICING, INC.,
Plaintiff,
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v.
VINAY VERMA, et al.,
Defendants.
Civil Action No. 3:23cv295 (RCY)
MEMORANDUM OPINION
This is a breach of contract and fraud case brought by Plaintiff Kapitus Servicing, Inc.,
wherein Plaintiff alleges Defendants Vinay Verma and Shastri Management, Inc., failed to
adequately perform their obligations under a Loan Agreement with non-party Kapitus, LLC. The
case is before the Court on Defendant Verma’s Motion to Dismiss (ECF No. 4). The motion has
been fully briefed, and the Court dispenses with oral argument because the facts and legal
contentions are adequately presented in the materials before the Court, and oral argument would
not aid in the decisional process. E.D. Va. Loc. Civ. R. 7(J). For the reasons stated below, the
Court will deny the Motion to Dismiss.
I. PROCEDURAL HISTORY
Plaintiff Kapitus Servicing, Inc. (“Plaintiff,” or “Kapitus”) filed its Complaint in state court
on September 22, 2022, alleging that the Defendants Shastri Management, Inc. (“Shastri”) and
Vinay Verma (“Verma”) (together, “Defendants”) breached their contract by failing to perform
their obligations under a Loan Agreement. Shastri’s Notice of Removal (“Shastri Not. Removal”)
¶¶ 1–2, ECF No. 5. Defendants both consented to removal of the case to federal court. Shastri
Not. Removal ¶ 9. In turn, the matter was timely removed to the Eastern District of Virginia, but
was filed in the Alexandria Division; the case was then transferred to the Richmond Division. See
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Shastri Not. Removal ¶ 12; Order, ECF No. 6. On March 17, 2023, Verma filed a pro se Motion
to Dismiss under Federal Rule of Civil Procedure 12(b)(3), alleging improper venue. Verma Mot.
Dismiss 1, ECF No. 4. Shastri filed a Response to the Motion to Dismiss on June 21, 2023,
supporting Verma’s attempt to have the case dismissed. Shastri’s Resp. Mot. Dismiss 1–2, ECF
No. 10. Plaintiff filed its Response in Opposition to Defendant’s Motion to Dismiss on June 22,
2023. ECF No. 13. Defendant Verma filed a Response to the Plaintiff’s Opposition to Dismiss
on July 5, 2023, which the Court considers her Reply. ECF No. 14.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(3) allows a party to move to dismiss a case for
“improper venue.” Fed. R. Civ. P. 12(b)(3). Rule 12(b)(3) is the “proper mechanism for
defendants seeking to raise an objection to improper venue” under 28 U.S.C. §1406(a).
Symbology Innovations, LLC v. Lego Sys., Inc., 282 F. Supp. 3d 916, 924 (E.D. Va. 2017) (citing
W. Va. Chamber of Commerce v. Browner, 166 F.3d 336, 1998 WL 827315, at *4 n.6 (4th Cir.
1998)). Title 28 U.S.C. § 1406 provides that “[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 deciding whether to transfer or dismiss, “district courts
generally favor transfer over dismissal, unless there is evidence that a case was brought in an
improper venue in bad faith or to harass defendants.” Conte v. Virginia, No. 3:19CV575, 2020
WL 3883251, at *4 (E.D. Va. July 9, 2020) (quoting Symbology Innovations, 282 F. Supp. 3d at
935).
In the Fourth Circuit, when facing an improper venue challenge under Rule 12(b)(3) and
28 U.S.C. § 1406, the “plaintiff bears the burden of establishing that venue is proper.” Symbology
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Innovations, 282 F. Supp. 3d at 925 (aggregating cases); Adhikari v. KBR, Inc., No. 1:15cv1248,
2016 WL 4162012, at *3 (E.D. Va. Aug. 4, 2016). To survive an allegation of “improper venue
when no evidentiary hearing is held, the plaintiff need only make a prima facie showing of venue.”
Mitrano v. Hawes, 377 F.3d 402, 405 (4th Cir. 2004). On such a motion, the Court is “permitted
to consider evidence outside the pleadings.” Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355, 366
(4th Cir. 2012). In determining whether the plaintiff has made a prima facie showing, courts “view
the facts in the light most favorable to the plaintiff.” Id. at 356–66.
III. FACTUAL BACKGROUND
On July 20, 2022, Kapitus LLC entered a Loan Agreement with Shastri and Verma. Shastri
Not. Removal, Ex. 2 at 12–18 (hereinafter, “Loan Agreement”), ECF No. 5-2. 1 Per the Loan
Agreement, Kapitus LLC was the “Lender,” Shastri was the “Borrower,” and Verma was the
“Guarantor.” Loan Agreement 1. Plaintiff Kapitus Servicing, Inc. (“Plaintiff,” or “Kapitus”) was
identified as the “Servicer.” Shastri Not. Removal, Ex. 2 at 9–11 (hereinafter, “Loan Summary”),
ECF No. 5-2. Other than the material terms of the loan itself, there are two portions of the Loan
Summary and Agreement that are particularly relevant for present purposes. First, as indicated in
the Loan Summary, “[Kapitus LLC], as Agent, may perform any and all of its duties and exercise
its rights and powers by or through any . . . sub-agents.” Loan Summary 3. The Loan Summary
continues:
“Kapitus Servicing is the Authorized Sub-Servicing Agent and the General Agent
of the Lender. Kapitus Servicing will . . . initiate any necessary collection actions
in the event of any default under the Transaction Documents, initiate and defend
legal actions related to the Transaction Documents . . . . Any and all authorizations
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Exhibit 2 to Shastri’s Notice of Removal is comprised of Plaintiff’s Complaint and its accompanying
attachments. See generally Shastri Not. Removal Ex. 2, ECF No. 5-2. Two of these attachments are the “Loan
Summary” on pages 9–11, as well as the “Loan Agreement” itself, on pages 12–18. These documents will be
referenced throughout and cited according to their internal page and/or paragraph numbers, rather than according to
the page numbering assigned by CM/ECF.
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and/or rights granted to Lender under the Transaction Documents are granted to
Kapitus Servicing, as servicer and general agent of the Lender.
Id. Inserting the relevant parties and documents into the language above, the Loan Agreement
therefore permits Kapitus LLC to assign and/or exercise its rights and powers under the agreement
through any agents. See generally id. at 1–3. In turn, Plaintiff was identified as one such agent.
See id.
The next relevant portion of the Loan Agreement comes in paragraph 1.17 of the
Agreement itself. Paragraph 1.17 is entitled “Consent to Jurisdiction and Venue,” and reads:
Borrower and Guarantor agree that any suit, action or proceeding to enforce or
arising out of the Transaction Documents shall be brought in any court in the
Commonwealth of Virginia or in the United States District Court for the Eastern
District of Virginia (the “Acceptable Forums”). Borrower and Guarantor agree that
the Acceptable Forums are convenient to them, submit to the jurisdiction of the
Acceptable Forums and waive any and all objections to jurisdiction or venue.
Loan Agreement 2. Once again inserting the relevant parties and documents into the language
above, this paragraph indicates that Shastri and Verma agreed that any Virginia state court, or any
court in the United States District Court for the Eastern District of Virginia, would be proper
forums for suits arising out of the Loan Agreement. See id. This paragraph also indicates that the
parties (1) agreed that such forums would be convenient, and (2) waived any potential objections
to venue. See id.
On July 25, 2022, Plaintiff fulfilled its obligations under the Loan Agreement by advancing
the specified amount to Defendants. Compl. ¶ 12, ECF No. 5-2. To date, neither Defendant has
successfully made any payment to Plaintiff under the Loan Agreement. Id. at ¶¶ 13–14. Pursuant
to the acceleration clause of the Loan Agreement, Plaintiff therefore initiated this action primarily
to accelerate all unpaid amounts and fees of the loan. Id. at ¶¶ 16–21.
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IV. DISCUSSION
Defendant Verma argues that venue is improper in the Eastern District of Virginia because
“the Plaintiff filed the civil action in a Virginia Court, and the defendant is a citizen of Maryland.”
Mot. Dismiss 1. Defendant Shastri supports Verma’s venue argument, contending that “[Plaintiff]
relies on difficult to read language in its paperwork” to establish venue in Virginia. Shastri’s Resp.
Mot. Dismiss 1. In response, Plaintiff first notes that it was in fact Defendants who removed this
matter to the Eastern District of Virginia in the first place, thus waiving any venue objection. Pl.’s
Resp. Mot. Dismiss (“Pl.’s Opp’n”) 1, ECF No. 13. Alternatively, Plaintiff argues that the Loan
Agreement at the center of the dispute lays venue in any court in the Commonwealth of Virginia,
including the United States District Court for the Eastern District of Virginia. Id. at 2. Finding
that the forum selection clause in the Loan Agreement is enforceable, the Court agrees with
Plaintiff that venue is indeed proper in the Richmond Division of the Eastern District of Virginia.
Federal courts interpreting forum selections clauses must apply federal law in doing so.
Albemarle Corp. v. AstraZeneca UK Ltd, 628 F.3d 643, 650 (4th Cir. 2010). Such is the case even
when federal courts are sitting in diversity. See id.; accord Wong v. PartyGaming Ltd., 589 F.3d
821, 828 (6th Cir. 2009) (“We therefore hold that in this diversity suit, the enforceability of the
forum selection clause is governed by federal law”); Manetti-Farrow, Inc. v. Gucci Am., Inc, 858
F.2d 509 (9th Cir. 1988) (“[F]ederal rules . . . control enforcement of forum [selection] clauses in
diversity cases . . . [and] because enforcement of a forum [selection] clause necessarily entails
interpretation of the clause before it can be enforced, federal law also applies to interpretation of
forum selection clause”). This is because forum selection clauses are “agreement[s] to modify or
waive the venue of a federal court . . . [and therefore] implicate[] . . . a procedural matter governed
by federal law—the proper venue of the court.” Albermarle, 628 F.3d at 650. In turn, federal
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courts presumptively favor enforcement of forum selection clauses, so long as they are not
unreasonable. See id. at 649, 651.
Turning to the facts of this case, the Court has no issue finding that the forum selection
clause at issue is reasonable and enforceable. The forum selection clause reads as follows, with
the names of the relevant parties inserted into the contract language:
[Shastri] and [Verma] agree that any suit, action or proceeding to enforce or arising
out of the [Loan Agreement] shall be brought in any court in the Commonwealth
of Virginia or in the United States District Court for the Eastern District of Virginia
(the “Acceptable Forums”). [Shastri] and [Verma] agree that the Acceptable
Forums are convenient to them, submit to the jurisdiction of the Acceptable Forums
and waive any and all objections to jurisdiction or venue.
Loan Agreement ¶ 1.17 (emphasis added). This paragraph appears on the second page of the
executed Loan Agreement, and is entitled “Consent to Jurisdiction and Venue.” Id. The language
in this paragraph clearly establishes that (1) venue is proper in the United States District Court for
the Eastern District of Virginia and (2) Defendants waived any objections to venue. The Court
will therefore give effect to the parties’ selection of the relevant forum unless it would be
unreasonable to do so.
Under controlling precedent, a forum selection clause may be found unreasonable if: (1)
its formation was induced by fraud or overreaching; (2) the complaining party will be practically
be deprived of her day in court because of the sheer inconvenience or unfairness of the selected
forum; (3) the fundamental unfairness of the chosen law may deprive that party of a remedy; or
(4) the enforcement of the clause would contravene a strong public policy of the forum state. See
Albemarle Corp., 628 F.3d at 651 (quoting Allen v. Lloyd’s of London, 94 F.3d 923, 928 (4th Cir.
1996)). Neither Verma nor Shastri argue that any of these “unreasonableness” factors apply, and
for good reason—there is no evidence to support any such argument.
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There are no indications of fraud or overreaching in the formation of the Loan Agreement.
See Int’l Specialty Servs. v. Willis Ins. Servs. Ga. Inc., 515 F. Supp. 3d 374, 381 (D.S.C. 2021)
(suggesting that where an agreement is freely negotiated and there is no extreme disparity in
bargaining power or evidence of undue influence, this unreasonableness factor will be
inapplicable). No parties risk being deprived of their day in court because there is nothing
fundamentally unfair about having proceedings in a nearby state and district in which Defendants
voluntarily agreed to appear beforehand. 2 And finally, Defendants have made no showing of either
significant public policy concerns or fundamental unfairness in the applicable law that would
render the instant forum selection clause unreasonable. See Grant v. State Nat’l Ins. Co., 586 F.
Supp. 3d 503, 511 (D.S.C. 2022) (noting that (1) the parties challenging venue or the applicability
of a forum selection clause bear the burden of establishing its unreasonableness, and (2) the law
merely being less favorable in one state does not rise to the level of fundamental unfairness
required to render a forum selection clause unreasonable).
Rather than attacking the forum selection clause as unreasonable, Verma and Shastri
instead combine to raise two 3 main arguments in support of the Motion to Dismiss. Verma, on the
one hand, cites 28 U.S.C. § 1391(b)(1) to argue that venue is improper in the Eastern District of
Virginia because Verma is a citizen of Maryland. Mot. Dismiss 1. Shastri, on the other hand,
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Additionally, Verma and Shastri are citizens of Maryland—a state that borders Virginia. See Shastri Not.
Removal ¶ 4. It would betray common sense to suggest that being required to travel to a bordering state for litigation
is fundamentally unfair, particularly when a party agreed in advance to do just that.
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Verma raises some additional venue arguments in her Reply, all of which generally assert that Plaintiff is a
third-party with no standing to enforce the Loan Agreement. See Reply 1–4. Such arguments are plainly belied by
the Loan Summary, which states that “[Kapitus LLC] . . . may perform any and all of its duties and exercise its rights
and powers by or through any . . . sub-agents. [Plaintiff] is the Authorized Sub-Servicing Agent and the General
Agent of [Kapitus LLC]. [Plaintiff] will . . . initiate and defend legal actions related to the [Loan Agreement], and
provide legal support and collection services to [Kapitus LLC]. Any and all authorizations and/or rights granted to
Lender under the [Loan Agreement] are granted to [Plaintiff], as servicer and general agent of [Kapitus LLC].” Loan
Summary 3. Pursuant to this language, Plaintiff clearly holds the right to initiate legal actions—such as this—to
enforce the Loan Agreement. All of Verma’s arguments to the contrary must therefore fail.
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contends that Plaintiff “relies on difficult to read language in its paperwork as to the subject loan”
to establish venue in Virginia, when venue is instead appropriate in Maryland. Neither argument
is a winning one.
As to Verma’s argument, she is indeed correct that § 1391(b)(1) renders venue proper in a
judicial district in which any defendant resides, if all defendants are residents of the state
encompassing said district. 28 U.S.C. § 1391(b)(1). However, merely failing to satisfy §
1391(b)(1) does not render venue improper, as it is not the only subsection of that statutory
provision. See § 1391(b). Indeed, § 1391(b)(2)—which would likely apply here, but for the forum
selection clause—renders venue proper in any “judicial district in which a substantial part of the
events or omissions giving rise to the claim occurred, or a substantial part of the property that is
the subject of the action is situated.” 28 U.S.C. § 1391(b)(2). Here, both Plaintiff and the Lender,
Kapitus, LLC (which permissibly assigned its enforcement rights in the Loan Agreement to
Plaintiff), are located in Virginia. Loan Summary 1–3. Additionally, as Plaintiff notes, the Lender
makes all final credit decisions from its office in Virginia, the loan itself was made in Virginia,
and payments are not accepted until received by the Lender in Virginia. Pl.’s Opp’n 2. In short,
even if there were no forum selection clause to control here, it is likely that a sufficient portion of
the events happened in this district, so as to render venue proper here.
Turning to Shastri’s argument, it simply is not the case that the forum selection clause
language is “difficult to read.” Instead, the clause clearly outlines that any court in Virginia,
including any court within the Eastern District of Virginia, is a proper forum. And in any event,
“ease of reading” is not one of the factors considered in the unreasonableness inquiry outlined
above. See Albemarle Corp., 628 F.3d at 651 (quoting Allen v. Lloyd’s of London, 94 F.3d 923,
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928 (4th Cir. 1996)).
Absent a more severe showing of fraud, overreaching, fundamental
unfairness, or compelling public policy rationale, Shastri’s argument must likewise fail.
V. CONCLUSION
For the reasons detailed above, Defendant’s Motion to Dismiss (ECF No. 4) will be denied.
An appropriate Order shall issue.
/s//
Roderick C. Young
ungg
United States District Judge
Richmond, Virginia
Date: December 19, 2023
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