Doubletree Partners LP v. Title Company et al, No. 4:2008cv00485 - Document 30 (E.D. Tex. 2008)
Court Description: 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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Case 3:08-cv-01547-O Document 28 Filed 12/03/2008 Page 1 of 10 IN THE UNITED STATESDISTRICTCOURT NORTHERNDISTRICTOF TEXAS DALLAS DIVISION L.P. PARTNERS. DOUBLETREE Plaintiff, VS. LAND AMERICA AMERICAN TITLE COMPANY. ET AL. Defendants. $ $ $ $ $ $ $ $ $ $ NO.3-08-CV-rs47-O MEMORANDUM 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 This coveragedisputeinvolves a title insurance Insurance Corporation ("Lawyers Title"), part of the LandAmerica family of underwriters ("LandAmerica"), 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 conveyed by wananty deed subject to 11 permitted exceptionsto title, including nine specific Lawyers Title issued a easements. (Def. App., Exh. 1 at 017-18). According to defendants, commitment for title insuranceto plaintiff prior to closing on the property. The commitment of reflectedthe 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 Case 3:08-cv-01547-O Document 28 Filed 12/03/2008 Page 2 of 10 referenced the warranty deed. (1d.,Exh. I at 003-04,I6; id,, Exh. I at 033-5I ). However,when in Lawyers Title issuedthe title policy in April 2006, none of the permittedexceptionslisted on the B. deedor commitmentwere includedin Schedule (SeeNot. of Removal,Exh. B, Attch. C at02737). Nor were the permitted exceptionsto title containedin a replacementpolicy issuedby Lawyers Title 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 LawyersTitle includedthe permittedexceptions Schedule to the mortgagee of Removal,Exh. B, Attch. C at039-49). On March 6, 2008, plaintiff, through its attorney,wrote to LandAmerica claiming more than that by for $850,000in damages diminishedvalueto the insuredpropertycaused the encumbrances policy. (Def. App., B were omitted from Schedule on the original title policy and the replacement Exh. I at 053-55). LandAmerica respondedto the demand letter on April 29,2008. While was issuedwith an incomplete policy in plaintiffs possession acknowledgingthat the replacement those sameexceptionswere part of ScheduleB attachment,LandAmerica deniedthe claim because the commitmentallegedlyissuedprior to closing. (ld. ,Exh. I at 057-62). In a letter datedMay 23, 2008, counsel for plaintiff asked LandAmerica to reconsiderits position "in order to avoid litigation." (Not. of Removal, Exh. B, Attch. I at l). LandAmerica denied the request for reconsideration June25,2008. (Id.,Exh. B, Attch. J). It also issueda correctedreplacement on policy that containedthe missing Schedule exceptions.(Def. App., Exh. I at006, tTl2). B judgment action againstplaintiff in the On July l, 2008, LawyersTitle filed a declaratory ShermanDivision of the EasternDistrict of Texas("the Shermanlitigation"), asking the court to determinethe respectiverights and obligationsof the parties under the original title policy, the policy. (Id.,Exh. 1 at 006-07,'l]fll3- l7). After policy, and the corrected replacement replacement Case 3:08-cv-01547-O Document 28 Filed 12/03/2008 Page 3 of 10 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 federalcourt and filed a motion to transferthe actionto the Eastern hasfiled 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 altemative,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 the 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. quotingStewartv. May Dep't StoreCo.,No. 02-2772,2002 I Defendantsallege that federal subject matterjurisdiction is proper because parties are citizens ofdifferent states the exceeds and 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. samestate, Plaintiff denies any improperjoinder and seeksto remandthe caseto statecourt. Alternatively, plaintiff has filed a who resides Texas,asan additionaldefendant. in employee anotherLandAmerica motion forleavetojoin Sally Sherman, Case 3:08-cv-01547-O Document 28 Filed 12/03/2008 Page 4 of 10 12,2002). Seealso Burse v. Purdue Pharma Co., Nos. C-04-594-SC& C-04-713-SC,2004 WL 1125055 *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 who 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 court 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 Def. 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 (citing cases).The rule is basedon principlesof comity and sound concernmanifestlyis to avoid the wasteof duplication,to avoid rulings which may trenchupon the resolutionof issues that call for a uniform result." authorityof sistercourts,and to avoid piecemeal 1985). Id.,quotingWestGulfMaritimeAss'nv.ILADeepSeaLocal24,75lF.2d,72l,729(5thCir. in Plaintiff doesnot disputethat the issues this caseand the issuesin the Shermanlitigation plaintiff arguesthat the court should exerciseits discretion "substantiallyoverlap." Nevertheless, to hear the casebecausedefendantsengagedin improper forum shopping by filing a declaratory judgment actionin anticipationofthe instantlawsuit. Onerecognized exceptionto the "first-to-fiIe" actionin anticipationof litigation by its adversary. rule is when apartybringsa declaratoryjudgment Case 3:08-cv-01547-O Document 28 Filed 12/03/2008 Page 5 of 10 See Paragon Industries,L.P. v. Denver Glass Machinery,lnc., No. 3-07CY2183-M, 2008 WL 3890495at *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." Frank'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 court with jurisdiction to hear it . . . is not in itself improper anticipatorylitigation or otherwise Co. abusiveforum shopping."TheSherwin-Williams v. HolmesCounty,343F.3d 383, 391 (5th Cir. judgment action in 2003) (internal quotationsomitted). In deciding whethera relateddeclaratory anothervenueis an improper anticipatory suit for purposesof the "first-to-fi1e" rule, the court should in consider,inter alia, whether "aparty engaged bad faith conduct,by inducing an opposingparty to 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 Corp. v. Marshall,381 F.2d661,663 (5th Cir.1967). Here,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 as a ruse to induceplaintiff to delay the filing of its lawsuit. Cf, Chapa,2005 WL 2978396 at*2 plaintiff led defendants believe to (decliningto 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. Designs,fizc., 3-99-CV-0008-G, No. with requestto cease-and-desist plaintiff openly encouraged defendantto believe it would cooperate Case 3:08-cv-01547-O Document 28 Filed 12/03/2008 Page 6 of 10 judgmentaction).Withoutevidence support recognized preparing while secretly declaratory to any to be to exception 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 Evenifthe courtdoes followthe"first-to-fi1e" transfer warranted Underthatstatute: $ 1a0a(a). in For 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 28 U.S.C. $ 1aOa(a). against a corporatedefendant"in any district in [a] State within which its contactswould be jurisdiction if that district were a separate State." suffrcientto subject[the defendant]to personal often "hasthe effect of nearlyeliminatingvenue Id. g 1391(c). Noting that the generalvenuestatute restrictions in suits againstcorporations,"the Fifth Circuit has statedthat "[t]he underlying premise of $ 1404(a)is that courts should preventplaintiffs from abusingtheir privilege under $ l39l by subjecting defendantsto venues that are inconvenient under the terms of $ 1404(a)." In re of Vollrswagen America,Inc., 545 F.3d 304,313 (5th Cir. 2008) (en banc). In ruling on a motion to transfervenue,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," district, 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. jurisdiction, 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., 986F.2d94,96(5thCir.l992); KineticConcepts,Inc.v.ConneticsCorp.,No.SA-04-CA-0237-XR,2004WL2026812 at *3 (W.D. Tex. Sept.8,2004). Case 3:08-cv-01547-O Document 28 Filed 12/03/2008 Page 7 of 10 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 AmericanIns. Co. of New York,No.08-895,2008WL 4809432 *l (E.D. La. Oct.31,2008). In deciding a transfermotion, the court must considervarious private and public interest F.3d at 315. The private interestfactorsare: (l) the relative ease factors. In re Voll<swegen,545 of to the of of 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 make a trial easy, expeditious,and inexpensive. Id.; see also Von Graffenreid v. Craig,246 F.Supp.2d553, 562 (N.D. Tex. 2003) (citing cases). The public interestfactors are: (l) the (2) administrativedifficulties 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 In re Voll<swagen,545 appropriate for most transfer cases,they are not necessarilyexhaustive or exclusive. In re 545 Voll<swagen, 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. Neither parfy disputesthat plaintiff could have filed this action in the EasternDistrict of Texas. part ofthe operativefactsgiving riseto plaintiffs claims,includingthe location Indeed,a substantial of the property that is the subject of the title policy made the basis of this suit, are linked to that district. The distancebetweenthe federal courthousesin Dallas and Plano, where the Sherman litigation is pending,is less than25 miles. (SeeDef. App. at 262). Therefore,the relative easeof of accessto sourcesof proof, the availability of compulsory processto securethe attendance the will be substantially samewhether for witnesses, and the cost of attendance willing witnesses Case 3:08-cv-01547-O Document 28 Filed 12/03/2008 Page 8 of 10 this caseremains in the Northern District of Texasor is transferredto the EasternDistrict of Texas. Similarly, 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 First, plaintiff arguesthat transfeningthis actionto the Eastern "true 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. operativefacts occurredoutsidethe district." Baxq Corp. v. ForHealth Techs.,1nc., 3-05-CV2274-D,2006 WL 680503at *2 Q.{.D.Tex. Mar. 15,2006),quoting Minka Lighting, Inc. v. Trans at WL GlobeImps.,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 also In re Vollcswagen,545 District of Texas, but the underlying transactionclosed in that district. The title policy at issuewas purchasedas part of the closing. (See Def. App., Exh. 6 at 236). Plaintiff also points to the because mediantime from filing to the possibility of delay and prejudiceif the caseis transferred disposition in the EasternDistrict of Texas is 2.2 months longer than in the Northern District of a Texas. (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 judge in the Shermanlitigation has ordereda meetingof counselby December15,2008, and the is submissionof a joint statusreport by December22,2008. A Rule l6 schedulingconference set that for January7,2009. This suggests the instantcasewill proceedexpeditiouslyupon transferto the EasternDistrict of Texas. Case 3:08-cv-01547-O Document 28 Filed 12/03/2008 Page 9 of 10 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<swagen, favors transfer. However, section 1404(a),by its terms, also allows a district court to transfera case"in the interestofjustice." 28 U,S.C. $ la0a(a). Although the letter of the statute might suggestotherwise, "it is well established that the interestof justice is a factor . . . to be considered its orvn, and is an extremelyimportantone." l5 C. Wright, A. Miller & E. Cooper, on FeoeRAr-PRACTICEANDPnocEpURB at246 (3ded. 2007). Seeslso Coffeyv. Vsn Dorn lron $ 3854 l4/or\rs,796F.2d217,220-21(7thCir. 1986)("interestofjustice"isaseparatecomponentofsection Freemanv. Hoffmann-LaRoche,Inc.,No. 06-CIV-13497(RMBXRLE), la\a@) transferanalysis); Inc.,No. 3-02-CVIsbell v. DM Records, 2007 WL895282 at *3 (S.D.N.Y. Mar. 21,2007) (same); 1408-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 court. See DataTreasury Corp. v. First Data Corp., 243 F.Supp.2d 591, 594 (N.D. Tex. 2003) (citing cases).InContinentalGrain Co. v. BargeFBL-585,364U.S. 19, 80 S.Ct. 1470,4L.Ed.zd Court observed: 1540(1960),the Supreme involving preciselythe same To permit a situationin which two cases issuesare simultaneouslypending in different District Courts leads of to the wastefulness time, energyand money that $ 1404(a)was designedto 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, ld.,80 S.Ct.at 1474. SinceContinental court is a factor that weighs strongly in held that the existenceof related litigation in a transferee favor 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); seealsoInre Medrad,Lnc.,215 Case 3:08-cv-01547-O Document 28 Filed 12/03/2008 Page 10 of 10 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); Drilling (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 did 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, In light ofthe first-filed declaratoryjudgment and becausea substantialpart of the operative facts giving rise to plaintiffs claims, including the location 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 transfervenue[Doc. # 3] is granted.This caseis herebytransferred the Sherman to District of Texaspursuant 28 U.S.C.$ la0a(a). Eastern SO ORDERED. 3. DATED: December 2008. S'I'ATESMACISTRATE JUDGE
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