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United States District Court, S.D. California

September 8, 2005.

MOREHOUSE ACQUISITIONS NO. 1, LLC, a California limited liability company, Plaintiff,
CULLASAJA JOINT VENTURE, et als., Defendants and ARVIDA/JMB MANAGERS, INC., a Delaware Corporation; ARVIDA/JMB PARTNERS, a Florida general partnership; ARVIDA/JMP PARTNERS, L.P. a Delaware limited partnership, Defendants/Judgment Creditors.

The opinion of the court was delivered by: MARILYN HUFF, Chief Judge, District

On June 27, 2005, Plaintiff/Judgment Debtor Morehouse Acquisitions No. 1, LLC ("Morehouse") filed a motion for setoff of judgment debtor's claim against judgment creditors' money judgment in miscellaneous case no. 99mc713-H. The miscellaneous case was opened in 1999 to register a judgment from the Southern District of Florida. On August 8, 2005, Defendants Arvida/JMB Managers, Inc., Arvida/JMB Partners, L.P. and Arvida/JMB Partners (collectively referred to as "Arvida") filed an opposition. A reply was filed on August 15, 2005. On August 17, 2005, the Court issued an Order Re Related Case opening a new civil case because the most recent filings consist of substantive legal issues that were not appropriately filed in a miscellaneous case. The Court also directed the parties to brief whether venue should be transferred to the Southern District of Florida pursuant to 28 U.S.C. § 1404(a). On September 6, 2005, the parties filed their briefs on the venue issue. As part of their briefing, Defendants filed a motion to dismiss for lack of personal jurisdiction, or in the alternative, to transfer venue to the Southern District of Florida. The motions are submitted on the papers without oral argument pursuant to Civil Local Rule 7.1(d)(1). For the reasons given below, the Court DENIES Defendants' motion to dismiss for lack of personal jurisdiction, GRANTS Defendants' motion to transfer venue, and DENIES Plaintiff's motion for setoff as MOOT.


  Morehouse is the holder in due course of two promissory notes, named "Contingent Promissory Note" and the "Replacement Promissory Note," (collectively referred to as "the Notes") both held in California. The Notes have a face value in excess of $5,650,000. Arvida is the promissor/obligor under these Notes. The Notes are part of a series of transactions involving a joint venture agreement between Arvida and Security Highlands Limited Partnership ("Security Highlands") in a North Carolina residential and golf course venture, known as the Cullasaja Project. Security Highlands was owned by Security Federal Savings and Loan Association ("Security Federal"). Arvida and Security Highlands each owned a 50% interest in the project. In May 1989, Arvida and Security Highlands each lent $3 million dollars toward the construction of the golf course clubhouse. On May 18, 1989, Cullasaja executed a Revolving Demand Note in the principal amount of $3,000,000 in favor of Security Federal.

  In 1992, Security Federal was seized by the Resolution Trust Corporation. Therefore, on December 31, 1991, Arvida/JMB Partners, L.P. was established and purchased Security Highlands' 50% interest in Cullasaja for $3.3 million, as evidenced by two $1.65 million promissory notes named "Contingent Promissory Notes." In addition, the Agreement on December 31, 1991 obligated Cullasaja and its partners to the repayment of two $3 million Partner Notes, renamed "Replacement Notes." Payments on the Replacement Promissory Note would only be made from the "net cash flow" as defined under the Cullasaja Joint Venture Agreement and any payment on the Contingent Promissory Note must be subordinated to the "Senior Indebtedness" as defined in the December 31, 1991 Agreement.

  In 1995, Morehouse acquired one of the two $1,650,000 Contingent Promissory Notes and one of the two $3,000,000 Replacement Promissory Notes pursuant to an Allonge issued by the Federal Deposit Insurance Corporation acting in its capacity as Receiver for $75,000. (Tallarida Decl., Ex. 8: Opp, Ex. A.)

  In 1996, Morehouse filed a lawsuit in Florida against Arvida to obtain the financial records and to determine if it was entitled to payments under the Notes. Arvida maintained that the Notes were not in default and that no payments were due. On the eve of trial, Morehouse moved to dismiss the declaratory relief claim. The Florida court granted Morehouse's motion to dismiss under Federal Rule of Civil Procedure 41 conditioning the dismissal on an award to Arvida of attorney's fees and costs. On November 1, 1999, the United States District Court for the Southern District of Florida entered judgment in favor of Arvida in the amount of $203,254.30 in attorney's fees and $19,695.83 in costs against Morehouse. On December 15, 1999, Arvida registered the judgment in this district in miscellaneous case no. 99mc713. The judgment remains unsatisfied.

  The Notes were the sole asset of Morehouse. Morehouse is a single purpose entity formed to isolate and protect assets from commingling so that its value is not impacted by other assets and liabilities. On June 1, 2004, Morehouse transferred the notes to CN Townhome #1, LLC. On June 30, 2004, CN Townhome filed a suit against Arvida in the Southern District of California seeking the same relief that Morehouse voluntarily dismissed in the Florida action seeking declaratory relief and an accounting of the promissory notes. On February 25, 2005, Judge Benitez granted Arvida's motion to dismiss for lack of personal jurisdiction over CN Townhome and dismissed the case.

  In 2004, Arvida initiated a Proceeding Supplemental in Aid of Execution in the same case number as the 1996 action in the Southern District of Florida against Morehouse and CN Townhome seeking to enforce the judgment against Morehouse. The docket in that case consists of 32 pages with 330 entries.


  A. Motion to Dismiss for Lack of Personal Jurisdiction

  In its briefing, Arvida filed a motion to dismiss for lack of personal jurisdiction. In order to establish that personal jurisdiction over a defendant is proper, it must be shown that (1) California's long-arm statute confers personal jurisdiction over the defendant, and (2) that the exercise of jurisdiction comports with the constitutional principles of due process. Fireman's Fund Ins. Co. v. Nat'l Bank of Cooperatives, 103 F.3d 888, 893 (9th Cir. 1996). Because California's long-arm statute permits the exercise of jurisdiction to the same extent as the Constitution, "the jurisdictional analyses under state law and federal due process are the same." Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1110 (9th Cir. 2002).

  In order for a court to exercise personal jurisdiction over a nonresident defendant, the defendant must have "minimum contacts" with the forum state "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Rio Props., Inc. v. Rio Int'l Interlink, 284 F.3d 1007, 1019 (9th Cir. 2002) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). Personal jurisdiction may be either general or specific. Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998). General jurisdiction exists when a defendant has maintained such "substantial" or "continuous and systematic" contacts with the forum state, so that a court may assert jurisdiction over the defendant for any cause of action, including those unrelated to the forum-related contacts. Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). If a defendant has not maintained "continuous" or "systematic" contacts with the forum state, a court may nonetheless exercise "specific jurisdiction" over a non-resident defendant if the following requirements have been met:

(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privileges of conducting activities in the forum, thereby invoking the benefits and protections of its laws;
(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and
(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e., it must be reasonable.
Dole Food Co., 303 F.3d at 1111 (citation omitted); see also Helicopteros Nacionales De Columbia, S.A. v. Hall, 466 U.S. 408, 414 (1984). A modification of the three-prong test may be appropriate "over a defendant whose only `contact' with the forum state is the `purposeful direction' of a foreign act having effect in the forum state." Haisten v. Grass Valley Medical Reimbursement Fund, Ltd., 784 F.2d 1392 (9th Cir. 1986) (citing Calder v. Jones, 465 U.S. 783, 789 (1984)). Based on the record in this case, general jurisdiction does not exist. The Court must look at whether specific jurisdiction exists.

  On December 15, 1999, Defendant Arvida registered a judgment from the Southern District of Florida in this district. On December 6, 2004, Arvida obtained a writ of execution. On December 17, 2004, Arvida filed a motion to compel production of documents on third parties. On January 28, 2005, Arvida filed a motion for reconsideration. These affirmative acts by Arvida purposefully availed itself to invoking the benefits and protection of the laws of this district. In addition, the setoff claim arises out of Arvida's attempt to register and execute its judgment against Morehouse. Therefore, the Court's jurisdiction over Defendants is reasonable. The Court finds there is sufficient contacts to establish specific jurisdiction over Arvida. Accordingly, the Court DENIES Defendants' motion to dismiss for lack of personal jurisdiction.

  B. Legal Standard for Venue

  In the alternative, Arvida moves to transfer the case to the Southern District of Florida. Title 28 U.S.C. section 1404(a) provides "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). The district court has discretion to "adjudicate motions for transfer according to an `individualized, case-by-case consideration of convenience and fairness.'" Jones v. GNC Franchising, Inc., 211 F.3d 495, 498 (9th Cir. 2000). The statute requires the courts to consider the (1) convenience of the parties; (2) the convenience of the witnesses; and (3) the interests of justice. 28 U.S.C. § 1404(a). The court may also consider the following in determining whether transfer is appropriate:

(1) the location where the relevant agreements were negotiated and executed, (2) the state that is most familiar with the governing law, (3) the plaintiff's choice of forum, (4) the respective parties' contact with the forum, (5) the contacts relating to the plaintiff's cause of action in the chosen forum, (6) the differences in the costs of litigation in the two forums, (7) the availability of compulsory process to compel attendance of unwilling non-party witnesses, and (8) the ease of access to sources of proof.
Jones, 211 F.3d at 498-99.

  1. Interest of Justice

  The interest of justice factor is a critical one and may be decisive in making a determination on a motion to transfer even though "the convenience of the parties and witnesses point in a different direction." 15 Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3854 (1986); Pratt v. Rowland, 769 F. Supp. 1128, 1133 (N.D. Cal. 1991). The pendency of related actions in the transferee forum is a significant factor in considering the interest of justice factor. See A.J. Indus., Inc. v. United States Dist. Court for Cent. Dist., 503 F.2d 384, 389 (9th Cir. 1974) see also Continental Grain Co. v. The Barge FBL-585, 364 U.S. 19, 26 (1960) ("[t]o permit a situation in which two cases involving precisely the same issues are simultaneously pending in different District Courts leads to the wastefulness of time, energy and money that § 1404(a) was designed to prevent.") "Litigation of related claims in the same tribunal is strongly favored because it facilitates efficient, economical and expeditious pre-trial proceedings and discovery and avoid duplicitous (sic) litigation and inconsistent results." Durham Prods, Inc. v. Sterling Film Portfolio, Ltd., Series A, 537 F. Supp. 1241, 1243 (S.D.N.Y. 1982) (citation omitted).

  Morehouse argues that the case should remain in California because Arvida registered its judgment in this district, attempted to execute discovery in this district and the promissory notes are located in California. However, Morehouse ignores the long litigation history in the Southern District of Florida stemming back to 1996 concerning the promissory notes that Morehouse seeks to use as a setoff from its 1999 judgment. Moreover, Arvida recently in 2004 filed a Proceeding Supplemental in Aid of Execution in the same case number as the 1996 case where it is essentially seeking to execute on the same judgment that Morehouse seeks to offset. Unlike this Court, the Florida court is intimately familiar with the parties and issues involved in this case since 1996. There have been extensive discovery and rulings on motions. (See Docket for Southern District of Florida Case No. 96cv8351.) Although Morehouse emphasizes the fact that Arvida registered the judgment in this district, the judgment was originally filed in the Southern District of Florida. In addition, Morehouse previously subjected itself to the jurisdiction of the Florida court when it initiated action against Arvida in 1996 concerning the promissory notes. Therefore, the most appropriate venue for the motion for setoff is in the pending Florida action where the issues related to the setoff are currently being litigated between the same parties and where rulings have been or will be made that will affect Morehouse's claim for setoff. Morehouse appears to argue that the setoff issue is a simple one that this Court can easily decide. However, the setoff will involve a voluminous amount of discovery of documents and testimony of witnesses located in Florida concerning the interpretation of the "net cash flow" as defined under the Cullasaja Joint Venture Agreement, the profitability of the joint venture, the amounts due on senior obligations and many other complex issues. The Florida court, who has already handled many of these issues, is the court most appropriate to handle the setoff motion in the pending proceeding as it concerns issues related to the 1999 judgment and the promissory notes. In the interests of justice and in the interest of efficiency and conservation of judicial resources, the Court finds that this factor favors transfer of the case.

  2. Ease of Access to Sources of Proof

  Arvida states that documents related to the Cullasaja Joint Venture and partnership are voluminous and are currently stored in Florida. (Arvida's Motion to Dismiss, Ex. G.) The auditors and accountants with knowledge about these matters are also located in South Florida. Morehouse argues that the mere inconvenience to Arvida regarding documents should not justify the transfer of this case. However, the ease of access to sources of proof is a factor that the Court may consider in assessing whether to transfer a case. See Jones, 211 F.3d at 498-99. Therefore, this factor favors the transfer of the case.

  3. Convenience of the Parties

  Plaintiff and its employees or agents reside in California while Defendants and their employees and agents reside in Florida. Therefore, this factor favors neither side.

  4. Convenience of the Witnesses

  Plaintiff contends that Arvida has already taken the deposition and compelled the production of documents by California resident third party witnesses. These witnesses all reside in California whose testimony will be needed in Morehouse's setoff proceeding. On the other hand, Defendants argue that the majority of their employees and former employees as well as the joint venture's outside accountants reside in Florida. Both parties have witnesses that reside in their respective resident states. Therefore, this factor favors neither side.

  Based on a review of the factors under 28 U.S.C. § 1404(a), the Court finds that the interest of justice warrants transfer of this case to the Southern District of Florida particularly since there is a pending case in Florida with the same parties concerning issues that relate to the setoff claim. Accordingly, the Court GRANTS Arvida's motion to transfer the case to the Southern District of Florida.


  For the reasons stated above, the Court DENIES Defendant's motion to dismiss for lack of personal jurisdiction and GRANTS Defendants' motion to transfer venue. The Court also DENIES Plaintiffs motion for setoff as MOOT. This case shall be transferred to the Southern District of Florida.



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