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
ORDER DENYING DEFENDANTS' MOTION TO DISMISS FOR LACK OF PERSONAL
JURISDICTION; GRANTING DEFENDANTS' MOTION TO TRANSFER AND
TRANSFERRING CASE TO SOUTHERN DISTRICT OF FLORIDA; AND DENYING
PLAINTIFF'S MOTION FOR SETOFF AS MOOT
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
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
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
(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
(2) the claim must be one which arises out of or
relates to the defendant's forum-related activities;
(3) the exercise of jurisdiction must comport with
fair play and substantial justice, i.e., it must be
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
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
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.
IT IS SO ORDERED.
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