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Breland v. Levada Ef Five, LLC

United States District Court, S.D. Alabama, Southern Division

January 16, 2015

CHARLES K. BRELAND, JR., et al., Plaintiffs,
v.
LEVADA EF FIVE, LLC, Defendant.

ORDER

CALLIE V. S. GRANADE, District Judge.

This matter is before the Court on Defendant's Motion to Dismiss or Transfer Venue (Doc. 31) and Plaintiffs' Motion for Reference to the United States Bankruptcy Court for the Southern District of Alabama (Doc. 35). The motions have been fully briefed and are ripe for consideration. For the reasons set forth herein, both motions are due to be denied.

Background

This lawsuit arises out of a contract between Plaintiff Osprey Utah, LLC ("Osprey") and Defendant Levada EF Five, LLC ("Levada"), which is pursuant to Plaintiff Charles K. Breland, Jr.'s ("Breland") Chapter 11 reorganization bankruptcy plan. (Doc. 1 at 3, ¶ 16). Breland is the sole member of Osprey, Water Canyon Holdings, LLC ("Water Canyon"), Range Creek Holdings, LLC, ("Range Creek"), and Utah Reverse Exchange, LLC ("Utah Reverse"). In 2009, Breland filed for protection under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Alabama ("the Bankruptcy Court"). As required, Breland filed a Chapter 11 bankruptcy plan with the Bankruptcy Court. As a means of implementing the Chapter 11 plan, Breland agreed to sell his interests in Water Canyon, Range Creek, Utah Reverse, and Patomos Energy, LLC to Levada. The agreement also includes satisfaction of a mortgage on property that was owned by Breland, to wit 20, 676 acres of land located in Carbon and Emery Counties, Utah ("the Utah property"). On December 10, 2010, the Bankruptcy Court entered an order confirming the plan.

Levada was formed for the sole purpose of purchasing property from Breland during his bankruptcy proceedings, and it is incorporated in Delaware and maintains its principle place of business in New York. Levada's managing partner is Argos Utah I, LLC ("Argos Utah"), which is also incorporated in Delaware and maintains its principle place of business in New York. Adrian Zajac is the sole member of Argos Utah. On behalf of Levada, Zajac traveled to Mobile, AL many times to negotiate the agreement to purchase the Utah property and to participate in Breland's bankruptcy proceedings. After the agreement was reached, the additional terms of the contract were negotiated by the parties and their attorneys in the states of Utah and New York.

After confirmation, on January 27, 2011, Levada and Osprey entered in an agreement whereby Plaintiffs agreed to sell Levada the Utah property subject to certain terms and conditions. The terms of the contract include Plaintiffs' conveyance of the Utah property and mineral rights to the property for and in consideration of Levada's agreement to pay settlement costs of up to $1, 750, 000 in a collateral civil action. The terms further required that if Levada was able to settle the collateral action for less than $2, 900, 000 then Levada remained obligated to reimburse Plaintiffs for $90, 000 of attorney's fees that they incurred in the collateral action. Under the terms of the contract, Levada also agreed to pay the property taxes on the Utah Property for the years of 2008-2011 and any future taxes. The contract also includes a forum selection clause that reads:

(a) This agreement shall be governed by, and construed and interpreted in all respects in accordance with, the laws of the State of Utah, without giving effect to the principles and conflicts of laws thereof. Each of the parties hereto irrevocably submit to the jurisdiction and venue of any state or federal court sitting in Salt Lake City, Utah over any action or proceeding arising out of or relating to this Agreement or its interpretation. The provisions of this Agreement may be enforced by equitable remedies, including, without limitation, specific performance, except as otherwise limited in this Agreement.

(Doc. 1-3 at 15-16). On April 18, 2011, Mr. Breland filed a motion to modify the plan and confirmation order to provide for an amended and modified agreement that represents the agreement between Plaintiffs and Levada. The Bankruptcy Court approved the modification.

On April 2, 2014, Plaintiff filed this action in this Court seeking compensation from Levada for breach of contract and attorneys fees incurred in litigating this action. In the complaint, Plaintiffs contend that Levada settled the collateral action for less than $2, 900, 000, but failed to remit the $90, 000 payment for Plaintiffs' attorney's fees. Additionally, Plaintiffs contend that Levada failed to pay the property taxes on the Utah Property for 2011-2013, and Mr. Breland was forced to pay the taxes in order to avoid any further delinquencies.

On September 23, 2014, Levada filed a Motion to Dismiss or Transfer Venue to the United States District Court for the District of Utah. In support thereof, Levada contends that venue in this district is improper under 28 U.S.C. § 1391(b). Levada, which is incorporated in Delaware and maintains its principle place of business in New York, contends that it does not reside in this district, and therefore, is not subject to venue pursuant to 28 U.S.C. § 1391(b)(1). Further, Levada contends that venue is not proper in this district because a substantial part of the event or omissions giving rise to this action did not occur in this district and the subject property is not located in this district; thus, venue is improper under 28 U.S.C. § 1391(b)(2). Finally, Levada contends that because there are at least three proper districts where the action could have been brought, Delaware, New York, and Utah, then venue is improper under 28 U.S.C. § 1391(b)(3). As such, Levada moves for dismissal of this case or transfer to the District Court in Utah pursuant to 28 U.S.C. § 1406(a). Additionally, Levada challenges its contacts with this district, and argues that this Court lacks personal jurisdiction over it. Alternatively, Levada moves for transfer of this case pursuant to 28 U.S.C. § 1404(a) primarily based on the forum selection clause and the parties irrevocable consent to jurisdiction and venue in Utah.

On October 7, 2014, Plaintiffs filed a response to Levada's motion and a Motion For Reference to the United States Bankruptcy Court in this district. (Docs. 34, 35). In their response, Plaintiffs argue that due to their petition for reference to the Bankruptcy Court, Levada's motion is moot. Plaintiffs contend that the instant suit is "related to" Mr. Breland's Chapter 11 bankruptcy plan and should be transferred pursuant to 28 U.S.C. § 157(a). Alternatively, Plaintiffs contend that Levada's motion to transfer should be denied, as venue is proper in this district under 28 U.S.C. § 1391(b)(2) because the agreement was negotiated in this district and submitted to and approved by the Bankruptcy Court in this district. Consequently, Plaintiffs contend that Alabama has specific jurisdiction over Levada regarding the disputed contract. Finally, Plaintiffs contend that because venue is proper in this district the case should not be dismissed under 28 U.S.C. § 1406; rather, Levada's request to transfer to Utah should be evaluated based on a forum non convenience analysis under 28 U.S.C. § 1404 because the parties' forum selection clause is permissive and not binding. Plaintiffs argue that such analysis favors maintaining venue in this district. Levada claims that its lack of contacts with this state raises the threshold issue of whether this Court has jurisdiction over it. "As a general rule, courts should address issues relating to personal jurisdiction before reaching the merits of a plaintiff's claims, as a defendant that is not subject to the jurisdiction of the court cannot be bound by its rulings." Range Creek Holdings, LLC v. Cypress Capital II, LLC, 2009 U.S. Dist. LEXIS 23951, *8-9, 2009 WL 857533 (S.D. Ala. March 25, 2009) (citing Republic of Pan. v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 940 (11th Cir. 1997)). The Court thus addresses Levada's jurisdictional challenge first.

1. Personal Jurisdiction

The plaintiff "has the burden of establishing a prima facie case of personal jurisdiction." Id . (citing Stubbs v. Wyndham Nassau Resort & Crystal Palace Casino, 447 F.3d 1357, 1360 (11th Cir. 2006)). If the plaintiff has done so, the burden shifts to the defendant to make a prima facie evidentiary showing, by affidavits or otherwise, that personal jurisdiction is not present. Future Technology Today, Inc. v. OSF Healthcare Systems, 218 F.3d 1247, 1249 (11th Cir. 2000). If the defendant sustains that responsibility, the plaintiff is then required to substantiate the jurisdictional allegations in the complaint by affidavits or other competent proof, and he may not merely reiterate the factual allegations in the complaint. Id . However, the allegations in the complaint still must be taken as true to the extent they are uncontroverted by the defendant's affidavits. S & Davis Intern., Inc. v. The Republic of Yemen, 218 F.3d 1292, 1303 (11th Cir. 2000). And if the parties present conflicting evidence, all factual disputes are resolved in the plaintiff's favor, and the plaintiff's prima facie showing will be sufficient to survive a motion to dismiss notwithstanding the contrary presentation by the moving party. Id.

A federal court sitting in diversity may exercise jurisdiction over a nonresident defendant to the same extent as a court of that state." Ruiz de Molina v. Merritt & Furman Ins. Agency, Inc., 207 F.3d 1351, 1355-56 (11th Cir. 2000) (citing Prejean v. Sonatrach, Inc., 652 F.2d 1260 (5th Cir. 1981)). Alabama permits its courts to exercise jurisdiction over nonresidents to the fullest extent allowed under the Due Process Clause of the Fourteenth Amendment to the Constitution. Ala. R. Civ. P. 4.2(a)(2)(I); Martin v. Robbins, 628 So.2d 614, 617 (Ala. 1993); Horn v. Effort Shipping Co., Ltd., 777 F.Supp. 927, 929 (S.D. Ala. 1991). Due process authorizes the exercise of personal jurisdiction over a nonresident defendant when "(1) the nonresident defendant has purposefully established minimum contacts with the forum;" and "(2) the exercise of jurisdiction will not offend traditional notions of fair play and substantial justice." S.E.C. v. Carrillo, 115 F.3d 1540, 1542 (11th Cir. 1997) (citation omitted); International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L.Ed. 95, 66 S.Ct. 154 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 85 L.Ed. 278, 61 S.Ct. 339, (1940)) (The Due Process Clause requires that a non-resident defendant has "certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.'"); see also ...


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