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Overlook Gardens Properties LLC v. Orix USA, L.P.

United States Court of Appeals, Eleventh Circuit

June 25, 2019

OVERLOOK GARDENS PROPERTIES LLC, a Georgia limited liability company, CREEKWOOD APARTMENTS, LLC, a Georgia limited liability company, IVERNESS II, LLC, a Georgia limited liability company, GREYSTONE FARMS APARTMENT COMMUNITY, LLC, a Georgia limited liability company, Plaintiffs - Appellees,
v.
ORIX USA, L.P., a Delaware limited partnership, RED CAPITAL GROUP, LLC, a Delaware limited liability company, RED MORTGAGE CAPITAL, LLC, a Delaware limited liability company, RED CAPITAL MARKETS, LLC, a Delaware limited liability company, RED CAPITAL PARTNERS, LLC, an Ohio limited liability company, Defendants - Appellants.

          Appeal from the United States District Court for the Middle District of Georgia D.C. Docket No. 4:17-cv-00101-CDL

          Before ED CARNES, Chief Judge, JULIE CARNES and CLEVENGER, [*] Circuit Judges.

          CLEVENGER, CIRCUIT JUDGE.

         In this diversity jurisdiction case, the United States District Court for the Middle District of Georgia remanded the case to the Georgia state court from which it was removed by the defendants. This appeal questions our jurisdictional authority to review the remand order.

         I

         A

         Overlook Gardens Properties, LLC, Creekwood Apartments, LLC, Inverness II, LLC, and Greystone Farms Apartment Community, LLC (collectively, "the Developers") develop large-scale apartment complexes in Georgia. They finance their developments using loans federally insured by the United States Department of Housing and Urban Development ("HUD") through its Multifamily Accelerated Processing ("MAP") program. They chose Red Mortgage Capital, LLC as their MAP-approved lender for assistance in applying for and securing HUD-guaranteed financing through the MAP program.

         The Developers each signed an application letter with Red Mortgage preliminarily agreeing that Red Mortgage has the exclusive right to fund and service their loans in exchange for certain fees and compensation. When HUD agreed to insure the loans, the Developers each signed a commitment letter with Red Mortgage. In those commitment letters, Red Mortgage quoted each of the Developers an interest rate that Red Mortgage allegedly represented was the best rate it thought it could obtain for the Developers. The Developers then signed agreements locking in their quoted interest rates. Red Mortgage worked to secure the quoted interest rates, issued confirmation letters to the Developers that it secured those rates, and proceeded to close on the loans based on the agreed upon terms. At closing, the Developers each executed with Red Mortgage a note and a security instrument (collectively, "the loan documents"). In the notes, the Developers agreed to repay their loans at the interest rates and on the terms they agreed to in their commitment letters. In the security instruments, the Developers pledged their property and rents as collateral against the debt.

         The commitment letters and the loan documents contain different forum selection clauses. The commitment letters for three of the four Developers recite the following forum selection clause:

By its acceptance of the Lender's Commitment, the Borrower agrees that (a) it was negotiated, made and issued by the Lender in the State of New York; (b) any action brought hereunder shall only be brought in the federal or local courts of Dallas County, Texas; and (c) the rights and obligations of the parties shall be determined in accordance with applicable federal law and, to the extent that State law applies, the law of New York.

Dist. Ct. Dkt. No. ("Doc.") 6-2 at 30, 56-58, 74-75. One of the four Developers-Greystone Farms-signed a commitment letter containing a substantially similar forum selection clause, except that it provides the agreement was made in Ohio, any applicable federal and Ohio law governs, and any action brought under the letter must be litigated in the Ohio federal or state courts.

         The loan documents for all four Developers recite the following forum selection clause:[1]

Borrower agrees that any controversy arising under or in relation to this Note or the Security Instrument shall be litigated exclusively in the Property Jurisdiction [i.e., Georgia] except as, so long as the Loan is insured or held by HUD and solely as to rights and remedies of HUD, federal jurisdiction may be appropriate pursuant to any federal requirements. The state courts, and with respect to HUD's rights and remedies, federal courts and Governmental Authorities in the Property Jurisdiction, shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note, any security for the Indebtedness, or the Security Instrument. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

Doc. 11-1 Note at 7.

         Fortunately, the commitment letters guarded against inconsistencies between clauses in the commitment letters and clauses in the loan documents. The commitment letters state that the terms of the loan documents supersede the ...


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