BETH BLOOM, District Judge.
Plaintiffs initiated this action in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida (the "Circuit Court") on October 7, 2014. That case was consolidated into a pending receivership action also before the Circuit Court, which was itself initiated on August 13, 2013. Plaintiffs filed their Amended Complaint in February, 2015. Process was served on Defendant Bo Brower on May 11, 2015. Bo Brower removed the action to this Court on June 10, 2015. ECF No. [1]. On June 11, 2015, the Court entered its order of procedure in removed actions, setting certain deadlines, ECF No. [6], and on July 10, 2015, entered a preliminary scheduling order to streamline and harmonize consideration of filed or impending motions to dismiss and remand, ECF No. [37]. Per the Court's instruction at the August 19, 2015 Hearing, Plaintiffs submitted their Proposed Second Amended Complaint on August 28, 2015, and Plaintiffs, Columbia and the Utah Defendants filed supplemental briefing with respect to the Motion to Transfer on September 10, 2015. The six substantive motions under review are now ripe for adjudication.
Plaintiffs' claims center on a failed land development investment involving real property located in in Pompano Beach, Florida. This background (except where indicated) is derived from the allegations in Plaintiffs' Amended Complaint.
Plaintiffs invested in a real estate development project (the "Pompano Project") through SLF Series G, a subsidiary SLF, and its affiliated managers and members. The project failed during the real estate downturn and recession in the late 2000s. Plaintiffs allege that SLF Series G and the entities and persons which operated that entity — what the Amended Complaint defines as the "Issuer Defendants" (which include SLF Series G, PWD, SLF, NA-SLF, K-Bro, Zama, T-Capital Partners, LLC, Lee Brower, Bo Brower, David Sheffield, Rick Bigelow and Private Consulting Group, Inc. ("PCG")) — along with what the Amended Complaint defines as the "Fraudulent Conveyance Defendants" (which include Workmen's Development Group, LLC ("Workmen's"), Hillsborough Development, LLC ("Hillsborough"), and Hunter Hospitality, LLC ("Hunter")), defrauded them in a variety of ways related to the initial and subsequent investments in SLF Series G and the eventual sale of the Pompano Property in which SLF Series G invested.
As SLF Series G promised to Plaintiffs as part of the original solicitation of funds, the investment was secured by a first priority mortgage (the "Development Mortgage") on the development property held by SLF Series G — which was in fact given when SLF Series G lent money to the developer, United South Florida Enterprises, Inc., sometime prior to February, 2007 (the "Developer Loan"). Due to non-payment, SLF Series G initiated a foreclosure action on the Developer Mortgage on February 7, 2007 (the "Foreclosure Action"), and recorded a lis pendens on February 8, 2007. Plaintiffs were allegedly defrauded into making subsequent investments from 2008 to 2010, which were secured by subsequent mortgages on the Pompano Property ("Subsequent Mortgages"). The fraud involved SLF Series G withholding information about the pending foreclosure on the first priority Developer Mortgage and about the consequent worthlessness of the Subsequent Mortgages (which would be extinguished through that Foreclosure Action). The fraud also involved SLF Series G accepting a deed in lieu of foreclosure, the temporary conveyance of title in the Pompano Property to a newly created straw affiliate, Defendant PWD, and issuance of the Subsequent Mortgages by PWD, during the foreclosure proceedings. While PWD was added to the Foreclosure Action as a defendant, SLF Series G never filed an amended lis pendens to add PWD. Plaintiffs further allege that the Issuer Defendants misrepresented to Plaintiffs that that mechanism — having a deed issued to PWD in lieu of foreclosure from the developer — would help "scrub" the property of (ostensibly other) junior liens and thereby permit development of the property, ultimately to the benefit of Plaintiffs' investments. Finally, Plaintiffs allege that this fraud was perpetuated on them and on the Circuit Court in the Foreclosure Action.
A judgment of foreclosure foreclosing the Developer Mortgage was entered by the Circuit Court in the Foreclosure Action on January 6, 2011, and a certificate of title in the Pompano Property was issued to SLF Series G on March 5, 2011. The property was transferred free and clear of any encumbrances. SLF Series G then sold the Pompano Property to Workmen's, who sold it to Hillsborough, who finally sold it to Hunter. Plaintiffs allege that those conveyances were fraudulent (despite, or perhaps in part because of, communications to Plaintiffs seeking approval for sale of the Pompano Property). Hunter purchased the property in 2011. Subsequently, on February 17, 2012, Columbia loaned money to Hunter, secured by a lien on the Pompano Property. Westcor acted as Columbia's title insurance carrier with respect to that transaction. Hunter itself later failed and went into receivership in Washington State. Jack Rader was appointed as the Florida receiver (the "Receiver"). The Receiver initiated an ancillary receivership action before the Circuit Court — the same umbrella action into which this action was consolidated prior to removal. Hunter was liquidated and the Pompano Property sold in January, 2015. As part of a stipulation and agreement entered into between the Receiver, Columbia and certain Plaintiffs, and confirmed by order of the Circuit Court in the ancillary receivership action, the Pompano Property was sold free and clear, and any liens Plaintiffs may have in the property were transferred to the sale proceeds. See ECF No. [65-12], Exh. 12 to PSAC (stipulation and approved orders). Columbia's secured claim was recognized and its loan fully repaid by that liquidation sale. The remainder of the sale proceeds are being held in escrow by the Receiver.
On March 10, 2015, Plaintiffs commenced an action in the United States District Court for the District of Utah, Dorsten, et al. v. Secured Lending Fund LLC, et al., Case No. 15-CV-00153 (PMW) (the "Utah Action"). See ECF No, [25-1] (amended complaint in Utah Action).
Plaintiffs here assert fourteen counts in the Amended Complaint: non-payment by the Issuer Defendants of mortgage notes with respect to the Subsequent Mortgages (Counts I and VII); declaratory judgment invalidating the lis pendens in the Foreclosure Action (Count II); vacation of the foreclosure judgment issued by the Circuit Court in the Foreclosure Action, allegedly obtained by intrinsic and extrinsic fraud (Count III); foreclosure of the Subsequent Mortgages or constructive trust on proceeds of the sale of the Pompano Property (Count IV); declaratory judgment, effective against all downstream interests in and purchasers of the Pompano Property, regarding proceeds of the sale of the Pompano Property (Count V); fraud by the Issuer Defendants related to the sale of the subsequent notes (Count VIII); rescission of sale to the Fraudulent Conveyance Defendants based on fraudulent conveyance (Count X); declaratory judgment or equitable lien on sale proceeds and damages against Columbia and Westcor (Count XI); fraudulent conveyances against the Fraudulent Conveyance Defendants (Count XII); violations of securities laws by PCG (Count XIII); joinder of the Receiver (Count XIV); and class representation of certain plaintiffs for Counts I through V (Count VI) and of certain plaintiffs for Counts VII and VIII (Count IX).
Ultimately, this is the wrong forum for Plaintiffs' claims. They are either part and parcel of the Utah Action, or belong before the Circuit Court by virtue of Plaintiffs' requested relief to vacate the foreclosure judgment. Plaintiffs' allegations here and in the Utah Action illustrate an integrated fraud scheme, involving the same Plaintiffs and the same bundle of Defendants and encompassing SLF Series G, the Pompano Property and the Foreclosure Action. In addition, Plaintiffs fundamentally seek the same relief in the Utah Action as to all of their investments and all of the investment properties — damages from the investment-side Defendants for their alleged fraud, and reanimation of their interests in the properties, or in the proceeds from sale of those properties, to gain damages from the purchase-side Defendants (whether knowledgeable of the fraud, as bad-faith subsequent transferees, or not). As such, the Court declines to exercise its discretion to remand this action to the Circuit Court and transfers this action to the District of Utah.
On August 24, 2015, Plaintiffs, consistent with their representations at the Hearing, voluntarily dismissed all claims against Wesctor. ECF No. [61]. The Court subsequently dismissed Wesctor without prejudice. ECF No. [63]. Accordingly, Westcor's Motion to Strike is denied as moot.
Plaintiffs ask the Court to remand this action to the Circuit Court for want of subject matter jurisdiction. They argue that the Rooker-Feldman doctrine
Rooker-Feldman is inapplicable here. "The Rooker-Feldman doctrine makes clear that federal district courts cannot review state court final judgments because that task is reserved for state appellate courts or, as a last resort, the United States Supreme Court." Casale v. Tillman, 558 F.3d 1258, 1260 (11th Cir. 2009); see also Nicholson v. Shafe, 558 F.3d 1266, 1271 (11th Cir. 2009) (federal district courts have "no authority to review final judgments of a state court"); Doe v. Florida Bar, 630 F.3d 1336, 1340-41 (11th Cir. 2011) (where applicable, Rooker-Feldman deprives federal court of subject matter jurisdiction). Rooker-Feldman is "confined to cases of the kind from which the doctrine acquired its name: `cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments.'" Lozman v. City of Riviera Beach, Fla., 713 F.3d 1066, 1072 (11th Cir. 2013) (quoting Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005)).
As the Supreme Court has explained, "Rooker-Feldman [is] inapplicable where the party against whom the doctrine is invoked was not a party to the underlying state-court proceeding." Lance v. Dennis, 546 U.S. 459, 464 (2006); see also Shuler v. Swatek, 465 F. App'x 900, 902 (11th Cir. 2012) (citing Lance for the same). Further, [t]he Rooker-Feldman doctrine does not bar actions by nonparties to the earlier state-court judgment simply because, for purposes of preclusion law, they could be considered in privity with a party to the judgment." Lance, 546 U.S. at 466.
Plaintiffs were not a party to the state court proceeding that rendered the judgment of foreclosure at issue. In fact, their Complaint is premised on the allegations that they had no notice of and were not parties to the Foreclosure Action. Accordingly, Plaintiffs are not "state-court losers" seeking redress for injuries caused by a state court judgment, and Rooker-Feldman is inapplicable.
Because the Court is not divested of jurisdiction by operation of Rooker-Feldman and need not remand any part of this action to the Circuit Court on that basis, Plaintiff's argument for Colorado River abstention is a non-starter: there is no parallel state court proceeding in deference to which to abstain.
Despite the inapplicability of Rooker-Feldman to divest this Court of jurisdiction, Plaintiffs raise a practical issue with regard to the ability of this Court to issue relief as to Count III of their Amended Complaint. Again, Plaintiffs seek vacation of the foreclosure judgment rendered by the Circuit Court in the Foreclosure Action, which they allege was obtained by intrinsic and extrinsic fraud. Plaintiffs question the Court's ability to vacate the foreclosure judgment. After all,
Kimball v. The Florida Bar, 632 F.2d 1283, 1284 (5th Cir. 1980) (quoting Lampkin-Asam v. Supreme Court of Florida, 601 F.2d 760 (5th Cir. 1979) and citing 28 U.S.C. § 1257).
First, Plaintiffs' argument is somewhat circular. The authority which limits a federal court's jurisdiction to upset or vacate a state court judgment ultimately stems from the Supreme Court cases which interpret 28 U.S.C. § 1257 and establish Rooker-Feldman. See, e.g., Kimball, 632 F.2d at 1284; In re James, 940 F.2d 46, 53 (3d Cir. 1991) (citing Feldman — which "made it clear that federal district courts and federal courts of appeals lack jurisdiction to review or reverse a state court judgment on the merits" — in holding that a federal court can vacate a state court judgment only when that judgment is void ab initio); Brinkmann v. Johnston, 793 F.2d 111, 113 (5th Cir. 1986) (citing to Feldman, its progenitors and progeny in holding that "litigants may not obtain review of state court actions by filing complaints about those actions in lower federal courts cast in the form of civil rights suits" and that "[e]rrors committed by state judges in state courts are for correction in the state court system"). But, as explained above, the Supreme Court, "emphasiz[ing] the narrowness of the Rooker-Feldman rule" and that "the doctrine applies only in limited circumstances," explained that Rooker-Feldman's limitation of a district court's jurisdiction applies only to suits brought by state court losers "in effect seek[ing] to take an appeal of an unfavorable state-court decision to a lower federal court" — which Plaintiffs are not. Lance, 546 U.S. at 464, 466.
Second, this Court's ability to grant relief in this action is at least equal to that of the Circuit Court from which this case was removed. Because removed state court proceedings are treated as if they originated in the district court, "[a] federal district court may dissolve or modify injunctions, orders, and all other proceedings which have taken place in state court prior to removal." Jackson v. Am. Sav. Mortgage Corp., 924 F.2d 195, 199 (11th Cir. 1991). Under Florida law, a successor court may modify or vacate rulings or orders of its predecessor, prior to final judgment. Hull & Co., Inc. v. Thomas, 834 So.2d 904, 906 (Fla. 4th DCA 2003) ("As a matter of `comity and courtesy,' a judge should hesitate to undo the work of another judge who presided earlier in the case. However, prior to final judgment, a successor judge has the power to vacate or modify a predecessor's interlocutory rulings, such as an order on a motion for summary judgment.") (citing Tingle v. Dade County Bd. of County Comm'rs, 245 So.2d 76, 78 (Fla. 1971) ("While a judge should hesitate to undo his own work, and should hesitate still more to undo the work of another judge, he does have, until the final judgment, the power to do so and may therefore vacate or modify the interlocutory rulings or orders of his predecessor in the case.")); Wasa Int'l Ins. Co. v. Hurtado, 749 So.2d 579, 580 (Fla. 3d DCA 2000) ("Because the trial judge here had not entered a final judgment in the case, she could modify her previous rulings and those of her predecessor." (citing Tingle). Accordingly, if and to the extent the Circuit Court in this proceeding prior to removal was empowered to modify or vacate the foreclosure judgment entered in an earlier and separate proceeding before the same court but presided over by another judge, this Court can do so as well.
Third, even were this Court unable to vacate the foreclosure judgment, it can still grant money damages to Plaintiffs with respect to Court III — relief which Plaintiffs explicitly request. Plaintiffs specifically "request that judgment be entered against the Issuer Defendants and the Fraudulent Conveyance Defendants, and each of them, for all damages caused by their fraud" which allegedly resulted in the foreclosure judgment, extinguishment of Plaintiffs' Subsequent Mortgages, and consequent losses to Plaintiffs. That relief is squarely within this Court's capabilities. At bottom, Plaintiffs do not seek reinstatement of their interests in the Pompano Property, but to be made whole with respect to their lost investments those interests represented — practically speaking, from the long trail of the sale proceeds. Money damages can do that. Regardless of the Court's power to modify or vacate the foreclosure judgment, it can still grant legal and equitable relief in the form of monetary damages against those active or complicit in the alleged fraud.
Columbia argues that Plaintiffs' claims against it — the downstream lender on a non-purchase loan to the eventual purchaser of the Pompano Property — fail to state a claim and should be dismissed on that basis. Columbia is included in three Counts of the Amended Complaint: Count IV, seeking foreclosure on the Subsequent Mortgages and imposition of a constructive trust on the Pompano Property sale proceeds; Count V, seeking a declaratory judgment regarding the validity of, and an imposition of a constructive trust over the proceeds of, the Receiver's sale of the Pompano Property; and Count XI, seeking a declaratory judgment that Plaintiffs have a security interest in, or imposition of a lien or constructive trust over, the Pompano Property sale proceeds.
Columbia construes Plaintiffs claims as effectively duplicative, all seeking imposition of a constructive trust on the proceeds paid to Columbia from the liquidation of Hunter and sale of the Pompano Property in order to restore and elevate the Subsequent Mortgages above Columbia's facially superior but later-acquired interest in the property. This is based on the theory that the foreclosure of the Developer Mortgage was ineffective to clear title to the Pompano Property. Columbia argues for dismissal for several interlocking reasons: (a) Plaintiffs, as Columbia contends is alleged in the Amended Complaint, had actual and constructive knowledge of the foreclosure of the Developer Mortgage and, thus, extinguishment of their junior Subsequent Mortgages; (b) the lis pendens filed in that foreclosure was effective regardless of notice to Plaintiffs; and (c) with regard to Columbia's taking of a security interest in the Pompano Property through its loan to Hunter, Columbia had no duty vis-à-vis Plaintiffs with respect to Plaintiffs' contention that Columbia should have discovered the existence (and superiority) of the Subsequent Mortgages. Columbia's second argument is correct and dispositive.
A pleading in a civil action must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). To satisfy the Rule 8 pleading requirements, a complaint must provide the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, (2002). While a complaint "does not need detailed factual allegations," it must provide "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (explaining that the Rule 8(a)(2) pleading standard "demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation"). Nor can a complaint rest on "`naked assertion[s]' devoid of `further factual enhancement.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557 (alteration in original)). The Supreme Court has emphasized that "[t]o survive a motion to dismiss a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Id. (quoting Twombly, 550 U.S. at 570); see also Am. Dental Assoc. v. Cigna Corp., 605 F.3d 1283, 1288-90 (11th Cir. 2010).
When reviewing a motion to dismiss, a court, as a general rule, must accept the plaintiff's allegations as true and evaluate all plausible inferences derived from those facts in favor of the plaintiff. See Chaparro v. Carnival Corp., 693 F.3d 1333, 1337 (11th Cir. 2012); Miccosukee Tribe of Indians of Fla. v. S. Everglades Restoration Alliance, 304 F.3d 1076, 1084 (11th Cir. 2002); AXA Equitable Life Ins. Co. v. Infinity Fin. Grp., LLC, 608 F.Supp.2d 1349, 1353 (S.D. Fla. 2009) ("On a motion to dismiss, the complaint is construed in the light most favorable to the non-moving party, and all facts alleged by the non-moving party are accepted as true."); Iqbal, 556 U.S. at 678. A court considering a Rule 12(b) motion is generally limited to the facts contained in the complaint and attached exhibits, including documents referred to in the complaint that are central to the claim. See Wilchombe v. TeeVee Toons, Inc., 555 F.3d 949, 959 (11th Cir. 2009); Maxcess, Inc. v. Lucent Technologies, Inc., 433 F.3d 1337, 1340 (11th Cir. 2005) ("[A] document outside the four corners of the complaint may still be considered if it is central to the plaintiff's claims and is undisputed in terms of authenticity.") (citing Horsley v. Feldt, 304 F.3d 1125, 1135 (11th Cir. 2002)). While the court is required to accept as true all allegations contained in the complaint, courts "are not bound to accept as true a legal conclusion couched as a factual allegation." Twombly, 550 U.S. at 555; Iqbal, 556 U.S. at 678. "Dismissal pursuant to Rule 12(b)(6) is not appropriate `unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Magluta v. Samples, 375 F.3d 1269, 1273 (11th Cir. 2004) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
Under Florida law, once a plaintiff has filed an accurate lis pendens identifying the subject property and the original owner of the property, all future interest holders are warned of the existing lawsuit affecting the property and no further amendments to the lis pendens are required, even if additional foreclosure defendants are added to the lawsuit. Nikooie v. JPMorgan Chase Bank, N.A., ___ So. 3d ___, 2014 WL 6911148, at *7-8 (Fla. 3rd DCA Dec. 10, 2014). Florida's lis pendens statute expressly provides that a lis pendens constitutes a bar to enforcement against the subject property of any subsequently acquired liens or interests in or against that property that were not recorded as of the time the lis pendens was recorded. Fla. Stat. § 48.23(1)(d). When a judicial sale is conducted pursuant to proceedings described in a lis pendens, the property is forever discharged of all interests that were not recorded prior to the lis pendens. Fla. Stat. § 48.23(1)(d). When a lis pendens describes an action founded upon a duly recorded instrument, such as a mortgage, the lis pendens does not expire. Fla. Stat. § 48.23(2). "A lis pendens serves as constructive notice of the claims asserted against the property in the pending litigation with respect to one acquiring an interest in the property after the lis pendens is filed." U.S. Bank Nat. Ass'n v. Bevans, 138 So.3d 1185, 1189 (Fla. 3rd DCA 2014). That is, lis pendens attaches to the property, not to the party or the action. "One who purchases property subject to a lis pendens is bound by the judgment or decree rendered against the party from whom he makes the purchases as much so as though he had been a party to the judgment or decree himself." U.S. Bank Nat. Ass'n v. Quadomain Condominum Ass'n, Inc., 103 So.3d 977, 979 (Fla. 4th DCA 2012 (quotation omitted). And, one of the purposes of required recordation of lis pendens is "to protect future purchasers or encumbrancers of the property from becoming `embroiled' in the dispute." Id. at 978-79; see also In re Martin, 278 B.R. 634, 641 (Bankr. S.D. Fla. 2002) ("A notice of lis pendens or actual notice filed on the public records, protects both the lis pendens proponent and third parties." (citing Medical Facilities Dev. Inc. v. Little Arch Creek Props. Inc., 675 So.2d 915, 917 (Fla. 1996)).
Plaintiffs argue that SLF Series G's failure to record an amended lis pendens to include PWD — to whom the Pompano Property was deeded and with whom Plaintiffs executed the Subsequent Mortgages — renders the lis pendens ineffective against them. A search in 2008 for PWD in Florida's grantor-grantee index, they contend, would not have revealed the initial lis pendens, despite the later addition of PWD to the Foreclosure Action. See, e.g., Oz v. Countrywide Home Loans, Inc., 953 So.2d 619, 620 (Fla. 3d DCA 2007) ("[C]onstructive notice in Florida is imputed only through the grantor-grantee index of the official public records.") (citing Slachter v. Swanson, 826 So.2d 1012, 1014 (Fla. 3d DCA 2001)). Thus, Plaintiffs claim to have had no constructive notice that PWD had been made party to the Foreclosure Action and that the property interest securing their Subsequent Mortgages was subject to that lawsuit.
As to the effectiveness of lis pendens, Florida law is contrary. As the Third DCA explained,
Nikooie, 2014 WL 6911148 at *7 (emphasis added).
Because a lis pendens was recorded identifying the Pompano Property prior to PWD receiving its deed and Plaintiffs making the Subsequent Mortgages, and because PWD was properly added to the Foreclosure Action, regardless of any fraud or lack of notice to Plaintiffs, that lis pendens was effective with respect to the Pompano Property. Any rights that PWD had in the Pompano Property, including the right to encumber the property with the Subsequent Mortgages, arose after SLF Series G recorded the lis pendens in the foreclosure action. Therefore, SLF Series G — and any later purchaser — acquired title to the Pompano Property free and clear of the Subsequent Mortgages. Plaintiffs may seek redress against those parties which they allege defrauded them in shielding the Foreclosure Action from them and by permitting the foreclosure judgment and sale to go forward to the detriment of their interests in the Pompano Property. But they do not allege that Columbia was a part of that fraud. Accordingly, Plaintiffs' claims against Columbia in Counts IV, V and XI of the Amended Complaint must be dismissed.
Columbia's Motion to Strike is directed against Plaintiffs' request for attorneys' fees associated with Counts IV, V and XI of the Amended Complaint. The Motion is also directed against reference, in Count IX of the Amended Complaint, to Columbia's alleged full recourse against Westcor based title insurance coverage that may potentially be available to Columbia. The Court notes that Plaintiff's PSAC does not include any allegations regarding insurance coverage. For that reason and because, in any event, Plaintiffs' claims against Columbia must be dismissed, Columbia's Motion to Strike is denied as moot.
The Utah Defendants request transfer of this action to the District of Utah, pursuant to 28 U.S.C. § 1404(a). They explain that Plaintiffs have sued each of the Utah Defendants (among others, including many of the Defendants named here) in the Utah Action. The Utah Action involves identical or similar allegations arising out of the same operative set of facts alleged here, but covers a considerably broader set of investments and investment properties (twenty-seven, to be precise).
As the Supreme Court recently explained, 28 U.S.C. § 1404(a) "is merely a codification of the doctrine of forum non conveniens for the subset of cases in which the transferee forum is within the federal court system." Atlantic Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Tex., 134 S.Ct. 568, 580 (2013). The statute provides that [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).
"To determine the propriety of transfer to a different district, courts engage in a two-step analysis under section 1404(a)." Osgood v. Disc. Auto Parts, LLC, 981 F.Supp.2d 1259, 1263-64 (S.D. Fla. 2013)
Id. (quoting Abbate v. Wells Fargo Bank, Nat. Ass'n, 2010 WL 3446878, at *4-5 (S.D. Fla. Aug. 31, 2010) (citing Manuel v. Convergys Corp., 430 F.3d 1132, 1135 n. 1 (11th Cir. 2005)).
"The federal courts traditionally have accorded a plaintiff's choice of forum considerable deference." In re Ricoh Corp., 870 F.2d 570, 573 (11th Cir. 1989). That choice "should not be disturbed unless it is clearly outweighed by other considerations." Robinson v. Giarmarco & Bill, P.C., 74 F.3d 253, 260 (11th Cir. 1996). "The burden is on the movant to establish that the suggested forum is more convenient" than the plaintiff's chosen forum. Steifel Labs., Inc. v. Galderma Labs., Inc., 588 F.Supp.2d 1336, 1338 (S.D. Fla. 2008) (citing Ricoh, 870 F.2d at 573). "Ultimately, transfer can only be granted where the balance of convenience of the parties strongly favors the defendant." Trafalgar Capital Specialized Inv. Fund (In Liquidation) v. Hartman, 878 F.Supp.2d 1274, 1282 (S.D. Fla. 2012) (quoting Steifel, 588 F.Supp.2d at 1339).
Transfer of this action to the District of Utah is appropriate under the conditions present here.
First, as discussed above, stripped of its claims against Columbia
Second, the interests of convenience to the parties and judicial economy would be ill-served by forcing the parties to litigate this matter twice, both here and in Utah. Plaintiffs have sued the same parties on allegations involving the same fraudulent scheme both in this action and in Utah. While Plaintiffs did include certain investment advisors as Defendants in the Utah Action, and named certain downstream purchasers of the Pompano Property here and not there, this case is in every practical way a subset of the Utah Action. Plaintiffs' initial investment and the consequent bridge loans for development of the investment property are part of the same series master investment plan — including as to SLF Series G. The sale of the investment properties after their development failed was part of a single master purchase and sale agreement — active including the Pompano Property. Plaintiffs' theory of the fraud and their right to relief — fraud by the investment-side Defendants and collusion or complicity, resulting in a lack of bona fide or good faith ownership, by the purchase-side Defendants — is identical. Plaintiffs' claims largely overlap as between the two cases. True, the intra-foreclosure fraud involving the Subsequent Mortgages financing the Pompano Property does not appear with respect to the other investment properties in the Utah complaint. Then again, the Utah complaint does not describe how SLF secured foreclosure of the other investment properties. In any event, that distinction simply makes the Pompano fraud a wrinkle in the larger fraudulent scheme. In short, the fraud alleged by Plaintiffs here is subsumed within the overarching fraud alleged in the Utah Action.
Accordingly, the locus of operative facts, the convenience of all parties, trial efficiency and the interests of justice all weigh heavily in favor of transfer to Utah. This holds true despite the fact that most Plaintiffs are not from Utah; given the nature of this suit, trial here is no more convenient, but trial twice is decidedly more inconvenient. The witnesses and documents relevant to SLF and related Defendants are located in Utah. As is apparent from the issues of personal jurisdiction raised by the Utah Defendants and Bo Brower, certain Defendants are only available in Utah. The investment properties are located in Washington, Oregon and Florida — not in Utah. But Plaintiffs' Complaints here and in the Utah Action make clear that the locus of evidence in this case will be with the SLF Defendants, and not where the properties are located. Finally, Plaintiffs' choice of forum is somewhat moot here — they have chosen to sue in both fora. The totality of the circumstances here clearly favors transfer of this action to the District of Utah.
The Receiver argues that because leave of the Washington court to sue the Receiver in Utah was not obtained, and because the Receiver is not otherwise a party to the Utah Action, under the Barton doctrine, the district court in Utah lacks subject matter jurisdiction over Plaintiffs' claims against the Receiver. The Receiver's argument is misplaced.
"[I]t is a general rule that before suit is brought against a receiver, leave of the court by which he was appointed must be obtained." Carter v. Rodgers, 220 F.3d 1249, 1252 (11th Cir. 2000) (quoting Barton v. Barbour, 104 U.S. 126, 127 (1881)). As one purpose of the Barton doctrine, the requirement to obtain leave enables the receivership court to maintain control over the receivership estate. See Palaxar Grp., LLC v. Williams, 2014 WL 5059286, at *3 (M.D. Fla. Oct. 2, 2014); In re VistaCare Grp., LLC, 678 F.3d 218, 228 (3d Cir. 2012) Allard v. Weitzman, 991 F.2d 1236, 1240 (6th Cir. 1993). "Where a plaintiff neglects to obtain leave from the appointing court, a suit filed against the receiver in another court must be dismissed for lack of subject matter jurisdiction." Patco Energy Express, LLC v. Lambros, 353 F. App'x 379, 381 (11th Cir. 2009).
Here, the Washington court overseeing Hunter's liquidation appointed the Receiver in order to manage the Pompano Property. The Receiver, based on that authorization, participated in this action before the Circuit Court and after removal to this Court. Transfer of this action to a separate venue does nothing to upset or diminish the Washington court's authorization or the Receiver's management of the Pompano Property sale proceeds. No new case is being initiated. Rather, the current case in which the Receiver is participating is being transferred. Accordingly, leave of the Washington court is unnecessary as it has already been given. Further, continued participation of the Receiver in this action promotes control by the Washington court over the assets of Hunter's receivership estate. This action may be transferred with the Receiver as a named Defendant consistent with the Barton doctrine.
Bo Brower seeks dismissal for lack of personal jurisdiction and for failure to state a claim. The Defendant construes Plaintiffs' Amended Complaint as a shotgun pleading with insufficient allegations of improper actions taken specifically by Bo Brower. Because this action will be transferred to the District of Utah, and Bo Brower is resident in Utah and subject to jurisdiction of the transferee court there, the issue of personal jurisdiction is moot. Further, Plaintiffs' PSAC does not name Bo Brower as a Defendant. This Court will leave whether and to what extent Plaintiffs will be required to amend their pleading to the sound discretion of the district court upon transfer.
Disposition of the Motion to Remand and Motion to Transfer involves interlocking considerations of supplemental jurisdiction and proper venue. Consideration of those issues together is most clearly stated in reference to Plaintiff's Proposed Second Amended Complaint.
For purposes of clarity, the Amended Complaint is Plaintiffs' operative pleading in this matter. Plaintiffs, at the Court's request, submitted the PSAC to assist the Court in addressing the motions currently before it. The Court has made reference to the PSAC in that analysis to provide the parties the fullest treatment of the issues presented here, but continues properly to treat the Amended Complaint as the operative pleading. Because the Court has determined not to remand this case to the Circuit Court, and to transfer it to the District of Utah, the Court will, as noted above, leave consideration of whether and how to permit Plaintiffs to amend their pleading to the discretion of the court in Utah upon transfer.
The prospective changes in Plaintiffs' Proposed Second Amended Complaint do not require remand of this action to the Circuit Court. The PSAC eliminates Plaintiffs' class representation claims, Counts VI and IX (which signaled federal jurisdiction by reason of the diversity of citizenship of the parties under the Class Action Fairness Act ("CAFA"), 28 U.S.C. §§ 1332, 1446, 1453), and asserts a violation by PCG of Oregon securities laws, rather than federal securities laws.
Regardless, courts look to claims in the operative complaint at the time of removal to assess federal subject matter jurisdiction. See Ehlen Floor Covering, Inc. v. Lamb, 660 F.3d 1283, 1287 (11th Cir. 2011) ("The existence of federal jurisdiction is tested as of the time of removal."); Adventure Outdoors, Inc. v. Bloomberg, 552 F.3d 1290, 1294-95 (11th Cir. 2008) (same); Pintando v. Miami-Dade Housing Agency, 501 F.3d 1241, 1243 n.2 (11th Cir. 2007) ("[T]he district court must look at the case at the time of removal to determine whether it has subject-matter jurisdiction"). The Supreme Court has further held that a plaintiff's post-removal amendment of her pleading to eliminate a basis for federal jurisdiction solely to secure a state forum in which to try the case is a factor a district court can consider when deciding whether to remand a case. Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 357 (1988) ("If the plaintiff has attempted to manipulate the forum, the court should take this behavior into account in determining whether the balance of factors to be considered under the pendent jurisdiction doctrine support a remand in the case.") superseded by statute, 28 U.S.C. § 1367 (providing that a district court may in its discretion decline to exercise supplemental jurisdiction where one of four circumstances apply, including if it has "dismissed all claims over which it has original jurisdiction"). In making a determination as to pendent jurisdiction under 28 U.S.C. § 1367(c) — including where federal claims have been "dismissed" — the district court should consider the factors articulated by the Supreme Court in United Mines Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966): judicial economy, convenience, fairness to the parties, and whether all the claims would be expected to be tried together. Ameritox, Ltd. v. Millennium Labs., Inc., ___ F.3d ___, 2015 WL 5155240, at *10 (11th Cir. Sept. 3, 2015) ("[D]etermining whether to dismiss the claims calls for the court to weigh the `host of factors' outlined in Gibbs and Cohill: `judicial economy, convenience, fairness, and comity.'").
This is not a case of improper removal. At the time Bo Brower removed this case to federal court, Plaintiffs' Amended Complaint pleaded minimal diversity and the required amount in controversy and contained claims for violation of federal securities laws, properly creating federal subject matter jurisdiction. Plaintiffs have on their own admission designed the PSAC so as to remove any claims invoking federal question or CAFA jurisdiction. See ECF No. [67] at 5-6. There is nothing wrong with attempting to avoid federal court or preferring a state forum. But the Court must consider the issue of forum manipulation in conjunction with the other Gibbs factors under the circumstances here — critically, the pending case in the District of Utah involving the same parties and allegations but covering twenty seven other investments and investment properties, all but the Pompano Property, implicated in the alleged fraud.
Again, this action involves a subset of the same larger fraud alleged in the Utah Action, and Plaintiffs request, at bottom, the same relief — including legal or equitable relief from the several state-level foreclosures involving the various investment properties. Declining to accept jurisdiction over Plaintiffs' state law claims and remanding the action to state court would force the parties to try this case twice, in Utah and before the Circuit Court. Plaintiffs cast this case as unique and separate from the overarching fraud alleged in the Utah Action largely on the basis of their request to vacate the judgment of foreclosure in the Foreclosure Action. On their argument, their other claims would fail as a set of dominoes if they cannot vacate the foreclosure judgment, a task they misconstrue as solely within the purview of the Circuit Court. The Court has addressed and disposed of that argument above and below, see §§ III.B.2, III.E.3. That is, at the very least, a federal district court can grant Plaintiffs money damages against the investment-side Defendants regardless of whether it can vacate the foreclosure judgment. Moreover, Plaintiffs' fraudulent transfer claims can be stated against the downstream interest holders even if the foreclosure judgment stands. (On the flipside, those downstream purchasers would be immunized from Plaintiffs' claims as bona fide purchasers or good faith transferees — effectively functional equivalents here — even were the foreclosure judgment vacated.) Regardless, the relief Plaintiffs seek with respect to the foreclosure judgment is not functionally or fundamentally different from the relief they seek in the Utah Action with respect to the other investment properties. Those properties, on Plaintiffs' allegations in the Utah complaint, also went through foreclosure proceedings and were sold free and clear to Workmen's in the same sale as was the Pompano Property. Plaintiffs' claims in the Utah Action challenge state court foreclosure proceedings in the same way in which Count III of their Amended Complaint does here. If Plaintiffs believe that they need to turn to the state courts for recourse against the ramifications of those foreclosure judgments, they will need to litigate this fraud in at least three separate state fora (i.e., the investment properties are located in Washington, Oregon and Florida) and possibly in dozens of separate actions. By contrast, the implied theory behind Plaintiffs' single action in Utah, and the upshot of this Court's holding with respect to Count III of the Amended Complaint and the Motion to Transfer, is that Plaintiffs can seek relief from all Defendants involved in the alleged investment fraud efficiently and economically before one federal district court. This is because that court has the power to grant Plaintiffs the full panoply of relief necessary to address their alleged losses.
These conditions of judicial economy, fairness to the Defendants, and convenience of all implicated by these actions militate against declining pendent jurisdiction and remanding this case. The Court in its discretion declines to remand this case to the Circuit Court.
Plaintiffs have amended Count III of the PSAC to remove their request for money damages as relief with respect to vacation of the foreclosure judgment in the Foreclosure Action. Again, the Amended Complaint is the operative pleading. In any event, regardless of how Plaintiffs define their cause of action, the relief they seek with respect to SLF Series G and the Pompano Property (as with all the investment properties) is clear: return on their investment allegedly lost through fraud by SLF and its related entities in conjunction with the initial and subsequent purchasers of the investment properties. The District Court in Utah will manage when and how Plaintiffs will be permitted to amend their complaint to align this case with the Utah Action.
Plaintiffs' Proposed Second Amended Complaint contains a set of factual allegations regarding Columbia's knowledge of the allegedly fraudulent nature of the transfers of the Pompano Property preceding Columbia's loan to Hunter, by which Hunter ultimately took title to the property, including: that Columbia had constructive notice of the Subsequent Mortgages; that the Subsequent Mortgages had not been joined in the Foreclosure Action; that Columbia did not perform adequate due diligence when closing the loan to Hunter; and that, ultimately, Columbia was "not a good faith transferee who took for adequate value." PSAC ¶¶ 107, 122-124, 192. Plaintiffs further allege that Columbia's loan to Hunter "was not for comparable value." Id. ¶ 107. None of this implicates Columbia in any way in the alleged initial fraud. But it does appear to state a claim for avoidance of both Columbia's security interest in the Pompano Property, taken as part of the loan to Hunter, and the transfer of the Pompano Property sale proceeds to Columbia, in satisfaction of its loan to Hunter. Compare Am. Compl. ¶ 259 with PSAC ¶ 192. Specifically, the PSAC alleges that Columbia, as a subsequent transferee of the value of the Pompano Property — which was initially transferred from PWD to SLF Series G through the foreclosure sale in order to defraud Plaintiffs, as holders of the Subsequent Mortgages — did not acquire its lien or take the sale proceeds for reasonably fair value and in good faith. See Fla. Stat. §§ 726.05(1)(a), 726.09(1).
That said, Plaintiffs' fraudulent conveyance claim in Count VII of the PSAC is asserted against only what that complaint defines as the "Fraudulent Conveyance Defendants," which does not include Columbia. Plaintiffs have themselves explicated that Columbia is not named in their proposed fraudulent transfer claim. See ECF No. [67] at 3.
Finally, Columbia has acceded that Plaintiffs' claims against it, to the extent not dismissed, may be severed and retained, and adjudicated as between Plaintiffs and Columbia without involvement of the remaining Defendants. See ECF No. [66] at 4-5.
As discussed above, Plaintiffs' claims against Columbia asserted in the Amended Complaint must be dismissed. And Plaintiffs, while providing factual allegations in their Second Amended Complaint to support a claim of fraudulent transfer against Columbia, do not in fact propose to assert that claim. That said, to the extent Plaintiffs intend to assert fraudulent conveyance claims against Columbia, those claims would be severed from the remainder of this action and would be separately adjudicated by this Court.
For the foregoing reasons, it is hereby
