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Venue Transfer in Construction Debt Suit

Deborah Elkins//July 11, 2016

Venue Transfer in Construction Debt Suit

Deborah Elkins//July 11, 2016//

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In this suit filed by a court-appointed re­ceiver for a chapter 7 business-group debtor seeking payment from a surety on several projects owned by the state of Maryland on which debtor allegedly is owed $8 million, the Alexandria U.S. District Court has per­sonal jurisdiction over defendants, but will transfer venue to the District of Maryland pursuant to 28 U.S.C. § 1404(a).

Defendants raise two challenges to per­sonal jurisdiction. Defendants Herbert and Young argue the claims alleged against them are commercial torts, which are not the re­ceiver’s “property” within the meaning of the Stay Lift and Receiver orders. The receiver brought this lawsuit to collect payments allegedly owed to debtor for subcontractor services rendered and alleges that Herbert and Young knowingly and/or wrongfully re­tained those payments. Payments for sub­contract services performed fall within the Stay Lift and Receiver Order definition of property as either accounts, general intangi­bles or proceeds thereof. The nature of the property and this proceeding do not change simply because the receiver bases his claim against these defendants on the Mary­land Construction Trust Fund Statute. The claims seek only to recover alleged receiver­ship property and are ancillary to plaintiff’s role as receiver.

Defendant Herbert also argues that exer­cising personal jurisdiction over him would violate his Fifth Amendment due process rights. He has not carried his burden of prov­ing extreme inconvenience or unfairness in this case. Requiring him to travel less than 80 miles from his home to this courthouse is not constitutionally inconvenient or unrea­sonable, regardless of traffic conditions.

Transfer order

The court further finds that venue is proper, as this proceeding is ancillary to the appointment of a receiver and personal ju­risdiction is proper. However, the court will exercise its discretion to transfer the case to the Maryland U.S. District Court.

The receiver has three connections to this forum: he has his principal place of business in Virginia, this court appointed him as re­ceiver and debtor formerly was at home in this district. These connections entitle his choice of venue to some weight, but that weight is reduced slightly by the fact that Virginia has very little, if any, connection to the factual circumstances giving rise to this suit.

Defendants have not shown that the con­venience of the parties weighs in favor of transfer. However, Yancey does not dispute the assertion that Maryland is more con­venient for witnesses and that assertion is reasonable given that all three construction sites are located in Maryland. The interest in having localized controversies resolved at home weighs heavily in favor of transfer of this case to the Maryland federal court. The court will transfer this case to the District of Maryland pursuant to 28 U.S.C. § 1404(a).

The court did not rely on the forum se­lection clause for this decision. Under 4th Circuit law, the forum selection clause at issue in this case points to a nonfederal fo­rum, “Court of Maryland,” which typically is interpreted to name a state court. Because the forum selection clause at issue points to a nonfederal forum, the appropriate proce­dure for applying the clause is forum non conveniens. No party, however, has argued that forum non conveniens requires dismiss­al of this case. The court will not sua sponte apply a doctrine that no party has advocated for, that could unreasonably affect the feder­al receiver’s rights and that defendants po­tentially waived or do not desire.

Yancey v. International Fidelity Ins. Co. (Cacheris) No. 1:16cv57, May 25, 2016; USDC at Alexandria, Va.; Erika L. Morabi­to for plaintiff; Stephen M. Seeger for defen­dant. VLW 016-3-289, 27 pp.

VLW 016-3-289

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