Felland v. Clifton
| Decision Date | 18 July 2013 |
| Docket Number | 10-cv-664-slc |
| Parties | ROBERT W. FELLAND, Plaintiff v. PATRICK CLIFTON; CM LA PERLA DE PENASCO, S. DE R.L. DE C.V., a Mexican corporation; and CLIFTON MERIDIAN LLC, Defendants. |
| Court | U.S. District Court — Western District of Wisconsin |
The subject of this removal case is a planned but never-completed seaside condominium development in Mexico known as La Perla del Mar. On June 1, 2010, plaintiff Robert Felland commenced a civil action against defendants Patrick Clifton, CM La Perla de Penasco, S. De R.L. De C.V. and Clifton Meridian LLC in the Circuit Court for Oneida County, Wisconsin, seeking rescission of the contract, which he alleges defendants fraudulently induced him to sign for the construction and purchase of a condo, and the return of his down payments. Dkt. 1, Exh. 2. On November 1, 2010, defendants removed the case to this court pursuant 9 U.S.C. § 205, which grants federal subject matter jurisdiction over international agreements arising under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. § 201 et seq., and the Inter-American Convention on International Commercial Arbitration, 9 U.S.C. § 301 et seq. Dkt. 1. On defendants' motion, I dismissed the case for lack of personal jurisdiction, dkt. 44, but the Court of Appeals for the Seventh Circuit reversed and remanded. See Felland v. Clifton, 682 F.3d 665 (7th Cir. 2012).
Currently before the court are: (1) defendants' motion to dismiss for improper venue and allow the parties to arbitrate the dispute pursuant to the contract, dkt. 63; and (2) Felland's amended motion to remand to state court for lack of subject matter jurisdiction and alternativemotion to order arbitration to take place in the United States, dkt. 67. Defendants also ask the court to dismiss this case, arguing that all of Felland's claims are subject to arbitration.
Because I find that the parties' arbitration agreement is enforceable under the Convention and encompasses Felland's claims of intentional misrepresentation and rescission, the parties must arbitrate their dispute as required by their contract. The agreement, however, is silent with respect to the location of the arbitration. Therefore, pursuant to 9 U.S.C. §§ 4, 206 and 208, I am ordering the arbitration to take place in the Western District of Wisconsin. Finally, given the unique circumstances in this case, I am retaining jurisdiction and staying this action pending arbitration.
According to the Court of Appeals for the Seventh Circuit, "a motion to dismiss based on a contractual arbitration clause is appropriately 'conceptualized as an objection to venue, and hence properly raised under Rule 12(b)(3).'" Faulkenberg v. CB Tax Franchise Systems, LP, 637 F.3d 801, 807-08 (7th Cir. 2011). When considering a Rule 12(b)(3) motion, the court must accept Felland's version of events as true but may consider evidence submitted by the parties outside the pleadings without converting the motion to one for summary judgment. Faulkenberg, 637 F.3d at 806 and 809-10. Therefore, from the complaint and the documents submitted by the parties in connection with the pending motions, I draw the following facts, solely for the purpose of deciding the motions:
ALLEGATIONS OF FACT
Plaintiff Robert Felland is a resident of Three Lakes, Wisconsin in Oneida County. Defendant Patrick Clifton is a resident of Scottsdale, Arizona who owns and controls both defendant Clifton Meridian LLC, which is organized under Arizona law, as well as defendant CM La Perla de Penasco, S. De R.L. De C.V. ("CM la Perla"), a corporation organized under the laws of Mexico. Defendant Clifton Meridian is a real estate development firm based in Scottsdale that specializes in building upscale beachfront residential projects located primarily in Northern Mexico.
In 2005, Clifton and Clifton Meridian began a luxury high rise condominium project named "La Perla del Mar" (the "Project") in the beachfront community of Puerto Penasco, Mexico, about 30 miles from the Arizona border. Clifton had formed CM La Perla to serve as the owner of the property on which the Project was to be constructed and to facilitate the sale of condominium units. CM La Perla maintained a sales office for the Project in Puerto Penasco, where it employed sales representatives employed by or affiliated with Clifton Meridian.
On February 23, 2006, while vacationing in Arizona, Felland and his wife, Linda Felland, made an excursion to Puerto Penasco to tour the Project's model unit. During their visit, the Fellands met with defendants' sales representative, Jon Puckett. During the sales presentation, the Fellands were told that construction of the Project was to start in a few weeks and would be completed no later than early 2008. Puckett also gave them a lengthy, full-color brochure for the project, which included conceptual renderings of the completed building, floor plans, and a description of the building amenities. The back of each page of the brochure states: "A Clifton Meridian Community."
Relying on defendants' representations, and while still on site in Puerto Penasco, Felland signed a "Reservation of Unit" form and paid a refundable $5,000 deposit. The form identifies Patrick Clifton as the representative and manager of CM La Perla. Under the terms of the Reservation of Unit form, a buyer wishing to finalize the purchase of the unit had to sign a type of contract under the laws of Mexico called a Promise of Trust Agreement (PTA).
On March 9, 2006, Felland signed the PTA, which stated that the Project "will be built" and that CM La Perla "commits to deliver" Felland's condominium "no later than January 31, 2009." It also contained the following provision:
PTA art. Fourteenth, at p. 16.
Felland avers that he agreed to the arbitration clause in the PTA because he did not believe that a dispute with defendants was likely. According to Felland, he held this belief because of the type of representations that the defendants made in the promotional literature and the PTA. Specifically, the promotional literature stated that "[d]eveloper financing currently offered is no-qualifying, 30% down, 15 years @ 10.5%." The PTA also discussed developer financing, stating that:
The balance of the Purchase Price, US $476,000.00 seventy percent (70%), shall be paid as follows:
Felland understood these representations to mean that the defendants had the financial wherewithal to fund 70% of the project on their own. By committing to fund 70% of a multi-million dollar project, Felland believed that defendants had put substantial "skin in the game." No one told the Fellands that defendants had not secured construction financing or that the initiation of construction was contingent upon the sale of additional units.
The purchase price for Felland's unit was $680,000. The PTA required a 30% down-payment (totaling $204,000), payable in three installments of $68,000 over 90 days. Having already paid $5,000 when he signed the Reservation of Unit form, Felland tendered a check for an additional $63,000 when he signed the PTA. Felland was told that a fully executed copy of the PTA would be mailed to him once it had been signed by Patrick Clifton on behalf of CM la Perla. Felland received the fully executed PTA in an envelope postmarked April 10, 2006. He subsequently paid two more installments of $68,000 of the down payment, for a total of $204,000.
Although various updates sent by defendants caused Felland to believe that the project was proceeding as planned, defendants failed to deliver the condominium by January 31, 2009.On February 10, 2009, defendant Patrick Clifton sent an e-mail to all of the owners, stating in part:
Unfortunately I must be very clear about the following: if anyone, I don't care who they are, engages in any activities to deliberately sabotage our financing attempts by organizing some type of legal action against the project or spread malicious and false lies about the project or developer I will assure you that we will take immediate and punitive legal action against the party or parties at fault.
After receiving this e-mail, the Fellands contacted an attorney, who on February 18, 2009, demanded that defendants refund the Fellands' down payment. Defendants refused. On April 9, 2009, Felland's attorney requested copies of any construction financing agreements or commitments in place at the time Felland paid the $204,000 in 2006. In a telephone call shortly thereafter, defendants' attorney stated that there were no construction finance agreements or commitments. Similarly, in an e-mail dated April 29, 2009, defendants' attorney stated that there was no "funding when your client signed on" and that "advance sales were funding the undertaking of the project." Construction of the Project has not advanced beyond the limited and preliminary work performed in 2007 and 2008.1
On June 1, 2010, Felland filed suit in the Circuit Court for Oneida County, Wisconsin,...
To continue reading
Request your trial