Firemen's Ins. Co. of Newark, NJ v. Keating, 90 Civ. 1076 (PKL)
| Decision Date | 13 December 1990 |
| Docket Number | 90 Civ. 1677 (PKL),No. 90 Civ. 1076 (PKL),90 Civ. 1678 (PKL),90 Civ. 1676 (PKL),90 Civ. 1809 (PKL),90 Civ. 1753 (PKL),90 Civ. 1754 (PKL),90 Civ. 6164 (PKL) and 90 Civ. 6288 (PKL).,90 Civ. 1076 (PKL) |
| Citation | 753 F. Supp. 1137 |
| Parties | FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Plaintiff, v. Robert F. KEATING, Ellen N. Keating, Eugene F. Loro and Ruth E. Loro Trust, Ronald D. Mercaldo, Barbara R. Mercaldo, Delores M. O'Gorman, Rae Pyper and John N. Sakellariadis, Defendants. FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Plaintiff, v. Ian BROWN, Defendant. FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Plaintiff, v. Albert H. STONE and Cynthia A. Stone, Defendants. FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Plaintiff, v. Joseph A. HENDRICH, Defendant. FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Plaintiff, v. Reva Butler HOFMANN, Defendant. FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Plaintiff, v. Warren CHISUM, Defendant. FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Plaintiff, v. SMITH & LEANY PARTNERSHIP, Don Smith and Lynn Leany, Defendants. FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Plaintiff, v. Joel C. ALSAKER, Bruce Babcock, Jr., Kenneth G. Braun, Paul F. Depond, Carolina A. Depond, Hassan Fakouraghai, Karen L. Fakouraghai, Robert I. Lewy, Henry K. Lui, John E. Metzger, R. Hamilton Morrison, Patricia Sipl a/k/a Patricia Sipl-Gannon, William J. Gannon, David C. Smith Family Trust, David E. Sponsler, Stanford Builders Supply, Inc., Don R. Wangberg and Bonnie J. Wangberg, Defendants. FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY, Plaintiff, v. Edward L. CAHILL, Edward L. Carter, Linda S. Carter, George Chimples, Carl Forsyth, Velma Forsyth, Marc S. Hermelin, Linda Hermelin, David H. Jaffe, Aram H. Keith, Edward S. Kraemer, Richard L. Monteith, Charlotte B. Monteith, Gary S. Nachman, Victor A. Nix, Jr., Ken O'Gorman, Jr., Floyd Stuart Reid, Lawrence S. Rich, William J. Sahl, Mayer A. Sarfan, Sidney M. Seltzer, George W. White and J.P. Wilson, Defendants. |
| Court | U.S. District Court — Southern District of New York |
Hart & Hume, New York City (Mark S. Gamell, of counsel), for plaintiff.
Beigel & Sandler, New York City (Patricia C. Hayashi, of counsel), and Barry H. Hart, Ltd., Phoenix, Ariz. (Barry H. Hart, of counsel), and Kelly & Roth, New York City (William H. Roth, of counsel), for defendants.
These nine related actions arise from purchases by defendants of investments in a limited partnership. All defendants (the "defendants") have now moved to dismiss these actions for failure of plaintiff Firemen's Insurance Company of Newark, New Jersey ("plaintiff" or "Firemen's"), to comply with the venue provisions of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. Those defendants represented by the law firm of Barry Hart, Esq., (the "Hart defendants"), have further moved for dismissal of the actions in which they are defendants (the "Hart actions") on the additional ground of forum non conveniens, or, in the alternative, for a stay of the Hart actions pending resolution of an Arizona state court action. Plaintiff has cross-moved, pursuant to Federal Rule of Civil Procedure 42(a), for consolidation of these actions for pretrial purposes only.
On November 18, 1985, the promoters of CSH-I Hotel Limited Partnership (the "Partnership"), a Texas limited partnership, began an offering of $20,000,000 in limited partnership interests in the Partnership. Investors could purchase units in the Partnership either with a single cash payment, or by making a small cash down payment and executing an installment promissory note. In cases in which the latter method of payment was employed, a surety bond would be issued, guaranteeing, in effect, the payments due under the note. The investor was then required to execute an "Indemnification and Pledge Agreement" ("Indemnification Agreement") in favor of the surety.
When the offering failed to sell a sufficient number of partnership units, the promoters arranged to borrow approximately $19,360,000 from Contitrade Services Corporation ("Contitrade"). This amount was required to close escrow on certain hotel properties throughout the United States that the promoters were obligated to purchase. The promoters and Contitrade then arranged for plaintiff to provide the necessary surety bonds, the loan from Contitrade to the Partnership collateralized by the investors' promissory notes, which were assigned to Contitrade, and by plaintiff's accompanying surety bonds, in which Contitrade was named the obligee.
Between January and May 1986, the defendants in these actions purchased units of the Partnership. These investments were purchased using the installment method, and thus each defendant executed a promissory note in favor of the Partnership, an Indemnification Agreement in favor of plaintiff,1 and plaintiff issued a surety bond on behalf of each defendant. After Contitrade was assigned the Partnership's rights under the notes, Contitrade in turn assigned both the notes and plaintiff's surety bonds to Manufacturer's Hanover Trust Company ("MHT"), as agent for Massachusetts Mutual Life Insurance Company.
The Partnership filed for bankruptcy in June 1989, and defendants have refused to make further payments on the notes, alleging that their investments in the Partnership were induced by misrepresentation and fraud.2 Consequently, defendants are now in default on those notes, and MHT has demanded payment from plaintiff pursuant to plaintiff's surety bonds. Defendants, however, have refused to make payments to plaintiff pursuant to the Indemnification Agreements, asserting that those agreements, like the notes, are void and unenforceable as a matter of law. Plaintiff thus commenced the instant actions, seeking to compel defendants to comply with the terms of the Indemnification Agreements.
Defendants have now moved to dismiss these actions, asserting that the venue provisions of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (the "FDCPA"), require that plaintiff bring suit against these defendants in courts other than the United States District Court for the Southern District of New York. The Hart defendants have separately moved for dismissal of the Hart actions on the ground of forum non conveniens, or, in the alternative, for a stay of the Hart actions pending resolution of the Pyper action pending in Arizona.
Rule 42(a) "empowers a trial judge to consolidate actions for trial when there are common questions of law or fact to avoid unnecessary costs or delay." Johnson v. Celotex Corp., 899 F.2d 1281, 1284 (2d Cir. 1990); see also Katz v. Realty Equities Corporation of New York, 521 F.2d 1354, 1358 (2d Cir.1975). This rule also permits the consolidation of actions at the pretrial stage. See Katz, supra, 521 F.2d at 1359 (); 9 Wright & Miller, Federal Practice and Procedure § 2382 at 257 (1971) () (citing MacAlister v. Guterma, 263 F.2d 65, 68 (2d Cir.1958)).
In deciding the appropriateness of consolidation, the Court must balance the interest of judicial convenience against the potential for delay, confusion and prejudice that may result from such consolidation. Johnson, supra, 899 F.2d at 1284-85; Bank of Montreal v. Eagle Associates, 117 F.R.D. 530, 532 (S.D.N.Y.1987). In the cases at bar, it is clear that the issues of fact and law relating to plaintiff's claims and defendants' defenses are substantially identical. In each case, for example, plaintiff's claims are based on identical Indemnification Agreements and identical legal principles. Defendants have made no showing that delay, confusion or prejudice would result from the requested consolidation, and to the extent such problems become manifest at a later date, if ever, they may be rectified by the Court at such time. Accordingly, plaintiff's motion to consolidate these actions, for pretrial purposes only, is granted.
Defendants have moved to dismiss the instant actions on the ground that plaintiff has not complied with the venue provisions of the FDCPA. Section 1692i of 15 U.S.C. provides, in relevant part:
Defendants argue that § 1692i(a)(2) applies to the actions brought by plaintiff, and thus these actions must be brought in the districts where the defendants reside or where the defendants entered into the Indemnification Agreements. Defendants' motion rests on an argument that, by serving as counsel to plaintiff in these actions, the law firm of Hart & Hume is acting as a "debt collector" within the meaning of the FDCPA. Defen...
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