IHFC Props., LLC v. APA Mktg., Inc., 1:10–cv–568.

Decision Date24 February 2012
Docket NumberNo. 1:10–cv–568.,1:10–cv–568.
Citation850 F.Supp.2d 604
CourtU.S. District Court — Middle District of North Carolina
PartiesIHFC PROPERTIES, LLC, Plaintiff, v. APA MARKETING, INC., and Whalen Furniture Manufacturing, Inc., Defendants.


Andrew Sampson Lasine, Keziah Gates & Samet, High Point, NC, for Plaintiff.

James R. Hundley, Wyatt Early Harris & Wheeler, L.L.P., High Point, NC, Jeffrey T. Workman, Tate, Gaylord, Lucas, Purdom & Workman, LLP, Greensboro, NC, Randall S. Waier, Law Offices of Randall S. Waier, Newport Beach, CA, for Defendants.


THOMAS D. SCHROEDER, District Judge.

This is a breach of contract action brought by IHFC Properties, LLC (IHFC), against APA Marketing, Inc. (APA), signatory to the contract, and Whalen Furniture Manufacturing, Inc. (Whalen), which allegedly assumed APA's contract liabilities. Whalen moves to dismiss the action for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3) or, alternatively, to transfer the action pursuant to 28 U.S.C. §§ 1406(a) and 1404(a) (Doc. 13), and IHFC moves to strike Whalen's reply brief (Doc. 20). The United States Magistrate Judge entered an Order and Recommendation in which he struck the reply brief and recommended denial of the motion to dismiss and/or transfer venue. (Doc. 24.) Before the court presently is Whalen's appeal of the Magistrate Judge's Order striking its reply brief and attachment and its objection to the Recommendation insofar as it urged denial of its motion to dismiss or transfer. (Doc. 26.) For the reasons that follow, the Magistrate Judge's Order not to consider IHFC's reply brief will be affirmed and Whalen's motion to dismiss and request to transfer venue will be denied.


In addition to the factual background set forth by the Magistrate Judge in his Order and Recommendation, the record, taken in a light most favorable to IHFC, reveals the following:

Plaintiff IHFC is a Delaware corporation that owns and operates a large showroom facility in High Point, North Carolina, branded as the International Home Furnishing Center (“Furniture Center”). IHFC leases portions of the Furniture Center to furniture manufacturers and vendors during the semi-annual International Home Furnishings Market (“Furniture Market”). (Doc. 18 at 1.) Defendant Whalen, incorporated under the laws of California, manufactures, markets, and sells furniture and decorative accessories across the United States from its corporate headquarters in San Diego, California. (Doc. 13–1 at 9.) Defendant APA is also a California corporation that, at least until 2008, was similarly engaged in the furniture trade. (Doc. 3 at 1–2.)

In the fall of 2006, IHFC leased a 15,421 square-foot showroom in its Furniture Center to APA (the “Lease”). The Lease term is five years, permits APA to participate in the biannual Furniture Markets in April and October, and obligates APA to pay a “base rental” of $14.50 per square foot. (Doc. 13–1 at 54.)

On July 10, 2008, nearly two years into the Lease, APA entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Whalen, by which Whalen agreed to purchase certain of APA's assets. (Doc. 3 at 2; Doc. 13–1 at 28.) At the time of the Purchase Agreement, APA had fallen behind in its rent due under the Lease for the October 2008 Furniture Market. (Doc. 18 at 2.) On September 26, 2008, Whalen paid the $74,645.58 in outstanding rent due under the Lease and occupied the showroom during the October 2008 Furniture Market. (Doc. 3 at 2–3; Doc. 18 at 3, 14.) Thereafter, Whalen paid IHFC $119,430.41 under the Lease for the April 2009 Furniture Market and occupied the showroom again. (Doc. 3 at 2–3; Doc. 18 at 4, 16.) After the April 2009 Furniture Market, however, neither APA nor Whalen made any further payment and vacated the showroom.

On June 22, 2010, IHFC filed this lawsuit against APA and Whalen in the General Court of Justice, Superior Court Division, in Guilford County, North Carolina. IHFC's three count verified complaint alleges that APA, as the signatory to the Lease, and Whalen, which IHFC charges had assumed the lease, are liable for rent in arrears, interest, and attorney's fees (Count I) and future rent (Count II). (Doc. 3.) In addition, IHFC charges that Whalen's purchase of APA's operations constituted a mere continuation of the latter's business and/or represented a de facto merger between the two entities, and thus that Whalen is liable for rent due under the Lease, interest, and reasonable attorney's fees (Count III). ( Id.) Whalen removed the case to this court on July 22, 2010, pursuant to 28 U.S.C. §§ 1441 and 1446. 1 Prior to filing an answer, Whalen moved to dismiss IHFC's complaint for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3) on the grounds that this court lacked personal jurisdiction over it. (Doc. 13.) In the alternative, Whalen moved to transfer venue to the Southern District of California pursuant to 28 U.S.C. §§ 1406(a) or 1404(a), arguing, as to the former, that this court lacked jurisdiction and, as to the latter, that the Southern District of California would be a more convenient forum. ( Id.) IHFC countered that venue is proper in North Carolina because this court may exercise personal jurisdiction over Whalen. In addition, IHFC moved to strike Whalen's 22–page reply brief because it exceeded the 10–page limit permitted by Local Rule 7.3(d) and because Whalen did not limit its brief to a discussion of matters newly raised in IHFC's response brief as required by Local Rule 7.3(h). (Doc. 20.)

The Magistrate Judge concluded, first, that venue is proper in this district. Assessing venue under 28 U.S.C. § 1391(a), he determined that IHFC had made a prima facie showing that personal jurisdiction existed over Whalen based on evidence that Whalen assumed the Lease obligation under the Purchase Agreement. Specifically, the Magistrate Judge reasoned that the Purchase Agreement defined “assets” as “all assets and properties owned, used, or leased or subleased by [APA] in connection with [its business] (other than the Excluded Assets) and the IHFC lease was not listed as an excluded asset. (Doc. 24 at 4 (quoting Doc. 13–1 at 13 (emphasis added)).) Thus, he concluded, IHFC had made a showing that specific personal jurisdiction could be exercised over Whalen because it purchased 2 the Lease.

Second, the Magistrate Judge denied Whalen's alternate motion to transfer venue under 28 U.S.C. §§ 1406(a) and 1404(a), finding as to the former that venue was proper based on Whalen's purchase of the Lease, and as to the latter that access to evidence, avoidance of choice of law problems, and a local district's interest in having local disputes settled at home did not weigh strongly in Whalen's favor. The Magistrate Judge also granted IHFC's unopposed motion to strike Whalen's reply brief, concluding that it exceeded the 10–page limit provided by Local Rule 7.3(d). (Doc. 24 at 3.) In so doing, the Magistrate Judge refused to consider a 17–page attachment captioned “Whalen Furniture Mtg., Inc.'s Objections to the Affidavit of Thomas J. Loney [the “Loney Affidavit”] in Support of IHFC Properties, LLC's Response to its Alternative Motion to Dismiss or Change Venue (Doc. 19–1) because it failed to comply with Local Rule 7.3(a).

Whalen objects to the Magistrate Judge's rulings on several grounds. First, it contends that the Magistrate Judge erred by striking the reply brief and failing to consider its attached objections to the Loney Affidavit. Second, it argues that the Magistrate Judge fundamentally misinterpreted the Purchase Agreement and failed to apply California law, which it contends would have revealed that the parties did not intend the Lease to be a purchased asset. Finally, it asks the court in the alternative to transfer the action to the Southern District of California, arguing that the Magistrate Judge's “brief and conclusory” opinion did not contain a proper analysis of the factors relevant to a venue determination. (Doc. 26 at 13 n. 12.)

IHFC contends that Whalen's objections are meritless. It argues that Whalen's reply brief and attachment were properly stricken because, together, they constituted “nearly 40 pages of argument” and because Whalen failed to object to IHFC's motion to strike. (Doc. 29 at 2.) Furthermore, IHFC contends that venue is proper because, when viewed in the light most favorable to the nonmoving party as required by Combs v. Bakker, 886 F.2d 673 (4th Cir.1989), the Purchase Agreement makes at least a prima facie showing that Whalen purchased the Lease and, thus, would be subject to personal jurisdiction in North Carolina. IHFC also invites the court to find general or specific personal jurisdiction in North Carolina on the basis of Whalen's other purported contacts with the state. Finally, IHFC urges that venue should not be transferred for the convenience of the parties because many of the witnesses to be called are located, and the parties signed the Lease, in North Carolina.

The parties' arguments will be addressed in turn.

II. ANALYSISA. Motion to Strike

The Magistrate Judge struck Whalen's reply brief because it exceeded the page limitation imposed by Local Rule 7.3(d), and he refused to consider Whalen's attached 17 pages of objections to the Loney Affidavit. (Doc. 24 at 3.) Whalen asks this court to “reconsider” the Magistrate Judge's decision and contends that the failure to rule on the objections to the Loney Affidavit constitutes error. (Doc. 26 at 2, 6 n. 5.) When a Magistrate Judge issues an order on a nondispositive question, such as a motion to strike, a district court's review is limited to whether the order was ‘clearly erroneous' or ‘contrary to law.’ Schwartz & Schwartz of Va., LLC v. Certain Underwriters at Lloyd's, London who Subscribed to Policy Number NC959, 677 F.Supp.2d 890, 893 (W.D.Va.2009) (quoting Fed.R.Civ.P. 72(a)).

Here, the Magistrate Judge's decision to strike Whalen's reply...

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