Overlook Gardens Props., LLC v. Orix United States, L.P.

• Decision Date: 25 June 2019
• Docket Number: No. 17-14967,17-14967
• Parties: OVERLOOK GARDENS PROPERTIES, LLC, a Georgia Limited Liability Company, Creekwood Apartments, LLC, a Georgia Limited Liability Company, Iverness II, LLC, a Georgia Limited Liability Company, Greystone Farms Apartment Community, LLC, a Georgia Limited Liability Company, Plaintiffs - Appellees, v. ORIX USA, L.P., a Delaware Limited Partnership, Red Capital Group, LLC, a Delaware Limited Liability Company, Red Mortgage Capital, LLC, a Delaware Limited Liability Company, Red Capital Markets, LLC, a Delaware Limited Liability Company, Red Capital Partners, LLC, an Ohio Limited Liability Company, Defendants - Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

927 F.3d 1194

OVERLOOK GARDENS PROPERTIES, LLC, a Georgia Limited Liability Company, Creekwood Apartments, LLC, a Georgia Limited Liability Company, Iverness II, LLC, a Georgia Limited Liability Company, Greystone Farms Apartment Community, LLC, a Georgia Limited Liability Company, Plaintiffs - Appellees,

v.ORIX USA, L.P., a Delaware Limited Partnership, Red Capital Group, LLC, a Delaware Limited Liability Company, Red Mortgage Capital, LLC, a Delaware Limited Liability Company, Red Capital Markets, LLC, a Delaware Limited Liability Company, Red Capital Partners, LLC, an Ohio Limited Liability Company, Defendants - Appellants.

No. 17-14967

United States Court of Appeals, Eleventh Circuit.

June 25, 2019

Charles A. Gower, Miranda J. Brash, Shaun P. O'Hara, Charles A. Gower, PC, COLUMBUS, GA, Michael Rosen Baumrind, Michael B. Terry, Bondurant Mixson & Elmore, LLP, ATLANTA, GA, for Plaintiffs - Appellees.

Edward Kendrick Smith, Edward Kendrick Smith, Joseph Edward Finley, Brian Charles Lea, Kim Purcell Pike, Jones Day, ATLANTA, GA, for Defendants - Appellants.

Before ED CARNES, Chief Judge, JULIE CARNES and CLEVENGER,^* Circuit Judges.

CLEVENGER, Circuit Judge:

In this diversity jurisdiction case, the United States District Court for the Middle District of Georgia remanded the case to the Georgia state court from which it was removed by the defendants. This appeal questions our jurisdictional authority to review the remand order.

I

A

Overlook Gardens Properties, LLC, Creekwood Apartments, LLC, Inverness II, LLC, and Greystone Farms Apartment Community, LLC (collectively, "the Developers") develop large-scale apartment complexes in Georgia. They finance their developments using loans federally insured by the United States Department of Housing and Urban Development ("HUD") through its Multifamily Accelerated Processing ("MAP") program. They chose Red Mortgage Capital, LLC as their MAP-approved lender for assistance in applying for and securing HUD-guaranteed financing through the MAP program.

The Developers each signed an application letter with Red Mortgage preliminarily agreeing that Red Mortgage has the exclusive right to fund and service their loans in exchange for certain fees and compensation. When HUD agreed to insure the loans, the Developers each signed a commitment letter with Red Mortgage. In those commitment letters, Red Mortgage quoted each of the Developers an interest rate that Red Mortgage allegedly represented was the best rate it thought it could obtain for the Developers. The Developers then signed agreements locking in their quoted interest rates. Red Mortgage worked to secure the quoted interest rates, issued confirmation letters to the Developers that it secured those rates, and proceeded to close on the loans based on the agreed upon terms. At closing, the Developers each executed with Red Mortgage a note and a security instrument (collectively, "the loan documents"). In the notes, the Developers agreed to repay their loans at the interest rates and on the terms they agreed to in their commitment letters. In the security instruments, the Developers pledged their property and rents as collateral against the debt.

The commitment letters and the loan documents contain different forum selection clauses. The commitment letters for three of the four Developers recite the following forum selection clause:

By its acceptance of the Lender’s Commitment, the Borrower agrees that (a) it was negotiated, made and issued by the Lender in the State of New York; (b) any action brought hereunder shall only be brought in the federal or local courts of Dallas County, Texas; and (c) the rights and obligations of the parties shall be determined in accordance with applicable federal law and, to the extent that State law applies, the law of New York.

Dist. Ct. Dkt. No. ("Doc.") 6–2 at 30, 56–58, 74–75. One of the four Developers—Greystone Farms—signed a commitment letter containing a substantially similar forum selection clause, except that it provides the agreement was made in Ohio, any applicable federal and Ohio law governs, and any action brought under the letter must be litigated in the Ohio federal or state courts.

The loan documents for all four Developers recite the following forum selection clause:¹

Borrower agrees that any controversy arising under or in relation to this Note or the Security Instrument shall be litigated exclusively in the Property Jurisdiction [i.e. , Georgia] except as, so long as the Loan is insured or held by HUD and solely as to rights and remedies of HUD, federal jurisdiction may be appropriate pursuant to any federal requirements. The state courts, and with respect to HUD’s rights and remedies, federal courts and Governmental Authorities in the Property Jurisdiction, shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note, any security for the Indebtedness, or the Security Instrument. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise.

Doc. 11–1 Note at 7.

Fortunately, the commitment letters guarded against inconsistencies between clauses in the commitment letters and clauses in the loan documents. The commitment letters state that the terms of the loan documents supersede the terms of the commitment letters in the event of any inconsistencies.

B

The Developers filed a complaint against Red Mortgage in Georgia state court. They also sued various companies related to Red Mortgage, including ORIX USA, L.P., Red Capital Group, LLC, Red Capital Markets, LLC, and Red Capital Partners, LLC (together with Red Mortgage, "the Defendants"). Among the Defendants, only Red Mortgage signed the commitment letters and loan documents. The remaining defendants are not bound by any forum selection clauses. In their complaint, the Developers asserted various state law causes of action, including breach of contract, fraud, and violation of the Georgia Racketeer Influenced and Corrupt Organizations Act. The essence of their complaint is that the Defendants intentionally and deceptively persuaded the Developers to accept high interest rates, not because they were the best market rates available, but instead to secretly pad their compensation and associated profits.

The Defendants removed the case to the United States District Court for the Middle District of Georgia based on diversity. They then moved to transfer venue, to dismiss for lack of personal jurisdiction, and to dismiss for failure to state a claim. In their transfer motion, the Defendants argued that the forum selection clause in the commitment letters requires the Developers to litigate their disputes in the federal or state courts in Dallas County, Texas.

The Developers responded by moving to remand the case to state court and moving to stay the Defendants’ motions to dismiss and to transfer. In their motion to remand, the Developers argued that the forum selection clause in the loan documents supersedes the forum selection clause in the commitment letters because of the inconsistencies clause in the commitment letters. They contended that the forum selection clause in the loan documents provides that the Georgia state courts are the exclusive jurisdiction for litigating their claims.

The district court stayed the motions to dismiss while it considered the remand and transfer motions. It then issued a single order remanding the case to Georgia state court. The district court first held that the Developers’ claims arise under and relate to both the commitment letters and the loan documents. It concluded that, even though the interest rates at the heart of the disputes were set in the commitment letters during the loan origination process, it was only after the loan documents were executed that the Developers became obligated to pay the agreed upon interest rates. It therefore determined that the Developers’ "claims are inextricably intertwined with both agreements," and that the commitment letters and loan documents "are not separate and distinct." Doc. 31 at 13–14. The district court then noted that the inconsistencies clause in the commitment letters required it to enforce the forum selection clause in the loan documents. The district court held that the forum selection clause in the loan documents bound both Red Mortgage and the Developers to litigate the Developers’ claims in Georgia state court. The district court concluded that "Red Mortgage waived any right it had to remove this action to federal court" based on the forum selection clause in the loan documents. Id. at 16–17. It then held, citing 28 U.S.C. § 1446(b)(2)(A) and our decision in Russell Corp. v. American Home Assurance Co. , 264 F.3d 1040 (11th Cir. 2001), that "Red Mortgage could not validly consent to the removal of this action, so the unanimity requirement is not met and this action must be remanded." Id. at 17.

The district court denied the Defendants’ transfer motion. It also denied the Defendants’ provisional motion to stay any potential remand until the Defendants have had an opportunity to appeal the decision. While the district court recognized that our decision in Russell would permit appellate review of its remand order, it expressed its confidence "that its decision is correct." Id. at 18.

The Defendants appeal the district court’s remand order.

II

We have a duty to assure ourselves of our jurisdiction at all times in the appellate process. Jara v. Núñez , 878 F.3d 1268, 1271 (11th Cir. 2018). We review our appellate jurisdiction de novo . Id.

III

A

Section 1447(d) of Title 28 of the U.S. Code provides in relevant part for purposes of this appeal that "[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise ...."² Notwithstanding that apparent bar to appellate review, the Supreme Court held in Thermtron...