RHH LLC v. Innisfree Hotels, Inc.

• Decision Date: 25 March 2021
• Docket Number: 1:19cv1184
• Court: U.S. District Court — Middle District of North Carolina
• Parties: RHH LLC, Plaintiff, v. INNISFREE HOTELS, INC., Defendant.

RHH LLC, Plaintiff,
v.
INNISFREE HOTELS, INC., Defendant.

1:19cv1184

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

March 25, 2021

MEMORANDUM OPINION AND ORDER

This case comes before the Court on "Defendant Innisfree Hotels, Inc[.]'s Motion to Dismiss or in the Alternative to Transfer Venue Pursuant to 28 U.S.C. § 1404(a)" (Docket Entry 7) ("Defendant's Motion"). For the reasons that follow, the Court will deny Defendant's request to dismiss this action but will grant Defendant's request to transfer this action to the Northern District of Florida.¹

BACKGROUND

RHH LLC ("Plaintiff") initiated this action against Innisfree Hotels, Inc. ("Defendant"), seeking a declaratory judgment concerning Plaintiff's obligations under a contract. (Docket Entry 1 (the "Original Complaint"), ¶¶ 21-26.) In particular, the Original Complaint alleges:

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"[Defendant] submitted an order to [Plaintiff] for, among other items, 180 dresser units" (the "Units"). (Id., ¶ 1.) "[Plaintiff] fulfilled the order, which was delivered for use at the Hampton Inn Pensacola Beach, Florida." (Id., ¶ 2.) Thereafter, a third party supplied refrigerators for the Units, and the Units sustained water damage. (See id., ¶ 3.) Plaintiff and Defendant have disputed the cause of the damage. According to Plaintiff, "[t]he Units would have been damaged due to the leaking refrigerators regardless of how the Units were constructed." (Id., ¶ 12.) In Defendant's view, "the Units contained defects resulting from [Plaintiff's] use of inappropriate materials and a failure to comply with product submittal specifications." (Id., ¶ 13 (internal quotation marks omitted).) However, the "shop drawings [did] not require [the use of] high pressure laminate . . . in the [Unit's] interior — only finish to match." (Id., ¶ 14.) Defendant's designer approved such drawings, which mirrored ones Plaintiff had submitted "for other Hampton projects in which [Plaintiff and Defendant] engaged," without objection from Defendant. (See id., ¶ 15.)

"In a letter dated October 28, 2019 (the 'Demand Letter'), [Defendant], through its legal counsel, demanded that [Plaintiff] replace all of the defective Units and modify all of the other Units." (Id., ¶ 16.) According to the Demand Letter, [Plaintiff] has failed to fulfill obligations that [Defendant] alleges [Plaintiff] has under the agreement(s) between the parties and applicable law." (Id., ¶ 17.) The Demand Letter represented "that

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[Defendant] intend[ed] to pursue legal remedies if [Plaintiff] d[id] not meet its demands." (Id., ¶ 18.) Plaintiff has denied that it supplied a defective product to Defendant. (Id., ¶ 19.) In connection with the foregoing allegations, the Original Complaint seeks "a judicial declaration that Plaintiff owes no obligation to Defendant to replace all of the defective Units and modify all of the other Units." (Id., ¶ 26.)

Several weeks later, Plaintiff filed an amended complaint (Docket Entry 3) (the "Amended Complaint") as of right. See Fed. R. Civ. P. 15(a)(1) (allowing one amendment "as a matter of course" within 21 days of serving complaint or within 21 days of service of responsive pleading). The Amended Complaint effectively mirrors the Original Complaint except that it references another letter from Defendant, which Plaintiff received after filing the Original Complaint. (Compare Docket Entry 1, with Docket Entry 3.) In particular, the Amended Complaint alleges that, "in further correspondence dated January 21, 2020 (the 'Final Demand Letter'), [Defendant], through its legal counsel, . . . indicated that it consider[ed Plaintiff] to be in default, and that it intend[ed] to seek recoupment from [Plaintiff], including through legal means." (Docket Entry 3, ¶ 18.)

Instead of answering the Amended Complaint, Defendant filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) ("Rule 12(b)(6)"), or, alternatively, "to transfer this action to the United States District Court for the Northern District of Florida pursuant to 28 U.S.C. § 1404(a)" ("Section

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1404(a)"). (Docket Entry 7 at 1; see also Docket Entry 8 (the "Memorandum").) Along with the Memorandum, Defendant tendered a sworn declaration from Kevin D. Warwick, one of Defendant's employees (Docket Entry 8-1 at 2-5), as well as copies of the following documents, among other items: the purchase order from Defendant to Plaintiff (id. at 7-26) (the "Purchase Order"); the corresponding invoice from Plaintiff to Defendant (id. at 28-51); the relevant shipment packing lists (id. at 56-65); a "notice sent to [Plaintiff from Defendant] . . . detailing certain defects manifesting in furniture items ordered pursuant to the Purchase Order" (id. at 3, 91); the Demand Letter (id. at 93-95); "the letter response received from [Plaintiff] addressing the [Demand Letter]" (id. at 4, 97-98); and the Final Demand Letter (id. at 100-02).

Plaintiff responded in opposition to Defendant's Motion, asserting that (i) the Amended Complaint adequately states a claim for a declaratory judgment (Docket Entry 9 (the "Response") at 3-7), (ii) venue remains proper in the Middle District of North Carolina (id. at 7-9), (iii) the Northern District of Florida lacks personal jurisdiction over Plaintiff (id.), and (iv) "the weighing of convenience factors favors [Plaintiff]'s choice of venue" (id. at 9-12). As exhibits to the Response, Plaintiff attached a sworn declaration from Michael Felsen, "the President and CEO of [] Plaintiff" (Docket Entry 9-1 (the "Felsen Declaration"), ¶ 2), as well as copies of the Demand Letter (id. at 5-7), Plaintiff's response to the Demand Letter (id. at 8-9), and the Final Demand

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Letter (id. at 10-12). Defendant replied, challenging Plaintiff's personal-jurisdiction argument. (See Docket Entry 10 (the "Reply") at 1-7.)

Thereafter, upon review of the Amended Complaint's jurisdictional allegations, the Court (per the undersigned United States Magistrate Judge) directed Plaintiff to clarify whether complete diversity existed between the parties, for purposes of subject-matter jurisdiction. (See Docket Entry 13 at 2-3 (noting Amended Complaint's failure to address citizenship of Plaintiff's members).)² Plaintiff then moved for leave to amend the Amended Complaint, attaching a proposed second amended complaint. (Docket Entries 14 (the "Motion to Amend"), 14-1 (the "Proposed Second Amended Complaint".) The Proposed Second Amended Complaint replicates the Amended Complaint in substance (compare Docket Entry 3, with Docket Entry 14-1) but clarifies that six members possess an ownership interest in Plaintiff and that none qualifies as a citizen of Florida, such that complete diversity of citizenship exists (see Docket Entry 14-1, ¶¶ 7-10). Without an objection from Defendant (see Docket Entry dated Mar. 15, 2021), the Court (per the undersigned) granted the Motion to Amend (see Text Order dated Mar. 16, 2021 (directing Plaintiff to file Second Amended

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Complaint)). (See also Docket Entry 15 (the "Second Amended Complaint").)³

DISCUSSION

II. Defendant's Motion

A. Dismissal

As a threshold matter, the parties appear to dispute the source of law that governs the Court's inquiry into whether the Second Amended Complaint alleges a justiciable claim. In that regard, the Memorandum asserts that the Court lacks jurisdiction to render a declaratory judgment because Plaintiff has failed to allege an actual controversy. (See Docket Entry 8 at 3-4 (citing N.C. Gen. Stat. § 1-254 and Gaston Bd. of Realtors, Inc. v. Harrison, 311 N.C. 230, 316 S.E.2d 59 (1984) (interpreting North Carolina law)).) In contrast, the Response characterizes the question as "a federal procedural issue" and therefore "focuses on

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federal law" but notes that the application of North Carolina law would yield the same outcome. (See Docket Entry 9 at 4 n.2.)

The Second Amended Complaint cites neither federal nor North Carolina law as the basis for the declaratory judgment. (See Docket Entry 15, ¶¶ 1-30.) The Declaratory Judgment Act (the "Act") provides that, "[i]n a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a).⁴ "[T]he phrase 'case of actual controversy' in the Act refers to the type of 'Cases' and 'Controversies' that are justiciable under Article III." MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). "[W]hether [a] plaintiff has made out a 'case or controversy' between himself and the defendant within the meaning of Art[icle] III" constitutes "the threshold question in every federal case, determining the power of the court to entertain the suit." Warth v. Seldin, 422 U.S. 490, 498 (1975).

"[W]hether a plaintiff in federal court has standing to maintain an action is a question of federal, not state law." Miller v. Augusta Mut. Ins. Co., 157 F. App'x 632, 636 (4th Cir. 2005). Consistent with that principle, "[f]ederal standards guide the inquiry as to the propriety of declaratory relief in federal

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courts, even when the case is under the court's diversity jurisdiction." White v. National Union Fire Ins. Co., 913 F.2d 165, 167 (4th Cir. 1990). Accordingly, the Second Amended Complaint must satisfy Article III standards in alleging an actual controversy for purposes of this declaratory action, and the Court applies federal standards to determine whether subject-matter jurisdiction exists.

1. Relevant Standards

Although Defendant's Motion and Memorandum invoke only Rule 12(b)(6), the Court construes Defendant's Motion to seek dismissal under Federal Rule of Civil Procedure 12(b)(1) ("Rule 12(b)(1)") because Defendant has raised a question about Plaintiff's standing (see Docket Entry 8 at 3-4). See Payne v. Chapel Hill N. Props., LLC, 947 F. Supp. 2d 567, 572 (M.D.N.C...