Ross v. Digioia

• Decision Date: 10 January 2012
• Docket Number: CIVIL ACTION NO: 11-1827
• Parties: ROBERT ROSS, ET AL. v. JOHN DIGIOIA, JR., ET AL.
• Court: U.S. District Court — Eastern District of Louisiana

ROBERT ROSS, ET AL.

v.JOHN DIGIOIA, JR., ET AL.

CIVIL ACTION NO: 11-1827

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF LOUISIANA SECTION: R(2)

Dated: January 10, 2012

ORDER AND REASONS

Before the Court is defendants' motion to dismiss the plaintiffs' complaint for improper venue.¹ Because the Court finds that venue is improper in this district as to defendant Elite Outdoor Kitchen, LLC, but venue is proper as to plaintiffs' claims against defendant John Digioia, defendants' motion is GRANTED in part and DENIED in part.

I. BACKGROUND

This dispute arises out of a failed real estate construction and management agreement between plaintiffs, Lisa and Robert Ross (the Rosses), and defendant, John M. Digioia (Digioia). Digioia is plaintiff Lisa Ross's brother.

In early 2009, the Rosses and Digioia began discussing the possibility of entering into a real estate development and management agreement. Plaintiffs allege that they paid forDigioia to travel to New Orleans in order to attend a Trump University Real Estate course in July of 2009. The parties discussed the details of the agreements during this and three other visits Digioia made to New Orleans. Plaintiffs allege that Digioia came to New Orleans during Easter of 2009 and 2010 and also visited in early 2011. The general idea of the agreement was that Digioia would select distressed properties in Florida, the Rosses would buy the properties, and then Digioia would repair and manage the properties. Plaintiffs allege that Digioia persuaded them that buying property in Orlando and allowing Digioia to oversee the renovations would be lucrative. Plaintiffs compensated Digioia for his services through a ten percent general contractor fee for all property construction² and a ten percent management fee. The parties did not execute a written contract. Plaintiffs allege that after reaching an oral agreement with Digioia, they spent $760,000 to purchase five properties in Orlando. Plaintiffs then transferred the properties to five Louisiana limited liability corporations (ABR Investments, ABR Investments-2, ABR Investments-3, ABR Investments-4 and ABR Investments-5) formed exclusively for this purpose.

Plaintiffs assert that Digioia grossly mismanaged the renovations of the properties and failed in his management duties once construction was completed. At the end of April 2011, the Rosses went to Florida to inspect the properties. Following this trip to Florida, the Rosses terminated the management relationship with Digioia. Plaintiffs allege that in response, Digioia sent them an email on July 4, 2011 that "declared war." They also allege that Digioia sent them an email on July 23, 2011 in which he stated that plaintiffs owed him $127,000 for construction costs. Plaintiffs contend that they do not owe Digioia any money. Moreover, they argue that at the end of the construction period Digioia owed plaintiffs money. In 2008, plaintiffs loaned Digioia $10,000. The loan note is governed by Louisiana law and provides for repayment at a rate of $250 per month. Plaintiffs contend that at the end of the construction period, Digioia still owed $2,800 of the $10,000 note. At that time, plaintiffs wrote Digioia a check for an additional $2,000. Plaintiffs assert that some of Digioia's management fees were deducted from the balance of the loan, and that the current outstanding balance is $3,400.

On July 28, 2011, plaintiffs filed a complaint against Digioia and Elite Outdoor Kitchen, LLC ("Elite") alleging unfair and deceptive trade practices, negligent misrepresentation,breach of contract, and detrimental reliance. Plaintiffs seek damages and a declaratory judgment.³ Defendants then filed this motion to dismiss for improper venue pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure, or in the alternative, to transfer the case to the Middle District of Florida or the Ninth Judicial Circuit for the State of Florida. Plaintiffs oppose the motion.

II. STANDARD

A. 12(b)(3) Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(3) states that a party may move the court to dismiss for "improper venue." FED. R. CIV. P. 12(b)(3). Dismissal for improper venue is governed by 28 U.S.C. § 1406. Under that statute, "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." 28 U.S.C. § 1406(a).

When venue is challenged, the burden is on the plaintiff to establish that the district he chose is a proper venue.⁴ SeePerez v. Pan American Life Ins. Co., 1995 WL 696803, at *2 (5th Cir. Oct. 20, 1995) (citing Advanced Dynamics Corp. v. Mitech Corp., 729 F.Supp. 519, (N.D. Tex. 1990) ("When an objection to venue has been raised, it is the Plaintiff's burden to establish that venue is proper in the judicial district in which the action has been brought."). On a Rule 12(b)(3) motion, the court must accept as true all allegations in the complaint and resolve all conflicts in favor of the plaintiff. Braspetro Oil Services, Co. v. Modec (USA), Inc., 2007 WL 1425851, at *2 (5th Cir. 2007). Further, in deciding whether venue is proper, the court may look outside of the complaint and its attachments. Ambraco Inc. v.Bossclip B.V. , 570 F.3d 233, 238 (5th Cir. 2009), cert. denied, 130 S.Ct. 1054 (2010).

The general rule is that venue must be established for each cause of action. See Tucker v. United States Dep't of Army, 1994 WL 708661, at * 2 (5th Cir. Dec. 6, 1994) (noting the district court's reliance on the general rule that venue must be proper as to each distinct cause of action); Burkitt v. Flawless Records, 2005 WL 6225822, at *3 (E.D. La. Jun. 13, 2005) ("The general rule is that venue must be established for each separate cause of action) (citing Beattie v. United States, 756 F.2d 91, 100 (D.C. Cir. 1984); see also WRIGHT & MILLER, 14D FEDERAL PRACTICE & PROCEDURE, § 3808 ("[I]n a case in which multiple claims are joined, the general rule that has been recited in a significant number of cases is that venue must be proper for each claim."). Venue must also be established for each defendant. See Burkitt, 2005 WL 6225822, at *3 (E.D. La. Jun. 13, 2005) (holding that venue must be established for each defendant) (citing McCaskey v. Cont'l Airlines, Inc., 133 F.Supp. 2d 514, 523 (S.D. Tex. 2001) ("It is well established that in a case involving multiple defendants and multiple claims, the plaintiff bears the burden of showing that venue is appropriate as to each claim and as to each defendant")); see also WRIGHT & MILLER, 14D FEDERAL PRACTICE & PROCEDURE, § 3808 (explaining that for transactional venue, thetransactional district must be proper for each of the parties).

B. Venue in Diversity Cases

Because the Court's jurisdiction in this matter is based on diversity of citizenship, venue is proper in

(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.

28 U.S.C. § 1391(a). To be a proper venue under Section 1391(a)(2), the chosen venue does not have to be the place where the most relevant events took place, but the selected district's contacts still must be substantial. McClintock v. Sch. Bd. East Feliciana Parish, 229 Fed. Appx. 363, 365 (5th Cir. 2008) (holding that venue was improper because "no events, let alone a 'substantial part of the events' occurred in the chosen district") (citing David D. Siegel, Commentary on 1988 and 1990 Revisions of Section 1391, in 28 U.S.C.A. § 1391 (2006)); see also Daniel v. American Bd of Emergency Med. , 428 F.3d 408, 432 (2d Cir. 2005) (explaining that venue can be appropriate in more than one district, and "Section 1391(a)(2) does not restrict venue to the district in which the 'most substantial' events oromissions giving rise to a claim occurred.").

III. DISCUSSION

A. Venue is Improper in this District as to Defendant Elite Outdoor Kitchens, LLC

The Court finds that venue is improper in this district as to defendant Elite. Plaintiffs do not make any allegations against Elite on which to predicate venue. The only information plaintiffs provide about Elite in their complaint is that it is Digioia's company. Plaintiffs do not allege that Elite was a party to the agreement between the Rosses and Digioia, that Digioia acted as an agent for Elite, or that Elite had any involvement whatsoever with the facts giving rise to plaintiffs' claims. Because the complaint does not assert any allegations against Elite, the Court cannot find that a substantial part of the events or omissions giving rise to plaintiffs claims against Elite occurred in this district. See 28 U.S.C. § 1391(a)(2). Accordingly, the Court finds that venue is improper as to Elite, and Elite is dismissed from this suit.

B. Venue is Proper in this District as to Defendant Digioia

The Court finds that venue is proper in this district for plaintiffs' claims against Digioia for unfair trade practices, negligent misrepresentation, and detrimental reliance.Plaintiffs assert that Digioia made the allegedly false statements that form the basis of plaintiffs' claims for unfair trade practices, negligent misrepresentation, and detrimental reliance when he was in New Orleans. Accordingly, a substantial part of the events giving rise to these claims occurred in this district.

Although it is a much closer question, the Court finds that venue is also proper in this district for plaintiffs' breach of contract claims against Digioia. Venue is proper in an action for breach of contract "at the place of...