Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-05454/USCOURTS-cand-3_07-cv-05454-0/pdf.json

Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 28:1441 Petition for Removal

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SANTA FE POINTE, LP, ET AL.,

Plaintiffs,

v.

GREYSTONE SERVICING CORP., INC.,

ET AL.,

Defendants.

___________________________________/

Case No. C-07-5454 JCS

ORDER DENYING DEFENDANTS’

MOTION TO TRANSFER VENUE [Docket

No. 10]

I. INTRODUCTION

This action was initially filed in Alameda County Superior Court and subsequently removed

by Defendants to this Court on the basis of diversity jurisdiction. Defendants now bring a Motion to

Transfer Venue (the “Motion”), asking that the Court transfer the action pursuant to 28 U.S.C.

§ 1404(a) to the Southern District of New York, where a later-filed action involving related claims is

pending. The parties have consented to the jurisdiction of a United States Magistrate Judge

pursuant to 28 U.S.C. § 636(c). The Court determines that the Motion is suitable for determination

without oral argument, pursuant to Civil Local Rule 7-1(b). Accordingly, the hearing scheduled for

February 8, 2008 is VACATED. For the reasons stated below, the Motion is DENIED.

II. BACKGROUND

A. The First Amended Complaint

Plaintiff Theotis Oliphant is an individual whose principal residence is in Alameda County,

California. First Amended Complaint (“FAC”) ¶ 4. Oliphant is general partner of Plaintiff Santa Fe

Pointe, LP (“SFP”), which is an Oklahoma limited partnership with its principal place of business in

Oklahoma City. FAC ¶¶ 2, 5. Oliphant is managing partner of Plaintiff Santa Fe Management

LLC, which is an Oklahoma limited liability company with its principal place of business in

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Oklahoma. FAC ¶¶ 3, 5. Oliphant is also managing partner of Plaintiff Rant, LLC, which is a

Delaware limited liability company with its principal place of business in Alameda County,

California. Complaint ¶¶ 4-5.

Defendant Greystone Servicing Corporation (“Greystone Servicing”) is a Georgia

Corporation with its principal place of business in New York City. FAC ¶ 6. Defendant Greystone

CDE, LLC (“Greystone CDE”) is a Delaware Corporation with its principal place of business in

New York City. FAC ¶ 7.

Plaintiffs’ claims are based on the alleged conduct of Defendants in connection with efforts

by Plaintiffs to acquire and rehabilitate an apartment building in Oklahoma City (the “Project”) as a

tax-credit developer of a Low Income Housing Tax Credit project offered through the Federal

Housing Administration’s Office of Housing and Urban Development (“HUD”). FAC ¶ 1. 

Defendants are originators of Federal Housing Administration (“FHA”) multifamily loans and are

HUD-approved underwriters for the FHA’s Multifamily Accelerated Processing Program. 

Complaint ¶¶ 1, 14. As such, Defendants serve as an intermediary between developer clients and

FHA offices to facilitate HUD approval of applications and to obtain financing for their clients. 

FAC ¶ 14.

On September 7, 2006, Plaintiffs and Greystone Servicing entered into a written agreement

(the “Engagement Agreement”) whereby Plaintiffs appointed Greystone Servicing to serve as their

exclusive agent to process the HUD application for financing the acquisition and rehabilitation on

the Project. FAC ¶ 15. Under the Engagement Agreement, Plaintiffs and Greystone Servicing were

to jointly prepare the application, while Defendants were to underwrite the financing for the Project

and submit the application to HUD on Plaintiffs’ behalf. FAC ¶ 16. Also in September 2006,

Plaintiffs arranged for bond-financing of the Project whereby over $7 million in tax-exempt bonds

were to be sold. FAC ¶ 17. Because the bond issue was to expire December 20, 2006, the bond

financing had to close by that date. FAC ¶ 17. Therefore, Plaintiffs impressed on Defendants that

the HUD application had to be filed by November 2006. FAC ¶ 17. 

In late October 2006, Greystone Servicing informed Plaintiffs that it was behind schedule,

and in November 2006, Greystone Servicing informed Plaintiffs that the HUD application would not

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be filed in 2006. FAC ¶¶ 23, 25. To address Plaintiffs’ concerns regarding the bond financing,

Defendants promised to fund a non-recourse bridge-loan to cover the purchase of the Project and the

cost of the issuing the tax-exempt bonds. FAC ¶ 25. On November 16, 2006, Defendant Greystone

CDE sent Plaintiff Oliphant a bridge loan term sheet that provided for a non-recourse bridge loan to

Oliphant in the amount of $4,348,400, the full amount of the purchase price of the Project. FAC

¶ 26. However, when Oliphant received the final bridge loan documents, on December 17, 2006, the

amount of the loan was only $500,000, which would cover the cost of the bond issuance but not

acquisition of the Project. FAC ¶ 29. In addition, the loan was not non-recourse, as promised, but

instead included a personal guaranty by Oliphant and a spousal guaranty. FAC ¶ 29. At this point,

however, the bonds had already been sold – on December 13 and 14 – and the cost of their issuance

had already been incurred, in the amount of $251,000. FAC ¶ 28. Because Plaintiffs would lose the

bond funding if the acquisition of the Project was not closed by December 20, 2006, Oliphant signed

the bridge-loan documents as presented. FAC ¶ 30.

Greystone Servicing submitted the final HUD application on March 14, 2007. FAC ¶ 31. 

On April 17, 2007, the tax credit purchaser/syndicator that had been lined up for the Project backed

out. FAC ¶ 32. In June 2007, Plaintiffs found a new syndicator and co-developer, David Henry,

who agreed to serve as general contractor, property manager and co-developer. On July 5, 2007,

Oliphant met with HUD personnel in Oklahoma City and was told that the HUD application had

been rejected. FAC ¶ 34. The HUD representative told Oliphant that Greystone’s representative

had gone out of her way to make disparaging remarks about the Project to the HUD Oklahoma City

representative. FAC ¶ 34.

Subsequently, Greystone’s Betsy Vartanian contacted HUD personnel in Oklahoma City,

who agreed to reconsider the application without starting over from the beginning if Greystone

would provide additional materials addressing HUD’s concerns. FAC ¶ 36. In the meantime,

Plaintiffs continued to work with David Henry and the seller of the Project to proceed with the

closing of the acquisition of the project. FAC ¶ 37. Plaintiffs and Henry were unable to reach an

agreement that addressed Henry’s concerns about the deal and in August 2007, Greystone and Henry

began negotiating on ways to get the deal done without Oliphant and Plaintiffs. FAC ¶¶ 38-40.

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On August 9, 2007, Graystone unilaterally withdrew the HUD loan application without prior

notice or warning to Plaintiffs. FAC ¶ 42. On August 21, 2007, Greystone CDE declared the bridge

loan in default and threatened legal enforcement. FAC ¶ 45. On August 22 and in the weeks

followed, Greystone pressured Plaintiffs to allow David Henry to take over the Project, telling

Plaintiffs that they would initiate a collection action against Plaintiffs if they did not agree to the

deal. FAC ¶ 46. In a telephone conference between Greystone and Oliphant on September 14,

2007, Greystone told Opliphant that it was “out” of the deal if Oliphant could not prove that the

Project was not a viable deal. FAC ¶ 50.

On September 21, 2007, Greystone CDE notified Plaintiffs that it was accelerating the bridge

loan and declaring all amounts under the bridge loan immediately due and payable. FAC ¶ 52.

Based on these allegations, Plaintiffs asserted the following claims against Defendants: 

Claim One: Professional Negligence, based on the allegation that the Greystone Defendants

“breached their respective duties of due care owed to Plaintiffs . . . with respect to the Project

and the HUD financing.”

Claim Two: Breach of Fiduciary Duty/ Constructive Fraud based on the alleged breach of the 

“trust and confidence Plaintiffs . . . reposed in . . . defendants by virtue of the Engagement

Agreement, the business relationship, and the Greystone Defendants’ position as a HUDapproved underwriter for the FHA’s Multifamily Accelerated Processing . . . Program.”

Claim Three: Intentional Interference with Prospective Economic Advantage based on

Defendants’ alleged interference with Plaintiffs’ “existing business relationship with the

Seller of the Project and with the HUD office in Oklahoma City.” 

Claim Four: Negligent Interference with Prospective Economic advantage.

Claim Five: Anticipatory Breach based on Greystone’s repudiation of the written agreements

to accomplish the financing for the acquisition of the Project.

B. Procedural Background of this Action

Plaintiffs filed this action in Alameda County Superior Court on September 7, 2007. They

filed a First Amended Complaint on September 25, 2007, which included additional alleged

misconduct that occurred after the original complaint was filed. The First Amended Complaint was

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served on Greystone Servicing on September 25, 2007 and on Greystone CDE on September 26,

2007. See Declaration of Ann McFarland Draper in Opposition to Defendants’ Motion to Transfer

Case to Southern District of New York (“Draper Decl.”), Exs B & C (proof of service). On

October 25, 2007, Defendants moved the action to this Court on the basis of diversity jurisdiction. 

On November 7, 2007, they filed the instant motion to transfer.

C. Procedural Background of the New York Action

On September 26, 2007 Greystone CDE filed an action in the Federal District Court for the

Southern District of New York (the “New York Action”) seeking damages based on the alleged

breach of the bridge loan agreement between Greystone CDE and the Plaintiffs in this action. 

Draper Decl., ¶ 4. Greystone CDE served the complaint on Plaintiffs by Federal Express on

September 27, 2007. Draper Decl., Ex. D (December 2, 2007 Opinion and Order in New York

Action) at 2-3. Plaintiffs did not respond and, upon the request of Greystone CDE, the clerk’s office

entered default. Id. at 3. Greystone CDE then sought entry of default judgment in the New York. 

Action. Id. Plaintiffs opposed the motion, making a limited appearance in the New York Action to

argue that service by FedEx was not proper. Id. at 5. The court in the New York Action concluded

that service by Federal Express was not proper under the various contractual agreements between the

parties and vacated the default in an order filed December 2, 2007. Id. at 9-10.

D. The Motion

Defendants assert that this action should be transferred under 28 U.S.C. § 1404(a) to the

Southern District of New York, where it can be heard with the action that is already pending there. 

In support of this contention, they point primarily to provisions contained in the bridge loan

guaranties that state as follows:

Section 15. Governing Law. THIS AGREEMENT SHALL BE

GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH

THE LAWS OF THE STATE OF NEW YORK WITHOUT

GIVING EFFECT TO ITS CONFLICTS OF LAWS 

PRINCIPLES . . . 

. . .

Section 26. Submission to Jurisdiction; Waivers.

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(a) PLEDGORS HEREBY IRREVOCABLY AND

UNCONDITIONALLY:

(i) SUBMIT THEMSELVES AND THEIR

RESPECTIVE PROPERTY IN ANY LEGAL

ACTION OR PROCEEDING RELATING TO

THIS AGREEMENT, OR ANY OTHER

DOCUMENT EXECUTED IN CONNECTION

WITH THE TRANSACTIONS CONTEMPLATED

BY THE LOAN AGREEMENT, OR FOR

RECOGNITION AND ENFORCEMENT OF ANY

JUDGMENT IN RESPECT HEREOF OR

THEREOF, TO THE NONEXCLUSIVE

GENERAL JURISDICTION OF THE COURTS

OF THE STATE OF NEW YORK, THE COURTS

OF THE UNITED STATES OF AMERICA FOR

THE STATE OF NEW YORK AND THE

APPELLATE COURTS FROM ANY THEREOF;

(ii) CONSENT THAT ANY SUCH ACTION OR

PROCEEDING MAY BE BROUGHT IN SUCH

COURTS, AND WAIVES ANY OBJECTION

THAT IT MAY NOW OR HEREAFTER HAVE

TO THE VENUE OF ANY SUCH ACTION OR

PROCEEDING IN ANY SUCH COURT OR THAT

SUCH ACTION OR PROCEEDING WAS

BROUGHT IN AN INCONVENIENT COURT

AND AGREE NOT TO PLEAD OR CLAIM THE

SAME;

(iii) AGREE THAT SERVICE OF PROCESS IN

ANY SUCH ACTION OR PROCEEDING MAY BE

EFFECTED BY MAILING A COPY THEREOF

BY REGISTERED OR CERTIFIED MAIL(OR

ANY SUBSTANTIALLY SIMILAR FORM OF

MAIL), POSTAGE PREPAID BY PLEDGORS AT

THE ADDRESSES REFERRED TO ON PAGE 1

OF THIS AGREEMENT; AND

(iv) AGREE THAT NOTHING HEREIN SHALL

AFFECT THE RIGHT TO EFFECT SERVICE OF

PROCESS IN ANY OTHER MANNER

PERMITTED BY LAW OR SHALL LIMIT

PLEDGEE’S RIGHT TO SUE IN ANY OTHER

JURISDICTION.

. . .

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 The Oliphant guaranty contains somewhat different language:

Section 3.08 Jurisdiction; Etc. The Guarantor irrevocably (a) agrees

that the Lender may bring suit, action or other legal proceedings arising

out of this Guaranty in the courts of the State of New York or the courts

of the United States located in New York; (b) consents to the jurisdiction

of each such court in any such suit, action or prceeding; (c) waives any

objection which the Guarantor may have to the laying of the venue of any

such suit, action, or proceeding in any of such courts . . . 

Swanholt Decl., Ex. 3C.

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Declaration of Erik K. Swanholt (“Swanholt Decl.”), Exs. 3D & 3E (Santa Fe Management and Rant

guaranties for bridge loan).1

Based on the provisions designating New York law as the governing law for the bridge loan

guaranties, Defendants argue that this action should be heard by a New York court. Further, in light

of the forum-selection clauses, Plaintiffs’ choice of forum should not be afforded deference,

Defendants assert. Rather, the Court should transfer the action to the Southern District of New

York, as contemplated by the parties in the bridge loan documents. Defendants further assert that

the action should be transferred because doing so will promote judicial efficiency, most parties and

third-party witnesses live closer to New York than they do to this district, and California has little or

no interest in resolving this controversy, which relates to an out-of-state development. Finally,

Defendants argue that the doctrine of federal comity under which a district court may decline to

exercise jurisdiction where a related action is already pending in another district court – the so-called

first-to-file rule – should not apply here because Plaintiffs’ action was filed in anticipation of

Defendants’ action and amounts to forum-shopping.

In their Opposition, Plaintiffs object to the transfer of this action to New York for several

reasons. First, they argue that the threshold requirement for a § 1404(a) transfer – that the transferee

court could exercise personal jurisdiction over Plaintiffs with respect to all relevant claims and that

venue there would be proper – has not been met. In particular, Plaintiffs argue that New York

cannot exercise personal jurisdiction over the Plaintiffs in this action because they do not have

minimum contacts with New York and there is not forum selection clause in the Engagement

Agreement with Greystone Servicing, the bridge loan agreement, the bridge loan promissory note or

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the assignments made to repay the note. The only documents that include forum selection clause

are the guaranties and these provisions are limited to claims arising out of those agreements,

Plaintiffs argue. Therefore, they assert, these provisions do not support a finding of personal

jurisdiction as to Plaintiffs’ claims in this action, which are not based on the guaranties with

Greystone CDE. Plaintiffs argue further that the documents signed in support of the bridge loan,

including the guaranties, are unconscionable and unenforceable in light of the circumstances under

which they were signed. Therefore, they argue, the forum selection clauses in the guaranties are

invalid and cannot give rise to personal jurisdiction

Second, Plaintiffs argue that even if New York could exercise personal jurisdiction over

Plaintiffs, the factors that are considered in determining whether a convenience transfer is

appropriate do not weigh strongly in favor of transfer, as Defendants are required to establish. In

particular, Plaintiffs assert: 1) Plaintiffs’ choice of forum is entitled to deference; 2) the contracts

were not negotiated or executed in New York; 3) the choice of law provision in the guaranty

agreements likely do not apply to Plaintiffs claims and California law, rather than New York law,

may well apply to those claims; 4) Plaintiffs have little or no contact with New York, while

Defendants do much of their business in California; 5) New York is no more convenient for parties

and witnesses than California; and 6) it will be more expensive to litigate in New York than

California.

Third, Plaintiffs argue that the significance of the forum selection clause has been overstated

by Defendants. In particular, while Defendants have stated that a party opposing transfer bears a

heavy burden where there is a forum selection clause, Plaintiffs argue that this rule does not apply

where the forum selection clause is permissive, as this one is.

IV. ANALYSIS

Pursuant to 28 U.S.C. § 1404(a), a case may be transferred “for the convenience of the

parties of the parties and witnesses, in the interest of justice” to “any other district or division where

the action might have been brought.” A party seeking transfer must make “a strong showing . . . to

warrant upsetting the plaintiff’s choice of forum.” Decker Coal Co. v. Commonwealth Edison Co.,

805 F.2d 834, 843 (9th Cir. 1986). In determining whether to transfer an action pursuant to

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§ 1404(a), the court must balance a number of case-specific factors, including “(1) the location

where the relevant agreements were negotiated and executed, (2) the state that is most familiar with

the governing law, (3) the plaintiff's choice of forum, (4) the respective parties’ contacts with the

forum, (5) the contacts relating to the plaintiff’s cause of action in the chosen forum, (6) the

differences in the costs of litigation in the two forums, (7) the availability of compulsory process to

compel attendance of unwilling non-party witnesses, and (8) the ease of access to sources of proof.” 

Jones v. GNC Franchising, Inc., 211 F.3d 495, 498-99 (9th Cir. 2000). In addition, the presence of a

forum selection clause is a “significant factor” in the § 1404(a) analysis. Id. at 499. 

The Ninth Circuit has held that the enforceability of a forum selection provision where

jurisdiction is based on diversity is a question of federal law. Manatti-Farrow, Inc. v. Gucci

America, Inc., 858 F.2d 509, 513 (9th Cir. 1988). Under federal law, a mandatory forum selection

clause is presumed valid and must be specifically enforced. The Bremen v. Zapata Off-Shore Co.,

407 U.S. 1, 15 (1972). On the other hand, “[a] permissive forum selection clause . . . simply means

that the parties consent to the jurisdiction of the designated forum.” Hsu v. OZ Optics Ltd., 211

F.R.D. 615, 618 (N.D. Cal. 2002) (holding that where forum selection clause was permissive, party

seeking convenience transfer was required to overcome the deference that is normally afforded the

plaintiff’s choice of forum and denying request to transfer action).

Here, the language of the forum selection clauses in the guaranties is clearly permissive. The

provisions do not purport to make New York the exclusive jurisdiction in which claims arising from

the guaranties can be litigated. Further, the Court notes that the forum selection clauses are limited

to claims that arise from the agreements in which they are contained. The claims that Plaintiffs

assert in their First Amended Complaint do not arise from the duties and obligations contained in the

guaranties that were signed in support of the bridge loan. Therefore, the forum selection clauses

contained in the guaranties do not apply to this action and Plaintiffs are entitled to the deference that

is generally afforded a plaintiff’s choice of forum. 

Defendants’ reliance on Unisys v. Access Co., Ltd., 2005 WL 3157457 (N.D. Cal. November

23, 2005) is misplaced. In that case, the court gave a permissive forum selection “substantial

consideration” in its determination that a § 1404(a) transfer was warranted. Id. at *5. The court

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 Because the Court finds that Defendants are not entitled to a convenience transfer under

§ 1404(a), it does not reach the question of whether the first-to-file doctrine should be applied here.

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noted that at oral argument, when asked why the court should not enforce the forum selection clause,

the plaintiff could not offer a “salient reason” in response. Id. In that case, however, in contrast to

the facts here, there was no dispute that the claims at issue arose out of the contract containing the

forum selection clause. Nor was there any argument that the agreement containing the forum

selection clause was itself unconscionable and unenforceable. Therefore, Unisys is not on point.

Looking to the remaining factors listed above, the Court concludes that Defendants have not

made the strong showing that is necessary to overcome Plaintiff’s choice of forum. First, the

relevant agreements were negotiated in both California and New York, while the place of

performance was in Oklahoma. Thus, this factor is neutral. Second, although New York law may

govern some of the claims, it is far from clear that it will apply to all of the claims in this case. In

any event, courts routinely apply the law of other states and, therefore, the fact that the Court may be

required to apply New York law does not strongly support transfer. Third, the parties contacts with

the relevant fora do not strongly support transfer: Plaintiffs have strong ties with California, while

Defendants have strong ties with New York. Fourth, the cost of litigation is likely to be comparable

in either California or New York and, therefore, does not support transfer. Fifth, either venue is

likely to require witnesses to travel. Because the witnesses are not predominantly located in or near

New York, this factor does not favor transfer.

The Court concludes that Defendants have not demonstrated that a transfer is warranted

under 28 U.S.C. § 1404(a).2

IV. CONCLUSION

For the reasons stated above, the Motion is DENIED. 

IT IS SO ORDERED.

Dated: February 4, 2008 

JOSEPH C. SPERO

United States Magistrate Judge

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