Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Red Mortgage Capital, LLC v. Shores, LLC

United States District Court, S.D. Ohio, Eastern Division

March 31, 2017

RED MORTGAGE CAPITAL, LLC, Plaintiff,
v.
SHORES, LLC, et al., Defendants.

          Kemp Magistrate Judge.

          OPINION AND ORDER.

          GEORGE C. SMITH, JUDGE

         This matter is before the Court upon the Motion to Dismiss of Defendants Shores, LLC (“Shores”) and Jerry B. Epstein (“Epstein”). Defendants have moved this Court to dismiss Plaintiff's Complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) and for improper venue pursuant to Fed.R.Civ.P. 12(b)(3) (Doc. 16). In the alternative, Defendants moved to transfer the present action to the U.S. District Court for the Central District of California pursuant to 28 U.S.C. § 1391, 28 U.S.C. § 1406, and 28 U.S.C. § 1404(a). Plaintiff RED Mortgage Capital, LLC (“RED”) responded in opposition (Doc. 25) and Defendants replied in support (Doc. 28). The Motions are fully briefed and ripe for review. For the following reasons, Defendants' Motions are DENIED.

         I. FACTUAL BACKGROUND

         This case arises out of a $125 million loan (the “Loan”) from RED to Shores for the purposes of constructing a twelve-building, 544-unit multi-family housing unit in Marina del Rey, California (the “Project”). (Doc. 1, Compl. at ¶ 51). RED, a commercial mortgage lender, is a limited liability company organized and existing under the laws of the State of Delaware. (Id. at ¶ 5). Through a chain of membership and holding companies, RED is also a citizen of Texas for the purposes of diversity citizenship. (Id. at ¶¶ 6-22). RED is headquartered in Columbus, Ohio and a large majority of RED's employees are located in the company's Columbus office. (Doc. 25-1, Smith Decl. at ¶ 3). Shores is a limited liability company organized and existing under the laws of the State of Delaware. (Doc. 1, Compl. at ¶ 23). Through a chain of membership, Shores is a citizen of California and New York for the purposes of diversity jurisdiction. (Id. at ¶¶ 24-47). Epstein is a citizen of the State of California. (Id. at 34). Epstein is the President of Del Rey Shores, LLC, Shores' Managing Member. (Doc. 25-1, Smith Decl. at ¶ 6). Epstein owns 50% of Shores through various companies and family trusts. (Id.). Epstein also owns a management company which handles the day-to-day operations of the Subject Property. (Id. at ¶ 7).

         In March 2010, Shores submitted an application to RED for a Federal Housing Authority (“FHA”)-insured construction loan to construct the Project. (Id. at ¶ 8). In general, the type of loan sought by Shores requires a lender to examine the feasibility of the project, determine the creditworthiness of the borrower and its principals, and navigate the application process with the Department of Housing and Urban Development (“HUD”) to ensure government approval of the loan. (Id. at 10). The Loan's underwriting process lasted approximately ten months and required extensive contact between Shores and RED representatives, many of which were located in Columbus. (Id. at ¶¶ 11-12). Contacts with RED representatives in Columbus included, in part, hundreds of phone calls, emails, paper mail correspondences, and Shores delivered several checks to RED in Columbus to cover costs associated with the underwriting process. (Id. at ¶ 12). The chief actors for Shores during this time were Epstein; David Levine, VP of Del Rey Shores and Epstein's chief of staff; Patricia Flynn, a loan-process consultant and advisor working for Shores; and Larry Levy, Epstein's legal counsel. (Id. at ¶¶ 5, 6, 11, 14). Shores and its representatives did not deal with RED's representatives exclusively in Ohio. RED has additional representatives located in Los Angeles, San Diego, and Washington, D.C. that were also involved in the loan process. (Doc. 16-1, Levine Decl. at ¶ 12). In addition, Shores submitted its pre-loan and final loan applications to HUD representatives in Los Angeles. (Id. at ¶ 11). No Shores employee or representative ever traveled to Ohio to “apply for, negotiate, accept, guarantee, close, or perform the Loan.” (Id. at ¶ 15).

         RED submitted its final loan application to HUD on January 20, 2011, and the parties set about preparing the closing documents. (Doc. 25-1, Smith Decl. at ¶ 14). The Loan closed on March 3, 2011, at the offices of Munger Tolles & Olson, LLP and at HUD's hub office, both located in Los Angeles. (Doc. 16-1, Levine Decl. at ¶ 16). The following documents, among others, were contemplated and/or executed by the parties on or around the Loan's closing Dated:

(1) Lender's Commitment Letter dated March, 2, 2011 (the “Commitment Letter”);
(2) Rate Lock Letter;
(3) Deed of Trust Note dated as of March 1, 2011 (the “Note”);
(4) Deed of Trust with Assignment of Rents dated March 1, 2011 (the “Deed of Trust”);
(5) Building Loan Agreement dated as of March 1, 2011;
(6) Construction Loan Disbursement Agreement dated March 3, 2011;
(7) Confirmation Letter dated March 2, 2011;
(8) Opinion Letter from Shores' counsel dated March 3, 2011 (the “Opinion Letter”); and
(9) Epstein Guaranty Agreement dated as of March 2, 2011 (the “Guaranty”)

(Id. at ¶ 53-54).

         Of particular importance here are the Commitment Letter, the Opinion Letter, and the Guaranty. The Commitment Letter contained a forum selection clause designating “the federal or local courts of Ohio” as the exclusive forum for any disputes arising thereunder. (See Doc. 1-2, Commitment Letter at 11). The Commitment Letter also stated that Shores was required to pay to RED any extension or other fees as set forth in the Confirmation Letter. In turn, the Confirmation Letter specified that Shores was required to pay to RED a recurring monthly extension fee if Shores was unable to achieve Final Endorsement of the Loan by November 1, 2013. (Doc. 1-8, Confirmation Letter at 3). The Commitment Letter also required Epstein to execute the Guaranty-which was attached to and incorporated into the Commitment Letter- thereby making Epstein jointly and severally liable for the extension fee obligation. Epstein signed the Guaranty, but the parties dispute whether Shores or one of its representatives ever signed the Commitment Letter-the only document which contained an Ohio forum selection clause. On March 3, 2011, at the request of Shores, Levy issued the Opinion Letter. (See Doc. 1-9, Op. Letter). In the Opinion Letter, Levy represented that he reviewed a number of documents, including the Commitment Letter (defined in the Opinion Letter as one of the “Loan Documents”), and that “each of the Loan Documents has been duly executed and delivered by the Mortgagor and constitute the valid and legally binding promises or obligations of the Mortgagor, enforceable against the Mortgagor in accordance with its terms.” (Id. at 8-9). Further, in 2015, Levy sent an email to RED's counsel stating that he did recall Shores signing and delivering the Commitment Letter at the Loan's closing. (See Doc. 1-11, Levy Email). Construction of the Project commenced shortly after the Loan closed, and RED regularly disbursed funds on an “as-needed” basis pursuant to the terms of the Loan. (Doc. 25-2, Murnane Decl. at ¶ 6). For reasons that are not relevant at this stage of the litigation, Shores completed construction of the Project in the fall of 2013 but was not able to achieve Final Endorsement of the Loan by November 1, 2013. (Doc. 1, Compl. at ¶ 80). RED alleges that this failure entitles it to collect Extension Fees from Shores and Epstein. (Id. at ¶ 81). In February 2014, RED began invoicing Shores for said Extension Fees. (Doc. 16-1, Levine Decl. at ¶ 27; Doc. 25-1, Smith Decl. at ¶ 17). RED's Complaint alleges that over $5.3 million in Extension Fees were due and owing and an additional $156, 250 continued to accrue each month. (Doc. 1, Compl. at ¶ 82).

         RED brought this action for breach of contract and declaratory judgment to enforce its right to recover the amounts allegedly due to it under the Commitment Letter. Shores and Epstein moved to dismiss for lack of personal jurisdiction and improper venue, or, in the alternative, to transfer the action to the U.S. District Court for the Central District of California. These motions are ripe for resolution.

         II. DISCUSSION

         A. Motion to Dismiss for Lack of ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.