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How an Apartment Developer Used a Forum Selection Clause to Get Its Case Moved Back to State Court in Georgia

Poole Huffman, LLC

There are many “battles” that must be won in order to achieve a successful result in your commercial litigation action. Sometimes they may involve getting a desired piece of your evidence on the record or stopping an unqualified expert witness from testifying for your opponent. Sometimes, the battle may be something as basic as contesting your case in the court venue and jurisdiction you prefer. As you pursue a beneficial outcome, it helps to have Georgia commercial litigation counsel on your side who are experienced in fighting all of these types of battles.

One example of this was a plaintiff who had to fight to keep its lawsuit in Georgia state court. The plaintiff that filed the lawsuit in this case was a developer of apartment complexes. The developer financed its projects through loans from the U.S. Department of Housing and Urban Development. To aid it in the acquisition of this funding, the developer contracted with a mortgage services company, which the developer retained to assist with the HUD loan process. In exchange for its services, the mortgage company received a loan origination fee.

Eventually, the relationship deteriorated, and the developer brought its claims against the mortgage company and others. It accused the mortgage company of breaching the parties’ contract, committing fraud, and violating Georgia’s Racketeer Influenced and Corrupt Organizations (RICO) law.

The developer filed the lawsuit in state court in Muscogee County. The defendants sought, and were permitted, to move the case from state court to federal court. There are several bases upon which a party can succeed in getting a case moved from state court to federal court. A common basis, which was the one cited by the defendants in this case, is something called “diversity of citizenship.” This means that the opposing sides are domiciled, or based, in different states. In this case, the plaintiff was domiciled in Georgia, but the defendants were out-of-state entities.

The defendants also sought to transfer the case from the Middle District of Georgia to the Northern District of Texas. The defendants claimed that a clause in the contract between the mortgage company and the developer entitled them to request the move from Georgia to Texas.

The developer fought back, however, asking the federal court to return the case to state court, which the federal court granted. If the two sides had diversity of citizenship, how then did the developer manage to get the case returned to its preferred venue of state court in Muscogee County? It came down to the terms of the two parties’ contractual agreements themselves. Parties can agree within their contractual agreements to something called “forum selection clauses.” These terms within contracts state where a case will be litigated in court if a dispute were to arise.

In this case, the two sides had multiple different forum selection clauses, so the court’s decision came down to which forum selection clause applied. The developer successfully persuaded the court that it only agreed to sign various notes and security instruments because of the mortgage company’s “misrepresentations during the loan origination process.” This meant that the forum selection clause in the notes and security instruments was the one that should control where the case went forward. Since that clause stated that disputes would be litigated in state court in Georgia, the developer was entitled to have the case returned to Muscogee County.

Any time you go to court in a commercial litigation matter, you know that you will be contesting certain factual disputes. There may, however, also be certain legal and procedural battles to be fought. Regardless of the particulars of your case, make sure you are prepared with experienced counsel. The diligent Atlanta commercial litigation attorneys at Poole Huffman, LLC have been working for many years to help their clients navigate the litigation process and achieve successful results. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation.

More blog posts:

Confirmation Letters – Avoiding Potential Conflict Regarding Agreement Terms, Atlanta Business Litigation Attorneys Blog, April 5, 2016

Commercial Real Estate Broker’s Liens, Atlanta Business Litigation Attorneys Blog, Sept. 23, 2013

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