United States District Court, W.D. Pennsylvania
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For MANUFACTURES AND TRADERS TRUST COMPANY, Plaintiff: William E. Kelleher, LEAD ATTORNEY, Cohen & Grigsby, P.C., Pittsburgh, PA.
For MINUTEMAN SPILL RESPONSE, INC., MINUTEMAN TOWING, INC., DOUBLE B REALTY, BPK CAPTIVE, INC., EVEREST AVIATION, LLC, BPK HOLDINGS, LLC, B3 MANAGEMENT, L.P., Defendants: Thomas E. Brenner, LEAD ATTORNEY, Goldberg Katzman, Harrisburg, PA; Thomas J. Weber, LEAD ATTORNEY, Goldberg Katzman, P.C., Harrisburg, PA.
MEMORANDUM AND ORDER
KIM R. GIBSON, UNITED STATES DISTRICT JUDGE.
Presently before the Court is (1) an emergency motion for appointment of a receiver (ECF No. 3), filed by Plaintiff Manufacturers and Traders Trust Company (" M& T Bank" ), and (2) Defendants' motions in response to Plaintiff's complaint (ECF No. 8), filed by Minuteman Spill Response, Inc., B3 Management, L.P., BPK Holdings, LLC, Everest Aviation, LLC, BPK Captive, Inc., Double B Realty, and Minuteman Towing, Inc. (collectively, " Minuteman" ). M& T Bank seeks an accounting and a court-appointed receiver to take control of Minuteman's business operations. In response, Minuteman requests that this case be transferred to the Middle District of Pennsylvania. Alternatively, Minuteman argues that the complaint must be dismissed for failure to join a necessary party and for failure to state a claim. For the reasons that follow, the Court will deny Minuteman's motions and will further deny M& T Bank's motion for a receiver.
The Court exercises diversity jurisdiction under 28 U.S.C. § 1332(a) because the amount in controversy exceeds $75,000, exclusive of interests and costs, and the suit is between citizens of different states. M& T Bank is a corporation with its principal place of business at One M& T Plaza, Buffalo, New York. Each of the Defendants has a principal place of business in Pennsylvania. Because the parties disagree on proper venue, the Court will address that issue in more detail below.
This case involves a dispute between a bank lender and its business borrowers. The companies listed in the caption are part of a business enterprise that, among other things, provides services and equipment for the natural gas industry. (ECF No. 14, Hr'g Tr. vol. 1 at 17:8-17). Brian J. Bolus directly or indirectly owns or controls all of the Defendants, including the two operating businesses--Minuteman Spill Response, Inc., and Minuteman Towing, Inc.--and the remaining ancillary entities that hold real property and other assets for the operating businesses. (ECF No. 1, Compl. ¶ ¶ 3-10; ECF No. 8-1 at 1; ECF No. 14, Hr'g Tr. vol. 1 at 18:6-19:8).
As set forth in the complaint and its exhibits,  Minuteman has acquired several loans through M& T Bank that remain outstanding as of September 19, 2013:
(1) On November 17, 2011, Minuteman Spill Response, Inc. (" Minuteman Spill" ) executed a Line of Credit Note for $1,500,000 (Compl. Ex. A), along with a Security Agreement granting M& T Bank a first priority security interest in all assets of Minuteman Spill ( see id. Exs. B, C);
(2) On August 21, 2012, Minuteman Spill executed a Term Note for $440,000, secured by a lien on certain vehicles ( see id. Ex. D);
(3) On October 17, 2012, Minuteman Spill executed a Term Note for $133,702, secured by a lien on certain vehicles ( see id. Ex. E);
(4) On June 8, 2012, Minuteman Spill executed a Term Note for $4,600,000, secured by a lien on certain vehicles ( see id. Ex. F);
(5) On November 17, 2011, B3 Management, L.P. executed a Term Note for $2,952,000, secured by a mortgage on real property located at 2435 Housel Run Road, Milton, Pennsylvania ( see id. Exs. G, H, I);
(6) On November 14, 2012, B3 Management, L.P. executed a Term Note for $1,500,000; in connection with this Note, Minuteman Spill entered into a Continuing Guaranty and General Security Agreement with M& T Bank (" MSR/B3 Security Agreement" ), granting M& T Bank a first priority security interest in all assets of Minuteman Spill ( see id. Exs. J, K, L, M);
(7) On December 16, 2010, BPK Holdings, LLC executed a Term Note for $873,295.55, secured by three mortgages on real property located at 901 Old Route 15, White Deer, Pennsylvania; 3066 East Valley Road, Loganton, Pennsylvania; and 509 West Third Street, Mifflinville, Pennsylvania ( see id. Exs. N, O, P, Q, R);  and
(8) On April 9, 2009, BPK Holdings, LLC and Minuteman Towing, Inc. executed a Loan Agreement with M& T Bank, wherein M& T Bank agreed to make a $680,000 Mortgage Loan and a $600,000 Term Loan;
this agreement was secured by a mortgage on real property located at 401 Richardson Road, Middletown, Pennsylvania ( see id. Exs. V, W, X).
As of July 30, 2013, Minuteman owed M& T Bank approximately $12,700,000. (Compl. ¶ 33). The total amount owed changes daily.
The dispute in this case began when M& T Bank learned of the Commonwealth of Pennsylvania's (" Commonwealth" ) pending criminal investigation of Minuteman. On May 29, 2013, the Pennsylvania Office of the Attorney General (" Attorney General" ) served a warrant on M& T Bank, authorizing the search and seizure of all bank accounts and financial products in possession of M& T Bank relating to Minuteman or to Brian J. Bolus and his family. (Compl. ¶ 34; ECF No. 3 ¶ 4). The Commonwealth also seized most of Minuteman's business assets and records. (Compl. ¶ 35; ECF No. 10 ¶ 7).
Since the seizure, a substantial portion of the Minuteman funds at M& T Bank remain sequestered under court order. (Compl. ¶ 38). M& T Bank avers that, despite repeated requests, Minuteman has refused to provide sufficient financial information from which M& T can assess the viability of Minuteman's business operations. ( Id. ¶ 41). M& T further avers that Minuteman has impeded M& T Bank's efforts to appraise its collateral; that Minuteman has been liquidating assets at " fire sale prices" ; and that Minuteman is in " payment default, among other defaults." ( Id. ¶ ¶ 37, 41, 43). Given the actions of the Attorney General, " the existing defaults," the lack of " adequate protection of M& T Bank's collateral interests," among other reasons, M& T has filed suit requesting a court-appointed receiver and an accounting. ( Id. ¶ 43).
Aside from asserting equitable grounds to justify the appointment of a receiver, M& T Bank avers that Minuteman has contractually authorized and consented to a receiver under the pertinent mortgage documents. ( Id. ¶ 47). According to M& T Bank, the MSR/B3 Security Agreement and the BPK Security Agreement also provide contractual grounds for a receiver. ( Id. ¶ 49).
M& T Bank filed a complaint on August 8, 2013, and an emergency motion for appointment of a receiver (ECF No. 3) the next day. On September 3, 2013, Minuteman responded to the complaint by filing a motion to transfer venue to the Middle District of Pennsylvania, a motion to dismiss for failure to join a necessary party, and a motion to dismiss for failure to state a claim. ( See ECF No. 8). These motions have been fully briefed and are ripe for disposition. On September 19, 2013 and October 8, 2013, the Court held a hearing on the motion for appointment of a receiver, where the parties presented extensive evidence and testimony.
IV. DEFENDANTS' MOTIONS IN RESPONSE TO THE COMPLAINT
Before addressing the merits of M& T Bank's request for a receiver, the Court must determine whether venue should be transferred to the Middle District of Pennsylvania. The Court must also determine whether M& T Bank's complaint must be dismissed for failure to join a necessary party or for failure to state a claim.
A. Minuteman's Motion to Transfer Venue
Minuteman seeks to transfer this matter to the Middle District of Pennsylvania under 28 U.S.C. § 1404(a). The issue is not whether venue is proper in this judicial district but whether it is in the " interest of justice" to transfer the matter elsewhere. See 28 U.S.C. § 1404(a). Minuteman argues that M& T Bank's principal place of business is in Buffalo, New York, and that M& T Bank has a major office in Harrisburg, Pennsylvania. Minuteman further argues that each of the Defendants has a registered office and headquarters in the Middle District; that all of the mortgaged properties are located in the Middle District; and that a receiver, if appointed, would be dealing with assets located in the Middle District. (ECF No. 8-1 at 9; ECF No. 15-2 at 3-4). On the other hand, M& T Bank argues that venue is proper in the Western District because, under certain loan documents, Minuteman has consented to venue in " any judicial district [in Pennsylvania] where [M& T Bank] has a branch." (ECF No. 13 at 2-3) (citations omitted).
1. Legal Standard for Change of Venue
Section 1404(a) provides: " For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought . . ." 28 U.S.C. § 1404. In determining whether to grant a motion to change venue, a district court is ordinarily " vested with wide discretion," Plum Tree, Inc. v. Stockment, 488 F.2d 754, 756 (3d Cir. 1973), and must weigh all relevant factors bearing on whether the litigation " would more conveniently proceed and the interests of justice be better served by transfer to a different forum." Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995). The moving party bears the burden of establishing that a change of venue is warranted, and a plaintiff's " choice of a proper forum is a paramount consideration in any determination of a transfer request." Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir. 1970).
In this case, several loan documents between Minuteman and M& T Bank contain the following forum selection clause:
BORROWER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT IN THE COMMONWEALTH OF PENNSYLVANIA IN A COUNTY OR JUDICIAL DISTRICT WHERE THE BANK MAINTAINS A BRANCH . . . Borrower acknowledges and agrees that the venue provided above is the most convenient forum for both the Bank and the Borrower. Borrower hereby waives any objection to venue and any objection based on a more convenient forum in any action instituted under this Note.
(ECF No. 13 at 2) (citations omitted and emphasis in original). As the U.S. Supreme Court recently explained, " [t]he presence of a valid forum-selection clause requires district courts to adjust their usual § 1404(a) analysis . . ." Atl. Marine Const. Co., Inc. v. U.S. Dist. Court for W. Dist. of Texas, 134 S.Ct. 568, 187 L.Ed.2d 487, 2013 WL 6231157, at *11 (U.S. Dec. 3, 2013). It is clear that " [o]nly under extraordinary circumstances" should a district court not enforce a valid forum selection clause. Id. Furthermore, in determining the proper forum, a district court should not consider the private interests of the parties: " When parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the litigation." 187 L.Ed.2d 487, [WL] at *12.
Courts may nonetheless consider " public-interest factors," including " the administrative difficulties flowing from court congestion; the local interest in having localized controversies decided at home; [and] the interest in having the trial of a diversity case in a forum that is at home with the law." 187 L.Ed.2d 487, [WL] at * 11 n.6 (internal citations omitted).
2. A Change of Venue is Not Warranted
Transferring this matter to the Middle District does not serve the interests of justice. Minuteman claims that a forum selection clause is just " one relevant factor" that this Court should consider in determining a transfer request. (ECF No. 8-1 at 8). Minuteman also points to certain factors that allegedly weigh in favor of changing venue, including (1) the location of the Minuteman businesses; (2) the location of the mortgaged properties; and (3) the fact that many business dealings between the parties occurred in the Middle District. ( See id. at 9; ECF No. 15-2 at 3). According to recent Supreme Court jurisprudence, however, all of these considerations are irrelevant.
In this case, M& T Bank chose to file suit in this district, and the parties contractually agreed to venue in any judicial district where M& T Bank has an office, including the Western District of Pennsylvania. Minuteman does not argue that the forum selection agreement was the result of fraud, nor has it shown that enforcing the agreement would violate public policy or seriously inconvenience the parties. See MoneyGram Payment Sys., Inc. v. Consorcio Oriental, S.A., 65 F.Appx. 844, 846 (3d Cir. 2003) (citations omitted) (discussing grounds for invalidating a forum selection clause). The fact that Minuteman freely consented to venue in this district--along with the fact that there are no public interest factors weighing in favor of a transfer of venue--leads this Court to conclude that the parties should remain bound by their agreement. The Court will thus deny Minuteman's request to change venue.
B. Minuteman's 12(b)(7) Motion
Minuteman also moves to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(7) for failure to join a necessary party. Minuteman argues that the Commonwealth is a necessary party based on Federal Rule of Civil Procedure 19(a)(1)(A) because " all actions that would be taken by a potential receiver would have to include the involvement, and possible approval, of the Commonwealth." (ECF No. 15-2 at 5).  M& T responds by stating that the Court " clearly can impose an accounting and appoint a receiver for the Defendants, without the joinder of the Commonwealth." (ECF No. 13 at 5).
1. Legal Standard for Failure to Join a Necessary Party
In reviewing a Rule 12(b)(7) motion to dismiss, a district court " must accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving party." Pittsburgh Logistics Sys., Inc. v. C.R. England, Inc., 669 F.Supp.2d 613, 618 (W.D. Pa. 2009) (citing Jurimex Kommerz Transit G.M.B.H. v. Case Corp., 65 F.Appx. 803, 805 (3d Cir. 2003)). Evidence outside the pleadings may be considered. See Cummings v. Allstate Ins. Co., CIV.A. 11-02691, 2011 WL 6779321, at *3 (E.D. Pa. Dec. 27, 2011) (citations omitted).
To prevail on a Rule 12(b)(7) motion, the movant must show that the plaintiff has failed to join a party under Federal Rule of Civil Procedure 19. See Gen. Refractories Co. v. First State Ins. Co., 500 F.3d 306, 312 (3d Cir. 2007). Rule 19 states in material part:
A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party if (A) in that person's absence, the court cannot accord complete relief among existing parties; or (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may: (i) . . . impair or impede the person's ability to protect the interest; or (ii) leave an existing party subject to a substantial risk of incurring . . . inconsistent obligations . . .
Fed. R. Civ. P. 19(a)(1) (emphasis added). Although a party may be deemed necessary under clause (A) or clause (B) of Rule 19(a)(1), Gen. Refractories Co., 500 F.3d at 312, Minuteman solely argues that the Commonwealth must be joined as a party under clause (A). (ECF No. 8-1 at 11; ECF No. 15-2 at 5).
Under clause (A) of Rule 19(a)(1), a district court must determine whether it " can grant complete relief to persons already named as parties to the action; what effect a decision may have on absent parties is immaterial." Gen. Refractories Co., 500 F.3d at 313 (emphasis in original) (citing Angst v. Royal Maccabees Life Ins. Co., 77 F.3d 701, 705 (3d Cir. 1996).  Complete relief can be granted as long as the " relief actually afforded to the parties in the action is meaningful." Bank of Am. Nat'l Trust & Sav. Ass'n v. Hotel Rittenhouse Assocs., 844 F.2d 1050, 1054 n.5 (3d Cir. 1988). If a party is deemed necessary under Rule 19(a)(1), that party must be joined if feasible. Pittsburgh Logistics Sys., Inc., 669 F.Supp.2d at 617. Otherwise, if the party is not deemed necessary under Rule 19(a)(1), the district court's analysis is finished. See id. at 617.
2. The Commonwealth is not a Necessary Party
The Court's inquiry is whether it can accord meaningful relief to the parties absent joinder of the Commonwealth. The Court answers this question in the affirmative because the Commonwealth is not necessary in resolving the instant dispute. As Minuteman points out, a court-appointed receiver would face unusual challenges because the Commonwealth has seized most of Minuteman's financial accounts. Nevertheless, the Court can order an accounting
without the Commonwealth's involvement. The Court can likewise appoint a receiver, even if that receiver would face unusual constraints provided by the Commonwealth. At minimum, then, the Court can accord meaningful relief to the parties.
Minuteman argues that the Commonwealth is a necessary party under Rule 19(a)(1)(A) because a receiver could not act without the Commonwealth's approval. (ECF No. 15-2 at 5). Minuteman further argues, " [N]either [M& T] Bank, nor any receiver that might be appointed, can operate without being substantially affected by the actions of the Commonwealth." (ECF No. 8-1 at 12). Finally, Minuteman asserts, " [T]he sweepingly broad powers that [M& T] Bank requests the receiver be granted would run counter to the [Commonwealth's] interests." ( Id. ). These arguments are unpersuasive because they have no bearing on the Court's present inquiry. The Court can appoint a receiver without the Commonwealth being joined as a party, and the fact that the Attorney General has already consented to the proposed order appointing a receiver corroborates this finding. ( See ECF No. 11-1). The Court will therefore deny Minuteman's 12(b)(7) motion.
C. Minuteman's 12(b)(6) Motion
Minuteman next asserts that M& T Bank's complaint must be dismissed for failure to state a claim. First, Minuteman argues that the Court cannot appoint a receiver because a receiver is the sole remedy requested. (ECF No. 8-1 at 17). Second, Minuteman argues that M& T Bank has failed to plead facts showing irreparable harm. ( Id ). Third, Minuteman argues that M& T Bank has failed to plead facts showing " wrongdoing, fraud, waste, mismanagement or dissipation" of ...