United States District Court, M.D. North Carolina
MEMORANDUM OPINION AND ORDER
OSTEEN, JR., DISTRICT JUDGE
matter is before this court for review of the Magistrate
Judge's Memorandum Opinion and Order, (the
“Order” (Doc. 24)), in accordance with 28 U.S.C.
§ 636(b)(1)(A) and Fed.R.Civ.P. 72(a). In the Order, the
Magistrate Judge denied Defendant Res-Care, Inc.'s motion
to transfer this case, (Doc. 16), to the Middle District of
Florida. The Magistrate Judge's Order and findings were
not clearly erroneous, based on the arguments presented to
the Magistrate Judge. This court finds that the case must be
transferred based on a new argument submitted only to this
court even though, as will be explained herein,
Defendant's failure to raise that argument before the
Magistrate Judge was entirely improper. Therefore, this court
will vacate the Magistrate Judge's Order, grant
Defendant's motion to transfer, and transfer this case to
the Middle District of Florida.
Salem Homes of Florida, Inc., originally filed a complaint in
the Forsyth County Superior Court, alleging that Defendant
breached the terms of an Amended and Restated Management
Agreement (the “Management Agreement”) between
the parties and was liable to Plaintiff for breach of
contract, an accounting, and conversion. (Doc. 1-2.)
Defendant removed this matter to the Middle District of North
Carolina as a diversity jurisdiction case under 28 U.S.C.
§§ 1441 and 1446. (Doc. 1.)
then simultaneously moved to dismiss for failure to state a
claim, (Doc. 13), and to transfer the case to the Middle
District of Florida pursuant to 28 U.S.C. § 1404(a).
(Doc. 16.) Defendant filed a memorandum in support of its
motion to transfer, (Doc. 17); Plaintiff responded opposing
the motion, (Doc. 21); and Defendant replied. (Doc. 22.) The
Magistrate Judge then issued a Memorandum Opinion and Order
denying Defendant's motion to transfer. (See Order (Doc.
24).) Defendant objected to the Magistrate Judge's Order,
(Def.'s Obj. to Order (“Def.'s Objs.”)
(Doc. 25)), and Plaintiff responded, (Pl.'s Resp. in
Opp'n to Def.'s Objs. to Order (“Pl.'s
Resp.”) (Doc. 26).) This court ordered supplemental
briefing on the issue of whether the forum selection clause,
which was not raised as a basis for transfer in front of the
Magistrate Judge, nevertheless requires that this action be
transferred. (See Doc. 27.) Defendant, (Doc. 28), and
Plaintiff, (Pl.'s Supp. Resp. in Opp'n to Def.'s
Obj. (“Pl.'s Supp. Resp.”) (Doc. 29)), each
submitted a supplemental brief addressing this issue.
is a Florida corporation whose principal place of business is
Winston-Salem, North Carolina. (Complaint
(“Compl.”) (Doc. 3) ¶ 1.) Defendant is a
Kentucky corporation whose principal place of business is
Louisville, Kentucky. (Def.'s Mem. in Supp. of Mot. to
Dismiss (“Def.'s Mem.”) (Doc. 14) at
claims relate to a business arrangement in which Defendant
provided management services at residential facilities for
developmentally-disabled adults in Florida leased and
operated by Plaintiff. (Compl. (Doc. 3) ¶¶ 3-4.)
Plaintiff paid Defendant a monthly management fee per
facility for these services. (Id., Management
Agreement, Ex. A at 20-21.)
explicitly contemplated by the Management Agreement,
(Id., Ex. A at 26), the parties contemporaneously
executed a Security Agreement. (See Def.'s Mem.,
Affidavit of Dennis Roberts, Security Agreement, Ex. B (Doc.
14-1) at 9-19.) Under the Security Agreement, Plaintiff
granted Defendant a first-priority security interest in
certain collateral, including accounts receivable from the
managed facilities, to secure Plaintiff's payment of the
management fee. (Id. at 9-10.) Plaintiff also
executed a promissory note in favor of Defendant, (id.,
Promissory Note, Ex. A at 5-8), due and payable upon
Plaintiff's breach of the Security Agreement.
Management Agreement is governed by Florida law but silent
regarding venue. (Compl., Management Agreement, Ex. A (Doc.
3) at 39.) The Security Agreement contains the following
Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of any United States federal or Florida state
court sitting in Jacksonville, Florida in any action or
proceeding arising out of or relating to this agreement or
the note and each such party hereby irrevocably agrees that
all claims in respect of such action or proceeding may be
heard and determined in any such court and irrevocably waives
any objection it may now or hereafter have as to the venue of
any such suit, action or proceeding brought in such a court
or that such court is an inconvenient forum.
(Def.'s Mem., Security Agreement, Ex. B (Doc. 14-1) at
managed Plaintiff's facilities from a corporate office in
Gainesville, Florida, (Def.'s Mem. (Doc. 14) at 3), which
is in the Northern District of Florida. See 28 U.S.C. §
89(a). Jacksonville is located in the Middle District of
Florida. See 28 U.S.C. § 89(b). Thirteen of the fourteen
facilities subject to the Management Agreement are located in
the Middle District of Florida. (See Def.'s Objs.,
Supplemental Affidavit of Robert Barnes (“Barnes
Aff.”), Ex. A (Doc. 25-1) at 6.) However, neither party
provided information about facility locations prior to the
Magistrate Judge's Order denying Defendant's motion
STANDARD OF REVIEW
Defendant's motion to transfer is not dispositive of the
case, the Magistrate Judge was authorized to rule on the
motion and this court reviews only to “consider timely
objections and modify or set aside any part of the order that
is clearly erroneous or is contrary to law.”
Fed.R.Civ.P. 72(a); see also Stonecrest Partners, LLC v.
Bank of Hampton Rds.,770 F.Supp.2d 778, 782 (E.D. N.C.
2011) (reviewing a magistrate judge's non-dispositive
pre-trial order under the clearly erroneous standard). The
parties agree that a “clearly erroneous” standard
of review applies in this instance. (See Def.'s Objs.
(Doc. 25) at 6; Pl.'s Resp. (Doc. 26) at 3.) “A
finding is clearly erroneous when although there is evidence
to support it, the reviewing ...