United States District Court, E.D. Virginia, Alexandria Division
RAYMOND A. YANCEY, as Receiver,
INTERNATIONAL FIDELITY INSURANCE CO., ET AL., Defendants.
C. CACHERIS UNITED STATES DISTRICT COURT JUDGE
matter is before the Court on Defendants International
Fidelity Insurance Company, Nationwide Electrical Services,
Inc., and John P. Young’s motion to dismiss the
complaint for lack of venue or, alternatively, to transfer to
the United States District Court for the District of
Maryland. [Dkt. 17.] Also before the Court is Defendant R.
Vaughn Herbert’s motion to dismiss for lack of personal
jurisdiction. [Dkt. 11.] For the following reasons, the Court
will deny the motions to dismiss and will grant the motion to
September 9, 2014, this Court granted a consent motion to
appoint Raymond A. Yancey (“Yancey” or
“Receiver”) as Receiver for various
Truland businesses that had filed for Chapter 7
bankruptcy. (See Receiver Order [Dkt. 1-2].) This
Court’s Receiver Order tracked the language of a
Bankruptcy Court order lifting the bankruptcy stay to
permit BMO Harris Bank to enforce its lien on certain Truland
property. (See Stay Lift Order [Dkt. 1-1].) The Stay
Lift Order applied broadly to Truland’s accounts,
chattel paper, instruments, documents, general intangibles,
inventory, equipment, fixtures, and proceeds of the
foregoing, among other categories of Truland property. (Stay
Lift Order at 3-4.) This Court appointed Yancey as Receiver
“to take change of all the property of Truland
described in the Stay Lift Order.” (Receiver Order
¶ 1.) Acting in that role, Yancey filed this lawsuit
against four Defendants who allegedly possess Truland
property defined in the Stay Lift and Receiver Orders.
alleges that Defendants owe payments to Truland for
subcontractor work Truland performed in Maryland.
Specifically, one Truland entity supplied labor and materials
as an electrical subcontractor on a project at the University
of Maryland in College Park. (Compl. ¶ 2.) Another
Truland entity supplied labor and materials as an electrical
subcontractor on two highway travel-plaza projects in
Aberdeen, Maryland. (Compl. ¶¶ 3-4.) Truland is
allegedly owed over $10 million for this work, approximately
$8 million of which remains unpaid. (Compl. ¶¶ 118,
state of Maryland owns the projects and hired a general
contractor to oversee the construction. (Compl. ¶¶
20, 51.) The general contractor hired a Maryland company
named Nationwide Electrical Services, Inc.
(“Nationwide”) to perform electrical
subcontractor work. (Compl. ¶¶ 22-23, 52-53.)
Defendant John P. Young is the President and CEO of
Nationwide, and Defendant R. Vaughn Herbert is a Vice
President. (Compl. ¶¶ 17-18.) Defendant
International Fidelity Insurance Company
(“Fidelity”) issued surety bonds for these
subcontracts naming Nationwide as the principal and the
general contractor as the obligee. (Compl. ¶¶ 15,
subcontracted some of its obligations on the projects to
Truland entities through a tiered subcontract. (Compl.
¶¶ 23, 53.) Yancey alleges that Truland performed
its contractual obligations in a timely, workmanlike, and
acceptable manner, and that Nationwide received payments from
the general contractor for Truland’s work. (Compl.
¶¶ 25-29, 36, 55-61.) Truland and Yancey made
repeated demands to Nationwide and Fidelity for payment, but
approximately $8 million remains unpaid on Truland’s
subcontracts. (Compl. ¶¶ 49, 83, 127.)
filed a five-count Complaint in this Court to recover the
amounts owed to Truland. Counts I and II allege that Fidelity
breached its bond obligations by not paying Truland for
labor, materials, and services furnished. (See
Compl. ¶¶ 84-101.) Counts III and IV allege that
Nationwide breached its subcontracts with Truland by failing
and refusing to pay Truland the outstanding balance for work
performed. (See Compl. ¶¶ 102-113.) Count
V alleges that Herbert and Young retained payments intended
for Truland in trust and are personally liable for those
payments pursuant to the Maryland Construction Trust Fund
Statute, Md. Code Ann., Real Prop. § 9-201.
(See Compl. ¶¶ 114-127.)
February 25, 2016, Defendant Herbert moved to dismiss for
lack of personal jurisdiction. (Herbert’s Mem. in Supp.
Dismiss [Dkt. 11-1].) The next day, Defendants Fidelity,
Nationwide, and Young moved to dismiss for improper venue or
to transfer venue to the U.S. District Court for the District
of Maryland. (Mem. in Supp. Transfer [Dkt. 17-1].) Those
motions have been fully briefed and argued at an oral
hearing. They are now ripe for disposition.
Standard of Review
Rule of Civil Procedure 12(b)(2) permits dismissal of an
action when the court lacks personal jurisdiction over the
parties. The plaintiff bears the burden of demonstrating
personal jurisdiction by a preponderance of the evidence once
its existence is questioned. Combs v. Bakker, 886
F.2d 673, 676 (4th Cir. 1989). When a district court resolves
a 12(b)(2) motion without an evidentiary hearing, however,
the plaintiff need prove only a prima facie case of personal
jurisdiction. Mylan Labs, Inc. v. Akzo, N.V., 2 F.3d
56, 60 (4th Cir. 1993); Combs, 886 F.2d at 676. In
deciding whether the plaintiff has proved the prima facie
case, the district court must draw all reasonable inferences
arising from the proof, and resolve all factual disputes, in
the plaintiff’s favor. Combs, 886 F.2d at 676;
Wolf v. Richmond Cty. Hosp. Auth., 745 F.2d 904, 908
(4th Cir. 1984). If personal jurisdiction is lacking, the
court may dismiss or transfer the case pursuant to 28 U.S.C.
§ 1406(a). See Saudi v. Northrop Grumman
Corp., 427 F.3d 271, 277 (4th Cir. 2005); In re
Carefirst of Md., Inc., 305 F.3d 253, 256 (4th Cir.
Rule of Civil Procedure 12(b)(3) permits a defendant to
challenge the plaintiff’s choice of venue. The
plaintiff bears the burden of establishing that venue is
proper. T. & B. Equip. Co. v. RI, Inc., No.
3:15-cv-337, 2015 WL 5013875, at *2 (E.D. Va. Aug. 24, 2015).
“But if no evidentiary hearing is held, ‘the
plaintiff need only make a prima facie showing of
venue.’” Id. (quoting Mitrano v.
Hawes, 377 F.3d 402, 405 (4th Cir. 2004)). “The
court need not accept the pleadings as true, but instead may
consider outside evidence. However, the Court must still draw
all inferences in favor of the plaintiff.” Id.
(citations omitted). If venue is improper, the court may
dismiss the case or exercise its discretion to transfer
pursuant to 28 U.S.C. § 1406(a). See Quinn v.
Watson, 145 F. App’x 799, 800 (4th Cir. 2005).
personal jurisdiction and venue are proper, the court may
transfer pursuant to 28 U.S.C. § 1404(a). Brock v.
Entre Computer Ctrs., Inc., 933 F.2d 1253, 1257 (4th
Cir. 1991). Section 1404(a) permits a district court to
transfer a civil action “[f]or the convenience of
parties and witnesses, in the interest of justice.” 28
U.S.C. § 1404(a). The moving party bears the burden of
demonstrating that transfer is proper. Intranexus, Inc.
v. Siemens Med. Solutions Health Servs. Corp., 227
F.Supp.2d 581, 583 (E.D. Va. 2002). But when a valid
forum-selection clause applies, “the plaintiff bears
the burden of establishing that transfer to the forum for
which the parties bargained is unwarranted.” Atl.
Marine Const. Co. v. U.S. Dist. Court for the W. Dist. of
Tex., 134 S.Ct. 568, 577 (2013).
Court will apply the above principles to Defendants’
motions in the following order: (1) motion to dismiss for
lack of personal jurisdiction; (2) motion to dismiss for
improper venue; (3) motion to transfer for convenience and in
the interest of justice. As described below, the Court
concludes that personal jurisdiction and venue are proper.
None-the-less, the Court will transfer this case to the U.S.
District Court for the District of Maryland pursuant to 28
U.S.C. § 1404(a).
proceeding is ancillary to the Court’s order appointing
Yancey as a receiver. Cf. Evans & Assocs., LLC v.
Holibaugh, 609 F.3d 359, 362-63 (4th Cir. 2010)
(discussing ancillary proceedings in receivership context
generally). Accordingly, the Court’s personal
jurisdiction analysis turns on an application of 28 U.S.C.
§§ 754, 1692, and Federal Rule of Civil Procedure
4(k)(1)(C). It is well recognized that these statutes,
working together, allow a court to exercise personal
jurisdiction over a defendant without considering the
defendants’ minimum contacts with the forum, when doing
so complies with due process. See SEC v. Bilzerian,
378 F.3d 1100 (D.C. Cir. 2004); Am. Freedom Train Found.
v. Spurney, 747 F.2d 1069 (1st Cir. 1984); Haile v.
Henderson Nat’l Bank, 657 F.2d 816 (6th Cir.
1981); Carney v. Lopez, 933 F.Supp.2d. 365, 375 (D.
Conn. 2013); Hodgson v. Gilmartin, No. 06-1944, 2006
WL 2707397, at *7 (E.D. Pa. Sept. 18, 2006); Terry v.
Modern Inv. Co., No. 3-04cv00085, 2005 WL 1154274, at *1
(W.D. Va. May 11, 2005). Establishing personal jurisdiction
under these statutes is a multi-step process. First, a
“receiver appointed in any civil action or proceeding
involving property, real, personal or mixed, situated in
different districts shall . . . be vested with complete
jurisdiction and control of all such property with the right
to take possession thereof” if the receiver files
copies of the complaint and order of appointment in the
district where the property is located within ten days of his
appointment. 28 U.S.C. § 754. By making those timely
filings, the receiver acquires in rem jurisdiction
over the receivership property. The receiver may then
establish personal jurisdiction over non-forum defendants in
the receivership court pursuant to Rule 4(k)(1)(C) because 28
U.S.C. § 1692 authorizes nationwide service of process,
provided the assertion of jurisdiction is compatible with due
process under the Fifth Amendment of the United States
Constitution. See ESAB Grp., Inc. v. Centricut,
Inc., 126 F.3d 617, 626 (4th Cir. 1997); Terry,
2003 WL 21738299, at *4.
do not dispute that Yancey complied with the statutory
requirements of sections 754 and 1692. The Court appointed
Yancey as receiver on September 9, 2014, and Yancey filed
copies of the complaint and appointment order in the District
of Maryland within ten days, as required by section 754.
(See Mem. in Opp’n to Herbert Ex. A [Dkt.
19-1].) Yancey then affected service of process as to all
Defendants and no Defendant has argued that service was
improper. (See Summonses [Dkts. 4, 5, 6].) Thus, the
statutory requirements for personal jurisdiction in this
Court are satisfied.
the foregoing, the individual Defendants raise two challenges
to personal jurisdiction that the Court must address. First,
Defendants Herbert and Young argue the claims alleged against
them are commercial torts, which are not Yancey’s
“property” within the meaning of the Stay Lift
and Receiver Orders. Thus, they contend that Yancey may not
rely on the receivership statutes to assert personal
jurisdiction over them. Defendants’ argument is not
applicability of the receivership statutes turns on whether
Yancey alleges that Herbert and Young possess receivership
property. Cf. U.S. SBA v. Cottonwood Advisors, LLC,
No. 3:12-cv-1222, 2012 WL 6044843, at *3 (N.D. Tex. Dec. 4,
2012) (considering whether defendant was holding receivership
property). Yancey brought this lawsuit to collect payments
that are allegedly owed to Truland for subcontractor services
rendered and alleges that Herbert and Young “knowingly
and/or wrongfully retained” those payments. (Compl.
¶¶ 123, 125.) Payments for subcontract services
performed fall within the Stay Lift and Receiver
Order definition of property as either accounts,
general intangibles,  or proceeds thereof. Cf.
Cottonwood Advisors, 2012 WL 6044843, at *3 (“The
cases uniformly hold that money owed to the entity in
receivership is a receivership asset.”). The nature of
the property and this proceeding do not change simply because
Yancey bases his claim against Herbert and Young on the
Maryland Construction Trust Fund Statute. Regardless of the
theory of relief, the claims seek only to recover alleged
receivership property and are ancillary to Yancey’s
role as Receiver. (See Receiver Order ¶ 7
(authorizing Yancey to “institute and prosecute all
such claims, actions, suits, insurance matters and the like .
. . as may be necessary in his judgment for the proper
protection of the Receivership
Defendant Herbert argues that exercising personal
jurisdiction over him would violate his Fifth Amendment due
process rights. (Herbert Reply [Dkt. 21].) Herbert presents
this argument through the lens of a multi-factor analysis
borrowed from the Court of Appeals for the Tenth Circuit.
See Peay v. BellSouth Med. Assistance Plan, 205 F.3d
1206 (10th Cir. 2000). Under that analysis, Herbert
emphasizes that he has minimal contacts with Virginia, he was
a minor actor regarding the contracts at issue, and it would
be inconvenient for him to drive 72.4 miles from his home
past Baltimore and Washington, D.C. to reach this courthouse.
(See Herbert Reply at 2-5.) The Court finds no need
to resort to Tenth Circuit law or to linger on
Herbert’s plainly inadequate due process arguments.
Fourth Circuit’s standard for Fifth Amendment due
process analysis is controlling here. Under that standard,
extreme inconvenience or unfairness must outweigh “the
congressionally articulated policy of allowing the assertion
of in personam jurisdiction” in this forum.
ESAB Grp., Inc. v. Centricut, Inc., 126 F.3d 617,
627 (4th Cir. 1997). It is “only in highly unusual
cases that inconvenience will rise to a level of
constitutional concern.” Id. (quoting
Republic of Panama v. BCCI Holdings, 119 F.3d 935,