Opinion
Bankruptcy No. 00-34701DWS, Adversary No. 03-0273
February 24, 2004
MEMORANDUM OPINION
Before the Court is the Motion of Northwood/National Provider Network LLC ("Defendant") for Change of Venue (the "Motion") pursuant to F.R.Bankr.P. 7087 and 9014. The Defendant seeks a change of venue to the Eastern District of Michigan based on a forum selection provision that is part of the arbitration clause included in the Provider and Network Participation Agreement between Plaintiff and Defendant. For the reasons that follow, I need not decide whether the forum selection and arbitration clause (the "Clause") is otherwise enforceable as I conclude that Defendant waived its right to insist on application of the contractual forum selection provision in this litigation.
BACKGROUND
On April 18, 2003 Matthew Dangel ("Plaintiff), in his capacity as Unsecured Claims Administrator of Beckett Healthcare, Inc. ("Debtor"), filed a Complaint seeking $33,992.65, together with interest and attorneys' fees based on Debtor's provision of healthcare services to Defendant. Defendant filed an Answer and Affirmative Defenses on July 18, 2003 after being granted two extensions of the time to answer. Notably the document does not plead improper venue as one of its affirmative defenses nor does it admit or deny the Plaintiff's allegation of venue, stating that to be a legal issue to which it need not respond.
Defendant failed to elicit any evidence in support of the Motion, referring to the Agreement, the procedural posture of this case and focusing on the issue of the enforceability of an arbitration clause in bankruptcy proceedings. As my decision is based on the Defendant's actions during this litigation, I shall take judicial notice of the docket entries in this case and refer to the pleadings that the Defendant has filed, Fed.R.Evid. 201, incorporated in these proceedings by F.R.Bankr.P. 9017. See Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1200n.3 (3d Cir. 1991);Levine v. Egidi, 1993 WL 69146, at *2 (N.D. Ill. 1993); In re Paolino, 1991 WL 284107, at *12 n. 19 (Bankr. E.D. Pa. 1991):see generally In re Indian Palms Associates. Ltd., 61 F.3d 197 (3d Cir. 1995). While a court may not take judicial notice sua sponte of facts contained in the debtor's file that are disputed, In re Augenbaugh, 125 F.2d 887 (3d Cir. 1942), it may take judicial notice of adjudicative facts "not subject to reasonable dispute . . .[and] so long as it is not unfair to a party to do so and does not undermine the trial court's factfinding authority."In re Indian Palms Assoc., 61 F.3d 197, 205 (3d Cir. 1995) ( citing Fed.R.Evid. 201(f) advisory committee note (1972 proposed rules). Moreover, "factual assertions in pleadings, which have not been superceded by amended pleadings, are judicial admissions against the party that made them. E.g., Larson v. Gross Bank. 204 B.R. 500, 502 (W.D. Tex. 1996); In re Musgrove, 187 B.R. 808 (Bankr. N.D. Ga. 1995).
On August 1, 2003 notice of an arbitration hearing to be held on November 6, 2003 was provided. On October 2, 2003 Defendant filed its Rule 26(a) disclosures with this Court. On November 3, 2003 a new notice was issued reflecting the parties apparent consent to continue the November 6 arbitration proceeding until December 5, 2003. That notice stated that there would be no further continuances without an order of this Court.
The first indication of Defendant's intention to rely on the Clause appears in its initial motion for change of venue and adjournment of arbitration hearing filed on December 4, 2003. With the arbitration scheduled for 9:30 a.m. on December 5, 2003, this request did not come to my attention until the morning of December 5 at which time the arbitration had commenced. Defendant's counsel indicates that the arbitrators were advised that Defendant had filed a motion to change venue. What Plaintiff responded and how the arbitrators reacted to the advice is unknown other than the arbitration was not adjourned. On December 5, 2003 the arbitration award was entered in favor of the Plaintiff and against the Defendant in the amount of $34,0848.45.
The Motion states that "Plaintiff had refused Defendant's numerous requests for change of venue." Motion ¶ 10. As stated above, there was no testimony provided so that fact has not been established. In any event, it is at best irrelevant to my decision since no steps were taken in this proceeding to advance that position. One would assume that the Plaintiff's failure to consent to the change of venue would have made Plaintiff realize that some action was required if it wished to enforce the Clause.
The document was dated December 2, 2003 and the certificate of service indicates that it was sent by regular mail to Plaintiff's counsel. Given its receipt by the Court on December 4, it appears that the motion was mailed to the Court as well. Defendant is represented by Paula Osborne, Esquire of Butzel Long, P.C., a Detroit, Michigan firm. (Co-counsel is Michael Morton, P.A., a Wilmington, Delaware attorney and member of the bar of this Court who filed a pro hac vice application for Osborne on December 18 when this Motion was filed.) While I do not know why Defendant waited to the last hour to file the Motion, one would have at least expected counsel to expedite the transmittal of the motion if it were intent on securing consideration of the motion prior to the arbitration hearing.
Defendant's filed a notice of appeal of the award on February 10, 2004 contending that the award should be set aside due to the pendency of the motion for change of venue which had not been decided and the pendency of the Motion sub judice. Defendant has not requested a trial de novo which is the procedural vehicle for contesting an arbitration award. It is not clear to which court the appeal is directed, A notice of appeal of a judgment of this court to the district court deprives me of jurisdiction over the matters dealt with by the judgment. As best as I can discern from the docket, it does not appear that a judgment was entered. In any event, the issue of whether Defendant is entitled to a change of venue has not been decided and was presented to me a second time after the award was issued. Accordingly, I will proceed to render a decision on that limited question.
On December 17, 2004 Defendant renewed its motion for change of venue by filing the Motion sub judice. In response, Plaintiff contends that Defendant failed to timely invoke and therefore waived this affirmative defense.
DISCUSSION
A.
Federal Rule of Civil Procedure 12(h), as incorporated by Federal Rule of Bankruptcy Procedure 7012, provides that the defense of improper venue is waived unless asserted in a pre-answer motion under Rule 12 or included in a responsive pleading or amendment of such pleading under Rule 15(a). Fed.R.Civ.P. 12(h). See also South Seas Catamaran, Inc. v. Motor Vessel "Leeway". 120 F.R.D. 17, 20 (D.N.J. 1988) (observing with case citation that waiver of the defense of improper venue unless asserted under Rule 12 or pled under Rule 15(a) has been universally accepted by the federal courts). Once venue is waived, even by mistake of law, it may not be reasserted. United Rubber. 269 F, Supp. at 714 ( citing Davis v. Smith, 253 F.2d 286, (3d Cir. 1958)).
Fed.R.Civ.P. 12(h) provides, in relevant part;
(1) A defense of . . . improper venue . . . is waived . . . (B) if it is neither made by motion under this rule nor included in a responsive pleading or an amendment thereof permitted by Rule 15(a) to be made as a matter of course.
Fed.R.Civ.P. 12(b)(3) provides an exception to the requirement that every defense be asserted in the responsive pleading with respect to the defense, inter alia, of improper venue. At the option of the pleader, such defense may also be made by motion. However, while there are two procedural vehicles to raise the defense of improper venue, it must be raised or it will be deemed waived.
See, e.g., Stjernholm v. Peterson, 83 F.3d 347, 349 (10th Cir. 1996); Costlow v. Weeks, 790 F.2d 1486, 1488 (9th Cir. 1986); Concession Consultants, Inc. v. Mirisch, 355 F.2d 369, 371 n. 1 (2d Cir. 1966); Paragon Int'l. N.V. v. Standard Plastics, Inc., 353 F. Supp. 88, 89 (S.D.N.Y. 1973); United Rubber, Cork, Linoleum and Plastic Workers of America, Local 102 v. Lee Rubber Tire Corp., 269 F. Supp. 708, 714 (D.N.J. 1967), aff'd, 394 F.2d 362 (3d Cir.), cert. denied. 393 U.S. 835, 89 S.Ct. 108, (1968).
The rationale underpinning Rule 12(h) was articulated by the South Seas Catamaran court as follows:
The policy underlying Rule 12(h) stems from the judicially recognized principle that 28 U.S.C. § 1391 vests a defendant with a privilege, rather than a right, to attack a claim on the grounds of improper venue, and privileges, unlike inalienable rights, can be lost if not asserted in a timely fashion, [citation omitted]. In addition, Rule 12(h)" . . . serves the purpose of early and expeditious determination of whether the court should proceed further with the action."
120 F.R.D, at 20 ( quoting United Rubber. 269 F. Supp. at 714), Indeed, the Third Circuit Court of Appeals has noted on more than one occasion that the strong policy to conserve judicial time and effort requires that "preliminary matters such as defective service, personal jurisdiction and venue should be raised and disposed of before the court considers the merits or quasi merits of a controversy."Wyrough Loser, Inc. v. Pelmor Labs, Inc., 376 F.2d 543, 547 (3d Cir. 1967): accord Bel-Ray Company, Inc. v. Chemrite (PTY) Ltd., 181 F.3d 435, 443 (3d Cir. 1999). Given the "twin goals" of the court-annexed arbitration program of "reducing cost and delay in civil litigation," District Local Rule 53.2, the policy articulated inWyrough and reiterated in Bel-Ray has special relevance to this matter. See United States District Court for the Eastern District of Pennsylvania: Civil Justice Expense and Delay Reduction Plan at 70, available athttp://www.paed.uscourts.gov/documents/cjraplan/cjraplan.pdf.
The court noted that the only exception to the waiver provision contained in Rule 12(h) occurs where the complaint either fails to give the defendant sufficient information with which to attack the propriety of venue or fraudulently induces defendant to believe that the suit has been brought in the proper judicial district. Id. Clearly the exception is not implicated in this case.
Local Rule 53.2 provides for compulsory arbitration in most civil cases seeking money damages under $150,000.
B.
Plaintiff's complaint asserted proper venue. Defendant's answer merely stated that Plaintiff's assertion called for a legal conclusion and therefore required no answer. Defendant presented no factual averments in its answer concerning the contractual provisions it now seeks to enforce, and Defendant's "Affirmative Defenses" as set forth in its answer did not raise a defense of improper venue. Nor did Defendant opt for the alternative procedure for raising this affirmative defense by filing a motion under Rule 12(b). Accordingly, application of Federal Rule 12(h) dictates the outcome of this Motion. The defense of improper venue has been waived.
Paragraph 8 of Plaintiff's complaint reads, "Venue is proper in this district pursuant to 28 U.S.C. § 1409,"
Defendant's conduct after the pleadings were joined further support this result, After filing its answer, it participated in discovery by filing is Rule 26 disclosures. It entered into an agreement to continue the arbitration hearing. It was not until the day before the rescheduled arbitration proceeding that Defendant first asserted improper venue in a pleading filed with the Court. That initial motion was not filed consistent with the Court's rules on local motion practice but rather was lodged as an expedited motion. The emergency was one of the Defendant's own making since the Complaint had been filed almost eight months before. Moreover, even the emergency motion was procedurally defective in not being presented with sufficient time to have a hearing on notice scheduled prior to the arbitration. The Defendant had been advised that the arbitrators would not adjourn the arbitration hearing without a court order. Defendant took no steps to secure such an order to allow its demand for a change of venue to be considered prior to the arbitration hearing. Thus while Defendant states that it notified the arbitrators at the hearing of its pending motion for change of venue, its failure to timely present such a motion undermines that contention. On December 5 the arbitration was ready to proceed based on the agreed date set on November 3rd-arbitrators, parties and witnesses were present. That a motion filed on the eve of a trial could abort that proceeding by presenting a new affirmative defense would contravene the policies of speed and efficiency underlying both the Federal Rules of Procedure and the arbitration program. Defendant's implicit submission to venue through its conduct in this case further supports my conclusion that it waived its right to object to venue.
C.
Having recognized that the Defendant has waived its right to a change of venue, it remains for this Court to determine the next step in this adversary proceeding. At the hearing on this Motion, the parties engaged in a colloquy with the Court concerning this issue. Plaintiff took the position that Defendant's failure to request a trial de novo within 30 days of the entry of the arbitrator's award was a waiver of the right to a trial before this Court. See District Local Rule 53.2 (parties my file a motion for trial de novo for 30 days following the entry of an arbitration award). Defendant stated that it had not been served with the award so that it was unaware that the thirty day period had commenced. While this collateral dispute has not been framed in a motion before the Court, in the interests of managing my docket and the Chapter 11 case, I find that I can proceed with the trial of this adversary proceeding without further motion and hearing. The Defendant's conduct in this case, while not preserving the improper venue defense, has nonetheless made it clear that it did not consent to the entry of a judgment based on the arbitrator's award. The first motion for change of venue was lodged the day before the hearing. As it was not withdrawn, there is certainly cause to conclude that Defendant did not accept the arbitrators' award as final. That its objection to the award did not expressly request a trial de novo is not dispositive in this case. Requesting a trial de novo would have been inconsistent with Defendant's contention that the proper venue for adjudication of the dispute is the Eastern District of Michigan. The thirty day filing requirement is intended to provide closure on litigation by deeming a party's silence to be an acceptance of the arbitrator's award. No such consent can be found in this case. Accordingly, I shall provide for the submission of a joint pretrial statement by the parties preparatory to setting this case down for trial.
Plaintiff also asserts this ground as a supplemental objection to the Motion.
An Order consistent with this Memorandum Opinion shall issue.