Mark F. Bailey v. ERG Enterprises, LP , 705 F.3d 1311 ( 2013 )

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
__________________________
No. 11-11670
__________________________
D.C. Docket No. 3:10-cv-00422-TJC-JRK
MARK F. BAILEY, GAY L. BAILEY,
STEVEN R. BREDAHL, ANDREA P. BREDAHL,
DAVID JANKOWSKI, KEVIN CRAWFORD, et al.,
Plaintiffs-Appellants,
versus
ERG ENTERPRISES, LP,
LUBERT-ADLER MANAGEMENT COMPANY, LP,
LUBERT-ADLER REAL ESTATE FUND III, LP,
LUBERT-ADLER CAPITAL REAL ESTATE FUND III LP, et al.,
Defendants-Appellees.
__________________________
Appeal from the United States District Court
for the Middle District of Florida
__________________________
(January 25, 2013)
Before HULL, MARCUS, and COX, Circuit Judges.
COX, Circuit Judge:
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Plaintiffs-Appellants (the Buyers) each sought to own a piece of paradise.
To that end, they purchased undeveloped lots in a planned resort in the Bahamas.
Their purchase contracts contain a provision that requires all disputes to be
litigated in the Bahamas. Many of the Buyers financed their purchases with
mortgage loans made by Bahamas Sales Associate, LLC (Bahamas Sales), a
mortgage lender.
Apparently the real estate market tanked sometime after the Buyers
purchased their lots. And in May 2010, the Buyers (who had received mortgage
financing to purchase the lots) sued Bahamas Sales and others associated with
Bahamas Sales, alleging that they engaged in appraisal fraud. Additionally, all of
the Buyers sued various Ginn entities and Lubert-Adler Management Company
entities, alleging fraud related to a loan transaction that had a negative impact on
the planned resort.
The Defendants-Appellees moved to dismiss the Buyers’ complaint for
improper venue, alleging that, under the purchase contracts, venue is proper only in
the Bahamas. The district court held that the complaint falls within the scope of
the forum-selection clause in the purchase contract. The court then applied the
doctrine of equitable estoppel to allow the Defendants-Appellees (all of which are
2
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nonsignatories to the contract containing the Bahamian forum-selection clause) to
invoke the clause. The Buyers appeal the dismissal. We reverse and remand.
I. Facts and Procedural History 1
The Buyers 2 purchased lots in the Ginn Sur Mer subdivision on Grand
Bahama Island in the Bahamas from Ginn-LA West End Limited (Ginn-LA). The
marketing materials promoting Ginn Sur Mer promised many amenities, including
a twenty-story grand palace, two signature golf courses, and a mega-yacht marina.
Each Buyer entered into a purchase contract with Ginn-LA. 3 Each contract
contains a forum-selection clause and a choice-of-law clause that requires all
disputes to be litigated in the Bahamas under Bahamian law. Specifically, each
forum-selection clause provides:
1
The Buyers’ complaint is the relevant pleading; because this appeal is before us at the
motion to dismiss stage, our recitation of the facts comes from the complaint. Additionally,
because we treat a dismissal based on a forum-selection clause as a question of proper venue
under Federal Rule of Civil Procedure 12(b)(3), Lipcon v. Underwriters at Lloyd’s, London, 148
F.3d 1285, 1290 (11th Cir. 1998), we also look to evidence outside the pleading, like the lot
purchase contracts and the mortgage notes, Estate of Myhra v. Royal Caribbean Cruises, Ltd.,
695 F.3d 1233, 1239 & n.22 (11th Cir. 2012).
2
The Buyers are Mark F. Bailey, Gay L. Bailey, Stephen R. Brehahl, Andrea P. Bredahl,
Kevin T. Crawford, David P. Jankowski, Troy A. Domnick, Lauren K. Domnick, James W.
Jackson, Bernard J. Shaughnessy, Jr., Frederick A. Reeping, Beachfront Holdings &
Investments, Ltd., Clear Reef Properties, Ltd., Edward R. Webb, Kenneth W. Liles, Patricia M.
Liles, James Josephson, William J. Andrews, Jr., Mark R. Roodvoets, Jon D. Andrews, Charles
B. Lesesne, Jerry A. Cicolani, Jr., Kris Brenneman, Susan C. Kherkher, Thomas E. Lammertsee,
Mary L. Sipski, Ronald P. Van as trustee of the Ronald P. Van Jr. Revocable Trust, and Kathy Jo
Van as trustee of the Kathy Jo Van Revocable Trust. (R.1-1 ¶¶ 5–19.)
3
Some Buyers purchased lots individually, while others jointly purchased lots. (R.1-1 ¶¶
5–19.)
3
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[T]he courts of the Commonwealth (“Commonwealth Courts”) will be
the venue for any dispute, proceeding, suit or legal action concerning
the interpretation, construction, validity, enforcement, performance of,
or related in any way to, this Contract or any other agreement or
instrument executed in connection with this Contract. In the event
any such suit or legal action is commenced by any party, the other
parties agree, consent, and submit to the personal jurisdiction of the
Commonwealth Courts with respect to such suit or legal action. In
such event, each party waives any and all rights under applicable law
or in equity to object to jurisdiction or venue of the Commonwealth
Courts. Such jurisdiction and venue shall be exclusive of any other
jurisdiction and venue.
(See, e.g., R.1-8 Ex. A ¶ 22.) Each choice-of-law provision states: “The local laws
of the Commonwealth, without regard to the Commonwealth’s choice of law rules,
will exclusively govern the interpretation, application, enforcement, performance
of, and any other matter related to, this Contract.” (Id.) Only the Buyers and
Ginn-LA (the seller) signed the lot purchase contracts.
Many of the Buyers applied for and received mortgage financing from
Bahamas Sales.4 The mortgage notes also contain forum-selection clauses and
choice-of-law clauses that each require disputes to be litigated in Florida under
Florida law. The relevant clauses state:
4
Mark F. Bailey, Gay L. Bailey, Stephen R. Bredahl, Andrea P. Bredahl, Kevin T.
Crawford, David P. Jankowski, Troy A. Domnick, Lauren K. Domnick, James W. Jackson,
Bernard J. Shaughnessy, Jr., Frederick A. Reeping, Clear Reef Properties, Ltd., and Beachfront
Holdings & Investments, Ltd. received financing from Bahamas Sales. (R.1-1 at 145–146.)
4
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This Note and the rights and obligations of Borrower and Lender shall
be governed by and interpreted in accordance with the law of the State
of Florida. In any litigation in connection with or to enforce this Note
or any endorsement or guaranty of this Note or any loan documents,
obligors, and each of them, irrevocably consent to and confer personal
jurisdiction on the courts of the State of Florida or the United States
located within the State of Florida and expressly waive any objections
as to venue in any such courts.
(See, e.g., R.3-31 Ex. A ¶ 11.) Only the Buyers and Bahamas Sales are parties to
the mortgage notes.
In May 2010, the Buyers who received financing from Bahamas Sales sued
Bahamas Sales, Ginn Financial Services (the parent company of Bahama Sales),
Edward R. Ginn, III (an officer of Bahamas Sales), William McCracken (an officer
of Ginn Financial Services)5, and Ginn Title Services (together, the Mortgage
Entities), alleging that the Mortgage Entities participated in a scheme to produce
fraudulent lot appraisals in violation of the Racketeer Influenced and Corrupt
Organizations Act (RICO), 18 U.S.C. §§ 1961–1968. Specifically, the Buyers
allege that the Mortgage Entities violated § 1962(c) and § 1962(d). The complaint
seeks rescission of the notes and mortgages and restitution of payments made on
the notes.
5
William McCracken was dismissed pursuant to a stipulation of dismissal. (R. 4-41.)
5
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The appraisal-fraud claims allege that the Mortgage Entities fraudulently
inflated the appraisals of their lots and used the inflated appraisals to set the
amounts on the mortgage notes. Because of the inflated appraisals, the Buyers
allege that they closed on the mortgage notes for amounts that far exceeded the
market value of the lots. The appraisal-fraud claims assume that if proper
appraisals had been done and the lots appraised for amounts lower than their sales
prices, the Buyers would not have closed on the lots. Further, if proper appraisals
had been done and the lots appraised for values less than their purchase prices, the
Buyers claim that they could have simply walked away from the lot purchase
contracts and paid only liquidated damages for their failure to close.
All of the Buyers also brought claims against other Ginn entities and Lubert-
Adler Management Company entities (together, the Credit Suisse Entities)6
alleging fraud related to a loan transaction (the Credit Suisse fraud). The Buyers
allege that the Credit Suisse Entities violated RICO § 1962(c) and § 1962(d).
6
The Credit Suisse Entities are Lubert-Adler Management Company; Lubert-Adler Real
Estate Fund III, LP; Lubert-Adler Real Estate Parallel Fund III, LP; Lubert-Adler Capital Real
Estate Fund III, LP; Lubert-Adler Real Estate Fund IV, LP; Lubert-Adler Real Estate Parallel
Fund IV, LP; Lubert-Adler Capital Real Estate Fund IV, LP; Lubert-Adler Real Estate Fund V,
LP; Lubert-Adler Real Estate Parallel Fund V, LP; Lubert-Adler Capital Real Estate Fund V, LP;
ERG Enterprises; Ginn West End; Ginn-LA West End LLLP; Ginn-LA CS Borrower; Ginn-LA
Conduit Lender; and, Ginn-LA OBB. (R.1-1 at 143–44.)
6
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The Buyers’ Credit Suisse fraud claims allege that before the Buyers signed
the lot purchase contracts, the Credit Suisse Entities entered into an arrangement to
obtain a $675 million loan from Credit Suisse, a financial-services company. The
$675 million loan was secured by various ownership interests in the parent
company of Ginn-LA (the Ginn Sur Mer developer) and the land from five Ginn
resort communities, including the Ginn Sur Mer subdivision. The repayment
schedule on the loan required that all of the cash flow produced by the five Ginn
resort communities be used to pay the Credit Suisse loan. As a result, Ginn-LA
could not complete the marketed, but not contractually required, amenities. The
Buyers further allege that if they had known about the Credit Suisse loan, they
would not have purchased the Ginn Sur Mer lots.
Rather than answering the Buyers’ complaint, the Mortgage Entities and
Credit Suisse Entities filed motions to dismiss asserting that venue is only proper
in the Bahamas as specified under the forum-selection clauses in the lot purchase
contracts. The district court agreed. The court held that the Buyers’ claims fall
within the scope of the lot purchase contracts’ forum-selection clauses. It also held
that the Mortgage Entities and Credit Suisse Entities, though not signatories to the
lot purchase contracts, could nevertheless enforce the forum-selection clauses
under the doctrine of equitable estoppel. We reverse and remand.
7
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II. Standards of Review
The enforceability of a forum-selection clause is a question of law that we
review de novo. Slater v. Energy Servs. Grp. Int’l, Inc., 634 F.3d 1326, 1329–30
(11th Cir. 2011). Further, whether the doctrine of equitable estoppel should apply
is a question of law that we review de novo. Sunkist Soft Drinks, Inc. v. Sunkist
Growers, Inc., 10 F.3d 753, 757 (11th Cir. 1993).
III. Discussion
This appeal presents three issues: (A) whether Bahamas Sales agreed to
venue in Florida under the mortgage notes; (B) whether the Buyers’ appraisal-
fraud claims and Credit Suisse fraud claims fall within the scope of the lot
purchase contracts’ forum-selection clauses; and (C) whether the Mortgage Entities
and Credit Suisse Entities, as nonsignatories to the lot purchase contracts, can
invoke the lot purchase contracts’ forum-selection clauses. We address each issue
in turn.
A.
The Buyers argue that the mortgage notes’ forum-selection clauses bind
Bahamas Sales as a party to the notes. This argument is foreclosed by our recent
decision in Bahamas Sales Assoc., LLC v. Byers, 11th Cir., ___ F.3d ___ (No. 11-
11664, Dec. 4, 2012). In Byers, we held that the mortgage notes only bind
8
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“obligors” under the notes, and Bahamas Sales is not an obligor because it is the
party to which an obligation is owed.
B.
The Buyers next argue that their appraisal-fraud claims and Credit Suisse
fraud claims do not fall within the scope of the lot purchase contracts’ forum-
selection clauses.7 We look to the nature of each of the Buyers’ claims to
determine if the claim falls within the scope of the lot purchase contracts’ forum-
selection clauses. Becker v. Davis, 491 F.3d 1292, 1300 (11th Cir. 2007).
Both the Mortgage Entities and the Credit Suisse Entities contend that the
Buyers’ claims fall within the scope of the lot purchase contracts’ forum-selection
clauses. Our decision in Byers, however, forecloses the Mortgage Entities’
argument. We held in Byers that the appraisal-fraud claims (identical to the
appraisal-fraud claims in this case) do not fall within the scope of the forum-
selection clauses. As a result, we need only address whether the Credit Suisse
fraud claims fall within the scope of the clauses.
The purchase contracts’ forum-selection clauses state, in relevant part, that:
7
In their brief, the Buyers simply argue that their claims do not relate to the lot purchase
contracts and therefore that the district court erred by applying the “related to” analysis to the
complaint. The district court only applied this “related to” analysis when it concluded that the
Buyers’ appraisal-fraud claims and Credit Suisse fraud claims fall within the scope of the lot
purchase contracts’ forum-selection clauses. Thus, we understand the Buyers’ argument to be
that their claims do not fall within the scope of the lot purchase contracts.
9
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[T]he courts of the Commonwealth [of the Bahamas] . . . will be the
venue for any dispute, proceeding, suit or legal action concerning the
interpretation, construction, validity, enforcement, performance of, or
related in any way to, [the lot purchase contract] or any other
agreement or instrument executed in connection with [the lot purchase
contract].
(See, e.g., R.1-8 Ex. A ¶ 22.) We must determine whether the Credit Suisse claims
are “related in any way” to the lot purchase contracts or any other agreements
executed in connection with the lot purchase contracts.
A claim “relates to” a contract when “the dispute occurs as a fairly direct
result of the performance of contractual duties.” Telecom Italia, SpA v. Wholesale
Telecom Corp., 248 F.3d 1109, 1116 (11th Cir. 2001). Moreover, the fact that a
dispute could not have arisen but for an agreement does not mean that the dispute
necessarily “relates to” that agreement. Int’l Underwriters AG v. Triple I: Int’l
Invs., Inc., 533 F.3d 1342, 1347 (11th Cir. 2008). The phrase “‘related to’ marks a
boundary indicating some direct relationship.” Doe v. Princess Cruise Lines, Ltd.,
657 F.3d 1204, 1218 (11th Cir. 2011). Requiring a direct relationship between the
claim and the contract is necessary because, “[i]f ‘relate to’ were taken to extend to
the furthest stretch of its indeterminacy, it would have no limiting purpose because
really, universally, relations stop nowhere.” Id. at 1218–19 (quoting N.Y. State
Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645,
655, 115 S. Ct. 1671, 1677 (1995)) (internal quotation marks omitted).
10
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In this case, the district court concluded that the Credit Suisse claims fall
within the scope of the lot purchase contracts’ forum-selection clauses because (1)
the Buyers’ claims arise out of a relationship that was established by the lot
purchase contracts, (2) the Buyers would not have any claims had they not entered
into the lot purchase contracts, and (3) the Buyers’ claims are similar to the claims
in Liles v. Ginn-LA West End, Ltd., where we held that the claims fell within the
scope of the lot purchase contracts’ forum-selection clauses, 631 F.3d 1242 (11th
Cir. 2011).
For the Credit Suisse claims to fall within the scope of the purchase
contracts’ forum-selection clauses, the claims must have a direct relationship to the
lot purchase contracts. They do not. The dispute between the Buyers and the
Credit Suisse Entities is not a “fairly direct result of the performance of contractual
duties” under the lot purchase contracts. See Telecom Italia, 248 F.3d at 1116.
The Buyers do not allege that the Credit Suisse Entities interfered with Ginn-LA’s
performance obligations under the lot purchase contracts.
Moreover, the lot purchase contracts did not create the relationships between
the parties. The only parties to the lot purchase contracts are the Buyers and Ginn-
LA. The Buyers do not have a contractual relationship with any of the Credit
Suisse Entities. And although the claims would not exist but for the Buyers
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purchasing the Ginn Sur Mer lots, this but-for relationship does not mean that the
claims relate to the lot purchase contracts. The claims must result from the
performance of duties under the lot purchase contracts; the Credit Suisse claims do
not. In fact, the Buyers would still be able to bring their Credit Suisse fraud claims
even if Ginn-LA had performed all of its obligations under the lot purchase
contracts.
Furthermore, although Liles involved the same lot purchase contracts at
issue here, the Buyers’ claims differ from the claims alleged in Liles. In Liles, the
plaintiffs alleged that the defendants (including Ginn-LA) violated the Interstate
Land Sales Full Disclosure Act and fraudulently failed to disclose information
relating to the titles to the properties. 631 F.3d at 1243. These allegations directly
related to the lot purchase contracts. The dispute in Liles occurred as a result of the
defendants’ alleged failure to perform various contractual duties, including the
duty to adhere to the Interstate Land Sales Full Disclosure Act and the duty to
provide marketable titles to the lots. The lot purchase contracts expressly
incorporate both of those duties.8 Here, as explained above, the Credit Suisse
claims do not relate to the performance of duties under the lot purchase contracts.
8
As we pointed out in Liles, the parties specifically incorporated the Interstate Land
Sales Full Disclosure Act’s obligations and rights into the lot purchase contracts. 631 F.3d at
12
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The Credit Suisse Entities contend that the Credit Suisse fraud claims fall
within the scope of the lot purchase contracts’ forum-selection clauses because (1)
claims of fraudulent inducement necessarily relate to the allegedly fraudulently
induced contracts and (2) the Credit Suisse claims relate to “instruments executed
in connection” with the lot purchase contracts.9
First, we reject the Credit Suisse Entities’ argument that the Buyers allege
fraudulent inducement of the lot purchase contracts and therefore that the claims
relate to the contract. While we agree that claims of fraudulent inducement can
relate to allegedly fraudulently induced contracts, see Prima Paint Corp. v. Flood
& Conklin Mfg. Co., 388 U.S. 395, 87 S. Ct. 1801 (1967), the Buyers do not allege
that the Credit Suisse Entities fraudulently induced them to enter into the lot
purchase contracts. And actually, it would be a rather nonsensical claim for the
Buyers to suggest that the Credit Suisse Entities—which they did not know existed
until after they purchased their Ginn Sur Mer lots—fraudulently induced them to
purchase the lots.
1252 n.17. Further, the lot purchase contracts obligate Ginn-LA to provide marketable title.
(See, e.g., R.1-8 Ex. A ¶¶ 2, 5.)
9
The Credit Suisse Entities also argue that Credit Suisse fraud claims relate to the lot
purchase contracts because the Buyers seek rescission of their lot purchase contracts. This
argument is unconvincing, however, because the Buyers dropped their rescission claim. (R. 3-33
at 11.)
13
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Second, the Credit Suisse Entities’ argument that the Credit Suisse fraud
claims fall within the scope of the forum-selection clauses because they are
“related in any way to . . . any other agreement or instrument executed in
connection with [the lot purchase contracts]” does not persuade us. The Credit
Suisse claims have nothing to do with the mortgage notes, and the Buyers do not
allege that the Credit Suisse fraud affected the notes. Instead, they allege that the
Credit Suisse Entities used the Credit Suisse loan to “loot” the Ginn Sur Mer
subdivision and, as a result, made it impossible for Ginn-LA to complete the
marketed amenities to the subdivision. 10
Because the Credit Suisse fraud claims do not have a direct relationship with
the lot purchase contracts, the district court erred in concluding that the Credit
Suisse fraud claims fall within the scope of the lot purchase contracts’ forum-
selection clauses.
C.
Having concluded that the Buyers’ appraisal-fraud and Credit Suisse fraud
claims do not fall within the scope of the forum-selection clauses, we also address
10
The Credit Suisse Entities argue that reading the phrase “related to” as requiring the
dispute to occur as a direct result of the performance of contractual duties strips the phrase of its
meaning. But this argument is contrary to our precedent that says a claim relates to a contract
when a direct relationship between the claim and the performance of contractual duties exists.
See Triple I, 533 F.3d at 1349; Telecom Italia, 248 F.3d at 1116.
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the Buyers’ final argument. They argue that the district court incorrectly applied
equitable estoppel to allow the Mortgage Entities and the Credit Suisse Entities to
invoke the lot purchase contracts’ forum-selection clauses. The Buyers assert that
their appraisal-fraud claims and Credit Suisse fraud claims do not rely on the lot
purchase contracts and that, for this reason, the doctrine of equitable estoppel
cannot properly be applied.
We hold in this case, as we held in Byers, that the district court erred in
allowing the Mortgage Entities to invoke the lot purchase contracts’ forum-
selection clauses under the doctrine of equitable estoppel. The Buyers’ appraisal-
fraud claims do not allege concerted misconduct between the Mortgage Entities
and Ginn-LA. Nor do the claims rely on the lot purchase contracts.
We write only to address whether the district court erred in applying
equitable estoppel to allow the Credit Suisse Entities to enforce the forum-selection
clauses.
First, we note that the parties litigated this case on the assumption that
federal common law applies to the question of whether equitable estoppel should
apply. 11 All of the parties briefed and argued this case under federal common law
11
The parties do not suggest that there is any significant difference between federal
common law and Florida law concerning equitable estoppel.
15
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as to the equitable estoppel issue. Therefore, we assume that federal common law
applies in this case. See Chase Manhattan Bank v. Rood, 698 F.2d 435, 436 n.1
(11th Cir. 1983) (assuming Florida law is the applicable substantive law in the case
because both parties briefed and argued Florida law on appeal).
Generally, “one who is not a party to an agreement cannot enforce its terms
against one who is a party.” Lawson v. Life of the S. Ins. Co., 648 F.3d 1166, 1167
(11th Cir. 2011). There are, however, exceptions to this rule. And the doctrine of
equitable estoppel is one of them.
Equitable estoppel allows a nonsignatory to enforce the provisions of a
contract against a signatory in two circumstances: (1) when the signatory to the
contract relies on the terms of the contract to assert his or her claims against the
nonsignatory and (2) when the signatory raises allegations of interdependent and
concerted misconduct by both the nonsignatory and one or more of the signatories
to the contract. MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir.
1999). In essence, equitable estoppel precludes a party from claiming the benefits
of some of the provisions of a contract while simultaneously attempting to avoid
the burdens that some other provisions of the contract impose. Blinco v. Green
Tree Servicing LLC, 400 F.3d 1308, 1312 (11th Cir. 2005). A forum-selection
clause would be one such burden.
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The doctrine of equitable estoppel is grounded in fairness. As we noted in In
re Humana Inc. Managed Care Litigation:
In all cases, the lynchpin for equitable estoppel is equity, and the point
of applying it to compel [application of a contractual provision] is to
prevent a situation that would fly in the face of fairness. The purpose
of the doctrine is to prevent a plaintiff from, in effect, trying to have
his cake and eat it too; that is, from relying on the contract when it
works to his advantage by establishing the claim, and repudiating it
when it works to his disadvantage . . . . The plaintiff’s actual
depend[e]nce on the underlying contract in making out the claim
against the nonsignatory defendant is therefore always the sine qua
non of an appropriate situation for applying equitable estoppel.
285 F.3d 971, 976 (11th Cir. 2002) (citations omitted) (internal quotation marks
omitted), rev’d on other grounds sub nom. PacifiCare Health Sys., Inc. v. Book,
538 U.S. 401, 123 S. Ct. 1531 (2003).
The Buyers’ complaint does not allege concerted misconduct between the
Credit Suisse Entities and Ginn-LA (the developer and signatory to the lot
purchase contracts). Nevertheless, the Credit Suisse Entities argue that the
concerted-misconduct circumstance applies here because the Credit Suisse fraud
claims depend on conduct between the Credit Suisse Entities and Ginn-LA. That
is, the Credit Suisse Entities assert that Ginn-LA’s sale of the Ginn Sur Mer lots
was a “necessary component” of the Credit Suisse scheme. According to the
Credit Suisse Entities, the fact that Ginn-LA entered into lot purchase contracts
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with the Buyers “is fundamental to and inextricably connected with” the Credit
Suisse Entities’ conduct in the Credit Suisse fraud.
We have noted, however, that the application of equitable estoppel is
appropriate when the signatory “raises allegations of substantially interdependent
and concerted misconduct by both the nonsignatory and one or more of the
signatories to the contract.” MS Dealer, 177 F.3d at 947. The Buyers neither
allege concerted misconduct between the Credit Suisse Entities and Ginn-LA in
their complaint nor name Ginn-LA as a party to this action. 12 Thus, the Credit
Suisse Entities must look only to the first circumstance in which the doctrine of
equitable estoppel applies. We therefore limit our inquiry to that circumstance—
12
The Credit Suisse Entities assert that simply because the Buyers did not name Ginn-LA
as a party does not mean that the Buyers do not allege concerted misconduct. The Entities cite
Choctaw Generation Ltd. v. Am. Home Assurance Co., 271 F.3d 403 (2d Cir. 2001), for the
proposition that nonsignatory defendants can invoke a contractual clause under the concerted-
misconduct prong of MS Dealer even when the plaintiff does not name a signatory as a
defendant. But a close reading of Choctaw reveals no such proposition. In Choctaw, the court
concluded that the defendant could enforce an arbitration clause in a contract it did not sign
because the plaintiff’s claims “are intertwined with the agreement.” Id. at 404. The Second
Circuit, applying an analysis that looked to whether the plaintiff’s claims related to the dispute
between the two signatories to the contract, determined that the nonsignatory defendant could
enforce the provision under the doctrine of equitable estoppel. Id. at 406–08. Choctaw tells us
very little about whether a plaintiff alleges concerted misconduct when the plaintiff does not
allege misconduct between the nonsignatories and the signatory in the complaint and does not
name the signatory as a party. Because the Buyers do not name Ginn-LA as a party and do not
allege that the Credit Suisse Entities acted in concert with Ginn-LA to engage in the Credit
Suisse fraud, the second circumstance in which equitable estoppel applies is not implicated.
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whether the Buyers rely on the terms of the lot purchase contracts in asserting their
Credit Suisse fraud claims.
A party relies on the terms of a contract when the party needs the underlying
contract to make out his or her claim against the nonsignatory. In re Humana, 285
F.3d at 976. The signatory must attempt to hold the nonsignatory to the terms of
the contract. Becker, 491 F.3d at 1300.
A but-for relationship between the claims and the contract “alone is not
enough to warrant equitable estoppel.” Lawson, 648 F.3d at 1174. For a party’s
claims to rely on a contract, the party must actually depend on the underlying
contract to assert the claims. In re Humana, 285 F.3d at 976. A simple but-for
relationship does not constitute the actual dependence on the underlying contract
that equitable estoppel requires. Scant authority exists that deals with this precise
issue. Our view, however, comports with the view of two of our sister circuits.
See Lenox MacLaren Surgical Corp. v. Medtronic, Inc., 449 F. App’x 704, 709
(10th Cir. 2011) (per curiam) (“For a plaintiff’s claims to rely on the contract
containing the arbitration provision, the contract must form the legal basis of those
claims; it is not enough that the contract is factually significant to the plaintiff’s
claims or has a ‘but-for’ relationship with them.”); Brantley v. Republic Mortg. Ins.
Co., 424 F.3d 392, 396 (4th Cir. 2005) (“The district court correctly found that the
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mere existence of a loan transaction requiring plaintiffs to obtain mortgage
insurance cannot be the basis for finding their federal statutory claims . . . to be
intertwined with that contract.”). And the parties cite no precedent to the contrary.
Because the application of equitable estoppel is not a “rigid test, and each
case turns on its facts,” In re Humana, 285 F.3d at 976, we now turn to the facts of
this case.
The Buyers allege that the Credit Suisse Entities fraudulently concealed the
$675 million dollar loan from them. They allege that the Credit Suisse Entities
“looted” the Ginn Sur Mer subdivision when the Credit Suisse Entities entered into
the Credit Suisse loan and used the Ginn Sur Mer subdivision as collateral. As a
result of the scheme, they allege that Ginn-LA could not complete the marketed
amenities. This loan and the allegedly fraudulent scheme took place before any of
the Buyers purchased their lots.
The Credit Suisse Entities argue that the Credit Suisse claims rely on the lot
purchase contracts because if the Buyers had not entered into the purchase
contracts, they would not have suffered damages from the alleged fraud. 13 As
13
The Entities also argue that the claims rely on the lot purchase contracts because the
Buyers seek rescission of the lot purchase contracts. But the Buyers do not seek rescission of the
lot purchase contracts. They dropped their request for rescission on September 13, 2010. (R.3-
33 at 11.)
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previously noted, however, a but-for relationship between the lot purchase
contracts and the claims is not enough to warrant the application of equitable
estoppel.
The Credit Suisse Entities further contend that Liles forecloses the Buyers’
argument that the claims do not rely on the lot purchase contracts. 631 F.3d at
1243. But Liles is distinguishable. As we said in Byers, the plaintiffs in Liles
relied on the lot purchase contracts to make out their claims and therefore the court
correctly applied equitable estoppel to allow the nonsignatories to invoke the
forum-selection clauses. Without the lot purchase contracts, the plaintiffs would
have been unable to bring their claims.
Here, the Buyers’ Credit Suisse fraud claims do not rely on the lot purchase
contracts. The Buyers do not seek to hold the Credit Suisse Entities to the terms of
the lot purchase contracts. The Buyers simply allege that they could not benefit
from the marketed amenities (which are not required under the lot purchase
contracts) because of the Credit Suisse fraud. Additionally, the Buyers do not rely
on any terms of the lot purchase contracts to establish the liability of the Credit
Suisse Entities. It would be rather puzzling to say that the Credit Suisse fraud
claims rely on the lot purchase contracts when the alleged fraud occurred before
any of the Buyers purchased their lots.
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Because the Credit Suisse fraud claims do not rely on the lot purchase
contracts, we hold that the district court erred in applying the doctrine of equitable
estoppel to allow the Credit Suisse Entities to invoke the lot purchase contracts’
forum-selection clauses.
IV. Conclusion14
For these reasons, we hold that the district court erred when it determined
that the Buyers’ claims fall within the scope of the lot purchase contracts’ forum-
selection clauses. We also hold that the court erred in applying equitable estoppel
to allow the Mortgage Entities and the Credit Suisse Entities (nonsignatories to the
lot purchase contracts) to invoke the lot purchase contracts’ forum-selection
clauses. Accordingly, we reverse the district court’s judgment granting the
motions to dismiss for improper venue and remand for proceedings consistent with
this opinion.
REVERSED AND REMANDED.
14
The Lubert-Adler entities (some of the Credit Suisse Entities) argue that the Buyers
failed to satisfy the pleading requirements for their RICO claims in violation of Federal Rule of
Civil Procedure 9(b). Additionally, they argue that the Buyers have failed to assert facts
showing that Lubert-Adler’s actions proximately caused the Buyers’ harm. Because the district
court has not addressed these issues, we prefer to leave them to the district court to address in the
first instance.
Finally, to the extent that the Ginn entities argue that the Buyers failed to properly plead
their RICO claims, we decline to address the argument because the district court has not yet
ruled on the issue. Again, we prefer to leave the issue for the district court.
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