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Dave Sheldon, et al v. Tara Khanal

August 31, 2011


The opinion of the court was delivered by: Matsumoto, United States District Judge:


Plaintiffs pro se, Dave Sheldon ("Sheldon") and Darren Kearns ("Kearns"), commenced this action in the United States District Court for the District of Kansas against defendants Tara Khanal ("Khanal"); Abu Athar ("Athar"); David Melo and the law firm of David J. Melo, Esq. (the "Melo defendants"); Shams Uddin, and Network Mortgage, Inc. (the "Uddin defendants"); Rosemarie Klie and the law firm of Sweeney, Gallo, Reich & Bolz, LLP (the "Klie defendants"); New York Community Bank, James Cantanno, and the law firm of Forchelli, Curto, Schwartz, Mineo, Carlino & Cohn, LLP (the "NYCB defendants"); Option One Mortgage Corp. ("Option One"); and Julie Wong and Winzone Realty, Inc. (the "Wong defendants"). Under New York State law, plaintiffs asserted claims against the various defendants for breach of contract (Count I); bad faith (Count II); breach of fiduciary duty (Count III); negligent and intentional abuse of process (Counts IV and V); negligent and intentional slander of title (Counts VI and VII); common law negligence (Count VIII); negligent misrepresentation (Count IX); fraud by misrepresentation (Count X); fraud by silence (Count XI); common law conspiracy (Count XII); and tortious interference with business relationships and economic prospects (Counts XIII and XIV). The action was transferred by order dated August 19, 2008 to the Eastern District of New York. (See ECF No. 176, Order Transferring Case; ECF No. 183, Case Transferred in from District of Kansas.) By Memorandum and Order dated September 30, 2009, this court dismissed plaintiffs' claims against all defendants. See Sheldon v. Khanal, No. 08-CV-3676, 2009 U.S. Dist. LEXIS 91599 (E.D.N.Y. Sept. 30, 2009). (See also ECF No. 253, Order Granting Motion to Dismiss for Lack of Jurisdiction, dated 9/30/2009.) On October 15, 2010, the Court of Appeals for the Second Circuit affirmed the district court's dismissal of all claims, with the exception of the breach of contract claim against Khanal, which was remanded to this court for further proceedings. See Sheldon v. Khanal, 396 F. App'x 737 (2d Cir. 2010). (See also ECF No. 260, Mandate of USCA as to Notice of Appeal, dated 10/15/2009.)

Now pending before the court are Khanal's motion to dismiss plaintiffs' breach of contract claim and plaintiffs' motion to change venue to Kansas. For the reasons set forth below, Khanal's motion to dismiss is granted and plaintiffs' motion to transfer venue is denied.


I.Allegations in the Complaint

The factual and procedural history of this case was set forth in the court's Memorandum and Order dated September 30, 2009. See Sheldon, 2009 U.S. Dist. LEXIS 91599, at *5-14. The court will repeat those facts herein only as necessary.

The remaining claim in this case involves a dispute concerning property located at 148-18 Laburnum Avenue, Flushing, New York ("the property"), specifically a breach of contract claim against the remaining defendant, Khanal. On approximately September 3, 2006, defendant Wong presented Khanal to plaintiffs as a potential buyer for the property, which plaintiffs owned at that time. (ECF No. 90, First Amended Complaint ("Am. Compl.") ¶¶ 10, 21.) Khanal signed a preliminary offer to purchase the property for $675,000 and plaintiffs accepted Khanal's offer. See Sheldon v. Khanal, No. 07-CV-2112, 2007 U.S. Dist. LEXIS 87973, at *31 (D. Kan. Nov. 29, 2007). (See also ECF No. 78, Memorandum and Order and Order To Show Cause, dated 11/29/2007, at 16; ECF No. 90, Am. Compl. ¶ 21.) Wong advised plaintiffs that Khanal was pre-qualified for the purchase and that the closing would transpire within 30-45 days. (ECF No. 90, Am. Compl. ¶¶ 10, 22.) Wong did not mention to plaintiffs that Khanal had any credit problems or that she was married. (Id.) Plaintiffs allege that Wong advised plaintiffs on several occasions between September 3, 2006 and November 8, 2006 that Khanal had a loan commitment from Network Mortgage, Inc. (Id. ¶¶ 5, 23-25, 31, 32, 38, 39.)

Prior to September 14, 2006, plaintiffs and Khanal, through her attorney, the Melo defendants, negotiated a contract of sale (the "contract"). (Id. ¶¶ 5, 26; see ECF No. 273-2, Residential Contract of Sale ("Contract").) The contract contained a "Mortgage Commitment Contingency" clause, which provided that Khanal's obligation to purchase the property was contingent on her ability to secure a commitment for $525,000 from an institutional lender within 30 days. (ECF No. 273-2, Contract ¶ 8(a).) Paragraph 23 of the contract, "Defaults and Remedies," provided:

(a) If Purchaser defaults hereunder, Seller's sole remedy shall be to receive and retain the Downpayment as liquidated damages, it being agreed that Seller's damages in case of Purchaser's default might be impossible to ascertain and that the Downpayment constitutes a fair and reasonable amount of damages under the circumstance and is not a penalty. (Id. ¶ 23.) A Rider to the contract, which the parties also executed, provided at paragraph 38:

(c) If Purchaser willfully defaults or willfully fails to carry out any of the provisions of this Contract as set forth herein, the Seller shall have the option to cancel this Contract. Seller shall notify Purchaser's attorney by mail and upon receipt of such notice this agreement shall become null and void and the Seller shall be entitled to retain the deposit paid by Purchaser hereunder, as liquidated damages. The Seller reserves the right to bring any legal proceedings or action which may be deemed necessary to protect his interest hereunder all at the sole expense of the Purchaser including, and not limited to, attorney fees. (Id. ¶ 38.) The contract provided that Khanal would pay $50,000 into an escrow account as a downpayment. (Id. ¶ 3(a).) On September 13, 2006, Khanal "wrote the down payment check" for $50,000. (ECF No. 90, Am. Compl. ¶ 5(a).) Plaintiffs executed the contract in Kansas on September 14, 2006. (Id. ¶¶ 5, 26.)

On September 22, 2006, Melo and Khanal ordered a title policy for the property. (Id. ¶ 28.) On October 4, 2006 Khanal had a termite inspection completed. (Id. ¶ 29.) On October 4, 2006, Melo and Khanal also advised plaintiffs that the parties' contract had been sent to a second lender. (Id. ¶ 29.) Plaintiffs understood this to mean that Khanal was seeking a better interest rate than the previous commitment. (Id.) On October 10, 2006, the Wong defendants advised plaintiffs that Khanal had a loan commitment and that she planned to close on October 20, 2006. (Id. ¶ 31.)

On October 18, 2006, Melo told Kearns that Khanal did not have a loan commitment, and plaintiffs granted Khanal an extension of the closing date. (Id. ¶ 33.) On November 2, 2006, Melo advised plaintiffs that Network Mortgage, Inc., and its broker Shams Uddin, wanted Khanal to buy the property in her cousin's name and transfer the deed back to her after closing. (Id. ¶ 34.) On November 7, 2006, Uddin, through Network Mortgage, Inc., advised plaintiffs that Khanal's husband had three accounts in collection, that Khanal had a loan commitment, that Khanal refused to accept a co-signer to obtain a second loan commitment at a lower interest rate, and that Sheldon could co-sign a second mortgage at a lower rate with no problem. (Id. ¶ 38.) Because of Khanal's husband's poor credit, Khanal needed five percent of the purchase price in a second mortgage or a co-signor. (Id. ¶ 39.) Sheldon agreed to co-sign the loan, but Khanal refused. (Id.) On November 7, 2006, Melo told plaintiffs that he was canceling the contract with Khanal because she could not qualify for a loan. (Id. ¶ 36.) In response, plaintiffs requested liquidated damages and advised the escrow agent that they objected to the release of any escrow funds to Khanal. (Id. ¶ 40.)

On November 7, 2006, Khanal asked Option One "to verify her inability to obtain a loan." (Id. ¶ 34.) Plaintiffs allege that Option One provided Khanal with a denial. (Id. ¶ 9.) Plaintiffs sold the property to a third party on February 16, 2007 for $630,000. (See ECF No. 276, Reply Memorandum of Law In Further Support of Defendant's Motion To Dismiss for Lack of Subject Matter Jurisdiction ("Def. Reply") at 5, Ex. A.)

II.Procedural History

On February 1, 2007, Khanal filed suit in New York State court against plaintiff Sheldon, seeking return of her $50,000 downpayment. See Khanal v. Sheldon, 851 N.Y.S.2d 58, 2007 NY Slip Op 51855U, at *2 (N.Y. Sup. Ct. Sept. 19, 2007). The court granted Khanal summary judgment and ordered plaintiffs to return the downpayment. Id. at *3; see also Khanal v. Sheldon, 867 N.Y.S.2d 460, 461 (2d Dep't 2008) (reducing the amount of the judgment entered by the New York Supreme Court on October 25, 2007 to $50,000). The New York Court of Appeals denied plaintiffs' motion for leave to appeal on June 24, 2009. See Khanal v. Sheldon, 12 N.Y.3d 714 (2009). The New York State court decision in favor of Khanal was reversed in 2010. See Khanal v. Sheldon, 904 N.Y.S.2d 453 (2d Dep't 2010).

On March 14, 2007, plaintiffs filed the instant action in the United States District Court for the District of Kansas. (See ECF No. 1, Complaint, dated 3/14/2007.) In April 2007, defendants filed motions to dismiss the federal action under Fed. R. Civ. P. 12(b)(1)-(3), and (5)-(6). (See ECF Nos. 33; 34; 40; 45.) On November 29, 2007, United States District Judge Katherine H. Vratil of the District of Kansas dismissed all claims against the Melo defendants and the Uddin defendants for lack of subject matter jurisdiction. Sheldon, 2007 U.S. Dist. LEXIS 87973, at *75. She ordered plaintiffs to show good cause as to why the court should not dismiss for lack of subject matter jurisdiction plaintiffs' claims against Khanal, the Klie defendants, and the Wong defendants. (Id. at *56, *75-76.) Additionally, Judge Vratil dismissed for lack of personal jurisdiction claims against the NYCB defendants. (Id. at *30-31, *76.) The court dismissed claims against Option One for ...

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