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Real Estate Fraud Case Should Not Be Heard in the Bahamas, Eleventh Circuit Rules - Bahamas Sales Assoc. v. Byers

December 21, 2012

Vincent Howard and our Murrieta foreclosure defense lawyers were interested to see a mortgage fraud case that turns on where the case should be heard, rather than the facts of the case. In Bahamas Sales Associate v. Byers, Donald Cameron Byers was sued for foreclosure in Florida, and countersued a variety of real estate entities alleging appraisal fraud. The defendants moved to dismiss Byers's counterclaim for improper venue, saying a forum-selection clause in his purchase contract made the Bahamas the appropriate place to hear the case. The district court agreed, then used equitable estoppel to apply the forum-selection clause to the counterclaim defendants, all of whom were not parties to the contract. The Eleventh U.S. Circuit Court of Appeals reversed and remanded.

Byers purchased a lot in a subdivision on Grand Bahama Island, from Ginn-LA West End Limited. The forum selection clause required that Bahamian courts would be the venue for any dispute.... related in any way to this Contract or any other agreement... executed in connection with this Contract." Byers then received financing from Bahamas Sales, whose contract required litigation in Florida. As the Eleventh noted, "apparently the real estate market tanked sometime after Byers closed the purchase." Byers failed to make payments and Bahamas Sales sued him in Central Florida. The counterclaim Byers filed alleged a conspiracy to inflate the appraisal by various mortgage entities, all of which were related to Bobby Ginn. Those entities moved to dismiss, saying venue was proper only in the Bahamas according to the purchase contract. Although none of the mortgage entities had signed the purchase contract, the district court agreed, using equitable estoppel to create that right. It dismissed the case.

Byers appealed, and the Eleventh Circuit reversed and remanded. It first disagreed with Byers that Bahamas Sales is bound by its own contract selecting Florida as the venue for disputes, saying the language of the contract makes only Byers an "obligor" bound by the clause. Byers also argued that the counterclaim does not "relate to in any way" the lot purchase contract. The district court disagreed, but the Eleventh Circuit found merit in the claim. Byers's appraisal fraud claims do not "relate to" this contract, and none of the defendants are signatories. Finally, the Eleventh decided that it was wrong for the district court to apply equitable estoppel to bring the nonsignatory mortgage defendants under the contract. Applying precedent involving a fraud claim against many of the same mortgage defendants, the court found that even though Byers wouldn't have sued without entering the contract, that's not a strong enough relationship to support estoppel.

Vincent Howard and our Anaheim foreclosure defense attorneys are pleased to see this decision keeping the case in American courts. Judging by the case the Eleventh cited involving a different fraud claim against the same defendants, Byers may very well have a case against these defendants. If so, it is likely better for him to seek justice through U.S. courts than in Bahamian courts, which could be less reliable or even influenced by knowing the defendants personally, since the community is smaller. And of course, being permitted to sue in the United States is only the first step for Byers; he still must prove his case in court. Vincent Howard and our Claremont foreclosure defense lawyers know that appraisal fraud was a contributor to the housing crisis, so we are pleased to see justice enabled.

If you believe you were entrapped in a bad mortgage loan by fraud or deception and you'd like to speak to an experienced attorney about your rights and your legal options, call Howard Law, P.C., today. You can reach us through our website or call 1-800-872-5925.

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