June 19, 2017 BY Daniel Cheek
Georgia Courts Address Right Of Removal Under Corporate Venue Statute
One of the first considerations for defense attorneys on receipt of a new lawsuit filed in a Georgia state court is the venue where it is pending and what, if anything, the defense can do about it. A potential option available to corporate defendants in tort actions is the right of removal to the county in Georgia where the company maintains its principal place of business. The Georgia Court of Appeals and Georgia Supreme Court have addressed this removal provision in two recent opinions. These decisions, addressed below, shed light on both the importance of complying with the proper procedure and the availability of the right of removal to companies operating within the state but headquartered outside Georgia.
Section § 14-2-510 of the Georgia Code specifies the appropriate venue for actions against corporate defendants. This statute provides, in pertinent part, that:
(b) Each domestic corporation and each foreign corporation authorized to transact business in this state shall be deemed to reside and to be subject to venue as follows:
(1) In civil proceedings generally, in the county of this state where the corporation maintains its registered office; or if the corporation fails to maintain a registered office, it shall be deemed to reside in the county where its last named registered office or principal office, as shown by the records of the Secretary of State, was maintained . . .
(3) In actions for damages because of torts, wrong, or injury done, in the county where the cause of action originated, if the corporation has an office and transacts business in that county;
(4) In actions for damages because of torts, wrong, or injury done, in the county where the cause of action originated. If venue is based solely on this paragraph, the defendant shall have the right to remove the action to the county in Georgia where the defendant maintains its principal place of business. A notice of removal shall be filed within 45 days of service of the summons. Upon motion by the plaintiff filed within 45 days of the removal, the court to which the case is removed may remand the case to the original court if it finds that removal is improper under the provisions of this paragraph. Upon the defendant's filing of a notice of removal, the 45 day time period for filing such notice shall be tolled until the remand, the entry of an order by the court determining that the removal is valid, or the expiration of the time period for the plaintiff to file a motion challenging the removal, whichever occurs first[.]
O.C.G.A. § 14-2-510. These provisions apply equally to limited liability companies. O.C.G.A. § 14-11-108 (“For purposes of determining venue, the residence of a limited liability company or foreign limited liability company shall be determined in accordance with Code Section 14-2-510 as though such limited liability company or foreign limited liability company were a corporation.”). Thus, the statute provides two venues for corporate defendants in tort actions: (1) the county where the company maintains its registered office; and (2) the county where the cause of action originated. If venue is based solely on the fact that the cause of action originated there, i.e. the defendant does not also have an office and transact business in that county to satisfy subsection (b)(3), the right of removal in subsection (b)(4) comes into play.
In Burchfield v. West Metro Glass Co., Inc., A16A1494 (Feb. 22, 2017), the plaintiff filed a lawsuit against a corporate defendant in Fulton County arising out of an automobile accident that occurred in Fulton County. Defendant filed a timely answer and raised the defense of improper venue. Five months later, defendant filed a motion to transfer, which the trial court granted. The Court of Appeals reversed on appeal, however, holding that defendant failed to file a timely notice of removal within 45 days of service. Essential to the Court’s analysis was that venue was proper in Fulton County under O.C.G.A. § 14-2-510(b)(4) because the cause of action (accident) originated there. That is the only requirement that must be satisfied to establish venue under that provision. The Court further held that raising a venue defense in the defendant’s answer was not sufficient to preserve the right of removal outside the 45-day window and did not serve as the “functional equivalent” of a notice of removal.
The Burchfield decision highlights the critical distinctions between a motion to transfer for improper venue and the procedure for removal provided by O.C.G.A. § 14-2-510(b)(4). Under the Georgia Civil Practice Act, the defense of improper venue is waived if not raised in the defendant’s answer or by motion before or at the time of the responsive pleading. See, e.g., Hamner v. Turpen, 319 Ga. App. 619 (2013). Once the defense of improper venue is raised in an answer, however, there is no statutory deadline for filing a motion to transfer. The Court of Appeals has held that the defense was not waived where the defendant raised it in its answer but did not file a motion to transfer until 18 months later. Coastal Transport, Inc. v. Tillery, 270 Ga. App. 135 (2004). Similarly, the Court of Appeals has held that “a properly raised defense of improper venue is not waived implicitly by allowing the litigation to proceed over a lengthy period of time, nor is it waived implicitly by entering into consent orders extending discovery.” Williams v. Willis, 204 Ga. App. 328, 329 (1992). This is, of course, not without some limitation. A defendant who raises the defense of venue in its answer may nevertheless waive it by doing nothing further to elicit a ruling on the issue of venue prior to the entry of judgment against it. See Taylor v. Career Concepts, Inc., 184 Ga. App. 551 (1987).
Section 14-2-510(b)(4), on the other hand, concerns a defendant’s right to remove an action from a county in which venue is proper. The Court of Appeals has referred to this as an “absolute right,” subject to the procedure for remand, but the Burchfield case illustrates that the right must be timely exercised or it will be lost.
The second opinion addressing this removal provision was handed down by the Georgia Supreme Court in Pandora Franchising, LLC v. Kingdom Retail Group, LLLP, 299 Ga. 723 (2016). There, the plaintiff sued defendant, a foreign corporation, in Thomas County pursuant to O.C.G.A. § 14-2-510(b)(4). Defendant removed the case to Gwinnett County on the grounds that its principal place of business in Georgia was located there. The Court of Appeals reversed the trial court’s grant of defendant’s request for removal, and the Court of Appeals’ decision was affirmed by the Supreme Court on appeal. The central issue in the case was the meaning of the phrase “the county in Georgia where the defendant maintains its principal place of business” in subsection (b)(4). The Court held that “principal place of business” in this subsection refers only to one place: the single “nerve center” where a company maintains its worldwide headquarters. The Court further reasoned that there was significance in the placement of the phrase “in Georgia” before, rather than after, the term “principal place of business.” In other words, the Court declined to interpret this provision as meaning the county where a company maintains its principal place of business or principal place of operations in this state. Rather, the Court held: “the language of subsection (b) (4) confers the right of a company to remove an action in which venue is based upon this subsection only to the county in Georgia where the defendant maintains its worldwide principal place of business. If that place is not located in a Georgia county, then no right to remove is granted.” Thus, as the defendant was headquartered outside Georgia, it had no right of removal under subsection (b)(4) at all.
The venue statute states that it applies equally to “[e]ach domestic corporation and each foreign corporation authorized to transact business in this state.” From a practical standpoint, however, the Pandora Franchising decision basically eliminates the option of removal for a foreign corporation transacting business in Georgia, unless the company’s worldwide headquarters happens to be located in the state.
The Journal is a publication for the clients of Drew Eckl & Farnham, LLP. It is written in a general format and is not intended to be legal advice to any specific circumstance. Legal Opinions may vary when based upon subtle factual differences. All rights reserved.
H. Michael Bagley