Opinion
NO. 218-13-CV-734
11-25-2013
Cate Street Capital, Inc. v. DG Whitefield, LLC d/b/a Whitefield Power and Light Company and Indeck Energy-Alexandria, LLC
ORDER
This case is a declaratory judgment action, brought by the Petitioner, Cate Street Capital, Inc. ("CSC"), the developer of a power plant owned by Berlin Station. The plant is now under construction in Berlin, New Hampshire. Petitioner seeks to invalidate three agreements it entered into with the Respondents, DG Whitefield, LLC d/b/a Whitefield Power and Light Company ("Whitefield") and Indeck Energy-Alexandria, LLC ("Indeck")—collectively referred to as "the Woods IPPs"— because the agreements were allegedly the product of economic duress.
Petitioner brought this action in the Rockingham County Superior Court. Respondents moved to change venue, asserting that that the matter should proceed in the Business and Commercial Dispute Docket of the Merrimack County Superior Court ("BCDD") because all three agreements contain a forum selection clause providing that exclusive jurisdiction to resolve all disputes arising out of the agreements is vested in this Court. Petitioner objected, and on October 4, 2013, the Rockingham County Superior Court (McHugh, J.) issued an Order transferring the matter to this Court. On October 23, 2013, that Order was modified and Chief Justice Nadeau ordered that this matter be transferred to the Merrimack County Superior Court for determination by the Presiding Justice of the BCDD as to whether the Court will accept jurisdiction over this matter. For the reasons stated in this Order, the Court finds that it has jurisdiction pursuant to RSA 491:7-a, and that this matter shall proceed in the BCDD.
I
This action arises out of the development of a power plant in Berlin, New Hampshire. In substance, CSC alleges that it owns a one-third interest in a project that will transform the James River Mill, located in Berlin, New Hampshire, into a wood biomass fueled 75 megawatt power plant. (Compl. ¶ 7.) The cost of the project is projected at approximately $300 million. (Id. ¶ 8.) CSC alleges that its ability to raise such a large amount of capital in connection with this project depended upon timely approval of the project by the Public Utilities Commission ("PUC"). (Id. ¶ 9.) In September 2010, the Woods IPPs moved to intervene in the proceedings before the PUC. (Id. ¶ 41.) CSC alleges that the Woods IPPs took a number of vexatious and improper positions in the PUC litigation. The gravamen of its Complaint is as follows:
The time pressures inherent in the financing of this project and the Wood IPPs' wrongful exploitation of the administrative and judicial processes to delay the project's financial close caused CSC had to have to renegotiate the deal in June and July 2011 (the time period when the deal as originally written had been set to close), causing an immediate loss of over seventy five million dollars. Even with this costly renegotiation, CSC was only able to "buy" two more months in which to attempt to convince the Wood IPP's to stop blocking the project. In the end, with only hours to spare before the project would have expired, CSC acquiesced to the Wood IPPs' demands, contained in the agreements that are here at issue, removing the impediment to closing. CSC conceded to the Wood IPPs' demands because it had no alternative.(Id. ¶ 11.)
CSC alleges that in order to complete the transaction, it entered into three separate agreements with Woods IPPs:
(a) The REC Price Support Agreement with Indeck required CSC to pay Indeck the difference between the price at which he could sell the environmental credits it generated for $31, during the time period from July 1, 2011 to May 31, 2013, limited to 210,833, credits. Indeck insisted on a $2.5 million escrow payment to be held by Wells Fargo as security for terms of the agreement;(Compl. ¶ 84.)
(b) A similar REC Price Support Agreement between CSC and Whitefield that required CSC to pay Whitefield price support for its environmental credits so that the price Whitefield received for the environmental credits it generated was no less than $30.00 per credit generated and sold from January 1, 2013 to December 31, 2014, subject to an 80,000 credit maximum. Whitefield insisted on cash collateral escrow amount of $1.2 million.
(c) The Facility Sales Option Agreement with Whitefield requiring CSC to purchase the Whitefield facility (which was a run-down facility likely worth somewhere in the vicinity of less than $500,000) for $3 million, at the option of Whitefield, which could be exercised through December 31, 2014. Whitefield insisted on a separate $1 million cash escrow as security for the sales agreement.
CSC alleges that all of these agreements are the result of economic duress and that the Court should declare them void. (Id. ¶ 99 B.) All three agreements contain identical choice of forum clauses, which provides as follows:
Governing Law, Jurisdiction and Venue. This Agreement and the rights and obligations of the Parties hereunder shall be governed by, and interpreted, construed and enforced under the laws of the State of New Hampshire, without regard to the conflicts of law principles in any jurisdiction. Sole and exclusive jurisdiction and venue for any action, suit or litigation arising from or related to this agreement shall be in the state or federal courts located in the State of New Hampshire, the Parties consent to venue and jurisdiction of the Business Court Docket of the New Hampshire Superior Court, and each Party waives any claim that such courts lack jurisdiction or constitute an inconvenient forum.(DG Price Support Whitefield Agreement, ¶ 14.3); (Indeck-Alexandria Agreement, ¶ 15.3); (DG Whitefield Facility Purchase Agreement, ¶ 8.3.)
The Complaint noted that the three agreements contained a forum selection clause that designated Merrimack County as the place for filing of any action, but asserted "since as alleged herein these agreements are the product of the Wood IPPs' coercion, the forum selection clauses are unenforceable." (Compl. ¶ 6, n. 3.) The Respondents moved to change the venue to this Court, asserting the forum selection clause in all three. The Petitioner objected. Accordingly, the Court addresses the parties' arguments in turn.
II
Interpretation of a forum selection clause is a matter of contract interpretation, and thus is a question of law to be decided by the court. Strafford Tech. v. Camcar Div. of Textron, 147 N.H. 174, 175 (2001). When interpreting any written contract, a court must read the document as a whole, and give its terms their reasonable meaning. Merrimack School Dist. v. Nat'l School Bus Serv., 140 N.H. 9, 11 (1995). Ultimately, in interpreting a forum selection clause, the Court's goal is to honor the legitimate expectations of the parties to the contract. Hansa Consult of N. Am., LLC v. Hansaconsult Ingenieurgesellschaft mbH, 163 N.H. 46, 52 (2011). Because the language of the contract regarding forum selection is generally controlling, "drawing an analogy to other cases is useful only to the extent those other cases address contract language that is the same for substantially similar to that at issue." Id. (quoting John Wyeth & Bro. Ltd. v. CIGNA Intern. Corp., 119 F.3d 1070, 1075 (3d Cir. 1997)).
The pertinent language contained within the three agreements reads as follows:
Sole and exclusive jurisdiction and venue for any action, suit or litigation(DG Price Support Whitefield Agreement, ¶ 14.3); (Indeck-Alexandria Agreement, ¶ 15.3); (DG Whitefield Facility Purchase Agreement, ¶ 8.3.) The Petitioner first argues that the clause is merely permissive in nature. The Court disagrees.
arising from or related to this agreement shall be in the state or federal courts located in the State of New Hampshire, the Parties consent to venue and jurisdiction of the Business Court Docket of the New Hampshire Superior Court, and each Party waives any claim that such courts lack jurisdiction or constitute an inconvenient forum.
Petitioner does not dispute that the clause vests exclusive jurisdiction in the state or federal courts of New Hampshire. Rather, it argues that the forum selection clause is only mandatory to the extent that it requires the suit arising from the Woods IPPs agreements be brought in state and federal courts of New Hampshire, and that the clause is otherwise permissive, in that it allows for litigation in any New Hampshire state or federal court where venue is proper. (Pet.'r's Objection ¶ 9.) According to Petitioner, this renders the clause consenting to venue and jurisdiction in the BCDD a mere consent to jurisdiction clause.
However, Petitioner overlooks the fact that the parties cannot, by agreement, vest jurisdiction in the BCDD, because by Superior Court Rule, the Presiding Justice of the BCDD must rule that the case meets the requirements for BCDD jurisdiction. See Super. Ct. R. 214 (d). The clause provides that the parties consent to the venue of the BCDD; the language contained within each of the three agreements states that "the Parties consent to venue and jurisdiction of the Business Court Docket of the New Hampshire Superior Court . . . ." There is no more that the parties could do to express their agreement that the case should proceed in the BCDD. Therefore, based upon the plain meaning of the language, the Court finds that the clause was intended to confer exclusive jurisdiction upon the BCDD. See Hansa Consult of N. Am., LLC, 163 N.H. at 52.
While Respondents cite RSA 508-A in support of its Objection, the statute is inapplicable, as the agreements are not the only basis for jurisdiction in New Hampshire, see RSA 508-A:2, and neither party seeks transfer to another state, see RSA 508-A:3.
III
Petitioner's principal argument is that the forum selection clause in each of the three agreements is void because the agreements were procured through fraud. More specifically, the Petitioner alleges that the Respondents utilized the PUC and appellate process as a means of coercing the Petitioner into signing these agreements.
In order to invalidate a forum selection clause based on fraud, the objecting party bears the burden of showing that it justifiably relied on a fraudulent or material misrepresentation made by the other party. See Rivera v. Centro de Turabo, Inc., 575 F.3d 10, 20 (1st Cir. 2009).
In Scherk v. Alberto-Culver Company, the United States Supreme Court noted that either forum selection clauses or arbitration clauses may be unenforceable based upon a claim of fraud, but that "[t]his qualification does not mean that any time a dispute arising out of a transaction is based upon an allegation of fraud, as in this case, the clause is unenforceable. Rather, it means that . . . [a] forum-selection clause in a contract is not enforceable if the inclusion of that clause in the contract was the product of fraud or coercion." 417 U.S. 506, 519 n. 14 (1974); see also Pride Enterprises v. Lewes Steel Serv., No. 09-330-GMS, 2010 WL 1337683, at *4 (D. Del., March 31, 2010). Other state courts have applied this reasoning. See, e.g., Carlyle Inv. Mgmt., LLC v. Nat'l Indus. Group Holding, No. 5527-CS, 2012 Del. Ch. LEXIS 238, at *42 (Del. Ch., Oct. 11, 2012) (finding that under both Delaware and Federal Law, a party must show that the forum selection clause itself is invalid), aff'd, Nat'l Indus. (Holding) v. Carlyle Inv. Mgmt., 67 A.3d 373 (Del. 2013).
The Court in Scherk—as well as many of the courts following its reasoning—rely on Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967). Under Prima Paint Corporation, a federal court may only consider fraud in the inducement if the fraud relates specifically to the arbitration clause itself and not the contract generally; otherwise, the claim of fraudulent inducement must be considered by the arbitrator. Id. at 403-04. The Court reasoned that its rule honored the congressional purpose of the federal arbitration act that the arbitration procedure, when selected by the parties to a contract, "be speedy and not subject to delay and obstruction in the courts." Id. at 404; see generally Sydnor v. Conseco Fin. Servicing Corp., 252 F.3d 302, 307 (4th Cir. 2001) (quoting Three Valleys Mun. Water Dist. v. E.F. Hunt & Co., 925 F.2d 1136, 1140 (9th Cir. 1991)); Thomas v. Vista A&S 2006-1, LLC, 2010 U.S. Dist. LEXIS 92224, at *7 (D. Neb., Aug. 5, 2010); Teradyne, Inc. v. Mostek Corp., 797 F.2d 43, 50-51 (1st Cir. 1986). Recently, the United States Supreme Court affirmed the validity of its holding and rationale in Rent-A-Center West v. Jackson, 130 S. Ct. 2772, 2778 (2010).
The Court finds the United States Supreme Court's reasoning applicable here. Parties to commercial transactions commonly execute jury trial waivers, arbitration provisions, and forum selection clauses as part of their agreements in order to facilitate resolution of commercial disputes. Relying upon the reasoning of Prima Paint Corporation, this Court has previously held that to allow a jury trial on the issue of fraud in the inducement whenever a plaintiff makes a generalized allegation of fraud in the inducement without any reference to the jury waiver itself would be inconsistent with New Hampshire law, because it would restrict parties freedom to waive the right to a jury trial in order to facilitate resolution of commercial disputes. Sabbow & Co., Inc. v. RBS Citizens Bank, N.A., No. 217-2010-CV-635, 2011 N.H. Super. LEXIS 29, at *7 (N.H. Super. Ct., June 20, 2011).
Similarly, the Petitioner in this case merely makes a generalized allegation of fraud in the inducement with respect to the validity of the contract. It does not plead fraud with particularity as required by the common law, see Belisle v. Belisle, 88 N.H. 459, 460 (1937), with respect to the alleged fraudulent inducement of the waiver of venue clause. If the Court were to decline to accept jurisdiction of a case in which the parties, on the face of the agreement, executed an agreement to proceed in the BCDD, based upon a mere generalized allegation of fraud, the result would be to delay litigation, and frustrate the important public purpose of allowing parties to freely contract where their dispute shall be resolved, and in that way honor the legitimate expectations of the parties to the contract. See Hansa Consult of N. Am., LLC, 163 N.H. at 52.
Because the Petitioner has failed to adequately allege that each forum selection clause contained in the three agreements was procured by fraud, its generalized allegation that each contract was induced by fraud is insufficient to support its argument that it has not validly consented to the jurisdiction of the BCDD. See Scherk, 417 U.S. at 519 n. 14; see also Carlyle Inv. Mgmt., LLC, 2012 Del. Ch. LEXIS 238, at *42.
IV
Having determined that the parties consented to the jurisdiction of the BCDD, the only remaining issue is whether the allegations of this case are within the jurisdiction of this Court. RSA 491:7-a provides that the BCDD shall have jurisdiction over a case when the following criteria are met:
(a) The parties have consented to the jurisdiction of the business and commercial dispute docket by agreement or stipulation;RSA 491:7-a, I. Under the statute, "[a] 'business entity' means a corporation, a statutory trust, a business trust or association, a real estate investment trust, a common law trust, any other unincorporated business, including a partnership, whether general or a limited liability partnership, or limited partnership, including a limited liability limited partnership, a limited liability company, a professional association, or a joint venture." RSA 491:7-a, II(a). Further, a consumer is defined as "an individual who purchases or leases merchandise primarily for personal, family or household purposes." RSA 491:7-a, II(b).
(b) At least one party is a business entity as defined in paragraph II;
(c) No party is a consumer as the term is defined in paragraph II; and
(d) If money damages are sought, the amount in controversy exceeds $50,000 or such other greater amount as the supreme court determines by rule.
Based on the pleadings put forth by the parties, this case fits squarely within the jurisdiction of the BCDD. See RSA 491:7-a, I. Here, the parties consented to the venue and jurisdiction of the BCDD, as evidenced by the forum selection clause contained in each agreement. Additionally, both parties are business entities, and neither party is considered a "consumer" as defined by the statute. Lastly, the amount in controversy in this action appears to exceed $50,000. As a result, the requirements of RSA 491:7-a are met, and this case is properly before the BCDD. Because this case falls within the criteria set forth in RSA 491:7-a, the Court accepts jurisdiction over this matter and it shall proceed in the BCDD.
SO ORDERED
_________________
Richard B. McNamara,
Presiding Justice