Opinion
No. 02-0130; Section "I" (2)
August 13, 2002
ORDER AND REASONS
Plaintiff, the City of New Orleans (the "City"), has filed a motion to remand this action to the state court from which it was removed. Defendant, Municipal Administrative Services, Inc. ("MAS"), opposes the motion. For the following reasons, the motion to remand is DENIED.
FACTUAL BACKGROUND
On November 6, 1995, the City entered into an agreement with MAS, a Texas corporation, whereby defendant was to perform certain auditing and analysis services for the City in exchange for an agreed upon sum plus a 20% contingency fee of any amounts "recovered, refunded or credited." An amendment to the agreement included a jurisdictional clause which provided:
Specifically, MAS was hired to perform an audit and analysis of BellSouth's franchise fee payments to the city. R. Doc. No. 4, p. 1.
R. Doc. No. 4, Ex. A, p. 4.
JURISDICTION
The undersigned Contractor does further hereby consent and yield to the jurisdiction of the State Civil Courts of the Parish of Orleans and does hereby formally waive any pleas of jurisdiction on account of the residence elsewhere of the undersigned Contractor.
R. Doc. No. 4, Ex. B, p. 2. Although the original agreement executed by the parties on November 6, 1995, did not include the forum selection clause, the same was incorporated by a series of amendments to the agreement in April, 2000. Id.; R. Doc. No. 4, p. 3.
After the services were performed, a dispute arose between the parties as to the amount of compensation owed MAS. On December 17, 2002, the City filed this action in the Orleans Parish Civil District Court ("CDC"), seeking a declaratory judgment that it owed no contingency fee payments to MAS or, alternatively, that any payments owed are materially less and should be set-off against any unjust enrichment received by defendant. On January 15, 2002, MAS, alleging diversity of citizenship of the parties pursuant to 28 U.S.C. § 1332, removed the action to this Court. On January 29, 2002, the City moved to remand the case on the basis that the aforementioned clause requires litigation of this lawsuit exclusively in CDC.
Specifically, it is alleged that after services were performed, defendant was paid $495,426.00 pursuant to the terms of the agreement. Thereafter, on July 25, 2000, the City filed a lawsuit against BellSouth in Orleans Parish Civil District Court which BellSouth removed to this Court. Ultimately, that lawsuit was settled. Following the settlement, defendant made a demand on the City to pay it an additional 20% commission of the settlement benefits received by the City. The City, however, refused on the basis that it did not consider the settlement funds to be amounts "recovered, refunded or credited" as a result of defendant's audit and analysis. R. Doc. No. 4. p. 2.
Id.
R. Doc. No. 1.
Defendant denies plaintiffs allegations and argues that the above-cited clause does not prevent removal to federal court. Specifically, defendant argues that by agreeing to the jurisdictional clause, it only consented to personal jurisdiction in Louisiana and not to a specific venue, i.e. CDC.
R. Doc. No. 7, p. 3 (emphasis added).
ANALYSIS
A party's consent to jurisdiction in a particular forum does not necessarily constitute a waiver of the right of removal based on diversity of citizenship. City of New York v. Pullman, Inc., 477 F. Supp. 438, 441-42, n. 11 (S.D.N.Y. 1979) (citing Keaty v. Freeport Indonesia, 503 F.2d 955 (5th Cir. 1974)). ("An agreement conferring jurisdiction in one forum will not be interpreted as excluding jurisdiction elsewhere unless it contains specific language of exclusion"). Rather, a waiver of the right of removal "must be clear and unequivocal" and may not be presumed from ambiguous contractual language. City of New Orleans v. National Service Cleaning Corp., 1996 WL 419750, *4 (E.D.La. 7/24/96); McDermott International Inc. v. Lloyds Underwriters of London, 944 F.2d 1199, 1204 (5th Cir. 1991). While a waiver of removal rights must be clear and unequivocal, it need not "include explicit words such as waiver of right of removal." Waters v. Browning-Ferris Industries, Inc., 252 F.3d 796, 797 (5th Cir. 2001). If the clause is ambiguous, "subject to opposing, yet reasonable interpretation," the clause will be construed against its drafter. Zapata Marine Service v. O/Y Finnlines, Ltd., 571 F.2d 208, 209 (5th Cir. 1978)."A forum selection clause is mandatory, and not permissive, where it clearly limits actions to the courts of a specific locale." BP Marine Americas v. Geostar Shipping Co., 1995 WL 131056, *4 (E.D.La. 3/22/95). These clauses are typically referred to as mandatory forum selection clauses. Id. However, "[w]hen only jurisdiction is specified, the clause will generally not be enforced without some further language indicating the parties' intent to make jurisdiction exclusive." John Boutari Son, Wines and Spirits, S.A. v. Attiki, 22 F.3d 51, 52-53 (2nd Cir. 1994); Keaty, 503 F.2d at 956. "[F]orum selection clauses have been construed as permissive where they show consent to the jurisdiction of a particular forum, but, do not state that the forum has exclusive jurisdiction." BP Marine Americas, 1995 WL 131056 at *4.
As the Court in Unity Creations, Inc. v. Trafcon Industries, Inc., 137 F. Supp.2d 108, 111 (S.D.N.Y. 2001) explained:
[I]f the parties' agreement stipulates that a state court shall be the venue for a dispute, the defendant's rights to remove the case to federal court would be deemed waived; removal would necessarily move the case to a venue other than the one in the agreement. However, if the agreement only establishes that a state court shall have jurisdiction over a dispute, the right to remove the case would not be affected; personal jurisdiction over a defendant is an issue distinct from the question of where a trial will be held.
In Keary v. Freeport Indonesia, Inc., 503 F.2d 955, 956 (5th Cir. 1974), the Fifth Circuit considered a forum selection clause that stated in pertinent part:
This agreement shall be construed and enforceable according to the law of the State of New York and the parties submit to the jurisdiction of the courts of New York.
Objecting to plaintiffs choice of forum, i.e. the Eastern District of Louisiana, Freeport argued that the clause required any action arising out of the contract to be brought exclusively in the state courts of New York. Id. Keaty, on the other hand, contended that while he had agreed to submit to the jurisdiction of New York if sued there, the clause did not constitute a waiver of his right to sue or be sued elsewhere. Id. Noting that the clause did not, on its face, limit actions pursuant to the contract "to the courts of a specific locale," the Court held that the provision fell "short of being a mandatory forum section clause." Id. Rather, the Court found that the clause was permissive and subject to opposing, yet reasonable, interpretations. Id. Accordingly, construing the clause against Freeport, the drafter of the clause, the Court held that the parties were not required to litigate the action in New York courts and it reversed the district court's dismissal for want of jurisdiction. Id.
The Court indicated that more specific and unequivocal forum language such as that used in M/S Bremen v. Zapata Offshore Co., 407 U.S. 1, 2, 92 S.Ct. 1907, 1909, 32 L.Ed.2d 513 (1972), i.e. "Any dispute arising must be treated before the London Court of Justice," is required for a court to find an unambiguous, mandatory forum selection clause. Id. at 957.
More recently, in Caldas Sons, Inc. v. Willingham, 17 F.3d 123, 127 (5th Cir. 1994), the Fifth Circuit considered whether a forum selection clause, providing in part that "the laws and courts of Zurich shall be applicable," mandated that the lawsuit before it be litigated in Zurich. Applying the Keaty analysis, the Court held that despite the presence of the term "shall," which is Generally mandatory, the clause "need not necessarily be classified as mandatory." Id. Rather, the court stated:
The only thing certain about the clause in the [parties'] contract is that the parties consented to the personal jurisdiction of the Zurich courts. Beyond that, however, the language does not clearly indicate that the parties intended to declare Zurich to be the exclusive forum for the adjudication of disputes arising out of the contract. As we stated in Keaty, "this is not a situation where the contract, on its face, clearly limits actions thereunder to the courts of a specified locale."
Id. at 128 (citing Keaty, 503 F.2d at 956). Accordingly, finding the clause ambiguous, the Court construed it against the defendant, i.e. the drafting party, as a permissive forum selection clause. Id.
See also, John Boutari, 22 F.3d at 52 (holding that a clause that provided that "[a]ny dispute arising between the parties hereunder shall come within the jurisdiction of the competent Greek Courts, specifically of the Thessaloniki Courts" was not mandatory where it mandated "nothing more than that the [Greek courts] have jurisdiction"); Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75(9th Cir. 1987) (provision stating, "[t]he courts of California, County of Orange, shall have jurisdiction over the parties in any action at law relating to the subject matter of the interpretation of this contract, held to be permissive); Raspino v. JRL Enterprises, Inc., 2001 WL 845455, *2 (E.D.La. 7/25/01) (finding that provision that stated that the parties hereby agree to submit to the jurisdiction of the courts of the State of New York, did not convey any exclusivity about the choice of New York as the proper venue and thus, lawsuit could be brought in Louisiana courts); BP Marine Americas v. Geostar Shipping Co., 1995 WL 131056, *4 (E.D.La. 3/22/95) (holding that language in forum selection clause stating that [t]he High Court in New York shall have exclusive jurisdiction over any dispute which may arise out of this Charter" was ambiguous and thus, not enforceable, where the clause referred to a forum that did not exist); John's Insulation, Inc. v. Siska Construction Co., Inc., 671 F. Supp. 289, 293 (S.D.N.Y. 1987) (finding that clause that provided, "any action hereunder shall be commenced in the Supreme Court of the State of New York" was permissive, and thus, action could properly be removed to federal court insofar as clause only designated the forum where action could be commenced) (emphasis added); Links Design, Inc. v. J. Lahr, 731 F. Supp. 1535, 1536 (M.D.Fla. 1990) (holding that language in clause providing that "the proper venue for said action shall be Polk County, Florida" was permissive where the clause could reasonable be interpreted as permitting removal of case to the federal district court for the district including that county).
Compare with Waters v. Browning-Ferris Industries, Inc., 252 F.3d 796, 798 (holding that forum selection clause was unambiguous and that defendant, therefore, waived its right to remove by agreeing that it could be sued in any court in Texas, that it consented to the jurisdiction of any such court in Texas, and that it waived "any objection it may have to the laying of venue of any such suit") (emphasis added); Sterling Forest Associates v. Barnett-Range Corp. 840 F.2d 249, 250, 252 (4th Cir. 1988) (holding that clause which stated that "the parties agree that in any dispute jurisdiction and venue shall be in California," was mandatory) (emphasis added); Nascone v. Spudnuts, Inc., 735 F.2d 763, 765 (3rd Cir. 1984) (provision which stated, this franchise shall be construed according to the laws of the State of Utah and venue for any proceeding relating to the provisions hereof shall be Salt Lake County, State of Utah, "held to be explicit, and thus, mandatory); Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762, 763 (9th Cir. 1989) (finding that forum selection clause which stated that [v]enue of any action brought hereunder shall be deemed to be in Gloucester County, Virginia" was mandatory because it made it clear "that venue, the place of suit, lies exclusively in the designated county"); City of New Orleans v. National Service Cleaning Corp., 1996 WL 419750 (E.D.La. 7/24/96) (finding that language in forum selection clause that provided that "[t]he contractor hereby consents to and stipulates to the personal jurisdiction and venue of the Civil District Court for the Parish of Orleans" was specific as to personal jurisdiction and venue and, therefore, foreclosed defendant's right to remove to federal court); Pelleport Investors, Inc. v. Budco Quality Theaters, Inc., 569 F. Supp. 612, 613-14 (C.D. Cal. 1983) (holding that defendant waived his right to remove by agreeing that all disputes "shall be litigated only in the Superior Court for Los Angeles, California"); Central Contracting Co. v. Maryland Casualty Co., 367 F.2d 341, 343 (3rd Cir. 1966) (provision which stated, "The subcontractor agrees that it will not commence any action . . . arising out of . . . this subcontract agreement, in any Courts other than those in the County of New York, State of New York," held to be mandatory and enforceable).
Plaintiff argues that although there are not explicit terms waiving the right of removal, such waiver is nevertheless implicit by the fact that MAS agreed to "waive any pleas of jurisdiction on account of the residence elsewhere of the undersigned Contractor. As stated, a waiver of removal does not have to include explicit words such as waiver of right of removal." However, the quoted language may reasonably be interpreted as constituting a waiver by MAS of any claim of lack of personal jurisdiction over it in Louisiana. The situation in Waters v. Browning-Ferris Industries, Inc., 252 F.3d 796, 797 (2001), a case relied upon by plaintiff, is different. In that case, language in the contract included a statement that defendant agreed to "waive any objection it may have to the laying of venue." The language of the clause at issue is not nearly as clear or unequivocal and, most significantly, makes no mention of any waiver of venue.
R. Doc. No. 4. Ex. B, p. 2.
Waters v. Browning-Ferris Industries, Inc., 252 F.3d 796, 797 (2001).
The Court finds that the forum selection clause at issue does not clearly limit litigation arising out of a breach of the parties' agreement to a specific forum. The clause mentions only jurisdiction and not venue. It does not mandate an intent that CDC be the exclusive forum to litigate any dispute. To the contrary, the most that can be said about the forum selection clause is that MAS consented to the personal jurisdiction of Louisiana courts.
Jurisdiction and venue are separate and distinct concepts. "Jurisdiction" refers solely to "the court's power to decide a case or issue a decree," while "venue" refers to "the proper . . . place for the trial of a lawsuit." Black's Law Dictionary, pp. 855, 1553 (7th ed. 1999).
At best, the clause at issue is permissive. Construing any ambiguity in the clause against its drafter, i.e., the City, and in favor of MAS, IT IS ORDERED that the motion of plaintiff, the City of New Orleans, to remand is DENIED.
The City does not contest the fact that it drafted the clause at issue.