Opinion
Civil Action No. 01-0055, Section "T" (3)
February 25, 2002
Before the Court is a Motion to Dismiss for Improper Venue or, alternatively, to Transfer Venue tiled on behalf of the Defendant, TDC Energy Corporation (Doc. 6). The matter was taken under submission on January 16, 2002. The Court, having considered the arguments of the parties, the Court record, the law and applicable jurisprudence, is fully advised in the premises and ready to rule.
ORDER AND REASONS
I. BACKGROUND:
Plaintiffs, Columbia Energy Services Corporation ("Columbia") and Enron North America Corporation ("Enron"), tiled suit against TDC Energy Corporation ("TDC") in this Court on January 8. 2001. Plaintiffs raise breach of contract and detrimental reliance claims against TDC with respect to an alleged financial hedge contract consisting of four no-cost collars which TDC entered into with Columbia in the summer of 1999. Columbia purportedly assigned this financial hedge contract to Enron.
On January 1, 1997, Columbia and TDC entered into a form contract published by the Gas Industries Standards Board ("GISB contract"). The GISB contract covers the physical sales of natural gas At the time of the GISB contract, Columbia was buying most of TDC's monthly natural gas production. The GISB contract between Columbia and TDC includes, as a Special Provision, a forum selection clause mandating that all litigation arising out of the GISB contract be brought in Harris County, Texas.
In July of 1999, Columbia and TDC entered into a financial hedge contract consisting of no-cost dollars. No-cost collars are financial hedges in which a floor and ceiling price are set based on a predetermined index, such as NYMEX, that a producer will receive for an agreed volume of gas production for an agreed amount of time, thus assuring the producer of a predictable cash flow from its production. Under the agreement between Columbia and TDC, TDC (i) would be owed money if the index price fell below the collar's floor price, (ii) would owe money if the index price rose above the collar's ceiling price, and (iii) would neither be due money nor owe money if the index price was between the collar's floor and ceiling prices. The purpose of the collars was to lock in a minimum price which TDC would receive for its natural gas in order to provide a predictable cash flow.
There is a discrepancy between the plaintiffs and the defendant as to what instrument created these no-cost collars. The defendant, TDC, contends that the no-cost collars were created by an amendment to the GISB contract. TDC argues that because the plaintiffs are bringing an action based on the no-cost collars which were established by an amendment to the GISB contract, the forum selection clause in the GISB contract should apply and this action should be brought in Harris County, Texas.
The plaintiffs contend that the no-cost collars were created by an instrument that is separate from the GISB contract. Columbia alleges that their standard procedure was to use GISB contracts for the physical trades of natural gas and to use a separate contract for financial trades such as the no-cost collars. Columbia alleges that the no-cost collars were actually established before the amendment to the GISB contract, and that even though the amendment allowed Columbia to collateralize TDC's obligations under the financial hedge contract with the assets under the separate GISB contract, it did not govern the parties' relationship under the financial hedge contract. Because the no-cost collars were not part of the GISB contract, the plaintiffs contend that the forum selection clause contained in the GISB contract should not apply.
II. LAW AND ANALYSIS:
A. Law on Transfers of Venue pursuant to 28 U.S.C. § 1404:
A district court may transfer any civil action to any other district in which it might have been brought for the convenience of the parties and witnesses or if such transfer is found to be in the interest of justice.See 28 U.S.C. § 1404(a). In determining whether to transfer venue in a particular case, "the court must exercise its discretion in light of the particular circumstances of the case." Hanby v. Shell Oil Co., 144 F. Supp.2d 673, 676 (E.D.Tex. March 5, 2001) (citing Radio Santa FE v. Sena, 687 F. Supp. 284, 287 (E.D.Tex. 1988)). In doing so, the court must balance two categories of interests: 1) the so-called private interests, which take into account the convenience of the litigants, and 2) the public interests, which take into account the fair and efficient administration of justice. See Hanby, 144 F. Supp.2d 673, 767 (citingRobertson v. Kiamichi RR Co., L.L.C., 42 F. Supp.2d 651, 655 (E.D.Tex. 1999)).
In balancing the aforementioned categories of interests, courts are to consider the following factors.
Convenience factors, [which] include: (1) plaintiff's choice of forum; (2) convenience of parties and witnesses; (3) place of the alleged wrong; (4) location of counsel; (5) cost of obtaining the attendance of witnesses; (6) accessibility and location of sources of proof; and (7) possibility of delay and prejudice if transfer is granted.
Public interest factors, [which] include: (1) administrative difficulties caused by court congestion; (2) local interest in adjudicating local disputes; (3) unfairness of burdening citizens in an unrelated forum with jury duty; and (4) avoidance of unnecessary problems in conflict of laws.Hanby, at 676-677 (quoting Robertson v. Kiamichi RR Co., L.L.C., 42 F. Supp.2d 651, 655 (E.D.Tex. 1999)); see also Willis v. Parrot, Civ.A. No. 96-691, 1996 WL 337241, at *4 (E.D.La. June 17, 1996).
Unless these factors balance heavily in favor of the defendants, the plaintiffs choice of forum should rarely be disturbed. See Willis, 1996 WL 337241, at *4 (citing Schexnider v. McDermott Intern., Inc., 817 F.2d 1159, 1163 (5th Cir. 1987), cert. denied, 484 U.S. 977, 108 S.Ct. 488, 98 L.Ed.2d 486 (1987); Peteet v. Dow Chemical Co., 868 F.2d 1428, 1436 (5th Cir. 1989), cert. denied, 493 U.S. 935, 110 S.Ct. 328, 107 L.Ed.2d 318 (1989)). The plaintiff's choice of forum "is held to be `highly esteemed,' and entitled to great weight, especially if the forum he chooses is in the district in which he resides." Sorrels Steel Co., Inc., 651 F. Supp. 623, 628 (S.D.Miss. 1986) (quoting Time, Inc. v. Manning, 366 F.2d 690, 698 (5th Cir. 1966)). "The plaintiff's privilege of choosing his venue, at the very least, places the burden on the defendants to demonstrate why the forum should be changed." Id. at 629 (citing Time, Inc, 366 F.2d at 698). Therefore, the defendant moving for a changc of venue pursuant to Section 1404(a) must show both that the original forum is inconvenienced for itself and that the plaintiff would not be substantially inconvenienced by a transfer. See id. (citing Wright, Miller Cooper, Federal Practice and Procedure § 3849, at 408 (1986)).
In Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 32-33, 108 S.Ct. 2239, 2245 (1988). the Supreme Court held that a district court's decision to transfer a diversity case to the venue provided for in a forum selection clause is governed by the factors identified in 28 U.S.C. § 1404(a). The Supreme Court further explained that Section 1404(a) was intended to vest district courts with broad discretion to determine on an individualized, case-by-case basis, whether a transfer is warranted. 487 U.S. at 29-31, 108 S.Ct. At 2244. Under that framework, the presence of a forum selection clause is a "significant factor that figures centrally in the district court's calculus" when considering a transfer motion. Id. at 29, 108 S.Ct. At 2244. However, because the existence of a forum selection clause is not dispositive of a transfer motion, a court should also weigh "such issues as the convenience of [the selected] forum given the parties' expressed preference for that venue, and the fairness of transfer in light of the forum selection clause and the parties' relative bargaining power." Id.
Although the party seeking transfer under Section 1404(a) ordinarily bears the burden to demonstrate why the case should be transferred to a different forum, See Time, Inc. 366 F.2d 690, when the transfer motion seeks to enforce a valid and reasonable forum selection clause designating a forum other than that chosen by the plaintiff, the burden shifts to the plaintiff to "persuade the court that the contractual forum is sufficiently inconvenient to justify retention of the dispute." In re Ricoh Corp., 870 F.2d 570, 573 (11th Cir. 1989), Shaw Group, Inc. v. Natkin Co., 907 F. Supp. 201 (M.D. La. 1995). The plaintiff must show exceptional facts or circumstances to invalidate the forum selection clause. Ricoh, 870 F.2d at 574.
B. Resolution of this matter requires interpretation of the GISB contract, and therefore the forum selection clause is applicable.
The GISB contract includes, as a Special Provision, a forum selection clause which reads:
The forum for any litigation arising out of this Contract will be in a state or federal court for Harris County, Texas, and the parties consent to the jurisdiction and venue of such courts.
Based on this forum selection clause, if the GISB contract, as amended, covers the no-cost collars that are the alleged subject of this lawsuit, then this matter must be transferred to Harris County, Texas.
In their Opposition to the Motion to Transfer Venue, the plaintiffs adamantly argue that the GISB contract does not cover the no-cost collars which are purportedly at issue, and therefore the forum selection clause is inapplicable. The defendant argues that the GISB contract covers the no-cost collars because the no-cost collars were created by an amendment to the GISB contract. The defendant further alleges that if the GISB contract does not govern the no-cost collars, then there is no written contract that governs the no-cost collars and therefore there is no agreement on the financial hedge.
Whether or not the GISB contract governs the no-cost collars requires this Court to interpret the GISB contract. If this Court has to interpret the GISB contract, the case at bar arises out of the GISB contract, and the forum selection clause is applicable.
This matter is analogous to cases in which plaintiffs bring both contractual and tort cause of action. See Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509 (9th Cir. 1988), Terra International v. Mississippi Chem Corp., 119 F.3d 688 (8th Cir. 1997). In Gucci America the Court found that whether a forum selection clause applies to tort claims depends on whether resolution of the claims relates to interpretation of the contract. Gucci America 858 F.2d at 514, citing Weidner Communications, Inc. v. Faisal, 671 F. Supp. 531, 537 (N.D.Ill. 1987). The Court in Gucci America found that the tort causes of action asserted by the plaintiff related to "the central conflict over the interpretation" of the contract, and therefore the tort claims were within the scope of the forum selection clause. Gucci America 858 F.2d at 514
Likewise, in this matter, whether the GISB contract covers the no-cost collars is related to the central conflict over the interpretation of the contract. Although in this matter the plaintiffs raise breach of contract and detrimental reliance claims, and not tort claims, in order to resolve this conflict, the Court must determine what contract governs the no-cost collars. Because the causes of action asserted by the plaintiffs relate to the central conflict over the interpretation of the GISB contract, the forum selection clause contained in the GISB contract is applicable.
C. Based on the forum selection clause, transfer pursuant to 28 U.S.C. § 1404 is warranted.
As previously noted, although the party seeking a transfer under Section 1404(a) ordinarily bears the burden to demonstrate why the case should be transferred to a different forum, the burden shifts to the plaintiff to persuade the court that the contractual forum is sufficiently inconvenient to justify retention of the dispute when the transfer motion seeks to enforce a valid forum selection clause.
In the case at bar, the plaintiffs argument in support of the convenience of their chosen forum is that the witnesses who are employed by TDC are located in New Orleans. The plaintiffs contend that they will call as witnesses the officers and representatives of TDC that were involved in the financial hedge contract, and that those officers are located in New Orleans. Plaintiffs allege that if the matter is litigating in Harris County, Texas, the Harris County Court will not have subpoena power over the TDC employees and representatives, and therefore could not compel their appearance at trial because Federal Rule ofCivil Procedure 45 provides that witnesses who reside more than 100 miles away from the court may not be compelled to testify.
However, for purposes of determining proper venue, courts consider employees of a party to be so closely aligned with that party that they are presumed to be willing to testify in either forum, despite any inconvenience that it may entail. 17 James W. Moore et at., MOORE'S FEDERAL PRACTICE § 111.13 {1][f][iii] (Matthew Bender 3d ed.); see Gundle Lining Constr. Corp. v. Fireman's Fund Ins. Co., 844 F. Supp. 1163, 1165 (S.D. Tex. 1994). Because the witnesses belonging to the defendant in this matter are presumed to testify no matter the inconvenience, the argument of the plaintiffs that the Harris County forum is inconvenient because the witnesses they will call are out of the subpoena power of the Harris County court must fail.
In addition, the interests of justice are furthered when the courts enforce contractual obligations entered into between parties. "[E]nforcing a part[y's] contractual obligations is exactly the type of consideration that falls within the `interests of justice' rubric [under Section 1404(a)]." Shaw Group, 907 F. Supp. at 205. "[E]nforcement of valid forum selection clauses, bargained for by the parties, protects their legitimate expectations and furthers vital interests of the justice system." Stewart Organization, 487 U.S. at 33, 108 S.Ct. at 2245.
III. CONCLUSION:
The forum selection clause is applicable to the claims brought in the current matter because the causes of action relate to the central conflict over the interpretation of the GISB contract which contains the forum selection clause. Applying this Court's broad discretion afforded by Section 1404(a). this matter must be transferred to the federal court for Harris County, Texas. The defendant has established that there is a valid and enforceable forum selection clause, and therefore the burden shifts to the plaintiffs to show that the contractual forum is inconvenient. The inconvenience argument by the plaintiffs that the TDC representatives are outside of the subpoena power of the Harris County federal court fails because the TDC representatives are so closely aligned with the defendant that they are presumed to be willing to testify for purposes of determining venue. The plaintiffs have not persuaded the Court that the contractual forum is sufficiently inconvenient to justify retention of the dispute. In addition, the interests of justice are furthered by enforcing forum selection clauses that were entered into by the parties.
Accordingly,
IT IS ORDERED that the Defendant's Motion to Transfer Venue pursuant to 28 U.S.C. § 1404(a) filed on behalf of the Defendant, TDC Energy Corporation Transfer (Doc. 6) be, and the same is hereby. GRANTED.
IT IS FURTHER ORDERED that the above-captioned action be, and the same is hereby, transferred to the United States District Court for the Southern District of Texas.