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denying a motion to dismiss under Rule 12(b) and ordering further briefing on the plaintiff's motion to transfer venue under § 1404 where the forum-selection clause mandated venue in "any court sitting in King County, Washington"
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Civil Action No. 04-0342 Section 1/3.
November 4, 2004
ORDER AND REASONS
A motion to dismiss plaintiffs' complaint pursuant to Fed.R.Civ.P. 12(b)(3), 12(b)(6) and 9(b) has been filed on behalf of defendants Northern Life Insurance Company, ING Reliastar Life Insurance Company, ING Life Insurance and Annuity Company, and ING Financial Advisors, LLC. Plaintiffs, Donna M. Dorsey, Kathleen "Bebe" Labourdette, Lily C. Miller, Joseph W. Pitts and/or Joseph W. Pitts CLU, Inc., Carlos "Chuck" Sabadie, Jr., Tasha Nicole Galan, and United Consumers Healthcare Association, Inc. oppose the motion and, alternatively, request that this Court transfer the case to the Western District of Washington pursuant to 28 U.S.C. § 1404(a). For the following reasons, defendants' motion to dismiss pursuant to 12(b)(3) is DENIED. Further, this Court hereby ORDERS the parties to submit memoranda of fact and law addressing the issue of whether this action should be transferred to the Western District of Washington pursuant to 28 U.S.C. § 1404(a). Pending a determination of whether this case should be transferred, this Court will not address defendants' motions to dismiss pursuant to Rules 12(b)(6) and 9(b).
Rec. Doc. No. 8.
FACTS AND PROCEDURAL HISTORY
Plaintiffs are independent insurance agents licensed by the State of Louisiana. Between 1990 and 2000, they sold insurance pursuant to separate sales agreements with Northern Life Insurance Company. A portion of the agents' clientele included public school employees to whom they marketed certain tax-deferred annuities in Orleans Parish and elsewhere.
Each of the plaintiffs' sales agreements contains a forum selection clause. However, the forum selection clauses in the plaintiffs sales agreements are not identical. The forum selection clause in the sales agreement between Northern Life and plaintiff, Joseph W. Pitts, CLU, Inc. (Pitts), dated June 1, 1990, provides:
This Agreement is governed by the laws of the State of Washington. In the event of a lawsuit arising out of this Agreement, the Executive General Agent [plaintiff] agrees that venue shall be laid in King County, Washington. The Executive General Agent further agrees to pay the Company's costs and legal expenses if the Executive General Agent is not the prevailing party in such a lawsuit.
Rec. Doc. No. 13, Ex. 1, ¶ 22. (emphasis added). Washington state trial courts and the United States District Court for the Western District of Washington both sit in King County which includes the City of Seattle. See 28 U.S.C. § 128(b) ("Court for the Western District [of Washington] shall be held at Bellingham, Seattle, and Tacoma.")
The forum selection clause in the remaining plaintiffs' sales agreements provides:
This Agreement is governed by the laws of the State of Washington. In any action or proceeding brought to enforce or otherwise arising out of or relating to this Agreement, you agree (1) to submit to the jurisdiction of any court sitting in King County, Washington, (2) to waive any objection you may have now or in the future to the laying of venue in any such action or proceeding in any such court, and (3) if you are not the prevailing party, to pay all of our expenses, including reasonable attorneys' fees, incurred by us to enforce our rights.
Rec. Doc. No. 8, exhibits 2-7. In some contracts, the clause is found in paragraph 20. In others, it is found in paragraph 22. Nevertheless, the language is identical. It is unclear why the language of the forum selection clause was altered at some point after June 1, 1990.
Northern Life subsequently merged into its parent company, Reliastar Life Insurance Company, which is a wholly-owned subsidiary of ING. As agents of ING, plaintiffs continued selling the same insurance products. About the same time, ING also acquired the annuity and life insurance business of a former competitor, Aetna Life Insurance Company, which had a salaried sales force.
Plaintiffs allege that after the Aetna acquisition, ING violated several different provisions of Louisiana law, including the state's Unfair Trade Practices Act and Trade Secrets Act, by sharing confidential and proprietary information with the new salaried sales force which, in turn, allowed that sales force to directly compete with plaintiffs. Plaintiffs also claim damages arising out of an alleged breach of the sales agreements, fraudulent misrepresentation, and tortious interference with contract.
On February 6, 2004, Plaintiffs filed this lawsuit pursuant to this Court's diversity jurisdiction. See 28 U.S.C. § 1332. On May 4, 2004, defendants filed the instant motion, seeking enforcement of the contractual forum selection clauses and dismissal of plaintiffs' complaint pursuant to Federal Rule of Civil Procedure 12(b)(3). Defendants also move for dismissal pursuant to Rule 12(b)(6), claiming that plaintiffs have failed to state a cognizable claim pursuant to Louisiana law upon which relief may be granted, and Rule 9(b), claiming that plaintiffs have failed to plead fraud with the requisite particularity.
Defendants did not, as a means of enforcing the forum selection clause, move to dismiss pursuant to 12(b)(6).
In support of their motion to dismiss pursuant to the contractual forum selection clause, defendants argue that (1) the forum selection clause in all of the plaintiffs' contracts are mandatory; (2) mandatory forum selection clauses are presumptively enforceable; (3) the forum selection clause at issue here is enforceable under the reasonableness standards articulated by the United States Supreme Court in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 1913, 32 L.Ed.2d 513 (1972); (4) plaintiffs have not met their burden of proving the unreasonableness of the clause; and (5) dismissal pursuant to Rule 12(b)(3) is the proper procedure for enforcing the forum selection clauses.
Plaintiffs argue that (1) despite Northern Life merging into ING, ING cannot invoke the terms of the forum selection clause because the sales agreements were executed with Northern Life, which ceased to exist upon the merger; (2) enforcement of the forum selection clause is unreasonable under the circumstances; and (3) the provision requiring plaintiffs to pay the company's expenses and attorneys' fees if plaintiffs are not the prevailing party is "overreaching" and contravenes Louisiana public policy. Alternatively, plaintiffs move this Court to transfer this lawsuit to the U.S. District Court for the Western District of Washington pursuant to 28 U.S.C. § 1404(a).
Rec. Doc. No. 15 ("Alternatively, should this Court be inclined to accept defendants' argument that this case should have been brought in Washington, then plaintiffs ask this Court to transfer the matter to the Federal District Court for the Western District of Washington[,] which includes King County, 28 U.S.C. § 128(b), for whatever disposition may be appropriate."). Neither party has addressed the factors that this Court should consider with regard to a § 1404 transfer or how those factors apply to the instant case.
LAW AND ANALYSIS
I. Whether the Sales Agreements Survived the ING MergerPlaintiffs first argument is that the defendants cannot rely on the forum selection clause because the signatory to those agreements, Northern Life, ceased to exist upon the merger with ING. In the context of this case, the argument is meritless. Plaintiffs' breach of contract claim is based upon a breach of the sales agreements, contracts that they contend have no force or effect due to the merger. Moreover, although the parties disagree about whether Washington or Louisiana law will ultimately apply to the claims asserted in this case, both Washington and Louisiana law provide that obligations, rights, and liabilities of a merged entity may continue with the surviving entity. See e.g., LSA-R.S. § 12:115(C) (stating that the surviving corporation in a merger "shall possess all the rights, privileges, and franchises possessed by . . . the former . . . corporation); Manuel v. Dean Shank Drilling Co., Inc., Civ. A. No. 91-2394, 1992 WL 161131 (E.D. La. June 23, 1992) (enforcing choice of law provision in a pre-merger contractual arrangement against the surviving company who legally succeeded to the terms of the contract post-merger). Travis-Edwards v. Texas-Edwards, 299 So.2d 389, 392-93 (La.App. 2d Cir. 1974) (noting that the purchase of a company's stock constitutes a merger and the corporate assets and liabilities of the merged company become the responsibility of the surviving corporation); Wash. Rev. Code § 23B.11.060(b) (providing that upon a merger, ownership of property of the merged corporations is vested in the surviving corporation); In re Freeborne, 617 P.2d 424, 427 (Wash. 1980) (citing cases holding that contractual rights are personal property). Accordingly, the Court rejects plaintiffs' argument that the merger precludes application of the terms of the sales agreements, including the forum selection clauses contained therein, in this action.
II. Permissive Versus Mandatory Forum Selection Clauses
Defendants argue that the forum selection clauses are mandatory such that they preclude litigation of plaintiffs' claims anywhere except a court in King County, Washington. Caselaw analyzing whether forum selection clauses are permissive or mandatory is "surprisingly uniform." K V Scientific Co. v. BMW, 314 F.3d 494, 499 (10th Cir. 2002); Watson v. John K. Burch Co., No. Civ.A.3:02-0555, 2003 WL 21145744, at *3 (N.D. Tex. May 14, 2003). Where venue is specified in a forum selection clause with mandatory or obligatory language, the clause will be enforced; where only jurisdiction is specified, the clause will generally not be enforced, unless there is some further language indicating the parties' intent to make venue exclusive. See City of New Orleans v. Municipal Administrative Services, Inc., 376 F.3d 501, 504 (5th Cir. 2004); see also K V Scientific, 314 F.3d at 499 ( quoting Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.3d 753, 757 (7th Cir. 1992)). As explained by the Fifth Circuit:
A party's consent to jurisdiction in one forum does not necessarily waive its right to have an action heard in another. For a forum selection clause to be exclusive, it must go beyond establishing that a particular forum will have jurisdiction and must clearly demonstrate the parties' intent to make that jurisdiction exclusive. Keaty v. Freeport Indonesia, Inc., 503 F.2d 955, 957 (5th Cir. 1974). It is important to distinguish between jurisdiction and venue when interpreting such clauses. Although it is not necessary for such a clause to use the word "venue" or "forum," it must do more than establish that one forum will have jurisdiction.Municipal Administrative Services, 376 F.3d at 504. Mandatory forum selection clauses have "express language limiting the action to the courts of a specific locale which is clear, unequivocal and mandatory . . . a permissive forum selection clause authorizes jurisdiction or venue in a selected forum, but does not prohibit litigation elsewhere." Bentley v. Mutual Benefits Corp., 237 F. Supp. 2d 699, 701-02 (S.D. Miss. 2002) (holding clause that read, "[t]his Agreement shall be construed under the laws of Florida and the parties stipulate to venue in Broward County" is permissive). In the case of an ambiguous forum selection clause, the clause will be construed against the drafter. Keaty v. Freeport Indonesia, Inc., 503 F.2d 955, 957 (5th Cir. 1974) (per curiam).
In Keaty, the Fifth Circuit analyzed a forum selection clause similar to the one set forth in Northern Life's contract with all plaintiffs except Pitts. The clause in Keaty provided, "[t]his 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." Id. at 956. The Fifth Circuit noted that the trial judge "assumed that the contractual provision in question constituted a mandatory forum-selection clause," an assumption that the Fifth Circuit found be "erroneous." Id. The Fifth Circuit overturned the trial court, noting that the clause could reasonably be interpreted as merely permitting, not requiring, New York to hear the case. Id. at 957.
Where two opposing, yet reasonable, interpretations of a contractual provision exist, the Court will adopt the traditional rule of construing the language against the drafting party. Keaty 503 F.2d at 957.
More recently, the Fifth Circuit construed a one-sentence forum selection clause providing "the laws and courts of Zurich shall be applicable," to be permissive and not mandatory. Caldas Sons, Inc. v. Willingham, 17 F.3d 123, 127-28 (5th Cir. 1994). Citing Keaty, the Court noted that while the word "shall" generally indicates mandatory, rather than permissive, language, the provision in Caldas only indicated that the parties consented to personal jurisdiction in Zurich courts. Id. at 127-28. Nowhere did the clause clearly indicate that Zurich should be the exclusive forum for all disputes. Id at 128; see also Raspino v. JRL Enter., No. Civ.A.01-1720, 2001 WL 845455, at *2 (E.D. La. July 25, 2001) (Barbier, J).
In contrast, the Fifth Circuit has held that a district court properly transferred an action pursuant to 28 U.S.C. § 1404 in a case where the forum selection clause provided, "[i]f the Subcontractor shall institute any suit or action for the enforcement of any of the obligations under this agreement, the venue of such suit or action shall be laid in the County of Essex and State of New Jersey." In re Fireman's Fund Insurance Companies, 588 F.2d 93, 94-95 (5th Cir. 1979) (emphasis added). Id. at 95.
28 U.S.C. § 1404(a) provides, "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought."
With respect to the clause in the sales agreement executed between plaintiff, Pitts, and Northern Life, the forum selection clause provides that "venue shall be laid in King County, Washington." The Court finds that the forum selection clause is unambiguous with respect to exclusivity and it is, therefore, mandatory. See 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) (holding that a 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," was 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"); Bonded Inspections, Inc. v. Northrop Grumman, Inc., No. Civ. A. 3:98-CV-0214D, 1998 WL 185518, at *1 n. 1 (N.D. Tex. April 10, 1998) (holding forum selection clause, which read in part, "[e]xclusive jurisdiction and venue shall lie in the State of New York . . ." is mandatory).
For additional examples of mandatory versus permissive forum selection clause language, see City of New Orleans v. Mun Admin. Servs., No. Civ.A. 02-0130, 2002 WL 1870028, at *3 n. 10 (E.D. La. Aug. 14, 2002), aff'd 376 F.3d 501 (5th Cir. 2004).
With respect to the forum selection clause in the remaining plaintiffs' sales agreements, the Court concludes that the provision is permissive. The remaining plaintiffs agreed to "(1) to submit to the jurisdiction of any court sitting in King County, Washington" and "to waive any objection [they] may have now or in the future to the laying of venue in any such action or proceeding in any such court." The language of the provision does not require venue to be laid exclusively in a Washington forum. It requires only that plaintiffs to submit to the jurisdiction of the court and waive any objections to venue should a lawsuit be filed in that venue. Merely mentioning venue in the forum selection clause is not sufficient to make the clause mandatory. See Bentley v. Mutual Benefits Corp., 237 F. Supp. 2d 699, 702 (S.D. Miss. 2002); see also Utah Pizza Service v. Heigel, 784 F.Supp. 835, 838 (D. Utah 1992) (holding that a clause which read, "[t]he parties agree that in the event of litigation between them, Franchise Owner stipulates that the courts of the State of Michigan shall have personal jurisdiction over its person, that it shall submit to such personal jurisdiction, and that venue is proper in Michigan" is permissive). Accordingly, the forum selection clause in the sales agreements, excluding the clause contained in Pitts' sales agreement, does not preclude venue in this district.
The paragraph also includes an attorney's fee provision which does not effect the forum selection clause analysis.
The Court notes that notwithstanding the forum selection clause, venue is statutorily proper in the Eastern District of Louisiana. Venue is proper pursuant to 28 U.S.C. § 1391 if a civil action is brought in "a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred." 28 U.S.C. § 1391(a)(2). Here, there is no dispute that a substantial part of the events giving rise to the claim occurred in the Eastern District of Louisiana. Among other things, plaintiffs are licensed by the State of Louisiana to sell insurance for defendants' companies and all of plaintiffs' claims pertain to ING's alleged interference with plaintiffs' ability to sell insurance in the New Orleans metropolitan area. See Rec. Doc. No. 15.
Therefore, with respect to plaintiffs Donna M. Dorsey, Kathleen "Bebe" Labourdette, Lily C. Miller, Carlos "Chuck" Sabadie, Jr., Tasha Nicole Galan, and United Consumers Healthcare Association, Inc., defendants' motion to dismiss pursuant to Rule 12(b)(3) is DENIED. With respect to Pitts, this Court, having decided the forum selection clause is mandatory, must next analyze whether the clause meets the test for reasonableness set forth in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 1913, 32 L.Ed.2d 513 (1972).
III. Validity of Forum Selection Clauses
Forum selection clauses, although not historically favored, are considered prima facie valid. Carnival Cruise Lines v. Shute, 499 U.S. 585, 589, 111 S.Ct. 1522, 1525, 113 L.Ed.2d 622 (1991) ( quoting The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 1913, 32 L.Ed.2d 513 (1972)). The party challenging the validity of the clause bears a heavy burden of proof, even when the selected forum is remote. The Bremen, 407 U.S. at 17, 92 S.Ct. at 1913. In the Fifth Circuit, the presumption of a forum selection clause's enforceability may be overcome by a clear showing that the clause is unreasonable under the circumstances. Haynsworth, 121 F.3d at 963 ( quoting The Bremen, 407 U.S. at 10, 92 S.Ct. at 1913). Unreasonableness potentially exists when: (1) the incorporation of the clause into the agreement was a product of fraud or overreaching; (2) the party seeking to escape enforcement will for all practical purposes be deprived of his day in court; (3) the fundamental unfairness of the chosen law will deprive the plaintiff of a remedy; or (4) the enforcement of the clause would contravene a strong public policy of the forum state. Id. (emphasis supplied).
Both Carnival and The Bremen involved federal admiralty jurisdiction. However, in the Fifth Circuit, the validity of forum selection clauses is analyzed under federal law regardless of whether jurisdiction is based on diversity or a federal question. Haynsworth v. The Corporation, 121 F.3d 956, 962 (5th Cir. 1997); Int'l Software Systems, Inc. v. Amplicon, Inc., 77 F.3d 112, 115 (5th Cir. 1996).
Pitts argues that the attorney fee-shifting provision included in the same paragraph as the venue clause was a product of overreaching, enforcement of the clause would effectively deprive Pitts of his day in court because of the high costs associated with litigating this case in the State of Washington, and enforcement of this clause would contravene the public policy of Louisiana. This Court will address each of these arguments in turn. A. Fraud/Overreaching
Plaintiff's sales agreement contains a fee-shifting provision that appears as the third sentence in a paragraph, entitled "Disputes," that also contains the jurisdiction and venue provisions discussed above. That provision provides, "[t]he Executive General Agent further agrees to pay the Company's costs and legal expenses if the Executive General Agent is not the prevailing party in such a lawsuit." Plaintiff argues that the inclusion of the fee-shifting provision was a product of "overreaching" or unequal bargaining power between the parties and that such a provision "contravenes every notion of fairness inherent in the American legal system."
Rec. Doc. No. 13.
In order to invalidate the forum selection clause on the grounds of fraud or overreaching, plaintiff must allege that the inclusion of the forum selection clause in the contract was the product of overreaching. Haynsworth v. The Corp., 121 F.3d 956, 963 (5th Cir. 1997) (citing Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 n. 14, 94 S.Ct. 2449, 2457 n. 14, 41 L.Ed.2d 270 (1974)). Plaintiff does not allege that the inclusion of the forum selection clause was the product of overreaching. Rather, he alleges that the attorney fee-shifting clause is overreaching. The Fifth Circuit has held that allegations of fraud or overreaching with respect to portions of a contract other than the forum selection clause are insufficient to demonstrate that the inclusion of the forum selection clause was the product of fraud or overreaching. See Haynsworth, 121 F.3d at 963. Although the fee-shifting provision appears in the same paragraph as the venue selection sentence, the Court finds that the fee-shifting provision is severable from the other two sentences in that paragraph addressed to choice of law and venue. Accordingly, to the extent that plaintiff claims fraud or overreaching with respect to the clause pertaining to fee-shifting, that claim is "irrelevant to enforceability" with respect to the venue provisions contained in the "Disputes" paragraph of the sales agreement. Id. ("[T]o the extent the plaintiffs claim fraud and overreaching in aspects of the General Undertaking other than the [forum selection/choice of law] clause, their allegations are irrelevant to enforceability.).
Finally, plaintiff argues that the forum selection clause should not be enforced because the sales agreement is a contract of adhesion. "Even in adhesion contracts, forum-selection clauses may be enforceable so long as they are not unreasonable or unfair." Pugh v. Arrow Electronics, Inc., 304 F. Supp.2d 890, 894 (N.D.Tex. 2003). In Carnival, the Supreme Court noted that "[c]ommon sense dictates that a ticket of this kind will be a form contract the terms of which are not subject to negotiation, and that an individual purchasing the ticket will not have bargaining parity with the cruise line." Carnival, 499 U.S. at 593, 111 S.Ct. at 1527. Nevertheless, the Supreme Court stated, "we do not adopt the Court of Appeals' determination that a nonnegotiated forum-selection clause in a form ticket contract is never enforceable simply because it is not the subject of bargaining." Id. Moreover, the validity of a forum-selection clause in a contract of adhesion also depends upon whether the clause was reasonably communicated to the plaintiff. Pugh, 304 F.Supp.2d at 894(citing Effron v. Sun Line Cruises, Inc., 67 F.3d 7, 9 (2d Cir. 1995)).
There is no evidence before the Court that demonstrates that the sales agreement is a contract of adhesion. Moreover, even assuming the sales agreement could ever be considered such a contract, plaintiff has not alleged or demonstrated that the contractual choice of forum was not reasonably communicated to him. In sum, the Court finds that plaintiff has not borne the burden of demonstrating that the inclusion of the forum selection clause in the contract was a product of fraud, overreaching, or unequal bargaining power between the parties. B. Plaintiff will not be denied his day in court or deprived of a remedy if the clause is enforced
Plaintiff next argues that the cost of routinely flying counsel and witnesses to the Pacific Northwest is beyond his means and that enforcement of the forum selection clause would, therefore, deprive Pitts of any "meaningful" day in court. The U.S. Supreme Court suggested in Carnival that forum selection clauses should not be invalidated solely because of the costs associated with litigating a claim in the selected domestic forum. Carnival Cruise Lines v. Shute, 499 U.S. 585, 594, 111 S. Ct. 1522, 1527-28, 113 L. Ed. 2d 622. Other federal courts have expressly stated that costs associated with litigating a case in a contractually agreed-upon domestic forum are not enough to render that forum "seriously inconvenient." Eisaman v. Cinema Grill Systems, Inc., 87 F.Supp.2d 446, 452 (D.Md. 1999) (citing Moses v. Business Card Express, Inc., 929 F.2d 1131, 1138-39 (6th Cir. 1991)); see also Effron v. Sun Line Cruises, Inc., 67 F.3d 7, 10 (2d Cir. 1995) ("[A] forum is not necessarily inconvenient because of its distance from pertinent parties or places if it is readily accessible in a few hours of air travel.") (citations omitted).
In Carnival, a cruise line included a clause on each passenger ticket requiring all disputes to be adjudicated in courts sitting in Florida. Carnival, 499 U.S. at 587-88, 111 S. Ct. at 1524. A couple residing in Washington State attempted to bring a personal injury lawsuit in the Western District of Washington, in part claiming that Florida was a "seriously inconvenient" forum because they were physically and financially incapable of pursuing the litigation on the opposite side of the country. Id. at 594, 1527. The Court clarified its statement in The Bremen that a forum selection clause could be invalidated if the contractual forum is "seriously inconvenient" by noting that the Bremen Court was addressing a hypothetical agreement to litigate in a "remote alien forum." Id. at 594, 1528. The State of Florida, as the Court noted, is not a "remote alien forum." Id. Similarly, in this case, Washington State does not constitute a remote alien forum. The plaintiff's cost of litigation may be higher in Washington than in Louisiana. However, that factor alone is not enough to invalidate the forum selection clause.
Pitts also argues that a variety of factors make Louisiana a more convenient forum than Washington. While factors relating to the convenience of a forum are certainly important when considering a motion to transfer venue pursuant to 28 U.S.C. § 1404(a), they are less important when considering a challenge to the validity of a forum selection clause. See United Rentals, Inc. v. Pruett, 296 F.Supp.2d 220, 227 (D.Conn. 2003). Furthermore, plaintiff makes no argument that filing the lawsuit in Washington would force the application of a state law which would deny him a remedy.
C. Enforcement of the clause will not contravene the public policy of Louisiana or the State of Washington
Pitts next argues that the fee-shifting provision included in the contractual provision governing disputes contravenes public policy and it should, therefore, be invalidated. However, as with the argument pertaining to overreaching, the argument misses the mark. Plaintiff has not argued nor demonstrated that the enforcement of the forum selection provision would contravene the public policy of Louisiana or Washington. Moreover, assuming arguendo that plaintiff's argument is relevant to the enforcement of the forum selection provision, the argument lacks merit.
The United States Supreme Court has noted that "[t]he rule here [in the United States] has long been that attorney's fees are not ordinarily recoverable in the absence of a statute or enforceable contract providing therefor." Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 717, 87 S.Ct. 1404, 1407, 18 L.Ed.2d 475 (1967) (emphasis added); Sierra Club v. Lynn, 502 F.2d 43, 64 (5th Cir. 1974). In addition, state courts in both Louisiana and Washington have routinely upheld such provisions. The Louisiana Supreme Court has stated that contractual fee-shifting provisions are "neither against public policy, nor good morals." Maloney v. Oak Builders, Inc., 235 So. 2d 386, 390 (La. 1970). Washington State goes a step further. Not only are contractual fee-shifting provisions acceptable, but a state statute requires that fees be awarded to the "prevailing party" in certain circumstances. Riss v. Angel, 912 P.2d 1028, 1034 (Wash.Ct.App. 1996); WASH. REV. CODE § 4.84.330 (2004).
Having found that the forum selection clause in Pitts' contract is reasonable and enforceable under the Bremen analysis, the only remaining issue is whether the forum selection clause should be enforced by a Rule 12(b)(3) dismissal.
IV. Proper Procedure for Enforcing Forum Selection Clauses
It is an open question in this circuit as to whether dismissal pursuant to Rule 12(b)(3) is the proper method for enforcing a forum selection clause in a diversity case where an alternative federal forum is available pursuant to the terms of the clause. In such a case, courts in this circuit differ on the question of whether a forum selection clause in such a case should be enforced by dismissal pursuant to Rule 12(b)(3) or transfer pursuant to 28 U.S.C. § 1404. The Fifth Circuit has yet to directly address the issue of whether dismissal pursuant to Rule 12(b)(3) is appropriate when the forum selection clause contemplates an alternative federal forum.
This Court's analysis begins with the United States Supreme Court's decision in Stewart Org. v. Ricoh, 487 U.S. 22, 108 S. Ct. 2239, 101 L. Ed. 2d 22 (1988). In Stewart, an Alabama corporation contracted with a New Jersey corporation to adjudicate disputes arising out of their agreement in a federal or state court sitting in Manhattan, New York City. Id. at 24 n. 1, 2241 n. 1. Despite the contractual language, the plaintiff in Stewart filed a lawsuit in the Northern District of Alabama for, among other things, breach of contract. Id. at 24, 2241. Jurisdiction was based on diversity of citizenship and the forum selection clause allowed plaintiffs to bring suit in a New York federal court. Defendants moved the Court to dismiss pursuant to 28 U.S.C. § 1406(a) or to transfer the case pursuant to 28 U.S.C. § 1404. Id.
A motion to dismiss pursuant to 28 U.S.C. § 1406(a) is similar to a motion to dismiss pursuant to Rule 12(b)(3). See 17 MOORE'S FEDERAL PRACTICE, § 111.04(4)(c) n. 44 (3d ed. 1998). Section 1406(a) provides: "The District Court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division where it may have been brought."
The Supreme Court did not expressly hold that a motion to transfer was the only proper procedural vehicle to enforce a forum selection clause where an alternative federal forum was available. However, in a footnote, Justice Marshall noted that neither party disputed that the district court properly denied the § 1406 motion because the case could not be dismissed for "laying venue in the wrong division or district" when venue was statutorily proper in the Northern District of Alabama. Id. at 29 n. 8, 2243 n. 8. On remand, the Eleventh Circuit gave substantial weight to the forum selection clause in its § 1404 analysis and it issued a writ of mandamus ordering the district court to transfer the case to the Southern District of New York. In re Ricoh Corp., 870 F.2d 570, 573 (11th Cir. 1989).
Some federal courts have interpreted this footnote as suggesting that venue is only "improper" when the statutory venue requirements have not been met. See, e.g., GMAC Commercial Credit, LLC v. Dillard Dep't Stores, Inc., 198 F.R.D. 402, 405 (S.D.N.Y. 2001).
Since Stewart, the Fifth Circuit has not addressed the issue of dismissing lawsuits on the basis of forum selection clauses when an alternative federal forum is available. It has addressed the issue when an alternative federal forum is unavailable. In Haynsworth v. The Corporation, 121 F.3d 956, 959 (5th Cir. 1997), for example, the Fifth Circuit was faced with a forum selection clause that required cases be litigated in English Courts. The Court enforced the forum selection clause by dismissing the case, although the precise procedural vehicle employed for dismissal was unclear. See id. at 970. However, in Haynsworth, the Court had no option to transfer the case because the selected forum was a foreign court.
Section 1404 only authorizes transfer to another federal district court. A federal court cannot transfer a case to a foreign or state forum. See 28 U.S.C. § 1404.
In International Software v. Amplicon, 77 F.3d 112, 113-14 (5th Cir. 1996), the Fifth Circuit was faced with the question of how to enforce a forum selection clause that provided for exclusive venue in an Orange County, California state court. The Court noted that although it "would prefer to apply" Stewart's § 1404 balancing test in motions to dismiss and motions to transfer pursuant to a forum selection clause, applying a balancing test "is not appropriate where, as here, a party seeks to have an action dismissed or remanded to state court, rather than transferred, on the basis of a forum selection clause that purports to preclude litigation from a venue other than a specific state court." Id at 115 (emphasis added and quotations omitted). The Court proceeded to list cases from other circuits where courts had treated motions to dismiss pursuant to a forum selection clause as motions to transfer, noting that those cases "unlike our own, did not involve a forum selection clause that limited the agreed venue to a state court." Id.
More recently, the Fifth Circuit noted that although the Stewart Court endorsed § 1404 as an appropriate mechanism to enforce a forum selection clause, " Stewart does not mandate that whenever a forum selection clause exists any transfer must fall under § 1404(a)." Jackson v. West Telemarketing Corp. Outbound, 245 F.3d 518, 522 (5th Cir. 2001) (finding that a transfer order which was based only on a forum selection clause without any discussion of "convenience and fairness" was properly construed as a transfer pursuant to § 1406). However, the primary issue in Jackson was whether the transferee court should have applied the law of the transferor court based upon a transfer pursuant to § 1404(a) or the transferee court based upon a transfer pursuant to § 1406 for improper venue. Id. at 522-23. The issue arose because the transferor court did not specify whether it was transferring pursuant to § 1406 or § 1404.
The Fifth Circuit cited Haskel v. FPR Registry, Inc., 862 F.Supp. 909, 915-16 (E.D.N.Y. 1994); National Micrographics Sys., Inc. v. Canon U.S.A., Inc., 825 F.Supp. 671, 679 (D.N.J. 1993); and Page Constr. Co. v. Perini Constr., 712 F.Supp. 9, 10-11 (D.R.I. 1989).
Construing the Fifth Circuit's language in Amplicon, several district courts in this circuit have suggested that the Court intended its holding to be limited to circumstances where no alternative federal forum was available. In other words, those district courts have suggested that when a party seeks to enforce a forum selection clause providing for exclusive venue in a foreign or state forum, dismissal is appropriate. Otherwise, when an alternative federal forum is available, a § 1404 transfer motion is appropriate. See Brock v. Baskin-Robbins, Inc., 113 F.Supp.2d 1078, 1085 (E.D. Tex. 2000); Lafargue v. Union Pac. R.R., 154 F.Supp.2d 1001, 1003 (S.D. Tex. 2001); Speed v. Omega Protein, Inc., 246 F.Supp.2d 668, 671 (S.D. Tex. 2003); see also Kerobo v. Southwestern Clean Fuels Corp., 285 F.3d 531, 536-39 (6th Cir. 2002) (reversing district court decision to dismiss pursuant to Rule 12(b)(3), and remanding for determination whether case should be transferred pursuant to § 1404); but see Vartec Telecom, Inc. v. BCE, Inc., No. 3:02-CV-2585-M, 2003 WL 22364302, at *6 (N.D. Tex. Oct. 9, 2003) (adopting broader reading of Amplicon and reasoning that dismissal is an appropriate means of enforcing an otherwise valid forum selection clause, even where an alternative federal forum is available).
In Brock, defendants moved to dismiss plaintiffs' lawsuit filed in the U.S. District Court for the Eastern District of Texas pursuant to Rule 12(b)(3) as a means of enforcing a forum selection clause requiring lawsuits be brought in California federal or state court. Id. at 1080, 1082. In the alternative, defendants moved to transfer the case to the Central District of California pursuant to 28 U.S.C. § 1404(a). After analyzing Haynsworth and Amplicon in light of the Supreme Court's footnote in Stewart, the court reasoned that forum selection clauses were properly enforced via § 1404(a) where (1) venue is statutorily proper in the district where the lawsuit was filed and (2) the forum selection clause provides for an alternative federal forum. The court noted that 28 U.S.C. § 1391, not the parties' contractual language, determined whether venue was "improper" pursuant to Rule 12(b)(3). Id. at 1084 (citing P.M. Enter. v. Color Works, Inc., 946 F.Supp. 435 (S.D.W. Va. 1996)). Therefore, the court concluded that a motion to dismiss for improper venue was procedurally incorrect when § 1391's statutory requirements were otherwise satisfied and an alternative federal forum was available pursuant to the terms of the forum selection clause. Brock, 113 F.Supp.2d at 1085. For reasons assigned below, this Court finds the Brock Court's reasoning persuasive.
Pitts' contract with Northern Life does not involve a contractual clause limiting the agreed litigation venue to a state court. Defendants have not cited any case, nor can this Court find any, where the Fifth Circuit has dismissed a lawsuit pursuant to Rule 12(b)(3) when the language in a forum selection clause contemplated an alternative federal forum. The cases cited by defendants involve dismissals where the forum selection clause precluded litigation in another federal forum. See Castillo Flores v. Harbor Shipping and Trading Co., No. Civ.A.01-0738, 2001 WL 740509, at *2 (E.D.La. June 29, 2001) (specified forum was Greek courts, making transfer impossible pursuant to § 1404); Hartash Constr., Inc. v. Drury Inns, Inc., No. Civ.A.00-1555, 2000 WL 1140498, at *2 (E.D.La. Aug. 11, 2000) (specified forum was Missouri state courts), aff'd 252 F.3d 436 (5th Cir. 2001); Kenner Marine and Machinery, Inc. v. Nat'l Car Rental Sys., Inc., No. Civ.A.87-0712, 1987 WL 4863, at *2 (E.D. La. April 16, 1987) (specified forum was Minnesota state courts).
Additionally, one prominent treatise agrees that Rule 12(b)(3) is not the proper enforcement vehicle. See 17 MOORE'S FEDERAL PRACTICE, § 111.04(4)(c) (3d ed. 1998) ("a motion to dismiss for improper venue is not the appropriate vehicle by which to give effect to the clause when the forum selection clause designates another federal court, or either a state or federal court in a particular state, as the exclusive forums"). Another prominent treatise recognizes that "analysis under § 1404(a) represents the majority approach when the contractually specified forum is another federal court." 15 Wright and MILLER, FEDERAL PRACTICE AND PROCEDURE, § 3803.1 (2d ed. 2004) ("the contradictory application of Rule 12(b)(3) remains the dominant approach when the forum-selection clause requires litigation in a state or foreign court"). Because this Court finds that the reasoning behind the weight of authority is sound, and in light of plaintiffs' alternative motion to transfer this action pursuant to § 1404(a), defendants' motion to dismiss Pitt's claim pursuant to Rule 12(b)(3) on the basis of the forum selection clause is DENIED.
The language of § 1404(a) requires a court to consider "the convenience of parties and witnesses" and "the interest of justice" in analyzing whether to transfer a case. Id. As stated by the Fifth Circuit:
The determination of "convenience" turns on a number of private and public interest factors, none of which are given dispositive weight. Action Indus., Inc. v. U.S. Fidelity Guar. Co., 358 F.3d 337, 340 (5th Cir. 2004) (citing Syndicate 420 at Lloyd's London v. Early Am. Ins. Co., 796 F.2d 821, 827 (5th Cir. 1986)). The private concerns include: (1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all other practical problems that make trial of a case easy, expeditious and inexpensive. Piper Aircraft Co., v. Reyno, 454 U.S. 235, 241 n. 6, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981). The public concerns include: (1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflict of laws of the application of foreign law. Id.In re Volkswagen AG, 371 F.3d 201, 203 (5th Cir. 2004). Neither party has briefed the application of these factors, despite plaintiff's alternative motion to transfer pursuant to § 1404. This Court declines to engage in a sua sponte discussion of issues that were not briefed. See Viron Int'l Corp. v. David Boland, Inc., No. 5:01-CV-42, 2002 WL 31990366, at *9 (W.D. Mich. March 4, 2002) (declining to address the transfer issue where plaintiffs raised possibility of transfer in reply brief, but neither party engaged in any § 1404 analysis). Therefore, the parties shall brief the issue of transfer pursuant to § 1404 in accordance with this Court's order below.
V. Conclusion
For the above reasons, defendants' motion to dismiss pursuant to Rule 12(b)(3) is DENIED. Further, it is ORDERED that the parties submit memoranda of fact and law with respect to the issue of whether this case should be transferred to the U.S. District Court for the Western District of Washington pursuant to 28 U.S.C. § 1404(a). Such memoranda shall be submitted to this Court on or before December 1, 2004. Additionally, this Court defers any decision on defendants' motions to dismiss pursuant to Rules 12(b)(6) and 9(b) pending this Court's transfer determination.