Harvey Specialty Supply, Inc. v. Anson Flowline Equipment

Full title: HARVEY SPECIALTY SUPPLY, INC. v. ANSON FLOWLINE EQUIPMENT, INC., ET AL

Court: United States District Court, E.D. Louisiana

Date published: Aug 13, 2004

Civil Action No: 04-1250, Section: "J" (1) (E.D. La. Aug. 13, 2004)

Opinion

Civil Action No: 04-1250, Section: "J" (1).

August 13, 2004

ORDER AND REASONS

CARL BARBIER, District Judge

Before the Court are the following motions: plaintiff's Motion for Leave to File Supplemental and Amending Pleading (Rec. Doc. 23); and defendants' Motion to Dismiss Plaintiff's Suit for Improper Venue (Rec. Doc. 24) and Motion to Enforce Choice of Law Agreement (Rec. Doc. 26). All of the motions are opposed, and are before the Court on briefs without oral argument. For the reasons which follow, the Court finds that plaintiff may not amend its pleading to add a non-diverse defendant, and this matter must be transferred to the Southern District of Texas.

BACKGROUND

This matter derives from the claim of plaintiff Harvey Specialty Supply, Inc. ("HSS") that defendants have violated a Sales Agent Agreement under which HSS allegedly operated as the exclusive Louisiana distributor of oil and gas industry equipment and machinery which is manufactured by defendant Anson, Ltd. ("Anson") and sold by a subsidiary entity, defendant, Anson Flowline Equipment, Inc. ("AFE").¹

In December of 2000, HSS and AFE entered into a Sales Agent Agreement ("Agreement"), which reduced to writing HSS's alleged "long standing roles [sic] as the exclusive distributor for Anson products in Louisiana." Petition, ¶ 15. Though the Agreement expired by its terms on December 31, 2002, plaintiff alleges that the parties have continued to operate under "the same ongoing business arrangement." Id. at ¶ 16.

On April 20, 2004, HSS filed its state court petition for temporary restraining order, preliminary and permanent injunctions, and damages, in the 24^th Judicial District Court for the Parish of Jefferson. The petition alleged, inter alia, that the Agreement could not be terminated by defendants pursuant to Louisiana's statute governing the Repurchase of Farm, Industrial and Law and Garden Equipment by Wholesaler, La.R.S. 51:482 et seq. Relying on that statute, the state court granted injunctive relief ex parte. Shortly thereafter, the matter was removed to this Court, and it came before the Court on a motion to extend the state court temporary restraining order. Following a hearing held in open court, the Court found that the prerequisites for a temporary restraining order were not met. Rec. Doc. 5. The state court TRO expired by its own terms, and no new one was granted.Id.

The Sales Agreement between the litigants contains the following provisions relevant to the issues presented here:

24. Entire Agreement — This Agreement comprises pages 1 to 8 and Schedules 1 to 5, . . . and contains the entire agreement between the parties with respect to the subject matter hereof, supersedes all previous agreements and understandings between the parties with respect thereto, and may not be modified except by an instrument in writing signed by the duly authorized representatives of the parties.

Rec. Doc. 24, Exh. A, ¶ 24.

Schedule 2, explicitly incorporated by reference, contains the following forum selection provision:

13. Litigation — Any litigation brought by [HSS] or its successors or assigns against [AFE], arising out of this agreement or by reason of any sale hereunder, shall be commenced in Houston, Texas within one (1) year of the date such cause of action arises, otherwise the same shall be barred, notwithstanding any statutory period of limitations to the contrary.

Id., Schedule 2, ¶ 13.

As is common, the Sales Agreement contains a severability clause, stating that

[i]f any provision of this Agreement is held by any court or other competent authority to be void or unenforceable in whole or part, this Agreement shall continue to be valid as to the other provisions thereof and the remainder of the affected provision.

Id., ¶ 21. The Sales Agreement also contains a choice of law (Texas) provision. Id. at Schedule 2, ¶ 14.

Due to the presence of the forum selection and choice of law clauses, following discussion with counsel, it was agreed that prior to consideration of HSS's motion for preliminary and permanent injunction, the parties would submit to the Court the issue of which forum and which law applied to their dispute. Accordingly, the instant defense motions were filed in conformity with an agreed scheduling order.

Prior to the filing of the motions, however, plaintiff moved for leave to file a supplemental and amending pleading, which seeks to add a non-diverse defendant, Jenco Service and Rental, Inc. ("Jenco"). Defendant opposes the amendment, as more fully discussed below.

DISCUSSION

1. Motion for Leave to Amend

Plaintiff has moved to amend its original petition to add Jenco, arguing that Jenco is an indispensable party that HSS recently learned has conspired with Anson/AFE to eliminate HSS's ability to service and repair Anson equipment, and to convert HSS's franchise. Proposed Amended Cmplt., ¶¶ 26b 26d. HSS alleges that its claim against Jenco is brought pursuant to Louisiana Civil Code article 2324A, which provides that "[h]e who conspires with another person to commit an intentional or willful act is answerable, in solido, with that person, for the damage caused by such act." Defendants oppose plaintiff's motion for leave to amend, arguing that Jenco is not indispensable to resolution of this litigation, and that the supplemental pleading does not state a claim against Jenco. They further contend that plaintiff has attempted to join the Louisiana company for the sole purpose of defeating federal jurisdiction. As such, defendants argue that the Court should deny plaintiff's motion for leave.

Jenco is not an indispensable party

Under Federal Rule 19(b), a party is considered indispensable "if a court cannot proceed without the party 'in equity and good conscience.'" Whalen v. Carter, 954 F.2d 1087, 1096 (5^th Cir. 1992) (quoting Fed.R.Civ.P. 19(b)). A district court is guided by the following four factors in determining whether a party is indispensable: (1) to what extent a judgment rendered in the party's absence might be prejudicial to that party or those already parties; (2) the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; (3) whether a judgment rendered in the party's absence will be adequate; and (4) whether the plaintiff will have an adequate remedy if the party cannot be joined. Fed.R.Civ.P. 19(b); Whalen, 954 F.2d at 1096. A district court's analysis is to be controlled by "pragmatic and equitable considerations." 954 F.2d at 1096 (internal quotations and citation omitted).

HSS has premised whatever claim it has against Jenco on Civil Code Article 2324A, which provides for solidary liability among conspirators. However, the core of plaintiff's case against Anson/AFE is the termination of an alleged exclusive distributorship agreement between AFE and plaintiff. Jenco is not a party to the alleged agreement. Therefore, Jenco is not essential to plaintiff's case before the Court. Rather, HSS is attempting to allege a state law claim against Jenco, and to the extent such a claim could be maintained, it may be prosecuted in state court. Thus, it is clear that Jenco's absence from this suit would not be prejudicial to either Jenco or HSS, nor will a judgment in the absence of Jenco will be an inadequate remedy for HSS.

Accordingly, the Court finds that HSS's claims against Anson/AFE can, in equity and good conscience, be resolved without the joinder of Jenco. Jenco is therefore not an indispensable party in this matter, and the Court must analyze the question whether amendment should otherwise be permitted under 28 U.S.C. § 1447(e).

Under 1447(e), amendment should not be allowed

Title 28 U.S.C. § 1447(e) provides that "[i]f after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the State court." The plain language of this provision suggests that allowing joinder of a non-diverse defendant is completely within the discretion of the trial judge; nonetheless, courts continue to be guided by the pre-section 1447(e) case, Hensgens v. Deere Co., 833 F.2d 1179 (5^th Cir. 1987), in which the Fifth Circuit counseled district courts to scrutinize more closely an amended pleading which names a new non-diverse defendant in a removed case than an ordinary amended pleading. Hensgens, 833 F.2d at 1182. In making this determination, the district court considers the following factors: (1) the extent to which the purpose of the amended petition is to defeat federal subject matter jurisdiction; (2) whether plaintiff has been dilatory in asking for the amended petition; (3) whether plaintiff will be significantly injured if the amended petition is not allowed; and (4) any other factors which bear on the equities. Id.

Plaintiff's state court petition makes no mention of a grievance against defendants based on its loss of status as the sole "certified" Anson repair facility. Only after removal has plaintiff attempted to assert this theory of liability. While plaintiff contends that this is because it has only recently learned of the conspiracy between defendants and Jenco to deprive HSS of its "certified" status, it turns out that HSS lost this designation over two years ago. The temporal proximity between the removal of this action and plaintiff's recent efforts to join a non-diverse defendant under a theory which is based on facts plaintiff has been aware of for two years reveals HSS's true purpose behind their amended petition. See Kelly v. Boeing Petroleum Servs., Inc., 1993 WL 370615, at *2-*3 (E.D.La. 1993). Thus, the Court concludes that plaintiff has been dilatory in seeking the joinder of Jenco and has done so with the purpose of defeating the Court's subject matter jurisdiction.

Further, plaintiff would not be significantly injured as a result of the Court's denial of its request to join Jenco, because the Court fails to see any colorable claim asserted against Jenco in plaintiff's amended petition. As pointed out by defendants in their brief, Civil Code article 2324A — the alleged legal basis for plaintiff's proposed amendment — does not provide an independent cause of action for conspiracy, but rather governs the question of whether an obligation for a tort is joint or solidary. Jefferson v. Lead Indus. Ass'n, Inc., 106 F.3d 1245, 1253-54 (5^th Cir. 1997). Rather, plaintiff's new claim appears to be one against a corporate entity for tortious interference with a contractual relationship, and under Louisiana law (which plaintiff would have apply to its suit, although the Court does not reach that question today), no cause of action exists for tortious interference with a contractual relationship by a corporate entity. Technical Control Systems, Inc. v. Green, 809 So.2d 1204, 1209 (La.App. 3d Cir. 2002) (discussing limited situations in which a tortious interference with contract claim may be brought, following the Supreme Court's holding in 9 to 5 Fashions, Inc. v. Spurney, 538 So.2d 228, 231-34 (La. 1989)).

As for the question whether plaintiff would be significantly injured by disallowance of the amendment, as the Court has already observed, the core of plaintiff's case is the termination of an alleged exclusive distributorship agreement between AFE and plaintiff, and to which Jenco is not a party. If the Court refuses to grant the request for joinder of Jenco, plaintiff will be free to pursue their claims, if any, against Jenco in state court.

Last, the Court sees no other factors which bear on the equities in this case. Thus, it is clear that HSS's request to join Jenco as a defendant should be denied. Accordingly, the Court denies HSS's motion for leave to file a supplemental and amended pleading.

2. Motion to Dismiss

Defendants have moved to dismiss plaintiff's claim based on the forum selection clause included in Schedule 2 to the Sales Agreement. Plaintiff opposes dismissal on this ground arguing that (1) Plaintiff's claims are not brought solely under the Sales Agreement but pursuant to state statute and in tort, and thus the forum selection clause contained in the Sales Agreement does not apply; (2) the parties' course of dealing preceded the Sales Agreement and extended beyond its expiration, and thus the forum selection clause does not apply; (3) Schedule 2 must be disregarded because it conflicts with provisions in the main body of the Sales Agreement.

The Court addresses each of plaintiff's arguments in turn. However, as a threshold matter, the Court observes that it is well-settled that forum selection clauses "are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be 'unreasonable' under the circumstances."M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907 (1972). While the Bremen rule was first announced in the admiralty context, it has been explicitly held to apply to motions to dismiss based on a forum selection clause filed in cases before federal courts sitting in diversity. International Software Systems, Inc. v. Amplicon, Inc., 77 F.3d 112, 115 (5^th Cir. 1996).

As for HSS's first argument, the fact that some of HSS's claims are based on theories beyond the four corners of the written Sales Agreement does not defeat the forum selection clause. A contract between two parties containing a forum selection clause determines where a plaintiff may bring suit for a claim arising either under the contract or in tort. Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 587-588, 111 S.Ct. 1522, 1524 (1991) (holding that a forum-selection clause on a cruise line ticket applied in a personal injury suit, thereby impliedly rejecting the idea that a forum-selection clause in a contract only applied in litigation arising from a breach of that contract); Marinechance Shipping, Ltd. v. Sebastian, 143 F.3d 216, 221-22 (5^th Cir. 1998) (rejecting the plaintiff's argument that a forum-selection clause in an employment contract only applied to suits arising from the contract and not a tort cause of action). Applying this precedent, the Court will not allow plaintiff to circumvent an otherwise valid forum selection clause by characterizing its claims as extra-contractual.

With respect to HSS's contention that the forum selection clause does not apply because the parties' course of dealing preceded the Sales Agreement and extended beyond its expiration, the Court points out that by its terms, the Sales Agreement superseded all previous agreements between the parties. Sales Agreement, ¶ 24. Thus, the fact that the forum selection clause would not have applied prior to the confection of the Sales Agreement which contains it is both obvious and irrelevant to whether it applies now. As for HSS's claim that the parties' relationship continued by virtue of a "course of dealing" that continued after expiration of the formal Sales Agreement, the Court notes that HSS has not come forward with any evidence that the parties' course of conduct subsequent to the expiration of the written Sales Agreement reflected an intent to modify the forum selection clause. While it is true that a course of conduct may in some cases supplement, qualify, or even override express contract terms, "express contract terms and an applicable course of dealing . . . shall be construed wherever reasonable as consistent with each other." Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129, 136 (5^th Cir. 1979). Because nothing in the parties' course of conduct following expiration of the Sales Agreement is inconsistent with maintaining the forum selection clause as originally drafted, assuming arguendo that the expired written contract could have been revived by a course of dealing,² the forum selection clause remained intact.

2 This proposition is questionable given the language of paragraph 24, recited supra at page 3.

Finally, the Court addresses plaintiff's argument that Schedule 2 must be disregarded because it conflicts with provisions in the main body of the Sales Agreement. The Court first observes that the relevant contract provisions are clear and unambiguous. The Sales Agreement explicitly provides that Schedule 2 is incorporated in the Sales Agreement (see ¶ 24), and Schedule 2 contains an explicit and unambiguous forum selection clause, dictating that litigation arising out of the parties' Agreement must take place in Houston, Texas. Id., Schedule 2, ¶ 13. While HSS attempts to point to alleged conflicts between the Sales Agreement and Schedule 2, nothing in the Sales Agreement undermines the incorporation of Schedule 2 or the terms of the forum selection clause. Any other clauses which might conflict are deemed severed and waived, without affecting these nonconflicting, unambiguous clauses. Id., ¶ 20. As for HSS's contention that Schedule 2 is invalid because it refers to a "Buyer" rather than an "Agent," (as HSS is defined in the Sales Agreement), and that this inconsistency requires that the entire contents of Schedule 2 should be disregarded, the Court is unpersuaded. First, while the Sales Agreement does state that HSS will be "hereinafter referred to as agent," it does not suggest that HSS must be exclusively referred to as agent. Moreover, it is clear from the facts presented to the Court thus far that HSS did indeed buy Anson products, and it is clear from the context of Schedule 2 that "buyer" is meant to refer to HSS. Thus, the reference to HSS as "Buyer" in Schedule 2, and the other purported inconsistencies cited by plaintiff, do not conflict with or invalidate the forum selection clause contained in Schedule 2.

Accordingly, the forum selection clause contained in Schedule 2 must be upheld unless it is unreasonable. Haynsworth v. The Corporation, 121 F.3d 956, 963 (5^th Cir. 1997), cert. denied, 523 U.S. 1072, 118 S. Ct. 1513 (1998). "Unreasonableness potentially exists where (1) the incorporation of the forum selection clause into the agreement was the product of fraud or overreaching; (2) the party seeking to escape enforcement will for all practical purposes be deprived of his day in court because of the grave inconvenience or unfairness of the selected forum; (3) the fundamental unfairness of the chosen law will deprive the plaintiff of a remedy; or (4) enforcement of the forum selection clause would contravene a strong public policy of the forum state." Id. at 963 (internal quotations omitted),cert. denied, 523 U.S. 1072, 118 S. Ct. 1513 (1998). HSS has not argued that any of the requirements for a finding of unreasonableness are present in this case; nor does the Court see how it could on the record before it. Accordingly, the forum selection clause must be upheld.

Conclusion

While defendants seek dismissal rather than transfer pursuant to the forum selection clause, under the transfer statute, a district court may transfer a case sua sponte, 28 U.S.C. § 1406(a). "The district court has broad discretion in deciding whether to order a transfer." Caldwell v. Palmetto State Sav. Bank of South Carolina, 811 F.2d 916, 918-19 (5^th Cir. 1987) (citations omitted). In this case the interests of justice may be best served by transferring this case to a venue contemplated by the parties' contract, and thus the Court finds that transfer to the United States District Court for the Southern District of Texas, Houston Division is appropriate. The Court pretermits the choice of law question raised by defendants, leaving that to the Court that will ultimately resolve the merits of this case. Accordingly,

IT IS ORDERED that plaintiff's Motion for Leave to File Supplemental and Amending Pleading (Rec. Doc. 23), should be and is hereby DENIED; IT IS FURTHER ORDERED that defendants' Motion to Dismiss Plaintiff's Suit for Improper Venue (Rec. Doc. 24) is DENIED; IT IS FURTHER ORDERED that this matter is hereby TRANSFERRED to the Southern District of Texas, Houston Division.