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holding that because there are no federal courts located in Newton County, a forum selection clause stating that "[v]enue for any disputes between the parties will be in Newton County, Mississippi" clearly intended to limit venue to the state court in Newton County
Summary of this case from Paolino v. Argyll Equities, L.L.C.Opinion
No. C 01-2495 SI
September 17, 2001
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
On September 14, 2001, the Court heard argument on defendant's motion to remand or dismiss. Having carefully considered the arguments of the parties and the papers submitted, the Court hereby GRANTS the motion to dismiss.
BACKGROUND
This case arises out of a dispute over a contract to purchase an airplane executed on March 14, 2000. Tommy Rose ("Rose"), a Mississippi resident, entered into a contract to sell an airplane to the Thunder Mustang Flying Club ("TMFC"). TMFC agreed to pay Rose a total of $510,000 for the airplane, a P-51-D Thunder Mustang, which they apparently planned to use in a business venture in California. See Compl. at Ex. A ("Thunder Mustang Aircraft Purchase Agreement"). TMFC was to have made a down payment of $110,000 and pay the balance in monthly installments. In addition, TMFC agreed to maintain insurance on the airplane during the period that installment payments were being made. See Compl. at Ex. B ("Installment Sales Contract"). According to Rose, TMFC never made the required down payment on the aircraft and did not provide insurance as required in the installment sales contract. Rose subsequently sold the airplane to a third party on February 23, 2001 for $350,000.
Charles Stevens and Solomon Adio are both members of TMFC. In their complaint filed in Court, they explain that "North American Air Force" is a "trust under which the Thunder Mustang War Bird Flying Club, LLC is a chartered fying club organized under the laws of the state of Delaware." Compl. at 1.
Rose filed a complaint against TMFC in state court in Newton County, Mississippi on March 6, 2001 alleging breach of contract and seeking $74,999, along with attorney's fees. See Compl. at Ex. H ("State court complaint").
TMFC, the North American Air Force, Charles Stevens, and Solomon Adio ("TMFC plaintiffs") filed a separate complaint in this Court on June 28, 2001 alleging breach of contract and seeking a total of more than $20 million in compensatory damages. In their complaint, the TMFC plaintiffs allege that Rose failed to deliver the aircraft in a "timely, safe and flyable condition or tender documents in a timely manner necessary for proper inspection and delivery, and therefore is in breach of contract. . . ." Compl. at 3. The complaint indicates that the TMFC plaintiffs were not allowed to take the airplane for a test flight before or after the contract was signed and that the airplane failed to conform to the contract. In addition, the TMFC plaintiffs allege that the airplane was not fit for the purpose they intended to use it for and that Rose failed to disclose the aircraft's hazardous operating characteristics. Id. at 5.
On the same day that they filed the complaint in this Court, TMFC filed a "Notice of Related Case" seeking removal and dismissal of Rose's initial suit against them in Mississippi state court. Stevens and Adio are both California residents and Rose is a resident of Mississippi. Plaintiffs cite diversity as the source of this Court's jurisdiction. See 28 U.S.C. § 1332. Rose subsequently filed a motion to remand the case back to state court in Mississippi. During oral argument Rose restyled the motion as a motion to dismiss.
DISCUSSION
A. Motion to Remand Mississippi Action
A suit filed in state court may be removed to federal court if the federal court would have had original subject matter jurisdiction over that suit. 28 U.S.C. § 1441 (a); Snow v. Ford Motor Co., 561 F.2d 787, 789 (9th Cir. 1977). In this case, TMFC contends that the basis for federal subject matter jurisdiction is the federal diversity jurisdiction statute, 28 U.S.C. § 1332.
However, a defendant wishing to remove a case to federal court must file a notice of removal with the federal district court for the district and division in which the state court action is pending. See 28 U.S.C. § 1446 (a); Wright Miller, Federal Practice and Procedure: Jurisdiction 3d § 3731. In the instant case, because the state court complaint was filed in Newton County, Mississippi, a notice of removal may be filed only in the United States District Court for the Southern District of Mississippi. The Mississippi state court case filed by Rose was never properly removed to this Court, and there is currently no bar to it proceeding in state court where filed.
B. Dismissal of Complaint
The motion filed by defendant Tommy Rose was titled "Motion to Remand." Because the state court action was never properly removed to this Court, remand is not an option. At argument on this motion. Rose made clear that he was seeking dismissal of the complaint filed in this Court by the TMFC plaintiffs. Therefore, his motion will be considered a motion to dismiss.
The contract signed by the parties in this case included a forum selection clause indicating that: "[v]enue for any disputes between the parties will be in Newton County, Mississippi." Compl. at Ex. A. ¶ 13 ("Purchase Agreement"). Furthermore, the installment sales contract executed by the parties states: "Purchaser hereby waives the right to remove any legal action from the court originally acquiring jurisdiction. . . ." Compl. at Ex. B, ¶ 6 ("Installment Sale Contract"). There are no federal courts situated in Newton County, Mississippi, so the clause was clearly intended to limit venue to the state court located in the county, which is where Rose filed his complaint alleging breach of contract.
These clauses in the contract represent an enforceable agreement on the part of both parties that any dispute arising under the contract would be resolved in Mississippi state court and would not be removed by TMFC. Courts generally honor forum selection clauses in contracts in the absence of proof of fraud or overreaching, or that enforcement of the clause would effectively deny a party of a meaningful day in court. See The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972); Pelleport Investors, Inc. v. Budco Quality Theatres, 741 F.2d 273, 279 (9th Cir. 1984) (applying Bremen principle to forum selection clause governing choice between state and federal court). A defendant can waive the right to remove a case to a federal court in a contract unless the Constitution or a federal statute grants the federal courts exclusive jurisdiction over that action. See id.
No federal claims are raised by either party in this case. Both sides assert state breach of contract claims. In its opposition, TMFC argues — without any factual showing — that Rose entered the contract with intent to defraud plaintiffs. TMFC further claims that enforcement of the forum selection clause would "deprive [them] of [their] day in court." However, it is "settled law that unless there is a showing that the alleged fraud or misrepresentation induced the party opposing a forum selection clause to agree to inclusion of that clause in the contract, a general claim of fraud or misrepresentation as to the entire contract does not affect the validity of the forum selection clause." Moses v. Business Card Express, Inc., 929 F.2d 1131, 1138 (6th Cir. 1991), citing Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 n. 14 (1974) (emphasis original). TMFC has failed to make any such argument, much less such a showing. Therefore, the forum selection clause in the contract dictates that the breach of contract action may not be brought in this Court and that TMFC's complaint filed in this Court should be dismissed.
TMFC may bring the claims made in the complaint filed in this Court as counterclaims in the Mississippi action. Any jurisdictional issues may be raised in that action.
Rose contends that he is entitled to fees and costs pursuant to 28 U.S.C. § 1447 (c) because TMFC's efforts to remove the case to this Court were frivolous. The matter of directing the payment of costs under § 1447(c) is left to the court's discretion. This Court finds that a grant of attorney's fees is not warranted in this case.
CONCLUSION
For the foregoing reasons, defendant's motion to dismiss [docket #8] is GRANTED, and the TMFC plaintiffs' action filed in this court is DISMISSED, without prejudice to refiling as a counterclaim in the Mississippi action. Plaintiffs' motion to compel discovery [docket #13] is DENIED as moot. The clerk shall close the file.
IT IS SO ORDERED.
JUDGMENT
In accordance with the Court's Order of September 17, 2001, judgment is hereby entered.
IT IS SO ADJUDGED.