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Pinnacle Fuel, LLC v. Pure Aviation, LLC

United States District Court, W.D. Texas, Austin Division
May 5, 2023
No. A-22-CV-979-LY (W.D. Tex. May. 5, 2023)

Opinion

A-22-CV-979-LY

05-05-2023

PINNACLE FUEL, LLC, Plaintiff, v. PURE AVIATION, LLC, CARLO DIMARCO, and SOUTHSTAR FINANCIAL, LLC, Defendants.


TO THE HONORABLE LEE YEAKEL, UNITED STATES DISTRICT JUDGE:

REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

MARK LANE, UNITED STATES MAGISTRATE JUDGE

Before the court is Defendant Southstar Financial, LLC's Motion to Transfer (Dkt. #21) and all related briefing. After reviewing the pleadings, the relevant case law, and the entire case file, and determining a hearing is not necessary, the undersigned submits the following Report and Recommendation to the District Court.

The motion was referred by United States District Judge Lee Yeakel to the undersigned for a Report and Recommendation as to the merits pursuant to 28 U.S.C. § 636(b), Rule 72 of the Federal Rules of Civil Procedure, and Rule 1 of Appendix C of the Local Rules of the United States District Court for the Western District of Texas. Dkt. #34.

I. Background

The following facts are taken directly from the Complaint (Dkt. #1).

Plaintiff Pinnacle Fuel LLC brings suit against Defendants Pure Aviation, LLC, individual Carlo DiMarco, and SouthStar Financial, LLC (collectively, Defendants). Dkt. #1 (Compl.). Pinnacle is a small oil trading company in the business of purchasing, marketing, and distributing various oil and petroleum products. Id. ¶ 11. Defendant Pure Aviation is a global energy and petrochemicals trading and supply firm. Id. ¶ 12. Pinnacle and Pure Aviation entered into a Supply Agreement in which Pinnacle promised to purchase reclaimed oil of certain quality specifications from Pure Aviation, with the final price for each shipment is subject to post-delivery adjustments. Id. ¶¶ 13-14. Pinnacle alleges Pure Aviation and DiMarco altered independent inspectors' testing reports on the quality of products it received from Pure Aviation, in order to induce Pinnacle to accept the shipments and make preliminary payments, and to reduce Pure Aviation's financial obligations to Pinnacle for the contractually-mandated price reductions based on quality. Id. ¶ 16. Pinnacle asserts venue is proper here under the Supply Agreement's exclusive forum selection clause: “Each Party submits to the exclusive jurisdiction of the United States District Court for the State of Texas. Each Party waives, to the fullest extent permitted by applicable law, any objection to venue in the United States District Court for the State of Texas or to any claim of inconvenient forum of such court or of sovereign immunity.” Id. ¶ 9.

DiMarco is the sole member of Pure Aviation. Compl. ¶ 7. The court is satisfied it has diversity jurisdiction. Id. at ¶¶ 7-8.

Pinnacle contends that “SouthStar succeeded by assignment to the Supply Agreement,” sometime between May and August 2022. Id. ¶ 20. SouthStar sent a letter to Pinnacle, dated July 29, 2022, advising Pinnacle that SouthStar was the assignee of Pure Aviation's accounts receivable and directing all Pinnacle invoices be paid to SouthStar. Id. That letter also contained a South Carolina choice of law and forum selection clause. Id.; Dkt. #21-1 at 48-49. SouthStar asserts that Pinnacle owes it approximately $400,000 for deliveries based on fraudulent invoices generated by Pure Aviation. Id. ¶ 21. Neither SouthStar nor Pure Aviation has paid any sum of money toward the amount owed to Pinnacle. Id. ¶ 24.

Pinnacle asserts claims against Defendants for breach of contract, fraud, unjust enrichment, DTPA violations, tortious interference with contract, and seeks a declaratory judgment. Id. ¶¶ 2656.

SouthStar answered and asserted counterclaims. Dkt. #22. SouthStar alleges it and Pure Aviation executed a Factoring Agreement, whereby SouthStar agreed to provide capital to Pure Aviation in return for a first-priority perfected security interest in Pure Aviation's assets and accounts receivable. Id. ¶ 8. The Factoring Agreement provides that it shall be interpreted under South Carolina law and any dispute in connection with the agreement shall be brought exclusively in South Carolina, Charleston County. Id. ¶ 9. SouthStar sent Pinnacle three letters, which SouthStar refers to as “Notice of Purchase and Estoppel Agreements” (“NOPs”), that informed Pinnacle its debt to Pure Aviation was owed to SouthStar. Id. ¶ 19. These NOPs purported to verify invoices of money owed by Pinnacle to Pure Aviation. Id. Pinnacle's Manager signed and returned the NOPs to SouthStar. Id. ¶ 20. Each NOP contained a South Carolina choice of law and venue provision. Id. ¶ 18. SouthStar asserts claims against Pinnacle for breach of contract and promissory estoppel for Pinnacle's failure to pay the amounts stated in the NOPs. Id. ¶¶ 32-49.

Relying on the forum selection clauses in the Factoring Agreement and the NOPs, SouthStar argues this action should be transferred to the United States District Court of South Carolina, Charleston Division. Dkt. #21-1 at 2. Pinnacle opposes the motion. Dkt. #31. Neither Pure Aviation nor DiMarco participated in the motion practice.

II. Applicable Law

Forum-selection clauses are “contractual provision[s] in which . . . parties establish the place (such as the country, state, or type of court) for specified litigation between them.” ForumSelection Clause, BLACK'S LAW DICTIONARY (11th ed. 2019). “[T]he appropriate way to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of forum non conveniens,” Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Tex., 571 U.S. 49, 60 (2013), which allows courts to “decline to exercise [their] jurisdiction and dismiss a case that is otherwise properly before [them] so that the case can be adjudicated in another forum.” PCL Civ. Constructors, Inc. v. Arch Ins. Co., 979 F.3d 1070, 1073 (5th Cir. 2020). “[F]or the subset of cases in which the transferee forum is within the federal court system,” Congress codified the doctrine of forum non conveniens in 28 U.S.C. § 1404(a), “replac[ing] the traditional remedy of outright dismissal with transfer.” Atl. Marine, 571 U.S. at 60. “[F]ederal law governs the enforceability of a forum selection clause, but the forum state's choice of law rules control what law governs the interpretation of the clause.” Wellogix, Inc. v. SAP Am., Inc., 648 Fed.Appx. 398, 401 (5th Cir. 2016) (citing Weber v. PACT XPP Techs., AG, 811 F.3d 758, 770 (5th Cir. 2016)).

Section 1404(a) “permits transfer to any district where venue is also proper (i.e., ‘where [the case] might have been brought') or to any other district to which the parties have agreed by contract or stipulation.” Atl. Marine, 571 U.S. at 59 (quoting 28 U.S.C. § 1404(a)). “[A] proper application of § 1404(a) requires that a forum-selection clause be ‘given controlling weight in all but the most exceptional cases.'” Id. at 59-60 (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988) (Kennedy, J., concurring)) (cleaned up).

At the outset, a court must determine whether the forum-selection clause is part of a valid contract and whether the dispute falls within the scope of that contract. Fintech Fund, F.L.P. v. Horne, 836 Fed.Appx. 215, 222 (5th Cir. 2020) (citing Atl. Marine, 571 U.S. at 62 n.5). A court must then analyze whether the forum-selection clause is mandatory or permissive. Sabal Ltd. v. Deutsche Bank AG, 209 F.Supp.3d 907, 917 (W.D. Tex. 2016). After making these determinations, a court reaches the final preliminary inquiry and evaluates the enforceability of a forum-selection clause. Weber, 811 F.3d at 770.

“When the parties hold a valid forum selection clause, Atlantic Marine alters the normal section 1404 analysis.” In re Rolls Royce Corp., 775 F.3d 671, 678 (5th Cir. 2014); Weber, 811 F.3d at 767 (“The existence of a mandatory, enforceable [forum-selection clause] dramatically alters this analysis.”). “First, the plaintiff's choice of forum ‘merits no weight'; instead he has the burden of establishing that § 1404(a) transfer . . . is unwarranted.” Weber, 811 F.3d at 767 (quoting Atl. Marine, 571 U.S. at 51). “And second, the court should not consider the private-interest factors: Because the parties have contracted for a specific forum, they ‘waive the right to challenge their preselected forum as inconvenient ....'” Id. (quoting Atl. Marine, 571 U.S. at 51). Thus, “a district court may consider arguments about public-interest factors only.” Atl. Marine, 571 U.S. at 64. Public factors include, “the interest in having a case involving local disputes and local law resolved by a local court, [] facilitating judicial economy[,] and avoiding duplicitous litigation.” In re Rolls Royce Corp., 775 F.3d at 678; see In re Volkswagen of Am., Inc., 545 F.3d 304, 315 (5th Cir. 2008) (“The public interest factors are: ‘(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 or in the application of foreign law.'” (quoting Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241 n.6 (1981)). Because only the public-interests may weigh against transfer, and “[b]ecause those factors will rarely defeat a transfer motion, the practical result is that the forum-selection clauses should control except in unusual cases.” In re Rolls Royce, 775 F.3d at 678 (quoting Atl. Marine, 571 U.S. at 51).

III. Analysis

Despite Pinnacle including the Supply Agreement's forum selection clause in its Complaint, SouthStar does not mention that forum selection clause in its motion. Instead, SouthStar relies on the forum selection clause in the Factoring Agreement-to which Pinnacle is undisputedly not a party-and the NOPs. In response, Pinnacle argues that between the two forum selection clauses, the Supply Agreement's clause should govern and, alternatively, argues the NOPs are not valid contracts. SouthStar only addresses the relevant issue-which of the forum selection clauses should be enforced-in its reply brief. SouthStar's failure to argue the real issue in its motion both denied Pinnacle the opportunity to rebut SouthStar's arguments and denied the court the benefit of full briefing on the issue. Accordingly, SouthStar's motion does not satisfy Local Rule CV-7(c)(1), which requires that “[a]ll motions must state the grounds therefor and cite any applicable rule, statute, or other authority justifying the relief sought.” The court could rightfully disregard SouthStar's reply brief and deny its motion on this basis alone.

Neither party argues the other party's forum selection clause is not mandatory or exclusive. Also, neither party argues the public interest factors should defeat the forum selection clause. Accordingly, the court turns to which of the two forum selection clauses should be enforced.

Few Texas courts have dealt with the issue of competing, conflicting forum selection clauses. In Nvision Biomedical Technologies, finding no clear precedent for how to proceed, the district court concluded the issue should be guided by the principle that the plaintiff is the master of their complaint. Nvision Biomedical Techs., LLC v. Jalex Med., LLC, No. 5:15-CV-0284-RP, 2015 WL 3457678, at *2 (W.D. Tex. May 29, 2015). In that case, the court enforced the mandatory forum selection clause found in the contract that formed the basis of the plaintiff's claims, although arguably the defendant breached other agreements that included their own mandatory forum selection clauses. Id. In Bio World Merchandising, the plaintiff sued defendant for breach of three contracts. Bio World Merch., Inc. v. Interactive Bus. Info. Sys., Inc., No. 3:19-CV-2072-E, 2020 WL 6047605 (N.D. Tex. Oct. 9, 2020). Two contracts contained mandatory Georgia forum selection clauses, while the third contract contained a mandatory Texas forum selection clause. Id. at *2. Citing cases outside the Fifth Circuit, the court noted that “case law reveals varying approaches to this situation” and “[t]here is not a ‘one size fits all analysis' for this situation” Id. at *4. The court found that a “number of courts faced with multiple valid and conflicting clauses have simply selected one to enforce, looking to all the facts and circumstances of the case” and adopted that approach. Id. Analyzing plaintiff's claims and the contract, the court found the bulk of plaintiff's claims originated from the two contracts with Georgia forum selection clauses and transferred the case to Georgia. Id. at *5.

SouthStar emphasizes that it has not consented to jurisdiction in Texas whereas-according to it-all parties have consented to jurisdiction in South Carolina through the Factoring Agreement and the NOPs. But, this is not the correct analysis. The correct analysis considers which forum selection clause applies and has the greatest connection to the claims in the case.

The heart of Pinnacle's Complaint is that Pure Aviation and DiMarco defrauded Pinnacle and breached the Supply Agreement. While SouthStar emphasizes the Factoring Agreement, there is no claim in this suit that the Factoring Agreement has been breached or is at issue. Pinnacle asserts claims against SouthStar that SouthStar has breached the Supply Agreement and that SouthStar has been unjustly enriched by Pinnacle's payments to it due to Pure Aviation's and DiMarco's fraud and breach of the Supply Agreement.

SouthStar disputes Pinnacle's assertion that it has any obligations under the Supply Agreement.

It is only SouthStar's counterclaims that assert breach of the NOPs. See Dkt. #22. SouthStar has presented no controlling authority that a defendant's counterclaims should be allowed to determine venue when there are competing forum selection clauses. Even if that were so, the court finds the Supply Agreement is the genesis for all claims in this case, and therefore its forum selection clause should govern. Accordingly, the court will recommend denial of SouthStar's motion.

IV. Recommendation

For the reasons given above, the court RECOMMENDS that Defendant Southstar Financial, LLC's Motion to Transfer (Dkt. #21) be DENIED.

V. Objections

The parties may file objections to this Report and Recommendation. A party filing objections must specifically identify those findings or recommendations to which objections are being made. The District Court need not consider frivolous, conclusive, or general objections. See Battles v. United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).

A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report and, except upon grounds of plain error, shall bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Services Automobile Ass'n, 79 F.3d 1415 (5th Cir. 1996)(en banc).


Summaries of

Pinnacle Fuel, LLC v. Pure Aviation, LLC

United States District Court, W.D. Texas, Austin Division
May 5, 2023
No. A-22-CV-979-LY (W.D. Tex. May. 5, 2023)
Case details for

Pinnacle Fuel, LLC v. Pure Aviation, LLC

Case Details

Full title:PINNACLE FUEL, LLC, Plaintiff, v. PURE AVIATION, LLC, CARLO DIMARCO, and…

Court:United States District Court, W.D. Texas, Austin Division

Date published: May 5, 2023

Citations

No. A-22-CV-979-LY (W.D. Tex. May. 5, 2023)