JAMES O. BROWNING, District Judge.
The parties agree on most of the underlying facts. Since approximately 1988, W. Doak has "owned and operated" Plaintiff Doak Transportation, Inc., "which was in the business of transporting general freight in interstate commerce." Civil Complaint for Fraud, Breach of the Duty of Good Faith and Fair Dealing, Tortious Interference with Contracts, Prima Facie Tort, Negligent Misrepresentation, and Breach of Fiduciary Duty ¶ 7, at 3 (dated February 21, 2012), filed March 29, 2012 (Doc. 1-2)("Complaint").
During February, 2008, an individual working for People's United, Richard Wong, negotiated with W. Doak the consolidation of all outstanding promissory notes and security agreements into a set of five promissory notes and security agreements. See Complaint ¶¶ 11-13, at 4-5. While W. Doak was recovering from surgery and under the influence of sedatives, Wong visited W. Doak at a hospital; Doak signed the set of five promissory notes and security agreements at the hospital. See Complaint ¶¶ 14-15, at 5-6. The Plaintiffs allege that, based on W. Doak's condition while in the hospital, there was a misunderstanding about the terms he believed were in the set of five promissory notes and security agreements. See Complaint ¶ 18, at 6-7. "On or about June 4, 2010," W. Doak "filed for bankruptcy." Complaint ¶ 20, at 7.
The five security agreements at issue in this lawsuit all contain substantially the same forum-selection clause, which provides:
Security Agreement at 3 (dated February 22, 2008), filed April 4, 2012 (Doc. 9-2). The security agreements provide that "the validity and enforceability of this agreement and each of its terms shall be governed by the laws of the State of Debtor's location as set forth in this agreement." Security Agreement at 3. The Security Agreement lists a New Mexico address as W. Doak's address. See Security Agreement at 2. Vicky Doak, W. Doak's wife,
Guaranty at 2. The Guaranty provides that "THIS GUARANTY AND ALL DOCUMENTS EXECUTED IN CONNECTION HEREWITH SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF GUARANTOR'S LOCATION AS SET FORTH IN THIS AGREEMENT." Guaranty at 2-3. The Guaranty lists New Mexico in the section listing V. Doak's address. See Guaranty at 3.
On February 21, 2012, the Plaintiffs filed their Complaint in the Second Judicial District, Bernalillo County, State of New Mexico. See Doc. 1-2. The Plaintiffs assert several causes of action, including: (i) fraud; (ii) breach of the duty of good faith and fair dealing; (iii) tortious interference with contract; (iv) prima-facie tort; (v) negligent misrepresentation; and (vi) breach of fiduciary duty. See Complaint at 8-11. People's United removed the case to federal court on March 29, 2012. See Notice of Removal at 1 (Doc. 1).
On April 4, 2012, People's United filed its Motion. See Doc. 9. It argues that "[e]ach of the Security Agreements and the Guaranty contains a valid forum selection provision that clearly provides" that the exclusive jurisdiction and venue for any disputes relating to the transactions are Harris County. Motion at 1-2. People's United asks the "Court to dismiss this case for want of proper venue" or alternatively to transfer the case "to the United States District Court for the Southern District of Texas, the federal court sitting in Harris County, Texas." Motion at 2. People's United relates that this dispute arose out of the issuance of several promissory notes under which People's
On April 17, 2012, the Plaintiffs filed their Plaintiffs' Response to Defendant's Motion to Dismiss, in Lieu of Filing an Answer in This Matter, for Improper Venue and for Failure to State a Claim or, in the Alternative, to Transfer Venue. See Doc. 12 ("Response"). The Plaintiffs argue that the contracts at issue as well as the forum-selections clauses are unenforceable, because they "were fraudulently entered into when" People's United "knowingly and intentionally obtained Doak's signature while he was under the influence of morphine, pain medications and/or other sedatives." Response at 3. They also contend that New Mexico is a more suitable forum for this case under 28 U.S.C. § 1404(a). See Response at 3-4. The Plaintiffs assert that the forum-selection clauses are permissive rather than mandatory. See Response at 4. They also argue that, should the Court choose to enforce the forum-selection clauses, transfer of the case is more appropriate than dismissal. See Response at 4. The Plaintiffs contend that the forum-selection clauses are not enforceable, because "[o]n or about February 22, 2008, while Doak was still hospitalized and under the influence of morphine, pain medications and/or other sedative, Defendant visited Doak for the purpose of having him execute the Contracts." Response at 6 (citing William Doak's Affidavit in Support of Plaintiffs' Response to Defendant's Motion to Dismiss (executed April 17, 2012), filed April 17, 2012 (Doc. 12-2)("W. Doak Aff.")). They argue that "Defendant represented to and reassured Doak that the execution of the Contracts would not change the terms of their previous agreements." Response at 6 (citing W. Doak Aff.). The Plaintiffs contend that "[t]he Contracts included a significantly increased interest rate, a cross-collateralization of Doak's entire fleet of trucks, and a shorter financing period with a maturity date that was sooner than that of the parties [sic] previous agreements." Response at 6 (citing W. Doak Aff.). They assert that the forum-selection clauses are not enforceable, because the parties did not negotiate the agreements at arms length and W. Doak was not "a sophisticated business entit[y]." Response at 7. They also argue that the forum-selection clauses are ambiguous and thus should be construed against People's United such that
On May 2, 2012, People's United filed its Defendant's Reply in Support of Its Motion to Dismiss, in Lieu of Filing an Answer in This Matter, for Improper Venue and for Failure to State a Claim or, in the Alternative, to Transfer Venue. See Doc. 15 ("Reply"). It argues that the portions of the forum-selections clauses which the Plaintiffs argue are ambiguous were included so that People's United can bring proceedings in other jurisdictions "for attachment or replevin proceedings to protect collateral in other jurisdiction, over which the Texas courts would not have subject matter jurisdiction." Reply at 4. It asserts that the portions of the forum-selection clauses that apply to the Plaintiffs are mandatory. See Reply at 4-5. People's United contends that the forum-selection clauses are enforceable, because the alleged fraudulent conduct "must go to the forum selection clause, not the contract generally." Reply at 5. People's United argues that, although the "Plaintiffs allege the five contracts were fraudulent because Plaintiff William Doak claims he was under the influence of morphine when he signed them," he "signed identical security agreements containing the same or similar forum selection clauses on fifty-three (53) previous occasions." Reply at 5-6. People's United asserts that the Plaintiffs are also improperly asking the Court to consider the arguments regarding the merits of their case rather than focusing their arguments on the forum-selection clauses. See Reply at 6.
At the hearing on May 15, 2012, People's United clarified that W. Doak signed the promissory notes and agreements at issue himself rather than on behalf of his business, Doak Transportation. See Transcript of Hearing at 4:20-24 (taken May 15, 2012)(Court, Schlagel)("Tr.").
The Court inquired whether the Plaintiffs were arguing that there was specific fraud in which People's United engaged by including the forum-selection clauses in the five series of agreements at issue as opposed to engaging in more general fraud regarding the execution of the contract. See Tr. at 15:11-17 (Court). The Plaintiffs conceded that they do not think that they can prove that there was specific fraud
"In 1948, Congress enacted the federal change-of-venue statute, codified at 28 U.S.C. § 1404, to allow a district court to transfer an action filed in a proper, though not necessarily convenient, venue to a more convenient district." Whiting v. Hogan, 855 F.Supp.2d 1266, 1284 (D.N.M. 2012) (Browning, J.). That statute provides, in pertinent part: "For the convenience of the 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 or to any district or division to which all parties have consented." 28 U.S.C. § 1404(a). Section 1404(a) affords a district court broad discretion to adjudicate motions to transfer based on a case-by-case review of convenience and fairness. See Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1516 (10th Cir.1991). "Recognizing that what is convenient for one litigant may not be convenient for the other, the Supreme Court has taught that section 1404(a) `is intended to place discretion in the district court to adjudicate motions for transfer according to [a] ... case-by-case consideration of convenience and fairness.'" Research Automation, Inc. v. Schrader-Bridgeport Int'l, Inc., 626 F.3d 973, 977 (7th Cir.2010) (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988)). "The statutory language guides the court's evaluation of the particular circumstances of each case and is broad enough to allow the court to take into account all factors relevant to convenience and/or the interests of justice." Research Automation, Inc. v. Schrader-Bridgeport Int'l, Inc., 626 F.3d at 977. The statute permits a "flexible and individualized analysis," and affords district courts the opportunity to look beyond a narrow or rigid set of considerations in their determinations. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. at 29, 108 S.Ct. 2239.
Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d at 1516 (internal quotation marks omitted). See Tex. Gulf Sulphur v. Ritter, 371 F.2d 145, 147 (10th Cir.1967)(stating the factors that courts consider in making a venue determination under § 1404(a)).
"28 U.S.C. § 1406 permits transfer to cure a venue defect." Whiting v. Hogan, 855 F.Supp.2d at 1284. It 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 in which it could have been brought." 28 U.S.C. § 1406. Although both § 1404(a) and § 1406(a) "were broadly designed to allow transfer instead of dismissal, § 1406(a) provides for transfer from forums in which venue is wrongly or improperly laid." Van Dusen v. Barrack, 376 U.S. 612, 634, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964).
The "interest of justice" is a separate element of the transfer analysis that relates to the court system's efficient administration. Van Dusen v. Barrack, 376 U.S. at 626-27, 84 S.Ct. 805. "For this element, courts look to factors including docket congestion and likely speed to trial in the transferor and potential transferee forums; each court's relative familiarity with the relevant law; the respective desirability of resolving controversies in each locale; and the relationship of each community to the controversy." Research Automation, Inc. v. Schrader-Bridgeport Int'l, Inc., 626 F.3d at 977 (citations omitted). In some circumstances, "[t]he interest of justice may be determinative, warranting transfer or its denial even where the convenience of the parties and witnesses points toward the opposite result." Research Automation, Inc. v. Schrader-Bridgeport Int'l, Inc., 626 F.3d at 977 (citing Coffey v. Van Dorn Iron Works, 796 F.2d 217, 220-21 (7th Cir.1986)). The United States Court of Appeals for the Tenth Circuit has interpreted the phrase — "if it is in the interest of justice" — to grant a district court discretion in making the decision to transfer the action. Driggers v. Clark, 422 Fed.Appx. 747, 749-50 (10th Cir.2011)(unpublished)(citing Trujillo v. Williams, 465 F.3d 1210, 1222 (10th Cir. 2006)).
In contract cases, "the role of the court is to give effect to the intention of the contracting parties." Bogle Farms, Inc. v. Baca, 122 N.M. 422, 428, 925 P.2d 1184, 1190 (1996). "The primary objective in construing a contract is not to label it with specific definitions or to look at form above substance, but to ascertain and enforce the intent of the parties as shown by the contents of the instrument." Bogle Farms, Inc. v. Baca, 122 N.M. at 428, 925 P.2d at 1190 (citing Shaeffer v. Kelton, 95 N.M. 182, 185, 619 P.2d 1226, 1229 (1980)). "The parol evidence rule `bars admission of evidence extrinsic to the contract to contradict and perhaps even supplement the writing.'" Memorial Med. Ctr., Inc. v. Tatsch Const., Inc., 129 N.M. 677, 683, 12 P.3d 431, 437 (2000) (citation omitted). If a contract is ambiguous, however, "evidence will be admitted to aid in interpreting the parties' expressions." C.R. Anthony Co. v. Loretto Mall Partners, 112 N.M. 504, 508, 817 P.2d 238, 242 (1991) (citation omitted). "On the other hand, if the court determines that the contract is clear and unambiguous on its face, evidence of the circumstances surrounding the transaction is inadmissible to vary or modify its
The Court has previously stated:
Knight Oil Tools, Inc. v. Unit Petroleum Co., No. 05-0669, 2005 WL 2313715, at *2 (D.N.M. Aug. 31, 2005) (Browning, J.) (citations omitted)(citing 17 J. Moore, Moore's Federal Practice §§ 111.04[3][d], 111.36[5][a], at 111-42 to 111-43, 111-179 (3d ed.2004)). Accord Lambert v. Kysar, 983 F.2d 1110, 1113 n. 2 (1st Cir.1993) ("[A] valid forum selection clause operates to render venue improper, not only under 28 U.S.C. § 1391 [the general venue statute] but also under 28 U.S.C. § 1441(a) [the removal statute]."). See also Int'l Software Sys., Inc. v. Amplicon, Inc., 77 F.3d 112, 113-15 (5th Cir.1996) (without discussing removal issue, affirming dismissal on improper venue grounds of action removed from state court when forum-selection clause specified state courts of another state as exclusive forum); Spradlin v. Lear Siegler Mgmt. Servs. Co., 926 F.2d 865, 866 (9th Cir.1991) (without discussing removal issue, affirming dismissal of removed action on improper venue grounds based on clause making Saudi Arabia exclusive forum).
"A motion to dismiss based on a forum selection clause frequently is analyzed as a motion to dismiss for improper venue under Fed.R.Civ.P. 12(b)(3)." K & V Scientific Co., Inc. v. Bayerische Motoren Werke Aktiengesellschaft ("BMW"), 314 F.3d 494 (10th Cir.2002) ("K & V Scientific Co., Inc. v. BMW"). The Tenth Circuit has observed that "[f]orum selection provisions are `prima facie valid' and a party resisting enforcement carries a heavy burden of showing that the provision itself is invalid due to fraud or overreaching or that enforcement would be unreasonable and unjust under the circumstances." Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 957 (10th Cir.1992) (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972)). Only a showing of inconvenience "so serious as to foreclose a remedy, perhaps coupled with a showing of bad faith, overreaching or lack of notice would be sufficient to defeat a contractual forum selection clause." Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d at 958. Even if minor inconvenience would result, that would not justify non-enforcement of the forum-selection clause. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 596-97, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991).
In Stewart Organization v. Ricoh Corp., the Supreme Court of the United States held: "Federal law, specifically 28 U.S.C. § 1404(a), governs the District Court's decision whether to give effect to the parties' forum selection clause...." 487 U.S. at 32, 108 S.Ct. 2239. "The Tenth Circuit, however, has never addressed which law applies to diversity cases when interpreting forum-selection clauses in general and when addressing transfer to a federal forum in particular." Knight Oil Tools, Inc. v. Unit Petroleum Co., 2005 WL 2313715, at *9. Notably, the Tenth Circuit has not drawn rigid distinctions between state and federal law when interpreting forum-selection
The Supreme Court has noted that there is substantial overlap between precedent interpreting the enforceability of arbitration agreements and forum-selection clauses. See Scherk v. Alberto-Culver Co., 417 U.S. 506, 518-19, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974)("An agreement to arbitrate before a specified tribunal is, in effect, a specialized kind of forum-selection clause that posits not only the situs of suit but also the procedure to be used in resolving the dispute."). The Supreme Court has stated that "an arbitration or forum-selection clause in a contract is not enforceable if the inclusion of that clause in the contract was the product of fraud or coercion." Scherk v. Alberto-Culver Co., 417 U.S. at 518-19, 94 S.Ct. 2449 (emphasis added). Reiterating this rule, the Tenth Circuit has stated: "A plaintiff seeking to avoid a choice provision on a fraud theory must, within the confines of Fed.R.Civ.P. 9(b) and 11, plead fraud going to the specific provision; the teachings of Scherk, interpreting M/S Bremen, require no less." Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d at 960. Thus, the Tenth Circuit requires that a party seeking to avoid a forum-selection clause produce evidence showing that the arbitration provision was a product of fraud or coercion. See Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d at 960 ("Third, at no time did Riley offer any evidence on the stipulated issues tending to show that the arbitration provision (or any other choice provision, for that matter) was a product of fraud or coercion." (emphasis in original)). The Honorable Lourdes A. Martinez, United States Magistrate Judge for the District of New Mexico, has similarly stated "[a] general claim of fraud or misrepresentation concerning an entire contract does not affect the validity of a forum selection clause." Mann v. Auto. Protection Corp., 777 F.Supp.2d 1234, 1240 (D.N.M.2011) (Martinez, M.J.).
The Supreme Court has rejected the notion that the parties must specifically negotiate a forum-selection clause for it to be enforceable. See Carnival Cruise
Mann v. Auto. Protection Corp., 777 F.Supp.2d at 1240 (citations omitted)(citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 593-94, 111 S.Ct. 1522).
Courts have similarly imposed a high standard for negating a forum-selection clause on the basis that it is inconvenient. The Tenth Circuit has, for instance, stated:
Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d at 958 (citations omitted). Magistrate Judge Martinez has similarly held that, "[t]o invalidate a forum selection provision for reasons of inconvenience, however, a party must show that enforcement of the provision would cause an inconvenience `so serious as to foreclose a remedy.'" Mann v. Auto. Protection Corp., 777 F.Supp.2d at 1240 (quoting Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d at 958).
"The difference between a mandatory and permissive forum selection clause
In Milk `N' More, Inc. v. Beavert, the Tenth Circuit held that the forum-selection clause was mandatory and precluded removal of the case to federal court. See 963 F.2d at 1343. In that case, the defendant appealed an order remanding the breach-of-contract action to a Kansas state court. See id. The district court concluded that an enforceable forum-selection clause in the agreement required the remand. The Tenth Circuit agreed and affirmed. See id. The clause in the Milk `N' More, Inc. v. Beavert agreement provided: "The parties herein have mutually agreed that said lease and the purchase option agreement contained herein, where applicable, shall be governed by the laws of the State of Kansas and the parties further agree that venue shall be proper under this agreement in Johnson County, Kansas." Id. The district court granted the motion to remand on the ground that the contractual agreement contained an enforceable forum-selection clause, relying on the principle that forum-selection clauses are "prima facie valid and should be enforced" unless shown to be unreasonable. Id. at 1344 (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. at 10, 92 S.Ct. 1907). On appeal, the defendant contended that the district judge erred in construing the clause as a mandatory agreement between the parties to resolve any dispute under the contract exclusively in the state court in Johnson County, Kansas; he said instead that the court should have construed the clause as merely a permissive designation on venue. See 963 F.2d at 1344. The defendant contended that the district court erroneously construed the contract language as an agreement making Johnson County, Kansas, the exclusive forum in which the parties could resolve disputes that arose under the agreement. See id. at 1345. The Tenth Circuit stated that the dispositive portion of the clause provided that "venue shall be proper under this agreement in Johnson County, Kansas." Id. at 1345-46. The Tenth Circuit held: "We are persuaded that the district judge made the proper interpretation and correctly enforced the clause." Id. at 1346.
In Milk `N' More, Inc. v. Beavert, the Tenth Circuit stated that it was mindful that a waiver of one's statutory right to be in federal court must be "clear and unequivocal." Id. (quoting Regis Assocs. v. Rank Hotels (Mgmt.) Ltd., 894 F.2d 193, 195 (6th Cir.1990)). The Tenth Circuit acknowledged that, if there is ambiguity in the clause, the court should construe it against the drafter. See id. Nevertheless, the Tenth Circuit said "[s]uch clauses are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be unreasonable under the circumstances." Id. The Tenth Circuit stated that the provision that "venue shall be proper under this agreement in Johnson County, Kansas" was "reasonably clear and the wording strongly points to the state court of that county." Id. The Tenth Circuit said the use of the word
In K & V Scientific Co., Inc. v. BMW, the parties entered into a new agreement which, unlike their earlier agreement, contained a jurisdictional and choice-of-law provision, which stated: "Jurisdiction for all and any disputes arising out of or in connection with this agreement is Munich. All and any disputes arising out of or in connection with this agreement are subject to the laws of the Federal Republic of Germany." 314 F.3d at 496. The plaintiff filed suit, asserting various contract, tort, and statutory causes of action. See id. at 497. The defendant removed the case to federal court, and moved to dismiss pursuant to rule 12(b)(2) and (3) of the Federal Rules of Civil Procedure for lack of personal jurisdiction and improper venue. The district court granted the defendant's motion to dismiss for improper venue. The district judge concluded that the forum-selection clause contained in the second confidentiality agreement was "unambiguous and enforceable," and demonstrated "[t]he parties' intent to locate jurisdiction for this action solely in the courts of Munich." Id. On appeal, the plaintiff argued that the clause's language contained no reference to venue, contained no language designating the courts in Munich as exclusive, and contained no language indicating that suit elsewhere is impermissible. See id. The Tenth Circuit made the distinction between a venue provision which fixed venue in a certain location — a mandatory clause — versus one which merely granted jurisdiction to a certain place — a permissive clause. The Tenth Circuit set forth an analysis for determining whether forum-selection clauses within a contract are mandatory or permissive:
K & V Scientific Co., Inc. v. BMW, 314 F.3d at 498. The Tenth Circuit cited Milk `N' More, Inc. v. Beavert, stating that the Tenth Circuit there had concluded that a forum-selection clause stating "venue shall be proper under this agreement in Johnson County, Kansas" was mandatory. See id. at 498. The Tenth Circuit found, however, that no Tenth Circuit case had yet dealt with a forum-selection clause similar to the one at issue.
The Tenth Circuit stated that, "generally speaking," the Courts of Appeals are in "agreement" that the following formula is to be used in determining whether the selection clause is mandatory or permissive:
K & V Scientific Co., Inc. v. BMW, 314 F.3d at 499 (alterations in original)(quoting Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753, 757 (7th Cir. 1992)). The Tenth Circuit analyzed language from six forum-selection clauses considered permissive, including four different forum-selection clauses wherein the provision used the word "shall" together with the name of a court. K & V Scientific Co., Inc. v. BMW, 314 F.3d at 499. The K & V Scientific Co., Inc. v. BMW formula for the four clauses using the word "shall" and considered permissive were:
K & V Scientific Co., Inc. v. BMW, 314 F.3d at 499. The other two examples of permissive clauses were:
K & V Scientific Co., Inc. v. BMW, 314 F.3d at 499. The Tenth Circuit in K & V Scientific Co., Inc. v. BMW also noted that the courts had held the following clauses to be mandatory:
K & V Scientific Co., Inc. v. BMW, 314 F.3d at 499-500 (footnote omitted).
Using the majority rule, the Tenth Circuit had little trouble concluding that the forum-selection clause at issue in K & V Scientific Co., Inc. v. BMW was permissive. See 314 F.3d at 500. The clause referred only to jurisdiction and did so in non-exclusive terms. See id. A clause is mandatory, in accordance with K & V Scientific Co., Inc. v. BMW, only when the venue is specific with mandatory language. See id. Mandatory language is venue coupled with such terms as "exclusive," "sole," or "only." Id. at 500. If the paragraph is ambiguous — capable of being construed as either permissive or mandatory, the paragraph is deemed to be permissive. The Tenth Circuit in K & V Scientific Co., Inc. v. BMW stated:
314 F.3d at 500-01 (citations omitted).
In an unpublished decision that followed K & V Scientific Co., Inc. v. BMW, the Tenth Circuit clarified that K & V Scientific Co., Inc. v. BMW decision addresses the issue
King v. PA Consulting Group, Inc., 78 Fed.Appx. 645, 648 n. 2 (10th Cir.2003)(unpublished)(emphasis in original). The Tenth Circuit, in American Soda, LLP v. U.S. Filter Wastewater Group, Inc., has also recognized that a party to a contract can waive venue in federal court, thus requiring remand to state court of the dispute:
428 F.3d at 927.
Magistrate Judge Martinez has stated: "Even though the Tenth Circuit has not addressed this issue, the United States Supreme Court has applied a forum selection provision in a case involving tort claims." Mann v. Auto. Protection Corp., 777 F.Supp.2d at 1243 (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 588, 111 S.Ct. 1522). The Court has followed the same approach in Knight Oil Tools, Inc. v. Unit Petroleum Co., looking also at whether "the forum-choice provision involved ... is broad enough to include tort actions." 2005 WL 2313715, at *13 ("That the tort and breach of contract claim involve the same operative facts also counsels that the forum-selection clause apply to the tort claim."). In a case where there was a contract between a passenger and a cruise line where the passenger asserted tort causes of action against the cruise line, the Supreme Court enforced a forum-selection clause against the passenger. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 588-90, 111 S.Ct. 1522 ("We granted certiorari to address the question whether the Court of Appeals was correct in holding that the District Court should hear respondents' tort claim.... Because we find the forum-selection clause to be dispositive of this question, we need not consider petitioner's constitutional argument as to personal jurisdiction."). "In addition, other Courts of Appeal have held that where tort claims `ultimately depend on the existence of a contractual relationship' between the parties, such claims are covered by a contractually-based forum selection clause, despite the `pleading of alternative non-contractual theories of liability.'" Mann v. Auto. Protection Corp., 777 F.Supp.2d at 1243 (quoting Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 203 (3d Cir.1983), overruled on other grounds by, Lauro Lines, s.r.l. v. Chasser, 490 U.S. 495, 109 S.Ct. 1976, 104 L.Ed.2d 548 (1989))(citing Lambert v. Kysar, 983 F.2d at 1121-22).
The Court will grant the Motion.
W. Doak asserts that, because People's United made him sign the set of five promissory notes and security agreements while he was recovering in the hospital and under the influence of medication, the forum-selection clauses are unenforceable. He contends that the clauses are not enforceable, because the parties did not specifically negotiate them. Alternatively, he argues that it would be inconvenient to enforce the forum-selection clauses. The Tenth Circuit has observed that "[f]orum selection provisions are `prima facie valid' and a party resisting enforcement carries a heavy burden of showing that the provision itself is invalid due to fraud or overreaching or that enforcement would be unreasonable and unjust under the circumstances." Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d at 957. The Supreme Court has stated that "an arbitration or forum-selection clause in a contract is not enforceable if the inclusion of that clause in the contract was the product of fraud or coercion." Scherk v. Alberto-Culver Co., 417 U.S. at 518-19, 94 S.Ct. 2449 (emphasis added). Reiterating this rule, the Tenth Circuit has stated: "A plaintiff seeking to avoid a choice provision on a fraud theory must, within the confines of Fed.R.Civ.P. 9(b) and 11, plead fraud going to the specific provision; the teachings of Scherk, interpreting M/S Bremen, require no less." Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d at 960.
The Plaintiffs have argued in their Response that "the Contracts, including the Forum Selection Clauses, are unenforceable because they were the result of fraud, overreaching and other unconscionable means." Response at 6. The Plaintiffs have presented some evidence that, given
The Plaintiffs conceded at the May 15, 2012, hearing, however, that they do not have any evidence that the inclusion of the forum-selection clause in the security agreements was the result of fraudulent or overreaching conduct. See Tr. at 15:11-16:13 (Court, Stevenson). Consistent with their concession at the May 15, 2012 hearing, they argue in their Response that fraudulent and overreaching conduct occurred with respect to the negotiation of the five sets of agreements as a whole rather than just the forum-selection clauses. See Motion at 6 ("[T]he Contracts, including the Forum Selection Clauses, are unenforceable because they were the result of fraud, overreaching and other unconscionable means."). The Supreme Court has stated that "an arbitration or forum-selection clause in a contract is not enforceable if the inclusion of that clause in the contract was the product of fraud or coercion." Scherk v. Alberto-Culver Co., 417 U.S. at 518-19, 94 S.Ct. 2449 (emphasis added). The Plaintiffs have not, "within the confines of Fed.R.Civ.P. 9(b) and 11, plead fraud going to the specific [forum-selection] provision." Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d at 960. Because the Plaintiffs have not directed their arguments at any fraudulent or overreaching conduct regarding the inclusion of the forum-selection clauses, the Plaintiffs have not met the "heavy burden of showing that the provision itself is invalid due to fraud or overreaching." Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d at 957.
The Plaintiffs' argument that the forum-selection clause is not enforceable based on the lack of negotiation between the parties is also unpersuasive. The Supreme Court has rejected the notion that parties must specifically negotiate a forum-selection clause for it to be enforceable. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 593, 111 S.Ct. 1522 ("[W]e 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."). Accord Marinechance Shipping, Ltd. v. Sebastian, 143 F.3d at 221 (holding that a forum-selection clause in an employment contract for a seaman was enforceable even when the parties did not negotiate for the provision). Magistrate Judge Martinez has similarly held:
Courts have rejected the notion that parties must individually negotiate each aspect of a contract for those portions of the contract to be enforceable. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 593, 111 S.Ct. 1522; Marinechance Shipping, Ltd. v. Sebastian, 143 F.3d at 221; Mann v. Auto. Protection Corp., 777 F.Supp.2d at 1240. Given that Carnival Cruise Lines, Inc. v. Shute involved passengers on a cruise line receiving a form contract from the cruise line, see 499 U.S. at 587, 111 S.Ct. 1522 ("The Shutes, through an Arlington, Wash., travel agent, purchased passage for a 7-day cruise on petitioner's ship, the Tropicale."), the Court cannot reasonably conclude, as the Plaintiffs argue, that there must be "an arms-length transaction between sophisticated business entities" for a forum-selection clause to be enforceable, see Response at 7. Furthermore, the Supreme Court has rejected such arguments by acknowledging that certain forms of business transactions will, by their character, not include negotiation and that such transactions may also counsel in favor of limiting the potential fora of lawsuits to promote predictability in resolving the disputes:
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 593-94, 111 S.Ct. 1522 (citation omitted). The result is that, if People's United has to litigate anywhere its debtors are located, consumers may suffer. People's United may: (i) cut back its services to only certain area of the country, potentially hurting consumers in New Mexico, which has few sources of capital; or (ii) increase its interest rates to compensate for the costs of out-of-state or out-of-area litigation.
Notably, W. Doak had a much more extensive history of dealing with People's United, given that they engaged in various loan transactions over a period of years, than the passengers in Carnival Cruise Lines, Inc. v. Shute, who received form tickets by mail with no direct negotiation with the cruise line. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 593, 111 S.Ct. 1522 ("Petitioner then prepared the tickets and sent them to respondents in the State of Washington. The face of each ticket, at its left-hand lower corner, contained this admonition...."). W. Doak was also obtaining the loans for his business rather than as part of some consumer transaction like the plaintiffs in Carnival Cruise Lines, Inc. v. Shute. Furthermore, the parties do not dispute that People's United maintains most of its operations in Texas. See Complaint ¶ 4, at 2 (referring to People's United as having its "home or home office" in "Houston, TX"). Thus, by designating Harris County as the venue for lawsuits W. Doak intends to bring against it, People's United is not choosing some "remote alien forum" to harass the Plaintiffs and to discourage them from bringing suit. Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 593-94, 111 S.Ct. 1522.
The Plaintiffs argue that Harris County is "so seriously an inconvenient forum that to require [them] to bring suit there would be unjust." Response at 8. Only a showing of inconvenience "so serious as to foreclose a remedy, perhaps coupled with a showing of bad faith, overreaching or lack of notice would be sufficient to defeat a contractual forum selection clause." Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d at 958. Even if minor inconvenience would result, that factor does not justify non-enforcement of the forum-selection clause. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 596-97, 111 S.Ct. 1522. Whatever inconvenience the Plaintiffs would face, which W. Doak did not discuss in his affidavit, the Court does not believe it is so serious as to "foreclose a remedy" to the Plaintiffs. Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d at 958. The Court acknowledges that some minor inconveniences would likely result if the Plaintiffs, who appear to be more comfortable litigating here in New Mexico and at least some of
Furthermore, the Supreme Court has recognized the legitimate business concerns a contracting party may have in limiting the potential forums in which they may be sued:
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 594, 111 S.Ct. 1522 (citations omitted). The parties do not dispute that People's United maintains most of its operations in Texas. See Complaint ¶ 4, at 2 (referring to People's United as having its "home or home office" in "Houston, TX"). Thus, by designating Harris County as the venue for lawsuits W. Doak intends to bring against it, People's United is not choosing some "remote alien forum" to harass the Plaintiffs and discourage them from bringing suit. Carnival Cruise Lines, Inc. v. Shute, 499 U.S. at 593-94, 111 S.Ct. 1522. Thus, the Court does not believe that the forum-selection clauses create significant inconveniences to render them unenforceable.
The parties dispute whether the forum-selection clauses, specifically those that apply to W. Doak, are mandatory or permissive. In its Motion, People's United argues that the terms of V. Doak's Guaranty, which contains a forum-selection clause, also binds her. See Motion at 6-7 ("Vicky L. Doak (i) voluntarily signed the Guaranty, and (ii) never notified PUEFC of any discrepancies in the Loan Documents upon receipt of a confirming letter from PUEFC."). In their Response, the Plaintiffs do not argue that V. Doak has an ability to avoid this forum-selection clause other than that it is permissive as opposed to mandatory. See Response at 10-13. The Plaintiffs briefly mentioned at the hearing that, under their reading of the
Cole v. New Mexico, 58 Fed.Appx. 825, 829 (10th Cir.2003)(unpublished)(citing Greenhow v. Sec'y of Health & Human Servs., 863 F.2d 633, 638 (9th Cir.1988)). Here, however, the Court held a hearing, so People's United had an opportunity to respond. In any case, the Court does not usually decline to address arguments raised at a hearing for the very reasons that new issues surface while lawyers and the Court prepare for the hearing and which the Court raises when questioning the attorneys at the hearing.
While the Court need not decide this issue, and perhaps should not, given that it potentially bears on the merits of the case as they apply to some individuals, because the parties have not briefed this issue, and because the Court is transferring this case to another judge, it appears — on the limited record before the Court — that V. Doak's Guaranty would apply to these five sets of security agreements. The Guaranty states that V. Doak agrees to guarantee "any and all existing and future indebtedness and/or obligations" that W. Doak has with People's United. Guaranty at 2-3 (emphasis added). Thus, for purposes of deciding the Motion, the Court considers — based on the lack of any evidence in the record to the contrary — V. Doak bound under the forum-selection clause in the Guaranty.
The five security agreements at issue in this lawsuit all contain substantially the same forum-selection clause, which provide:
Security Agreement at 3. V. Doak's Guaranty contains a similar forum-selection clause, which provides:
Guaranty at 2.
"The difference between a mandatory and permissive forum selection clause is that `[m]andatory forum selection clauses contain clear language showing that jurisdiction is appropriate only in the designated forum.'" Am. Soda, LLP v. U.S. Filter Wastewater Grp., Inc., 428 F.3d at 926. "In contrast, permissive forum selection clauses authorize jurisdiction in a designated forum, but do not prohibit litigation elsewhere." Am. Soda, LLP v. U.S. Filter Wastewater Grp., Inc., 428 F.3d at 926-27 (citation omitted). The Tenth Circuit has held that, when venue is specified in a forum-selection clause, such as when the parties designate a particular county or tribunal, and the designation is accompanied by mandatory or obligatory language, a forum-selection clause will be enforced as mandatory. See K & V Scientific Co. v. BMW, 314 F.3d at 499. For instance, the Tenth Circuit has stated that a forum-selection clause stating that "venue shall be proper under this agreement in Johnson County, Kansas" was mandatory. K & V Scientific Co., Inc. v. BMW, 314 F.3d at 498.
The operative forum-selection clause in each of the agreements, the ones W. Doak entered and the one V. Doak entered, are largely identical. W. Doak's security agreements provide that he
Security Agreement at 3. V. Doak's Guaranty provides:
Guaranty at 2.
Each clause refers to any court in Harris County as the exclusive jurisdiction and venue for actions W. Doak or V. Doak file. Each clause states that W. Doak and V. Doak waive their right to contest or seek a transfer of venue. The Tenth Circuit has stated that, when "venue is specified [in a forum selection clause] with mandatory or obligatory language, the clause will be enforced; where only jurisdiction is specified [in a forum selection clause], the clause will generally not be enforced unless there is some further language indicating the parties' intent to make venue exclusive." K & V Scientific Co., Inc. v. BMW, 314 F.3d at 499 (alterations in original)(quoting Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d at 757). The word exclusive in relation to Harris County as a venue indicates the parties' intent that Harris County be the exclusive venue for any suits that W. Doak or V. Doak file. See King v. PA Consulting Group, Inc., 78 Fed.Appx. at 648 n. 2 ("Use of mandatory language like `shall' in a clause dealing directly with venue carries stronger implications regarding the intent to designate an exclusive forum." (emphasis in original)); K & V Scientific Co., Inc. v. BMW, 314 F.3d at 499.
The Plaintiffs argue that, because the forum-selection clauses are permissive for People's United in that it may file suit in any venue it chooses, the forum-selection clauses are ambiguous. The Court does not find this argument persuasive, given that there are no ambiguities in the portion of the forum-selection clauses that apply to W. Doak and V. Doak. The provision at issue contains the following qualification: "PROVIDED THAT HOLDER MAY BRING SUIT IN ANY OTHER COURT HAVING JURISDICTION...." Security Agreement at 3. The Guaranty contains an almost identical provision: "PROVIDED THAT BENEFICIARY MAY BRING SUIT IN ANY OTHER COURT HAVING JURISDICTION." Guaranty at 2. The United States Court of Appeals for the Seventh Circuit has addressed a similar clause where the first portion of the clause was mandatory regarding venue for one of the parties while the second portion of the clause permitted one of the parties to the agreement to file suits in other venues:
Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d at 755 (emphasis added). The Seventh Circuit concluded that the second sentence in the forum-selection clause supported a conclusion that the clause was mandatory as to the purchaser, because "of the additional sentence" granting to the supplier the right to commence an action in additional venues. Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d at 755. Specifically, it held that the language in the second sentence "supports a finding that the clause confers exclusive jurisdiction because the sentence in question would be appropriate and meaningful only if the clause were in fact mandatory," and because, "if the clause were permissive, the additional sentence would be redundant." Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d at 755. Thus, it concluded that "[t]he specific reservation of the supplier's right to file suit at the purchaser's place of business demonstrates that the clause was in all other respects mandatory and exclusive." Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d at 755 (emphasis in original). Notably, the Tenth Circuit, while conducting a survey of forum-selection clauses across jurisdictions, also found the clause in Paper Express, Ltd. v. Pfankuch Maschinen GmbH to be mandatory. See K & V Scientific Co., Inc. v. BMW, 314 F.3d at 499-500.
There is also nothing inherently unconscionable about a one-way forum-selection clause, that makes a consumer to a transaction file in the home district of the company/supplier but gives the company/supplier discretion regarding where to file suit. It is unclear how giving the company/supplier the discretion to file in the consumer's home state is unfair to the consumer. There is no reason for the law to demand equality or symmetry merely for the sake of equality or symmetry. A lender such as People's United may have concerns, as it has argued, about obtaining personal jurisdiction if it were forced to litigate in one venue when a debtor who had ceased to pay on a loan was moving collateral out of the state to avoid losing that collateral. A one-way forum-selection clause could also reduce costs to the company/supplier of purchasing and supplying goods. Furthermore, there is no indication here that People's United is attempting to abuse the forum-selection clause in this case, because it is not the one who filed a lawsuit.
The Plaintiffs' argument that the phrase "provided that" makes the forum-selection clause ambiguous is not persuasive. They rely on a Tenth Circuit case, which acknowledges that the words provided that can potentially create a condition precedent in a contract. See MidAmerica Constr. Mgmt, Inc. v. MasTec N. Am., Inc., 436 F.3d 1257, 1262-63 (10th Cir. 2006)("While no particular words are necessary for the existence of a condition, such terms as `if,' `provide that,' `on condition that,' or some other phrase that conditions performance, usually connote an intent for a condition rather than a promise."). It is worth noting that the Tenth Circuit case dealt with the interpretation of a subcontracting agreement rather than a forum-selection clause. See MidAmerica Constr. Mgmt, Inc. v. MasTec N. Am., Inc., 436 F.3d at 1259. "A condition precedent
Security Agreement at 3.
The Plaintiffs' argument is an interesting one, because compliance with a mandatory forum-selection clause itself is a "condition precedent to suit under the contract." Marra v. Papandreou, 216 F.3d 1119, 1125 (D.C.Cir.2000) ("Adherence to the forum-selection clause is not an obligation owed by Marra to the Greek government, but a condition precedent to suit under the contract, binding equally on both parties."). "The primary objective in construing a contract is not to label it with specific definitions or to look at form above substance, but to ascertain and enforce the intent of the parties as shown by the contents of the instrument." Bogle Farms, Inc. v. Baca, 122 N.M. at 428, 925 P.2d at 1190. Courts should not adopt "a strained interpretation of" a contract. Nearburg v. Yates Petroleum Corp., 123 N.M. 526, 532, 943 P.2d 560, 566 (Ct.App. 1997) ("We find this position to be a strained interpretation of the operating agreement."). Given the language stating that the exclusive venue for any suit W. Doak or V. Doak may bring is Harris County, reading the contract in the manner the Plaintiffs contend — where People's United would have to file suit in some location before W. Doak or V. Doak could bring suit — would result in a construction where the Plaintiffs could not file suit until People's United has filed suit. See Response at 12 ("The last sentence in the Forum Selection Clauses' [sic] can be interpreted as conditioning Defendant to file in any other jurisdiction as a condition precedent to Plaintiffs' obligation to file in Harris County — an absurd result."). Such a construction would potentially result in forfeiture of the Plaintiffs' ability to bring an action under the contract, and is in many ways a less favorable interpretation to the Plaintiffs than interpreting the forum-selection clauses as not having a condition precedent. See 8 C. Cauliff, Corbin on Contracts § 30.14, at 29-30 (Revised ed. 1999)("If the non-occurrence of a condition causes a forfeiture, the law will try
Ultimately, the Court believes that interpreting the contract as a whole leads to the conclusion that the parties intended the forum-selection clauses to be exclusive as they apply to the Plaintiffs and that the forum-selection clauses are not ambiguous. See Crow v. Capitol Bankers Life Ins. Co., 119 N.M. 452, 457, 891 P.2d 1206, 1211 (1995)("Another basic principle of contract construction is that `[a] writing is interpreted as a whole, and all writings that are part of the same transaction are interpreted together.'" (alteration in original)). The forum-selection clauses refer to venue as exclusive in Harris County for W. Doak and V. Doak, but contain a less restrictive provision for People's United. Much like the situation in Paper Express, Ltd. v. Pfankuch Maschinen GmbH, the provision that grants People's United broader rights "supports a finding that the clause confers exclusive jurisdiction [regarding suits that W. Doak and V. Doak may bring] because the sentence in question would be appropriate and meaningful only if the clause were in fact mandatory," and because, "if the clause were permissive, the additional sentence would be redundant." 972 F.2d at 755. Furthermore, in the next section of the forum-selection clauses, W. Doak and V. Doak "WAIVE[] ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY SUCH ACTION OR PROCEEDING," and also "WAIVE[] THE RIGHT TO TRANSFER THE VENUE OF ANY SUCH ACTION OR PROCEEDING." Security Agreement at 3. W. Doak and V. Doak also consent to service of process in Texas through the Texas Secretary of State. See Security Agreement at 3; Guaranty at 2. Reading the forum-selection clauses in their entirety, the Court concludes that they are mandatory as to W. Doak and V. Doak. The Court believes it would be placing "form above substance" to arrive at any other conclusion. Bogle Farms, Inc. v. Baca, 122 N.M. at 428, 925 P.2d at 1190.
The Court notes that the Plaintiffs have not raised as an argument in response to the Motion that the forum-selection clauses would not cover their tort claims, but only their contract claims. People's United raised this issue preemptively in its Motion. See Motion at 9 ("Suing on tort theories rather than for breach of contract will not defeat the applicability of a forum selection clause."). Additionally, the Plaintiffs stated at the hearing that, if the Court concludes that the forum-selection clauses are mandatory, they prefer to litigate all the claims in one forum. See Tr. at 19:3-8 (Stevenson).
Magistrate Judge Martinez has stated: "Even though the Tenth Circuit has not addressed this issue, the United States Supreme Court has applied a forum selection provision in a case involving tort
The Court concludes that these forum-selection clauses cover the tort claims the Plaintiffs have asserted. Each of the forum-selection clauses is broad enough to cover tort claims. See Security Agreement at 3 (stating that W. Doak "AGREES TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY COURT LOCATED IN HARRIS COUNTY, TEXAS, REGARDING ANY DISPUTE WITH HOLDER" (underlining added)); Guaranty at 2 ("GUARANTOR DOES HEREBY AGREE TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY COURT LOCATED IN HARRIS COUNTY, TEXAS REGARDING ANY MATTER ARISING HEREUNDER...." (underlining added)). Moreover, the Plaintiffs have not disputed that all the claims they have asserted "ultimately depend on the existence of a contractual relationship" between themselves and People's United. Mann v. Auto. Protection Corp., 777 F.Supp.2d at 1243 (quoting Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d at 203). For instance, in their fraud claim, they argue that People's United "misrepresented the terms of the Promissory Note Consolidation
Accordingly, venue for a suit brought on behalf of W. Doak and V. Doak is improper in New Mexico, and the Court must decide whether it should dismiss or, in the interest of justice, transfer the case to the appropriate forum. See 28 U.S.C. § 1406(a).
Knight Oil Tools, Inc. v. Unit Petroleum Co., 2005 WL 2313715, at *13 (citations omitted). "[I]n most cases of improper venue the courts conclude that it is in the interest of justice to transfer to a proper forum rather than to dismiss.... The usual procedure should be to transfer rather than dismissal." Knight Oil Tools, Inc. v. Unit Petroleum Co., 2005 WL 2313715, at *13 (citing Wright, C., Miller, A., & Cooper, E., 15 Federal Practice & Procedure § 3827 (2005)).
The Court believes that all the applicable factors weigh in favor of transfer. First, there are potential statute-of-limitations problems for the Plaintiffs if the Court were to dismiss their case.
Second, there is no indication that the Plaintiffs filed their Complaint in this forum to harass People's United. The parties do not dispute that some relevant conduct occurred here in New Mexico. Additionally, the Plaintiffs were not raising frivolous arguments that the forum-selection clauses at issue were unenforceable such that the Court believes the suit was harassing. Moreover, People's United could have waived its rights under the forum-selection clause and litigated the case here. Third, the Plaintiffs were not forum shopping. There is no dispute that W. Doak and V. Doak both reside here in New Mexico, or that W. Doak ran his business here in New Mexico. If the Plaintiffs had filed their lawsuit in some forum wholly unconnected to the lawsuit, such as North Dakota or Florida, there would be a stronger basis for finding forum shopping. Given that they filed the suit here in New Mexico, whose law applies to this dispute, the Court does not believe that they were forum shopping.
Furthermore, the Plaintiffs conceded at the May 13, 2012 hearing that, if the forum-selection clauses are mandatory, they would bind Montoya, the trustee of the bankruptcy estate, in the same manner that they would have bound W. Doak and V. Doak. See Tr. at 18:7-21 (Court, Stevenson). The Plaintiffs also stated that, while they prefer to be in New Mexico, if the Court decides to enforce the forum-selection clauses, they would prefer that the Court also transfer the claims Doak Transportation has brought against People's United from the standpoint of convenience to the parties and judicial economy. See Tr. at 19:3-8 (Stevenson).
People's United has argued that Doak Transportation is bound by the forum-selection clauses, because W. Doak is the sole owner of the business. The Court has, however, no evidence before it detailing the relationship between W. Doak and Doak Transportation to assess whether Doak Transportation would also be bound by the forum-selection clauses, which creates a problem for People's United, given that Doak Transportation never had a representative sign the respective agreements. See Thompson v. THI of N.M. at Casa Arena, No. 05-1331, 2008 WL 5999653, at *14 (D.N.M. Dec. 24, 2008)(Browning, J.)(recognizing that "[a] non-signatory to an arbitration agreement generally cannot be forced to arbitrate claims" subject to certain exceptions, such as when a "non-signatory has a principal/agent
17 J. Moore, Moore's Federal Practice § 111.35[2], at 111-170 (3d ed.2012) (citations omitted). Accord Cottman Transmission Sys., Inc. v. Martino, 36 F.3d 291, 296 (3d Cir.1994)("In the situation where venue is proper for one defendant but not for another and dismissal is inappropriate, the district court has a choice. One option is to transfer the entire case to another district that is proper for both defendants."). Thus, given that the same counsel represents all the Plaintiffs and that the Plaintiffs have informed the Court that transfer of Doak Transportation's claims to Harris County would be preferable to them if the Court enforces the forum-selection clauses against W. Doak, V. Doak, and Montoya, the Court will follow the procedure of transferring the case in part under § 1406(a) and the remainder of the case under § 1404(a). Consequently, the Court will transfer this case to the Southern District of Texas, specifically the Houston Division — the division that includes Harris County.
Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d at 1515 n. 3.
