PEARSON, District Judge.
Before the Court are four motions: Defendants' Martin York and M Y Investments' (collectively hereafter "York") Motion to Dismiss for Lack of Personal Jurisdiction, Improper Venue, or, Alternatively, to Transfer Venue, and to Dismiss for Failure to State a Claim (ECF No. 21). Plaintiff Bertha Villanueva's ("Villanueva") Motion for Partial Summary Judgment (ECF No. 35), York's Rule 56(f) Motion to Withhold Ruling on Bertha Villanueva's Motion for Partial Summary Judgment (ECF No. 42), and Villanueva's Motion for Default Judgment against Defendant Robert Marsh
On or about July 6, 2010, Villanueva filed this lawsuit in the United States District Court for the Northern District of Ohio. ECF No. 1. In the Complaint, Villanueva asserts ten causes of action against all of Defendants—York, Marsh, and Marcus Barcroft ("Barcroft"). ECF No. 1 at 4-10. Villanueva alleges breach of contract (Count One; ECF No. 1 at 4-5), breach of a fiduciary duty (Count Two; ECF No. 1 at 5), fraud (Count Three; ECF No. 1 at 6), unjust enrichment (Count Four; ECF No. 1 at 6), conversion (Count Five; ECF No. 1 at 7), promissory estoppel (Count Six; ECF No. 1 at 7), violations of the Ohio Securities Act (Count Seven; ECF No 1 at 8), violations of the Ohio Consumer Sales Protection Act (Count Eight; ECF No. 1 at 8-9), civil violations of the U.S. RICO Act (Count Nine; ECF No. 1 at 9-10), and punitive damages (Count Ten: ECF No. 1 at 10). ECF No. 1 at 4-10.
Since filing of the complaint, both York and Villanueva have moved the Court to take various actions. On October 15, 2010, York filed a Motion to Dismiss for Lack of Personal Jurisdiction, Improper Venue, or, Alternatively, to Transfer Venue, and to Dismiss for Failure to State a Claim. ECF No. 21. On November 11, 2010, Villanueva filed a Motion for Partial Summary Judgment. ECF No. 35, In response to Villanueva's motion, on December 13, 2010, York filed a Rule 56(f) Motion to Withhold Ruling on Villanueva's Motion for Partial Summary Judgment. ECF No. 42. On May 12, 2011, Villanueva filed a Motion for Default Judgment against Marsh, who has failed to plead or otherwise defend himself in the instant lawsuit. ECF No. 56.
This action arises out of an alleged investment scheme sold to Villanueva in early 2010. Villanueva alleges that in January of 2010 Barcroft approached her with an investment opportunity that would guarantee high yield returns. ECF No. 33 at 1.
The opportunity involved participating in an investment program, entitled "500k CMO Program." ECF No. 1 at 3. As a condition of entry, the participant was required to invest a minimum of $500,000. These funds would then be wired to an escrow account—held by York, the Escrow Agent—to be used to purchase an approved collateral mortgage obligation ("CMO") for trade. ECF Nos. 1 at 3; 32 at 20-21; 1-2 at 2. In consideration for the program participant's substantial investment, the participant would be contractually guaranteed a high return evidenced by an "Escrow Agreement" between the participant—who is identified in the agreement as the "Depositor"—and the Escrow Agent, York. ECF Nos. 1 at 3; 1-2 at 2. The Escrow Agreement provided that if trading on the participant's CMO did not commence within a specified period, the participant would receive a payment equal to her principal investment amount plus an additional 10%. ECF Nos. 1 at 3; 1-2 at 2 (Non Performance Clause). If trading were, however, to commence pursuant to the terms of the Escrow Agreement, the participant would be entitled to 6 monthly
After becoming knowledgeable of the program, Villanueva told Barcroft that she had only $250,000 to invest and was, therefore, unable to meet the $500,000 minimum deposit amount required to participate in the 500k CMO Program. ECF No. 32 at 18. Barcroft responded by offering Villanueva the opportunity to invest in connection with him. Villanueva agreed. ECF Nos. 1 at 3 and 32 at 18. Villanueva and Barcroft agreed that each would be individually responsible for contributing $250,000 to meet the minimum deposit amount. Their agreement did not involve Villanueva contracting directly with York as a Depositor, under the terms of the Escrow Agreement, as originally dictated.
According to Villanueva, the Profit Agreement ECF Nos. 1-1 at 2-3; 33 at 15-16 provided that, in consideration for Villanueva wiring $250,000 to York, the Escrow Agent,—so that York could use the funds to purchase the CMO for trade,
The Profit Agreement repeatedly references the term Escrow Agent, a term defined in an Escrow Agreement entered into by Barcroft as "Depositor" and York's business, M Y Investments. ECF Nos. 1 at 4; 1-1 at 2-3; 1-2 at 2-3. Additionally, both agreements contain the following identical sentence in nearly identical "Non Performance" [sic] clauses:
ECF Nos. 1-1 at 2-3 and 1-2 at 2-3.
After Villanueva wired $250,000 to York's account, pursuant to the Profit Agreement, she was informed by Barcroft that trading had, in fact, commenced. ECF No. 32 at 25. Villanueva did not receive, however, any of the monies—including her initial investment—that were contractually guaranteed. Villanueva initiated the instant action to obtain relief. ECF No. 1 at 4.
Since filing this lawsuit, both York and Barcroft have blamed Defendant Marsh for Villanueva's predicament. ECF Nos. 32 at 42; 43 at 7-8; 36 at 5-6. Barcroft has attempted to distance himself from his role in the scheme, by stating that he was only an intermediary, working under the direction and instruction of Marsh to recruit investors to participate in the program.
York acknowledges that Villanueva's funds were wired into his account and that he took some for his own use. (ECF No. 25-2 at 16-17). He nevertheless contends that he believed the money belonged to Marsh and was proceeds from a legitimate business transaction (ECF Nos. 25-2 at 12-13; 36 at 5). Moreover, York claims that his signature was forged on the Escrow Agreement by Marsh. ECF Nos. 21-1 at 2; 36 at 5-6. He also states that he was not aware of either the Escrow Agreement or the Profit Agreement until April 19, 2010, several months after Villanueva had wired her funds into his account. ECF Nos. 36 at 6-7; 21-1 at 2.
Under Rule 12(b)(2) of the Federal Rules of Civil Procedure, a defendant may move a court to dismiss a case for lack of personal jurisdiction. The plaintiff bears the burden of demonstrating that personal jurisdiction exists. Air Prods. and Controls, Inc. v. Safetech Intern., Inc., 503 F.3d 544, 549 (6th Cir.2007). When the defendant files a properly supported motion to dismiss, "the plaintiff may not stand on [its] pleadings but must, by affidavit or otherwise, set forth specific facts showing that the court has jurisdiction." Theunissen v. Matthews d/b/a Matthews Lumber Transfer, 935 F.2d 1454, 1458 (6th Cir.1991) (citation omitted). Nonetheless, when ruling on a motion to dismiss for lack of personal jurisdiction, a district court, "without conducting an evidentiary hearing,... must consider the pleadings and affidavits in a light most favorable to the plaintiff." Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir.1998) (citations omitted). The plaintiff "need only make a prima facie showing of jurisdiction," and the court "does not weigh the [defendant's] controverting assertions." Id. Dismissal is proper where the plaintiffs factual allegations taken together fail to establish a prima facie case for personal jurisdiction. CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir.1996).
York's motion to dismiss presents two arguments. First, York contends that the Court lacks personal jurisdiction because neither he nor his investment company has sufficient minimum contacts with Ohio to meet constitutional due process requirements. He highlights that he never signed the Escrow Agreement nor did he take any action under the contract. ECF Nos. 21 at 3, 5-13; 36 at 2-11. Additionally, York argues that the action should be dismissed pursuant to "12(b)"
Moreover, Villanueva rejects York's reliance upon the "Non Performance Clause" to dismiss the case.
The Sixth Circuit has noted that "the use of a forum selection clause is one way in which contracting parties may agree in advance to submit to the jurisdiction of a particular court." Preferred Capital Inc. v. Associates in Urology, 453 F.3d 718, 721 (6th Cir.2006). Because the Supreme Court "has held that such clauses `should control absent a strong showing that [they] should be set aside,'"
As a preliminary matter, the Court disagrees with Villanueva's contention that the last sentence in the Non Performance Clause is ambiguous and should be deemed unenforceable. ECF No. 33 at 11-12 Whether contractual terms are ambiguous is a question of law for the court. See Tennessee Consol. Coal Co. v. United Mine Wkrs. of Am., 416 F.2d 1192, 1198 (6th Cir.1969). "If a contract is clear and unambiguous ... there is no issue of fact to be determined." Royal Ins. Co. of Am. v. Orient Overseas Container
In the instant case, when the last sentence of the Non Performance Clause is read as a whole and its language given its ordinary and natural meaning, that sentence unambiguously contains both a forum selection clause and a choice of law provision.
Villanueva argues that the sentence at best can be construed as a choice of law provision as it only speaks to "legal issues" and "laws," which relate to the determination of matters within the lawsuit as opposed to the actual forum of the lawsuit itself. ECF No. 33 at 12-13. The Court finds, however, that Villanueva fails to appreciate the structure of the sentence, which indicates that there are two distinct provisions that are substantively different. Again, the sentence at issue states:
ECF Nos. 1-1 at 2-3 and 1-2 at 2-3. The sentence contains only one subject—"any and all legal issues." Additionally, the word "and"—a conjunction, commonly used to connect two clauses or phrases
Additionally, construing the sentence as a whole and avoiding an interpretation that would render one of the provisions meaningless requires the Court to find that each section has a distinct meaning. See Royal Ins. Co. of Am., 525 F.3d at 421; see also PCL Const. Services, Inc. v. U.S., 47 Fed. Cl. 745, 784 (Fed.Cl.2000) ("When interpreting the language of a contract, a court must give a reasonable meaning to all parts of the contract and not render portions of the contract meaningless.") (citing Fortec Constructors v. United States, 760 F.2d 1288, 1292 (Fed.Cir.1985)).
Contrary to Villanueva's assertion, the first part is provision of the sentence refers to the appropriate forum for litigation as evidenced by the naming of an actual location—"State of Michigan" which is preceded by the preposition—"through."
The second part or provision is a choice of law provision as it unequivocally states the applicable law to govern the dispute. Similar to the first provision, this part indicates a physical location—"State of Michigan." However, unlike the former provision, the physical location is modified by the phrase "laws and guidelines of and the provision further instructs that "the laws and guidelines of" are to be "follow[ed]." The language, taken in the totality, is harmonious with a choice of law provision.
Moreover, the Court's interpretation that the sentence contains both a forum selection clause and a choice of law provision is consistent with the general anatomy of foreign selection clauses as they "are often ... designed to specify not only the site, but also the applicable law, for a given dispute." See Liles v. Ginn-La West End, Inc., 631 F.3d 1242, 1247 (11th Cir.2011).
Having determined that both the Profit Agreement contains a forum selection clause, the Court's next inquiry involves determining whether said clause is enforceable. When evaluating the enforceability of a forum selection clause, the Sixth Circuit has instructed the Court to look to the following three factors:
See Wong v. PartyGaming, Ltd., 589 F.3d 821, 828 (6th Cir.2009). Additionally, "[t]he party opposing the forum selection clause bears the burden of showing that the clause should not be enforced". Id.
Under the first factor, the party opposing the clause must show fraud in
Under the second factor, plaintiff must show that the identified forum would ineffectively or unfairly handle the suit. See Wong, 589 F.3d at 829. The record before the Court, however, lacks any indication that the designated forum—Michigan—would be unable to fairly litigate this case. Accordingly, in the absence of evidence indicating otherwise, the Court finds that clause remains enforceable pursuant to the second prong.
Under this step of the analysis, courts are to determine whether the chosen forum is so inconvenient such that enforcement of the clause would be unjust or unreasonable. See Wong, 589 F.3d at 829 (citing Preferred Capital, Inc. v. Assocs. of Urology, 453 F.3d 718, 722-23 (6th Cir.2006)). "This finding must be based on more than mere inconvenience of the party seeking to avoid the clause." See Wong, 589 F.3d at 829.
Villanueva's argument against the enforceability of the clause under the third prong, however, hinges upon a showing of mere inconvenience, rather than the requisite showing that enforcement of the provision would be unreasonable or constitute an impediment to justice. Id. For instance, in support of her argument that the Court should not grant York's alternative motion to transfer to Michigan, Villanueva offers the fact that she and several witnesses reside in Ohio. ECF No. 33 at 14-15. Villanueva's additional proffered reasons to deny the transfer include the allegation that none of the Defendants would be inconvenienced as Michigan and Ohio are adjoining states, and that the Court's ruling in favor of the moving Defendants will cause delay and duplication. ECF No. 33 at 15. While the listed reasons undoubtedly support Villanueva's position that removing the instant case from Ohio may prove to be less convenient, it cannot be said that enforcement of the clause would be unjust or unreasonable. Id.
As Villanueva has not made an adequate showing under any of the aforementioned factors, the Court deems the forum selection clause valid and enforceable. Id. at 828-30.
Although the forum selection clause is enforceable, the Court must also determine whether the clause is applicable to the matter at hand. Specifically, the Court must inquire as to (1) which of Villanueva's claims are covered under the clause and (2) which parties are either
With respect to the first issue, the Court finds that the forum selection clause includes all of Villanueva's claims. Foremost, the language of the clause is broad as it states "any and all legal issues will be through the State of Michigan." ECF Nos. 1-1 at 2-3 and 1-2 at 2-3. Secondly, each of Villanueva's causes of action arises out of the Profit Agreement. This is best evidenced by the Complaint, wherein each count incorporates by reference the allegation that Villanueva entered into a Profit Agreement with the Defendants
Concerning the second issue, the Court's inquiry is complex. Although this is a contract dispute, not all parties were a signatory to the same agreement. The record reflects that Villanueva was a signatory party to the Profit Agreement. York was not a signatory to the Profit Agreement signed by Villanueva, which nearly mirrors the Escrow Agreement (entered into by York and Barcroft) that, if York's allegation is to be given even minimal weight, contains a forgery of his signature.
While the Sixth Circuit has determine that a non-signatory to a contract may be bound by "a forum selection clause in that contract if the non-signatory is so sufficiently `closely related' to the dispute that it is foreseeable that the party will be bound." See Hitachi Med. Sys. Am. v. St. Louis Gynecology & Oncology, LLC, 2011 WL 711568, *8, 2011 U.S. Dist. Lexis 17022, *24-25 (N.D.Ohio 2011) (citing Baker v. LeBoeuf, Lamb, Leiby & Macrae, 105 F.3d 1102, 1105-06 (6th Cir.1997)). And, while the Sixth Circuit has yet to explicitly interpret the term "closely related," at least one district court in this Circuit has held that an assignee meets this definition and is, therefore, bound by a forum selection clause contained in an underlying contract, to which the assignee is not a signatory. See Regions Bank v. Wyndham Hotel Mgmt., Inc., 2010 WL 908753, *7-8, 2010 U.S. Dist. Lexis 23371, *19-20 (M.D.Tenn.2010). This occurs when the assignment agreement, to which the assignee party is a signatory, incorporates by reference the underlying contract and the underlying contract is attached to the assignment agreement. See Id. (citing Exch. Mut. Ins. Co. v. Haskell Co., 742 F.2d 274, 276 (6th Cir.1984) (finding that a non-signatory may become bound by a contract when that contract is "specifically incorporated by reference" by another
It is clear that the Profit Agreement and Escrow Agreement are "closely related." The facts disclosed at this early stage of litigation confirms that close relationship. There is also no dispute that York is the Escrow Agent referred to in those related documents.
It cannot be ignored, however, that the inartfully worded Profit Agreement fails to explicitly incorporate the Escrow Agreement or assign the rights of Barcroft to Villanueva, despite Villanueva's assertions to the contrary.
It is also undeniable that the The Profit Agreement repeatedly references the Escrow Agreement. Although the record does not reflect that the Escrow Agreement was physically attached to the Profit Agreement, reviewing the facts in a light most favorable to Villanueva, she was obviously aware of the existence and contents of the Escrow Agreement prior to entering into the Profit Agreement with Villanueva. She also received a copy of the Escrow Agreement and acknowledged its contents by initialing it. ECF No. 32 at 21-22, Additionally, the Profit Agreement signed by Villanueva contains the very same forum selection clause that is present in the Escrow Agreement. Therefore, it cannot be said that binding Villanueva to the forum selection clause is unfair, as its language and its effect on Villanueva were certainly foreseeable. See Baker, 105 F.3d at 1106.
The Court finds that York is entitled to invoke the forum selection clause contained in the Escrow Agreement, despite his allegations that he did not sign the Escrow Agreement. In Liles v. Ginn-La West End, Ltd., 631 F.3d 1242, 1256-57 (11th Cir.2011), the Eleventh Circuit Court of Appeals held that a non-signatory to a contract could invoke a forum selection clause contained therein against a signatory to a contract based upon the theory of equitable estoppel. In arriving at their conclusion, the Court primarily relied upon its previous decision—in MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir.1999)—wherein the Court had recognized that the equitable estoppel doctrine permits a non-signatory to invoke an arbitration agreement. The Eleventh Circuit's decision to extend the holding of MS Dealer Serv. Corp., and transfer the theory of equitable estoppel doctrine to the context of forum selection clauses was based upon that Circuit's acknowledgment that forum selection clauses are substantially similar to arbitration agreements. See Liles, 631 F.3d at 1256.
While the Sixth Circuit has yet to decide whether the equitable estoppel doctrine
Additionally, as in Liles, the Sixth Circuit has recognized that forum selection clauses and arbitration provisions are substantially similar. See Moses v. Business Card Express, Inc., 929 F.2d 1131, 1138 (6th Cir.Mich.1991) (stating that arbitration clauses are a particular type of forum selection clauses); Liles, 631 F.3d at 1256. See also Moses, 929 F.2d at 1138; Liles, 631 F.3d at 1256.
Relying upon the aforementioned case law, the Court finds that the theory of equitable estoppel is indeed applicable in this context. The Court, therefore, adopts the test articulated in Liles which provides:
Id (quoting MS Dealer Serv. Corp., 177 F.3d at 947).
Both circumstances giving rise to equitable estoppel exist here. First, all of Villanueva's claims arise out of the Escrow Agreement containing the forum selection clause. Secondly, Villanueva's allegations against York are primarily premised upon the theory of agency and that all of the Defendants—including Barcroft, a signatory to both the Escrow Agreement and Profit Agreement—acted in concert to defraud Villanueva. ECF Nos. 1; 33 at 8-11; 35 at 4 and 8-9.
Accordingly, York is entitled to invoke the forum selection clause contained in the Escrow Agreemen: and, by extension, as a closely related document, the identical clause in the Profit Agreement.
Lastly, the Court deems it appropriate to briefly address Villanueva's remaining argument that York is estopped
As a preliminary matter, the Court notes that Rule 8 of the Federal Rules of Civil Procedure permits defendants to plead inconsistent positions. See Fed. R.Civ.P. 8(d)(3).
Additionally, Villanueva's view of estoppel is in error. The theory that she relies upon in making her argument is judicial estoppel, not to be confused with equitable estoppel described above.
With respect to the theory of judicial estoppel, the Sixth Circuit has held that there is no set formula for assessing when judicial estoppel should apply, and that Courts should consider a variety of factors including whether "(1) a party's later position is clearly inconsistent with its earlier position; (2) the party has succeeded in persuading a court to accept that party's earlier position; and (3) the party advancing an inconsistent position would gain an unfair advantage if allowed to proceed with the argument." See United States v. Hammon, 277 Fed.Appx. 560, 566 (6th Cir.2008) (citing In re Commonwealth Institutional Sec., 394 F.3d 401, 406 (6th Cir.2005)), The Sixth Circuit, however, has limited the doctrine to apply only to those instances "where a party asserts a position in litigation that is adopted by the court, gains an advantage through that assertion, and then attempts to assert a clearly opposite position in a later proceeding." Hammon, 277 Fed. Appx. at 566 (emphasis added). In reviewing this matter for procedural correctness, the Court has not adopted York's positions, the doctrine of judicial estoppel is, therefore, inapplicable.
Additionally and perhaps more directly to the point, the Court does not find York's argument—asserting that Villanueva should be bound by the forum selection clause—inconsistent with his position that he did not sign the contract. As discussed above, the theory of equitable estoppel permits York to maintain his averment that he is not a signatory to the contract while simultaneously allowing him to invoke the provisions contained therein. See Liles, 631 F.3d at 1256.
Having found the forum selection clause enforceable and applicable to this lawsuit, the Court dismisses the claims against York without prejudice. Villanueva may refile these claims in the appropriate Michigan Court. As to the claims asserted against the remaining Defendants, the Court dismisses all claims asserted against them as well, in light of the Court's finding regarding the enforceability and applicability of the forum selection clause.
Accordingly, for all of the reasons discussed above, the Motion to Dismiss, or, in the Alternative, to Transfer filed by York is granted. The pending motions are denied as moot and the case in its entirety is dismissed from the Court's docket.