CIS Financial Services Inc v. Brooks
MEMORANDUM OPINION. Signed by Judge Sharon Lovelace Blackburn on 3/25/14. (ASL)
2014 Mar-25 PM 12:20
U.S. DISTRICT COURT
N.D. OF ALABAMA
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ALABAMA
CIS FINANCIAL SERVICES,
CASE NO. 6:13-cv-1281-SLB
This case is currently before the court on plaintiff’s Motion to Remand. (Doc. 4.)1
Plaintiff claims a forum selection clause in an Employment Agreement between the parties
requires them to litigate this dispute in state court in Marion County, Alabama. (Id. at 2-3.)
Defendant argues that the forum selection clause plaintiff is seeking to enforce has been
modified by a subsequent agreement between the parties that allows for jurisdiction in federal
court. (Doc. 6 at 1.) Defendant attached five exhibits to his opposition brief, including the
Employment Agreement, that he argues must be read together as parts of a unified
transaction. (Id. at 9-10.) Plaintiff argues that defendant is not personally a party to any
agreement except the Employment Agreement, whose terms it alleges are still in effect. (Doc.
8 at 3.) Plaintiff also requests an award of attorney’s fees incurred as a result of defendant’s
Reference to a document number, (“Doc. ___”), refers to the number assigned to
each document as it is filed in the court’s record.
removal. (Doc. 4 at 10-12.) The court will grant plaintiff’s motion to remand, but will not
award plaintiff attorney’s fees.
SUMMARY OF RELEVANT FACTS
In this case it’s important to keep who’s who and what’s what straight. Plaintiff CIS
is a financial services corporation whose principal place of business is in Hamilton, Alabama.
(Doc. 4 at 2.) Defendant Greg Brooks was an Executive Vice President at CIS from
November 19, 2012, to May 2, 2013. (Doc. 6 at 3, 6-7.) As its name might give away, 267
Floridian, LLC is a Florida limited liability company. (Doc. 6-2 at 2.) Its only member is
Greg Brooks. (Doc. 6 at 2.) Sonny Jeung is a resident of California. (Doc. 6 at 2.) At some
point during the relevant time period, Mr. Jeung became the president and CEO of CIS and
the owner of all of its outstanding capital stock. (Doc. 6 at 2; doc. 6-3 at 3; doc. 6-5 at 2.)
On June 7, 2012, Mr. Brooks and CIS entered into a written “Employment
Agreement” contingent upon Mr. Jeung’s successful purchase of CIS. (Doc. 6-1 at 3.) Mr.
Brooks agreed to serve as an Executive Vice President of CIS and CIS agreed to give Mr.
Brooks, among other forms of compensation, $200,000 per year for five years. (Id. at 3-4.)
Both parties agreed that “CIS will sell fifteen (15%) percent of CIS stock to Brooks (or an
entity designated by him) for a purchase price of $825,000,” financed by CIS. (Id. at 5.)
Under the heading “Jurisdiction Venue,” the following text appears: “[p]arties hereby waive,
consent to, and agree that personal jurisdiction of venue shall be in the appropriate State
court of Marion County, Alabama, with respect to any cause of action arising hereunder, or
with respect to any document or instrument delivered pursuant thereto.” (Id. at 7.) The
agreement states that it “contains the entire understanding of the parties regarding the subject
matter of the Agreement . . . .” (Id. at 6.) On the signature page, Mr. Jeung signed for CIS
and Mr. Brooks signed for himself. (Id. at 8.) This is the agreement that CIS is now seeking
to rescind through its complaint. (Doc. 4 at 4.)
On June 8, 2012, three other agreements were formed:
(1) 267 Floridian, LLC executed a promissory note for $825,000 payable to Mr. Jeung
or the holder. (Doc. 6-2 at 2.) The document expressly incorporates an attached “Repayment
Agreement.” (Id.) Mr. Brooks signed for 267 Floridian, LLC as its member. (Id.)
(2) 267 Floridian, LLC and Mr. Jeung entered into a “Repayment Agreement” reciting
various provisions related to 267 Floridian, LLC’s stock purchase agreement with Mr. Jeung.
(Doc. 6-3 at 2.) Under the heading “Submission to Jurisdiction,” the following text appears:
Each of the parties submits to the jurisdiction of any state or
federal court sitting in Tuscaloosa, Alabama, in any action or
proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court. Each party also
agrees not to bring any action or proceeding arising out of or
relating to this Agreement in any other court.
(Id. at 5.) On the signature page, Mr. Brooks signed for 267 Floridian, LLC as its member
and Mr. Jeung signed for himself. (Id.)
(3) 267 Floridian, LLC, Mr. Jeung, and CIS entered into a “Stock Purchase
Agreement” where the parties agreed that CIS and Mr. Jeung would sell 267 Floridian, LLC
fifteen percent of CIS’s outstanding stock. (Doc. 6-4 at 3.) The Stock Purchase Agreement
contains a “Submission to Jurisdiction” provision identical to the one in the Repayment
Agreement. (Id. at 13; doc. 6-3 at 5.) On the signature page, Mr. Brooks signed for 267
Floridian, LLC as its member, Mr. Jeung signed for CIS as its president, and Mr. Jeung
signed again for himself. (Doc. 6-4 at 13.)
On October 18, 2012, Mr. Jeung “completed the purchase of all of the outstanding
shares of CIS . . . .” (Doc. 6-5 at 2.)
On December 28, 2012, 267 Floridian, LLC, Mr. Jeung, and CIS entered into a
“Closing Agreement,” which claims to “modify” a “Transaction” consisting of a Stock
Purchase Agreement, a Promissory Note, a Repayment Agreement, and an Employment
Agreement. (Doc. 6-5 at 2.) The Closing Agreement states that it is retroactively effective
as of October 18, 2012, but that the attached Employment Agreement “shall be in effect as
of October 19, 2012 under its terms and conditions.” (Id.) It contains a “Submission to
Jurisdiction” provision nearly identical to the ones in the Repayment Agreement and the
Stock Purchase Agreement, except for an irrelevant portion of the provision’s last sentence.
(Id. at 4.) On the signature page, Mr. Brooks signed for 267 Floridian, LLC as its member,
and two unsigned lines appear: one for CIS, by Mr. Jeung as its CEO, and one simply for Mr.
Jeung. (Id. at 5.)2
At oral argument on the Motion to Remand, counsel for both parties informed the
court that it is undisputed that the original Closing Agreement was signed by all listed
parties. (See doc. 6-5 at 5.) In other words, the original Closing Agreement’s validity is
Mr. Brooks was fired on May 2, 2013. (Doc. 6 at 7.) Plaintiff soon after filed a
complaint in state court in Marion County, Alabama, seeking a declaratory judgment and
equitable recision of the Employment Agreement. (Id.)
Defendant removed this case pursuant 28 U.S.C. § 1332(a), which allows federal
courts to hear cases between diverse parties when the amount in controversy is over $75,000.
While defendant established that the parties are completely diverse, he did not mention
whether the amount in controversy was satisfied in his notice of removal. (Doc. 1 at 2.) The
amount in controversy was not clear from the face of the complaint either, because the
complaint seeks equitable relief, not money damages. “Where, as here, the plaintiff has not
pled a specific amount of damages, the removing defendant must prove by a preponderance
of the evidence that the amount in controversy exceeds the jurisdictional requirement.”
Williams v. Best Buy Co., Inc., 269 F.3d 1316, 1319 (11th Cir. 2001). Plaintiff argues that
this “is a declaratory action and does not involve damages.” (Doc. 8 at 6.) However, a request
for declaratory relief does not preclude a finding that $75,000 or more is in controversy.
Cohen v. Office Depot, Inc., 204 F.3d 1069, 1077 (11th Cir. 2000) (“When a plaintiff seeks
injunctive or declaratory relief, the amount in controversy is the monetary value of the object
not at issue here.
of the litigation from the plaintiff’s perspective.”). The court can “review the record to find
evidence that diversity jurisdiction exists.” Williams, 269 F.3d at 1320. The evidence here
is clear: the complaint seeks to rescind a contract that requires plaintiff to pay $200,000 per
year for five years to defendant. (Doc. 1-1 at 10-11.) Therefore, the court finds that the
requirements of 28 U.S.C. § 1332(a) are met.
Plaintiff argues that the forum selection clause in the Employment Agreement requires
defendant to defend this suit where plaintiff sued him: in state court in Marion County,
Alabama. (Doc. 4 at 1.) Defendant argues that the Employment Agreement has been
modified by the Closing Agreement or else should be read in harmony with contemporaneous
agreements that establish venue elsewhere. (Doc. 6 at 1, 6, 9.)
The court should first determine what law applies to interpret the relevant agreements.
Plaintiff notes that forum selection clauses “are interpreted according to ordinary contract
principles and may constitute waivers of the right to remove.” (Doc. 4 at 5) (citing Global
Satellite Comm. Co. v. Starmill U.K. Ltd., 378 F.3d 1269, 1271-72 (11th Cir. 2004)).
Contract interpretation is normally an issue of state law, but plaintiff quotes Cornett v.
Carrithers, 465 F. App’x 841, 842 (11th Cir. 2012), in which the court explained that “the
construction of forum selection clauses by federal courts is a matter of federal common law,
not state law of the state in which the federal court sits.” (citing P & S Bus. Machs., Inc. v.
Canon USA, Inc., 331 F.3d 804, 807 (11th Cir. 2003)).3 This might appear confusing at first,
since all contracts in the record state that they are governed by Alabama law. (Doc. 6-1 at 7;
doc. 6-2 at 2; doc. 6-3 at 4; doc. 6-4 at 12; doc. 6-5 at 4.) But neither Cornett nor Canon USA
say that federal common law governs interpretation of contracts that include a forum
selection clause. Canon USA says that “[c]onsideration of whether to enforce a forum
selection clause in a diversity jurisdiction case is governed by federal law, under 28 U.S.C.
§ 1404(a) (1982), not state law.” Canon USA, 331 F.3d at 807 (citing Stewart Org., Inc. v.
Ricoh Corp., 487 U.S. 22, 28-29 (1988)) (emphasis added). In Ricoh and Canon USA, the
issue was whether a forum selection clause mandated transferring a case within the federal
court system pursuant to 28 U.S.C. § 1404. Canon USA, 331 F.3d at 806; Ricoh, 487 U.S.
at 29. Here, plaintiff is arguing that one forum selection clause applies and other forum
selection clauses do not. Plaintiff is not requesting transfer pursuant to § 1404. It is
requesting remand to state court. The ultimate question is not whether to enforce a forum
selection clause, but which forum selection clause governs this dispute.
The court need not decide in this case whether federal common law or Alabama law
applies in interpreting the contracts. Federal common law and Alabama law are closely
aligned on the relevant points of this case. The court in Cornett notes that “under federal
During oral argument on the Motion to Remand, defendant’s counsel argued that
Cornett is not binding on this court because it is an unpublished opinion. Defendant is
correct. Bonilla v. Baker Concrete Const., Inc., 487 F.3d 1340, 1345 n.7 (11th Cir. 2007)
(“Unpublished opinions are not controlling authority and are persuasive only insofar as
their legal analysis warrants.”).
common law, forum selection clauses are to be interpreted by reference to ordinary contract
principles.” Cornett, 465 F. App’x at 842 (citing Snapper, Inc. v. Redan, 171 F.3d 1249,
1261 (11th Cir. 1999)). And ordinary contract principles, ordinarily, come from state
common law. See Miree v. DeKalb Cnty., Ga., 433 U.S. 25, 28 (1977) (“Since the only basis
of federal jurisdiction alleged for petitioners’ claim against respondent is diversity of
citizenship, 28 U.S.C. § 1332, the [contract in the] case would unquestionably be governed
by Georgia law, Erie R. Co. v. Tompkins, 304 U.S. 64 (1938), but for the fact that the United
States is a party to the contracts in question, entered into pursuant to federal statute.”).
Plaintiff argues that the only relevant agreement is the Employment Agreement,
because that is the only agreement between the parties to this lawsuit, and because plaintiff
is only suing to rescind that agreement. If that is true, it will be dispositive. The Employment
Agreement establishes that “personal jurisdiction of venue shall be”4 in state court in Marion
County. See Slater v. Energy Servs. Grp. Int'l, Inc., 634 F.3d 1326, 1330 (11th Cir. 2011)
(“Based on a plain reading of the clause, we conclude that the forum designation in the
clause is not permissive, but mandatory . . . the use of the term ‘shall’ is one of
Mr. Brooks argues that selection clauses in other contracts negate the selection clause
in the Employment Agreement, or at least make it ambiguous:
The word “of” is apparently a typographical error. “And” would make more sense.
Here we have an Employment Agreement that is tied to, and
inseparable from, other contracts related to the terms of the
Employment Agreement which have different forum selection
clauses and allow the case to proceed in federal court. Further,
the Employment Agreement is now considered a “Transaction”
in the Closing Agreement which states that the agreed upon
forum is the federal court in Tuscaloosa, Alabama.
(Doc. 6 at 9.) In other words, because the Employment Agreement was a part of a larger
transaction, it was foreseeable that Mr. Brooks might later invoke the forum selection clause
in the Closing Agreement even if he was not a signatory to that particular agreement.
Although defendant does not cite this law in his brief, both Alabama law and federal
common law recognize that non-signatories may invoke a contract’s forum selection clause
against a signatory in some circumstances. Ex parte Procom Servs., Inc., 884 So. 2d 827, 834
(Ala. 2003)5; Liles v. Ginn-La W. End, Ltd., 631 F.3d 1242, 1256 (11th Cir. 2011). Such
circumstances include: “(1) incorporation by reference; (2) assumption; (3) agency; (4) veilpiercing/alter-ego; and (5) estoppel.” Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151, 116970 (11th Cir. 2009). Also, a non-signatory may invoke a forum selection clause when he or
she is “‘closely related’ to the dispute such that it becomes ‘foreseeable’ that it will be
Ex parte Procom cites a number of federal cases in support of this proposition,
including Hugel v. Corp. of Lloyd’s, 999 F.2d 206, 209-210 (7th Cir. 1993), ManettiFarrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514 n.5 (9th Cir. 1988), and Clinton v.
Janger, 583 F. Supp. 284, 290 (N.D. Ill. 1984) (“[A] range of transaction participants,
parties and non-parties, should benefit from and be subject to forum selection clauses.”).
bound.” Lipcon v. Underwriters at Lloyd’s, London, 148 F.3d 1285, 1299 (11th Cir. 1998)
(quoting Hugel, 999 F.2d at 209).6
Courts have explored various permutations of enforcement by or against non-signatory
transaction participants. See Smith v. Prof’l Claims, Inc., 19 F. Supp. 2d 1276, 1282 (M.D.
Ala. 1998) (signatory defendant could enforce clause against both joint-venturing plaintiffs:
the non-signatory and the signatory); Razi v. Razavi, 5:12-CV-90-OC-34PRL, 2013 WL
1193005, at *1-2 (M.D. Fla. Mar. 22, 2013) and Ex parte Procom Serv., 884 So. 2d at 834
(non-signatory individual co-defendant(s) could enforce clause against signatory plaintiff).
However, the circumstances here are unique. Plaintiff and defendant, sometimes in his
individual capacity and sometimes on behalf of his one-member corporation, signed a
number of agreements with conflicting forum selection clauses. Plaintiff is now seeking to
enforce one of those forum selection clauses against defendant, and argues that the court
should ignore the others.
In Gonzalez v. Watermark Realty Inc., No. 09-60265-CIV, 2010 WL 1299740 (S.D.
Fla. 2010), the plaintiff brought claims for breach of contract, fraud in the inducement, and
breach of fiduciary duty against a real estate agent and her agency. Id. at *1. There were two
The standard announced in Lipcon might not be as liberal as it sounds, because
the court held that “the non-signing parties were bound by the choice of law and choice of
forum clauses where the parties’ rights were ‘completely derivative or those of the
[signing parties]–and thus directly related to, if not predicated upon the interests of the
[signing parties].’” Cooper, 575 F.3d at 1170 (quoting Lipcon, 148 F.3d at 1299) (internal
quotation marks and citations omitted).
relevant contracts: (1) a Reservation Agreement signed by the plaintiff and the real estate
agent requiring a $30,000.00 down payment; and (2) a real estate Sales Contract requiring
a $200,000.00 down payment and containing a forum selection clause signed by the plaintiff
and the agent on behalf of the owner of the real estate. Id. Plaintiff attempted to avoid the
forum selection clause by arguing that he was suing under the Reservation Agreement, not
the Sales Contract, and that neither defendant was a party to the Sales Contract. Id. at *3.
Despite the plaintiff’s characterization of his claims, the court found that he was asserting
claims under both contracts because he was seeking return of money paid under both
contracts. Id. The court also noted that the Sales Contract expressly referred to money paid
under the Reservation Agreement. Id. In concluding that the non-signatory defendants could
invoke the forum selection clause, the court said: “In sum, Defendants’ involvement in the
transaction is such that Plaintiff cannot now divorce Defendants from the Sales Contract in
an effort to bypass the forum-selection clause’s application.” Id. at *4.
Like the defendants in Gonzalez, defendant is seeking to enforce a forum selection
clause in a contract that he signed, but not in his individual capacity. Alabama and federal
common law potentially allow him to do so—he is within a range of transaction participants
who would foreseeably invoke the selection clause in the Closing Agreement.7 However, CIS
The Closing Agreement contains a “No Third-Party Beneficiaries” clause that
prohibits the agreement from “confer[ring] any rights or remedies upon any Person other
than the Parties,” but the agreement also reaffirms “the Employment Agreement between
Greg Brooks [a nonparty] and CIS.” It is unnecessary to analyze how broad the “No
Third-Party Beneficiary” clause is under these circumstances. For an analysis of similar
has a better argument than the plaintiff in Gonzalez for why, in this case, the court should
ignore some of the forum selection clauses that it signed. CIS does not need any contract
other than the Employment Agreement to obtain the relief it has requested: recision of the
Employment Agreement. The plaintiff in Gonzalez needed the Sales Agreement to prove that
he was entitled to the additional $200,000 in damages, but did not want the court to honor
the forum selection clause in the Sales Agreement.
CIS and Mr. Brooks negotiated a number of agreements in June of 2012. Then, on
(effectively) October 18, 2012, they modified and consolidated them—all except one, the
Employment Agreement. That one, they agreed, “shall be in effect as of October 19, 2012
under its terms and conditions.” (Doc. 6-5 at 2.) Now CIS wants to rescind that separate
agreement, according to its terms and conditions. There are only two relevant conditions
here: (1) the parties must litigate “in the appropriate state court of Marion County, Alabama,
with respect to any cause of action arising hereunder,” and (2) “[t]his Agreement contains
the entire understanding of the parties regarding the subject matter of the Agreement and
shall supersede and replace all other agreements or understandings of whatever nature . . . .”
(Doc. 6-1 at 6-7.) If the latter condition means anything, it means that when a party is seeking
merely to rescind an unambiguous agreement, no “prior or contemporaneous agreements”
can be consulted “in order to change, alter, or contradict the terms of the integrated contract.”
Capmark Bank v. RGR, LLC, 81 So. 3d 1258, 1269 (Ala. 2011) (internal citations and
facts, see Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151, 1168-69 (11th Cir. 2009).
quotation marks omitted). Even if the court could consult the Closing Agreement, the only
way to give both of the competing forum selection clauses effect would be to hold that
litigation over the Stock Purchase Agreement, the Promissory Note, and the Repayment
Agreement should be in state or federal court in Tuscaloosa, and litigation over the
Employment Agreement should be in state court in Marion County.
Therefore, the court finds that plaintiff’s Motion to Remand, (doc. 4), is due to be
granted except insofar as it requests attorney’s fees.
2. Attorney’s Fees
Plaintiff asks this court to award it “just costs and any actual expenses, including
attorney’s fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). It asserts that the
forum selection clause in the Employment Agreement makes it “beyond debate that the
parties have agreed to have [this] matter decided in the Circuit Court of Marion County,
Alabama,” and that defendant had no reasonable basis for removal. (Doc. 4 at 11-12.)
“Absent unusual circumstances, courts may award attorney’s fees under § 1447(c)
only where the removing party lacked an objectively reasonable basis for seeking removal.”
Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). Courts have awarded fees where
“clearly established law,” such as the forum defendant rule, “foreclosed a defendant’s basis
for removal,” Wolf v. Kennelly, 574 F.3d 406, 411-12 (7th Cir. 2009), or where a defendant
attempted to invoke federal question jurisdiction because the plaintiff’s complaint
“mention[ed] the words ‘federal’ and ‘overtime,’” Devine v. Prison Health Servs., Inc., 212
F. App’x 890, 891 (11th Cir. 2006). Removal would have been appropriate in this case but
for the forum selection clause in the Employment Agreement. Even considering the
Employment Agreement’s forum selection clause, the Closing Agreement’s competing
selection clause provided an objectively reasonable basis for arguing that removal was
Therefore, the court finds that plaintiff is not entitled to an award of attorney’s fees
incurred as a result of removal.
For the foregoing reasons, plaintiff’s Motion to Remand will be granted and its
request for attorney’s fees will be denied.
DONE, this 25th day of March, 2014.
SHARON LOVELACE BLACKBURN
UNITED STATES DISTRICT JUDGE
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