Azar Family Holdings L L C et al v. Directv Inc

Filing 14

MEMORANDUM RULING re 4 MOTION to Dismiss DIRECTV, Inc. filed by Directv Inc DENIED IN PART and GRANTED IN PART. Signed by Judge Tucker L Melancon on 09/20/10. (crt,Bacon, C) [Transferred from Louisiana Western on 9/21/2010.]

-RC

Azar Family Holdings L L C et al v. Directv Inc

Do c. 14

UNITED STATES DISTRICT COURT W E S T E R N DISTRICT OF LOUISIANA L A F A Y E T T E DIVISION A z a r Family Holdings, LLC, et al v e rs u s DIRECTV, Inc. C iv il action no. 10-01145 J u d g e Tucker L. Melançon M a g is tra te Judge Patrick J. Hanna M E M O R A N D U M RULING B e fo re the Court is defendant, DIRECTV's, Motion to Dismiss Or Transfer Under F ed e ra l Rule Of Civil Procedure 12(b)(3) And 28 U.S.C. § 1406, Or, In The Alternative, To T ra n sfe r Under 28 U.S.C. § 1404 [Rec. Doc. 4], a Memorandum in Opposition filed by p lain tiffs, Azar Family Holdings, LLC and Wilderness Communications, LLC's (" A z a r" )[R e c . Doc. 7] and DIRECTV's Reply thereto [Rec. Doc. 12]. For the reasons that fo llo w , DIRECTV's Motion will be denied in part and granted in part. I . FACTUAL BACKGROUND O n April 19, 2006, Azar and DIRECTV entered into a Retransmission Consent A g re e m e n t ("the Agreement"), whereby Azar granted DIRECTV the right to retransmit K L W B , a local Lafayette television station then owned by Azar.1 R. 4, Exh. 1, Agreement. T h e Agreement states in pertinent part: 7 . NETWORK AFFILIATION AND PROGRAMMING RIGHTS. T h e parties acknowledge that the Stations' affiliations as identified on Exhibit A are the essence of this Agreement. Accordingly, DIRECTV may, in its sole d is c re tio n , cease distribution of a Station and/or terminate this Agreement at a n y time during the Term if the Station is no longer a primary affiliate

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The Agreement was later assigned to Wilderness Communications, LLC. R. 4.

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(" A ffilia te d " ) of a Network of the said network or if any other station affiliated w ith the same network is located in the same Local Territory. If at any point d u rin g the Term, the retransmission rights set forth in this Agreement are for a n y reason lost, rescinded, invalidated or impaired, then DIRECTV shall have th e option, exercisable in its sole discretion, to immediately cease distribution s u c h Station. E x . 1, § 17. H e n c e, under the Agreement, DIRECTV has no obligation to carry KLWB if KLWB had no a ffilia tio n with a "Network." Id. at § 7. On May 12, 2010, after discovering that KLWB was s e t to lose its affiliation with the CW, a "Network" under the Agreement, DIRECTV in fo rm e d Azar that it intended to cease carriage of KLWB in accordance with the terms of th e Agreement. R. 1-2, Petition, ¶ 7. On June 7, 2010, Azar filed a Petition in the Fifteenth J u d ic ia l District Court in Lafayette, Parish of Lafayette, Louisiana. Id. Plaintiffs allege in th e ir Petition that DIRECTV should be ordered to carry KLWB because: (1) they are entitled to rescind the Agreement on the grounds of mistake and failure of consideration, since they re c e iv e d nothing in return for entering into the Agreement, Id. ¶¶ 8, 17; (2) the Agreement sh o u ld be reformed to eliminate DIRECTV's discretion regarding carriage of a non-Network a ffilia te d station under Section 7, and to require DIRECTV to carry KLWB for the remainder o f the term under federal "must carry" regulations, Id. at ¶ 8; (3) the one-sidedness of the term s and provisions of the Agreement, specifically Sections 2, 3(a), 4(a), 7, and 8, renders th e Agreement unconscionable, Id. at ¶¶ 14A-D; and, (4) DIRECTV "failed to perform the A g re e m e n t in good faith and in accordance with fair dealing" by "seek[ing] to use the change o f network affiliation as an excuse to terminate carriage of KLWB . . . ." Id. at ¶ 16.

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D IR E C T V removed plaintiffs' state action to this Court on July 15, R. 1. Thereafter, D I R E C T V filed the motion at bar, moving the Court to transfer this matter to the United S tates District Court, Central District of California, pursuant to the Agreement's mandatory fo ru m selection clause, Section 17, which provides in pertinent part: 1 7 . GOVERNING LAW. This Agreement shall be governed by and c o n stru e d in accordance with the laws of the State of California applicable to c o n tra c ts made and fully performed therein, except to the extent that the p a rties ' respective rights and obligations are subject to mandatory local, State a n d Federal laws or regulations. Any dispute that may later arise with respect to any term or provision of this Agreement shall be resolved in the appropriate c o u rt located in Los Angeles, California, it being the clear intent of the parties h e re to to consent to such jurisdiction and venue. . . . E x . 1, § 17. P la in tiffs oppose DIRECTV's motion contending that Section 17 of the Agreement does not e n c o m p a ss this action because it is "not a dispute with respect to a `term or provision' of the A g re e m e n t. This suit seeks rescission or reformation of the Agreement, and damages ­ and th e quoted provision of Section 17 is thus by its own terms not applicable to this action." I I . DISCUSSION D IR E C T V moves the Court to transfer this action to the United States District Court fo the Central District of California pursuant to Rule 12(b)(3) and 28 U.S.C. § 1406. A lte rn a tiv e ly , DIRECTV moves for transfer under 28 U.S.C. § 1404(a). "In Lim v. Offshore S p e c ia lty Fabricators, Inc., 404 F.3d 898, 902 (5th Cir.), the Fifth Circuit determined that a Rule 12(b)(3) motion is the proper procedural vehicle to request dismissal based on a forum s e le c t io n clause. Significantly, however, the forum selection clause in Lim designated a

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fo ru m in a foreign country, and the Fifth Circuit has not considered whether dismissal for im p ro p e r venue is proper where the designated venue is another federal court, rather than a s ta te court or foreign jurisdiction. See Southeastern Consulting Group, Inc. v. Maximus, In c ., 387 F.Supp.2d 681, 683 (S.D.Miss.2005) (noting that the Fifth Circuit has not addressed w h e th e r dismissal for improper venue pursuant to Rule 12(b)(3) is appropriate where another fe d e ra l court is an agreed venue under an enforceable forum selection clause). However, the m a jo rity of courts which have considered the issue have held that when a federal court is the a g re e d forum under an enforceable forum selection clause the proper way to enforce such a c lau se is through a motion to transfer venue pursuant to 28 U.S.C. § 1404(a), and not a m o tio n to dismiss for improper venue pursuant to Rule 12(b)(3) and § 1406(a)." Ellington C r e d it Fund, Ltd. v. Select Portfolio Servicing, Inc., 2007 WL 3256210, 4 (W.D.Tex., 2007) (in terna l citations omitted); see also, Pinnacle Interior Elements, Ltd. v. Panalpina, Inc., 2 0 1 0 W L 445927, 6 -7 (N.D.Tex.,2010); Wal-Mart Stores, Inc. v. Qore, Inc., 2007 WL 2 7 6 9 8 3 5 at * 2 (N.D.Miss. Sept. 20, 2007); Canvas Records, Inc. v. Koch Entertainment D is tr ib u t i o n , LLC, 2007 WL 1239243 at * 5 (S.D. Tex. April 27, 2007); Gutermuth In v e stm e n ts , Inc. v. Coolbrands Smoothies, 2006 WL 2933886 at * 3 (W.D.Tex. Oct. 11, 2 0 0 6 ); Youngblood v. JTH Tax Services, Inc., 2006 WL 1984656, at * 3 (W.D.Tex. July 17, 2 0 0 6 ); Southeastern Consulting Group, Inc. v. Maximus, Inc., 387 F.Supp.2d 681, 683 (S .D .M is s .2 0 0 5 )(c o n c lu d in g that "[i]t can reasonably be inferred from" footnote 8 in Stewart O r g a n iz a tio n , Inc. v. Ricoh Corporation, 487 U.S. 22, 29 n. 8 (1988) "that when a court has

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p o w er to transfer a case to another federal court, a motion to dismiss for improper venue is n o t appropriate if venue is statutorily proper" (emphasis in original))2 ; Dorsey v. Northern L ife Ins. Co., 2004 WL 2496214, at *9 (E.D.La. Nov. 5, 2004); Speed v. Omega Protein, In c ., 246 F.Supp.2d 668, 671 (S.D.Tex.2003). In light of the foregoing, the Court will deny D IR E C T V 's motion to dismiss under Federal Rule of Civil Procedure 12(b)(3) and motion to transfer under 28 U.S.C. § 1406, and will address DIRECTV's alternative motion to tran sfer under 28 U.S.C. 1404(a). 1 . Enforceability of the Forum Selection Clause B e fo re the court can apply the section 1404(a) analysis, it must first determine the e n fo rc e ab ility of the Agreement's forum selection clause. The enforceability of a forum s e le c tio n clause is a question of law, and such clauses are presumptively valid. Mitsui & Co. (U S A ), Inc. v. Mira M/V, 111 F.3d 33, 35 (5th Cir.1997). Mandatory forum selection clauses th a t require all litigation to be conducted in a specified forum are enforceable if their la n g u a g e is clear. City of New Orleans v. Municipal Admin. Servs., Inc., 376 F.3d 501, 504

"The decision of the Supreme Court of the United States in Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22 (1988) provides the Court with initial direction. Based on a forum selection clause that provided for venue in an alternative federal court, the defendant in Stewart made a motion to transfer venue pursuant to § 1404 or alternatively, to dismiss under § 1406. Id. at 28. The Supreme Court in Stewart remanded the case to the district court, directing the district court to balance the factors under § 1404 in deciding whether to transfer the case. Id. at 32. Although the Stewart Court did not expressly hold that a motion to transfer under § 1404 was preferred over a motion to dismiss, the Court in a footnote states, "[t]he parties do not dispute that the District Court properly denied the motion to dismiss the case for improper venue under 28 U.S.C. § 1406(a) because the respondent apparently does business in the Northern District of Alabama." Id. at 29 n. 8 (citing 28 U.S.C. § 1391). It can reasonably be inferred from this proclamation that when a court has power to transfer a case to another federal court, a motion to dismiss for improper venue is not appropriate if venue is statutorily proper." Id.

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(5 th Cir.2004) ("For a forum selection clause to be exclusive, it must go beyond establishing th a t a particular forum will have jurisdiction and must clearly demonstrate the parties' intent t o make that jurisdiction exclusive."). The party resisting the forum selection clause must s h o w that the clause is "unreasonable" before a court may decline to enforce the clause. M a r i n e c h a n c e Shipping, Ltd. v. Sebastian, 143 F.3d 216, 220 (5 th Cir.1998). " U n re a so n a b le n e ss potentially exists where (1) the incorporation of the forum selection c lau se into the agreement was the product of fraud or overreaching; (2) the party seeking to e s c a p e enforcement "will for all practical purposes be deprived of his day in court" because o f the grave inconvenience or unfairness of the selected forum; (3) the fundamental u n fa irn e ss of the chosen law will deprive the plaintiff of a remedy; or (4) enforcement of the fo ru m selection clause would contravene a strong public policy of the forum state. The party re sis tin g enforcement on these grounds bears a `heavy burden of proof.' " Haynsworth v. T h e Corporation, 121 F.3d 956, 963 (5th Cir.1997) (quoting M/S Bremen v. Zapata O ff-S h o r e Co., 407 U.S. 1, 12-13, 17, 18 (1972)). Plaintiffs argue that The language in the forum selection clause expressly limits any a c tio n such as the one at bar to the laws of California and to court located in Los Angeles, C a lifo rn ia .3 As the forum selection clause clearly demonstrates the parties' intent to made C a lifo rn ia the exclusive jurisdiction, the Clause is therefore mandatory. Having decided the

Plaintiffs do not dispute that jurisdiction is proper in the United States District Court, Central District of California, DIRECTV's home district, under 28 U.S.C. § 1391(a)(b) ("a judicial district where any defendant resides, if all defendants reside in the same State").

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fo ru m selection clause is mandatory, the Court must analyze whether the clause meets the test for reasonableness. Azar contends they were "induced into negotiations by DIRECTV's m is re p re se n ta tio n s ," and therefore "[p]laintiffs' consent to the contract [Agreement] was v itia te d by fraud, misrepresentation, error, mistake, duress or undue influence." R. 7. Azar cites the August 3, 2010 Affidavit of Eddie Blanchard in support of its contention that "[n]o n e g o tia tio n over the making of a forum selection clause took place between DIRECTV and th e plaintiffs." Id. Blanchard's Affidavit states he represented Azar in dealing with the A g re e m e n t and "there were no negotiations between DIRECTV AND Azar with regard to th e form of the contract, and specifically, there were no negotiations with regard to Section 1 7 of the Agreement." Id., Exh. 3, Aff. Of Blanchard. Paragraph 18 of the Petition sets forth plaintiffs' allegations related to the forum s e le c tio n clause, Section 17 of the Agreement. Id. at ¶ 18. Plaintiffs' allegations do not s ta te that they entered into the forum selection clause as a result of fraud and duress. R. 1, P la in tiffs ' Petition, ¶ 18. Rather, throughout the Petition, plaintiffs allege fraud and duress a s to their election of the "retransmission consent" and as to the Agreement as a whole.4 Id. a t ¶¶ 1-17. "[A]llegations of such conduct as to the contract as a whole -- or portions of it o th e r than the [forum selection/choice-of-law] clause -- are insufficient; the claims of fraud o r overreaching must be aimed straight at the [forum selection/choice-of-law] clause in order to succeed. Afram Carriers, Inc. v. Moeykens, 145 F.3d 298, 301 (5 th Cir.,1998) (quoting
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Plaintiffs allege that the forum selection clause is not applicable because "[t]his suit is not a dispute with respect to a `term or provision' of the Agreement." See infra.

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H a y n sw o r th v. The Corporation, 121 F.3d 956, 964 (5th Cir., 1997)). As to plaintiffs' c o n te n tio n s that the forum selection clause was unreasonable, the record provides that Azar a g re e d to the forum selection clause and has not shown any fraud, overreaching, u n re a so n a b le n e ss , or indications of unequal bargaining power.5 While Azar contends that th e affidavit of its representative, Blanchard, states that there were no negotiations held as to the Agreement or the forum selection clause, plaintiffs' Petition indicates that Blanchard h a d "conversations with DIRECTV leading to the Agreement" and the memorandum in o p p o s itio n makes numerous references to "negotiations" between Azar and DIRECTV. R. 1 -A , Petition, ¶ 11, R. 7. As Azar has failed to provide any evidence or testimony of its allegations that: (1) the f o ru m selection clause results from fraud or overreaching; (2) enforcement of the clause d e p riv e s Azar of its day in court, albeit in California; (3) California law is fundamentally u n fair; or (4) enforcement of the forum selection clause violates public policy, DIRECTV's c h o ic e of forum should be honored. Because the Agreement's forum selection clause is enforceable and this action should b e transferred to the federal court in Los Angeles, California, the private and public interest fa c to rs that pertain to convenience and govern a transfer under section 1404(a) do not come

Plaintiffs also contend that the forum selection clause is not applicable because "[t]his suit is not a dispute with respect to a `term or provision' of the Agreement." Based on the allegations in the Petition, paragraphs 1 through 17, the Court finds that this is a dispute as the provisions of the Agreement. R. 1, Exh. A, Petition, ¶¶ 1-17. In particular, under paragraph 8 of the Petition, plaintiffs allege that the Agreement should be reformed based on section 7, which allows DIRECTV to cease carriage of stations like KLWA once they lose their Network affiliation. Id. at ¶ 8.

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in to play. See, TIB-The Independent Bankersbank v. American Gateway Bank, 2010 WL 3 2 6 0 1 7 8 , 3-4 (N.D.Tex.,2010). However, even assuming arguendo that 1404(a) does apply, th e Court finds that a transfer is warranted under 1404(a) and jurisprudence interpreting the s ta tu te . 2 . Transfer Pursuant to 28 U.S.C. § 1404(a) U n d e r 28 U.S.C.§ 1404(a), "[f]or the convenience of parties and witnesses, [and] in th e interest of justice, a district court may transfer any civil action to any other district or d iv isio n where it might have been brought." 28 U.S.C. § 1404(a). This language is p e rm iss iv e , as opposed to mandatory, and, accordingly, a transfer pursuant to this section is w ith in a court's sound discretion. Jarvis Christian Coll. v. Exxon Corp., 845 F.2d 523, 528 (5 th Cir. 1988). The determination of "convenience" turns on a number of private and public in ter e st factors, none of which are given dispositive weight. Action Indus., Inc. v. U.S. F id e lity & Guar. Co., 358 F.3d 337, 340 (5th Cir.2004) (citing Syndicate 420 at Lloyd's L o n d o n v. Early Am. Ins. Co., 796 F.2d 821, 827 (5th Cir.1986)). The private concerns to b e considered include: (1) the "relative ease of access to sources of proof"; (2) the a v a ila b ility of compulsory process to secure the attendance of witnesses; (3) the cost of a tte n d a n c e for willing witnesses; and (4) all other practical problems that make trial of a case e a sy , expeditious and inexpensive. The public concerns include: (1) the "administrative d iffic u ltie s flowing from court congestion"; (2) the local interest in having localized interests d e c id e d at home; (3) the familiarity of the forum with the law that will govern the case; (4)

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th e avoidance of unnecessary problems of conflict of laws of the application of foreign law; a n d (5) any unfairness to jurors in burdening them with jury duty in an unrelated forum. Id. (citatio n s omitted). Although a court must consider the above factors to determine whether transfer is a p p ro p ria te , an enforceable forum selection clause "is a significant factor that [should figure] c e n t ra lly in the district court's § 1404(a) calculus. Shaw Group, Inc. v. Natkin & Co., 907 F .S u p p . 201, 204 (M.D.La.,1995) (citing Stewart, 487 U.S. at 29). "[W]here the parties have e n t e r e d into a contract which contains such a clause, the burden of persuasion to establish th a t the suggested forum is more convenient shifts to the non-movant since the moving party is not trying to limit the plaintiff's right to choose a forum, but is merely attempting to e n fo rc e the forum choice the plaintiff has already made." Shaw Group at 205 (citing In re R ic o h Corp., 870 F.2d 570, 573 (11th Cir.1989)). "[W]hile other factors might `conceivably' m ilita te against a transfer, the clear import of the Court's opinion [in Stewart ] is that the v e n u e mandated by a choice of forum clause rarely will be outweighed by other 1404(a) fa c to rs ." Shaw Group at 205 (citing Ricoh, 870 F.2d at 573; and Stewart, 487 U.S. at 33 (K e n n e d y , J., concurring) ("[A] valid forum selection clause [should be] given controlling w eigh t in all but the most exceptional cases."). Plaintiffs' sole contention as to inconvenience under § 1404 is that "litigation costs a re notoriously much higher in California than in Lafayette." R. 7. That factor alone,

h o w e v e r, is not enough to invalidate the forum selection clause. Dorsey v. Northern Life Ins.

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C o ., 2004 WL 2496214, 7 (E.D.La.,2004) (J. Africk). Plaintiffs have failed to meet their b u rd e n of persuasion to establish that the 1404(a) factors outweigh the California venue m a n d a te d by the forum selection clause. Nor can plaintiffs show that "exceptional

c irc u m s ta n c es " warrant overriding the parties' choice of California venue in this case. M o re o v e r, the interests of justice are furthered by enforcement of the parties' contractual a g re e m e n t. See Stewart at 33 (Kennedy, J., concurring) ("[E]nforcement of valid forum s e le c tio n clauses, bargained for by the parties, protects their legitimate expectations and fu rth e rs vital interests of the justice system."). III. CONCLUSION F o r the foregoing reasons, the mandatory forum selection clause in the Agreement at is s u e is dispositive and this action will be transferred to the United States District Court for th e Central District of California.

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