Graham et al v. Sterling Trust Company

Filing 40

ORDER granting in part and denying in part 28 Motion for Attorney Fees; denying 33 Motion to Alter Judgment. by Judge R. Brooke Jackson on 7/9/14.(jdyne, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge R. Brooke Jackson
Civil Action No. 13-cv-03046-RBJ-KLM
MARIA BURKE, both individually and on behalf of the Individual Retirement Account of Maria
Burke, and
DONNA GRAHAM, both individually and on behalf of the Individual Retirement Account of
Donna Graham,
Plaintiffs,
v.
STERLING TRUST COMPANY n/k/a EQUITY TRUST COMPANY d/b/a EQUITY
INSTITUTIONAL, an Ohio Corporation,
Defendant.

ORDER

This matter comes before the Court on Plaintiffs’ Motion to Alter or Amend Judgment,
or, in the Alternative, to Transfer Venue [ECF No. 33]. The motion is hereby denied. The Court
also addresses the Defendant’s Bill of Costs and Motion for Attorney’s Fees [ECF No. 28],
which is granted in part and denied in part.
A. Plaintiffs’ Motion to Alter or Amend Judgment, or, in the Alternative, to
Transfer Venue.
The plaintiffs argue that the Court improperly dismissed their case when it found that a
forum selection clause mandated that the case be brought in the county courts of Lorain County,
Ohio. In particular, they feel the Court failed effectively to consider their argument that the
defendant did not properly authenticate their signatures on the contracts containing the forum
selection clause. Notably, at no point while briefing the original motion to dismiss did the

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plaintiffs claim that the signatures found on the contracts were forgeries. Instead, they argued
that the defendant failed to meet its burden to authenticate the documents because they could
have been forged. [ECF No. 21 at 3]. The Court disagreed, and found instead that the contracts
were properly authenticated. Without an actual claim of forgery or of another defect, my hands
are tied.
This Court has no desire to deprive plaintiffs of their day in court. If one assumes the
truth of their allegations, then they have sustained a substantial, maybe devastating, loss, at the
hand of an unscrupulous investment advisor. Whether they could recover the loss against this
defendant is a different matter, but the Court’s preference would be that the issue be decided on
its merits, not on a procedural issue. They had an available forum, the county court in Lorain
County, Ohio, but chose not to pursue the case there, apparently fearing that they would fall
victim to the defendant’s alleged home court advantage in that court. I do not comment on the
merits of that concern, but I do note that appellate courts exist to review and, if necessary, correct
the decisions of lower courts. Regardless, what this Court must do is to apply the law. The law
generally supports the enforcement of forum selection clauses, notwithstanding that they might
be contained (as appears to be so here) in a “contract of adhesion.” Without an innovative and
persuasive argument for modification of the law as applied to this case, my duty is to enforce it,
however much I might wish it were otherwise.
Even presuming (without finding) that this most recent motion calls into question the
authenticity of the plaintiffs’ signatures, there is no reason to believe that this revelation
constitutes new evidence previously unavailable. The plaintiffs could have undertaken these
handwriting analyses or called into question the enforceability of the contracts at the time of the
original motion. In fact, the Court granted leave to file a Sur-Reply [ECF No. 20] because, as the

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plaintiffs pointed out in their request, the defendant had attached 74 pages of new material to its
Reply to which the plaintiffs wished to respond [ECF No. 19]. The evidence (or at minimum the
arguments) could have been presented at that time. Plaintiffs’ counsel has not persuaded the
Court that it made a diligent yet unsuccessful attempt to discover the evidence at that time, and
therefore it will not be considered now.
I also note that allegations concerning the validity of these contracts were not put forth in
the Complaint. Nor did plaintiffs’ counsel file for leave to amend the Complaint once they
became aware of this significant oversight. The Court certainly would expect such a motion
should the plaintiffs genuinely believe that these signatures are forgeries. The Court further
recognizes that the Complaint asserts a breach of contract claim for which the plaintiffs seek
monetary damages. [ECF No. 1 at 12–14]. In consequence, it appears the plaintiffs believe
these contracts are valid. The plaintiffs cannot assert that they are due damages for breach of
contract and then, without striking this claim, argue that the contracts are invalid upon
discovering they filed suit in the wrong venue.
Finally, the Court has no jurisdiction to transfer this litigation to the Northern District of
Ohio as the forum selection clause specifies that the suit must be filed in the county courts of
Lorain County, Ohio. A federal court cannot transfer a case to a state or county court. Further,
plaintiffs’ argument concerning the right to removal (in the Reply brief) is inapposite. Simply
because the defendant may be able to remove this case to federal court after it is filed in a state
court does not mean that plaintiffs have a right to litigate the case on its merits in the federal
court.
The Court declines to address any other arguments put forth as unavailing.

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B. Defendant’s Bill of Costs and Motion for Attorney’s Fees.
The Court has reviewed the defendant’s motion seeking attorney’s fees and costs related
to defending this action. The Court grants the motion as to costs only.
The defendant asks this Court to grant it attorney’s fees under a Colorado statute, C.R.S.
§ 13-17-201. But the Court has previously ruled (as defendant argued) that Ohio substantive law
governs this dispute. April 11, 2014 Order [ECF No. 27] at 5. In the Tenth Circuit, attorney fee
statutes are considered substantive for purposes of a diversity action. Jones v. Denver Post
Corp., 203 F.3d 748, 757 (10th Cir. 2000). But defendant cites no Ohio law supporting its
attorney’s fee request. The burden to carry a motion lies on the moving party. Without
providing authority or basis for an award of fees under Ohio law, defendant has not met its
burden. See Sheppard v. Sooner Survey, Inc., No. 06-CV-324-GKF-PJC 2007 WL 1203004, *2
(N.D. Okla. Apr. 23, 2007).
In the alternative, the defendant contends that it must be awarded its attorney’s fees and
costs under the terms of the custodial agreement entered into by the plaintiffs. In support of this
argument the defendant once again cites Colorado case law. [See ECF No. 28 at 2]. However,
the question is whether this agreement, a contract of adhesion purporting to indemnify the
defendant from suit arising even from its own negligence, would be supported under Ohio law.
Ohio courts recognize the right for two parties to include a provision of attorney’s fees to
the prevailing party should a dispute arise under the parties’ agreement. See Marcy Estates, Inc.
v. Reserve Co., Inc., 90-G-1614, 1991 WL 216942, *1–2 (Ohio Ct. App. Oct. 25, 1991).
However, no case law has been cited in support of the defendant’s assertion that attorney’s fees
can be imposed based on a provision in a contract of adhesion calling for reimbursement of “all

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legal fees, expenses, costs, fines, penalties and obligations incurred or to be incurred in
connection with the defense, contest, prosecution or satisfaction of any claim made, threatened or
asserted pertaining to any investment or action . . . including, without limitation, claims asserted
by you, any state or federal regulatory authority or self regulatory organization.” Traditional and
Roth IRA Custodial Account Agreements and Disclosure Statements [ECF No. 28-1] at 3, §
8.03(a) (emphasis added). This language, which appears in size 8 font and in the middle of page
3 of 19 of a custodial account agreement, does not take into account the merits of the claim,
purporting to provide fees to the defendant even if it should lose the case. Ohio courts strictly
scrutinize contract language that would indemnify one party from the financial consequences of
its own negligent behavior. See e.g., Glaspell v. Ohio Edison Co., 505 N.E.2d 264, 266 (Ohio
1987); George H. Dingledy Lumber Co. v. Erie R. Co., 131 N.E. 723, 725 (Ohio 1921).
Applying this strict scrutiny standard, the Court finds that this clause overreaches and is, in turn,
unenforceable. The defendant’s motion for attorney’s fees pursuant to the terms of the custodial
agreement is therefore denied.
The Court does agree, however, that under the Federal Rules of Civil Procedure and the
District Court of Colorado’s Local Rules the defendant as the prevailing party is entitled to its
reasonable costs. Fed. R. Civ. P. 54(d)(1); D.C.COLO.LCivR 54.1. The defendant contends that
it has incurred reasonable and necessary costs totaling $2,504.38. However, the defendant
should follow the procedure set forth in those rules, particularly the local rule which requires the
filing of a bill of costs with the clerk’s office.
ORDER
The Court hereby DENIES Plaintiffs’ Motion to Alter or Amend Judgment, or, in the
Alternative, to Transfer Venue [ECF No. 33]. The Court GRANTS IN PART and DENIES IN

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PART Defendant’s Bill of Costs and Motion for Attorney’s Fees [ECF No. 28]. The motion is
granted only as to costs, which are awarded pursuant to Fed. R. Civ. P. 54(d)(1) and
D.C.COLO.LCivR 54.1.
DATED this 9th day of July, 2014.

BY THE COURT:

___________________________________
R. Brooke Jackson
United States District Judge

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