Connecticut Addiction Medicine, LLC v. eLab Solutions Corporation

Filing 31

ORDER granting in part and denying in part 13 Motion to Dismiss pursuant to the attached decision. This case shall be transferred to the Northern District of Georgia. The Clerk is directed to close this case. Signed by Judge Vanessa L. Bryant on 01/11/2018. (Lee, E.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT

CONNECTICUT ADDICTION,
MEDICINE, LLC
Plaintiff,
v.
eLAB SOLUTIONS CORPORATION
d/b/a eLAB CONSULTING
SERVICES, INC.,
Defendant.

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No. 3:17-CV-00333 (VLB)

January 11, 2018

MEMORANDUM OF DECISION ON MOTION TO DISMISS OR TRANSFER VENUE
[DKT. 13]
This action involves a contract dispute between Connecticut Addiction
Medicine, LLC (“Plaintiff” or the “Practice”) and Defendant eLab Solutions
Corporation doing business as eLab Consulting Services, Inc. (“Defendant” or
“eLab”).

Plaintiff raises claims of breach of contract, negligence, negligent

misrepresentation, breach of the covenant of good faith and fair dealing, and a
violation of the Connecticut Unfair Trade Practices Act (“CUTPA”), Conn. Gen.
Stat. § 42-110 et seq., which are all related to the Defendants’ actions in executing
and performing the contract.

Defendant now seeks to dismiss the case for

improper venue pursuant to Fed. R. Civ. P. 12(b)(3) or, in the alternative, transfer
the case to the Northern District of Georgia, which is where Fulton County,
Georgia is located. For the foregoing reasons, dismissal is DENIED but the Court
GRANTS transfer to the Northern District of Georgia.

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Background
The Practice performs medical services that include drug testing. [Dkt. 1-1
(Compl.) ¶ 1].

In 2013, the Practice entered into the first of several Program

Agreements with eLab arranging for eLab to provide staff, products, and training
to facilitate testing.

Id. ¶ 3.

The Program Agreement included a Committed

Products Addendum, which outlined types of kits the Practice would purchase
and the costs associated per kit and per test and upon which the Practice relied.
Id. ¶ 4. The Complaint alleges eLab breached the Program Agreement by failing
to (a) properly represent costs, (b) train employees, (c) monitor the products, and
(d) perform quality control. Id. ¶ 8.
The parties entered into several successive one-year program agreements.
See [Dkt. 13-4 (Mot. Dismiss Ex. 4, Program Agreement 8/2013) at 2; Dkt. 13-6
(Mot. Dismiss Ex. 6, Program Agreement 2/2014) at § 15(b); Dkt. 13-7 (Mot.
Dismiss Ex. 7, Program Agreement 7/2014) at § 15(b)].

All of the program

agreements in evidence contain a forum selection clause, which reads:
The rights and obligations of the parties hereunder shall be
governed by and construed in accordance with the laws of the State
of eLab’s manufacturing location, without reference to its choice of
law provisions. Each party hereby irrevocably consents to the
exclusive jurisdiction of the state and federal courts located in the
county and state of eLab’s manufacturing location, in any action
arising out of or relating to this Agreement and waives any other
venue to which it may be entitled by domicile or otherwise.
Id. at § 15(b). None of the submitted Program Agreements define “manufacturing
location.”
Relying on the forum selection clause, Defendant moves for an order
dismissing the case for lack of venue or transferring venue to the Northern

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District of Georgia where eLab manufacturing operations are located. [Dkt. 13-1
(Mot. Dismiss Mem.) at 4-5]. Plaintiff objects to dismissal and transfer, arguing
principally that the forum selection clause is vague, ambiguous, undefined, not
clearly communicated, and that enforcement would be unreasonable and unjust.
[Dkt. 26 (Obj’n to Mot. Dismiss) at 1].
Discussion
As an initial matter, transfer rather than dismissal is appropriate here. The
prescribed manner by which to enforce a valid forum selection clause specifying
a different federal district is to transfer under 28 U.S.C. § 1404(a), not dismissal
pursuant to Fed. R. Civ. P. 12(b)(3). See Atl. Marine Constr. Co., Inc. v. United
States Dist. Court for the W. Dist. of Texas, 134 S. Ct. 568, 575, 579-80 (2013).
Where the forum selection clause points to a state or foreign jurisdiction, a court
can dismiss a case under the forum non conveniens doctrine. Id. at 580.1 In view
of the diversity of the parties and the resulting availability of federal court
jurisdiction and the fact that neither party has suggested this case should be
litigated in state court, the court will consider whether the case should be
transferred rather than dismissed. See 28 U.S.C. § 1332.
A court typically looks at pleadings and affidavits when evaluating a
motion to dismiss based on a forum selection clause. See Martinez v. Bloomberg
LP, 740 F.3d 211, 216-17 (2d Cir. 2014). This Court will also rely on additional

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The United States Supreme Court has clarified that § 1404(a) “is merely a
codification of the doctrine of forum non conveniens for the subset of cases in
which the transferee forum is within the federal court system; in such cases,
Congress has replaced the traditional remedy of outright dismissal with transfer.”
Id.

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undisputed evidence submitted by the parties. See New Moon Shipping Co., Ltd.
v. MAN B&W Diesel AG, 121 F.3d 24, 33 (2d Cir. 1997) (approving appellants’
introduction of “additional evidence to support their claim of unreasonableness
before the district court”); Martinez, 740 F.3d at 216-17 (requiring a court to
conduct an evidentiary hearing to resolve disputed factual questions).
I.

Enforceability of the Forum Selection Clause
The critical question in this case is whether the forum selection clause is

enforceable as the answer impacts the standard used to determine the
appropriateness of transfer under 28 U.S.C. § 1404(a). Where a forum selection
clause is unenforceable or otherwise not applicable, a court is to engage in the
standard transfer analysis and consider the parties’ private interests and other
public interest factors. See Atl. Marine, 134 S. Ct. at 581 n.6 (citing Piper Aircraft
Co. v. Reyno, 454 U.S. 235, 241 n.6 (1981). A valid forum selection clause alters
this analysis by precluding the court from giving weight to the plaintiff’s choice of
forum and from considering the parties’ private interests; a court must instead
consider only arguments about public-interest factors. Id. at 583. A court is also
bound by the choice of law provision “[i]n all but the most unusual
circumstances.” Id.; see Charter Oak Oil Co., Inc. v. Applied Underwriters, Inc.,
No. 17-cv-00689, slip op. at 1 (D. Conn. Sept. 12, 2017) (citing Atl. Marine, 134 S.
Ct. at 581-82).
A forum selection clause is enforceable if it satisfies the Second Circuit’s
four-part test. A court must ask:
(1) whether the clause was reasonably communicated to the party
resisting enforcement; (2) whether the clause is mandatory or

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permissive, i.e., . . . whether the parties are required to bring any [ ]
dispute to the designated forum or simply permitted to do so; and (3)
whether the claims and parties involved in the suit are subject to the
forum selection clause. If the forum clause was communicated to
the resisting party, has mandatory force and covers the claims and
parties involved in the dispute, it is presumptively enforceable. A
party can overcome this presumption only by (4) making a
sufficiently strong showing that enforcement would be unreasonable
or unjust, or that the clause was invalid for such reasons as fraud or
overreaching.
Martinez, 740 F.3d at 217 (internal quotation marks and citations omitted); see
Charter Oak, slip op. at 5 (applying this four factor test “[t]o determine whether a
forum selection clause is enforceable”); United States ex rel. QSR Steel Corp.,
LLC v. Safeco Ins. Co. of Am., No. 3:14-cv-1017 (VAB), 2015 WL 4393576, at *6 (D.
Conn. July 16, 2015) (same); Compuweigh Corp. v. Honeywell Int’l, Inc., No. 3:16cv-01108 (VAB), slip op. at 3 (D. Conn. Dec. 9, 2016) (same).
In Martinez, 740 F.3d at 217 (2d Cir. 2014), the Second Circuit distinguished
interpretation of a forum selection clause from enforceability of a forum selection
clause. The Second Circuit found that the “overriding framework” of the fourfactor test is guided by federal law but clarified that “[i]n answering the
interpretive questions posed by parts two and three of the four-part framework,
we normally apply the body of law selected in an otherwise valid choice-of-law
clause.”

Id. at 217-18. This distinction is necessary because “[i]t would

undermine the predictability fostered by forum selection clauses, however, if
federal law—rather than the law specified in a choice-of-law clause—were to
govern the interpretation as well as the enforceability,” federal law “could
frustrate the contracting parties’ expectations by giving a forum selection clause

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a broader or narrower scope in a federal court than it was intended to have.” Id.
at 220.
In addition, the Second Circuit discussed the value of retaining a
distinction between procedure and substance. The Second Circuit reasoned that
the application of federal law at steps two and three could create a federal
common law undermining the balance between state and federal systems
established in Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). Id. at 221. This
principle is a reminder that “[c]ontract law—including the rules governing
contract interpretation—is quintessentially substantive for Erie purposes, and
therefore primarily the realm of the states.” Id. “In construing a forum selection
clause, a court may confront a wide range of contract law issues, from the
treatment of ambiguous phrases, to the admissibility of parol evidence, to
successorship and the rights of third-party beneficiaries.” Id. (emphasis added)
(internal quotation marks and citations omitted). Such a discussion is a helpful
reminder to limit the analysis of each factor to the specific question at hand—the
first step of the four-part analysis, which deals with enforceability and applies
federal law, is not the stage to engage in interpretation of the contract language.
Plaintiff challenges the first and fourth factor of the four-part test. The
Court will address these two factors in turn.
A. The Forum Selection Clause was “Reasonably Communicated”
A forum selection clause is “reasonably communicated” when the
“physical characteristics” evince the important terms and the circumstances
present in effectuating the contract enabled the parties to “become meaningfully

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informed of the contractual terms at stake.” Ward v. Cross Sound Ferry, 273 F.3d
520, 523 (2d Cir. 2001) (adopting the rule for a passenger’s ticket on a cruise); see
United Rentals, Inc. v. Pruett, 296 F. Supp. 2d 220, 225 (D. Conn. 2003) (applying
the two-part test in a contract dispute over an employment agreement); FSB USA,
Inc. v. Am. Prods. Prod. Co. of Pinellas Cnty., Inc., No. 3–08–cv–1758 (JCH), 2009
WL 2762744, at *4 (D. Conn. Aug. 24, 2009) (utilizing the two-part test for a
purchase and sale contract dispute between two companies); see also
Compuweigh Corp., slip op. at 3 (acknowledging a party need not have read the
provision so long as the physical characteristics reasonably communicate the
clause and the circumstances enable the party to be meaningfully informed of the
terms).
The

physical

characteristics

of

the

forum

selection

clause

are

unchallenged and do not undermine the clarity with which these terms were
effectively communicated. “Courts have . . . considered the inclusion of a forum
selection clause within the main text of a contractual agreement to support a
finding that the forum selection clause was reasonably communicated.”
Compuweigh Corp., slip op. at *3 (collecting cases); c.f. FSB USA, Inc., 2009 WL
2762744, at *4 (finding forum selection clause was not reasonably communicated
where “FSB was required to affirmatively ask API for a separate copy of the
Terms in order to become aware of the forum selection clause,” and API’s failure
to do so meant it did not adequately “ensure[ ] that the terms were reasonably
communicated”).

In this case, the physical characteristics of the Program

Agreement make clear the important terms of the forum selection clause as it is

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set forth in the Miscellaneous section in plain text matching the body of other
contractual provisions. See [Dkt. 13-4 at § 15(b)].
Implied in enforcing any contract is the principle that “a person who signs
a contract is presumed to know its terms and consents to be bound.” Horvath v.
Banco Comercial Portugues, S.A., No. 10 Civ. 4697 (GBD), 2011 WL 666410 at *4
(S.D.N.Y. Feb. 15, 2011), aff’d 461 F. App’x 61 (2d Cir. 2012); see Frankford
Crossing Shopping Ctr. Dallas, Tx. Ltd. P’ship v. Pho Partners, LLC, 942 F. Supp.
2d 366, (W.D.N.Y. 2013) (quoting Horvath and enforcing a forum selection clause
on jurisdiction). As long as a party does “all it reasonably could” to warn a party
of an important matter in a contract affecting legal rights, a forum selection
clause can be considered “reasonably communicated.” FSB USA, Inc., 2009 WL
2762744, at *4 (quoting Silvestri v. Italia Societa Per Azioni Di Navigazione, 388
F.2d 11 (2d Cir. 1968)).
The Court finds that the forum selection clause enabled the parties to
“become meaningfully informed of the contractual terms at stake” in light of the
fact that the parties both appear to be sophisticated businesses capable of
informing themselves about the important terms of the contract. See Ward, 273
F.3d at 523. The clause was typed in the body of the contract in the same font as
the other terms.

Indeed, Plaintiff does not challenge the circumstances

surrounding the signing of the contract. Nor does Plaintiff posit an interpretation
of the terms different than that advanced by Defendant; but rather asserts that it
did not understand the terms. It is paramount that sophisticated parties inquire
about purportedly ambiguous contractual terms so as to ensure they can achieve

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a proper meeting of the minds.

If they were not required to do so, a party

consenting to terms would be incentivized to ignore any potentially ambiguous
language under the premise that it will not be enforceable in court, thereby
creating a risk of inequity in the bargain. It is a general principle that a party’s
lack of understanding about an ambiguous term does not render the contract
unenforceable when the party “fail[ed] to clarify or ascertain the meaning once
the ambiguity becomes apparent.” 2 Williston on Contracts § 6:59 (4th ed. 2017);
see Restatement (Second) of Contracts § 20, cmt. d (Am. Law Inst. 1981) (“[A]
party may be bound by a merely negligent manifestation of assent, if the other
party is not negligent.”); Restatement (Second) of Contracts § 153, cmt. a (Am.
Law Inst. 1981) (“Courts have traditionally been reluctant to allow a party to avoid
a contract on the ground of mistake, even as to a basic assumption, if the mistake
was not shared by the other party.”). Here, Plaintiff had the opportunity to inquire
as to what “manufacturing location” meant and the language was clearly stated in
the body of the contract.

That Plaintiff continued to sign additional Program

Agreements containing the exact same language is indicative of its intent to be
bound by the clearly apparent terms. See [Dkt. 13-13-6 at § 15(b); Dkt. 13-7 at §
15(b)].
Mr. Smith has submitted an affidavit indicating the “manufacturing
location” exists in Fulton County, Georgia. See [Dkt. 13-3 (Mot. Dismiss Ex. 3,
Smith Aff.) at ¶ 8]. There is no evidence indicating Plaintiff did not believe the
manufacturing location existed anywhere outside of the facility in Georgia or that
the manner in which the contract was formed otherwise prevented Plaintiff from

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“becom[ing] meaningfully informed of the contractual terms at stake.” See Ward,
273 F.3d at 523. Here, Defendant did “all it reasonably could” by including the
exact same language in the body of a contract repeatedly renewed. See FSB
USA, Inc., 2009 WL 2762744, at *4.
Plaintiff

cites

Randolph

Eng’g

Co.

v.

Fredenhagen

Kommandit-

Gesellschaft, 476 F. Supp. 1355, 1359 (W.D. Pa. 1979), a case wherein the district
court ruled it would be unreasonable to enforce a forum selection clause that did
not explicitly identify a jurisdiction. The forum selection clause provided,
This order and any contract arising from this order, as well as all
transactions contemplated hereby, shall be governed by and
construed according to the laws of the State from which this order is
issued and the courts of the State and the federal courts sitting in
the State shall have jurisdiction in all actions arising with respect
thereto. Any trade or commercial terms used in this order shall be
interpreted in the light of the INCOTERMS 1953 of the International
Chamber of Commerce.
Id. at 1357 n.1. In finding the plaintiff’s forum of Michigan would unreasonable,
the district court noted that Michigan had only tenuous connection to the
litigation and that personal jurisdiction did not exist in Michigan. See id. at 1360
n.2. In contrast, this case involves a forum selection clause that identifies the
company’s “manufacturing location” as the proper forum for venue and
jurisdiction.

Defendant’s principal place of business is located in Georgia, it

engaged in a substantial portion of its business activities in Georgia, and there is
no reason to believe the manufacturing location would not have existed at eLab’s
principal place of business or that Plaintiff could not obtain jurisdiction over eLab
in Georgia. Moreover, Randolph does not address the four-factor test. Thus, the

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comparison is not as persuasive as Plaintiff suggests and the Court will adhere to
the analysis presented by courts within this circuit.
The Court similarly does not find Plaintiff’s reliance on City of New York v.
Pullman Inc., 477 F. Supp. 438, 443 (1979) to be persuasive. In this case, the
forum selection clause stated that “only the New York courts shall have
jurisdiction over this contract and any controversies arising out of this contract”
and further restricted the litigation of “any controversies or problems arising out
of this contract to the New York courts and the New York courts only.” Id. at 440.
This case was removed to New York federal court on the basis of diversity and
the parties disputed jurisdiction rather than venue, arguing whether the forum
selection clause required the case to be heard in state court. The district court
did not remand the case to state court because the forum selection clause did not
limit the forum to state or federal court.

The Court does not find this case

persuasive as the facts are distinguishable.

Because the facts are inherently

different and Pullman does not address the four-factor test, the Court does not
rely on its reasoning in reaching its conclusion for the first factor.
The Court is, however, persuaded by Defendant’s discussion of Horvath v.
Banco Comercial Portugues, S.A. In this case, the plaintiff entered into a contract
in 2002 with a forum selection clause restricting jurisdiction to courts in Lisbon
or Oporto. Horvath, 2011 WL 666410, at *1. Not only did the plaintiff sign the
contract even though the provisions were in Portuguese, but he also re-signed
the contract in 2005 and received and signed an English translation in 2006. Id.
The district court observed “the terms were not hidden” despite the language

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difference, because “[t]he forum selection clause was set off on its own and in
normal sized font.” Id. at *4. The court stated that “[f]ailure to read a contract,
even if such failure is brought about by an inability to understand the language, is
not an excuse or defense to enforcement of the contract terms.” Id. (collecting
cases). The court reasoned,
Plaintiff is a sophisticated business man who has a residence in
Portugal and has a wife who speaks Portuguese fluently. He signed
multiple agreements containing the forum selection clause, including
one in English. He cannot now circumvent these agreements by
saying he did not understand the language of the contract. It was his
responsibility to request a translation or to request clarification of
the terms he was signing.
Id. at *5. The situation is largely the same here. Like the plaintiff in Horvath, it
appears that Plaintiff in this case may have failed to read or inquire about
language present in multiple contractual renewals spanning multiple years. If
Plaintiff was not sure what the language meant, the response should have been
to inquire about the terms.
The Court has considered the parties’ arguments on Plaintiff's claim that
the forum selection language is ambiguous because Plaintiff was unaware of
Defendant’s “manufacturing location.” The Court abstains from interpreting the
provision, first because Plaintiff identified only the first and fourth factors of the
Second Circuit enforceability test and thus it is inappropriate for the to consider
the second factor. See Martinez, 740 F.3d at 217.

Second, Plaintiff does not

allege that it misunderstood the meaning of the language because it was unclear.
Instead it alleges it did not know and did not ask where Defendant manufactured
its products.

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B. Plaintiff Has Not Demonstrated the Forum Selection Clause’s
Enforcement Would Be Unreasonable or Unjust
At the fourth step, an otherwise valid forum selection clause will be
enforced unless “(1) its incorporation was the result of fraud or overreaching; (2)
the law to be applied in the selected forum is fundamentally unfair; (3)
enforcement contravenes a strong public policy of the forum in which suit is
brought; or (4) trial in the selected forum will be so difficult and inconvenient that
the plaintiff will effectively be deprived of his day in court.” Martinez, 740 F.3d at
227 (internal quotation marks and citations omitted). In making a showing under
any of these circumstances, Plaintiff bears a “heavy burden.” Id. at 219.
To the extent Plaintiff challenges the fourth factor of the test, Plaintiff
states in conclusory fashion that it would be unreasonable or unjust to litigate in
Georgia as the forum selection clause fails to identify a geographic location, the
transactions took place in Connecticut, its witnesses are located in Connecticut,
and its Connecticut Unfair Trade Practices Act (“CUTPA”) claim would be more
properly heard in Connecticut. [Dkt. 26 at 15]. By entering into the Program
Agreements containing forum selection and choice of law clauses, Plaintiff has
agreed that Georgia law applies and essentially contracted around these
arguments. [Dkt. 13-4 at § 15(b)]. Most importantly, Plaintiff has failed to provide
the Court with any facts, legal authority, or analysis supporting these claims and
thus does not overcome the “heavy burden” required to rebut the presumption of
the forum selection clause’s enforceability. See Martinez, 740 F.3d at 217. For
these reasons, the Court finds that the forum selection clause is enforceable.

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II.

Transferring Venue
Section 1404(a) of Title 28 of the United States Code provides, in relevant

part, that “[f]or the convenience of 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.” Because the forum selection clause is enforceable,
the Court may not consider the plaintiff’s choice of forum or arguments
concerning the parties’ private interests. Atl. Marine, 134 S. Ct. at 581-82; Charter
Oak, slip op. at 1; Compuweigh Corp., slip op. at 6.

A court may, however,

consider public-interest factors such as “the administrative difficulties flowing
from court congestion; the local interest in having localized controversies
decided at home; and the interest in having the trial of a diversity case in a forum
that is at home with the law.” Atl. Marine, 134 S. Ct. at 582 n.6. “Because those
factors will rarely defeat a transfer motion, the practical result is that forumselection clauses should control except in unusual circumstances.” Id. at 582.
The forum selection clause’s choice of law provision is to control absent unusual
circumstances. Id. at 583; Charter Oak, slip op. at 7.
The Court cannot consider much of Plaintiff’s argument against transfer as
Plaintiff largely refers to its private interests. Plaintiff does, however, posit that
Connecticut law applies.

As stated above, the Court disagrees.

The forum

selection clause provides for “the laws of the State of eLab’s manufacturing
location” to apply. [Dkt. 13-4 at § 15(b)]. Thus, Georgia’s laws will apply, not
those of Connecticut.

In failing to provide the Court with any other factors

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disfavoring transfer, Plaintiff has not met its burden to show that transfer is
unwarranted. See Atl. Marine, 134 S. Ct. at 583.
Conclusion
For the aforementioned reasons, the Court hereby GRANTS in part and
DENIES in part Defendant’s Motion to Dismiss or Transfer Venue. The Clerk is
directed to transfer this case to the Northern District of Georgia and close this
case.

IT IS SO ORDERED.
________/s/______________
Vanessa L. Bryant
United States District Judge

Order dated in Hartford, Connecticut on January 11, 2018.

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