Madoff v. Bold Earth Teen Adventures et al
Filing
68
ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS re 21 , 22 - Signed by CHIEF JUDGE SUSAN OKI MOLLWAY on 3/28/13. (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
MICHAEL MADOFF, Individually
and as Administrator of the
Estate of TYLER MADOFF,
Deceased,
)
)
)
)
)
Plaintiff,
)
)
vs.
)
)
BOLD EARTH TEEN ADVENTURES,
)
AMERICA’S ADVENTURE, INC.,
)
ABBOTT WALLIS, ANDREW MORK,
)
KELSEY TYLER, HAWAII PACK AND )
PADDLE LLC, BARRY MIMS, NOLAN )
KEOLA A. REED, and LETITIA
)
MIMS,
)
)
Defendants.
)
_____________________________ )
CIVIL NO. 12-00470 SOM/RLP
ORDER DENYING DEFENDANTS’
MOTIONS TO DISMISS
ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS
I.
INTRODUCTION.
On July 4, 2012, fifteen-year-old Tyler Madoff was
swept out to sea near Kealakekua Bay during a kayaking and hiking
adventure tour operated by Defendant Bold Earth Teen Adventures,
America’s Adventure, Inc.
Tyler’s body has not been recovered,
and he is presumed dead.
Plaintiff Michael Madoff, for himself and as the
Administrator of Tyler’s estate, now brings this action against
Bold Earth, its President and founder, Abbott Wallis, Bold Earth
employees Andrew Mork and Kelsey Martin,1 Hawaii Pack and Paddle
LLC (“Pack and Paddle”), Pack and Paddle owner Bari Mims,2 and
Pack and Paddle employees Nolan Keola Reed and Letisha Mims3
(collectively, “Defendants”).
Madoff argues that Defendants’
allegedly negligent acts caused Tyler’s death.
Bold Earth’s release forms contain a forum selection
clause stating that “any suit or other proceeding must be filed
or entered into only in Jefferson County, Colorado.”
Based on
this provision, Defendants Bold Earth, Wallis, Martin, and Mork
move to dismiss this action for improper venue, pursuant to Rule
12(b)(3) of the Federal Rules of Civil Procedure.
21.
See ECF No.
Defendants Pack and Paddle, Bari Mims, Letisha Mims, and
Reed also move separately to dismiss on the same grounds.
ECF No. 22.
See
The court DENIES Defendants’ motions to dismiss, ECF
No. 21 and ECF No. 22.
II.
BACKGROUND FACTS.
Bold Earth is a Colorado corporation that offers
adventure trips for teenagers in various locations around the
1
The Complaint refers to Defendant “Kelsey Tyler,” but
Defendants’ Motion to Dismiss states that her name is “Kelsey
Martin.”
2
The Complaint refers to Defendant “Barry Mims,” but
Defendants’ Motion to Dismiss states that “Bari Mims” is the
correct spelling of his name.
3
The Complaint refers to Defendant “Letitia Mims” but
Defendants’ Motion to Dismiss states that “Letisha Mims” is the
correct spelling of her name.
2
world.
See Exhibit “B” attached to ECF No. 21.
Tyler
participated in Bold Earth’s twenty-one-day “Ultimate Hawaii”
trip held in July 2012 (the “Trip”) along with eleven other
students.
Id.
The Trip included activities such as surfing,
kayaking, backpacking, and biking on the Big Island of Hawaii.
See Exhibit “3" attached to ECF No. 56.
Bold Earth employed Mork and Martin to accompany the
Trip participants as “team leaders.”
ECF No. 1 (“Compl.”) at 4.
Bold Earth also hired Pack and Paddle to supply kayaks and local
guides for the kayaking portion of the Trip.
Id.
Pack and
Paddle employees Reed and Letisha Mims led that portion of the
Trip, accompanied by Mork and Martin.
Id. at 6.
On July 4, 2012, Tyler and the other Trip participants
planned to spend the day kayaking near Kealakekua Bay.
Exhibit “3" attached to ECF No. 56; Compl. at 6.
See
After the
kayaking activity, the tour group leaders took the group on an
allegedly unscheduled hike to a scenic tide pool area.
6-7.
Compl. at
Allegedly, neither Bold Earth nor Pack and Paddle held a
proper State of Hawaii permit authorizing the taking of groups to
this area.
Id. at 6.
While visiting the tide pools, the group
was struck by large surf that swept Tyler and another male Trip
participant into the ocean.
Id. at 8.
A local fishing vessel
picked up the other teenager from the water, and he was
3
ultimately resuscitated.
Id. at 9.
Tyler, however, was never
found despite prolonged search efforts.
Id. at 10.
Before the Trip, Tyler’s mother, Marianne Madoff, who
is not a party to this lawsuit, appears to have signed a hard
copy version of Bold Earth’s Parent Agreement, dated March 26,
2012.
See Exhibit “D” attached to ECF No. 22.
The Parent
Agreement contains a provision stating, “I agree that Colorado
substantive law will govern this Agreement and all other aspects
of my and my child’s relationship with Bold Earth and that any
suit or proceeding must be filed or entered into only in
Jefferson County, Colorado.”
Id.
Defendants also allege that, on January 31, 2012, at
least one of Tyler’s parents signed an online version of Bold
Earth’s Liability Agreement.
The Liability Agreement covers Pack
and Paddle, stating, “[W]e understand and agree that [Bold Earth]
contracts with, and that this Release is intended to protect and
include as additional released parties the following companies: .
. . Hawaii Pack and Paddle . . . .”
No. 22.
Exhibit “C” attached to ECF
The forum selection clause contained in the Liability
Agreement states, “We understand and agree that Colorado
substantive laws will govern this Application and Release, any
dispute we have with [Bold Earth], and all other aspects of our
relationship with [Bold Earth], and that any suit or other
proceeding must be filed or entered into only in Jefferson
4
County, Colorado.”
Id.
The Liability Agreement also states, “We
agree that this Release is binding on us, our family members,
heirs, executors, representatives, subrogors and estate.”
Id.
Michael Madoff’s Complaint, filed in this court,
alleges that Defendants negligently led the Trip participants
into the dangerous tide pool area despite high surf forecasts,
and despite State of Hawaii permitting restrictions, and that
Tyler died as a result.
Defendants now move to dismiss for improper venue,
arguing that the forum selection clauses in the Bold Earth
agreements require Madoff to litigate in Jefferson County,
Colorado.
Because the language in the two agreements does not
differ in any manner material to the present motions, this order
sometimes refers to the “forum selection clause” in the singular.
Madoff argues, among other things, that the forum selection
clause is unreasonable, and therefore unenforceable, because as
many as forty-three Hawaii-based witnesses would be beyond the
compulsory subpoena authority of the Jefferson County court.4
See ECF No. 56 at 33.
Defendants Wallis, Mork, and Martin
apparently reside in Colorado, Wisconsin, and Illinois,
4
This court is only considering Madoff’s Second
Amended Memorandum in Opposition, ECF No. 56. Because the
Amended Memorandum in Opposition, ECF No. 50, which amended the
original Memorandum in Opposition, ECF. No. 42, exceeded the word
limit in Local Rule 7.5(b), the court struck the Amended
Memorandum in Opposition.
5
respectively.
See Exhibit “24" attached to ECF No. 56.
Of the
eleven other Trip participants, six currently reside in New York,
and the remaining five currently reside in Colorado, Florida,
Pennsylvania, Connecticut, and California.
See Exhibit “23”
attached to ECF No. 56.
In his affidavit, Michael Madoff states, “If this case
were to be moved to Colorado, it would create an insurmountable
burden upon myself and our family, and our ability to access and
present all witnesses and evidence regarding the circumstances
surrounding my son’s death would be impossible.”
See Exhibit “1"
attached to ECF No. 56.
III.
STANDARD.
Rule 12(b)(3) of the Federal Rules of Civil Procedure
governs motions to dismiss for improper venue.
In “resolving motions to dismiss based on a forum
selection clause, the pleadings are not accepted as true, as
would be required under a Rule 12(b)(6) analysis . . . .
Analysis under Rule 12(b)(3) . . . permits the district court to
consider facts outside of the pleadings[.]”
Argueta v. Banco
Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996).
In the context
of a Rule 12(b)(3) motion based on a forum selection clause, the
trial court must draw all reasonable inferences in favor of the
nonmoving party and resolve genuine factual conflicts in favor of
the nonmoving party.
See Murphy v. Schneider Nat’l, Inc., 362
6
F.3d 1133, 1138 (9th Cir. 2004) (“a party seeking to avoid
enforcement of a forum selection clause is entitled to have the
facts viewed in the light most favorable to it, and no disputed
fact should be resolved against that party until it has had an
opportunity to be heard”).
When genuine issues of material fact are raised, the
district court may hold an evidentiary hearing on the disputed
facts.
Id.
“Whether to hold a hearing on disputed facts and the
scope and method of the hearing is within the sound discretion of
the district court.”
Id.
Upon holding a hearing, “the district
court may weigh evidence, assess credibility, and make findings
of fact that are dispositive on the Rule 12(b)(3) motion.
These
factual findings, when based upon an evidentiary hearing and
findings on disputed material issues, will be entitled to
deference.”
Id. at 1140.
“Alternatively, the district court may
deny the Rule 12(b)(3) motion while granting leave to refile it
if further development of the record eliminates any genuine
factual issue.”
Id. at 1139.
If the court determines that venue is improper, it may
dismiss the case, or, if the interests of justice require, the
court may transfer the case to any district in which it properly
could have been brought.
28 U.S.C. § 1406(a); Dist. No. 1, Pac.
Coast Dist., M.E.B.A. v. Alaska, 682 F.2d 797, 799 (9th Cir.
1982).
The decision to transfer rests in the court’s discretion.
7
28 U.S.C. § 1404(b); King v. Russell, 963 F.2d 1301, 1304 (9th
Cir. 1992).
IV.
ANALYSIS.
Madoff argues that the forum selection clause is not
enforceable for various reasons.
This court disagrees with most
of Madoff’s arguments, but does agree that, under the narrow
circumstances of this case, the forum selection clause is not
enforceable because it will effectively deprive Madoff of a
meaningful day in court.
A.
The Parent Agreement and Liability Agreement Are
Not Rendered Unenforceable Against Michael Madoff
Just Because Marianne Madoff, a Nonparty, May Have
Signed Them.
Madoff argues that he is not bound by the Parent
Agreement or the Liability Agreement because these agreements
were allegedly executed only by Marianne Madoff, Tyler’s mother,
who is not a party to this action.
The court is not persuaded
that this circumstance makes the forum selection clauses
unenforceable against Tyler’s father.
The Ninth Circuit has noted that, “[i]n order to bind a
non-party to a forum selection clause, the party must be ‘closely
related’ to the dispute such that it becomes ‘foreseeable’ that
it will be bound.”
Manetti-Farrow, Inc. v. Gucci Am., Inc., 858
F.2d 509, 514 n.5 (9th Cir. 1988); see also id. (“a range of
transaction participants, parties and non-parties, should benefit
from and be subject to forum selection clauses”).
8
As the
Eleventh Circuit notes, spouses are so “closely related” that
they bind each other to forum selection clauses.
See Lipcon v.
Underwriters at Lloyd’s, London, 148 F.3d 1285, 1299 (11th Cir.
1998).
In keeping with the reasoning of the Ninth and Eleventh
Circuits, this court concludes that Michael Madoff is bound by
the forum selection clauses contained in the Parent Agreement and
Liability Agreement, even if only Marianne Madoff signed those
documents.
Madoff also argues that the Liability Agreement is void
with respect to claims of gross negligence, voidable given the
lack of informed consent, and disfavored as applied to minors.
These arguments appear to relate to the effectiveness of clauses
that attempt to shield a party from liability rather than to the
issue of where suit may be brought.
Liability issues are not
before the court on the present motions and will not be decided
at this time.
B.
The Forum Selection Clause is Mandatory.
Madoff argues that the forum selection clause fails to
render Jefferson County, Colorado, the exclusive jurisdiction in
which suit may be filed, and that enforcement of the clause is
therefore precluded.
The court disagrees.
The Ninth Circuit has distinguished between forum
selection clauses that are mandatory, and those that are
permissive.
See Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817
9
F.2d 75, 77 (9th Cir. 1987).
A mandatory clause is one that
clearly provides for exclusive jurisdiction.
Id.
For example,
in Pelleport Investors, Inc. v. Budco Quality Theatres, Inc., 741
F.2d 273, 275 (9th Cir. 1984), the mandatory forum selection
clause stated that “this Agreement shall be litigated only in the
Superior Court for Los Angeles (and in no other).”
In contrast,
a permissive clause does not provide that any jurisdiction is the
exclusive forum for a lawsuit.
For example, in Hunt Wesson, the
permissive forum selection clause stated, “The courts of
California . . . shall have jurisdiction over the parties in any
action at law relating to the subject matter or the
interpretation of this contract.”
817 F.2d at 76.
Because the
language “clearly [fell] short of designating an exclusive forum”
and allowed cases to be filed in other jurisdictions, the Ninth
Circuit ruled that the clause was permissive.
Id. at 78.
In
other words, because the forum selection clause merely provided
that California courts had jurisdiction over any dispute, it did
not preclude other courts from also exercising jurisdiction over
any dispute.
The forum selection clauses contained in the Parent
Agreement and the Liability Agreement state that “any suit or
other proceeding must be filed or entered into only in Jefferson
County, Colorado.”
This language clearly designates Jefferson
10
County, Colorado, as the exclusive forum.
This forum selection
clause is mandatory, not permissive.
C.
The Court Analyzes the Validity of the Forum
Selection Clause Under M/S Bremen.
Federal law governs the validity of a forum selection
clause in diversity cases.
See Manetti-Farrow, 858 F.2d at 513
(“because enforcement of a forum clause necessarily entails
interpretation of the clause before it can be enforced, federal
law also applies to interpretation of forum selection clauses”).
A forum selection clause is presumptively valid and should be
enforced unless the resisting party shows that enforcement is
“unreasonable” under the circumstances.
See M/S Bremen v. Zapata
Off-Shore Co., 407 U.S. 1, 10 (1972); accord Pelleport, 741 F.2d
at 279 (“Although The Bremen involved an international forum
selection question . . . we see no reason why the principles
announced in The Bremen are not equally applicable to the
domestic context.
Courts addressing the issue uniformly apply
The Bremen to cases involving domestic forum selection
questions.”).
A forum selection clause is unreasonable if (1) its
incorporation into the contract was the result of fraud, undue
influence, or overweening bargaining power, (2) the selected
forum is so gravely difficult and inconvenient that the resisting
party will be effectively deprived of a meaningful day in court,
or (3) enforcement of the clause would contravene a strong public
11
policy of the forum in which the suit is brought.
M/S Bremen,
407 U.S. at 12-13, 18; accord Argueta, 87 F.3d at 325.
To
establish the unreasonableness of a forum selection clause under
the second test, the party resisting enforcement of the clause
has the “heavy burden of showing that trial in the chosen forum
would be so difficult and inconvenient that the party would
effectively be denied a meaningful day in court.”
F.2d at 281.
Pelleport, 741
Forum selection clauses contained in form contracts
are also “subject to judicial scrutiny for fundamental fairness.”
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595 (1991).
1.
The Nonnegotiated Nature of the Forum
Selection Clause Does Not Render it
Unreasonable.
Madoff argues that the forum selection clause is
unreasonable under the first M/S Bremen exception (incorporation
into a contract as a result of fraud, undue influence, or
overweening bargaining power) because it was not subject to
negotiation.
The Supreme Court addressed this issue in Shute,
holding that a forum selection clause is not per se unreasonable
merely because it was not freely negotiated.
499 U.S. at 593.
Shute involved a forum selection clause printed on a
cruise ship ticket that required passengers to litigate in
Florida.
The Shutes had purchased their cruise tickets through a
State of Washington travel agency, boarded the cruise ship in
California, and sailed to Mexico.
12
Id. at 587-88.
While the ship
was in international waters off the coast of Mexico, Mrs. Shute
slipped and fell, injuring herself.
Id. at 588.
The Shutes
filed suit against Carnival Cruise in the United States District
Court for the Western District of Washington.
Id.
Carnival Cruise moved for summary judgment on the
ground that the forum selection clause printed on the Shutes’
tickets required them to litigate in a Florida court.
Id.
The
Washington district court granted the motion, holding that
Carnival Cruise lacked sufficient in-state contacts to support
the exercise of personal jurisdiction over it.
Id.
The Ninth
Circuit reversed, finding the contacts sufficient, and ruling
that, under M/S Bremen, the forum selection clause printed on the
Shutes’ ticket was unenforceable because it had not been freely
bargained for.
Id. at 589.
Pointing to evidence in the record
that the Shutes were physically and financially incapable of
pursuing litigation in Florida, the Ninth Circuit determined that
enforcement of the forum selection clause would effectively
deprive the Shutes of their day in court under M/S Bremen.
The Supreme Court reversed.
Id.
It began by stating that
“we do not adopt the Court of Appeals’ determination that a nonnegotiated forum-selection clause in a form ticket contract is
never enforceable simply because it is not the subject of
bargaining.”
Id. at 593.
The Court noted that a nonnegotiated
forum selection clause might be reasonable given the cruise
line’s interest in limiting fora, the confusion and expense saved
13
by naming a forum, and the possible consumer benefit of reduced
fares reflecting the cost-savings associated with a forum
limitation.
Id. at 593-94.
The Court also rejected the Ninth
Circuit’s “independent” and “conclusory” finding that the Shutes
were physically and financially incapable of litigating in
Florida, a finding the district court had not made.
Id. at 594.
The Court concluded that the Shutes had not met their heavy
burden of showing severe inconvenience for purposes of M/S
Bremen.
Id. at 595.
The Ninth Circuit thereafter recognized that, under
Shute, unequal bargaining power in a nonnegotiated contract does
not, by itself, overcome the presumption of validity of a forum
selection clause.
See Murphy, 362 F.3d at 1141 (“a differential
in power or education on a non-negotiated contract will not
vitiate a forum selection clause”); accord Holck v. Bank of N.Y.
Mellon Corp., 769 F. Supp. 2d 1240 (D. Haw. 2011) (Ezra, J.).
Madoff argues that, given the parties’ allegedly unequal
bargaining power and the absence of negotiation, the forum
selection clause in the present case is invalid.
untenable argument under controlling law.
This is an
Those circumstances,
without more, are insufficient to render the clause unreasonable.
14
2.
Under the Exceptional Circumstances of this
Case, the Forum Selection Clause Is
Unreasonable Because, on the Present Record,
its Enforcement Will Effectively Deprive the
Madoffs of a Meaningful Day in Court.
Madoff argues that he will be deprived of a meaningful
day in court if forced to litigate in Colorado, because a
substantial number of key witnesses will be beyond the reach of
compulsory subpoena authority.
Drawing all reasonable inferences
in favor of Madoff, the court agrees that he will effectively be
deprived of a meaningful day in court.
The term “deprivation of a meaningful day in court” is
not precisely defined in controlling cases.
However, the Ninth
Circuit provides guidance in saying that a deprivation occurs
when a complaining party is physically and financially unable to
litigate in the forum designated by contract.
F.3d at 1142.
See Murphy, 362
Plaintiff Murphy, who lived in Oregon, was a long
haul trucker employed by Schneider.
Murphy was injured on
premises in Lexington, Kentucky, that were owned by Trane.
at 1136.
Id.
Murphy filed a personal injury action against both
Trane and Schneider in the United States District Court for the
District of Oregon, based on diversity of citizenship.
Id.
Schneider moved to dismiss based on Murphy’s employment contract,
which contained a forum selection clause stating that “all suits
with respect hereto shall be instituted exclusively in the
Circuit Court of Brown County, Wisconsin.”
15
Id.
Trane filed its
own motion to dismiss based on forum non conveniens if the forum
selection clause was enforced.
Murphy presented evidence that he would be unable to
litigate his claim if the forum selection clause was enforced:
Since my accident I have been unable to work.
Because I was unable to work, I earned no
income, and the truck that I used to earn my
livelihood was repossessed. I presently live
on my disability payments, which amount to
approximately $2,000.00 per month. I am 61
years old. My wife, who is 61 years of age,
is also disabled and cannot work. She
receives approximately $234.00 per month in
disability payments. Each month we use all
of our combined disability payments to pay
outstanding bills. We also put an average of
$200 [to] $300 per month on credit cards, on
which we are making minimum payments. We
have no disposable income . . . . I could
not afford to maintain this case if it were
in a Wisconsin court.
Id. at 1142.
Despite his affidavit, the district court granted
the defendants’ motions to dismiss.
Id.
The Ninth Circuit vacated and remanded, stating,
“Taking Murphy’s allegations as true and resolving all disputed
facts in his favor, . . . Murphy’s physical and financial
limitations together would preclude his day in court, and the
second M/S Bremen exception to enforcing forum selection clauses
would apply.”
Id. at 1143.
In contrast, the “deprivation of a meaningful day in
court” standard was not met in Pelleport, when the complaining
party alleged that some witnesses would be inconvenienced if
16
forced to travel to the specified forum.
741 F.2d at 281.
Pelleport involved a contractual dispute between a California
motion picture supplier and a Pennsylvania corporation that
licensed films from it.
Id. at 275.
The defendant argued that
the forum selection clause limiting jurisdiction to the Superior
Court for Los Angeles, California, was unreasonable.
Id. at 281.
The Ninth Circuit disagreed, noting that the defendant was
alleging “that some of the witnesses will be inconvenienced if
forced to travel to California for trial and that the contracts
were performed outside of California.”
Id. at 281.
Deeming
those circumstances insufficient to deprive the defendant of a
meaningful day in court under M/S Bremen, the Ninth Circuit
affirmed the district court’s enforcement of the forum selection
clause.
Id.
Although Madoff’s concern about the effect of a
Colorado trial on Hawaii witnesses might seem, at first blush,
akin to the rejected argument in Pelleport, Madoff presents a
much more compelling case for overriding the forum selection
clause.
Madoff has so far identified forty-three Hawaii-based
witnesses relevant to proving Defendants’ liability.5
No. 56 at 33.
See ECF
These witnesses include Hawaii first responders,
5
In Pelleport, the plaintiff sought to enforce the
forum selection clause to retain the suit in its preferred forum,
while here, it is Defendants who seek to enforce the forum
selection clause they drafted and to take the action out of
Plaintiff’s chosen forum.
17
Hawaii search and rescue personnel, Hawaii government permitting
officials, and other hiking and kayaking tour operators in
Hawaii.
Id.
This raises several issues relevant to the court’s
analysis.
a.
Colorado Proceedings Would Deprive
Madoff of the Ability to Present an
Effective Liability Case.
This court is concerned that enforcing the forum
selection clause would leave Madoff without any guarantee that he
could present his liability case in an effective manner.
Possibly, some Hawaii witnesses might agree to travel to Colorado
for trial, but if those witnesses changed their minds or ran into
conflicting work or family obligations, Madoff would have no
means of compelling their attendance at trial in Colorado.
That
is because a Colorado court’s civil subpoena power does not
extend to Hawai.
Madoff would instead be relegated to presenting
almost his entire liability case through depositions or by video.
Not only are depositions far less likely to engage a
jury than live testimony, depositions are subject to a number of
other disadvantages.
First, courts often limit the number of depositions
that a party may take.
For example, Rule 30 of the Federal Rules
of Civil Procedure states that a party must obtain leave of court
to take more than ten depositions.
If this case were filed in
Colorado state court in Jefferson County, it would be governed by
18
Rule 30 of the Colorado Rules of Civil Procedure, which states
that a party must obtain leave of court to take more than the
number of depositions set forth in a Case Management Order.
Madoff’s present plan to obtain testimony from forty-three Hawaii
witnesses, augmented by testimony from numerous others who reside
in neither Hawaii nor Colorado, could be hampered by a
restriction on his ability to conduct discovery or present all
relevant testimony at trial.
Second, although some Defendants stated at the hearing
on the present motions that they will not object to depositions
based on their number, even an unlimited number of depositions
would not cure Madoff’s grave difficulty in presenting his case.
As Defendants concede, absent willingness on the part of
witnesses to travel to Colorado, Madoff’s only live in-person
liability witnesses at a Colorado trial would be Defendants
themselves.
At the hearing, Defendants stated that the Trip
participant that lives in Colorado would also be physically
available at trial as a liability witness.
The court notes,
however, that this Trip participant was not named as a possible
witness in Madoff’s pretrial motion briefs.
Thus, quite apart from the disadvantage of having to
present all liability evidence through some combination of the
reading of deposition transcripts, the showing of videotaped
depositions, or, possibly, witnesses appearing by live video
19
feed, Madoff would be faced with having the only in-person
“stars” of his liability case be his opponents!
These
circumstances would impair the effectiveness of any presentation,
no matter how dazzling counsel might be.
The court assumes that a Colorado trial would take
advantage of all the “bells and whistles” that technology makes
available to advocates today.
But this court is far from alone
in recognizing that technology is not yet able to replicate a
person’s physical presence.
A videotaped deposition allows the jury, to some
extent, to observe the candor and demeanor of the witness, but it
remains inferior to live testimony.
See United States v. Wilson,
601 F.2d 95, 97 (3d Cir. 1979) (“Attendance of witnesses at trial
. . . is the favored method of presenting testimony . . . . The
antipathy to depositions is due in large part to the desirability
of having the factfinder observe witness demeanor.
Although this
concern has been alleviated to a marked degree by the advent of
modern audio-visual technology, the policy in favor of having the
witness personally present persists.”).
Third, under Rule 16(f)(3)(D) of the Colorado Rules of
Civil Procedure, a party seeking to present deposition testimony
“shall provide the other parties with its designations of such
testimony at least 28 days before the trial date.”
This time
allows for counterdesignations by Defendants and court rulings on
20
objections (pity the judge faced with ruling on designations from
forty-three depositions).
But it means that, if Madoff’s
testimonial evidence on liability ends up consisting almost
entirely of preserved depositions, Madoff will have had to have
disclosed not just his liability theories, but his entire
liability case verbatim a month before trial.
The former is
routine, and the natural consequence of civil discovery.
The
latter is far from routine or natural.
Fourth, preserved testimony would severely limit
Madoff’s ability to present rebuttal testimony at trial following
the close of Defendants’ case.
Even if Madoff could accurately
anticipate Defendants’ case in chief, it would be difficult
indeed for him to effectively rebut a live defense case with more
deposition testimony.6
Fifth, Madoff’s difficulties would not be overcome by
“live” video conferencing.
That is, Madoff might be able to
present trial witnesses who, while remotely located in Hawaii,
were testifying “live” via video, thus allowing the jurors to
6
There may also be significant cost considerations
associated with recording and editing videotaped deposition
testimony. Michael Madoff’s affidavit states that a Colorado
trial “would create an insurmountable burden upon myself and our
family”. See Exhibit “1” attached to ECF No. 56. Because Madoff
does not explain whether this “insurmountable burden” includes
financial hardship, this court does not here rely on cost
considerations, although conducting both discovery depositions
and preservation video depositions of each out-of-state witness
will surely be costly.
21
view interaction with the witness as it occurred.
This
presentation in real time is clearly better than a videotaped
deposition, but, barring cost and scheduling concerns, no
attorney would choose this over having a witness in person in the
courtroom with the jurors.
That is because, as this court has
already noted, nothing is as effective as physical presence.
Madoff must plan for this turning out to be his best option.
Having to present an entire liability case in this manner would
not only be difficult, it would be severely prejudicial.
No plaintiff would desire a trial in which the only
liability witnesses appearing in person were the defendants.
The
inability to procure attendance in person of dozens of witnesses
is a severe handicap to Madoff, as a jury’s attention to
preserved testimony (or even live video testimony) is unlikely to
match its attention to live testimony.
Madoff will have the
burden of proof at trial, and it would be tremendously difficult
for him to meet this burden solely through preserved testimony
that is read or live testimony on a screen.
Additionally, even a trial at which all or most of the
plaintiff’s witnesses appeared via live video testimony from
Hawaii would present considerable difficulties.
If the attorneys
were in a courtroom in Colorado questioning witnesses in Hawaii
via video, their interaction with witnesses would be curtailed.
Physical presence is not only optimal vis à vis a witness’s
22
impact on jurors, but also vis à vis an attorney’s impact on a
witness.
Moreover, the questioning attorney would lose the
ability to meet in person with a witness immediately before the
witness testified.
Of course, the attorneys could choose to be
in Hawaii to examine witnesses in Hawaii, or some attorneys could
be in Colorado, some in Hawaii.
Even in that event, some
attorneys would give up their in person impact with the jury in
Colorado.
These are extraordinary circumstances.
Drawing all
reasonable inferences in favor of the nonmoving party, including
the risk of not having any in person liability witness other than
Defendants, the court determines that, if forced to litigate in
Jefferson County, Colorado, Madoff would be deprived of a
meaningful day in court.
That is not to say that, if presented
with a different record, the court would reach the same
conclusion.
If the parties later determine that circumstances
have materially changed, Defendants may renew their motion to
enforce the forum selection clause.
This court recognizes that the Eighth Circuit, in Sun
World Lines, Ltd. v. March Shipping Corp., 801 F.2d 1066 (8th
Cir. 1986), upheld a forum selection clause under analogous
circumstances.
That was a breach of contract case between a
resident citizen of the Federal Republic of Germany, who owned
and operated a shipping company, and two American companies.
23
The
contract was prepared by the German shipping company owner and
included a forum selection clause that had not been the subject
of negotiation.
It provided for disputes to be submitted “to the
competent court of the Federal Republic of Germany.”
1067.
Id. at
A dispute arose, and the American companies filed suit in
federal court in Missouri.
The Eighth Circuit affirmed the
district court’s decision to dismiss the case based on the forum
selection clause.
The American company had argued that their
witnesses were “all in the United States,” including the
president of one of the companies, who was in a federal
penitentiary.
The Eighth Circuit said, “While we recognize the
hardship of litigating this suit in Germany, we agree with the
district court that the alternative of using depositions of key
witnesses provides adequate opportunity” for the American
companies.
Id. at 1068.
While the reference to “all” of the American companies’
witnesses and to a forum in a foreign country might make Sun
World appear even more egregious than the present case, it is not
at all clear that that is indeed so.
First, this court cannot
tell how many witnesses were involved in the case.
number, the shorter the trial might have been.
The fewer the
In any trial,
jurors are likelier to be more attentive throughout a short trial
than throughout a lengthy trial, and when witnesses are appearing
24
on screens, loss of attentiveness becomes an even greater
concern.
Second, there is no indication as to whether some of
the witnesses were employees or agents of the American companies.
If some witnesses were controllable by the American companies,
that was a mitigating factor not available to Madoff, because
such witnesses would likelier have appeared in Germany.
Third,
if the incarcerated president of one of the American companies
was going to testify, his testimony may well have had to be by
deposition designations regardless of where the trial was held.
Finally, there is no contention that the only in-person witnesses
the companies could count on with respect to the liability issue
would be their opponents.
In short, the circumstances Madoff
faces may, in fact, present him with greater difficulties than
existed in Sun World.
b.
Witnesses Could Be Required to Appear in
Person at a Hawaii Trial.
At the hearing on the present motions, Defendants
argued that the absence of “in-person witnesses” in a Colorado
trial would not be cured by allowing trial in Hawaii.
Noting
that the Hawaii witnesses lived on the Big Island, more than 100
miles from this court, Defendants contended that Hawaii witnesses
could not be subpoenaed to attend trial even if trial occurred in
this court, located in Honolulu.
Defendants are mistaken.
Under Rule 45(c)(3)(A)(ii), a court shall quash or
modify a subpoena requiring a nonparty witness to travel more
25
than 100 miles “except that, subject to Rule 45(c)(3)(B)(iii),
the person may be commanded to attend a trial by traveling from
any such place within the state where the trial is held.”
That
is, while Rule 45(c)(3)(B)(iii) permits a court to quash or
modify a subpoena if a nonparty witness will “incur substantial
expense to travel more than 100 miles to attend trial,” it
clearly gives this court compulsory subpoena authority throughout
the entire state so long as a witness does not incur substantial
expense to travel more than 100 miles.
Inter-island Hawaii
travel is significantly cheaper than travel between Hawaii and
other states and, if paid for or reimbursed by Madoff, is no
impediment to enforcement of a trial subpoena by this court.
This court therefore could compel Hawaii witnesses to appear in
person at trial in Honolulu.
c.
For Purposes of Defendants’ Motions to
Dismiss, Madoff Is Not Required to
Specify Which Witnesses He Expects to
Have Physically Present at a Hawaii
Trial.
Defendants also predict that Madoff will actually call
far fewer Hawaii witnesses at trial than he now lists.
Defendants point out that Madoff fails to demonstrate which of
these witnesses, if any, have actually committed to testifying at
trial.
The court is unpersuaded that these circumstances support
dismissal.
First, the court does not expect Madoff to narrow the
list of potential trial witnesses before discovery has begun.
26
Second, even if Madoff obtained commitments from witnesses to
appear in person at a trial set one year away, he would be
powerless to enforce those commitments.
3.
Madoff Has Not Shown That Enforcement of the
Forum Selection Clause Would Contravene
Strong Public Policy in Hawaii.
Madoff additionally argues that the forum selection
clause is unreasonable under the third M/S Bremen exception
because enforcement would contravene Hawaii’s public policy
regarding (1) state park use regulation, and (2) local dispute
adjudication.
argument.
He points to no authority in support of this
Cf. Willis v. Nationwide Debt Settlement Grp., 878 F.
Supp. 2d 1208 (D. Or. 2012) (the forum selection clause was
unenforceable under the third M/S Bremen exception given an
Oregon statute prohibiting enforcement of forum selection
provisions in consumer contract disputes under arbitration).
Madoff thus fails to demonstrate that the enforcement of the
forum selection clause would contravene strong public policy in
Hawaii.7
7
The parties have grappled with a separate policy
issue: the forum selection clause’s possible preclusion of
federal litigation. The clause does this without expressly
stating that it is doing so, as the forum selection clause in
issue here does not include the name of a particular state court.
It therefore did not give express notice that a suit could not be
filed in federal court. The clause provides only that “any suit
or proceeding must be filed or entered into only in Jefferson
County, Colorado.” There is no federal court in Jefferson
County. See http://www.cod.uscourts.gov (listing district court
locations in Denver, which is in the City and County of Denver;
27
V.
CONCLUSION.
Drawing all reasonable inferences in favor of Madoff,
the court determines that the forum selection clause is
unreasonable under the second M/S Bremen exception.
Given, among
other things, the number of witnesses, the nature of the dispute,
and the advantage to Defendants of possibly being the only
witnesses to appear in person in Madoff’s liability case in
chief, this court concludes that Madoff would be deprived of a
meaningful day in court if required to litigate in Jefferson
County, Colorado.
Even if witnesses from Hawaii agreed to fly to
Colorado, if they later changed their minds, they could not be
compelled to appear at trial in Colorado in person.
Under the
circumstances presented on these motions, the grave difficulty or
impossibility of presenting significant in-person testimonial
evidence at a trial in Colorado effectively precludes Madoff from
in Colorado Springs, which is in El Paso County; in Grand
Junction, which is in Mesa County; and in Durango, which is in La
Plata County). The clause therefore may refer to lawsuits only
in Jefferson County state courts, although that is unlikely to be
obvious to a layperson from the face of the agreement.
This court need not determine whether the waiver of a
federal forum in the present case does or does not render the
clause fundamentally unfair under Shute. As Defendants have
noted, information about whether a particular location includes a
federal district court is publicly available even if not common
knowledge to a normal layperson. Whether that suffices to negate
the need for an express warning that a federal forum is being
waived is not something the present order attempts to decide.
This court instead bases its ruling on the unreasonableness
ground it discusss at length.
28
having a meaningful day in court.
Therefore, Defendants’ motions
to dismiss, ECF Nos. 21 and 22, are DENIED.
If, upon conducting
discovery, Defendants have a different record upon which to base
a motion, they may, of course, file another motion seeking to
enforce the forum selection clause.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, March 28, 2013.
/s/ Susan Oki Mollway
Susan Oki Mollway
Chief United States District Judge
Madoff v. Bold Earth Teen Adventures, et al., Civil No. 12-00470 SOM/RLP;
ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS
29
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