United States of America v. Outside The Box, LLC, et al.
Filing
49
MEMORANDUM DECISION AND ORDER. Defendant OTB's Motion to Dismiss or, Alternatively, to Transfer Venue (Dkt. 27 ) is GRANTED in part, and DENIED. AFSS's Motion to Consolidate Related Cases (Dkt. 34 ) is DENIED as moot, without prejudice. OTB's Motion to Stay Discovery Pending a Ruling on OTB's Motion to Dismiss or, Alternatively, to Transfer Venue (Dkt. 44 ) is DENIED as moot. Signed by US Magistrate Judge Raymond Edward Patricco, Jr. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (kt)
Case 1:21-cv-00113-REP Document 49 Filed 11/17/21 Page 1 of 12
UNITED STATES DISTRICT COURT
DISTRICT OF IDAHO
UNITED STATES OF AMERICA, for the use and
benefit of AUTOMATIC FIRE SYSTEM
SERVICES, INC.,
Case No.: 1:21-cv-00113-REP
MEMORANDUM DECISION AND
ORDER RE:
Plaintiff,
vs.
OUTSIDE THE BOX, LLC, a Virginia limited
liability company and AEGIS SECURITY
INSURANCE COMPANY, Bond No. B10 031
695, a foreign corporation,
Defendants.
DEFENDANT OUTSIDE THE BOX,
LLC’S MOTION TO DISMISS OR,
ALTERNATIVELY, TO TRANSFER
VENUE
(Dkt. 27)
PLAINTIFF AUTOMATIC FIRE
SYSTEM SERVICES, INC.’S
MOTION TO CONSOLIDATE
RELATED CASES
(Dkt. 34)
DEFENDANT OUTSIDE THE BOX,
LLC’S MOTION TO STAY
DISCOVERY PENDING A RULING
ON OTB’S MOTION TO DISMISS
OR, ALTERNATIVELY, TO
TRANSFER VENUE
(Dkt. 44)
Before the Court are (i) Defendant Outside the Box, LLC’s (“OTB”) Motion to Dismiss
or, Alternatively, to Transfer Venue (“Motion to Dismiss”) (Dkt. 27), (ii) Plaintiff Automatic
Fire System Services, Inc.’s (“AFSS”) Motion to Consolidate Related Cases (“Motion to
Consolidate”) (Dkt. 34), and (iii) OTB’s Motion to Stay Discovery Pending a Ruling on OTB’s
Motion to Dismiss or, Alternatively, to Transfer Venue (“Motion to Stay) (Dkt. 44). All parties
have consented to the exercise of jurisdiction by a United States Magistrate Judge. (Dkt. 35).
Because the at-issue forum-selection clause within the parties’ Subcontract Agreement requires
that disputes be resolved in a court of competent jurisdiction in Lowndes County, Georgia,
OTB’s Motion to Dismiss is granted insofar as this action is transferred to the Middle District of
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Georgia, Valdosta Division. As a consequence of the transfer, AFSS’s Motion to Consolidate
and OTB’s Motion to Stay are denied as moot.
I. BACKGROUND
The National Park Service contracted with OTB to rehabilitate a warehouse at the
Minidoka National Historic Site in Jerome, Idaho (the “Project”). Compl. ¶¶ 1, 31 (Dkt. 1).
OTB subcontracted with AFSS to perform fire suppression work in connection with the Project.
Id. ¶¶ 2, 11. AFSS alleges that it completed its scope of work on the Project but has not been
fully compensated by OTB. Id. ¶¶ 3, 16-17. AFSS brings this action against OTB, asserting
claims for (i) breach of contract, (ii) violation of the Federal Prompt Pay Act, and (iii) unjust
enrichment. Id. ¶¶ 18-37.1
Pointing to a forum-selection clause within the Subcontract Agreement between OTB and
AFSS, OTB moves to dismiss AFSS’s claims against it or, alternatively, transfer the action to the
United States District Court for the Middle District of Georgia, Valdosta Division. See generally
OTB’s Mem. ISO MTD at 5-7 (Dkt. 27-1). The forum-selection clause reads:
39.0 DISPUTES AND CHOICE OF LAW
As to any dispute or controversy between the Parties arising out of this
subcontract which cannot be resolved by good-faith negotiation of the
parties, it shall be resolved through litigation in a court of competent
jurisdiction of OTB’s choice in Lowndes County, Georgia, with or without a
jury. Provided, upon Subcontractor’s request by written notice, OTB shall
within twenty days provide notice of such decision to Subcontractor. In any
such dispute, a Settlement-Oriented Prevailing Party shall be entitled to
receive, as part of any award or judgment, eighty percent (80%) of its
reasonable attorneys’ fees and expert witnesses’ fees incurred in handling the
dispute. (Provided, only those attorneys’ fees and expert witness fees
incurred after written notice is given by either party that it will seek to recover
them under this clause may be reimbursed hereunder.) For these purposes, a
“Settlement-Oriented Prevailing Party” shall be a party who obtains a
1
AFSS also seeks foreclosure of a Miller Act payment bond issued by Defendant Aegis
Security Insurance Company (“Aegis”). Compl. at ¶¶ 38-44 (Dkt. 1). Aegis issued a surety
bond to OTB for the protection of AFSS pursuant to the Miller Act. Id. ¶ 6.
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litigation result more favorable to it than its last formal written offer (made
at least twenty calendar days prior to the formal trial or hearing) to settle such
litigation or arbitration. (Where there is no Settlement-Oriented Prevailing
Party, each party shall bear its own attorneys’ fees and other costs). This
Agreement shall be governed in all respects by the laws of the State of
Georgia and Subcontractor hereby accepts the jurisdiction of such courts.
Ex. A to OTB’s Mem. ISO MTD (Dkt. 27-1) (emphasis added). In response, AFSS argues that
OTB’s dismissal/transfer efforts should be rejected because the forum-selection clause does not
apply in the first instance due to (i) OTB’s inability to establish that the instant dispute cannot be
resolved by good-faith negotiation (a triggering precondition according to AFSS), and (ii) OTB’s
waiver of the forum-selection clause’s enforcement by consenting to this Court’s jurisdiction.
See generally AFSS’s Opp. to MTD at 5-7 (Dkt. 33).
II. LEGAL STANDARD
In Atlantic Marine Construction Co., Inc. v. United States District Court for the Western
District of Texas, 571 U.S. 49 (2013), the United States Supreme Court clarified that a party may
seek to enforce a forum-selection clause through a motion to transfer under 28 U.S.C. § 1404(a).2
Section 1404(a) provides 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 . . . .” 28 U.S.C. § 1404(a). The purpose of § 1404(a) is to “prevent the
waste of time, energy, and money and to protect litigants, witnesses, and the public against
unnecessary inconvenience and expense.” Van Dusen v. Barrack, 376 U.S. 612, 616 (1964)
2
The Supreme Court also held that 28 U.S.C. § 1406(a) and FRCP 12(b)(3) permit
dismissal only when venue is “improper,” which turns exclusively on whether the court where
the case was filed satisfies the requirements of federal venue laws, regardless of any forumselection clause. Atl. Marine Const. Co., 571 U.S. at 55-61. Here, OTB does not assert that
venue in this district is improper under federal venue laws. Instead, it seeks to enforce the
Subcontract Agreement’s forum-selection clause. Therefore, pursuant to Atlantic Marine, the
Court focuses its analysis on OTB’s motion to transfer under § 1404(a). See also OTB’s Reply
ISO MTD at 12 (Dkt. 36) (“Given that OTB moved in the alternative to transfer the case, OTB
has no objection to the case being transferred in lieu of dismissal.”).
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(internal citations and quotation marks omitted). A motion to transfer lies within the broad
discretion of the district court and must be determined on an individualized basis. Jones v. GNC
Franchising, Inc., 211 F.3d 495, 498 (9th Cir. 2000).
Two steps typically inform that decision. First, the court must decide whether the case
could have been brought in the forum to which the transfer is sought – meaning the proposed
transferee court has jurisdiction and venue is proper there. 28 U.S.C. § 1404(a); Hatch v.
Reliance Ins. Co., 758 F.2d 409, 414 (9th Cir. 1985). If so, the second step calls for a casespecific analysis that balances the plaintiff’s interest in choosing a forum against the aggregate
considerations of convenience and the interest of justice. Steward Org., Inc. v. Richoh Corp.,
487 U.S. 22, 29 (1988). Among the private-interest and public-interest factors for the court to
consider are: (i) plaintiff’s choice of forum; (ii) convenience of the parties and witnesses; (iii)
ease of access to the evidence; (iv) familiarity with the applicable law; (v) feasibility of
consolidation with other claims; and (vi) any local interest in the controversy; and (vii) the
relative court congestion and time of trial in each forum. Decker Coal Co. v. Commonwealth
Edison Co., 805 F.2d 834, 843 (9th Cir. 1986).
But in Atlantic Marine, the Supreme Court indicated that “[t]he presence of a valid
forum-selection clause requires district courts to adjust their usual § 1404(a) analysis in three
ways.” Atl. Marine Const. Co., 571 U.S. at 63. First, “the plaintiff’s choice of forum merits no
weight” Id. To the contrary, as the party defying the forum-selection clause, “the plaintiff bears
the burden of establishing that transfer to the forum for which the parties bargained is
unwarranted.” Id. Second, “a court evaluating a defendant’s § 1404(a) motion to transfer based
on a forum-selection clause should not consider arguments about the parties’ private interests”
but instead may only consider arguments regarding public-interest factors. Id. at 64. “Because
those factors will rarely defeat a transfer motion, the practical result is that forum-selection
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clauses should control except in unusual cases.” Id. Third, “when a party bound by a forumselection clause flouts its contractual obligation and files suit in a different forum, a § 1404(a)
transfer of venue will not carry with it the original venue’s choice-of-law rules – a factor that in
some circumstances may affect public-interest considerations.” Id. at 64. “Not only would it be
inequitable to allow the plaintiff to fasten its choice of substantive law to the venue transfer, but
it would also encourage gamesmanship . . . [by] . . . multiplying opportunities for forum
shopping.” Id. at 65.
III. ANALYSIS
OTB seeks to transfer this action to the United States District Court for the Middle
District of Georgia, Valdosta Division, on the grounds that the Subcontract Agreement’s forumselection clause requires the parties to litigate any dispute in Lowndes County, Georgia. AFSS
disagrees, arguing that the forum-selection clause does not even apply because (i) OTB has not
established that the parties’ dispute cannot first be resolved through good-faith negotiation, and
(ii) OTB waived enforcement of the forum-selection clause when it consented to this Court’s
jurisdiction.
A.
The Forum-Selection Clause’s Reference to “Good-Faith Negotiation of the Parties”
Does Not Preclude Enforcement of Its Mandate that Any Dispute “be Resolved
Through Litigation . . . in Lowndes County, Georgia”
AFSS contends that the forum-selection clause “only applies ‘to any dispute or
controversy between the [p]arties . . . which cannot be resolved by good-faith negotiation of the
Parties . . . .” AFFS’s Opp. to MTD at 5 (Dkt. 33) (quoting Ex. A to OTB’s Mem. ISO MTD
(Dkt. 27-1)) (emphasis in original). From this, AFSS implies either that the parties’ dispute can
in fact be resolved by good-faith negotiation (such that any claimed precondition to the forumselection clause’s enforcement does not exist), or that OTB failed to meet its burden to first
establish that the parties’ dispute cannot be resolved by good-faith negotiation before enforcing
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the forum-selection clause. Compare id. at 5 (“Because this matter can be resolved through
good-faith negotiations, the forum-selection clause does not apply to this dispute.”), with id. at 56 (“Thus, since OTB has not established the language of the forum-selection clause, meaning it
has not established that the clause applies to this dispute, its Motion must be denied, especially
since it has not addressed the relevant factors to establish a transfer in the absence of a forumselection clause.”). However the argument is exactly constructed, it comes up short.
To begin, there is no indication here that the parties’ dispute can be resolved without
litigation – i.e., via good-faith negotiation. Even if such a metric is capable of objective
evaluation and measurement, there can be no dispute that AFSS’s claims against OTB and Aegis
remain unresolved, despite an understood preference between the parties for informal and
efficient resolution. After all, it was AFSS – not OTB – that moved on from demand letters and
initiated this action, with a subsequent judicially-supervised settlement conference before this
Court proving unsuccessful. In such a setting, it is not enough (and potentially misleading) to
flatly proclaim that this matter can be resolved through good-faith negotiation and, in doing so,
avoid the forum-selection clause’s enforcement. The record seems to suggest just the opposite.
But more fundamentally, the Court does not read the forum-selection clause as even
incorporating a precondition to negotiate in good faith before that same forum-selection clause
may be invoked. It simply directs where legal action is to be situated in the event a dispute
cannot be resolved short of litigation. In other words, there is no underlying good-faith
negotiation requirement that operates as a condition precedent; only that, if the parties cannot
settle their dispute themselves, then any eventual litigation must take place in Lowndes County,
Georgia. See, e.g., Claudio-De Leon v. Sistema Universitario Ana G. Mendez, 775 F.3d 41, 4748 (1st Cir. 2014) (rejecting appellants’ interpretation of similar forum-selection clause language
as “lead[ing] to absurd results” because “[s]uch an outcome would defeat the entire purpose of
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including a forum-selection clause to begin with, and cannot have been the intent of the parties
when they entered the contract.”); Coastal Mechanics Co. v. Def. Acquisition Program Admin.,
79 F. Supp. 3d 606, 612 (E.D. Va. 2015) (finding that forum-selection clause’s reference to
thirty-day negotiating period before litigation “is not a condition precedent to invoking the
forum-selection clause” and that “[r]egardless of whether there has been thirty days of
negotiation, any litigation must be brought in South Korea.”). There is thus no condition
precedent that OTB must affirmatively establish before litigation is commenced.3
In sum, a dispute clearly exists between AFSS and OTB. Regardless of whether there
has been any good-faith negotiation to resolve that dispute, the forum-selection clause requires
that any litigation be brought in Lowndes County, Georgia.
B.
OTB Did Not Waive Enforcement of the Forum-Selection Clause
AFSS separately maintains that OTB waived enforcement of the forum-selection clause
by not timely responding to AFSS’s notifications that it planned to file a direct action against
OTB in Idaho. AFSS’s Opp. To MTD at 6 (Dkt. 33). Specifically, AFSS argues that it notified
OTB of this lawsuit in two ways – (i) through email correspondence between counsel that legal
action in Idaho was forthcoming, and (ii) the fact of action’s actual filing – but that OTB never
objected within the mandated twenty days. Id. at 5-6. The argument is misplaced.
It is well-settled that in interpreting contracts, courts look first to the plain and ordinary
meaning of the agreement. See, e.g., Monarch Greenback, LLC v. Monticello Ins. Co., 118 F.
3
The Court takes no position on whether it is even OTB’s obligation (rather than
AFSS’s, as the party opposing OTB’s transfer efforts) to establish an otherwise valid condition
precedent in light of Atlantic Marine. Atl. Marine Const. Co., 571 U.S. at 63-64 (“But when a
plaintiff agrees by contract to bring suit only in a specified forum – presumably in exchange for
other binding promises by the defendant – the plaintiff has effectively exercised its ‘venue
privilege’ before a dispute arises. Only that initial choice deserves deference, and the plaintiff
must bear the burden of showing why the court should not transfer the case to the forum to which
the parties agreed.”) (emphasis added).
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Supp. 2d 1068, 1074 (D. Idaho 1999) (applying Idaho law); Ross v. SIMU U.S., Inc., 2008 WL
11407256 at *4 (N.D. Ga. 2008) (applying Georgia law).4 A contract is ambiguous where, upon
examining the contract as a whole, it is capable of two or more reasonable meanings. Id. If the
language in the contract is ambiguous, it is ordinarily construed against the party that prepared
the contract; however, if the language is clear and explicit, it must govern. Id. The Court
therefore looks to the forum-selection clause’s terms to frame and resolve the issue.
The forum-selection clause states in relevant part:
As to any dispute or controversy between the Parties arising out of this
subcontract which cannot be resolved by good-faith negotiation of the
Parties, it shall be resolved through litigation in a court of competent
jurisdiction of OTB’s choice in Lowndes County, Georgia, with or without a
jury. Provided, upon Subcontractor’s request by written notice, OTB shall
within twenty days provide notice of such decision to Subcontractor.
Ex. A to OTB’s Mem. ISO MTD (Dkt. 27-1) (emphasis added). AFSS’s argument necessarily
presumes that, first, it made the contemplated “request by written notice” to OTB and that,
second, OTB’s failure to respond to that request within twenty days amounted to a waiver that
precluded OTB from insisting that any litigation take place in Lowndes County, Georgia.
Except, neither position aligns with the plain and ordinary meaning of the forum-selection
clause.
First, none of AFSS’s alleged notifications amounted to a “request” for anything. For
example, the referenced correspondence between counsel simply discussed procedural courtesies
attendant to AFSS’s anticipated filing of an action in the District of Idaho. See 2/10/21 emails,
attached as Ex. A to Campbell Decl. (Dkt. 33-1). Nowhere within these exchanges does AFSS
ask OTB for any information at all, let alone request that OTB provide notice of its decision
4
The parties’ briefing does not address choice of law. Therefore, the Court includes both
Idaho and Georgia legal authority on contract interpretation. As expected, their respective
considerations of the matter do not materially diverge.
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about the locus of any litigation. Without a compliant request, there can be no corresponding
waiver.5 Likewise, only a tortured reading of the forum-selection clause would allow an action’s
filing (in a forum instantly at odds with the forum-selection clause itself) to simultaneously
constitute a request in satisfaction of that same forum-selection clause’s notice requirement.
This “cart-before-the-horse” approach would endorse a practice that the forum-selection clause is
expressly designed to avoid. Viewed in such ways, an action’s filing cannot represent the sort of
“request by written notice” that the forum-selection clause requires.
Second, even assuming a proper upfront request, any failure on OTB’s part to respond
within twenty days would only waive its ability to unilaterally choose where within Lowndes
County, Georgia a claim can be brought, and whether that claim is tried before a jury. This is
because the forum-selection clause anticipates that a subcontractor’s request to OTB is for its
pre-litigation “decision” on the previously-identified “choice(s)” before it – namely, (i) which
court in Lowndes County, Georgia will hear a particular dispute, and (ii) whether that dispute
will be heard before a jury. A waiver affects only these two choices. But to be clear, the forumselection clause requires that the action be brought in Lowndes County, Georgia.
At bottom, there may be room to argue that the forum-selection clause could be clearer.
But this after-the-fact assessment does not make it ambiguous, especially when, read in its
entirety, the forum-selection clause not only contemplates that any litigation will take place in
Georgia, but that Georgia law will apply to such litigation, and that AFSS accepts the jurisdiction
of Georgia’s courts. Ex. A to OTB’s Mem. ISO MTD (Dkt. 27-1). No logical reading of the
5
The Court notes a separate “Notices” provision in the parties’ Subcontract Agreement,
requiring that “[a]ny notice under this Agreement shall be . . . delivered . . . to the Points of
Contact set forth on the signature page of this Subcontract Agreement or to such other address as
either party may designate by written notice to the other.” Ex. A to OTB’s Mem. ISO MTD
(Dkt. 27-1). It is not clear whether any notice giving rise to OTB’s alleged waiver complied with
this provision.
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forum-selection clause compels a different result; nor would it suggest that OTB waived the
forum-selection clause’s enforcement.
C.
Equitable Factors Informed by the Forum-Selection Clause Favor Transfer
Where, as here, a valid forum-selection clause exists, the Court’s analysis is limited to the
public interest factors only – the Court does not consider the plaintiff’s choice of forum, private
interests, or Idaho’s choice-of-law rules. Atl. Marine Const. Co., 571 U.S. at 63. The public
interest factors the Court considers are: (i) the administrative difficulties flowing from court
congestion; (ii) 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. Id. at 62,
n.6 (quoting Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241, n.6 (1981)). In all but the most
unusual cases, those factors will rarely defeat a transfer motion and “the interest of justice” is
served by holding parties to their bargain. Atl. Marine Const. Co., 571 U.S. at 64-66.
AFSS argues that (i) no party or witnesses have any connection to Georgia; (ii) the
Project is located in Idaho; (iii) the indispensable witnesses are all located in Idaho (and beyond
subpoena power in Georgia); and (iv) there is a high risk of inconsistent results if this action is
transferred, while an earlier-filed, related case remains in this district. AFSS’s Opp. To MTD at
11-12 (Dkt. 33) (citing Case No. 1:20-cv-00407-REP). These factors typically may be
persuasive. But in light of the applicable forum-selection clause, they have little effect in
avoiding transfer.
Convenience of the parties and relative ease of access to sources of proof constitute
private interest factors that are not to be considered. Atl. Marine Const. So., 571 U.S. at 62-64.
Moreover, while the Project is in Idaho, Georgia law applies to subvert that recognized interest.
Finally, any claim that a transfer runs the risk of inconsistent rulings ignores the fact that AFSS
voluntarily dismissed its third-party action against OTB and Aegis in the related case, only to
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bring a separate action against those same parties here. In short, owing to the forum-selection
clause’s existence, these factors do not satisfy OTB’s burden of establishing “extraordinary
circumstances unrelated to the convenience of the parties.” Id. at 62.
In contrast, the parties agreed in advance to litigate all their claims in Lowndes County,
Georgia by virtue of the forum-selection clause. That proviso “may have figured centrally in the
parties’ negotiations and may have affected how they set monetary and other contractual terms; it
may, in fact, have been a critical factor in their agreement to do business together in the first
place.” Id. at 66. These settled expectations will not be disrupted. A transfer is warranted.
IV. ORDER
Based on the foregoing, IT IS HEREBY ORDERED that:
1.
Defendant OTB’s Motion to Dismiss or, Alternatively, to Transfer Venue (Dkt.
27) is GRANTED in part, and DENIED in part as follows:
a.
AFSS’s claims against OTB and Aegis are not dismissed. In this respect,
the motion is DENIED.
b.
AFSS’s claims against OTB and Aegis are transferred to the United States
District Court for the Middle District of Georgia, Valdosta Division, pursuant to 28 U.S.C.
§ 1404(a). In this respect, the motion is GRANTED. The Clerk shall transfer the case to the
United States District Court for the Middle District of Georgia, Valdosta Division.
2.
AFSS’s Motion to Consolidate Related Cases (Dkt. 34) is DENIED as moot,
without prejudice.
///
///
///
///
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3.
OTB’s Motion to Stay Discovery Pending a Ruling on OTB’s Motion to Dismiss
or, Alternatively, to Transfer Venue (Dkt. 44) is DENIED as moot.
DATED: November 17, 2021
________________________
Honorable Raymond E. Patricco
United States Magistrate Judge
MEMORANDUM DECISION AND ORDER - 12
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