HARDING MATERIALS, INC. v. RELIABLE ASPHALT PRODUCTS, INC.
REPORT AND RECOMMENDATIONS re 8 MOTION to Dismiss for improper venue-The Magistrate Judge recommends that the Court DENY Defendant's Motion to Dismiss. Signed by Magistrate Judge Mark J. Dinsmore on 2/6/2017.(CBU)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
HARDING MATERIALS, INC.,
RELIABLE ASPHALT PRODUCTS, INC.,
REPORT AND RECOMMENDATION
This matter is before the Court on Defendant’s Motion to Dismiss. [Dkt. 8.] For the
following reasons, the Magistrate Judge recommends that the Court DENY Defendant’s Motion.
This diversity case arises out of a dispute over a contract (the “Contract”) to renovate
Plaintiff’s asphalt plant and expand its production capacity. [Dkt. 1-1.] Plaintiff alleges that
Defendant poorly designed and installed the upgrades to Plaintiff’s plant, causing frequent shut
downs and loss of business. [Id.] Plaintiff, an Indiana citizen, brought suit in Indiana state court,
alleging breach of contract, breach of warranties, and professional negligence. [Id.] Defendant,
a Kentucky citizen, removed the matter to this Court [Dkt. 1] and filed the instant motion to
dismiss [Dkt. 8], citing the Contract’s forum-selection clause which provides (in all capital
letters) that “any litigation arising hereunder shall be filed in a court of law or equity in Jefferson
County, Louisville, Kentucky” [Dkt. 1-1 at 48.] The Contract also contains a choice-of-law
clause (also in all capital letters), providing that the Contract is “deemed to be made in Kentucky
and governed by Kentucky law.” [Dkt. 1-1 at 47.]
Defendant initially filed the instant Motion in reliance upon Federal Rule of Civil
Procedure 12(b)(3), which permits a party to move to dismiss an action for improper venue. As
Plaintiff explained in response, however, Rule 12(b)(3) only countenances a motion to dismiss
where the venue contravenes the federal venue statute—not where the venue contravenes a
private forum-selection clause. See Atl. Marine Constr. Co., Inc. v. U.S. Dist. Court for the W.
Dist. Of Tex., 134 S. Ct. 568 (2013).
Nonetheless, Plaintiff proceeded to address Defendant’s Motion on its merits and
contends that Indiana’s anti-venue statute, Ind. Code § 32-28-3-17, voids both the forum
selection and choice-of-law clauses. Plaintiff maintains in the alternative that the anti-venue
statute expresses a “strong public policy” of this forum, such that enforcement of the clauses
would be inappropriate. [Dkt. 14 at 7.]
In reply, Defendant acknowledges that Atlantic Marine precludes a motion for dismissal
under Rule 12(b)(3) on the basis of the forum-selection clause. Defendant, however, asks the
Court to treat its Motion as a motion for dismissal for forum non conveniens. Defendant
expressly disavows any interpretation of its Motion as one for transfer pursuant to 28 U.S.C. §
1404(a), arguing instead that dismissal rather than transfer is appropriate because the forum
selection clause contemplates only a state-court forum. 1
Despite its clear representation that the forum selection clause does not allow this matter
to be maintained in a federal court in Kentucky, Defendant repeatedly asks the Court to treat its
Motion “as one made pursuant to [28 U.S.C.] § 1404(a),” which is the federal change of venue
statute. [Dkt. 20 at 1.] Section 1404(a) permits transfer of cases, not dismissal, and is a partial
In light of those representations, the Court concludes that Defendant is now judicially estopped from
arguing that a federal forum in Kentucky would be appropriate.
codification of the common law forum non conveniens doctrine. A federal court may transfer a
matter under § 1404(a) only to another federal judicial district. Section 1404(a) does not allow a
federal court to transfer a case to a state court. In light of Defendant’s representations that the
Contract’s forum-selection clause only allows this case to be brought in a state court in Jefferson
County, Kentucky [e.g. Dkt. 9 at 6-7; Dkt. 20 at 4-5], § 1404(a) cannot provide Defendant any
relief in this case.
The “residual doctrine” of forum non conveniens persists of its own accord, though it
generally requires “the same balancing-of-interests” test as § 1404(a). Atl. Marine, 134 S. Ct. at
580. Because the response and reply briefs fully develop arguments on the relevant issues, the
Court finds it appropriate to treat Defendant’s Motion as a motion for dismissal for forum non
If Plaintiff is correct that the anti-venue statute applies or that the forum-selection clause
is otherwise unenforceable, then Defendant’s Motion must be denied because Plaintiff makes no
other argument in support of dismissal. The Court therefore first addresses whether state law or
federal law applies. Second, the Court addresses whether the forum-selection clause is
enforceable under applicable law. Finally, the Court addresses whether dismissal is appropriate
for forum non conveniens.
A. Applicable Law
Plaintiff argues that Indiana Code section 32-28-3-17 voids the forum selection and
choice of law clauses. In the alternative, Plaintiff argues that enforcement of the clauses would
contravene Indiana’s public policy. Defendant, in reply, responds that section 32-28-3-17 does
not affect the result in this case because federal law applies to determine the validity of a forumselection clause.
Thus, the first issue to resolve is whether federal or state law applies in determining
whether the forum-selection clause is valid and enforceable. Defendant’s argument relies upon a
tandem of Supreme Court cases addressing forum-selection clauses: Stewart Org., Inc. v. Ricoh
Corp., 487 U.S. 22 (1988), and Atlantic Marine, 134 S. Ct. 568 (2013). The more recent case,
Atlantic Marine, held that the factors a court must consider in ruling on motions pursuant to §
1404(a) or forum non conveniens change dramatically “when the parties’ contract contains a
valid forum-selection clause.” 134 S. Ct. at 581 (emphasis added). In fact, the entire Atlantic
Marine “analysis presupposes a contractually valid forum-selection clause.” Id. at 581 n.5
(emphasis added). Thus, Atlantic Marine provides no guidance in answering the antecedent
question of whether federal or state law applies to determine the validity of the forum-selection
clause in this case.
Stewart, on the other hand, hits closer to the mark in that it held that the venue transfer
statute, § 1404(a), embodied Congress’s directive to apply federal law to motions for transfer.
487 U.S. 22. Stewart held that, in addressing such motions, the “first question for consideration .
. . [is] whether § 1404(a) itself controls [the movant’s] request to give effect to the parties’
contractual choice of venue.” Id. at 29. Because Congress itself had validly spoken through §
1404(a), federal law applied, such that even the strongest state policy against forum-selection
clauses would not warrant dispositive weight in the transfer analysis.
But unlike in Stewart, where “a validly enacted Act of Congress control[led] the issue in
dispute,” id. at 32 n.11, here Defendant seeks dismissal pursuant to the common-law, “residual
doctrine” of forum non conveniens, Atl. Marine, 134 S. Ct. at 580; see, e.g., Sinochem Int’l Co.
Ltd. V. Malaysia Int’l Shipping Corp., 549 U.S. 422 (2007). Congress has not expressly
displaced state law with regard to this particular doctrine, which it certainly could have done at
the time it passed § 1404(a) or later once the Supreme Court continued to recognize the forum
non conveniens doctrine. Most critically, Stewart expressly left open the question of what law
applies to the validity of forum-selection clauses, 487 U.S. at 27 n.6, “other than in the specific
context exemplified by the Stewart case, that is, other than in cases in which the determination
of validity is incidental to the application of the forum non conveniens statute.” IFC Credit
Corp. v. Aliano Bros. Gen. Contractors, Inc., 437 F.3d 606, 609 (7th Cir. 2006) (emphasis
added) (recognizing circuit split and collecting cases).
In 2014—eight months after Atlantic Marine was decided—the Seventh Circuit squarely
held that “in the absence of a controlling federal statute,” Jackson v. Payday Fin., LLC, 764 F.3d
765, 774 (7th Cir. 2014) (quoting Wong v. PartyGaming Ltd., 589 F.3d 821, 826 (6th Cir.
2009)), “the law designated in the choice of law clause [is] used to determine the validity of
the forum selection clause,” id. at 774 (emphasis added) (citing Abbott Labs. v. Takeda Pharm.
Co., 476 F.3d 421, 423 (7th Cir. 2007)). The Seventh Circuit recognized that applying either
federal or state law in such situations could seem “arbitrary.” IFC Credit, 437 F.3d at 609. The
court observed that “[i]f federal law governs, an arbitrary difference between a federal and a state
litigation is created. If state law governs, an arbitrary difference between a dismissal
(followed by a refiling) and a transfer is created.” Id. (emphasis added). Either result creates
some incentive for forum shopping. But while “Stewart too is an invitation to forum shop,” it
was “an invitation tendered . . . by section 1404(a).” Id. Neither § 1404(a) nor any other section
of the United States Code provides the basis for Defendant’s Motion in this case. Therefore, the
Court concludes that state law applies to determine the validity of the forum-selection clause.
B. Enforceability of Forum Selection Clause Under State Law
The next issue is which state’s law applies and how the application of state law impacts
the enforceability of the forum-selection clause. A straightforward application of Jackson and
the other Seventh Circuit cases set out above would result in application of Kentucky law based
upon the Contract’s choice-of-law clause. Complicating matters is Indiana’s anti-venue statute,
which provides as follows: “A provision in a contract for the improvement of real estate in
Indiana is void if the provision: (1) makes the contract subject to the laws of another state; or (2)
requires litigation, arbitration, or other dispute resolution process on the contract occur in another
state.”2 Ind. Code § 32-28-3-17. If this provision applied, there would be no forum-selection or
choice-of-law clauses to analyze.
The Court need not resolve this issue because the result is the same whether Indiana or
Kentucky law applies. Clearly, if Indiana’s anti-venue statute applies, the forum-selection clause
is void and unenforceable. But even if Kentucky law applies, the Indiana anti-venue statute
remains relevant. Kentucky, like the majority of jurisdictions, does not enforce a forumselection clause where “enforcement would contravene a strong public policy of the forum in
which the suit is brought.” Wilder v. Absorption Corp., 107 S.W.3d 181, 183 (Ky. 2003); see
also M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). Here, the anti-venue statute,
with its language providing that forum-selection clauses are “void,” expresses Indiana’s strong
public policy in “having these types of actions litigated within its borders.” E & J Gallo Winery
v. Morand Bros. Beverage Co., 247 F. Supp. 2d 973, 978 (N.D. Ill. 2002); see Coral Chem. Co.
v. Chemetall US, Inc., No. 4:16-CV-00023-RLY-DML, 2016 WL 3521952, at *5 (S.D. Ind. June
Defendant does not contest that the Contract is one “for the improvement of real estate in Indiana.”
28, 2016) (applying similar analysis and noting that the relevant issue is whether the “forumselection clause violates Indiana’s public policy”).
Defendant places all of its eggs in the “federal law” basket and makes no argument
addressing whether the forum-selection clause constitutes a strong public policy of this forum;
Defendant therefore waives any argument that it does not. Bonte v. U.S. Bank, N.A., 624 F.3d
461, 466 (7th Cir. 2010) (“Failure to respond to an argument . . . results in waiver.”).
Accordingly, the Court concludes that the Contract’s forum-selection clause contravenes the
strong public policy set out in section 32-28-3-17 and is therefore unenforceable in the present
C. Forum Non Conveniens Analysis
Having found that the forum-selection clause is unenforceable for purposes of the forum
non conveniens analysis, the Court must ascertain whether Defendant has nonetheless met its
burden of demonstrating that this is an inappropriate forum for this litigation.
“[T]he appropriate way to enforce a forum-selection clause pointing to a state or foreign
forum is through the doctrine of forum non conveniens.” Atl. Marine, 134 S. Ct. at 580. Forum
non conveniens requires application of the same factors as the transfer statute, § 1404(a), which
as explained above is a partial codification of the doctrine. Id. These factors include private
interest factors, such as access to evidence, availability of compulsory process, and practical
challenges, and public interest factors, such as court congestion, community interest, and
familiarity with the law. Id. at 581 n.6.
The calculus changes dramatically, however, when there is a valid forum-selection
clause. Id. at 581-82. Here, as the Court explained above, there is no valid forum-selection
clause for purposes of the forum non conveniens analysis. Defendant has raised no other
argument in favor of dismissal for forum non conveniens. As Plaintiff explains, the dispute
centers around Defendant’s construction work in Indiana, so this forum clearly has a strong
connection to the case. Accordingly, the Court concludes that Defendant has not met its burden
of showing that dismissal is warranted in the absence of a valid forum-selection clause.
Defendant repeatedly disavows seeking transfer to a federal court in Kentucky under §
1404(a) and maintains instead that the forum-selection clause only contemplates venue in
Kentucky state court. Defendant therefore seeks dismissal pursuant to the common-law doctrine
of forum non conveniens. Binding Seventh Circuit precedent requires this Court to apply state
law to determine whether a forum-selection clause is enforceable where, as here, there is no
controlling federal statute. Under either Kentucky or Indiana law, the forum-selection clause is
unenforceable in the present context, and Defendant makes no other arguments to support
dismissal. Accordingly, the Magistrate Judge recommends that the Court DENY Defendant’s
Motion to Dismiss. [Dkt. 8.]
Any objections to the Magistrate Judge’s Report and Recommendation must be filed with
the Clerk in accordance with 28 U.S.C. § 636(b)(1) and Federal Rule of Civil Procedure 72(b),
and failure to timely file objections within fourteen days after service shall constitute a waiver of
subsequent review absent a showing of good cause for such failure.
Dated: 6 FEB 2017
Service will be made electronically
on all ECF-registered counsel of record via
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