Cottingham & Butler Insurance Services, Inc. v. Patel
Filing
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ORDER granting 12 Motion to Remand to State Court. The Clerk of Court is directed to remand the case to state court and deny all pending motions as moot. Signed by Chief Judge Linda R Reade on 3/18/16. (ksy)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
EASTERN DIVISION
COTTINGHAM & BUTLER
INSURANCE SERVICES, INC.,
Plaintiff,
No. 15-CV-1036-LRR
vs.
ORDER
SUMAN K. PATEL,
Defendant.
--------------------------------------------------SUMAN K. PATEL,
Counter Claimant,
vs.
COTTINGHAM & BUTLER
INSURANCE SERVICES, INC.,
Counter Defendant.
--------------------------------------------------SUMAN K. PATEL,
Third Party Plaintiff,
vs.
STEVEN SCHILL,
Third Party Defendant.
____________________
I. INTRODUCTION
The matter before the court is Plaintiff Cottingham & Butler Insurance Services,
Inc.’s (“Cottingham”) “Motion to Remand to State Court” (“Motion”) (docket no. 12).
II. PROCEDURAL HISTORY
On December 21, 2015, Cottingham filed the Motion. On December 30, 2015,
Defendant Suman K. Patel filed a Resistance (docket no. 15). On January 8, 2016,
Cottingham filed a Reply (docket no. 16). The matter is fully submitted and ready for
decision.
III. ANALYSIS
In the Motion, Cottingham requests that the court remand the instant action to state
court because Patel signed an Employment Agreement that contains a forum selection
clause. See Motion at 3; Petition, Exhibit A (docket no. 4) at 15. Cottingham also argues
that the Notice of Removal (docket no. 2) is defective because it “does not set forth a
specific amount in controversy” and therefore violates Local Rule 81(f). See Brief in
Support of the Motion (docket no. 12-1) at 6. Patel argues that the court should deny the
Motion because the “forum selection clause does not require a remand” because it is
“invalid” and “public factors . . . support retention of this case in this forum.” Resistance
at 5, 7 (formatting omitted). Patel also argues that the amount in controversy exceeds
$75,000. Id. at 8.
A. Forum Selection Clause
On November 12, 2012, Patel signed the Employment Agreement. See Petition,
Exhibit A at 17. The Employment Agreement provides, in relevant part:
Employee expressly consents to the jurisdiction of the Iowa
courts. It is further agreed that any and all legal actions
concerning this Employment Agreement shall be filed by the
Employee in Dubuque County, Iowa. The parties also agree
that the proper venue for all such actions, suits and proceedings
shall be in Dubuque County, Iowa only.
Id. at 15.
“Because ‘the enforceability of a forum selection clause concerns both the
substantive law of contracts and the procedural law of venue,’ there is some disagreement
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among the circuits over whether state or federal law applies . . . .” Servewell Plumbing,
LLC v. Fed. Ins. Co., 439 F.3d 786, 789 (8th Cir. 2006) (quoting Sun World Lines, Ltd.
v. March Shipping Corp., 801 F.2d 1066, 1068-69 (8th Cir. 1986)) (citations omitted).
Although the Eighth Circuit has yet to adopt a position on the issue, where the parties do
not argue that the state and federal standards differ, the court will apply federal law. See
M.B. Rests., Inc. v. CKE Rests., Inc., 183 F.3d 750, 752 (8th Cir. 1999); cf. Rainforest
Café, Inc. v. EklecCo, L.L.C., 340 F.3d 544, 546 (8th Cir. 2003) (recognizing that the
Eighth Circuit has not explicitly ruled on the issue, but stating the Eighth Circuit is
“inclined to agree” that “federal law controls the question of whether [a] forum selection
clause applies” in a diversity case).
“Forum selection clauses are prima facie valid and are enforced unless they are
unjust or unreasonable or invalid for reasons such as fraud or overreaching. They are
enforceable unless they would actually deprive the opposing party of his fair day in court.”
M.B. Rests., Inc., 183 F.3d at 752 (citations omitted). “[T]he forum [selection] clause
should control absent a strong showing that it should be set aside.” M/S Bremen v. Zapata
Off-Shore Co., 407 U.S. 1, 15 (1972). “While ‘inconvenience to a party is an insufficient
basis to defeat an otherwise enforceable forum selection clause,’ a party can avoid
enforcement of the clause by showing that proceeding ‘in the contractual forum will be so
gravely difficult and inconvenient that he will for all practical purposes be deprived of his
day in court.’” Union Elec. Co. v. Energy Ins. Mut. Ltd., 689 F.3d 968, 974 (8th Cir.
2012) (quoting M.B. Rests., Inc., 183 F.3d at 753). Furthermore, the court must consider
“the public policy of the forum state” in its analysis of enforceability. Id.
1.
Whether the forum selection clause is invalid
Patel argues that the forum selection clause is invalid because it “is confusing and
ambiguous,” and because the Employment Agreement was not the product of an arm’s
length negotiation and, therefore, “the disparity in bargaining power and the lack of
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negotiations” render the clause invalid. Resistance at 5, 7. Patel argues that the language
“any and all legal actions concerning this Employment Agreement shall be filed by the
Employee in Dubuque County, Iowa” is ambiguous because it leaves open the possibility
that a legal action filed by the employer need not be filed in state court. See id. at 5-6.
Furthermore, Patel argues that the Eastern Division for the United States District Court for
the Northern District of Iowa “is the proper venue and district for Dubuque County” and
that, therefore, the claim is properly before this court. See id.
The court finds that the forum selection clause is not confusing or ambiguous. The
clause states, in full:
Employee expressly consents to the jurisdiction of the Iowa
courts. It is further agreed that any and all legal actions
concerning this Employment Agreement shall be filed by the
Employee in Dubuque County, Iowa. The parties also agree
that the proper venue for all such actions, suits and proceedings
shall be Dubuque County, Iowa only.
Petition, Exhibit A at 17. Under this provision, if an employee files a legal action
concerning the Employment Agreement, he or she must file it in Dubuque County, Iowa.
The next sentence constitutes the venue provision and dictates that the parties agree that the
proper venue for all legal actions is Dubuque County, Iowa. Id. Therefore, under the
venue provision, any legal action, whether filed by the employer or an employee, must be
filed in Dubuque County, Iowa.1 The separation of the venue provision from the clause
regarding an employee-filed action demonstrates that the venue provision applies to all legal
proceedings between the parties.
The court also finds that the Employment Agreement is not invalid due to any
The court notes that Patel’s argument that the forum selection clause only
encompasses legal actions, suits and proceedings filed by the employee would result in his
counterclaim being subject to the forum selection clause, even if Cottingham’s claim were
not.
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disparity in bargaining power or opportunity for negotiation. “Forum selection clauses are
prima facie valid and are enforced unless they are unjust or unreasonable or invalid for
reasons such as fraud or overreaching.” M.B. Rests., Inc., 183 F.3d at 752. Patel argues
that no negotiations took place regarding the signing of the Employment Agreement and that
“the disparity in bargaining power between this major employer and an insurance salesman
who was unrepresented by counsel casts doubt on the validity” of the clause. Resistance
at 6. However, the fact that a forum selection clause was “not actually negotiated does not
render the clause per se unenforceable.” M.B. Rests., Inc., 183 F.3d at 753. Additionally,
a contract “offered on a ‘take it or leave it’ basis is not sufficient as a matter of law to
establish adhesion,” and, therefore, to deny enforcement of a forum selection clause. See
Dominium Austin Partners, L.L.C. v. Emerson, 248 F.3d 720, 726 (8th Cir. 2001). Patel
does not argue that the clause is invalid for fraud or suggest that it overreaches.
Accordingly, the court finds that the forum selection clause is valid. See Brenner v. Nat’l
Outdoor Leadership Sch., 20 F. Supp. 3d 709, 717 (D. Minn. 2014) (upholding a forum
selection clause and finding that a contract between a college student and “a corporation
with substantial resources and comparatively greater sophistication” was not a contract of
adhesion because there was no “fraud or coercion,” unsuccessful negotiation by the college
student or insistence by the corporation upon the inclusion of the forum selection clause).
2.
Public policy factors
Patel argues that other public factors “support retention of this case in this forum.”
Resistance at 7 (formatting omitted). Patel argues that his “counterclaim is properly
before the [c]ourt on the basis of federal question jurisdiction” and Cottingham’s claim is
“properly before [the court] on the basis of diversity jurisdiction,” and that remanding
Cottingham’s “claim would result in judicial inefficiency and open the door to the
possibility for inconsistent results.” Resistance at 7 (citing RK Dixon Co. v. Dealer Mktg.
Servs., Inc., 284 F. Supp. 2d 1204, 1213 (S.D. Iowa 2003)). However, as the court
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addressed above, Patel’s counterclaim is subject to the forum selection clause, so there is
no risk of judicial inefficiency. Patel also argues that “the public factor of having local
controversies decided locally supports [the court’s] retention of the case.” Id. at 8.
Although the court agrees that Cedar Rapids is “local” for purposes of the instant action,
Dubuque County, Iowa is also “local.” Therefore, this factor does not weigh in favor of
retention. Accordingly, the court finds that public factors do not warrant retention and the
forum selection clause is enforceable.
B. Amount in Controversy
Because forum selection clauses are “prima facie valid” and Patel has not
demonstrated sufficient reasons for the court to decline to enforce the forum selection clause
at issue, the court need not address Cottingham’s argument that the Notice of Removal does
not include an amount in controversy, as required by Local Rule 81(f).
IV. CONCLUSION
In light of the foregoing, Cottingham’s Motion to Remand (docket no. 12) is
GRANTED. The Clerk of Court is DIRECTED to remand the case to state court and deny
all pending motions as moot.
IT IS SO ORDERED.
DATED this 18th day of March, 2016.
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