Kentucky Fuel Corporation v. Celtic Marine Corporation

Filing 21

MEMORANDUM OPINION & ORDER: IT IS HEREBY ORDERED that Defendant's Motion to Transfer DE# 13 be SUSTAINED and that this matter be TRANSFERRED to the United States District Court for the Eastern District of Louisiana. Signed by Judge Henry R. Wilhoit, Jr on 11/25/13.(KSS)cc: COR

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF KENTUCKY

NORTHERN DIVISION

ASHLAND

Civil Action No. 13-33-HRW
KENTUCKY FUEL CORPORATION,

v.

PLAINTIFF,

MEMORANDUM OPINION AND ORDER

CELTIC MARINE CORPORATION,

DEFENDANT.

This matter is before the Court upon Defendant's Motion to Transfer [Docket No.
13]. For the reasons stated herein, this Court finds transfer to the United States District
Court for the Eastern District of Louisiana to be appropriate.

I.

FACTUAL AND PROCEDURAL BACKGROUND
This case arises from a series of contracts and agreements between Kentucky Fuel

Corporation ("KFC") and Celtic Marine pertaining to the carriage of Plaintiffs cargo.
In February 2011, KFC entered into a contract with Celtic Marine entitled "Service
Agreement," numbered 0216 ("2011 Spot Contract") [Docket No. 13-2]. Pursuant to the
2011 Spot Contract, Celtic Marine agreed to arrange for the transportation of
approximately 80,000 short tons ofKFC's metallurgical coal on approximately 48 barges
from Kentucky to Louisiana from April2S, 2011 through May 16,2011.
In April 2011, KFC entered into another contract with Celtic Marine entitled
"2011 Annual Service Agreement," numbered 11-0148 ("2011 Service Agreement")
[Docket No. 13-3]. Under the 2011 Service Agreement, Celtic Marine agreed to arrange

for the transportation of approximately 1,050,000 short tons ofKFC's metallurgical coal
on approximately 650 barges from Kentucky and West Virginia to Louisiana, from June
2011 through December 2011.

These contracts contain the following provisions:
APPLICABLE LAW: The parties to this Contract hereby agree that this
Contract and all claims and disputes arising under, in connection with, or
incident to this Contract, shall be governed by and construed pursuant to the
general maritime law of the United States or, in the event the choice of
general maritime law is deemed unenforceable, by the laws of the State of
Louisiana, excluding any choice of law rule that may direct the application
of the laws of any other state or country.
EXCLUSIVE JURISDICTION: The parties to this Contract hereby agree
that all claims and disputes arising under, in connection with, or incident to
this Contract, shall be filed in a federal court in the State of Louisiana, to
the exclusion of any other courts in any state or country. In the event the
federal courts of Louisiana are deemed not to have subject matter
jurisdiction, the parties agree that the aforementioned claims shall be filed
in a state court in the State of Louisiana. Buyer [KFC] hereby agrees to
subject itself to personal jurisdiction in the federal and state courts in
Louisiana for any claims or disputes arising hereunder.
In December 2011 Celtic Marine brought a lawsuit against KFC and its parent
company, James C. Justice Companies, Inc. alleging a breach of these contracts. Pursuant
to the provisions quoted above, the lawsuit was filed in the United States District Court
for the Eastern District of Louisiana. [See Complaint, Docket No. 13-4].
In February 2012, a settlement was reached ("February Settlement Agreement")
[Docket No. 13-9]. As part of the settlement agreement, KFC agreed to execute a new
service agreement, entitled "2012 Annual Service Agreement," numbered 12-0139 ("2012
Service Agreement") [Docket No. 13-5]. Per the agreement, KFC agreed to ship a

minimum of 420,000 short tons of metallurgical coal at 40,000 short tons per month from
Tennessee to Louisiana from May 1,2012 through March 15,2013, the transportation of
which Celtic Marine would arrange. The 2012 Service Agreement contained the
following provisions:
APPLICABLE LAW: The parties to this Agreement hereby agree that this
Agreement and all claims and disputes arising under, in connection with, or
incident to this Agreement, shall be governed by and construed pursuant to
the general maritime law of the United States or, in the event the choice of
general maritime law is deemed unenforceable, by the laws of the State of
Louisiana, excluding any choice of law rule that may direct the application
of the laws of any other state or country.
EXCLUSIVE JURISDICTION: The parties to this Agreement hereby
agree that all claims and disputes arising under, in connection with, or
incident to this Agreement, shall be filed in a federal court in the State of
Louisiana, to the exclusion of any other courts in any state or country. In the
event the federal courts of Louisiana are deemed not to have subject matter
jurisdiction, the parties agree that the aforementioned claims shall be filed
in a state court in the State of Louisiana. Buyer [KFC] hereby agrees to
subject itself to personal jurisdiction in the federal and state courts in
Louisiana for any claims or disputes arising hereunder and waives any
objections it might otherwise have to personal jurisdiction and venue in the
courts, federal or state, of Louisiana.
Another agreement was then executed ("2012 Spot Contract") [Docket No. 13-7]
and, again, contained the forum selection clause:
APPLICABLE LAW: The parties to this Agreement hereby agree that this
Agreement and all claims and disputes arising under, in connection with, or
incident to this Agreement, shall be governed by and construed pursuant to
the general maritime law of the United States or, in the event the choice of
general maritime law is deemed unenforceable, by the laws of the State of
Louisiana, excluding any choice of law rule that may directthe application
of the laws of any other state or country.
EXCLUSIVE JURlSDICTION: The parties to this Agreement hereby
agree that all claims and disputes arising under, in connection iritbJlIDt to

this Agreement, shall be filed in a federal court in the State of Louisiana, to
the exclusion of any other courts in any state or country. In the event the
federal courts of Louisiana are deemed not to have subject matter
jurisdiction, the parties agree that the aforementioned claims shall be filed
in a statcourt in the State of Louisiana. Buyer [KFC] hereby agrees to
subject itself to personal jurisdiction in the federal and state courts in
Louisiana for any claims or disputes arising hereunder and waives any
objections it might otherwise have to personal jurisdiction and venue in the
courts, federal or state, of Louisiana.
Subsequently, additional disputes arose about new sums owed by KFC and its
parent company under not only the February Settlement Agreement, but also the 2012
Service Agreement and 2012 Spot Contract. The parties entered into a second settlement
agreement in October 2012 to resolve all remaining disputes over unpaid sums owed to
Celtic Marine [Docket no. 13-11]. Under the terms of both the February Settlement
Agreement and the October Settlement Agreement, Celtic Marine's claims arising out of
the 2011 Service Agreement, 2011 Spot Contract, 2012 Service Agreement, and 2012
Spot Contract would be released only ifKFC and Justice fully complied with all terms
and conditions of the settlement agreements. In addition, the October Settlement
Agreement specified that any actions to enforce the settlement agreements or actions for
breach of the settlement agreements "must be filed in a federal or state court in the State
of Louisiana, to the exclusion of any other courts in any other state or country."
Incorporated into the October Settlement Agreement were cross-guarantees
executed by both KFC and its parent corporation, Justice. In the cross-guarantees, KFC
and Justice guaranteed that each would fulfill the obligations of the other under the
October Settlement Agreement, of which Justice has been held in breach by the Eastern

District of Louisiana. KFC and Justice also agreed that "all claims and dispute arising
under, in connection with, or incident to th[e] Guaranty, shall be governed by and
construed pursuant to the laws of the State of Louisiana." The guarantees each contained
a mandatory venue provision requiring that "all claims and disputes arising under, in
connection with, or incident to th[e] Guaranty, shall be filed in a federal court in the State
of Louisiana, to the exclusion of any other courts in any other state or country." In the
cross-guarantees, both KFC and Justice agreed to subject themselves to personal
jurisdiction in the federal and state courts in Louisiana.
Further disputes arose and Celtic Marine sought to reopen the litigation in the
Eastern District of Louisiana. On March 26, 2013, that court granted both motions,
holding KFC's parent corporation, Justice, in breach of the settlement agreements. The
litigation arising out of the 2011 Service Agreement and 2011 Spot Contract remains
pending in that court. Also pending in that litigation, are Celtic Marine's claims of
breaches of the 2012 Service Agreement and 2012 Spot Contract.
Meanwhile, KFC filed this civil action, alleging that Celtic failed to handle the
coal properly, resulting in a substantial reduction of its value, perhaps even a total loss.
Celtic Marine seeks entry of an Order transferring this matter to the Eastern
District of Louisiana.

II.

THE FORUM SELECTION CLAUSE APPLIES TO THIS LITIGATION.
The various contracts and agreements between the parties contain provisions

regarding where disputes will be adjudicated, specifically, in Louisiana. These provisions

are known as "forum selection clauses" and are common in agreements between large
commercial entities. "A forum selection clause should be upheld absent a strong showing
that it should be set aside." Carnival Cruise Lines v. Shute, 499 U.S. at 585, 595 (1991).
"When evaluating the enforceability of a forum selection clause, this court looks to the
following factors: (1) whether the clause was obtained by fraud, duress, or other
unconscionable means; (2) whether the designated forum would ineffectively or unfairly
handle the suit; and (3) whether the designated forum would be so seriously inconvenient
such that requiring the plaintiff to bring suit there would be unjust." Sec. Watch, Inc. v.
Sentinel Sys., Inc., 176 F.3d 369,375 (6th Cir.1999). "The party opposing the forum
selection clause bears the burden of showing that the clause should not be enforced."
Shell v. R. W. Sturge, Ltd., 55 F.3d 1227, 1229 (6th Cir.1995).
There is simply no evidence in the record that the forum selection clause was
obtained by fraud, duress or is otherwise the product of coercion. Nor is there an
allegation that the Louisiana courts are somehow ill-equipped to preside over this
litigation. As for "serious inconvenience." Plaintiff can hardly make such an argument
as there is litigation between these very parties percolating in the Eastern District of
Louisiana.
In an attempt at an end-run around the forum selection clause, KFC maintains that
it is the October Settlement Agreement, which contains a more limited forum selection
clause, controls. Instead of requiring all disputes arising out of the prior agreements to be
litigated in Louisiana federal court, the provision in the October Settlement Agreement

requires only that actions "to enforce this Agreement or to obtain damages for breach of
this Agreement" be filed in either the state or federal courts of Louisiana. KFC contends
that the October Settlement Agreement, discharged the parties' earlier agreements and
rendered the provisions and requirements of those earlier agreements moot.
However, the October Settlement Agreement contains no provision which provides
that it superceded prior contracts. KFC an affidavit from Steve Ball, the vice president
of operations ofKFC and the vice president of operations of Justice, who signed all of the
contracts and guarantees at issue. Mr. Ball states that Justice, a corporation, "believes and
has argued" that the October Settlement Agreement supplanted the prior agreements
between the parties. Unfortunately, Mr. Ball's statement as to what a corporation
believes, if, indeed a corporation can have beliefs, is not sufficient as evidence that the
October Settlement Agreement superceded all prior agreements.
Nor does KFC provide any documentary evidence of the alleged modification of
the contracts, and there is no legal basis for its claim. The October Settlement Agreement
did not alter the parties' contractual requirements for the litigation of disputes arising
from the contracts for transportation ofKFC's cargo. It did not limit the applicability of
the prior forum selection clauses.
As Defendant point out, it is axiomatic that a settlement agreement cannot
"supercede" a contract that is breached, and there is absolutely no merit in the argument
that a settlement agreement, which itself has been breached, supercedes the contracts
which that party breached.

The October Settlement Agreement allowed for KFC and Justice's release from
those contracts and guarantees if they complied with all terms of the settlement
agreement, which, based upon the record before the Court, they have not done. As those
contracts are in effect, and contain mandatory venue provisions, they require transfer of
this litigation to the Eastern District of Louisiana.
KFC has not met its burden to show that the forum selection clauses should not be
enforced.

III. UNDER 28 U.S.C. 1404 (a), TRANSFER OF THIS MATTER IS
APPROPRIATE.
Section 1404(a) states that, "for the convenience of the parties and witnesses, in
the interest of justice, a district court may transfer any civil action to any other
district court ...where it might have been brought." In ruling upon a motion to transfer
based on Section 1404(a), several factors may be considered by the court, including 1)
convenience of the parties and witnesses, 2) accessibility of sources of proof. 3) costs of
securing testimony from witnesses, 4) practical problems associated with trying the case
in the least expensive and most expeditious manner, and 5) the interests ofjustice.
Kentucky Speedway, L.L. C. v. National Ass 'n ofStock Car Auto Racing, 406 F .Supp.2d

751,755 (E.D. Ky. 2005).
The Court is mindful that "the presence of a forum selection clause ... will be a
significant factor that figures centrally in the district court's calculus." Stewart Org., Inc.

v. v. Ricoh Corp., 487 U.S. 22,29 (1988).
"The parties' convenience is already reflected in the mandatory forum selection

clause." Id. at 31 (stating that forum selection clause "represents the parties' agreement as
to the most proper forum"). By entering into agreements containing forum selection
clauses, KFC agreed to litigate any claims or disputes arising out of those agreements in
Louisiana.
Moreover, "[c]ourts have generally considered the ability to avoid duplicative
litigation through transfer to be a weighty factor in the §1404(a) calculus." Limited
Service Corp. v. MIV APL PERU, 2010 WL 2105362, *5 (S.D. Ohio 2010) (emphasis
added). "To permit a situation in which two cases involving precisely the same issues are
simultaneously pending in different District Courts leads to the wastefulness of time,
energy, and money that § 1404(a) was designed to prevent." US. v. Kunkle, 2006 WL
416259, *3 (W.D. Mich. 2006)(citing Continental Grain Co. v. Barge FBL-585, 364 U.S.
19,26 (1960)). The courts "generally hold that the existence ofa related litigation in a
transferee court weighs heavily in favor of transfer, especially when cases may be
consolidated." Id.
A plain reading ofKFC's complaint in this litigation demonstrates that the same
allegations are relevant to the litigation in Louisiana. The arguments raised by Justice
seem to be an attempt to avoid paying the damages that the court held it owed Celtic
Marine and arise from the same issues that KFC wants this court to address. In the
instance case, KFC has alleged that Celtic Marine is responsible to KFC for damages
resulting from the alleged improper handling, securing and delivery ofKFC's cargo,
damages which are clearly not available under the contracts. According to KFC, Celtic

Marine's actions in allegedly improperly handling KFC's cargo have rendered the cargo
unmarketable.
Actions regarding the movements and handling ofKFC's cargo appear to be the
crux of Louisiana litigation. The amounts which Justice has been ordered to pay in the
Louisiana litigation arose out of the multiple movement orders. KFC now seeks to place
these actions at issue here. It would appear that should this Court retain his case, judicial
economy would not be served. Rather, much of the work necessary to determine the
validity of each party's claims and allegations will be substantially duplicated by two
different courts. Moreover, there is a risk of conflicting rulings and findings, which
certainly is not in the interest ofjustice for any party.

III.

CONCLUSION
Celtic Marine's arrangement for the transportation ofKFC's cargo, and the terms

and conditions of that arrangement, is governed by the terms of the agreements between
the parties, i.e., the 2011 Service Agreement, the 2011 Spot Contract, the 2012 Service
Agreement, and the 2012 Spot Contract. Each and every agreement between Celtic
Marine and KFC contains a forum selection clause providing that any claims and disputes
arising under each agreement be brought in a federal court in Louisiana. KFC's cross­
guaranty of Justice's October Settlement Agreement obligations contains an exclusive
and mandatory venue provision requiring that any disputes be brought in a federal court in
Louisiana. The cross-guaranty also mandates the application of Louisiana law to those
disputes. There is no evidence that the forum selection clauses are invalid or

unenforceable. In clear violation of these mandatory provisions, KFC filed this diversity
action, which arises from the agreements between it and Celtic Marine, in the Eastern
District of Kentucky. Therefore, this matter will be transferred to the forum agreed upon
the parties.
Accordingly, IT IS HEREBY ORDERED that Defendant's Motion to Transfer
[Docket No. 13] be SUSTAINED and that this matter be TRANSFERRED to the United
States District Court for the Eastern District of Louisiana.
This 25 th day of November, 2013.