Capital Holdings 234, LLC v. Advocate Consulting Legal Group, PLLC

Filing 8

MEMORANDUM OPINION AND ORDER by Judge Greg N. Stivers on 8/30/2017 GRANTING 3 Motion to Dismiss. cc: Counsel(JWM)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
BOWLING GREEN DIVISION
CIVIL ACTION NO. 1:17-CV-00023-GNS

CAPITAL HOLDINGS 234, LLC

PLAINTIFF

v.

ADVOCATE CONSULTING GROUP, PLLC

DEFENDANT

MEMORANDUM OPINION AND ORDER
This matter is before the Court upon Defendant’s Motion to Dismiss (DN 3). For the
reasons stated below, the motion is GRANTED.
I.

BACKGROUND

Plaintiff Capital Holdings 234, LLC (“Capital Holdings”) and Defendant Advocate
Consulting Legal Group, PLLC (“Advocate Consulting”) entered into an agreement for legal
services.

(Compl. ¶ 7, DN 1-2; Def.’s Mot. Dismiss Ex. C, at 1, DN 3-3 [hereinafter

Agreement]). Under the terms of the Agreement, Advocate Consulting was to provide legal
services to Capital Holdings “related to the structuring of the acquisition and operation of an
aircraft in a tax efficient manner” for an annual fee of $7,500. (Compl. ¶¶ 7-9; Agreement 1-2).
Pursuant to their contract, Capital Holdings sought tax advice from Advocate Consulting
regarding the sale of fifty percent of an aircraft, and Advocate Consulting advised that the sale
would have “a tax gain to report of approximately $150,000.” (Compl. ¶ 12). Capital Holdings
alleges that after the sale, “it became apparent that [Defendant] omitted a Section 179 tax
deduction recapture in the analysis it provided to Capital Holdings and the resulting sale, which
will result in a total tax gain of $438,402.” (Compl. ¶¶ 13-14).

Capital Holdings filed this lawsuit in Warren Circuit Court asserting claims of
negligence, professional negligence, breach of fiduciary duty, misrepresentation, and breach of
contract against Advocate Consulting. After being served, Advocate Consulting removed the
lawsuit to this Court and has moved to dismiss the action based on forum non conveniens due to
the forum selection clause in the Agreement and the lack of personal jurisdiction over it in this
forum. (Notice Removal, DN 1; Def.’s Mem. Supp. Mot. Dismiss 2-8)/
II.
A.

DISCUSSION

Forum Selection Clause

“A forum selection clause should be upheld absent a strong showing that it should be set
aside.” Wong v. PartyGaming Ltd., 589 F.3d 821, 828 (6th Cir. 2009) (citation omitted). “[T]he
appropriate way to enforce a forum-selection clause pointing to a state forum is through the
doctrine of forum non conveniens.” Chinook USA, LLC v. Duck Commander, Inc., No. 3:14-CV01015-CRS, 2016 U.S. Dist. LEXIS 2211, at *10 (W.D. Ky. Jan. 7, 2016) (alteration in original)
(internal quotation marks omitted) (quoting Atl. Marine Const. Co. v. U.S. Dist. Court for W.
Dist. of Tex., 134 S. Ct. 568, 580 (2013)).
In enforcing a forum selection clause, the Court must first determine whether the forum
selection clause is valid. In doing so, the Court considers 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.” Id. (internal quotation marks omitted) (citation omitted).

2

In the case at bar, the parties agreed upon a valid and enforceable forum selection clause.1
First, Plaintiff has not asserted that the forum selection clause was obtained by fraud, duress or
other unconscionable means. Instead of arguing that the agreed upon forum would be ineffective
or unfairly handle the suit, Plaintiff contends that “Kentucky courts would be much more
effective at handling the suit than Florida courts.” (Pl.’s Resp. Def.’s Mot. Dismiss 3, DN 5
(emphasis added)). As the Sixth Circuit has noted, however, “[d]ifferent or less favorable
foreign law or procedure alone does not satisfy this prong. Rather, the foreign law must be such
that a risk exists that the litigants will be denied any remedy or will be treated unfairly.”
PartyGaming, 589 F.3d at 829 (citation omitted). Third, Plaintiff asserts that “Plaintiff is much
more inconvenienced bringing this action in Florida than Defendant is inconvenienced defending
this action in Kentucky.” (Pl.’s Resp. Def.’s Mot. Dismiss 4 (emphasis added)). Not only is
mere inconvenience not the standard, but Plaintiff offers minimum evidence to support this
conclusion.2 See PartyGaming, 589 F.3d at 829 (“To meet the third prong of our test, the
plaintiff must show that enforcement of the clause would be so inconvenient such that its
enforcement would be unjust or unreasonable.” (citing Preferred Capital v. Assocs. in Urology,
453 F.3d 718, 722-23 (6th Cir. 2006))). See also Lorenzana v. 2nd Story Software, Inc., No.
4:12CV-00021-JHM, 2012 U.S. Dist. LEXIS 95119, at *19 (W.D. Ky. July 10, 2012) (quoting
1

The forum selection clause in the Agreement provides:
Any and all claims arising under this agreement or the relationship created by it
shall be brought only in the courts of Collier County, Florida and shall be
governed by Florida law, without regard to its choice of law provisions. By
signing below the parties agree to be bound by the terms of this engagement
letter.

(Agreement 2).
2
In its response, Plaintiff states that it is a “small Kentucky company” with limited resources,
while Advocate Consulting is a “complex organization” with 1,500 clients throughout the
county. Plaintiff cites to www.advocatetax.com/our-clients/. (Pl.’s Resp. Def.’s Mot. Dismiss
4).
3

Wayne Cty. Emps. Ret. Sys. v. MGIC Inv. Corp., 604 F. Supp. 2d 969, 975 (E.D. Mich. 2009))
(“Generally, ‘[a] transfer is not appropriate if the result is simply to shift the inconvenience from
one party to another.’”). In the absence of any indication that the forum selection clause was
tainted by misconduct, that Florida courts could not handle this type of dispute, or any unjust
inconvenience, it appears that the forum selection clause is valid.
Next, the Court must determine whether to dismiss the case based on forum non
conveniens. “In assessing whether to dismiss a case based on forum non conveniens, the Court
must first identify an adequate alternative forum. “This requirement will be satisfied if the
defendant is amenable to process in the foreign jurisdiction. An alternative forum is inadequate
if the remedy provided by it is so clearly inadequate or unsatisfactory that it is no remedy at all.”
PartyGaming, 589 F.3d at 830-31 (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255 n.22,
(1981)).
Here, Defendant is amendable to process in Florida state court because Florida is its
principle place of business. Furthermore, this is an adequate and satisfactory forum capable of
providing remedy to Plaintiff’s claims. See Chinook USA, 2016 U.S. Dist. LEXIS 2211, at *12
(finding that a Louisiana state court was an adequate alternative forum because Defendant was
amendable to process there, the forum was capable of providing remedy to Plaintiffs, and
Plaintiff agreed to resolve disputes arising from the Agreement in Louisiana when signing the
contract).
After identifying Florida state court as an adequate alternative, the Court must weigh
relevant public and private factors in favor of the Florida forum. PartyGaming, 589 F.3d at 83132 (citing Estate of Thomson v. Toyota Motor Corp. Worldwide, 545 F.3d 357, 364 (6th Cir.
2008)). When there is a valid forum selection clause, however, the analysis changes:

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(1) [P]laintiff’s forum selection merits no weight, and, instead, the plaintiff bears
the burden of establishing that transfer to the forum for which the parties
bargained is unwarranted. Also, (2) the Court conclusively presumes the private
interest factors favor the contractually agreed upon forum; and (3) considers the
public-interest factors.
Chinook USA, 2016 U.S. Dist. LEXIS 2211, at *13 (internal citations omitted).
Public interest factors include: “court congestion, local interest in the matter, interest in
having the trial at home with the law that governs, avoidance of conflict-of-law problems or
application of foreign law, and unfairness in burdening local citizens with jury duty.”
PartyGaming, 589 F.3d at 832. When the parties signed the Agreement, they agreed that
disputes arising from the Agreement would be governed by Florida law. Florida courts—state or
federal—are certainly more familiar with all aspects of Florida law. Regarding court congestion,
as of December 2016, the median time from filing to disposition in a civil case in the Middle
District of Florida is 7.1 months, while it is 9.3 months in the Western District of Kentucky.3
Thus, the public interest factors do not weigh in favor of overriding the parties’ selected forum.
Plaintiff argues that a Kentucky forum will be much more convenient, as most of the
witnesses are in Kentucky; however, Plaintiff offers no evidence to support to this conclusion.
Plaintiffs have failed to show how litigating in Florida would be such an inconvenient forum to
yield it unjust or unreasonable. Thus, the forum selection clause is valid and enforceable, and
Defendants Motion to Dismiss should be granted based on the doctrine of forum non conveniens.
See Atl. Marine Constr. Co., 134 S. Ct. at 583 (finding that in all but the most unusual cases, “the
interest of justice is served by holding parties to their bargain.”)

3

See Administrative Office of the United States Courts,
http://www.uscourts.gov/statistics/table/na/federal-court-management-statistics/2016/12/31-1.
5

B.

Independent Duty Exception

Plaintiff asserts that even if this Court determines the forum selection clause is valid, “he
can still maintain his tort claims in Kentucky since they arose independent of the contract and not
beholden to the contract’s forum selection clause.” (Pl.’s Resp. Def.’s Mot. Dismiss 6). Under
Kentucky law, the failure to perform a contractual obligation typically does not give rise to a
cause of action in tort. Ronald A. Chisholm, Ltd. v. Am. Cold Storage, Inc., No. 3:09-CV-00808CRS-JDM, 2012 U.S. Dist. LEXIS 156849, at *10 (W.D. Ky. Oct. 30, 2012). The exception is
the independent legal duty. “[I]f a plaintiff can establish the existence of an independent legal
duty, [then] he may maintain an action in tort even though the acts complained of also constitute
breach of contract.” Id. (internal quotation marks omitted) (quoting Mims v. W.-S. Agency, Inc.,
226 S.W.3d 833, 836 (Ky. App. 2007). Plaintiff has not pleaded any legal duty owed to it by
Defendant other than as set forth in the Agreement. Regardless, Plaintiff contractually agreed
that “[a]ny and all claims arising under this agreement or the relationship created shall be
brought only in the courts of Collier County, Florida . . . .” (Agreement 2). Thus, Plaintiff may
not maintain its tort claims against Defendant in Kentucky.
III.

CONCLUSION

For the foregoing reasons, IT IS HEREBY ORDERED that Defendant’s Motion to
Dismiss (DN 3) is GRANTED.

Greg N. Stivers, Judge
United States District Court
August 30, 2017

cc:

counsel of record
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