Alberici Constructors, Inc. v. Oliver et al

Filing 93

MEMORANDUM AND ORDER; IT IS HEREBY ORDERED that the motion of defendants Industrial & Municipal Supply, Inc. and Kenneth Mar Simmons to dismiss the amended complaint for improper venue [# 64 ] is denied. Signed by Honorable Carol E. Jackson on 06/14/2012; (DJO)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
ALBERICI CONSTRUCTORS, INC.,
Plaintiff,
vs.
CLONE JEFFERSON OLIVER, et al.,
Defendants.

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Case No. 4:11-CV-744 (CEJ)

MEMORANDUM AND ORDER
This matter is before the Court on the motion of defendants Industrial &
Municipal Supply, Inc., and Kenneth Marc Simmons to dismiss the amended complaint
for improper venue, pursuant to Fed.R.Civ.P.12(b)(3) and 12(b)(6). Plaintiff opposes
the motion and the issues are fully briefed.
I. Background
Plaintiff Alberici Constructors Inc., (Alberici) is a construction company located
in St. Louis, Missouri. Defendant Clone Jefferson Oliver was employed by plaintiff as
the Vice President of Construction. In 2006, plaintiff entered into a contract with
Arlington County, Virginia to upgrade and expand the Arlington County Water Pollution
and Control Plant. Oliver was the project director and was responsible for issuing
purchase orders and approving invoices submitted by subcontractors. Plaintiff alleges
that Oliver devised a fraudulent scheme to divert profits from plaintiff for his personal
gain.

Specifically, it is alleged that Oliver encouraged subcontractors to submit

improperly inflated invoices, price quotes, and change orders to plaintiff. Once the
invoices were paid by plaintiff, the subcontractors would then pay a portion of the
money received to a corporation that was created by Oliver and defendant Pamela

Whitmore for the purpose of diverting and concealing the proceeds from inflated
invoices. Defendant Simmons was the president of defendant Industrial & Municipal
Supply, Inc., (IMS), a subcontractor that, at Simmons’ direction, allegedly submitted
inflated invoices to plaintiff.
On December 29, 2011, plaintiff filed an amended complaint against IMS,
Simmons, Oliver, Whitmore, and other subcontractors who allegedly submitted inflated
invoices, price quotes, or change orders. Plaintiff asserts claims of fraud (Count I),
conspiracy to commit fraud (Count II), fraud in the inducement (Count III), breach of
duty of loyalty (Count IV), breach of contract (Counts V, VI, VII, VIII), unjust
enrichment (Counts IX, X, XI), and piercing the corporate veil (Counts XII, XIII, XIV).
IMS and Simmons move to dismiss the amended complaint for improper venue,
pursuant to Fed.R.Civ.P.12(b)(3) and 12(b)(6). They assert that their contract with
plaintiff contains a

forum selection clause that requires claims to be litigated in

Georgia.
II. Discussion
A forum selection clause is prima facie valid and should be enforced unless
enforcement would be unreasonable and unjust. Marano Enters. of Kan. v. Z–Teca
Rests., 254 F.3d 753, 757 (8th Cir.2001) (quoting Dominium Austin Partners v.
Emerson, 248 F.3d 720, 726 (8th Cir.2001)). When a “forum selection clause is the
fruit of an arm’s length negotiation, the party challenging the clause bears an
especially heavy burden of proof to avoid its bargain.” Servewell Plumbing, LLC v.
Federal Ins. Co ., 439 F.3d 786, 789 (8th Cir.2006); see also Root v. Gers, Inc., 2002
WL 809539 * at 2, (D. Neb. April 3, 2002)(“Where sophisticated parties freely
negotiate a forum selection clause in a private business agreement, unaffected by

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fraud, undue influence, or overwhelmingly unequal bargaining power, there are
compelling reasons to give such clauses full effect.”).1
On December 19, 2006, the plaintiff and IMS entered into a subcontract
agreement; which states in part:
Unless otherwise agreed in writing, Seller [IMS] shall continue to perform
its obligations under this Purchase Order pending the resolution of any
dispute that may arise under or relate to this Purchase Order. Any
dispute resolution provisions set forth in the Prime Contract between the
Owner and Buyer [plaintiff] shall be also binding upon Seller, if no Prime
Contract’s dispute resolution provision governs, the dispute shall be
resolved by litigation in the Superior Court of Fulton County, Georgia.
(Doc. # 61-17, p3).
Plaintiff argues that the forum selection clause is unenforceable because the
subcontract agreement was procured through fraud.

It is well established that a

forum selection clause is not enforceable if the inclusion of that clause in the contract
was the product of fraud or coercion. Marano, 254 F.3d at 757(quoting Scherk v.
Alberto-Culver Co., 417 U.S. 506, 519 (1974)). Furthermore, a forum selection clause
is not enforceable when a scheme to defraud commenced before the contract was
executed. See Farmland v. Frazier-Parrot Commodities, 806 F.2d. 848,851 (8th Cir.
1987)(abrogated on other grounds by Lauro Lines S.R.L. v. Chasser, 490 U.S. 495
(1989))(“we believe that in a situation where a fiduciary relationship is created by a

There is some disagreement among courts regarding whether state or
federal law applies to the analysis of the enforceability of a forum selection clause.
Servewell, 439 F.3d at 789 (8th Cir.2006)(noting that because “the enforceability of
a forum selection clause concerns both the substantive law of contracts and the
procedural law of venue” the circuits disagree regarding whether federal or state
law applies, and the Eighth Circuit has yet to adopt a definitive position on the
issue). However, the Court does not believe it is necessary to resolve this issue
here, inasmuch as Missouri has adopted the federal standard, and neither party
argues that the application of either standard would materially affect the outcome.
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contract tainted by fraud, the person defrauded cannot be held to the contractual
forum selection clause. To hold otherwise would be grossly unfair to Farmland because
it would force Farmland to comply with an agreement which never would have been
made had the existence of fraud been known.”). To render a forum selection clause
unenforceable, the challenging party must state sufficient facts to support its claim of
fraud. 11550 v. Cummings, 2008 WL 4681371 *2 (W.D. Mo. Oct. 22, 2008). Vague
allegations of fraud are not enough to meet its burden. Instead, fraud must be pled
with particularity. Id.
Plaintiff has pled with sufficient specificity that the subcontract was entered into
through fraud. Plaintiff alleges that the IMS and Simmons had a duty to disclose the
value of piping needed for the project before the contract was entered. Plaintiff further
alleges that prior to executing the subcontract, the defendants knowingly made false
representations to plaintiff regarding the value of piping materials. The defendants
made the misrepresentations knowing that the plaintiff would rely upon them in
executing the subcontract. The Court finds that these allegations support plaintiff’s
claim of fraud in the inducement, and therefore, enforcement of the forum selection
clause would be unreasonable in this case.
Generally, a forum selection clause is not enforceable if it would require a
plaintiff to litigate its claims arising from the same operative facts in multiple forums.
Public Sch. Ret. System v. State Street Bank, 2010 WL 318538, at * 1 (W.D. Mo. Jan.
21, 2010). Plaintiff’s claims against all of the defendants center on the same operative
facts (i.e., the subcontractors’ submission of inflated invoices to plaintiff and paying
proceeds from the invoices to Oliver’s corporation). If the forum selection clause were
enforced, plaintiff’s claims against IMS and Simmons would have to be litigated in a

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Georgia court but not the claims against the other defendants. Severing plaintiff’s
claims against IMS and Simmons would be impracticable, especially since plaintiff has
asserted a claim of a conspiracy to commit fraud claim against all of the defendants.
Given the claims asserted here, the Court finds that it would be inefficient to force the
plaintiff to litigate in multiple forums. See Public Sch. Ret. System, 2010 WL 318538
at *3 (citing JP Morgan Chase Bank, N.A. v. Coverall No. Amer., Inc., 22009 WL
1531779, at *3-4 (N.D. Ohio. June 1, 2009)(noting courts considering judicial economy
as a factor in determining propriety of venue for tort and contract claims in the
presence of a forum selection clause.)).
Accordingly,
IT IS HEREBY ORDERED that the motion of defendants Industrial & Municipal
Supply, Inc. and Kenneth Mar Simmons to dismiss the amended complaint for
improper venue [# 64] is denied.

CAROL E. JACKSON
UNITED STATES DISTRICT JUDGE

Dated this 14th day of June, 2012.

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