Lane v. Nash Finch Company

Filing 34

MEMORANDUM AND ORDER - IT IS ORDERED: Plaintiff's Motion for Preliminary Injunction (Filing No. 10 ) remains pending for determination. Defendant's Motion to Dismiss or, in the Alternative, Motion to Transfer (Filing No. 6 ) is granted i n part, as follows: The Motion to Transfer is granted, and the Motion to Dismiss is denied. All other pending motions are denied as moot. The case will be transferred to the United States District Court for the District of Minnesota. Ordered by Judge Laurie Smith Camp. (TCL )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
DANNY F. LANE,
Plaintiff,
v.
NASH FINCH COMPANY,
Defendant.

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CASE NO. 8:11CV241

MEMORANDUM
AND ORDER

This matter is before the Court on the Motion to Dismiss for Improper Venue, or in
the alternative, to Transfer Venue to the United States District Court for the District of
Minnesota (Filing No. 6) filed by Defendant Nash Finch Co. (“Nash Finch”). For the
reasons discussed below, the Motion to Dismiss will be denied, but the Alternative Motion
to Transfer will be granted.
BACKGROUND
Plaintiff Danny F. Lane (“Lane”) is a Nebraska resident. (Filing No. 1-2, Compl. ¶ 1.)
Nash Finch Company (“Nash Finch”) is a Delaware Corporation that does business in
Nebraska, but has its principal place of business in Minneapolis, Minnesota. (Id. at ¶ 2.)
Nash Finch employed Lane as an executive in the food distribution industry for sixteen
years.

(Id. at ¶ 3.)

Lane was terminated on or about June 8, 2011, and is now

unemployed. (Id. at ¶ 6.) During his employment with Nash Finch, Lane participated in
certain incentive compensation plans, including the “NFC Executive Incentive Program, the
Nash-Finch Company Long-Term Incentive Program, the Nash-Finch Company Incentive
Award Plan, and the Nash-Finch Company Performance Incentive Plan.” (Id. at ¶ 3.)
Each plan contains provisions that attempt to prohibit the plan participant’s
competition with Nash Finch or its subsidiaries. These provisions state that the participant

forfeits the benefits under the plans and may need to reimburse Nash Finch for benefits
previously received if the participant materially breaches a provision of the non-competition
provisions in the plans, even if the breach occurs after termination of employment. (Filing
No. 1-2, at ¶¶ 4, 5.)
Only the 2010 Long-Term Incentive Program (“LTIP”) has a specific choice of law
provision. (Filing No. 1-1, ex. 1 ¶ 10.2.) That provision states “[t]his LTIP description and
all rights and obligations hereunder shall be . . . governed by the laws of the State of
Minnesota, without regard to its conflicts of laws provisions. Any legal proceeding related
to . . . this LTIP will be brought in an appropriate Minnesota court, and the parties hereto
consent to the exclusive jurisdiction of the court for this purpose.” (Id.) All of the other
incentive programs simply provide for an action to be brought in “a court of competent
jurisdiction.” (Filing No. 8-2, ex. 2, at 15; Id., ex. 3, at 27.)
Lane filed this action on June 27, 2011, in the District Court for Douglas County,
Nebraska. (Filing No. 1-2.) Lane asserts that the non-competition provisions are not
reasonably necessary to protect any of Nash Finch’s legitimate business interests while
also being unduly harsh and oppressive to Lane. (Id. at ¶ 8.) Specifically, Lane asserts
that by listing named competitors that Lane is prohibited from working for, the noncompetition provisions effectively eliminate Lane’s ability to continuing working as an
executive in the food distribution industry. (Id. at ¶ 6.) Lane also contends that he will
suffer irreparable harm and injury unless Nash Finch is prohibited from enforcing the noncompetition and forfeiture/reimbursement provisions of the incentive plans. (Id. at ¶ 10.)
As a result, Lane is seeking temporary and permanent injunctions prohibiting Nash Finch
from attempting to enforce the non-competition or forfeiture/reimbursement provisions, a
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declaration that the non-competition provisions are void and unenforceable, a declaration
that the forfeiture/reimbursement provisions are void and unenforceable, compensation for
any damages he may have sustained resulting from Nash Finch’s attempts to enforce
those provisions, and court costs.
Pursuant to 28 U.S.C. §§ 1332, 1441, and 1446, Nash Finch removed this case to
the United States District Court for the District of Nebraska, on July 7, 2011. (Filing No. 1,
Notice of Removal.) Nash Finch then filed this Motion on July 15, 2011, claiming that
venue is improper. (Filing No. 6.) Alternatively, Nash Finch asks the Court to transfer the
case to the United States District Court for the District of Minnesota.
DISCUSSION
I. Motion to Dismiss under Rule 12(b)(3)
Federal Rule of Civil Procedure 12(b)(3) permits a party to raise the defense of
“improper venue” by motion. When jurisdiction is based solely on diversity of citizenship,
28 U.S.C. § 1391(a) governs the question of proper venue. However, 28 U.S.C. § 1441
governs the question of proper venue if a case has been removed to federal court. Polizzi
v. Cowles Magazines, Inc., 345 U.S. 663, 665 (1953). Section 1441 states “the district
court of the United States for the district and division embracing the place where such
action is pending” is the proper venue for a removed action. See also Polizzi, 345 U.S. at
666.
In Rainforest Café, Inc. v. ElecCo LLC, 340 F.3d 544 (8th Cir. 2003), the Eighth
Circuit recognized “that there is some controversy,” and “the question appears to be open
in this circuit,” regarding the issue of “whether Rule 12(b)(3) . . . is the proper vehicle for

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bringing a motion to dismiss . . . when the issue turns on a forum selection clause in the
parties’ underlying contract.” Id. at 546 n.5 (citing Kerobo v. Sw. Clean Fuels Corp., 285
F.3d 531, 534-36 (6th Cir. 2002)).1 In Rainforest Café, the Eighth Circuit did not address
the issue, however, because the defendant brought its motion to dismiss under both Rule
12(b)(3) and 12(b)(6). Id. Although the circuits are split on the issue, see Kerobo, 285 F.3d
at 534-35, the United States Supreme Court in Stewart Org., Inc. v. Ricoh Corp., 487 U.S.
22 (1988), suggested that if venue is proper under a federal venue statute, a forum
selection clause can not render venue improper. 14D Charles Alan Wright et al., Federal
Practice and Procedure: Jurisdiction and Related Matters § 3803.1 (3d ed. 2011).
In Stewart, the Supreme Court held that 28 U.S.C. § 1404(a) controlled the effect to
be given to the parties’ forum selection clause. Stewart, 487 U.S. at 29. When the Supreme
Court has compared 28 U.S.C. § 1404(a) to 28 U.S.C. § 1406(a), it has stated “[§] 1406(a)
provides for transfer from forums in which venue is wrongly or improperly laid, whereas, in
contrast, [§] 1404(a) operates on the premises that the plaintiff has properly exercised his
venue privilege.” Van Dusen v. Barrack, 376 U.S. 612, 633 (1964); see also Jumara v.
State Farm Ins. Co., 55 F.3d 873, 878 (3d Cir. 1995) (“Section 1404(a) provides for the
transfer of a case where both the original and the requested venue are proper. Section
1406, on the other hand, applies where the original venue is improper and provides for
either transfer or dismissal of the case”); 14D Charles Alan Wright et al., Federal Practice
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The Court also notes that although som e district courts have found that the Eighth Circuit in Marano
Enters. of Kansas v. Z-Teca Rests., L.P., 254 F.3d 753 (8th Cir. 2001), im plicitly addressed the issue of
whether a forum selection clause can deprive a court of venue, see Stacks v. Bluejay Holdings, LLC, No.
4:10CV00718 JLH, 2010 W L 3893990, at *2 n.2 (E.D. Ark. Sept. 29, 2010); CCI of Arkansas, Inc. v. Baggette
Constr., Inc., No. 4:09CV00513 JLH, 2009 W L 3010986, at *3 (E.D. Ark. Sept. 17, 2009), the Eighth Circuit
decided Rainforest subsequent to Marano, and the court in Rainforest stated that “the question appears to
be open in this circuit.” Rainforest, 340 F.3d at 546 n.5.

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and Procedure: Jurisdiction and Related Matters § 3827 (providing that § 1404(a) is “the
statute that allows transfer from one court of proper venue to another”). Thus, by holding
that § 1404(a), and not § 1406(a), controlled the effect to be given to the parties’ forum
selection clause, the Supreme Court in Stewart implicitly concluded that a forum selection
clause does not render venue improper when venue is otherwise proper under a federal
venue statute. The Supreme Court in Stewart “footnoted with apparent approval the parties’
agreement that the district court had properly denied the motion to dismiss for improper
venue because the case had been filed in the venue prescribed by 28 U.S.C. § 1391, the
statute governing venue for cases filed directly in federal court.” Kerobo, 285 F.3d at 536
(citing Stewart, 487 U.S. at 28 n.8).
Since this action was removed from state to federal court, § 1441 governs whether
venue is proper. See Polizzi, 345 U.S. at 665. Lane filed this action in the District Court
for Douglas County, Nebraska. Since the United States District Court for the District of
Nebraska is “the district court of the United States for the district and division embracing the
place where” the action was filed, 28 U.S.C. § 1441, venue is proper in this Court. The
parties’ forum selection clause does not render venue improper. Therefore, Nash Finch’s
Motion to Dismiss under Rule 12(b)(3) is denied.
II. Transfer under 28 U.S.C. § 1404
Where jurisdiction and venue are proper, transfer of venue is governed by 28 U.S.C.
§ 1404. Section 1404(a) states: “For the convenience of parties and witnesses, in the
interest of justice, a district court may transfer any civil action to any other district or division
where it might have been brought.” The moving party bears the burden of showing why a

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change of forum is warranted. Stinnett v. Third Nat’l Bank of Hampden Cnty., 443 F. Supp.
1014, 1017 (D. Minn. 1978).
Although courts consider several factors when balancing the “convenience of the
parties and witnesses” and determining whether “the interests of justice” support transfer
of venue, the Court’s analysis is not limited to these factors, and the Court may consider
other factors relevant to the particular circumstances of the case at hand. Terra Int’l, Inc.
v. Mississippi Chem. Corp., 119 F.3d 688, 691, 696 (8th Cir. 1997). One factor particularly
relevant in this case is the forum selection clause in the LTIP. “[C]ourts have determined
that a valid and applicable forum selection clause in a contract is ‘a significant factor that
figures centrally in the district court's calculus.’” Id. at 691 (citing Stewart, 487 U.S. at 29).
In fact, the parties here limit their arguments regarding the Alternative Motion to Transfer
to the validity of the forum selection clause in the LTIP, and its applicability to Lane’s claims.
M/S Bremen v. Zapata Off-Shore Co., 407 U.S.1 (1972), identifies four factors to
consider when a court decides whether to enforce a forum selection clause. These four
factors include whether: (1) “the forum selection clause covers the claim presented”; (2) “the
clause is mandatory or permissive”; (3) “it is the result of fraud or overreaching”; and (4) the
clause “is invalid for some other reason.” Thrasher v. Grip-Tite Mfg., Co., No. *:07CV400,
2007 WL 4180716, at *2 (D. Neb. Nov. 21, 2007). “Where . . . the 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. Fed.
Ins. Co., 439 F.3d 786, 789 (8th Cir. 2006) (quoting M/S Bremen, 407 U.S. at 17).

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Lane asserts that the forum selection clause at issue does not cover the claim
presented in this case because only the LTIP contains a forum selection clause calling for
related suits to be brought in a Minnesota court. Lane does not contend the forum selection
clause does not cover the LTIP, but asserts the non-competition agreement in the LTIP is
invalid because Lane did not receive any consideration for it being added to the LTIP. The
Court finds, however, that the Motion to Dismiss and Alternative Motion to Transfer should
be considered before the merits of the case and, therefore, does not consider the validity
of the non-competition agreement at this time. See State ex. rel. Nixon v. Coeur D’Alene
Tribe, 164 F.3d 1102, 1107 (8th Cir. 1999) (approving district court’s decision to transfer
case before ruling on merits of motion for preliminary injunction). Lane also admits that the
forum selection clause in the LTIP includes language implying that application of the clause
is mandatory, and Lane does not claim that the forum selection clause was obtained by
fraud or overreaching.
Finally, Lane asserts that transferring this case to a court in Minnesota will result in
an outcome that is contrary to Nebraska public policy. Lane argues that, if transferred to
a Minnesota court, the court will enforce the choice of law provision and will enforce the
non-competition either in full or in part.2 This Court finds that enforcement of the forum
selection clause will not necessarily lead to contravention of Nebraska public policy. While
it is possible that the non-competition agreement will “be enforced in whole or in part, that

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Minnesota courts enforce restrictive covenants “to the extent reasonably necessary to protect a
legitim ate business interest.” W ebb Publ’g Co. v. Fosshage, 426 N.W .2d 445, 450 (M inn. Ct. App. 1988)
(citing Bennet Storz Broad. Co., 134 N.W .2d 892, 899-900 (Minn. 1965)). In contrast, Nebraska
“jurisprudence . . . reflects a consistent refusal to strike or alter the language of an integrated covenant not
to com pete in order to m ake it enforceable.” H & R Block Tax Servs., Inc. v. Circle A Enters., Inc., 693
N.W .2d 548, 553 (Neb. 2005).

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result is not preordained, and that result would only follow, if it does follow, . . . after a
conflicts of laws analysis has been conducted with consideration to the facts and the states’
(potentially) competing interests.” Thrasher v. Grip-Tite Mfg., Co., No. 8:07CV400, 2007
WL 4180716, at *4 (D. Neb. Nov. 21, 2007).
When a case is transferred pursuant to 28 U.S.C. § 1404(a), “the transferee district
court must be obligated to apply the state law that would have been applied if there had
been no change of venue. A change of venue under [§] 1404(a) generally should be, with
respect to state law, but a change of courtrooms.” Van Dusen, 376 U.S. at 638. Thus, if
this Court were to transfer this case pursuant to § 1404(a), the transferee Minnesota court
would be obligated to follow the same Restatement (Second) of Conflict of Laws rules as
would this Court when deciding whether to enforce the choice of law provision. See Piper
Aircraft Co. v. Reyno, 454 U.S. 235, 244 n.8 (1981) (“Under Klaxon v. Stentor Electric Mfg.
Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), a court ordinarily must apply the
choice-of-law rules of the State in which it sits”); DCS Sanitation Mgmt., Inc. v. Castillo, 435
F.3d 892, 895 (8th Cir. 2006) (“In deciding choice-of-law questions, Nebraska follows the
Restatement (Second) of Conflict of Laws”). As a result, the federal district court, whether
for the District of Nebraska or for the District of Minnesota, will consider the Restatement
(Second) of Conflict of Laws § 1873 when deciding the conflicts of law issue that this case

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The Restatem ent (Second) of Conflict of Laws § 187 provides:

(1) The law of the state chosen by the parties to govern their contractual rights and duties will
be applied if the particular issue is one which the parties could have resolved by an explicit
provision in their agreem ent directed to that issue.
(2) The law of the state chosen by the parties to govern their contractual rights and duties will
be applied, even if the particular issue is one which the parties could not have resolved by
an explicit provision in their agreem ent directed to that issue, unless either

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presents. This Court is confident the federal district court in Minnesota would apply the
Restatement (Second) of Conflicts of Laws to determine if it should enforce the choice of
law provision, or if doing so would be contrary to the state that has the materially greater
interest, potentially Nebraska.4 The forum selection clause in the LTIP is valid and
applicable to Lane’s claim relating to the LTIP, and Lane’s claim relating to the LTIP should
be transferred to the United States District Court for the District of Minnesota.
Although the other incentive programs may not contain forum selection clauses
mandating that claims be brought in a Minnesota court, a factor courts traditionally have
considered in determining whether, under 28 U.S.C. § 1404(a), “the interests of justice”

(a) the chosen state has no substantial relationship to the parties or the transaction and there
is no other reasonable basis for the parties' choice, or
(b) application of the law of the chosen state would be contrary to a fundam ental policy of a
state which has a m aterially greater interest than the chosen state in the determ ination of the
particular issue and which, under the rule of § 188, would be the state of the applicable law
in the absence of an effective choice of law by the parties.
(3) In the absence of a contrary indication of intention, the reference is to the local law of the
state of the chosen law.

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Even if the transferee court were to apply Minnesota’s conflicts of laws rules and not the
Restatem ent (Second) of Conflicts of Laws, it is still not preordained that Minnesota’s choice of laws rules
would require the Minnesota court to enforce the choice of law provision and the non-com petition agreem ent,
either in full or in part. “Minnesota's approach to choice of law is based on the five ‘choice-influencing
considerations’ proposed by Professor Robert Leflar: [1] predictability of results, [2] m aintenance of interstate
and international order, [3] sim plification of the judicial task, [4] advancem ent of the forum 's governm ental
interests, and [5] application of the better rule of law.” SCM Corp. v. Deltak Corp., 702 F. Supp. 1428, 1430
(D. Minn. 1988) (citing Milkovich v. Saari, 295 Minn. 155, 203 N.W .2d 408, 412 (1973)). The purpose of the
“m aintenance of interstate and international order” factor is to “m aintain a coherent legal system in which the
courts of different states strive to sustain, rather than subvert, each other’s interests in areas where their own
interests are less strong.” Jepson v. Gen. Gas Co. of W isconsin, 513 N.W .2d 467, 471 (Minn. 1994).
Additionally, under the “advancem ent of the forum ’s governm ental interests” factor, application of Nebraska
law m ay further Minnesota’s interests. See SCM Corp, 702 F. Supp. at 1431-32 (“in som e cases, the choice
of another forum ’s law has been found to better advance Minnesota’s interest”). Finally, the “application of
the better rule of law” factor allows the court to “choose what [it] considers to be the better of two rules.” Id.
at 1432. As a result, even if it em ployed the five “choice -influencing considerations”and not § 187, this Court
is confident a Minnesota court would determ ine whether or not it should enforce any part of the noncom petition agreem ent only after a conflicts of laws analysis taking, into consideration the facts and states’s
potentially com peting interests.

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weigh in favor of transfer is “judicial economy.” Terra, 119 F.3d at 696. Because the LTIP
contains a valid forum selection clause applicable to claims relating to the LTIP, and Lane’s
claims relating to the LTIP and the other incentive programs will likely require the resolution
of the same or similar factual and legal issues, the Court finds that judicial economy will be
better served if all Lane’s claims are transferred to the District of Minnesota. Otherwise, two
cases involving the same or similar issues would be “simultaneously pending in different
District Courts lead[ing] to the wastefulness of time, energy and money that [§] 1404(a) was
designed to prevent.” Cont’l Grain Co. v. The FBL-585, 364 U.S. 19, 25 (1960). For that
reason, the Court concludes that this matter should be transferred in its entirety to the
United States District Court for the District of Minnesota. Accordingly,
IT IS ORDERED:
1.

Plaintiff’s Motion for Preliminary Injunction (Filing No. 10) remains pending for
determination;

2.

Defendant’s Motion to Dismiss or, in the Alternative, Motion to Transfer (Filing
No. 6) is granted in part, as follows:
The Motion to Transfer is granted, and the Motion to Dismiss is denied;

3.

All other pending motions are denied as moot; and

4.

The case will be transferred to the United States District Court for the District
of Minnesota.

DATED this 26th day of September, 2011.
BY THE COURT:

s/Laurie Smith Camp
United States District Judge
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