Mid-American Benefits, Inc. et al v. RMTS, LLC et al

Filing 26

MEMORANDUM OPINION - While Plaintiffs will have the option of bringing their case in the United States District Court for the Southern District of Ohio, the Court will not prevent plaintiffs from exercising their option of bringing the case in an Ohio state court of appropriate venue and jurisdiction. For these reasons, the Court will not transfer venue, but will dismiss the case without prejudice. Ordered by Senior Judge Lyle E. Strom. (TEL)

IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEBRASKA
MID-AMERICAN BENEFITS, INC.,
a Nebraska corporation, and
THE NEBRASKA ASSOCIATION OF
RESOURCE DISTRICTS, a
Nebraska corporation,

)
)
)
)
)
)
Plaintiffs,
)
)
v.
)
)
RMTS, LLC, a New York limited )
liability company, and
)
NATIONWIDE LIFE INSURANCE
)
COMPANY, an Ohio corporation, )
)
Defendants.
)
______________________________)

8:12CV96

MEMORANDUM OPINION

This matter is before the Court on the motion of
defendants RMTS, LLC (“RMTS”) and Nationwide Life Insurance
Company (“Nationwide”) to dismiss or, in the alternative, to
transfer venue (Filing No. 20, with accompanying brief, Filing
No. 21).

Plaintiffs Mid-American Benefits, Inc. (“Mid-American”)

and the Nebraska Association of Resource Districts (“NARD”) filed
a brief in resistance to the motion (Filing No. 23), to which
defendants replied (Filing No. 24).

Plaintiff NARD and defendant

Nationwide are parties to a Stop Loss Insurance Contract (the
“Contract”).

The Contract contains a forum selection clause

mandating venue for any legal action thereunder in Columbus,
Ohio.

Because the Court finds the forum selection clause

enforceable, the Court will dismiss the action without prejudice.

BACKGROUND
Plaintiff Mid-American is a Nebraska corporation that
“offers insurance claims administrative support and management
services for companies and organizations,” including NARD
(Complaint, Ex. 1, Filing No. 1, ¶ 1).

Plaintiff NARD is a

Nebraska non-profit corporation that “has established a selffunded health care plan for certain of its employees” (Id. ¶ 2).
Defendant Nationwide is an Ohio corporation with its principal
place of business in Ohio (Id. ¶ 4; Ex. 3, Filing No. 1, at 1).
Defendant RMTS is a New York limited liability company and is a
managing general underwriter for the Contract between NARD and
Nationwide (Ex. 1, Filing No. 1, ¶ 3, 4).

Plaintiffs bring this

lawsuit because they allege that defendants inappropriately
denied coverage to certain insurance claims asserted on behalf of
a NARD employee (Id. ¶ 5, 6).
Plaintiffs originally filed their complaint in Douglas
County, Nebraska, District Court.

Defendants removed the suit to

this Court, claiming diversity jurisdiction under 28 U.S.C.
§ 1332.

Plaintiffs do not dispute jurisdiction.
With this motion, defendants “move the Court to dismiss

this action without prejudice or, in the alternative, transfer
the action to the United States District Court for the Southern
District of Ohio, Eastern Division, which is located in Columbus,
Ohio” (Filing No. 20, at 1).

Defendants argue that the Court

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should dismiss the case without prejudice under either Federal
Rule of Civil Procedure 12(b)(3) or 12(b)(6) because venue in
Nebraska is not proper under the forum selection clause
contained in the Contract.

The forum selection clause states:

LEGAL ACTION: . . . All Contract
terms will be interpreted under the
laws of ths state shown on page 1
of this Contract [Nebraska]. . . .
Venue for any legal action filed by
either party under this Contract,
shall be located in Columbus, Ohio.
(Ex. 3, Filing No. 1, at 18).

Plaintiffs oppose the motion,

claiming that the forum selection clause is “unfair and unjust;
altogether unreasonable within the context of this case” (Filing
No. 23, at 12).
APPLICABLE LAW1
As an initial matter, it should be noted that
defendants move the Court pursuant to both Federal Rules of Civil
Procedure 12(b)(3) and 12(b)(6), recognizing that the Eighth
Circuit has not determined which of these subsections governs
venue dismissals based on a forum selection clause (Filing No.
21, at 2).

See Rainforest Café, Inc. v. EleckCo, LLC, 340 F.3d

544, 545 n.5 (8th Cir. 2003) (declining to resolve whether a

1

Both parties quote this Court’s decision in Mongold v.
Universal Nationwide, L.L.C., 8:09CV86, 2009 WL 3297508 (D. Neb.
Oct. 13, 2009). Since the analysis of the law surrounding the
applicability of the forum selection clause in that case is
similar to the legal analysis required herein, the Court will
review the applicable law as cited in Mongold.
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motion to dismiss for improper venue should be brought under
12(b)(3) or 12(b)(6), because the defendant moved under both
subsections).

Since a determination of which subsection governs

venue dismissals based on forum selection clauses is also nonessential here, the Court declines to determine which paragraph
is the proper basis for the motion.
Because this is a diversity jurisdiction action, the
Court must determine whether to treat the forum selection clause
issue as substantive or procedural, which will, in turn,
determine the choice of law.

In Rainforest Café, the Eighth

Circuit acknowledged a circuit split regarding whether the
enforceability of a forum selection clause in a diversity
jurisdiction case is a substantive or procedural issue.
Rainforest Café, 340 F.3d at 546.

Nevertheless, the Court

concluded, “Because the parties have not argued that state law
would result in a materially different outcome, we indulge their
suggestion that we interpret the forum selection clause under
federal law.”

Id.

In a later case, the Eighth Circuit stated

more unequivocally, “[E]nforcement, or not, of the contractual
forum selection clause [is] a federal court procedural matter
governed by federal law.”

Fru-Con Const. Corp. v. Controlled

Air, Inc., 574 F.3d 527, 538 (8th Cir. 2009).

The Court will

apply federal law to resolve this forum selection clause dispute.

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“Forum selection clauses are prima facie valid and
enforceable unless they are unjust or unreasonable or invalid.”
M.B. Restaurants, Inc. v. CKE Restaurants, Inc., 183 F.3d 750,
752 (8th Cir. 1999).

Courts must scrutinize a forum selection

clause in a form contract for fundamental fairness.

Carnival

Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595 (1991).

A forum

selection clause can be fundamentally fair even when it is found
in a contract between a business entity and an individual
consumer.

Carnival, 499 U.S. at 595.

A forum selection clause

is “enforceable unless [it] would actually deprive the opposing
party of his fair day in court.”
752.

M.B. Restaurants, 183 F.3d at

A forum selection clause is still enforceable even when it

is the product of a form contract and was not actually negotiated
or bargained for.

Carnival, 499 U.S. at 593; M.B. Restaurants,

183 F.3d at 752.
In Carnival, the U.S. Supreme Court determined that a
forum selection clause in a contract between a cruise line and
its passengers was enforceable.

Carnival, 499 U.S. at 595.

In

that case, a passenger from the state of Washington was injured
during a cruise off the coast of Mexico, and she and her husband
sued Carnival in federal court in the Western District of
Washington.

Id. at 588.

Carnival moved for summary judgment,

arguing that the forum selection clause found on the back of the

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passenger’s ticket stub required the passenger to bring suit in
Florida, where Carnival was headquartered.

Id. at 587, 588.

The Supreme Court determined that the forum selection
clause at issue was reasonable because “a cruise line has a
special interest in limiting the fora in which it potentially
could be subject to suit.”

Id. at 593.

Because it was

foreseeable that passengers from many locales could potentially
be injured on the cruise, it was reasonable for Carnival to limit
the number of places where an action against it could be brought.
Id. (citing The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 13
(1972)).
In addition, the Court determined that the forum
selection clause was reasonable because it dispelled any
confusion regarding where to bring suits arising from the
contract, “sparing litigants the time and expense of pretrial
motions to determine the correct forum and conserving judicial
resources that otherwise would be devoted to deciding those
motions.”

Id. at 593-94.
Finally, the Court decided that the forum selection

clause in Carnival was fundamentally fair because (1) there was
no indication that the particular forum was chosen to discourage
“passengers from pursuing legitimate claims,” (2) the cruise line
had its principal place of business in the forum state, (3) the
cruise line did not commit fraud or overreach in obtaining the

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passengers’ assent to the forum selection clause, and (4) the
passengers “presumably retained the option of rejecting the
contract with impunity.”

Id. at 595.
DISCUSSION

Here, just as Carnival served a national clientele in
operating its cruise line, Nationwide also serves a substantially
national clientele in its insurance business (Filing No. 21, at
7).

The fact that Nationwide must qualify to do business as an

insurance carrier in each state, as emphasized by defendants,
has no bearing on this fact.

Thus, it is reasonable for

Nationwide to limit the number of places where an action may be
brought against it.

Furthermore, as in Carnival, plaintiffs have

presented nothing to indicate that Nationwide chose Ohio as a
forum for any illegitimate reason.

Nationwide is an Ohio

corporation, with its principal place of business in Columbus,
Ohio, and has a legitimate interest in litigating in that state.
As in Carnival, Nationwide did not procure the forum
selection clause through fraud or overreaching, and plaintiffs
had the option to reject the forum selection clause with
impunity.

Moreover, in Carnival, the plaintiffs were individuals

whose lack of legal sophistication was not sufficient to prevent
the forum selection clause from operating.

Here, defendants

point out that Mid-American “is in the business of offering
‘insurance claims administrative support and management

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services’” and that it “represents ‘more than 100 Midwest
corporations,’ including NARD, and has been in business since
1981" (Filing No. 21, at 5, citing the complaint and MidAmerican’s website).

Similarly, NARD is not an individual, but a

non-profit corporate employer.

Two corporate plaintiffs can be

assumed to be better acquainted with the terms of the contract
into which they entered than can two individual passengers.
However, plaintiffs also claim that insurance
contracts, as contracts of adhesion, should be treated
differently when construing a forum selection clause.

Defendants

claim that this view is anachronistic, stating, “In modern
jurisprudence, federal courts regularly enforce forum selection
clauses in insurance contracts” (Filing No. 21, at 8, collecting
cases).

The Court is not convinced that any distinction is to be

made between insurance contracts and other contracts with respect
to forum selection clauses.
While it is true that the plaintiffs may experience
some extra costs and inconvenience by litigating in Ohio as
opposed to Nebraska, this disadvantage was part of the bargaining
process at the time the contract was made.

“[M]ere inconvenience

to a party is an insufficient basis to defeat an otherwise
enforceable forum selection clause.”

Servewell Plumbing, LLC v.

Fed. Ins. Co., 439 F.3d 786, 790 (8th Cir. 2006) (quotation
omitted).

“Instead, a party seeking to avoid his promise must

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demonstrate 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.”
omitted).

Id. (quotation

The Court finds that plaintiffs have not made a

sufficient showing of grave difficulty to defeat the forum
selection clause.
Once the forum selection clause has been found valid,
the Court must determine whether to dismiss the action or to
transfer venue.

Generally, courts favor transfer of an action

under 28 U.S.C. § 1404(a) over dismissal if a forum selection
clause dictates venue in another federal district.

14D Charles

A. Wright et al., Federal Practice and Procedure § 3803.1 at 75
(3d ed. 2007).

However, when “the valid forum selection clause

mandates venue in a state . . . court, Section 1404 has no
application.”

Id. at 117.

dismiss or remand the case.

In such situations, the Court must
Id.

In this case, the forum selection clause states,
“Venue for any legal action filed by either party under this
Contract, shall be located in Columbus, Ohio.”
No. 1, at 18).

(Ex. 3, Filing

Because the forum selection clause does not

dictate venue in a federal court, transfer under § 1404 is not
proper.

In addition, plaintiffs make no argument as to whether

they prefer that the Court dismiss the case or transfer venue;
plaintiffs do not engage in the typical analysis evaluating

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transfer as laid out in 28 U.S.C. § 1404(a) and Terra Int'l, Inc.
v. Mississippi Chem. Corp., 119 F.3d 688 (8th Cir. 1997).
Consequently, while plaintiffs will have the option of bringing
their case in the United States District Court for the Southern
District of Ohio, the Court will not prevent plaintiffs from
exercising their option of bringing the case in an Ohio state
court of appropriate venue and jurisdiction.

For these reasons,

the Court will not transfer venue, but will dismiss the case
without prejudice.

A separate order will be entered in

accordance with this memorandum opinion.
DATED this 5th day of June, 2012.
BY THE COURT:
/s/ Lyle E. Strom
____________________________
LYLE E. STROM, Senior Judge
United States District Court

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