PTS DATA CENTER SOLUTIONS, INC. v. RF CODE, INC.

Filing 13

OPINION. Signed by Judge William J. Martini on 2/20/15. (gh, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

PTS DATA CENTER SOLUTIONS, INC.,

Civ. No. 2:14-3483 (WJM)

Plaintiff,
OPINION
v.
RF CODE, INC.
Defendant.

WILLIAM J. MARTINI, U.S.D.J.:
In this action, Plaintiff PTS Data Center Solutions, Inc. (hereinafter, “PTS”) alleges
that Defendant RF Code, Inc. (hereinafter, “RF Code”) violated a non-disclosure
agreement (hereinafter, “the NDA”) by, among other things, directly marketing its products
to one of PTS’s clients. This matter comes before the Court on RF Code’s motion to
dismiss, or in the alternative, transfer venue. Because the NDA’s forum selection clause
provides that this case must be heard in Texas, the Court will grant RF Code’s motion and
transfer this matter to the Western District of Texas.
I.

BACKGROUND

PTS is a New Jersey corporation that specializes in providing data center design and
management solutions to its clients. (Complt. at ¶5). RF Code is a Texas corporation that
provides businesses with radio frequency identification tags designed to track assets used
in data centers. (MTD at 2). Because the parties come from different states and the amount
of controversy exceeds $75,000, this Court has subject-matter jurisdiction under 28 U.S.C.
§ 1332(a)(1).
The Court will recount the allegations in the Complaint only to the extent that they
are relevant to RF Code’s motion to dismiss. In July 2011, PTS and RF Code entered into
a partnership agreement under which PTS received a license to market and sell RF Code
products to PTS customers. (Complt. at ¶14). In addition to the partnership agreement,
the parties entered into the NDA, which provided that RF Code would not use, disseminate,
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or disclose any of PTS’s confidential information, including information related to PTS’s
customers. (Complt. at ¶16). Of particular significance to the instant motion is the NDA’s
forum selection clause, which provides:
This Agreement shall be governed in all respects by the laws of
the United States of America and by the laws of the State of
Texas…. Each of the parties irrevocably consents to the
exclusive personal jurisdiction of the federal and state courts
located in Texas, as applicable, for any matter arising out of or
relating to this Agreement….Additionally, notwithstanding
anything in the foregoing to the contrary, a claim for equitable
relief arising out of or related to this Agreement may be brought
in any court of competent jurisdiction.
(Complt.. at Ex. 1, ¶13).
In June 2014, PTS filed its Complaint in the United States District Court for the
District of New Jersey. The Complaint alleges that RF Code violated the NDA by directly
marketing its products to one of PTS’s clients without PTS’s knowledge or involvement.
(Complt. at ¶¶35-48). It asserts six causes of action: (1) breach of contract; (2) injunctive
relief pursuant to the inevitable or probable disclosure doctrine; (3) breach of fiduciary
duty; (4) violation of the New Jersey Trade Secrets Act; (5) conversion; and (6) tortious
interference with business relations. (Complt. at ¶¶49-83). The Complaint seeks fourteen
specific forms of relief; thirteen of those requests involve monetary damages, and one seeks
a permanent injunction. (Complt. at ¶83).
II.

DISCUSSION

RF Code now moves to dismiss the Complaint on the grounds that the forum
selection clause requires that PTS bring this action in Texas. In the alternative, RF Code
moves for this Court to transfer the case to the Western District of Texas pursuant to 28
U.S.C. § 1404(a). PTS does not challenge the enforceability of the forum selection clause,
i.e., it does not argue that the forum selection clause was procured by fraud, or that it runs
contrary to public policy. Instead, PTS contends that the forum selection clause does not
apply to this dispute because the Complaint seeks substantial forms of equitable relief, not
just money damages. PTS argues the forum selection clause’s carve-out provision – which
provides that “a claim for equitable relief…may be brought in any court of competent
jurisdiction” – applies in this case because “the thrust of the Complaint is equitable in
nature.” (Opp. at 7).
The Court must therefore determine the scope of the forum selection clause. “The
question of the scope of a forum selection clause is one of contract interpretation.” John
Wyeth & Bro. Ltd. v. CIGNA Intern. Corp., 119 F.3d 1070, 1073 (3d Cir.1997). Moreover,
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the law that governs the NDA will also govern the interpretation of the forum selection
clause. See Martinez v. Bloomberg, L.P., 740 F.3d 211 (2d Cir. 2014) (“To ensure that the
meaning given to a forum selection clause corresponds with the parties’ legitimate
expectations, courts must apply the law contractually chosen by the parties to interpret the
clause.”) While the NDA provides that it is to be governed by Texas law, the parties did
not rely on any distinctive features of Texas law in their briefings. After reviewing relevant
legal authority from Texas, the Court is satisfied that the parties’ oversight is immaterial
because Texas courts – like most courts – apply general contract principles to forum
selection clauses. See John Wyeth & Bro. Ltd., 119 F.3d at at 1074. (applying general
contract principles to forum selection clause governed by English law where parties did
not rely on any distinctive features of English law).
In construing the forum selection clause, the Court “must ascertain and give effect
to the parties’ intentions as expressed in the document.” Frost Nat. Bank v. L & F
Distributors, Ltd., 165 S.W.3d 310, 311-12 (Tex. 2005). As part of this analysis, the Court
must first decide whether the contract unambiguously states the parties’ intentions. See
John Wyeth & Bro. Ltd., 119 F.3d at 1074; In re International Profit Associates, Inc., 274
S.W.3d 672, 676-77 (Tex. 2009). A contract is unambiguous if it is susceptible of one
reasonable interpretation. Frost Nat. Bank, 165 S.W.3d at 312.
The Court concludes that the NDA’s forum selection clause unambiguously
provides that PTS was required to file this case in a Texas court. The narrow carve-out to
the forum selection clause provides that “a claim for equitable relief” may be heard in any
court of competent jurisdiction. The Complaint, however, is much more than simply “a
claim for equitable relief.” Thirteen of the fourteen specific requests for relief in the
Complaint request monetary damages. Of the Complaint’s seven causes of action, only
one makes specific reference to a need for an injunction. And by PTS’s own admission,
the Complaint seeks “significant” monetary relief. (Opp. at 7). Notwithstanding PTS’s
contention that the Complaint is “primarily equitable,” this action is not merely “a claim
for equitable relief” that PTS can file in any court of competent jurisdiction.
The Court’s analysis is also driven by the well-settled principle that when a court
determines the parties’ intention, the contract must be interpreted as a whole. Williams v.
Metzler, 132 F.3d 937, 947 (3d Cir. 1997); Capitol Bus Co. v. Blue Bird Coach Lines, Inc.,
478 F.2d 556, 560 (3d Cir. 1973). A “court cannot interpret words in a vacuum, but rather
must carefully consider the parties' context and the other provisions of the plan.” In re New
Valley Corp., 89 F.3d 143, 149 (3d Cir.1996); see also Frost Nat. Bank, 165 S.W.3d at 312
(“We consider the entire writing and attempt to harmonize and give effect to all the
provisions of the contract by analyzing the provisions with reference to the whole
agreement.”) Here, the forum selection clause is worded broadly, providing that “any
matter arising out of or relating to” the NDA must be heard in a Texas court. It is then
followed by a much narrower carve-out that applies only to “a claim for equitable relief.”

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Other courts interpreting similar provisions have concluded that the carve-out is not
triggered just because a plaintiff brings equitable claims in a complaint. In Remy Amerique,
Inc. v. Touzet Distribution, S.A.R.L., 816 F. Supp. 213 (S.D.N.Y. 1993), a contract included
an arbitration clause requiring that any controversy relating to the contract be decided in
arbitration. It also included a carve-out that allowed the parties to seek equitable relief in
any court of competent jurisdiction. The plaintiff contended that the carve-out allowed it
to file its claims for injunctive relief in federal court rather than in arbitration. Finding that
the contract was unambiguous, the court rejected this argument. After harmonizing the
arbitration agreement as a whole, the court found that the purpose of the carve-out was to
allow the parties to seek preliminary injunctive relief in order to maintain the status quo
pending the outcome of the underlying dispute. See 816 F. Supp. at 217-18. Otherwise,
the exception would severely narrow the broad agreement to arbitrate. 1 See id; see also
Nexteer Auto. Corp. v. Korea Delphi Auto. Sys. Corp., No. 13-cv-15189, 2014 WL 562264,
*12 (E.D. Mich. Feb. 13, 2014). Similarly, in one of the few cases involving an equitable
relief carve-out in the context of a forum selection clause, the court agreed that “[w]hen
read in its entirety, the clear purpose of the forum selection provision is to permit [the
plaintiff] to ‘follow the money’….[and, among other things,] seek an order of attachment
in [any state of competent jurisdiction] to maintain the status quo pending litigation.” See
General Elc. Capital Corp. v. Metz Family Enterprises, LLC, 141 Conn. App. 412, 422
(Conn. App. Ct. 2013). In sum, PTS’s sweeping interpretation of the carve-out provision
has been rejected by other courts on multiple occasions. Reading the contract as a whole,
the Court agrees with RF Code that PTS must file this action in a Texas court.
There still remains the question of whether the Court should dismiss the Complaint
pursuant to Federal Rule of Civil Procedure 12(b)(6) or transfer it to a different district
pursuant to 28 U.S.C. § 1404(a). “[A]s a general matter, it makes better sense, when venue
is proper but the parties have agreed upon a not-unreasonable forum selection clause to
another venue, to transfer rather than dismiss.” Salovaara v. Jackson Nat’l Life Ins. Co.
246 F.3d 289, 298-99 (3d Cir. 2001). Here, RF Code does not contend that venue is not
proper in New Jersey, it instead has (successfully) argued that the parties contractually
agreed to resolve this case in a Texas court. See Atlantic Marine Const. Co. v. United
States Dist. Ct. for the Western Dist. of Texas, 134 S.Ct. 568, 577 (“Whether venue is
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According to PTS, the “NDA itself recognizes that any action based on a breach thereof must be
principally equitable in nature.” (Opp. at 2). PTS then argues that because its action must be
principally equitable in nature, the carve-out provision in the forum selection clause applies. This
argument proves too much. If PTS were correct that (1) any action based on a breach of the NDA
must be principally equitable in nature, and (2) any action that is principally equitable in nature
comes within the forum selection clause’s carve-out provision, the NDA’s forum selection clause
would be rendered an absolute nullity. In other words, the exception would swallow the rule. The
Court cannot accept such an interpretation as reasonable. See, e.g., El Paso Field Services, L.P. v.
MasTec North America, Inc., 389 S.W.3d 802, 805 (Tex. 2012) (“[W]e must examine and consider
the entire writing in an effort to harmonize and give effect to all the provisions of a contract so that
none will be rendered meaningless.”)
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‘wrong’ or ‘improper’ depends exclusively on whether the court in which the case was
brought satisfies the requirements of federal venue laws, and those provisions say nothing
about a forum-selection clause.”) RF Code requests that if the Court chooses not to dismiss
the Complaint, it should transfer the action to the Western District of Texas. PTS similarly
notes that if the Court sides with RF Code’s interpretation of the forum selection clause, it
should transfer the case to another district court rather than dismiss it. The Court concludes
that transfer to the Western District of Texas would satisfy the terms of the forum selection
clause. Moreover, there are no exceptional circumstances that preclude this Court from
transferring this case to the Western District of Texas. See Atlantic Marine Const. Co.,
134 S.Ct. at 581 (in §1404(a) context, “a valid forum selection clause [should be] given
controlling weight in all but the most exceptional cases.”) (citations omitted). The Court
will therefore transfer the case to the Western District of Texas pursuant to 28 U.S.C. §
1404(a).
III.

CONCLUSION

For the foregoing reason, RF Code’s motion to transfer pursuant to 28 U.S.C. § 1404(a)
is GRANTED. The Court will transfer this case to the Western District of Texas. An
appropriate order accompanies this decision.

/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: February 19, 2015

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