HOUSTON CASUALTY COMPANY V. THOMAS LINDERMAN GRAHAM, INC.

Filing 20

MEMORANDUM OPINION AND ORDER signed by JUDGE THOMAS D. SCHROEDER on 07/25/2017, that the motion to dismiss (Doc. 8 ) is DENIED. (Garland, Leah)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
HOUSTON CASUALTY COMPANY,
Plaintiff,
v.
THOMAS LINDERMAN GRAHAM, INC.,
Defendant.

)
)
)
)
)
)
)
)
)

1:17CV40

MEMORANDUM OPINION AND ORDER
THOMAS D. SCHROEDER, District Judge.
Plaintiff Houston Casualty Company (“HCC”) brings this action
seeking a declaratory judgment that it owes no further duty to
defend

its

insured,

Defendant

Thomas

Linderman

Graham,

(“TLG”), in a State court action presently on appeal.

Inc.

TLG now

moves to dismiss the complaint, contending that it contravenes a
forum-selection clause in the parties’ May 1, 2015 settlement
agreement (“Agreement”) in an earlier duty-to-defend declaratory
judgment action by HCC involving the same State court action.

The

forum-selection

the

clause

required

any

action

to

enforce

Agreement to be brought in Wake County Civil Superior Court. (Doc.
8 at 1.)

For the reasons explained below, the court finds that

the Agreement’s forum-selection clause does not encompass HCC’s
present action.
I.

TLG’s motion to dismiss must therefore be denied.

BACKGROUND
Viewed in the light most favorable to HCC, the operative facts

are as follows:
Defendant TLG, a real estate agency, held a professional
liability insurance policy with Plaintiff HCC.
¶ 19.)

(Doc. 1 at 8,

In 2006, the owner of a commercial property in Durham

retained TLG to prepare an offering memorandum for prospective
purchasers.

(Id. at 4, ¶ 12.)

Triple Net Properties, LLC,

eventually purchased the property and sold fractional interests to
a number of parties.

(Id. at 4-5, ¶ 12.)

The ultimate purchasers

sued TLG in 2012, alleging that its memorandum overrepresented the
likelihood that existing tenants would renew their leases (and
therefore overrepresented the property’s value).

(Doc. 1 at 5,

¶ 12.)
While that action was pending, HCC brought a declaratory
judgment action against TLG in Wake County Civil Superior Court,
seeking a declaration that it had no duty to defend TLG in the
property owners’ lawsuit.
6.)

(Id. at 11, ¶¶ 25-26; Doc. 10-1 at 4-

TLG filed an answer and counterclaims.

(Doc. 1 at 11, ¶ 26.)

On January 10, 2014, the Superior Court held that HCC had a duty
to defend TLG (Doc. 10-1 at 5-6), and on May 1, 2015, HCC and TLG
settled

their

Agreement

is

dispute
a

short,

by

entering

into

three-paragraph

the

Agreement.

document

that

The

provides

principally that each party dismiss all claims against the other
with prejudice, agree to adhere to the Superior Court’s rulings,
and acknowledge that the Agreement would not release any party
2

from “any potential future contractual duties or obligations which
may accrue after April 27, 2015, or any causes of action that arise
therefrom.”

(Id. at 1-7.)

The last sentence reads: “Any action

to enforce this Agreement shall be filed in Wake County, North
Carolina, Civil Superior Court.”

(Id. at 3.)

Meanwhile, HCC made a settlement offer to the property owners
on TLG’s behalf in the underlying lawsuit.

(Id. at 11, ¶ 29.)

The owners accepted the offer, but TLG refused to consent to it.
(Id. at 12, ¶ 31.)

Thereafter, the court granted TLG’s motion for

summary judgment and dismissed all the claims then pending.
1 at 7, ¶ 16.)

(Doc.

The property owners have since appealed that

ruling.
In the present case, HCC contends that under the insurance
policy, TLG’s refusal to consent to the settlement excused HCC
from further defending TLG in the action.

(Id. at 12, ¶ 33.)

HCC

therefore seeks a declaratory judgment from this court that it had
no duty to defend TLG following TLG’s refusal to consent to the
settlement.
TLG now moves to dismiss the complaint for improper venue on
the basis that the Agreement’s forum-selection clause makes venue
in this court improper.
II.

ANALYSIS
A.

Standard of Review

A motion to dismiss based on a forum-selection clause is
3

treated as a motion to dismiss for improper venue, pursuant to
Rule 12(b)(3).

Sucampo Pharm., Inc. v. Astellas Pharma, Inc., 471

F.3d 544, 550 (4th Cir. 2006).

“On a motion to dismiss under Rule

12(b)(3), the court is permitted to consider evidence outside the
pleadings.

A plaintiff is obliged, however, to make only a prima

facie showing of proper venue in order to survive a motion to
dismiss.

In assessing whether there has been a prima facie venue

showing, [the court views] the facts in the light most favorable
to the plaintiff.”

Aggarao v. MOL Ship Mgmt. Co., 675 F.3d 355,

365–66 (4th Cir. 2012) (citations omitted).
B.

Scope of the Forum-Selection Clause
1.

Choice of Law

“Interpreting a forum-selection clause first requires the
court to ascertain what law applies to the contract, because the
court must apply that law to decide the scope of the contract’s
relevant clauses.”

Generation Companies, LLC v. Holiday Hosp.

Franchising, LLC, No. 5:15-CV-220-FL, 2015 WL 7306448, at *4
(E.D.N.C. Nov. 19, 2015) (citing Atl. Marine Const. Co. v. U.S.
Dist. Court for W. Dist. of Tex., 134 S. Ct. 568, 583–84 (2013)).
Here, neither party contends that the Agreement’s forum-selection
clause is unenforceable; 1 the only dispute is over its scope.

1

“When a forum-selection clause is asserted as the basis for a motion
to transfer under § 1404(a), its validity and effect are governed by
federal law regardless of the basis for the court’s subject-matter
jurisdiction.” Eisaman v. Cinema Grill Sys., Inc., 87 F. Supp. 2d 446,
448 n.1 (D. Md. 1999) (citing Stewart Org., Inc. v. Ricoh Corp., 487

4

“‘[T]he body of law selected in an otherwise valid choiceof-law clause’ governs the interpretation of a forum-selection
clause.”

Queen City Pastry, LLC v. Bakery Tech. Enterprises, LLC,

No. 5:14-CV-143, 2015 WL 3932722, at *3 (W.D.N.C. June 26, 2015)
(quoting Martinez v. Bloomberg LP, 740 F.3d 211, 218 (2d Cir.
2014)) (alteration in original). Here, the Agreement selects North
Carolina law (Doc. 10-1 at 2), so the court will apply North
Carolina

law

to

determine

whether

the

forum-selection

clause

encompasses HCC’s claims.
2.

Scope of the Forum-Selection Clause

Under North Carolina law, settlement agreements are construed
according to principles of ordinary contract interpretation.
Associated,

Ltd.

v.

Am.

Tobacco

Co.,

No.

1:91CV415,

2004

ABD
WL

1554155, at *3 (M.D.N.C. July 8, 2004) (citing Chappell v. Roth,
353 N.C. 690, 692, 548 S.E.2d 499, 500 (2001)).

North Carolina

contract law gives words their ordinary meaning, id. at 4 (citing
Internet E., Inc. v. Duro Commc’ns, Inc., 146 N.C. App. 401, 405–
06, 553 S.E.2d 84, 87 (2001)), and requires courts to interpret
“clear and unambiguous” language as it is written, id. (quoting
Corbin v. Langdon, 23 N.C. App. 21, 25, 208 S.E.2d 251, 254
(1974)).

Cf. Rivera v. Centro Medico de Turabo, Inc., 575 F.3d

U.S. 22, 29–31 (1988)). Here, of course, TLG asserts the clause as a
basis for a motion to dismiss. Cf. id. at 448-49 (applying State law
to a forum-selection clause to decide a motion to dismiss).

5

10, 19 (1st Cir. 2009) (“[I]t is the language of the forum
selection clause itself that determines which claims fall within
its scope.”).
susceptible
parties.”

A term is ambiguous if it is “fairly and reasonably

to

either

of

the

constructions

asserted

by

the

Williams v. Aluminum Co. of Am., No. 1:00CV00379, 2006

WL 2023133, at *2 (M.D.N.C. July 17, 2006) (quoting Glover v. First
Union Nat’l Bank of N.C., 109 N.C. App. 451, 456, 428 S.E.2d 206,
209 (1993)), aff’d, 234 F. App’x 73 (4th Cir. 2007).

Unambiguous

language

meaning

is

interpreted

as

a

matter

of

ambiguous language is a question of fact.

law;

the

of

ABD Associated, Ltd.,

2004 WL 1554155, at *4 (citing Taha v. Thompson, 120 N.C. App.
697, 701, 463 S.E.2d 553, 556 (1995)).
The Agreement’s forum-selection clause provides: “Any action
brought to enforce this Agreement shall be filed in Wake County,
North Carolina, Civil Superior Court.”

(Doc. 10-1 at 2.)

The

language at issue here is the first clause, “Any action brought to
enforce

this

Agreement.”

HCC

argues

that

this

language

is

unambiguous and that its present lawsuit does not fall within it.
(Doc. 16 at 6.)

TLG does not offer an interpretation of this

phrase, as such, but necessarily reads it as more expansive. 2

2

TLG’s motion rests largely on the following language from Atlantic
Marine Construction Co.: “When the parties have agreed to a valid forumselection clause, a district court should ordinarily transfer the case
to the forum specified in that clause.
Only under extraordinary
circumstances unrelated to the convenience of the parties should a
§ 1404(a) motion be denied.” 134 S. Ct. at 581 (footnote omitted). That
rule, however, “presupposes a contractually valid forum-selection

6

A

term

susceptible
parties.”

is
to

ambiguous
either

of

if

it

the

is

“fairly

constructions

and

reasonably

asserted

by

the

Williams, 2006 WL 2023133, at *2 (citation omitted).

At most, TLG contends that the Agreement incorporated the 2014
summary judgment order that required HCC to continue to defend the
underlying action “until all the covered claims were ‘finally
resolved.’”

(Doc. 19 at 1-3.)

TLG argues that because the case

is on appeal, the action is not finally resolved.

(Id. at 3.)

From this, TLG concludes, “the duty assumed in [the Agreement]
is . . . a central component of the current dispute between the
parties.”

(Id. at 4.)

Elsewhere, TLG intonates that it construes

the clause to mean that “all further litigation involving the
issues at issue should be litigated” in the agreed-upon court.
(Id. at 3; see also id. (stating that the agreement “specifically
provided that any subsequent actions relating to that matter would
be filed in” the selected court).)
HCC acknowledges that its present claims are substantially
related to the Agreement but contends that the present action was

clause,” id. at 581 n.5, and, “by extension[,] . . . a dispute that
unquestionably falls within the scope of that contract,” Indus. Print
Techs. LLC v. Canon U.S.A., Inc., No. 2:14-CV-00019, 2014 WL 7240050,
at *2 (E.D. Tex. Dec. 19, 2014). Accord Telesocial Inc. v. Orange S.A.,
No. 14-CV-03985-JD, 2015 WL 1927697, at *3 (N.D. Cal. Apr. 28, 2015)
(“If the claims do not fall within the scope of the forum selection
clause, the Court need not reach the forum non conveniens issue, and
Orange’s lengthy discussion of Atlantic Marine is nothing more than
interesting but irrelevant commentary.” (citation omitted)). In other
words, Atlantic Marine addressed the effects of forum-selection clauses,
not their scope.

7

not brought to enforce that Agreement, as required by the plain
language of the forum-selection clause.

(Doc. 16 at 5.)

HCC

correctly points out that it has made no allegation that TLG
violated any term of the Agreement.

(Id.)

HCC relies on the

Agreement’s clear terms, urging the court to “enforce the contract
as the parties have made it” and not “remake” it.

(Id. at 6

(quoting Wake Cty. Hosp. Sys., Inc. v. Nat’l Cas. Co., 804 F. Supp.
768, 773 (E.D.N.C. 1992), aff’d, 996 F.2d 1213 (4th Cir. 1993)).)
The

language

in

question,

“brought

to

enforce

this

Agreement,” is not “fairly and reasonably susceptible to” TLG’s
construction.

In essence, TLG asks the court to read the phrase

“actions brought to enforce the Agreement” to mean “actions of
which the Agreement is a central component” or “actions involving
the issues the Agreement addressed” or “actions relating to the
Agreement.”

These constructions are substantially broader than

the plain language.

For an action to be brought “to enforce” the

Agreement, the action must in some way rely on the Agreement or
allege a violation of its terms.

At the very least, such an action

must allege facts that, if true, would show that the Agreement was
violated or would show that it entitles the claimant to some
relief.

The language TLG proposes would encompass any action that

relates to the Agreement or its underlying terms.
Because the phrase in question is not ambiguous, its meaning
is a question of law.

As North Carolina law dictates, the court
8

will accord the phrase its clear, ordinary meaning.

Because only

one party has offered a construction of the phrase, and because
that construction accords with its plain language, the court will
adopt it.
Under the ordinary meaning of the forum-selection provision,
it is plain that the action was not brought “to enforce the
Agreement.”

The Agreement contains seven terms, only three of

which could be “enforced.” 3

First, each party was to execute a

notice of dismissal with prejudice pursuant to North Carolina Rule
of Civil Procedure 41.

(Doc. 10-1 at 1, ¶ 1.)

agree to bear their own costs and expenses.

Second, the parties
(Id. at 1, ¶ 2.)

Finally, the parties agree to “follow” the 2014 summary judgment
order, which is incorporated into the Agreement by reference.
(Id.)

The only term in the order that would need to be “followed”

is its holding that HCC “has a continuing duty to defend the
underlying action . . . until all the potentially covered claims
are finally resolved.”

(Id. at 5-6.)

HCC does not allege that TLG violated any of these terms, nor
does it invoke the Agreement for any form of relief.

It does not

allege facts that would constitute a violation of the Agreement on
TLG’s part.

Of course, TLG alleges in a counterclaim that HCC is

3

The other four terms are the forum-selection clause (Doc. 10-1 at 2),
the choice-of-law clause (id.), and provisions deeming the settlement
agreement’s consideration “material” (id. at 1) and recognizing that it
does not release the parties from obligations that accrue after April
27, 2015 (id. at 1, ¶ 3).

9

acting

in

violation

of

the

Agreement’s

requirement

continue to defend TLG in the underlying action.

that

HCC

(Doc. 10 at 12,

¶ 67 (“[TLG] seeks a declaratory judgment declaring that the
plaintiff has breached its duty to continue to provide a defense
in the underlying action . . . .”).)

But TLG did not bring this

action; HCC did.
The parties negotiated for the settlement agreement “at armslength” (Doc. 8-1 at 1, ¶ 5 (affidavit of TLG’s president, John B.
Linderman, Jr.)), and they were free to bargain for any of the
terms TLG now proffers.

They did not.

Rather, they settled on

the phrase, “Any action brought to enforce this Agreement.”

HCC

did not bring this action to enforce the Agreement, and HCC’s
claims will not have the effect of enforcing it.

This action

therefore falls outside the scope of the forum-selection clause.
III. CONCLUSION
For the reasons stated, the court finds that this action is
outside the scope of the parties’ forum-selection clause.
IT IS THEREFORE ORDERED that the motion to dismiss (Doc. 8)
is DENIED.
/s/
Thomas D. Schroeder
United States District Judge
July 25, 2017

10