Cliffs Natural Resources Inc. v. Seneca Coal Resources, LLC., et al.

Filing 59

Opinion and Order. Defendant Seneca Coal Resources' Motion to Transfer Venue (Related doc # 42 ) is granted. Case is transferred to the United States District Court for the District of Delaware for further adjudication. Judge Christopher A. Boyko on 5/12/2017. (H,CM)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

CLIFFS NATURAL RESOURCES, INC )
)
Plaintiff,
)
)
Vs.
)
)
SENECA COAL RESOURCES, LLC., )
ET AL.,
)
)
Defendant.
)

CASE NO.1:16CV3034
JUDGE CHRISTOPHER A. BOYKO

OPINION AND ORDER

CHRISTOPHER A. BOYKO, J:
This matter is before the Court on Defendant Seneca Coal Resources, LLC.’s Motion
to Transfer Venue Under 28 U.S.C. § 1404(a). (ECF # 42). For the following reasons, the
Court grants Defendant’s Motion and transfers the case to the United States District Court for
the District of Delaware for further adjudication.
This matter arises out of a purchase agreement between Plaintiff Cliffs Natural
Resources, Inc. (“Cliffs”) and Defendant Seneca Coal Resources, LLC (“Seneca”) that was
entered into in 2015, involving the sale of certain mining assets owned by Cliffs to Seneca.
According to Cliffs’ Complaint, Cliffs is an Ohio-based mining and natural resources
company that is a major supplier of iron ore pellets to the North American steel industry.

Seneca is a Virginia-based company. On December 22, 2015, Cliffs, CLF PinnOak LLC and
Seneca entered into a Unit Purchase Agreement (“UPA”) wherein Cliffs sold outstanding
equity interests in Cliff North American Coal LLC to Seneca. Under the UPA, Seneca
agreed to replace bonds and guarantees and agreed to reimburse Cliffs for certain expenses.
Seneca agreed to replace certain bonds and cause the release of Cliffs’ bonds within 45 days
of the Closing date.
Because of the sale of the equity interests in Cliffs North American Coal, Seneca was
responsible for assuming all liabilities, including the purchase of workers compensation
insurance and administering the same. Under the UPA, Seneca agreed to indemnify Cliffs for
any losses arising out of or resulting from the breach of the UPA, the bonds or guarantees.
Seneca failed to replace the bonds within 45 days as required by the UPA and failed to
cause the timely release of the guarantees and letters of credit, causing Cliffs to incur losses.
Cliffs also incurred additional losses related to capital lease repayments, workers
compensation costs, bond premiums and medical costs all of which Seneca was contractually
obligated to pay. Seneca has failed to assume administration of workers compensation as
required under the UPA. Cliffs now moves for Breach of Contract for Seneca’s failure to pay
under the UPA over $6,000,000. Cliffs further moves for a declaratory judgment that Seneca
may not transfer assets to its Defendant owners or affiliates until it pays its obligations to
Cliffs under the UPA.
Seneca has counterclaimed for Breach of the UPA for Cliffs’ failure to disclose
obligations due and owing at the time of the sale. Seneca also alleges a claim for Breach of
Contract for failing to make Union payments and Breach of Contract for failing to pay certain

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contractual obligations at closing.
On February 1, 2017, Cliffs filed its First Amended Complaint adding additional
parties Cliffs alleges conspired to transfer assets from Seneca to the newly named affiliates of
Seneca.
On March 30, 2017, Defendant Seneca Coal Resources, LLC. moved to transfer the
case to Delaware based on a forum selection clause in the UPA. Section 9.10 of the UPA
reads in pertinent part:
This Agreement shall be governed by and construed in accordance with the
Laws of the State of New York applicable to Contracts to be made and
performed entirely therein without giving effect to the principles of conflict of
law thereof or of any other jurisdiction. Each of the parties hereto hereby (a)
expressly and irrevocably submits to the exclusive personal jurisdiction of
the United States District Court for the District of Delaware and to the
jurisdiction of any other competent court of the State of Delaware located
in New Castle County (collectively, the “Delaware Courts”), preserving,
however, all rights of removal to such federal court under 28 U.S.C. 1441
in connection with all disputes arising out of or in connection with this
Agreement or the transactions contemplated hereby and (b) agrees not to
commence any litigation relating thereto except in such courts. * * * Each
party hereto hereby waives the right to any other jurisdiction or venue for any
litigation arising out of or in connection with this Agreement or the
transactions contemplated hereby to which any of them may be entitled by
reason of its present or future domicile.
Due to the mandatory language of the forum selection clause and pursuant to the
United States Supreme Court’s relatively recent ruling on the enforceability of forum
selection clauses, Defendant contends the case must be transferred to Delaware.
Cliffs argues Seneca expressly agreed that this Court has jurisdiction over Cliffs’
claims in Seneca’s Motion to Dismiss for Lack of Jurisdiction. In its Motion at pgs 13-14,
Seneca represented “Defendant Seneca recognizes that there exists a justiciable case or
controversy with Plaintiff to vest this court with subject matter jurisdiction with respect to
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Plaintiff’s post- transaction breach of contract claims. The BB&T settlement agreement
contains a specific retention of jurisdiction by the Court.” Cliffs contends this statement,
Seneca’s waiting approximately three months after Plaintiff filed its Complaint to raise a
venue challenge and Seneca’s filing of a Motion to Dismiss and Answer constitute a waiver
of its venue challenge. Furthermore, Cliffs contends Seneca expressly consented to this
Court’s jurisdiction in a 2016 settlement of a related case wherein the parties agreed the Court
retained jurisdiction to enforce the terms of the settlement or otherwise. Also, Cliffs argues
Defendant improperly moved for transfer of venue under 28 U.S.C. § 1404(a) when they
should have moved under 28 U.S.C. § 1406. Lastly, Cliffs argues it did not consent to venue
in Delaware as no party is a resident of Delaware and non-of the actions at issue occurred in
Delaware.
Having reviewed the Motion,Opposition, Reply and supporting exhibits the Court
grants Defendant’s Motion.
First, Defendant is correct that 28 U.S.C. § 1404(a) is the proper mechanism for
enforcing a forum-selection clause. See Atlantic Marine Const. Co. v. U.S. Dist. Court for
W. Dist. of Texas, 134 S. Ct. 568, 574, 187 L. Ed. 2d 487 (2013) (“ the clause may be
enforced through a motion to transfer under § 1404(a), which permits transfer to any other
district where venue is proper or to any district to which the parties have agreed by contract or
stipulation.”).
28 U.S.C. §1404(a) reads:
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 or to any district or division to which all parties have
consented.
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In Atlantic Marine, the Supreme Court, in determining what weight to apply to a
forum selection clause upon a motion to transfer held, “[w]hen a defendant files such a
motion, we conclude, a district court should transfer the case unless extraordinary
circumstances unrelated to the convenience of the parties clearly disfavor a transfer.” Id. at
581. When a valid and enforceable forum selection clause evidences the parties’ intent to
bring an action in a particular federal district, the forum selection clause must be given
“controlling weight in all but the most exceptional circumstances.” Id. “Only under
extraordinary circumstances unrelated to the convenience of the parties should a § 1404a
motion be denied.” Id.
The Supreme Court considered the usual analysis of a § 1404 motion to transfer.
In the typical case not involving a forum-selection clause, a district court
considering a § 1404(a) motion (or a forum non conveniens motion) must
evaluate both the convenience of the parties and various public-interest
considerations. Ordinarily, the district court would weigh the relevant factors
and decide whether, on balance, a transfer would serve “the convenience of
parties and witnesses” and otherwise promote “the interest of justice.”
§1404(a).

In Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, (1988), the Supreme Court
outlined the following factors for courts to consider:
1) the convenience of parties;
2) the fairness of the transfer in light of the forum selection clause;
3) the relative bargaining power of the parties to the forum selection clause;
4) convenience of witnesses; and
5) public interest in systemic integrity and fairness

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Id. at 29,30.
The existence of a valid forum selection clause changes the above analysis.
The calculus changes, however, when the parties' contract contains a valid
forum-selection clause, which “represents the parties' agreement as to the most
proper forum.” (Internal citation omitted). The “enforcement of valid forumselection clauses, bargained for by the parties, protects their legitimate
expectations and furthers vital interests of the justice system.” For that reason,
and because the overarching consideration under § 1404(a) is whether a
transfer would promote “the interest of justice,” “a valid forum-selection
clause [should be] given controlling weight in all but the most exceptional
cases.” (Internal citations omitted).

Atlantic Marine, at 581.
The Supreme Court described three ways the usual venue analysis changes when there
exists a valid forum selection clause. First, plaintiff’s choice of forum is accorded no weight
because plaintiff is presumed to have expressed its desired forum in the forum selection
clause. Second, courts cannot entertain arguments on the parties’ private interests as those are
now deemed to weigh “entirely” in favor of the choice of forum contained in the forum
selection clause. Finally, the law of the state wherein the suit was filed, if different from the
forum agreed to in a forum selection clause, will not follow the case upon transfer.
Id at 581-82.
As a result, “a district court may consider arguments about public-interest factors
only,” and “those factors will rarely defeat a transfer motion.” Id. at 582. Importantly, the
party opposing the transfer has the burden of showing that the forum selection clause should
not be enforced. Wong v. PartyGaming Ltd., 589 F.3d 821, 828 (6th Cir. 2009)
Cliffs does not challenge the validity of the forum selection clause on traditional contract
enforceability grounds. It does not allege the forum selection clause is invalid due to duress,
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fraud or any other invalidity argument. Thus, the clause itself is valid.
However, Cliffs challenges the applicability of the forum-selection clause found in the
UPA in light of the settlement agreement in a related action before another Judge in this
district. The Court finds this argument has no merit because that case did not involve the
same parties as the UPA. Defendant Seneca was not a party in the BB & T Equipment
Finance Corp. v. Oak Grove Resources, LLC et al. 1:16CV672. BB & T involved rights
under a mining equipment lease between BB & T and Oaks Grove. The lease was guaranteed
by Cliffs. It arose out of the lease agreement and guaranty. It did not involve the UPA.
Neither was Seneca a party to the settlement agreement in BB & T Equipment Finance Corp.
v. Oak Grove Resources, LLC, et al., Cliffs has produced some evidence that Seneca was
involved in the negotiations, however, Seneca undisputedly was not a party or a signatory to
the settlement agreement. Seneca is referenced in a reservation of rights section wherein
Seneca, Cliffs and Oak Grove reserved all claims against each other arising from other
agreements including the UPA. However, it was not a party as defined by the settlement
agreement itself.
Cliffs contends Seneca agreed to the jurisdiction of the Northern District of Ohio in
the settlement agreement as that agreement expressly reads “Judge Polster and the Federal
District Court for the Northern District of Ohio, Eastern Division shall retain jurisdiction to
enforce the terms of the Agreement or otherwise.” However, such terms only bind the parties
and those are defined in the agreement as BB & T, Oak Grove and Cliffs. Therefore, Seneca
did not waive any rights under the UPA to enforce the UPA’s forum selection clause.
Furthermore, Judge Polster declined transfer of this case, which the Court must infer he did

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not find the claims herein related to the settlement agreement over which he presided.
Cliffs further contends it has not consented to Delaware as a forum for its claims.
However, as the Supreme Court in Atlantic Marine held, a forum selection clause represents
the parties agreement as to the most proper forum.” Atlantic Marine at 581. It is important to
further note that all Defendants have consented to venue in Delaware.
Furthermore, the broad language of the forum selection clause clearly encompasses
the claims in Cliffs’ First Amended Complaint as all involve breach of the UPA or transfers
of funds owed Cliffs under the UPA. Under the forum selection clause the parties agree that
Delaware courts are the proper forum for “all disputes arising out of or in connection with this
Agreement or the transactions contemplated hereby.” Therefore, the Court finds the private
interest factors must be construed in favor of transfer.
Because the private interest factors are deemed to favor the forum as agreed to by the
parties in a valid forum selection clause, the Court must next consider the public interest.
Here, the public interest also favors Delaware as the appropriate forum. The forum selection
clause states New York law applies to disputes arising out of the UPA. This factor favors
neither forum since both can equally apply New York law. However, the public interest
favors transfer because “the public has a strong interest in applying contracts as they are
written.” PolyOne Corp. v. Teknor Apex Co., No. 1:14CV0078, 2014 WL 4207671, at *6
(N.D. Ohio Aug. 25, 2014) citing First Solar, LLC v. Rohwedder, Inc., No. 3:04CV7518,
2004 WL 2810105 (N.D.Ohio Dec.8, 2004). Cliffs contracted in advance to litigate disputes
in Delaware and “courts should not unnecessarily disrupt the parties’ settled expectations.”
Atl. Marine Const. Co., 134 S. Ct. 568 at 583. “[T]he interest of justice is served by holding

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parties to their bargain.” Id. Nor is there evidence for or against Delaware courts due to
docket congestion. In short, no public interest factor supports denying transfer to the parties’
contracted for forum of Delaware.
Lastly, the Court finds Seneca did not waive its rights under the forum selection clause
by first filing a Motion to Dismiss and an Answer or by acknowledging that this Court had
subject matter jurisdiction over the disputes. Defendant’s Motion to Transfer does not dispute
that venue is proper in this Court, rather, a 1404(a) challenge seeks to transfer the case to the
contractually agreed upon forum. See Atlantic Marine at 574, (“a forum-selection clause
does not render venue in a court “wrong” or “improper” under § 1406(a) or Rule 12(b)(3).”)
Thus, the waiver provisions of Fed. R. Civ. P. 12(h) do not apply.
Therefore, for the foregoing reasons, the Court finds transfer of Plaintiff’s claim is
warranted in light of the parties’ forum selection clause and the Court transfers the abovecaptioned case to the United States District Court for the District of Delaware for further
adjudication.
IT IS SO ORDERED.
s/ Christopher A. Boyko
CHRISTOPHER A. BOYKO
United States District Judge
Dated: May 12, 2017

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