Valley Electrical Consolidated, Inc. v. TFG-Ohio, LP et al
Memorandum of Opinion and Order For the reasons set forth herein, Defendants' Motion to Dismiss (ECF No. 7 is denied, Defendants' Alternative Motion to Transfer the Action to United States District Court for the District of Utah (ECF No. 7 is granted, and Plaintiff's Alternative Motion to Amend (ECF No. 9 ) is denied without prejudice. Judge Benita Y. Pearson on 6/30/2016. (JLG)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
TFG-OHIO, LP, et al.,
CASE NO. 4:16CV00060
JUDGE BENITA Y. PEARSON
MEMORANDUM OF OPINION AND
ORDER [Resolving ECF Nos. 7 and 9]
Pending is Defendants’ Motion to Dismiss, or, in the Alternative, Motion to Transfer,
ECF No. 7. Defendants assert that a forum selection clause makes venue in this Court improper.
In addition to its opposition, Plaintiff has filed an alternative motion for leave to amend the
Complaint, ECF No. 9. The Court has been advised, having reviewed the record, the parties’
briefs1, and the applicable law. For the reasons set forth below, Defendants’ motion to dismiss is
denied, Defendants’ motion to transfer is granted, and Plaintiff’s motion to amend is denied
without prejudice to its resurrection on an improved record.
Plaintiff Valley Electrical Consolidated, Inc. is an Ohio corporation with its principal
place of business in Ohio. Complaint, ECF No. 1-1 ¶ 1. Defendant TFG-Ohio, LP (“TFG”) is a
Defendants filed a Reply in support of their motion, ECF No. 10. On the same
day, Defendants filed an Amended Reply in support, ECF No. 11. The Court relies on
Defendants’ Amended Reply (“Reply”) in ruling on the motion.
Utah limited partnership, the partners of which are all citizens of Utah, and its principal place of
business is in Utah. Notice of Removal, ECF No. 1 ¶ 3(a). Defendant Tetra Financial Group
(“Tetra”) is a Utah limited liability company, the members of which are all citizens of Utah, and
its principal place of business is in Utah. Id. Plaintiff sold property located in Girard, Ohio (the
“Leased Property”) to TFG pursuant to a Sale and Leaseback Agreement. Complaint, ECF No.
1-1 ¶ 7. TFG leased the Leased Property to Plaintiff pursuant to the terms of a Master Lease
Agreement (“Lease”). Id. The Lease provides Plaintiff the option to repurchase all but not less
than all of the Leased Property upon completion of the base term of the Lease, “for a price to be
agreed upon by Lessor and any applicable Assignee and Lessee.” Id. ¶ 9. In 2015, Plaintiff
advised Tetra, successor to TFG (Id. ¶ 3), of its intention to exercise its option to repurchase. Id.
¶ 10. After receipt of this notice, Plaintiff alleges, TFG continued to charge Plaintiff's account
with the monthly rental fee until Plaintiff suspended the transaction. Id. ¶ 11. Plaintiff asserts
that Defendants violated the Lease by “fail[ing] and refus[ing] to negotiate in good faith a price
to be paid by [Plaintiff] for the [repurchase of the] Leased Property.” Id. ¶¶ 11, 12.
Plaintiff filed a lawsuit in the Court of Common Pleas, Trumbull County, Ohio. See
Complaint, ECF No. 1-1. In the Complaint, Plaintiff asserts claims for breach of contract and
breach of an implied covenant of good faith and fair dealing. Id. ¶¶ 14, 17. Plaintiff also seeks a
declaratory judgment that its only obligation under the Lease is to pay the fair value of the Leased
Property. See id. ¶ 22. Defendants jointly and timely removed the action to this Court on the
basis of diversity of citizenship, pursuant to 28 U.S.C. § 1332. See Notice of Removal, ECF No.
1. Diversity is complete. See id. ¶ 3(a)(i), (ii). Though Plaintiff alleges damages in excess of
only $25,000.00, Defendants have shown that the amount in controversy requirement is satisfied.
See id. ¶ 3(b) (explaining that the amount at issue for Plaintiff’s declaratory judgment claim is
$185,634.36). See also Charvat v. GVN Mich., Inc., 561 F.3d 623, 628 (6th Cir. 2009) (“To
defeat diversity jurisdiction, it must appear to a legal certainty that the claim is really for less than
the jurisdictional amount.”) (internal quotations and citation omitted); Freeland v. Liberty Mut.
Fire Ins. Co., 632 F.3d 250, 253 (6th Cir. 2011) (“[W]here a party seeks a declaratory judgment,
the amount in controversy is not necessarily the money judgment sought or recovered, but rather
the value of the consequences which may result in the litigation.”) (internal quotations and
citation omitted). Accordingly, removal is proper.
After removing the action, Defendants filed the motion to dismiss or transfer, ECF No. 7.
Defendants argue that venue is not proper in this Court. They request that the case be
dismissed pursuant to Fed. R. Civ. P. 12(b)(6), or, in the alternative, transferred to the United
States District Court for the District of Utah pursuant to 28 U.S.C. § 1404(a). ECF No. 7.
A. Defendants' Motion to Dismiss
To survive a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss, the plaintiff’s
complaint must allege enough facts to “raise a right to relief above the speculative level.” Ass’n
of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir.2007) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). When a claim lacks “plausibility in th[e]
complaint,” that cause of action fails to state a claim upon which relief can be granted. Twombly
, 550 U.S. at 564.
Defendants assert, “Because Valley Electrical waived its right to bring any cause of action
relating to the Lease in this Court, dismissal under Fed. R. Civ. P. 12(b)(6) is warranted.” ECF
No. 7 at PageID #: 103. This waiver in the forum selection clause states,
Except as set forth below, Lesser and Lessee agree that any and all claims, dispute
and controversies arising out of or relating to this Master Lease shall be brought only
in the state or federal courts sitting in County of Salt Lake, Utah, and Lessor and
Lessee each irrevocably and unconditionally submits to the sole and exclusive
jurisdiction of such courts and waive any objection to the jurisdiction or venue of
such courts or Utah Law governing the Lease Documents. NO LAWSUIT,
PROCEEDING OR ANY OTHER ACTION RELATING TO OR ARISING
UNDER THE LEASE DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY MAY BE COMMENCED OR PROSECUTED IN
ANY OTHER FORUM.
Lease § 20(e), ECF No. 1-1 at PageID #: 25 (emphasis in original). The plain language of the
forum selection clause appears to unequivocally mandate that all claims arising out of or relating
to the Lease shall be brought only in a state or federal court in the County of Salt Lake, Utah.
There is no question that Plaintiff’s claims arise out of or relate to the Lease. See
Complaint, ECF No. 1-1. Therefore, those claims are within the reach of the forum selection
clause. The clause is presumed valid and should be enforced unless “(1) it was obtained by
fraud, duress, abuse of economic power, or other unconscionable means; (2) the chosen forum
would be closed to the suit or would not handle it effectively or fairly; or (3) the transferee forum
would be so seriously inconvenient that to require that plaintiff to bring suit there would be
unjust.” See Braman v. Quizno's Franchise Co., LLC, No. 5:07CV2001, 2008 WL 611607, at *3
(N.D. Ohio Feb. 20, 2008) (Lioi, J.) (internal citations omitted). Plaintiff does not contend that
the forum selection clause is invalid; rather, Plaintiff asserts that Rule 12(b)(6) is not the proper
mechanism for enforcing the forum selection clause. ECF No. 9 at PageID #: 117.
Rule 12(b)(6) concerns only “the claim for relief and the substantive plausibility of the
supporting factual allegations” and Defendants cannot “stretch the application of FRCP 12(b)(6)
to the issue of venue,” Plaintiff argues. Id. at PageID #: 118-19. While the U.S. Supreme Court
has declined to determine whether Rule 12(b)(6) is an appropriate mechanism for enforcing a
forum selection clause, see Atl. Marine Constr. Co., Inc. v. U.S. Dist. Ct. for W. Dist. of Tex., 134
S.Ct. 568, 580 (2013), the Sixth Circuit has held that Rule 12(b)(6) can be used to enforce a
statutory forum selection clause, see Smith v. Aegon Companies Pension Plan, 769 F.3d 922, 934
(6th Cir. 2014). There is not, however, consensus among district courts in this Circuit as to
whether Rule 12(b)(6) can be used to enforce a contractual forum selection clause. Compare
Angiosystems, Inc. v. Worldwide Innovations & Technologies, Inc., No. 1:15CV78, 2016 WL
919001, at *3 (E.D. Tenn. Mar. 4, 2016) (“On a motion to dismiss under Rule 12(b)(6) to enforce
a forum selection clause, the Court ‘only needs to determine whether the forum selection clause
is enforceable and applicable; if it is, then the suit should be dismissed.’”), and Discount Drug
Mart, Inc. v. Devos, Ltd., No. 1:12CV00386, 2013 WL 5820044, at *2 (N.D. Ohio Oct. 29, 2013)
(“When a party seeks to enforce a forum-selection clause, the district court may enforce the
forum-selection clause through dismissal. . . . [T]he issue is properly considered under Federal
Rule of Civil Procedure 12(b)(6).”) (internal citations omitted), with Hudson Financial Corp. v.
Autoliv ASP, Inc., No. 1:12CV2808, 2014 WL 132437, at *2, n.1 (N.D. Ohio Jan. 14, 2014)
(“While there is split authority on this issue, the Court sees no reason to depart from its prior
holding in Lawson Steel that 12(b)(6) is not an appropriate mechanism [for enforcing a forum
selection clause].”), and Morgantown Machine & Hydraulics of Ohio, Inc. v. American Piping
Products, Inc., No. 5:15CV1310, 2016 WL 705261, at *1 (N.D. Ohio Feb. 23, 2016) (“Although
many courts, including this one, have used Rule 12(b)(6) to enforce forum selection clauses, the
Supreme Court has recently identified § 1404(a) ‘as a mechanism for enforcement of
forum-selection clauses that point to a particular federal district.’”) (internal citation omitted).
Decidedly, Rule 12(b)(6) is a mechanism for dismissing claims that lack legal sufficiency.
While Defendants assert that this Court is not the appropriate one to grant relief to Plaintiff, they
do not assert that Plaintiff fails to state a claim upon which relief can be granted—an important
distinction. Even if the Court were to dismiss the action, there is a substantial likelihood that
Plaintiff would simply commence the action anew in the preselected forum, rendering dismissal
inexpedient. Moreover, the Court is not persuaded that dismissal is appropriate based on the
record before it. Therefore, Defendants’ motion to dismiss is denied.
B. Defendants’ Alternative Motion to Transfer
Pursuant to 28 U.S.C. § 1404(a), “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.” Accordingly, under the traditional § 1404(a) analysis, a court may consider the
following factors upon a motion for change of venue: “(1) the convenience of the parties; (2) the
convenience of the witnesses; (3) the interests of justice; and (4) whether the civil action might
have been brought in the district to which the movant requests a transfer.” Roberts Metals, Inc.
v. Florida Properties Marketing, 138 F.R.D. 89, 91-92 (N.D. Ohio 1991), aff’d No. 93-1562,
1994 WL 84735 (Fed. Cir. March 14, 1994). A court may also consider the plaintiff’s choice of
forum and the respective docket loads of the two district courts. Id. at 92 n. 2; Pace Indus.
Union-Mgmt. Pension Fund v. King Soopers, Inc., No. 3:11-cv-00148, 2011 WL 1481306, at *1
(M.D. Tenn. April 18, 2011).
“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.” Atl.
Marine Constr. Co., Inc. v. U.S. Dist. Ct. for W. Dist. of Tex., 134 S.Ct. 568, 581 (2013) (internal
quotations and citation omitted). 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)
(citing Shell v. R.W. Sturge, Ltd., 55 F.3d 1227, 1229 (6th Cir. 1995)). Because the enforcement
of a valid forum selection clause protects the parties’ bargained-for interests and legitimate
expectations, “and because the overarching consideration under § 1404(a) is whether a transfer
would promote the interest of justice,” the clause “should be given controlling weight in all but
the most exceptional cases.” Id. (internal quotations and citation omitted).
Plaintiff argues that enforcement of the forum selection clause would be “inequitable,
unjust, inconvenient, unreasonable and unfair to Plaintiff and the other interested parties.” ECF
No. 9 at PageID #: 126. According to Plaintiff, enforcing the clause would burden the
real-property landlord and mortgage holders, their counsel, and potential witnesses who would
have to travel from Ohio to Utah for the litigation. Id. at PageID #: 121-25. Defendants retort
that they are Utah entities with their principal places of business in Utah, their witnesses are
located in Utah, and Plaintiff fails to show how the landlord and lenders would be implicated in
Plaintiff’s breach of contract claim. Reply, ECF No. 11 at PageID #: 148, 146. These arguments
are not well taken. As the U.S. Supreme Court has intoned,
When parties agree to a forum-selection clause, they waive the right to challenge the
preselected forum as inconvenient or less convenient for themselves or their
witnesses, or for their pursuit of the litigation. A court accordingly must deem the
private-interest factors to weigh entirely in favor of the preselected forum.
Atl. Marine, 134 S.Ct. at 582.
Plaintiff next argues that Ohio substantive law applies, creating a disadvantage for a Utah
Court interpreting and applying the applicable law. See ECF No. 9 at PageID #: 121-25. This
apprehension does not warrant abrogation of the parties’ agreement as to venue. “Federal judges
routinely apply the law of a State other than the State in which they sit.” Atl. Marine, 134 S.Ct.
at 584 (noting that the Court is “not aware of any exceptionally arcane features of Texas contract
law that are likely to defy comprehension by a federal judge sitting in Virginia”). Plaintiff makes
no attempt to show that Ohio contract law is so uniquely complex that a Utah Court is not
competent to correctly interpret and apply it. Moreover, based on the terms of the Lease, a court
may find that Ohio law has no application in this case:
THIS MASTER LEASE, THE LEASE DOCUMENTS AND THE LEGAL
RELATIONSHIP BETWEEN THE PARTIES SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF UTAH, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, WITHOUT GIVING EFFECT TO ANY
CONFLICT OF LAW PRINCIPLES.
Lease § 20(e), ECF No. 1-1 at PageID #: 25 (emphasis in original).
Plaintiff contends that Ohio law applies because the Leased Property is affixed to real
property located in Ohio. ECF No. 9 at PageID #: 121-24. Notwithstanding that Plaintiff failed
to raise this factual allegation in the pleadings, or that Plaintiff fails to heed the parties’ choice of
law provision, Plaintiff’s position may be called into question by the following provision in the
THE LEASED PROPERTY CONSISTS SOLELY OF, AND SHALL AT ALL
TIMES BE DEEMED, PERSONAL PROPERTY AND NOT FIXTURES. THE
LEASED PROPERTY IS REMOVABLE FROM AND IS NOT ESSENTIAL TO
THE PREMISES AT WHICH THE LEASED PROPERTY IS LOCATED. THE
LEASED PROPERTY IS AND SHALL REMAIN PERSONAL PROPERTY
DURING THE TERM NOTWITHSTANDING THAT ANY PORTION THEREOF
MAY IN ANY MANNER BECOME AFFIXED, ATTACHED TO OR LOCATED
ON REAL PROPERTY OR ANY IMPROVEMENT THERETO.
Lease § 7(d), ECF No. 1-1 at PageID #: 17.
The determinations of what law applies and whether the Leased Property is affixed to real
property are left to the appropriate forum—in this case, the forum preselected by the parties.
In any case, these issues do not alter the conclusion that the forum selection clause is presumed
valid, and Plaintiff has not rebutted that presumption. Even if the factors discussed by Plaintiff
would render adjudication in Utah more difficult than in Ohio, Plaintiff was aware of the risks at
the time it agreed to a forum.
When parties have contracted in advance to litigate disputes in a particular forum,
courts should not unnecessarily disrupt the parties’ settled expectations. A
forum-selection clause, after all, may have figured centrally in the parties’
negotiations and may have affected how they set monetary and other contractual
terms; it may, in fact, have been a critical factor in their agreement to do business
together in the first place. In all but the most unusual cases, therefore, ‘the interest
of justice’ is served by holding parties to their bargain.
Atl. Marine, 134 S.Ct. at 583. Plaintiff has failed to demonstrate the kind of exceptional
circumstances that warrant overriding the bargain of sophisticated parties, such as the entities
involved in the case at the bar. The interests of justice will not be served by permitting Plaintiff
to evade its promise without legal justification. For that reason, the Court will not do so.
Defendants’ alternative motion to transfer the case to the United States District Court for
the District of Utah is granted.
C. Plaintiff’s Alternative Motion for Leave to Amend
Plaintiff requests leave to amend the Complaint “to plead additional facts which have
become material as a result of the assertions made by Defendants in support of their Motion to
Dismiss or, in the alternative, to Transfer.” ECF No. 9 at PageID #: 128 (citing Fed. R. Civ. P.
15(a)(2)). Plaintiff has not identified its additional facts or hinted at their import to the motions
under review. Based on the record, the Court is not persuaded that amending the Complaint
would be anything other than futile. See SFS Check, LLC v. First Bank of Delaware, 774 F.3d
351, 355 (6th Cir. 2014) (“[C]ourts need not give leave to amend when doing so would be
futile.”). Plaintiff’s motion to amend is denied without prejudice to its resurrection on an
For the foregoing reasons, Defendants’ motion to dismiss is denied, Defendants’
alternative motion to transfer the action to United States District Court for the District of Utah is
granted, and Plaintiff’s alternative motion to amend is denied without prejudice.
IT IS SO ORDERED.
June 30, 2016
/s/ Benita Y. Pearson
Benita Y. Pearson
United States District Judge
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