City of Albany v. CH2M Hill, Inc.

Filing 11

OPINION AND ORDER: Plaintiff's motion to remand 5 is GRANTED and plaintiff's request for attorney's fees is DENIED. Defendant shall have 14 days to file a formal motion for stay pending an appeal. The Clerk is ordered to w ithhold entering final judgment in this case for 14 days or until the Court has resolved any formal motions for a stay, whichever is later. Signed on 3/30/2018 by Judge Ann L. Aiken. (ck) Modified on 3/30/2018 by denying request for attorney's fees (ck).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
EUGENE DIVISION

CITY OF ALBANY,

Case No. 6:18-cv-00073-AA
OPINION AND ORDER

Plaintiff,

v.
CH2M HILL, INC.,
Defendants.

AIKEN, District Judge:
Plaintiff City of Albany brought suit against defendant CH2M Hill, Inc. ("CH2M") in
Linn County Circuit Court alleging claims for breach of contract, professional negligence,
attorney fees, and reckless misrepresentation. Defendant removed this case to federal court on
the basis of diversity jurisdiction. (doc. 1) Plaintiff now seeks remand of the case back to state
court based on the exclusive language of the venue selection clause in the agreements between
the parties.

For the reasons set forth below, plaintiffs Motion to Remand (doc. 5) is

GRANTED.

II I
II I
Page 1 - OPINION AND ORDER

BACKGROUND
Plaintiff initially filed this lawsuit in the Circuit Court of the State of Oregon, Linn
County.

The complaint alleges claims for breach of contract and professional negligence,

attorney fees, and reckless misrepresentation against defendant.
Plaintiff contracted defendant's professional engineering services to design and oversee
the construction of two infrastructure projects for a new wastewater treatment plant and a 30-acre
wetland. The first agreement between the pmiies was signed on May 15, 2005, whereby plaintiff
engaged defendant's services related to modifications to Albany's wastewater treatment system.
The second agreement was signed on October 12, 2006, whereby plaintiff engaged defendant's
engineering services related to the design of a constructed wetland that would reduce the
temperature of effluent from the treatment facility before its discharge into the Willamette River.
Both agreements contained identical venue selection clauses providing that: "The laws of Oregon
shall govem the validity of this agreement, its interpretation and performance, and other claims
related to it. Venue for litigation shall be in Linn County, Oregon." 1
Defendant removed the action to federal comi in the District of Oregon, Eugene Division,
asserting diversity jurisdiction. Plaintiff is an Oregon municipal corporation located within Linn
County, Oregon. Defendant is a Florida corporation, with its principal place of business in
Colorado. Plaintiff filed the present motion to remand arguing the venue selection clause in the
two agreements mandates Oregon Circuit Comi in Linn County as proper venue for their dispute.
Defendant argues that the venue selection clause in their agreements can be considered either
permissive or mandatory, but under either interpretation, the clause allows for this suit to remain
before this Comi.
1

This language is found under "Article XIV: COURT OF JURISDICTION" in the
2005 agreement and "Article XVIII. COURT OF JURISDICTION" in the 2006 agreement.
Page 2 - OPINION AND ORDER

STANDARDS

Federal law is applied in interpreting a venue selection clause in federal comi. Doe I v.

AOL LLC, 552 F.3d 1077, 1081 (9th Cir. 2009). Forum selection clauses in commercial contexts
are prima facie valid. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972); Pelleport

Inv'rs., Inc. v. Budco Quality Theaters, Inc., 741F.2d273, 279 (9th Cir. 1984). Forum selection
clauses are not set aside "unless the enforcement is shown by the resisting party to be
umeasonable under the circumstances." Docksider, Ltd v. Sea Tech., Ltd., 875 F.2d 762, 763
(9th Cir. 1989). "To establish umeasonableness of a forum selection clause the patty resisting
enforcement of the clause has a heavy burden of showing that trial in the chosen f01um would be
so difficult and inconvenient that the party effectively would be denied a meaningful day in
comt." Pelleport, 741 F.2d at 281 (citing Bremen, 407 U.S. at 18).
The "plain language of the contract should be considered first." Doe I, 552 F.3d at 1081
(quoting Klamath Water Users Protective Ass'n v. Patterson, 204 F.3d 1206, 1210 (9th
Cir.1999)). In considering the plain language of the contract, "common or normal meaning of
language will be given to the words of a contract unless circumstances show that in a particular
case a special meaning should be attached to it." Hunt Wesson Foods, Inc. v. Supreme Oil Co.,
817 F.2d 75, 77 (9th Cir. 1987)).
DISCUSSION

Plaintiff asserts that because the language of the venue selection clause lists Linn County,
Oregon as venue for litigation and no federal district court sits in in Linn County, the Circuit
Court in Linn County is the exclusive venue for litigation.

Thus, plaintiff argues that the

language of the clause is mandatory and must be enforced. Defendant avers that the language of
the clause is ambiguous and thus it must be construed against plaintiff, the drafter of the contract.

Page 3 - OPINION AND ORDER

Defendant also argues that the ambiguous language of the clause means that it can be construed
as both permissive and mandatory, but in either case, it cannot preclude venue in federal court.
I must first dete1mine whether the clause is mandatory or merely permissive. The Ninth
Circuit directs that a venue selection clause must contain mandatory and exclusive language in
order to require litigation of disputes in a paiiicular court. See Hunt Wesson Foods, 817 F.2d at
78. "To be mandatory, a clause must contain language that clearly designates a forum as the
exclusive one." N Cal. Dist. Counsel of Laborers v. Pittsburgh-Des lvfoines Steel Co., 69 F.3d
1034, 1037 (9th Cir. 1995). However, where venue is not specified with exclusivity, the clause
is permissive. Hunt Wesson Foods, 817 F.2d at 77.
Where venue is defined with specific language, the clause is mandatory. Docksider, 875
F.2d at 764.

Docksider involved a license to distribute equipment manufactured by the

defendant which included a forum selection clause stating that "venue ... shall be deemed to be

in Gloucester County, Virginia." 875 F.2d at 763 (emphasis added). The court there found the
clause mandatory based on this additional language as "indicating the parties' intent to make
jurisdiction exclusive." Id

at 764. Thus, the comi noted that the defendant had not only

consented to the jurisdiction of state comis of Virginia but also further agreed to the Gloucester
County, Virginia as the venue for litigation. Id

Docksider can be contrasted with the Ninth Circuit's decision in Pittsburgh-Des lvfoines
Steel Co. There, the Circuit panel vacated a district court's remand order in an action to confirm
an arbitration award filed in California state co1ui, finding that the forum selection clause at issue
was pe1missive. Pittsburgh-Des 1',;!oines Steel Co. 69 F.3d at 1036, 1038. The language in the
forum selection clause in that case read that the arbitration decision " ... shall be enforceable ...
in the Superior Court of the City and County of San Francisco, State of California." Id at 1036.

Page 4 - OPINION AND ORDER

The Ninth Circuit panel opined that "shall be enforceable" was not enough to make the clause
mandatory absent additional language, such as, "venue ... shall be deemed to be in" or "cases
may only be litigated only in" a patticular venue. Id. at 1037. Since there was no language
"clearly requiring exclusive jurisdiction," the clause was permissive, not mandatory. Id. See
also Hunt Wesson Foods, 817 F.2d at 77 (holding that despite the use of "shall," which is a

mandatory tenn, the language in the forum selection clause was petmissive as it granted a
patticular court jurisdiction, but not exclusive jurisdiction).
I find that the venue selection clause at issue is in this case is mandatory. The language
of the clause is clear that the specific forum for litigation is Linn County, Oregon. Futiher
distinguishing Pittsburgh-Des Moines Steel Co. is that the enforceability language in that was
also followed by the language "petition to confitm an arbitration award filed in the Superior
Court of the City and County of San Francisco, State of California." Pittsburgh-Des J..Ioines
Steel Co., 69 F.3d at 1036. This language in Pittsburgh-Des }vfoines Steel Co. suggests that what

enforceability clause modifies is the ability to file the petition to confirm arbitration, not the
ability to file a lawsuit with respect to that patticular arbitration award. By way of comparison,
no language modifies the command to litigate issues arising out of the agreements in Linn
County in this case. The clause in this case is exclusive in prescribing Linn County as the venue
for all litigation and thus is more akin to the clause at issue in Docksider.
Defendant also argues that this Couti could still hear this case because Linn County is
located in the Eugene Division of the District of Oregon. 2 In a notable case, the Ninth Circuit
interpreted a forum selection clause providing "exclusive jurisdiction and venue ... in King
2

Defendant further notes that simply because there is no federal courthouse in Linn
County, I would not be precluded from conducting proceedings in Linn County pursuant to 28
U.S.C. § 14l(a)(l) ("Special sessions of the district comi may be held at such places in the
district as the nature of the business may require, and upon such notice as the couti orders.")
Page 5 - OPINION AND ORDER

County" as providing venue in both state and federal comts. Simonojfv. Expedia, Inc., 643 F.3d
1202, 1207 (9th Cir. 2011) (holding "a fornm selection clause that vests 'exclusive jurisdiction
and venue' in the courts 'in' a county provides venue in the state and federal courts located in
that county"). There the court affirmed the district comt's denial to remand to state court. Id. at
1207. The court noted that when the fornm selection clause at issue used "the preposition 'in,'
the contract contemplates federal as well as state courts as proper courts for adjudication." Id. at
1206. The court further opined that "when a federal comt sits in a patticular county, the district
comt is undoubtedly 'in' that county." Id While the Simonojfcomt did use the "in" language in
the forum selection clause to keep the suit in federal court, it was mainly concerned with the
geographical limitations provided in the forum selection clause. Id. The venue prescribed by
contract was King County, Washington, where both federal and state comts me situated. Thus,
the comt held that it made sense to constrne the clause as allowing suit in both state and federal
courts in Simona.If.
I also note that other courts have examined this issue and taken a similar approach to
Simona.If and remanded cases where the federal court did not sit in the county specified in a

forum section clause. See, Stone v. Cty. ofLassen, 2013 WL 269085, at 3 (E.D. Cal. 2013) ("A
fornm selection clause stating that venue 'shall be in' a patticular county means that venue lies in
state comt when there is no federal court in that particular county--even though that county may
be patt of a judicial district whose courthouse lies elsewhere."); Neighborcare Health v. Porter,
2012 WL 13049188, at 4 (W.D. Wash. 2012) (the court stated that the action should have been
filed in a court located within geographical boundaries of the county chosen by the parties as
fornm for litigation and no federal district court sits in Thurston County, Washington); Garza
Aviation Servs., LLC v. Cty. of Yuma, 2011 WL 6012967, at 4 (D. Ariz. 2011) (removal of suit to

Page 6 - OPINION AND ORDER

a federal district court that did not sit in the county specified in the forum selection clause was
improper); Air Ion Devices, Inc. v. Air Ion, Inc., 2002 WL 1482665, at 3 (N.D. Cal. 2002) (suit
was remanded back to state comi in Marin County, California which was prescribed as the
exclusive venue for litigation in the forum selection clause).
Unlike the forum contracted by the parties in Simonoff, here the parties' forum is located
in Linn County where no federal comi is located. The language with respect to exclusivity is
clear in this case. The clause expressly provides that Linn County, Oregon shall be the venue for
litigation. Given that no federal court sits in Linn County, removal to federal court is improper
in this case.
Defendant fmiher argues that plaintiff cannot meet its burden to prove that the parties
intended the venue clauses to effectively waive federal jurisdiction. Defendant believes that the
ambiguity in the clause is sufficient basis to construe it against plaintiff, the drafting pmiy.
However I have found that the language of the clause is clear, and the venue selection clause is
mandatory.

Further, even if the language of the clause was ambiguous, the Ninth Circuit

recognizes that courts should enforce venue selection clauses absent evidence of factors such as
"overweening bargaining power." Spradlin v. Lear Siegler lvfgmt. Servs. Co .. 926 F.2d 865 (9th
Cir. 1991). Here, there is no evidence of overweening bargaining power or disparity among the
parties to trigger the need to find the venue selection clause unenforceable. Defendant is a
sophisticated business entity, and it had notice of the venue selection clause when it entered into
the two agreements. Finally, defendant has not shown that it was it was induced to enter into this
agreement through means such as fraud.
Defendant next asse1is that it would not have intended to waive its right for federal
removal because, as a resident of the state of Florida litigating in front of a jury pool from Linn

Page 7 - OPINION AND ORDER

County, it could face a risk of bias as the jury could have an indirect interest in the outcome of
the litigation. Additionally, defendant also contends that due to prohibition on expert discovery
in Oregon state comis and the technical nature of the underlying services perfo1med by
defendant giving rise to this claim, it would never have intended to waive its right to a federal
forum. Defendant raises valid concerns for why it might have chosen not to waive its right to a
federal forum. However, because the forum selection language of the agreements was clear at
the time defendant signed them, it "waive[d] the right to challenge the preselected forum as
inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the
litigation." At/. 1\lfarine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S. Ct. 568, 582
(2013). Absent ambiguous language, defendant cannot find harbor in the risks it alleges.
Plaintiff also moves the Court to order defendant to pay its reasonable attorney fees in
making this motion to remand. "An order remanding the case may require payment of just costs
and any actual expenses, including attorney fees, incurred as a result of the removal." 28 U.S.C.
§ 1447(c). "An award of attorney's fees pursuant to section 1447(c) ... is within the discretion
of the district comi, and bad faith need not be demonstrated. Fmiher, because the award of
attorney's fees pursuant to 28 U.S.C. § 1447(c) is collateral to the decision to remand, the district
court retain[s] jurisdiction after remand to entertain Plaintiffs motion for attorney's fees."

Moore v. Permanente lvfed Group, Inc., 981 F.2d 443, 447 (9th Cir.1992). Absent unusual
circumstances, comis may award attorney's fees under§ 1447(c) only where the removing party
lacked an objectively reasonable basis for seeking removal. Conversely, when an objectively
reasonable basis exists, fees should be denied. 1vfartin v. Franklin Capital Corp., 546 U.S. 132,
141 (2005).

Page 8 - OPINION AND ORDER

The court denies plaintiffs request for attorneys' fees in making this motion to remand.
Though ultimately unsuccessful, I find that a reasonably objective basis existed for defendant to
seek removal. I also find that defendant did not act in bad faith.
Finally, defendant requests this Comt for a stay of any remand order pending its appeal to
the Ninth Circuit. It argues that the remand order could raise serious questions concerning the
legal effect of state court proceedings that occur while a federal appeal is pending, creating a risk
of duplicative and potentially futile proceedings. "An order remanding a case to the State court
from which it was removed is not reviewable on appeal or otherwise." 28 U.S.C. § 1447(d).
However, a remand order based on a forum selection agreement is appealable as a collaterally
final order. Pelleport, 741 F.2d at 277-78. The policy underlying the general nomeviewability
rule of§ 1447(d) is to prevent delay by protracted litigation over jurisdictional issues. See
Therm/ran Products, Inc. v. Hermansdo1fer, 423 U.S. 336, 351 (1976).

The Court finds that this issue is not adequately addressed in the cunent briefing.
Moreover, defendant has not filed a foimal motion for a stay. Therefore, the Comt will grant a
temporary stay in entering a final judgment in this case to allow defendant an opportunity to file
an initial motion for stay pending appeal. The Court is also cognizant of plaintiff interest in
preventing further delay and so shall consider any such motion on an expedited basis. This will
allow the patties to present fully aiticulated arguments on this matter without undue delay.

Ill
Ill
Ill
I II
I II

Page 9 - OPINION AND ORDER

CONCLUSION

Plaintiffs motion to remand is GRANTED and plaintiffs fmiher request for attorney's
fees on this motion is also GRANTED. Defendant shall have 14 days to file a formal motion for
stay pending an appeal. The Clerk is ordered to withhold entering final judgment in this case for
14 days or until the Comt has resolved any formal motions for a stay, whichever is later.
IT IS SO ORDERED.
Dated this

~~fMarch 2018.

AtmAiken
United States District Judge

Page 10- OPINION AND ORDER