East Inlet Partners LLC et al v. GTT Communications Inc
Filing
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ORDER granting 5 Motion to Change Venue, and transferring case to Southern District of New York. Signed by Honorable David C Norton on February 1, 2018.(span, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
EAST INLET PARTNERS, LLC and
TYLER BEAUREGARD,
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Plaintiffs,
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vs.
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GTT COMMUNICATIONS, INC.,
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Defendant.
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_______________________________________)
No. 2:17-cv-03043-DCN
ORDER
The following matter is before the court on defendant GTT Communications
Inc.’s (“GTT”) motion to change venue, ECF No. 5. For the reasons set forth below, the
court transfers the action to the Southern District of New York pursuant to the forumselection clause.
I. BACKGROUND
Tyler Beauregard is the sole owner and member of East Inlet Partners LLC.
Plaintiffs East Inlet Partners LLC and Beauregard (collectively, plaintiffs) entered into a
contract titled “Agent Agreement” with Perseus Telecom USA, LLC in November 3,
2016. The Agent Agreement allowed Beauregard to serve as an independent contractor
to conduct sales of Perseus products, and created a compensation structure that included
the payment of commissions. On June 20, 2017, Perseus was sold to GTT. As a
condition of the sale, GTT assumed all “contracts, agreements, and liabilities of Perseus.”
Soon after the sale, GTT terminated the Agent Agreement with plaintiffs. Plaintiffs have
now brought a breach of contract claim against GTT for the alleged breach of an “Agent
Agreement” that was entered into by the parties. Plaintiffs request actual and
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compensatory damages, costs, and “any further relief” related to this breach of contract
action.
The Agent Agreement includes a section titled “Governing
Law/Jurisdiction/Venue” that states:
This Agreement shall be governed, interpreted, and enforced by the laws of
the State of New York, without giving effect to conflict of law principles.
Each party submits to the exclusive jurisdiction of any state or federal court
located in the City of New York over any suit, action or proceeding arising
out of or relating to or concerning this Agreement.
ECF No. 5, Ex. 2, Agent Agreement.
On November 16, 2017, GTT filed a motion to change venue, arguing that the
Agent Agreement has a forum-selection clause and so this court should transfer the case
to the Southern District of New York. ECF No. 5. Plaintiffs filed a response on
November 30, 2017, ECF No. 7, and GTT replied on December 7, 2017, ECF No. 9. The
motion has been fully briefed and is now ripe for the court’s review.
II. STANDARD
“Federal law governs a district court’s decision to enforce or not enforce a forum
selection clause.” Scott v. Guardsmark Sec., 874 F. Supp. 117, 120 (D.S.C. 1995) (citing
Stewart Org. v. Ricoh Corp., 487 U.S. 22 (1988)). “Under federal law, a forum selection
clause is prima facie valid and enforceable when it is the result of an arm’s length
transaction by sophisticated business entities absent some compelling and countervailing
reason.” SeaCast of Carolinas, Inc. v. Premise Networks, Inc., 2009 WL 5214314, at *2
(D.S.C. Dec. 28, 2009) (citing Atlantic Floor Servs., Inc. v. Wal–Mart Stores, Inc., 334 F.
Supp. 2d 875, 877 (D.S.C. 2004)). When the parties have agreed to a valid forumselection clause, a district court should ordinarily transfer the case to the forum specified
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in that clause. Only under extraordinary circumstances unrelated to the convenience of
the parties should a § 1404(a) motion be denied.” Atl. Marine Const. Co. v. U.S. Dist.
Court for W. Dist. of Tex., 134 S. Ct. 568, 581 (2013).
A court should enforce a forum-selection clause unless the party opposing
enforcement establishes that enforcement is “unreasonable” under the circumstances.
SeaCast, 2009 WL 5214314 at *2 (citing Atlantic Floor, 334 F. Supp. 2d at 877). Forumselection clauses may be considered unreasonable if: (1) their formation was induced by
fraud or overreaching; (2) the complaining party will essentially be deprived of his day in
court because of the grave inconvenience or unfairness of the selected forum; (3) the
fundamental unfairness of the chosen law may deprive the plaintiff of a remedy; or (4)
their enforcement would contravene a strong public policy of the forum state. Id. (citing
Atlantic Floor, 334 F. Supp. 2d at 877).
III. DISCUSSION
The Agent Agreement includes a section titled “Governing
Law/Jurisdiction/Venue” that states:
This Agreement shall be governed, interpreted, and enforced by the laws of
the State of New York, without giving effect to conflict of law principles.
Each party submits to the exclusive jurisdiction of any state or federal court
located in the City of New York over any suit, action or proceeding arising
out of or relating to or concerning this Agreement.
ECF No. 5, Ex. 2, Agent Agreement (emphasis added). The dispute in this case turns on
whether the forum-selection clause in the Agent Agreement is valid and enforceable. As
explained below, the court finds that it is.
Plaintiffs’ sole argument regarding the forum selection clause is that the forum
selection clause is invalid and unenforceable because a contract for personal services
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cannot be assigned. ECF No. 7 at 2. Plaintiffs contend that GTT is not a party to the
Agent Agreement, and so GTT cannot now enforce the forum-selection clause in the
Agent Agreement. Id. GTT rebuts that to accept plaintiffs’ argument that the Agent
Agreement is invalid undermines the only claim that plaintiffs are bringing—that GTT
has breached the Agent Agreement. ECF No. 9 at 2.
The Agent Agreement states that New York law applies. New York law employs
an exception to the general rule of assignability of contracts when the contract is for
“personal services.” In re Compass Van & Storage Corp., 65 B.R. 1007, 1010 (Bankr.
E.D.N.Y. 1986) (“The nonassignability imprint of personal service contracts is firmly
established New York law.”). The Agent Assignment includes a section under the
“Assignment” header that states “[a]gent acknowledges that the services to be rendered
by Agent are unique and personal.” Id. While this section does operate to bind plaintiffs
from transferring its obligations to other parties without Perseus’s prior written consent, it
also confirms that this is a personal services contract. However, even a personal services
contract may be assigned if the contract provides for assignment. Preferred Oncology
Networks of America, Inc. v. Bottino, 1997 WL 305253, at *2 (S.D.N.Y. 1997)
(“Defendants represent to this Court that New York law does not recognize assignment of
an obligation to provide personal services, yet neglect to inform the court that this
prohibition is inapplicable when the parties expressly provide for assignability.”). Here,
it is clear the parties contemplated possible assignment when entering into the agreement.
Indeed, a review of the Agent Agreement reveals that it also includes a section under the
“Assignment” header stating “[t[he rights and obligations of Perseus under this
Agreement shall inure to the benefit of and shall be binding upon the successors and
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assigns of Perseus.” ECF No. 5, Ex. 2, Agent Agreement (emphasis added). This binds
GTT to the Agent Agreement as a successor of Perseus, and puts plaintiffs on notice that
the Agent Agreement provides for the assignment of the contract to successors of
Perseus—in this case, GTT. Indeed, Beauregard states in the complaint that even after
the Perseus acquisition, when he was informed that GTT was terminating the Agent
Agreement, he submitted his invoices for compensation and expenses to GTT in the same
manner as he did when he was an agent of Perseus. Compl. ¶ 10–14. It was only after
GTT did not pay Beauregard the commission he believed he was due that he brought this
suit for breach of contract. Beauregard’s behavior, of continuing to interact with GTT
and submit invoices for services, indicates that Beauregard consented to the assignment
of the Agent Agreement. Given the language of the Agent Agreement and Beauregard’s
actions, the forum selection clause is valid. 1
Ordinarily, a plaintiff’s choice of forum “will not be disturbed lightly; a defendant
has a heavy burden when it moves to transfer a venue properly selected by the plaintiff.”
Blevins v. Pension Plan for Roanoke Plant Hourly Employees of ITT Indus. Night
Vision, 2011 WL 2670590, at *6 (D.S.C. July 8, 2011) (quoting Sw. Equip., Inc. v.
Stoner & Co., 2010 WL 4484012, at *2 (D.S.C. Nov. 1, 2010)). However, this rule is not
the case when a forum selection clause governs. “In the typical case not involving a
forum-selection clause, a district court considering a § 1404(a) motion . . . must evaluate
both the convenience of the parties and various other public-interest considerations.”
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Furthermore, to accept the argument that the Agent Agreement, and thus its
forum selection clause, is invalid would undermine the plaintiffs’ breach of contract
claim entirely. Certainly, a breach of contract claim cannot be levied against an invalid
contract—one of the elements of a breach of contract claim is that there exists a valid
contract.
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Atlantic Marine, 134 S. Ct. at 581. 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.’” Id. (citing Stewart, 487 U.S. at 31). Specifically the
court’s analysis changes in three ways: (1) “the plaintiff’s choice of forum merits no
weight[,]” and the plaintiff “bears the burden of establishing that transfer to the forum for
which the parties bargained is unwarranted”; (2) the court “should not consider
arguments based on the parties’ private interests” and “may consider arguments about
public-interest factors only”; and (3) “when a party bound by a forum-selection clause
flouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of
venue will not carry with it the original venue’s choice-of-law rules.” Id. at 581–82.
Plaintiffs’ argument challenging transfer is unavailing. Plaintiffs and GTT
entered into a valid forum-selection agreement under which any dispute arising out of the
contract must be resolved in New York City. Having disposed of the argument that the
Agent Agreement itself is rendered invalid because it was a personal services contract
assigned to GTT, there is no indication that the clause is unreasonable or that it was not
the “result of an arm’s length transaction by sophisticated business entities” and is
therefore prima facie valid “absent some compelling and countervailing reason.”
SeaCast, 2009 WL 5214314, at *2. Plaintiffs failed to provide any reasons why the
transfer is unwarranted, and the court is unaware of any public-interest factors that would
weigh in favor of venue in this court. Therefore, the court transfers venue to the Southern
District of New York pursuant to section 1404(a) and in accordance with the forumselection clause.
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IV. CONCLUSION
For the reasons set forth above, the court GRANTS GTT’s motion to transfer
venue, and transfers the case to the Southern District of New York.
AND IT IS SO ORDERED.
DAVID C. NORTON
UNITED STATES DISTRICT JUDGE
February 1, 2018
Charleston, South Carolina
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