Schmitt et al v. Lewis-Goetz & Company Inc et al
ORDER AND OPINION denying as moot 12 Motion to Transfer Case; denying as moot 13 Motion to Stay; granting 21 Motion to Transfer Case; declining to rule on 21 Motion to Dismiss. Signed by Honorable J Michelle Childs on 10/31/2017.(asni, )
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
Michael S. Schmitt; Jeffrey D. Nyman;
Scott D. Roberts; and James S. Schmidt,
Lewis-Goetz and Company, Inc.,
Civil Action No. 3:17-cv-01557-JMC
ORDER AND OPINION
Plaintiffs Michael S. Schmitt, Jeffrey D. Nyman, Scott D. Roberts and James S. Schmidt
(collectively “Plaintiffs”) filed the instant action against Defendant Lewis-Goetz and Company,
Inc. (“Defendant”) seeking “declaratory relief, specific performance, and injunctive relief” for
Defendant’s alleged failure to comply with its obligations under a Membership Interest Purchase
Agreement (“MIPA”) and an escrow agreement. (ECF No. 18 at 2 ¶ 6)
This matter is before the court pursuant to Defendant’s Motion to Transfer Venue to the
United States District Court for the Southern District of New York pursuant to 28 U.S.C. §
1404(a).1 (ECF No. 21 at 1.) In the alternative, Defendant moves for dismissal of “Count III of
the Amended Complaint for failure to state a claim upon which relief may be granted.” (Id.)
The court observes that the instant Motion is Defendant’s second Motion to Transfer Venue.
On August 7, 2017, Defendant filed a Motion to Transfer Venue regarding Plaintiffs’ Complaint.
(See ECF No. 12.) Thereafter, on August 28, 2017, Plaintiffs timely filed an Amended
Complaint. (See ECF No. 18.) Plaintiffs’ Amended Complaint superseded the original
Complaint such that Defendants’ original Motion to Transfer Venue (ECF No. 12) is deemed
DENIED AS MOOT. See, e.g., Young v. City of Mount Ranier, 238 F.3d 567, 572 (4th Cir.
2001) (noting that an amended pleading supersedes the original “and renders it of no legal
effect.”). Additionally, Defendant filed a Motion for Stay of Deadlines and Entry of Scheduling
Order (ECF No. 13.) seeking to stay the case until the court ruled on the original Motion to
Transfer. In accordance with the observations in the instant footnote and Order, the court also
DENIES AS MOOT the Motion for Stay. (ECF No. 13.)
Plaintiffs oppose Defendant’s Motions in their entirety. (ECF No. 24.) For the reasons set forth
below, the court GRANTS Defendant’s Motion to Transfer Venue.
RELEVANT BACKGROUND TO PENDING MOTION
Plaintiffs allege that they had an ownership interest in Action Industrial Group, LLC
(“AIG”) “which Plaintiffs desired to sell and [Defendant] Lewis-Goetz desired to purchase.”
(ECF No. 18 at 2 ¶ 10.) Plaintiffs allege that on or about April 1, 2015, they entered into the
MIPA with Defendant and others for “All Issued and Outstanding Membership Interest” of AIG.
(Id. at 3 ¶ 11 (referencing ECF No. 18-1).) The MIPA allegedly required Plaintiffs to indemnify
Defendant “from certain losses resulting from or related to breaches of Plaintiffs’
representations, warrants, and covenants in the Purchase Agreement.”
(Id. at 4 ¶ 17.)
Furthermore, because the MIPA required “certain portions of the purchase price . . . to be placed
into an escrow account,” Defendant entered into an escrow agreement with JPMorgan Chase
Bank N.A. (“Chase Bank”) and Plaintiffs. (Id. ¶¶ 14–15.)
In accordance with the foregoing, the parties closed the MIPA on April 8, 2015, and
funds were placed in an escrow account at Chase Bank. (Id. at 5 ¶¶ 22–23.) On September 28,
2016, Plaintiffs allege that they were provided notice of a claim by Defendant who also
communicated to Chase Bank that Defendant “would not execute joint written instructions for
the release of any portion of the Escrow Funds until its alleged claim was resolved.” (Id. ¶¶ 26–
27.) Thereafter, Plaintiffs allege that they attempted to determine the nature of the claim being
made by Defendant, but were unsuccessful. (See id. at 6 ¶ 30–8 ¶ 41.)
On April 7, 2017,
Plaintiffs allege that they asked Defendant to “execute joint written authorizations to Chase Bank
allowing it to release Plaintiffs’ Escrow Funds within ten (10) days.” (Id. at 8 ¶ 42.) Plaintiffs
further allege that Defendant ignored this demand. (Id. ¶ 43.)
On June 14, 2017, Plaintiffs filed a Complaint against Defendant in this court alleging a
claim for breach of contract and requesting injunctive relief. (ECF No. 1 at 5 ¶ 37–6 ¶ 44.) In
response to Plaintiffs’ Complaint, Defendant filed an Answer (ECF No. 15) and Motions to
Transfer Venue or to Dismiss (ECF No. 12) on August 7, 2017. Plaintiffs timely filed an
Amended Complaint on August 28, 2017, alleging claims for declaratory judgment, breach of
contract and breach of the covenant of good faith and fair dealing. (ECF No. 18 at 8 ¶ 45–11 ¶
63.) Thereafter, on August 31, 2017, Defendant filed the instant Motion to Transfer Venue or to
Dismiss. (ECF No. 21.)
The court has subject matter jurisdiction over this action, pursuant to 28 U.S.C. § 1332,
based on Plaintiffs’ allegations that the parties are citizens of different states and the amount in
controversy exceeds $75,000.00. Plaintiffs allege that Schmitt, Schmidt and Nyman are citizens
and residents of South Carolina while Roberts is a citizen and resident of Georgia. (ECF No. 18
at 1 ¶¶ 1–4.) Plaintiffs further allege that Defendant “is a corporation existing under and by
virtue of the laws of the State of Pennsylvania with its principal place of business in Pittsburgh,
Pennsylvania.” (Id. ¶ 5.) Moreover, the court is satisfied that the amount in controversy exceeds
$75,000.00. (Id. at 2 ¶ 7 & 5 ¶ 25.)
28 U.S.C. § 1404(a) provides that “[f]or 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.” Id. “The appropriate venue of an action is a procedural matter that is governed by
federal rule and statutes.” Albemarle Corp. v. AstraZeneca UK Ltd., 628 F.3d 643, 651 (4th Cir.
2010) (citing Fed. R. Civ. P. 12(b)(3); 28 U.S.C. § 1391; 28 U.S.C. § 1406(a)). “Whether a case
should be transferred to an alternative venue rests within the sound discretion of the district
court.” Sw. Equip., Inc. v. Stoner & Co., Inc., C/A No. 6:10-1765-HMH, 2010 WL 4484012, at
*2 (D.S.C. Nov. 1, 2010) (citing In re Ralston Purina Co., 726 F.2d 1002, 1005 (4th Cir. 1984)).
“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.”2 Atl. Marine Constr. Co. v. U.S. Dist. Ct.
W.D. Tex., 134 S. Ct. 568, 581 (2013). However, “[w]hen the parties have agreed to a valid
forum-selection clause, a district court should ordinarily transfer the case to the forum specified
in that clause.” Id. “[A] valid forum-selection clause, which ‘represents the parties’ agreement
as to the most proper forum[,]’” should be “‘given controlling weight in all but the most
exceptional cases.’” Id. (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 31 & 33
A court conducts a two-part analysis in deciding whether to enforce a forum selection
clause. First, the court determines whether the forum-selection clause is valid and enforceable.
The Court in Atlantic Marine identified the private and public factors as follows:
Factors relating to the parties’ private interests include “relative ease of access to
sources of proof; availability of compulsory process for attendance of unwilling,
and the cost of obtaining attendance of willing, witnesses; possibility of view of
premises, if view would be appropriate to the action; and all other practical
problems that make trial of a case easy, expeditious and inexpensive.” Piper
Aircraft Co. v. Reyno, 454 U.S. 235, 241, n.6, 102 S. Ct. 252, 70 L. Ed. 2d 419
(1981) (internal quotation marks omitted). Public-interest factors may include
“the administrative difficulties flowing from court congestion; the local interest in
having localized controversies decided at home; [and] the interest in having the
trial of a diversity case in a forum that is at home with the law.” Ibid. (internal
quotation marks omitted). The Court must also give some weight to the plaintiffs'
choice of forum. See Norwood v. Kirkpatrick, 349 U.S. 29, 32, 75 S. Ct. 544, 99
L. Ed. 789 (1955).
Atl. Marine, 134 S. Ct. at 581 n.6.
Atl. Marine, 134 S. Ct. at 581. A forum-selection clause is “prima facie valid and should be
enforced unless enforcement is shown by the resisting party to be ‘unreasonable’ under the
circumstances.” M/S Bremen v. Zapata Off–Shore Co., 407 U.S. 1, 10 (1972). A forumselection clause may be considered unreasonable if “(1) [its] formation was induced by fraud or
over-reaching; (2) the complaining party “will for all practical purposes 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)[its]
enforcement would contravene a strong public policy of the forum state.” Albemarle Corp., 628
F.3d at 651 (quoting Allen v. Lloyd’s of London, 94 F.3d 923, 928 (4th Cir. 1996)).
Second, the court must consider whether “extraordinary circumstances” would hinder the
enforcement of the forum-selection clause. Atl. Marine, 134 S. Ct. at 581. In considering
whether extraordinary circumstances are present to avoid enforcement of a valid forum selection
clause, a court may consider “arguments about public-interest factors only.”3 Id. at 581–82.
The Parties’ Arguments
Defendant contends that “Plaintiffs claims are entirely premised on the allegation that the
MIPA is a ‘valid and enforceable’ contract.” (ECF No. 21-1 at 6 (citing ECF No. 18 at 9 ¶ 50
(“The Purchase Agreement and the Escrow Agreement are valid and enforceable contracts.”)).)
“The presence of a valid forum-selection clause requires district courts to adjust their usual §
1404(a) analysis in three ways.” Atl. Marine, 134 S. Ct. at 581. “First, the plaintiff’s choice of
forum merits no weight.” Id. “Second, a court evaluating a defendant’s § 1404(a) motion to
transfer based on a forum-selection clause should not consider arguments about the parties’
private interests.” Atl. Marine, 134 S. Ct. at 582. “Third, when a party bound by a forumselection 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—a factor that in
some circumstances may affect public-interest considerations.” Atl. Marine, 134 S. Ct. at 582.
Defendant further contends that the MIPA has the following mandatory forum selection clause
that requires the litigation of disputes “solely and exclusively in the courts of the State of New
York sitting in New York County, or, . . . in the United States District Court for the Southern
District of New York:
Except as otherwise provided in Section 12.9, any Claim seeking to enforce any
provision of, or based on any right or claim arising out of or relating to, this
Agreement, any of the other Transaction Documents, or the Contemplated
Transactions shall be brought by or against any of the Parties solely and
exclusively in the courts of the State of New York sitting in New York County,
or, if it has or can acquire jurisdiction, in the United States District Court for the
Southern District of New York in New York County, and each of the Parties (a)
irrevocably consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts) in any such Claim, and (b) hereby waives and agrees
not to assert, by way of motion, as a defense or otherwise, in any such Claim, (i)
that such Party is not subject personally to the jurisdiction of the above-named
courts, (ii) that venue in any such court is improper, (iii) that such Party's property
is exempt or immune from attachment or execution, (iv) that any such Claim
brought in one of the above-named courts should be dismissed on grounds of
improper venue, (v) that such Claim should be transferred or removed to any
court other than one of the abovenamed courts, (vi) that such Claim should be
stayed by reason of the pendency of some other Claim in any other court other
than one of the above-named courts, or (vii) that this Agreement or the subject
matter hereof may not be enforced in or by such court, and (c) hereby agrees not
to commence or prosecute any such Claim other than before one of the abovenamed courts.
(ECF No. 21-1 at 1 (citing ECF No. 21-2 at 58 ¶ 12.5).)
Defendant argues that because there is a forum selection clause, the court in the context
of its section 1404(a) analysis can only consider public-interest factors. (Id. at 7 (citing Atl.
Marine, 134 S. Ct. at 575).) In this regard, Defendant asserts that the public interest factors do
not “justify disregarding the forum selection clause.” (Id. at 7–8 (“[O]ne of the public interest
factors weighs in favor of transferring this case, while the remaining two factors are, at most,
neutral.”).) Based on the aforementioned, Defendant urges the court to “enforce the parties’
bargained-for agreement to litigate disputes between them in New York.” (Id. at 7.)
In the alternative to transferring the matter, Defendant argues that it is entitled to
dismissal of Plaintiffs’ third claim for breach of an implied duty of good faith and fair dealing
because all of Defendant’s “alleged ‘misconduct’ is expressly covered by the terms of the MIPA
and the Escrow Agreement.” (Id. at 8.) In this regard, Defendants assert that Plaintiffs have
failed to allege a gap in the parties’ agreements requiring application of the implied duty. (Id.
(quoting Haney v. Blackhawk Network Holdings, Inc., No. 10851, 2016 WL 769595, at *9 (Del.
Ch. Feb. 26, 2016) (“Where a plaintiff has failed to identify a gap in the contract, merely
repeating the defendant’s allegedly improper acts or omissions already the subject of a separate
breach of contract claim is insufficient to support a claim for breach of the implied covenant of
good faith and fair dealing.”)).) Accordingly, Defendant requests that Plaintiffs’ implied duty
claim be dismissed if the court decides to not transfer the matter. (ECF No. 21-1 at 9.)
Plaintiffs oppose the Motion to Transfer Venue arguing that Defendant’s invocation of
the forum selection clause is invalid because it disregards both “an exception to the forum
selection clause” and a separate applicable provision. (ECF No. 24 at 9.) Specifically, Plaintiffs
assert that “Section 12.54 [of the MIPA] and the corresponding Section 12.9,5 are dispositive and
Supra at 6.
Section 12.9 provides:
The Parties acknowledge and agree that the Sellers and Buyer would be
irreparably harmed if any of the provisions of this Agreement are not performed
in accordance with their specific terms and that any breach of this Agreement by
the Selling Parties or the Buyer could not be adequately compensated in all cases
by monetary damages alone. Accordingly, the Parties agree that, in addition to
any other right or remedy to which Buyer or the Sellers may be entitled at Law or
in equity, Buyer and the Sellers shall be entitled to enforce any provision of this
Agreement by a decree of specific performance and to obtain temporary,
preliminary, and permanent injunctive relief (in each case from any court of
competent jurisdiction) to prevent breaches of this Agreement, without posting
any bond or giving any other undertaking or having to prove actual damages or
that monetary damages will not afford an adequate remedy. The Parties agree that
they shall not oppose or otherwise challenge the appropriateness of equitable
defeat [Defendant] Lewis-Goetz’s Motion to Transfer” because these sections permit Plaintiffs
“to obtain temporary, preliminary, and permanent injunctive relief” from any court of competent
jurisdiction. (ECF No. 24 at 9 & 11.) Therefore, Plaintiffs assert that their action is proper in
this court of competent jurisdiction because they are seeking “declaratory judgment, specific
performance, and injunctive relief with respect to the Purchase Agreement and the Escrow
Agreement, which are claims directly covered by Section 12.5 and 12.9 of the Purchase
Agreement.” (ECF No. 24 at 11.)
Plaintiffs also argue that their implied covenant of good faith and fair dealing claim
should not be dismissed because their allegations “support the conclusion that [Defendant]
Lewis-Goetz acted in bad faith and for the purpose of attempting to recover for lost customers or
sales (which were lost for reasons unrelated to Plaintiffs’ conduct) or otherwise to reduce the
ultimate net purchase price paid by [Defendant] Lewis-Goetz in the Purchase Agreement, by
wrongfully placing blame on Plaintiffs.” (Id. at 14 (citing ECF No. 18 at 8 ¶¶ 44–45).)
The Court’s Review
Defendant moves to transfer the matter to the Southern District of New York pursuant to
a forum selection clause contained in section 12.5 of the MIPA. (ECF No. 21 at 1 (referencing
ECF No. 18-1 at 58 § 12.5).) In order to resolve Defendant’s Motion to Transfer, the court must
determine whether the forum selection clause is valid. Plaintiffs do not contend that the forum
selection clause is unreasonable under Albemarle Corp. Instead, Plaintiffs argue that this court is
a proper forum for this action pursuant to section 12.9 of the MIPA, which Plaintiffs assert is an
exception to section 12.5’s forum selection provision.
Upon consideration of the parties’
relief or the entry by a court of competent jurisdiction of an order granting
equitable relief, in either case, consistent with the terms hereof.
(ECF No. 21-2 at 59 ¶ 12.9.)
positions, their dispute is an issue of contract interpretation.
Under South Carolina law,6 “‘[w]here the contract’s language is clear and unambiguous,
the language alone determines the contract’s force and effect.’” Id. (quoting McGill v. Moore,
672 S.E.2d 571, 574 (S.C. 2009)). “‘It is a question of law for the court whether the language of
a contract is ambiguous.’”
Id. at 710 (quoting S.C. Dep’t of Nat. Res. v. Town of
McClellanville, 550 S.E.2d 299, 302-03 (S.C. 2001)). “‘A contract is ambiguous when it is
capable of more than one meaning when viewed objectively by a reasonably intelligent person
who has examined the context of the entire integrated agreement and who is cognizant of the
customs, practices, usages and terminology as generally understood in the particular trade or
business.’” Id. (quoting Hawkins v. Greenwood Dev. Corp., 493 S.E.2d 875, 878 (S.C. Ct. App.
1997)). Moreover, “‘extrinsic evidence may only be considered if the contract is ambiguous.’”
Rodarte v. Univ. of S.C., 2015 WL 4275972, at *5 (S.C. Ct. App. July 15, 2015) (quoting
Preserv. Capital Consultants, LLC v. First Am. Title Ins. Co., 751 S.E.2d 256, 261 (S.C. 2013)).
“Where a written instrument is unambiguous, parol evidence is inadmissible to ascertain the true
intent and meaning of the parties.” McGill v. Moore, 672 S.E.2d 571, 576 (S.C. 2009).
Upon review, the court finds that the terms of the MIPA are unambiguous. Specifically,
in addition to its forum selection provision, the MIPA allows a party to the Agreement to enforce
any of its provisions in “any court of competent jurisdiction  to prevent breaches of th[e]
Agreement, . . . .” (ECF No. 18-1 at 59 § 12.9.) However, in this matter, Plaintiffs allege that
Defendant has already breached the MIPA by:
asserting claims for which it is not entitled to indemnification from
Because this action is premised on diversity jurisdiction, the interpretation of the Agreement is
governed by South Carolina contract law. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78
(1938); Vagish, LLC v. Seneca Specialty Ins. Co., Case No. 3:13-cv-03161-TLW, 2014 WL
12638788, at *1 (D.S.C. July 25, 2014) (citing Erie R.R.).
asserting claims that are unsupported and without merit;
wrongfully refusing to provide Chase Bank with joint written instructions
directing the release of the Escrow Funds to Plaintiffs; and
otherwise as may be proven at trial.
(ECF No. 18 at 9–10 ¶ 52.) Based on Plaintiff’s express allegations, the court cannot conclude
that this action is being “brought to ‘prevent’ a breach of the parties’ agreements” since a breach
has already been alleged to have occurred. (ECF No. 25 at 4.) Therefore, the court finds that the
exception to the MIPA’s forum selection clause is inapplicable and the MIPA’s forum selection
clause is valid.
The foregoing finding resolves Defendant’s Motion to Transfer because
Plaintiffs also fail to present exceptional circumstances mandating that the forum selection clause
not be given controlling weight. Accordingly, this case should be transferred to the Southern
District of New York as requested by Defendant.
Upon careful consideration of the entire record and for the reasons set forth above, the
court hereby GRANTS Defendant Lewis-Goetz and Company, Inc.’s Motion to Transfer Venue
and TRANSFERS the matter to the United States District Court for the Southern District of
New York. (ECF No. 21.) The court DECLINES to rule on the remaining pending Motion to
Dismiss (id.) in this case and leaves resolution of this Motion for the transferee court.
IT IS SO ORDERED.
United States District Judge
October 31, 2017
Columbia, South Carolina
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?