BH Services Inc. v. FCE Benefit Administrators Inc. et al
ORDER denying 23 Motion to Change Venue. Signed by U.S. District Judge Karen E. Schreier on 8/23/2017. (JLS)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
BH SERVICES INC., For Itself as
Sponsor and Fiduciary and for the BH
SERVICES, INC., HEALTH AND
ORDER DENYING MOTION
TO TRANSFER VENUE
FCE BENEFIT ADMINISTRATORS INC.,
TRUST MANAGEMENT SERVICES,
ACEC MW, and
TRANSAMERICA LIFE INSURANCE
Defendant FCE Benefit Administrators Inc., moves to transfer this action
under 28 U.S.C. § 1404(a) to the Northern District of California based on the
forum selection clause in a Third Party Administrator (TPA) Agreement between
plaintiff, BH Services, Inc., and FCE. Docket 23; Docket 25-1 at 5. BH Services
opposes the motion to transfer and argues that venue is proper in the District
of South Dakota. Docket 30 at 1-2. For the reasons that follow, the court
denies the motion to transfer venue.
BH Services is a not-for-profit corporation based in Rapid City, South
Dakota, providing employment to over 200 people in Nebraska and South
Dakota. Docket 31 ¶ 2. BH Services is the sponsor, administrator, and named
fiduciary of the BH Services, Inc. Health and Welfare Plan (the Plan). Docket 28
¶¶ 2.01, 2.02. FCE is a third party administrator that provides administration
support services to ERISA health and welfare plans. Docket 25 ¶ 2.
From 1995 to 2015, BH Services retained FCE to provide a plan
document, compliance services, and third-party administrative services for the
Plan. Docket 28 ¶ 5.01. In March 2004, BH Services and FCE entered into two
agreements relating to FCE’s management of the Plan. Docket 25 ¶¶ 3, 4. The
first, the Adoption Agreement, incorporated the Plan by reference and added
several exhibits to the Plan. Id. ¶ 4. The second agreement, the TPA Agreement,
was one of the included attachments and describes the services FCE would
provide related to administering and managing the Plan. Id. ¶¶ 4, 5.
Article VIII(f) of the TPA Agreement provides:
Governing Law and Venue: This Agreement will be governed by the
internal laws of the State of California except to the extent
preempted by ERISA, COBRA or other applicable federal law, and
the venue for resolving any dispute under this Agreement will be
San Mateo County, California.
Docket 25-1 at 5.
In October of 2013, BH Services appointed defendant Trust Management
Services (TMS) to serve as trustee of the Plan’s assets. Docket 31 ¶ 8; see also
Docket 28 ¶ 5.01. This appointment was made at FCE’s recommendation.
Docket 31 ¶ 3. To effectuate this appointment, BH Services and TMS executed
a Trust Assignment Agreement, under which TMS agreed to assume “the
rights, claims and obligations of Trustee and agrees to perform the services and
function of the Trustee under the Trust Agreement as expressly provided
therein.” Docket 25-3. Section 7.4 of the Trust Agreement contained a forum
selection clause similar to the one entered into between BH Services and FCE:
“This Trust Agreement will be construed, administered and enforced according
to ERISA and the law of the State of California . . . . Venue for any dispute
under this Agreement will be San Mateo County, California.” Docket 25-2 at 4. 1
On June 10, 2016, BH Services filed a complaint in this court naming
FCE and TMS as defendants. Docket 1 ¶¶ 2.03, 2.04. FCE responded to the
complaint on October 11, 2016, by filing both a motion to dismiss for failure to
state a claim (Docket 20) and a motion to transfer venue (Docket 23). On
October 28, 2016, BH Services amended its complaint as a matter of course
under Federal Rule of Civil Procedure 15(a)(1)(B). See Docket 28. The first
amended complaint added two additional defendants, ACEC MW and
Transamerica Life Insurance Company. Id. ¶¶ 2.05, 2.06.
BH Services alleges in the first amended complaint that in 2015, it
decided to transfer plan document compliance, administration, and servicing of
the Plan to Fringe Benefits Group. Id. ¶ 5.01. BH Services also alleges that it
notified FCE and TMS of its intent to terminate their services on October 28,
2015. Id. BH Services further alleges that despite its multiple attempts to have
FCE and TMS transfer the Plan’s assets to Fringe Benefits Group, FCE and
BH Services does not contest the existence of either forum selection clause
but, as explained below, does argue that the forum selection clauses should
not be enforced.
TMS have failed to transfer the Plan’s assets totaling more than $735,000.
Id. ¶ 5.02.
The first amended complaint also recites several allegations regarding the
relationship of the parties to this dispute. For example, BH Services alleges
that, despite its belief that FCE and TMS would operate the Plan to provide
plan members with group term life insurance, see id. ¶¶ 1.03, 5.09, FCE and
ACEC actually contracted with Transamerica to provide plan members with life
insurance plans that were part of two master group variable universal life
insurance policies. Id. ¶¶ 1.03, 5.09. Instead of these universal life insurance
policies being owned by TMS, as trustee of the Plan, BH Services alleges that
the Transamerica policies and their cash values were owned by both FCE and
ACEC. Id. ¶ 1.03. BH Services also alleges that because FCE and ACEC had
control of the Plan’s assets and the cash value held in the Transamerica
policies, FCE and ACEC could build up cash accounts that accumulated in the
Transamerica policies. Id. ¶ 1.04. BH Services further alleges that FCE and
ACEC, along with TMS as trustee of the Plan’s assets, were able to hide the
cash surrender value of the policies from BH Services and access that cash
surplus without BH Services’ knowledge. Id. BH Services also alleges that FCE
and TMS are preventing BH Services from discovering additional information
about the Plan’s assets, which has frustrated BH Services’ attempts to get an
accounting. Id. ¶ 5.14.
In total, the first amended complaint alleges seven causes of action
against FCE, TMS, ACEC, and Transamerica. Count one seeks an injunction
against FCE, TMS, and ACEC under 29 U.S.C. § 1132(a)(3). Count two requests
an accounting of the Plan’s assets under 29 U.S.C. § 1132(a)(3) against FCE
and TMS. Count three seeks the recovery of wrongfully dissipated Plan assets
against FCE, TMS, and ACEC under 29 U.S.C. § 1132(a)(3)(B)(i). Count four
seeks damages against FCE, TMS, and ACEC for the breach of fiduciary duty
and breach of fiduciary duty by co-fiduciaries under 29 U.S.C. §§ 1105, 1109,
and 1132(a)(2). Count five seeks an award of attorney’s fees and costs under
29 U.S.C. § 1132(g) against FCE, TMS, and ACEC for BH Services’ ERISA
claims. Count six seeks damages, including punitive damages, against FCE
and Transamerica for common law fraud under state law. Count seven seeks
damages for unjust enrichment against FCE, TMS, ACEC, and Transamerica.
FCE responded to the first amended complaint on November 14, 2016,
by filing a partial motion to dismiss and motion to strike portions of the first
amended complaint (Docket 33) and an answer to the first amended complaint
(Docket 37). FCE did not refile its motion to transfer venue, see Docket 23, and
instead, also on November 14, 2016, filed its reply brief in support of the
motion to transfer venue. 2 Docket 36.
BH Services filed TMS’s waiver of service on March 13, 2017. Docket 83.
Under this waiver, TMS had until May 12, 2017, to respond to the first
amended complaint. TMS failed to file an answer or responsive motion to the
first amended complaint. Thus, BH Services moved for a clerk’s entry of default
against TMS, Docket 85, which was entered on May 19, 2017. Docket 86. Since
BH Services filed its response in opposition to the motion to transfer venue
(Docket 30) four days after it filed the first amended complaint.
the clerk’s entry of default was entered, TMS has moved to vacate the clerk’s
entry of default. Docket 88. This motion is still pending.
Transamerica responded to the first amended complaint on January 20,
2017, by filing a motion to dismiss for failure to state a claim. Docket 52.
ACEC responded to the first amended complaint on February 2, 2017, by filing
a partial motion to dismiss. 3 Docket 64. Neither Transamerica nor ACEC have
moved to join FCE’s motion to transfer venue to the Northern District of
28 U.S.C. § 1404(a) provides: “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.” For parties to be
able to use § 1404(a) to seek a transfer, venue in the transferor court must be
proper. Van Dusen v. Barrack, 376 U.S. 612, 634 (1964) (stating that § 1404(a)
“operates on the premises that the plaintiff has properly exercised his venue
privilege.”). “In general, federal courts give considerable deference to a plaintiff's
choice of forum and thus the party seeking a transfer under section 1404(a)
typically bears the burden of proving that a transfer is warranted.” Terra Int'l,
Inc. v. Miss. Chem. Corp., 119 F.3d 688, 695 (8th Cir. 1997). The Eighth Circuit
has “declined to offer an ‘exhaustive list of specific factors to consider’ in
The court will address FCE’s partial motion to dismiss and motion to strike
(Docket 33), Transamerica’s motion to dismiss (Docket 52), and ACEC’s partial
motion to dismiss (Docket 64) in a separate order.
making the transfer decision[.]” In re Apple, Inc., 602 F.3d 909, 912 (8th Cir.
2010) (quoting Terra Int'l, 119 F.3d at 691). Instead, district courts considering
a motion to transfer under § 1404(a), “must evaluate both the convenience of
the parties and various public-interest considerations.” Atl. Marine Constr. Co.
v. U.S. Dist. Court for the W. Dist. of Tex., 134 S. Ct. 568, 581 (2013); see also
id. n.6 (describing the private-interest and public-interest factors that courts
can consider in deciding a motion under § 1404(a) (citing Piper Aircraft Co. v.
Reyno, 454 U.S. 235, 241 n.6 (1981))).
Parties seeking to transfer an action to enforce a forum selection clause
must do so using either § 1404(a) or the doctrine of forum non conveniens.
Id. at 579-80. Both § 1404(a) and the doctrine of forum non conveniens require
courts to employ an identical analysis, with the exception that a motion to
transfer under § 1404(a) does not require dismissal of the suit. Id. at 580
(“Section 1404(a) is merely a codification of the doctrine of forum non
conveniens for the subset of cases in which the transferee forum is within the
federal court system; in such cases, Congress has replaced the traditional
remedy of outright dismissal with transfer.” (citing Sinochem Int'l Co. Ltd. v.
Malaysia Int'l Shipping Corp., 549 U.S. 422, 430 (2007))). Where a forum
selection clause is valid and calls for transfer to a federal forum, the normal
§ 1404(a) analysis is altered in three ways: (1) the plaintiff’s choice of forum
receives no weight; (2) the court considers only arguments regarding the
public-interest factors and does not consider arguments relating to the parties’
private interests; and (3) if a transfer is warranted, the transferee court will not
be required to apply the transferor court’s choice-of-law rules. Id. at 581-82.
Forum Selection Clause
A. Choice of Law
Initially, the court must determine whether federal law or state law
applies to determine the enforceability of FCE’s forum selection clause. This
court’s subject matter jurisdiction is based on the federal questions raised in
counts one through five of the first amended complaint, which alleges
violations of the Employee Retirement Income Security Act of 1974 (ERISA),
29 U.S.C. §§ 1001-1461 (2012). See 28 U.S.C. § 1331; Docket 28 at 14-18. The
court has supplemental jurisdiction over the two state-law causes of action.
See 28 U.S.C. § 1367(a).
The Eighth Circuit has not addressed the issue of whether federal or
state law applies when determining the enforceability of forum selection
clauses in federal question cases that include claims invoking supplemental
jurisdiction. In the context of cases based on diversity jurisdiction, the Eighth
Circuit has stated: “Because ‘the enforceability of a forum selection clause
concerns both the substantive law of contracts and the procedural law of
venue,’ . . . there is some disagreement among the circuits over whether state
or federal law applies, . . . and we have yet to adopt a definitive position on the
issue.” Servewell Plumbing, LLC v. Fed. Ins. Co., 439 F.3d 786, 789 (8th Cir.
2006) (internal citations omitted) (quoting Sun World Lines, Ltd. v. March
Shipping Corp., 801 F.2d 1066, 1068-69 (8th Cir. 1986)); but see Fru-Con
Constr. Corp. v. Controlled Air, Inc., 574 F.3d 527, 538 (8th Cir. 2009) (stating
that “enforcement, or not, of the contractual forum selection clause was a
federal court procedural matter governed by federal law.”). 4 Courts need not
resolve this question if both parties agree that federal law applies. See
Servewell, 439 F.3d at 789. Additionally, courts have avoided choosing between
state substantive and federal procedural law if state law and federal law both
apply the same standard. M.B. Rests., Inc. v. CKE Rests., Inc., 183 F.3d 750,
752 (8th Cir. 1999) (“Although there may be some disagreement among the
circuits regarding whether this is a procedural question governed by federal
law or a substantive question governed by state law . . . the parties here do not
argue the state and federal standards differ.”); see also 14D Charles Alan
The precedential value of this language in Fru-Con is called into question in
Judge Shepherd’s dissent, which Judge Bye joined in part. Judge Shepherd
wrote: “Moreover, contrary to Judge Beam’s contention, . . . [the cases cited by
Judge Beam] make clear that we have not yet decided whether enforcement of
a contract’s forum selection clause is governed by state substantive or federal
procedural law . . . .” Fru-Con, 574 F.3d at 543 n.12 (Shepherd, J., dissenting).
Compare Heartland Family Servs. v. Netsmart Techs., Inc., 961 F. Supp. 2d 964,
967 (D. Neb. 2013) (applying Fru-Con to determine that enforcement of a forum
selection clause is a procedural matter governed by federal law in the Eighth
Circuit), and Wong v. PartyGaming Ltd., 589 F.3d 821, 827 (6th Cir. 2009)
(collecting cases and stating that the Eighth Circuit in Fru-Con held that
enforceability of a forum selection clause is procedural and governed by federal
law), with C.H. Robinson Worldwide, Inc. v. Rodriguez, No. 12-264(DSD/SER),
2012 WL 4856245, at *4 (D. Minn. Oct. 12, 2012) (following the language in
Servewell that the Eighth Circuit has not taken a definitive position, despite
the contrary language in Fru-Con), and 14D Charles Alan Wright & Arthur R.
Miller, Federal Practice & Procedure, § 3803.1 (4th ed.) (observing that while
“the Eighth Circuit appears not to have taken a position on the matter, the
clear majority [of Circuits] . . . conclude that enforceability of a forum selection
clause is governed by federal law.” (footnote omitted)).
Wright & Arthur R. Miller, Federal Practice & Procedure, § 3803.1 (4th ed.)
(“Most states, however, appear to have adopted the federal approach, so often
courts are able to elide the basic issue because the result would be the same
under federal and state law.”).
Here, the parties do not necessarily differ over whether the court should
use federal law to analyze the enforceability of the forum selection clause.
FCE argues that the court should apply the standard found in M/S Bremen v.
Zapata Off-Shore Co., 407 U.S. 1 (1972), to determine the enforceability of the
forum selection clause. See Docket 24 at 6-7 (quoting federal law and
reiterating the test laid out in Bremen). BH Services also cites to federal law but
does so in order to make two arguments. See Docket 30 at 4-12. The first
argument raised by BH Services is that the forum selection clause should not
be enforced here because the clause does not designate a federal forum to
adjudicate an exclusive federal issue. See id. at 5-6. The second argument is a
policy argument that focuses on a question unanswered by the United States
Supreme Court and the Eighth Circuit: Whether forum selection clauses
contravene ERISA’s strong public policy and are thus unenforceable in ERISA
cases. Because the parties cite only to federal law in their discussions
regarding the applicability of the forum selection clause here, the court will
apply federal law to determine if the clause is enforceable.
Even if state law did apply, the result would not be different. The South
Dakota Supreme Court has employed the Bremen standard to determine the
enforceability of forum selection clauses. See O’Neill Farms, Inc. v. Reinert, 780
N.W.2d 55, 58 (S.D. 2010). Similarly, the California Supreme Court has cited to
Bremen as the standard for determining whether a forum selection clause,
which does not violate the state’s public policy, is valid. Smith, Valentino &
Smith, Inc. v. Superior Court, 551 P.2d 1206, 1209 (Cal. 1976) (citing M/S
Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972)) (adopting Bremen which
reflected “the modern trend which favors the enforceability of such forum
selection clauses.”); see also Tompkins v. 23andMe, Inc., 840 F.3d 1016, 1028
(9th Cir. 2016) (“Smith, Valentino . . . concluded ‘that forum selection clauses
are valid and may be given effect, in the court's discretion and in the absence
of a showing that enforcement of such a clause would be unreasonable.’ ”
(quoting Smith, Valentino, 551 P.2d at 1209)). Thus, even if the Eighth Circuit
were to hold that the Bremen standard is not automatically applicable in
federal question cases involving supplemental jurisdiction over state-law
claims, in this case both parties cite to federal law to discuss the enforceability
of the forum selection clause and courts in both South Dakota and California
would apply Bremen to determine the validity of the forum selection clause.
“ ‘Forum selection clauses are prima facie valid and are enforced unless
they are unjust or unreasonable or invalid for reasons such as fraud or
overreaching.’ ” Union Elec. Co. v. Energy Ins. Mut. Ltd., 689 F.3d 968, 973 (8th
Cir. 2012) (quoting M.B. Rests., 183 F.3d at 752). “A contractual choice-offorum clause should be held unenforceable if enforcement would contravene a
strong public policy of the forum in which suit is brought, whether declared by
statute or by judicial decision.” Bremen, 407 U.S. at 15. If a forum selection
clause is valid and enforceable, the party seeking to litigate in a forum other
than that negotiated in the clause “bears an especially ‘heavy burden of proof’
to avoid its bargain.” Servewell, 439 F.3d at 789 (quoting Bremen, 407 U.S. at
17); see also Atl. Marine, 134 S. Ct. at 581 (“[B]ecause 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.’ ” (first alteration added) (quoting Stewart
Org., Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988) (Kennedy, J., concurring))).
Inconvenience to a party is insufficient to invalidate a forum selection clause,
but a party may avoid enforcement of that clause if it would, for all practical
purposes, deprive a litigant of its day in court. Union Elec., 689 F.3d at 974.
As the Supreme Court observed in Atlantic Marine, the question as to
whether venue is proper in a particular district is generally governed by
28 U.S.C. § 1391. Atl. Marine, 134 S. Ct. at 577. Only after a court determines
whether venue is proper, can the court determine if a forum selection clause is
enforceable and whether transfer under § 1404(a) is appropriate. See id. at 579
(stating that because forum selection clauses “may be enforced through a
motion to transfer under § 1404(a). . . . [the statute] permits transfer to any
district where venue is also proper . . . or to any district which the parties have
agreed by contract or stipulation.”). In ERISA cases, the question of venue is
governed by ERISA’s own venue statute, 29 U.S.C. § 1132(e)(2). Under this
statute, an ERISA action “may be brought in the district where the plan is
administered, where the breach took place, or where a defendant resides or
may be found, and process may be served in any other district where a
defendant resides or may be found.” 29 U.S.C. § 1132(e)(2). Here the parties
agree that venue in South Dakota is proper under this statute. See Docket 24
at 2 (FCE acknowledging that venue is proper in South Dakota absent the
presence of a valid forum selection clause); Docket 28 ¶ 3.01 (BH Services
stating that venue is proper under § 1132(e)(2) because the breaches occurred
in South Dakota). Thus, if the forum selection clause is invalid or transfer is
not appropriate, South Dakota is a proper venue for this action.
Given that venue is otherwise proper in South Dakota, the analysis now
must focus on whether the forum selection clause here is enforceable under
federal law. BH Services does not argue that the forum selection clause found
in the TPA Agreement is the result of fraud or overreaching. See Union Elec.,
689 F.3d at 973. Instead, as observed above, BH Services presents two main
arguments as to why the court should not enforce the clause. First, BH
Services argues that the clause is unreasonable and unenforceable because by
its terms, it requires an exclusively federal issue to be tried in a state court.
Docket 30 at 5-7. Second, BH Services argues that the clause violates the
public policy embedded into ERISA by Congress. See id. at 7-10. Because the
court finds the forum selection clause here is unenforceable by its terms, the
court will not address BH Services’ second argument.
The operative language of the forum selection clause states that the
“venue for resolving any dispute under [the TPA] Agreement will be San Mateo
County, California.” Docket 25-1 at 5. Here, it is impossible for plaintiffs to
comply with the forum selection clause in the TPA Agreement. The clause
requires suit to be brought in San Mateo County, California. But the ERISA
claims alleged in the complaint and the first amended complaint vest exclusive
jurisdiction in “the district courts of the United States . . . .” 29 U.S.C.
§ 1132(e)(1) (setting exclusive federal court jurisdiction for most ERISA causes
of action). And there is no federal courthouse located in San Mateo County,
California. Additionally, the forum selection clause in the TPA Agreement is
mandatory because it requires that “venue will be San Mateo County,
California.” Docket 25-1 at 5; see Dunne v. Libbra, 330 F.3d 1062, 1064 (8th
Cir. 2003) (discussing mandatory and permissive forum selection clauses and
observing that mandatory clauses use words that “suggest exclusivity”). Thus,
it is impossible for BH Services to comply with the forum selection clause in the
TPA Agreement because the forum selection clause mandates that venue will
be San Mateo County, California, but the ERISA claims alleged in the first
amended complaint are subject to exclusive federal jurisdiction and there is no
federal courthouse located in San Mateo County, California. As a result, the
court concludes that the clause is unenforceable under Bremen. 5 Cf. U.S. ex rel.
B & D Mech. Contractors, Inc. v. St. Paul Mercury Ins. Co., 70 F.3d 1115, 1118
(10th Cir. 1995) (concluding that a forum selection clause that “attempt[ed] to
The court would reach the same conclusion—that the forum selection clause
is unenforceable under Bremen—if the court were asked to interpret the
enforceability of the forum selection clause found in the Trust Agreement
between BH Services and TMS. See Docket 25-2 at 4 (requiring that venue “for
any dispute under this Agreement will be San Mateo County, California”).
divest the federal courts of their exclusive jurisdiction to hear [a] case is void
In support of its argument that the contract language requires the court
to transfer this action to the Northern District of California, FCE cites Graham
Construction Services, Inc. v. Hammer & Steel, Inc., No. 4:11-cv-020, 2011 WL
3236083 (D.N.D. July 27, 2011). FCE argues that Graham, and the cases cited
by Graham, stand for the proposition that “in situations such as this, where a
claim must be heard in a U.S. District Court, a forum selection clause
providing for exclusive jurisdiction in a county supports a transfer to the U.S.
District Court in which the county sits.” Docket 24 at 6 (citing Graham, 2011
WL 3236083, at *5).
In Graham, the court evaluated a forum selection clause stating “that
any legal proceedings brought to determine the validity, construction, breach,
interpretation or enforcement of the Rental Agreement shall be instituted and
maintained in St. Louis County, Missouri.” Graham, 2011 WL 3236083, at *23. In determining whether this forum selection clause allowed for a transfer to
a federal court in Missouri, the court compiled a number of cases analyzing
similar clauses. Id. at *5 (collecting cases). After analyzing those cases, and
engaging in a Bremen analysis, the court concluded that:
While the forum selection clause is mandatory in that St. Louis
County, Missouri is the correct forum, the provision does not
exclusively mandate federal or state court jurisdiction. The United
States District Court for the Eastern District of Missouri is located
in St. Louis County, Missouri. The Court finds that the forum
selection clause permits litigation in federal court and, in the
interests of justice, the action should be transferred to the United
States District Court for the Eastern District of Missouri.
BH Services argues that Graham, and the cases cited by Graham, are
inapposite here because each of those cases involved a situation where the
county at issue in the forum selection clause contained both a state
courthouse and a federal courthouse. Docket 30 at 6. Due to the difference
between Graham, the cases cited in Graham, and this case, BH Services argues
that the court should decline to adopt FCE’s reading of Graham and conclude
that BH Services filed suit in a proper venue. Id. at 6-7. FCE counters this
argument by stating that if the court were not to adopt the rationale in
Graham, the result—not transferring this case pursuant to the forum selection
clause—“would result in a loss of an important contractual right negotiated by
the parties.” Docket 38 at 6.
After analyzing the cases cited in Graham, the court agrees with
BH Services that the cases cited in Graham are inapplicable here because the
counties in those cases housed both state and federal courthouses. See
Graham, 2011 WL 3236083, at *5; see also, e.g., Alliance Health Grp., LLC v.
Bridging Health Options, LLC, 553 F.3d 397, 398-400 (5th Cir. 2008) (forum
selection clause requiring litigation “shall occur in Harrison County,
Mississippi” permitted suit “in either federal or state court, because a federal
courthouse is located in that county”); Glob. Satellite Commc'n Co. v. Starmill
U.K., Ltd., 378 F.3d 1269, 1272 (11th Cir. 2004) (forum selection clause
specifying “Venue shall be in Broward County” permitted filing in either state
or federal court in that county). Unlike the forum selection clauses in Graham,
Alliance Health, or Global Satellite, the forum selection clause here requires suit
in “San Mateo County, California.” Docket 25-1 at 5. And while the Northern
District of California encompasses San Mateo County, California, the
authorized places of holding court for the Northern District of California are
Eureka, Oakland, San Francisco, and San Jose, California, none of which are
in San Mateo County. See 28 U.S.C. § 84(a).
FCE contends that failure to enforce the forum selection clause would
result in the loss of a contractual right. Docket 38 at 6. But the parties did not
contractually agree to venue of this type of dispute anywhere other than San
Mateo County, California. See Docket 25-1 at 5. Thus, because the forum
selection clause was impossible to comply with, BH Services did not err in filing
suit in a venue authorized under ERISA’s own venue statute—South Dakota.
See 29 U.S.C. § 1132(e)(2).
Is Transfer Appropriate Here?
Although the court has determined that the forum selection clause is
unenforceable, and therefore does not require the court to transfer this matter,
the court still may order a transfer to another judicial district where venue is
proper. See 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 . . . .”). And because
the forum selection clause is unenforceable, the court’s review of a potential
transfer under § 1404(a) “must evaluate both the convenience of the parties
and various public-interest considerations.” Atl. Marine, 134 S. Ct. at 581;
see also id. n.6 (describing the private-interest and public-interest factors that
courts can consider in deciding a motion under § 1404(a) (citing Piper, 454 U.S.
at 241 n.6)). After making those considerations, the court then must “weigh the
relevant factors and decide whether, on balance, a transfer would serve ‘the
convenience of the parties and witnesses’ and otherwise promote ‘the interests
of justice.’ ” Atl. Marine, 134 S. Ct. at 581 (quoting 28 U.S.C. § 1404(a));
see also Terra Int'l, 119 F.3d at 696 (describing factors for district courts to
consider under § 1404(a) relating to the interests of justice and to the
convenience of the parties and witnesses).
Having weighed the various factors prescribed by the Supreme Court and
the Eighth Circuit, the court finds that transfer to the Northern District of
California is not warranted here. Of the factors described by the Supreme
Court and the Eighth Circuit, one of the most important factors in determining
whether a court should transfer venue is the plaintiff’s choice of forum. See
Terra Int’l, 119 F.3d at 695 (“In general, federal courts give considerable
deference to a plaintiff's choice of forum and thus the party seeking a transfer
under section 1404(a) typically bears the burden of proving that a transfer is
warranted.”). Further, a weighing of the other factors shows that those factors
are, at a minimum, neutral or weigh slightly in favor of BH Services. This is
because no party has shown that it would be any more or less difficult for this
court to adjudicate the federal questions presented, key witnesses reside both
in South Dakota and in California, and keeping this case together in South
Dakota—where the court has jurisdiction over all defendants—supports the
interests of justice and has the largest potential for making a potential trial of
this case “easy, expeditious, and inexpensive.” Piper, 454 U.S. at 241 n.6
(citation omitted); see also Atl. Marine, 134 S. Ct. at 581 n.6; Terra Int'l, 119
F.3d at 696. Thus, no combination of factors here outweighs BH Services’
interest in having South Dakota as the forum for this dispute.
The federal issues asserted in the first amended complaint can only be
heard by a federal court. 29 U.S.C. § 1132(e)(1). But the forum selection clause
in the TPA Agreement between BH Services and FCE—like the forum selection
clause in the Trust Agreement between TMS and BH Services—requires that
“venue for resolving any dispute under this Agreement will be San Mateo
County, California.” Docket 25-1 at 5; see also Docket 25-2 at 4. Thus, because
the forum selection clause in the TPA Agreement would require an exclusively
federal action to proceed in San Mateo County, California, where no federal
courthouse is located, the court concludes that the forum selection clause is
unenforceable under Bremen. As a result, BH Services did not err by filing this
action in South Dakota where venue is proper under 29 U.S.C. § 1132(e)(2).
Because none of the factors prescribed by the Supreme Court or the Eighth
Circuit warrant transfer to the Northern District of California, the court
declines to order a transfer under 28 U.S.C. § 1404(a). Thus, it is
ORDERED that FCE’s motion to transfer venue to the Northern District
of California (Docket 23) is denied.
DATED August 23, 2017.
BY THE COURT:
/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE
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