Phelan v. American Institute of Toxicology Inc
OPINION AND ORDER denying 13 MOTION to remand to State Court and Response to Motion To Dismiss or Transfer Venue, granting in part and denying in part 6 MOTION to Dismiss Complaint , or Alternatively MOTION to transfer ca se to the Northern District of Texas. The Clerk of Court is directed to transfer this case to the U.S. District Court for the Northern District of Texas pursuant to 28 U.S.C. §§ 1406 and 1631, and to close this case and terminate any pending motions. Signed by Judge Elizabeth A. Kovachevich on 10/4/2017. (EJJ) [Transferred from Florida Middle on 10/5/2017.]
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
MICHAEL PHELAN, as Assignee of
Physicians Choice laboratory Services,
Case No: 8:17-cv-1691-T-17TGW
AMERICAN INSTITUTE OF
This cause comes before the Court pursuant to the motion to dismiss (Doc. No. 6)
(the "Motion to Dismiss") filed by the Defendant, American Institute of Toxicology, Inc.
(the "Defendant"), and the motion to remand (Doc. No. 13) (the "Motion to Remand")
filed by the Plaintiff, Michael Phelan, as Assignee of Physicians Choice Laboratory
Services, LLC (the "Plaintiff'). For the reasons set forth below, the Motion to Dismiss is
GRANTED IN PART AND DENIED IN PART, and the Motion to Remand is DENIED.
The Court must decide· whether a supplemental proceeding brought by an
assignee for the benefit of creditors to recover money on behalf of the assignor's estate
is a an independent civil action that is removable under 28 U.S.C. § 1441 and, if so,
whether the case should be dismissed or transferred for improper venue. Because the
Plaintiff is seeking to impose new liability against a new defendant based on a new legal
theory, this case is not merely ancillary to the insolvency proceeding currently pending
before the state court and, as a result, is removable under 28 U.S.C. § 1441. Moreover,
because forum selection clauses are enforceable in insolvency proceedings, and the
parties clearly selected Texas as their forum of choice, the case will be transferred to the
U.S. District Court for the Northern District of Texas.
On October 21, 2016, Physicians Choice Laboratory Services, LLC ("Physicians
Choice") filed a petition for assignment for benefit of creditors under Chapter 727 of the
Florida Statutes (the "ABC") in the Circuit Court of the Thirteenth Judicial Circuit in and
for Hillsborough County, Florida (the "Circuit Court"). See (Doc. No. 1, at
11 5). The
Plaintiff was designated as the assignee in the ABC. Id.
Prior to filing the ABC, on June 30, 2016, the Defendant purchased assets from
Physicians Choice pursuant to an Asset Purchase Agreement (the "APA"). (Doc. No. 1,
In addition, to help effectuate the APA, the parties contemporaneously entered
into a Transition Services Agreement (the "TSA"), pursuant to which the Defendant
agreed to purchase ongoing transition services from Physicians Choice. (Doc. No. 1, at 11
The TSA contains choice of law and forum selection clauses stating that (1) the
parties' rights and obligations shall be "governed, construed and enforced in accordance
with the laws of the State of Texas," and (2) "[l]egal proceedings commenced by
[Physicians Choice] or [Defendant] arising out of
... [the TSA] shall be brought
exclusively in the federal courts, or in the absence of federal jurisdiction, in state co1.,1rts,
in either case in the State of Texas." While the APA does not contain a forum selection
clause, it similarly states that the parties' rights and obligations shall be "governed,
construed and enforced in accordance with the laws of the State of Texas."
On June 12, 2017, the Plaintiff filed a complaint (Doc. No. 2) (the "Complaint") in
the Circuit Court against the Defendant, asserting claims for breach of the TSA (Count I)
and declaratory relief relating to the Plaintiff's right to certain amounts reserved by the
Defendant for possible indemnity claims under the APA (Count II).
The Defendant removed the case to this Court on July 14, 2017, alleging diversity
jurisdiction under 28 U.S.C. § 1332. (Doc. No. 1). After removing the case, the Defendant
filed a Motion to Dismiss, arguing that the case should be dismissed for improper venue
or, alternatively, transferred to the U.S. District Court for the Northern District of Texas
pursuant to the forum selection clause contained in the TSA. (Doc. No. 6). The Plaintiff
responded by filing the Motion to Remand, asserting that the case was not removable
under 28 U.S.C. § 1441 and, due to the pendency of the ABC, must proceed in the Circuit
Court. (Doc. No. 13). The Defendant responded to the Motion to Remand on September
4, 2017, and both motions are now ripe for consideration.
As noted above, the Court must consider two issues: First, whether this case was
removable pursuant to 28 U.S.C. § 1441, and if so, whether this case should be dismissed
or transferred pursuant to the forum selection clause found in the TSA. The Court will
consider each issue, in turn, below.
"Under 28 U.S.C. § 1441, any civil action . .. of which the district courts ... have
original jurisdiction, may be removed ... to the district court of the United States for the
district and division embracing the place where such action is pending." Jackson-Platts v.
Gen. Elec. Capital Corp., 727 F.3d 1127, 1134 (11th Cir 2013) (emphasis in original).
Because the Eleventh Circuit has broadly construed the term "civil action," the removal
statute's "limitation to civil actions is not particularly important." Id. However, as the court
noted in Jackson-Platts, the term "civil action" and, by extension, the scope of 28 U.S.C.
§ 1441, "is not without limit." Id. Rather, to be removable, a case must be an independent
civil action that is "separate from, and not ancillary to, a suit in a state court." Id.
"Whether litigation is properly characterized as an independent civil action under
§ 1441 is essentially a matter of federal law." Id. "Under [the Eleventh Circuit's] settled
precedent, actions are not ancillary and instead are independent civil actions when they
are in effect suits involving a new party litigating the existence of a new liability." Id.
Unsurprisingly, then, the Jackson-Platts court held that a post-judgment proceeding in
which the plaintiff sought to impose new liability against new defendants based on a new
legal theory was an independent civil action that was removable to district court. Id. at
1134-35. Here, like in Jackson-Platts, the Plaintiff seeks to impose new liability against
a defendant that did not participate in the ABC based on a new theory of liability. As a
result, the case is removable under 28 U.S.C. § 1441 and, because the Notice of Removal
(Doc. No. 1) and the parties' joint notice specifying the citizenship of Physicians Choice
(Doc. No. 24) demonstrate that diversity jurisdiction is appropriate under 28 U.S.C. §
1332, 1 the Motion to Remand is DENIED.
Dismissal or Transfer
"[A) forum selection provision in a written contract is prima facie valid and
enforceable unless the opposing party shows that enforcement would be unreasonable."
Manchester, Inc. v. Lye (In re Manchester, Inc.), 417 B.R. 377, 384 (Bankr. N.D. Tex.
The Plaintiff and Physicians Choice are citizens of Florida, South Carolina, and North
Carolina, and the Defendant is a citizen of Indiana and Texas. See (Doc. No. 1 & 24).
The amount in controversy unquestionably exceeds $75,000. See (Doc. No. 2, at 21)
(alleging $248,286.27 in damages).
2009) (internal quotations omitted). "Unreasonableness exists where: (1) the agreement
to the forum selection clause involved fraud or overreaching; (2) the complaining party
will be effectively deprived of its 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) the enforcement would contravene a strong public
policy of the forum in which the plaintiff has brought suit." Id. "The burden of showing that
trial in the selected forum would be inherently unfair is placed on the party bringing suit in
a forum other than the one designated in the forum selection clause." Id.
"Assuming jurisdiction is otherwise proper, forum selection clauses are as
enforceable in bankruptcy courts 2 as they are in other federal courts." In re Pen-Mont
Benefit SeJVs., Inc., 2013 WL 6405046, at *11 (Bankr. M.D. Fla. Dec. 6, 2013); see also
In re Manchester, 417 B.R. at 384 ("Within a bankruptcy context, the mere fact that [a
party] is in bankruptcy is not sufficient to prevent enforcement of a contractual forum
selection clause." (internal quotations omitted)).
The same holds true for arbitration
clauses and, as a result, courts view motions to enforce forum selection clauses as
"analytically indistinguishable" from motions to stay actions pending arbitration. Id.
(internal quotations omitted). Importantly, not only do federal courts demonstrate a strong
preference for enforcing arbitration clauses, see Matthews v. Ultimate Sports Bar, LLC,
2015 WL 4430629, at *1 (11th Cir. July 21, 2015), but so too do Florida courts; even in
ABC proceedings. See Akin Bay, 180 So. 3d at 1183 (enforcing a mandatory arbitration
Because "Florida's [so-called ABC] statute is intended as an economical and efficient
alternative to the Federal Bankruptcy [Code]," Florida courts look to federal bankruptcy
law for guidance in interpreting the assignment for benefit of creditors statute. Akin Bay
Co. v. Von Kahle, 180 So. 3d 1180, 1184 n.4 (Fla. 3d DCA 2015)
clause in an ABC proceeding "despite the fact that [the assignor] was not a signatory to
the agreement."). In light of the foregoing, the Court is satisfied that the forum selection
clause in the TSA should be treated the same in this case as it would in any other Florida
or federal case, i.e. deemed "prima facie valid and enforceable unless the opposing party
shows that enforcement would be unreasonable." See In re Manchester, 417 B. R. at 384.
Here, there is no argument that the forum selection clause in the TSA was obtained
as a result of fraud or overreaching, that the Plaintiff would be deprived of his day in court
if this case were transferred to the Northern District of Texas, or that Texas law would
deprive the Plaintiff of his remedy. Even more importantly, public policy favors honoring
the parties' forum selection clause and transferring the case to Texas. This case is an
independent action that, absent the ABC proceeding, likely could not have been brought
in the Circuit Court. See (Complaint,
9) (failing to allege well-pleaded facts that the
Defendant has sufficient minimum contacts with Florida to satisfy the Due Process Clause
of the United States Constitution); (Doc. No. 6-1, at~~ 8-10) (declaring that the services,
payments, and demands for indemnity provided under the TSA occurred in South
Carolina and Texas; not in Florida); see also Venetian Salami Co. v. Parthenais, 554 So.
2d 499, 502 (Fla. 1989) (stating that Florida long-arm jurisdiction ·requires sufficient
jurisdictional allegations to bring the action within the ambit of Section 48.193 of the
Florida Statutes, and sufficient minimum contacts to satisfy the Due Process Clause of
the United States Constitution).
By the same token, this Court does not believe that the general grant of jurisdiction
found in Section 727 .102 of the Florida Statutes is sufficient to create personal jurisdiction
where none otherwise exists. Compare Fla. Stat., § 727 .102 ("All proceedings under this
chapter shall be subject to the order and supervision of the circuit court."), with Fla. Stat.,
§ 727.110(2) (stating that supplemental proceedings are subject to the Florida Rules of
Civil Procedure and, by extension, the Rules permitting a defendant to move to dismiss
a complaint for lack of personal jurisdiction or for improper venue).
Federal Rule of Bankruptcy Procedure 7004(f), which authorizes nationwide service of
process in cases related to bankruptcy, and Federal Rule of Civil Procedure 4(k)(1)(C),
which allows a party to obtain personal jurisdiction over a defendant "when authorized by
a federal statute," i.e. the Bankruptcy Code and Federal Rules of Bankruptcy Procedure,
the Florida ABC statute lacks an independent basis for exercising personal jurisdiction
over an out-of-state party. As a result, this Court doubts that a Florida court could properly
exercise jurisdiction over the Defendant, much less that Florida policy militates against
transferring the case to Texas.
Finally, it is important to note that the Florida ABC statute only empowers the
Circuit Court to "[h]ear and determine" actions for "turnover," to "[d]etermine the validity,
priority, and extent of a lien or other interests in assets of the estate," and to avoid
fraudulent transfers. See Fla. Stat.,§ 727.109(8)(a)-(c) (2016). All other "supplemental
proceedings," like the one at issue here, are merely required to be "brought" in the Circuit
Court. Fla. Stat.,§ 727.110(1)(b). (2016). Once filed and docketed, however, there is no
requirement that the supplemental proceeding remain before the Circuit Court. Rather,
like in any other case, the Circuit Court would presumably be free to enforce any forum
selection clause mandating transfer to a more appropriate jurisdiction. Since the parties
clearly selected the federal courts of Texas as their preferred forum, and the Defendant
admits it is subject to personal jurisdiction in the U.S. District Court for the Northern District
of Texas, the Motion to Dismiss will be GRANTED IN PART AND DENIED IN PART, as
set forth below.
Accordingly, it is
ORDERED that the Motion to Remand is DENIED.
It is further ORDERED that the Motion to DISMISS is GRANTED as to the
Defendant's request that the case be transferred to the U.S. District Court for the Northern
District of Texas, and otherwise DENIED. The Clerk of Court is directed to TRANSFER
this case to the U.S. District Court for the Northern District of Texas pursuant to 28 U.S.C.
§§ 1406 & 1631, and to CLOSE this case and TERMINATE any pending motions.
DONE and ORDERED in Chambers, in Tampa, Florida this 4th day of October,
Copies furnished to:
Counsel of Record
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