Arrington et al v. Everett Financial, Inc.

Filing 17

REPORT AND RECOMMENDATIONS re 8 Motion to Change Venue filed by Everett Financial, Inc. Based upon the foregoing, the undersigned RECOMMENDS that the District Court GRANT Defendants Opposed Motion to Transfer under 28 U.S.C. § 1404(a) (Dkt. No. 8), and TRANSFER this case to the United States District Court for the Northern District of Texas, Dallas Division.. Signed by Judge Andrew W. Austin. (dm)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
MIREYA ARRINGTON &
ISABEL WESLEY
V.
EVERETT FINANCIAL, INC. D/B/A
SUPREME LENDING

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A-14-CV-1086-LY

REPORT AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
TO:

THE HONORABLE LEE YEAKEL
UNITED STATES DISTRICT JUDGE
Before the Court are: Defendant’s Opposed Motion to Transfer under 28 U.S.C. § 1404(a)

and Brief in Support, filed on February 9, 2015 (Dkt. No. 8); Plaintiff’s Response in Opposition to
Defendant’s Motion to Transfer Venue, filed on February 17, 2015 (Dkt. No. 10); and Defendant’s
Reply in Support of its Motion to Transfer under 28 U.S.C. § 1404(a), filed on February 24, 2015
(Dkt. No. 12). The District Court referred the above-motion to the undersigned Magistrate Judge
for a report and recommendation pursuant to 28 U.S.C. §636(b) and Rule 1(c) of Appendix C of the
Local Rules of the United States District Court for the Western District of Texas, Local Rules for
the Assignment of Duties to United States Magistrate Judges.
I. GENERAL BACKGROUND
Mireya Arrington and Isabel Wesley (“Plaintiffs”) are former employees of Everett Financial,
Inc. d/b/a Supreme Lending a mortgage banker with corporate headquarters in Dallas, Texas.
Plaintiffs worked at a branch located in Austin, Texas, before they were terminated in July 2014.
On December 9, 2014, Plaintiffs filed the instant lawsuit alleging that Defendant failed to pay them
overtime hours in violation of the Fair Labor Standards Act, 29 U.S.C. § 216(b) (“FLSA”).

Defendant moves to transfer venue under 28 U.S.C. § 1404(a), arguing that this case should be
transferred to the United States District Court for the Northern District of Texas, Dallas Division,
based on a forum-selection clause contained in the Plaintiffs’ Confidentiality and Non-Solicitation
Agreements.
II. ANALYSIS
A forum-selection clause may be enforced through a motion to transfer under 28 U.S.C.
§ 1404(a). Atlantic Marine Constr. Co. v. U.S. Dist. Court for the W. Dist. of Texas, –– U.S.––, 134
S.Ct. 568, 579 (2013). Section 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.”
28 U.S.C. § 1404(a) (emphasis added). Thus, § 1404(a) permits transfer to any district where venue
is also proper “or to any other district to which the parties have agreed by contract or stipulation.”
Atlantic Marine, 134 S.Ct. at 579. The United States Supreme Court has recently clarified that “a
proper application of § 1404(a) requires that a forum-selection clause be given controlling weight
in all but the most exceptional cases.” Id. at 579 (internal citations and quotations omitted).
“Federal law applies to determine the enforceability of forum-selection clauses in both
diversity and federal question cases.” Alliance Health Group, LLC v. Bridging Health Options, LLC,
553 F.3d 397, 399 (5th Cir. 2008). “In examining forum-selection clauses, courts must examine the
language of the clause and determine whether or not the forum-selection clause evidences an intent
of the parties to limit the scope of jurisdiction or venue to a particular forum, or whether an
ambiguity exists.” Shawn Massey Farm Equip., Inc. V. Claas of America, Inc., 2012 WL 7004153
at * 3 (E.D. Tex. Dec. 19, 2012). Where a forum-selection clause contains clear language requiring
all litigation to be conducted in a specified forum, it is considered mandatory. UNC Lear Services,
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Inc. v. Kingdom of Saudi Arabia, 581 F.3d 210, 219 (5th Cir. 2009), cert. denied, 559 U.S.
971(2010). For a forum-selection clause to be considered mandatory “it must go beyond establishing
that a particular forum will have jurisdiction and must clearly demonstrate the parties’ intent to make
that jurisdiction exclusive.” City of New Orleans v. Mun. Admin. Servs., Inc., 376 F.3d 501, 504 (5th
Cir. 2004), cert. denied, 543 U.S. 1187 (2005). In contrast, “permissive forum-selection clauses
allow but do not require litigation in a designated forum.” Waste Mgmt. of Louisiana, L.L.C. v.
Jefferson Parish ex rel. Jefferson, 594 F. App’x 820, 821 (5th Cir. 2014). Unlike mandatory forumselection clauses, courts do not have to transfer or dismiss cases involving permissive clauses. Id.
Shortly after they began working for Supreme Lending, Plaintiffs executed Confidentiality
and Non-Solicitation Agreements containing the following forum-selection clause:
Exclusive venue for any litigation between the parties hereto shall be in Dallas,
Texas, and shall be brought in the State Courts of Dallas, Texas. The parties hereto
waive any challenge to personal jurisdiction or venue (including without limitation
a challenge based on inconvenience) in Dallas, Texas, and specifically consent to the
jurisdiction of the State District Courts of Dallas and the United States District Court
for Dallas, Texas.
Exh. B to Dkt. No. 8 at ¶ 14. Supreme Lending argues that this is a valid clause and requires transfer
of the case to the U.S. District Court in Dallas. Plaintiffs disagree, and contend that the clause states
that the exclusive venue for the suit is in the state court in Dallas. They argue that to the extent that
the second sentence of the clause has any impact on this, it at best creates an ambiguity, as it is
inconsistent with the statement that exclusive jurisdiction would be in the state courts of Dallas.
Although the language of the clause is imperfect, it is in fact a valid forum-selection clause
that clearly specifies Dallas, Texas as the exclusive venue for “any litigation between the parties.”
Notably, Plaintiffs do not dispute that they voluntarily agreed to a mandatory forum-selection clause

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requiring litigation to be conducted in Dallas, Texas. See Dkt. No. 10 at p. 1.1 Plaintiffs’
construction of the clause as requiring suit only in state court is flawed, as it would require the reader
to completely ignore the second sentence of the agreement. “Each provision of a contract is to be
given its reasonable, natural, and probable meaning when considered in relation to the whole.”
Hennigan v. Chargers Football Co., 431 F.2d 308, 314-15 (5th Cir. 1970). Reading the entire
clause, the Parties agreed that, first, the exclusive venue of any litigation between them would be “in
Dallas, Texas,” second, that any suit between them would be “brought in the State Courts of Dallas,
Texas,” and third, that they each consented to venue and jurisdiction in both the state and federal
courts of Dallas, and waived any challenge to those venues. In short, it would appear that the
Plaintiffs violated the second clause of the agreement by bringing suit in the federal courts of Austin,
instead of the state courts of Dallas. But nothing in the language of the clause—when read as a
whole—prevents the Court from transferring the case to the agreed-upon exclusive forum of Dallas,
and, more specifically, to a federal court in Dallas, a court in which the Plaintiffs have explicitly
consented to litigate. This conclusion is consistent with a large body of Fifth Circuit decisions
enforcing forum selection clauses.2

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Plaintiffs’ attorney was apparently not aware of the forum-selectionclause before filing this
lawsuit in this district. See Dkt. No. 10 n. 1.
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See, e.g., M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 20 (1972) (forum-selection
clause was “mandatory and all-encompassing” where it stated “[a]ny dispute arising must be treated
before the London Court of Justice.”); Argyll Equities LLC v. Paolino, 211 F. App’x 317, 319 (5th
Cir. 2006) (forum-selection clause was mandatory, rather than permissive where clause provided for
“the exclusive jurisdiction of the courts sitting in Kendall County, Texas.”); Kevlin Servs., Inc. v.
Lexington State Bank, 46 F.3d 13, 14 (5th Cir. 1995) (forum-selection clause was mandatory that
stated “[t]he legal venue of this contract and any disputes arising from it shall be settled in Dallas
County, Texas”); McQuillan v. Norwegian Cruise Line, 2014 WL 5305792, *5 (E.D. La. Oct. 14,
2014) ( forum-selection clause was mandatory where it provided that all claims must be filed “before
the United States District Court for the Southern District of Florida in Miami, Florida, U.S.A . . . to
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This interpretation is also consistent with the cases that have distinguished between clauses
calling for exclusive venue in a state or city, versus those setting venue in the courts of a particular
location. “Reference to the courts ‘of’ a specific state, and not ‘in’ that state, generally indicate that
state court is prescribed.” 14D CHARLES ALAN WRIGHT, ARTHUR R. MILLER, EDWARD H. COOPER
& RICHARD D. FREER, FEDERAL PRACTICE AND PROCEDURE § 3803.1 (4th ed. 2013). Thus, in
Alliance Health, the Fifth Circuit held that a clause stating that “venue shall occur in Harrison
County” (as opposed to courts “of that county”) included both state and federal courts and did not
limit venue to only state courts. 553 F.3d at 400. In contrast, clauses setting venue in “the courts
of Virginia” or the “Courts of Texas, U.S.A.” were both found to set venue exclusively in the state
courts of those locations. Doe 1 v. AOL LLC, 552 F.3d 1077,1081(9th Cir. 2009); Dixon v. TSE Int’l
Inc., 330 F.3d 396, 398 (5th Cir. 2003). Here, the operative clause with regard to exclusivity is the
first clause of the first sentence: “[e]xclusive venue for any litigation between the parties hereto shall
be in Dallas, Texas.” This is consistent with the Court’s reading of the clause—considering all of
its language—as allowing suit in either state or federal court in Dallas.
The question then becomes, is transfer appropriate here under § 1404(a)? In a case without
a forum selection clause, a court considering a § 1404(a) motion to transfer must evaluate both the
convenience of the parties and the various public interest considerations and decide whether, on
balance, “a transfer would serve ‘the convenience of parties and witnesses’ and otherwise promote
‘the interest of justice.’” Atlantic Marine, 134 S.Ct. at 581 (quoting § 1404(a)). “The calculus

the exclusion of the Courts of any other country, state, city or county where suit might otherwise be
brought.”); Maley v. Design Benefits Plan, Inc., 125 F.Supp.2d 836, 838 (E.D. Tex. 2000) (forum
selection clause was mandatory where it provided that “[v]enue for any action, suit or other
proceeding, including non-contract disputes, shall be exclusively in Winnebago County, Illinois.”).
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changes, however, when the parties’ contract contains a valid forum-selection clause, which
“represents the parties’ agreement as to the most proper forum.” Id. (quoting Stewart Organization,
Inc. v. Ricoh Corp., 487 U.S. 22, 31 (1988)). Because the enforcement of a valid forum selection
clause “protects their legitimate expectations and furthers vital interests of the justice system,” and
“because 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.” Id. As the Supreme Court explained:
When parties have contracted in advance to litigate disputes in a particular forum,
courts should not unnecessarily disrupt the parties’ settled expectations. A
forum-selection clause, after all, may have figured centrally in the parties’
negotiations and may have affected how they set monetary and other contractual
terms; it may, in fact, have been a critical factor in their agreement to do business
together in the first place. In all but the most unusual cases, therefore, “the interest
of justice” is served by holding parties to their bargain.
Id. at 583. This means that “[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. at 581.
Thus, when parties have agreed to a valid forum-selection clause, as in the instant case,
district courts must adjust the customary § 1404(a) analysis in three ways. Id. “First, the plaintiff’s
choice of forum merits no weight,” and the plaintiff has the burden of showing that transfer to the
designated forum is unwarranted. Id. Second, the court should not weigh the parties private
interests, as the parties agreed to waive such concerns when they agreed to a forum. Id. at 582. “As
a consequence, a district court may consider arguments about public-interest factors only,” which
means the “practical result is that forum-selection clauses should control except in unusual cases.”
Id. (internal citations omitted). Finally, when (like here) a party to a forum selection clause ignores

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it and sues elsewhere, the case will “not carry with it the original venue’s choice-of-law rules,” as
it ordinarily would. Id..
Applying these principles here, the Court cannot give any weight to the Plaintiffs’ choice of
forum and must deem the private interest factors to weigh entirely in favor of transferring the case
to Dallas. In determining whether “extraordinary circumstances” exist in this case to warrant denial
of the transfer, the Court may only consider the traditional § 1404(a) public interest factors of (1) the
administrative difficulties flowing from court congestion, (2) the local interest in having localized
interests decided at home, (3) the familiarity of the forum with the law that will govern the case, and
(4) the avoidance of unnecessary problems of conflict of laws of the application of foreign law. Id.
at 581 n.6.

Plaintiffs bear the heavy burden of showing that the public interest factors

“overwhelmingly disfavor a transfer.” Id. at 583. Given that Plaintiffs do not even argue that any
of the public interest factors weigh against transfer, let alone do so overwhelmingly, they have failed
to carry their burden. Trevino v. Cooley Constructors, Inc., 2014 WL 2611823 at * 6 (W.D. Tex.
June 9, 2014) (granting motion to transfer venue in forum selection clause case where plaintiffs
failed to argue any of the public interest factors). Indeed, there are no public interest factors present
that would demonstrate extraordinary circumstances justifying the Court not transferring this case
to Dallas.
III. RECOMMENDATION
Based upon the foregoing, the undersigned RECOMMENDS that the District Court
GRANT Defendant’s Opposed Motion to Transfer under 28 U.S.C. § 1404(a) (Dkt. No. 8), and
TRANSFER this case to the United States District Court for the Northern District of Texas, Dallas
Division.
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IV. WARNINGS
The parties may file objections to this Report and Recommendation. A party filing objections
must specifically identify those findings or recommendations to which objections are being made.
The District Court need not consider frivolous, conclusive, or general objections. See Battle v.
United States Parole Comm’n, 834 F.2d 419, 421 (5th Cir. 1987).
A party’s failure to file written objections to the proposed findings and recommendations
contained in this Report within fourteen (14) days after the party is served with a copy of the Report
shall bar that party from de novo review by the District Court of the proposed findings and
recommendations in the Report and, except upon grounds of plain error, shall bar the party from
appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the
District Court. See 28 U.S.C. § 636(b)(1)(c); Thomas v. Arn, 474 U.S. 140, 150-53 (1985); Douglass
v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en banc).
To the extent that a party has not been served by the Clerk with this Report &
Recommendation electronically pursuant to the CM/ECF procedures of this District, the Clerk is
directed to mail such party a copy of this Report and Recommendation by certified mail, return
receipt requested.
SIGNED this 20th day of May, 2015.

_____________________________________
ANDREW W. AUSTIN
UNITED STATES MAGISTRATE JUDGE

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