The HJH Consulting Group, Inc. v. National Steak Processors, Inc.

Filing 18

ORDER GRANTING IN PART AND DENYING IN PART 7 Motion to Remand to State Court and for Attorney's Fees. The Court GRANTS the Motion to Remand back to State Court, but DENIES the request for Attorney's Fees. The Clerk is Ordered to REMAND this case back to Kerr County Court, and CLOSE THIS CASE. Signed by Judge Xavier Rodriguez. (wg)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
THE HJH CONSULTING GROUP INC.,
d/b/a THE SALT GROUP,

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Plaintiff,
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v.
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NATIONAL STEAK PROCESSORS, INC., §
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Defendant.

Civil Action No. SA-15-CV-0717-XR

ORDER
On this date, the Court considered Plaintiff HJH Consulting Group, Inc., d/b/a The SALT
Group’s (“TSG”) Motion to Remand and For Attorneys’ Fees (docket no. 7), Defendant National
Steak Processors, Inc.’s (“NSP”) response (docket no. 9), and TSG’s reply (docket no. 16).
After careful consideration, the motion is GRANTED IN PART and DENIED IN PART.
BACKGROUND
TSG is a Texas-based tax and financial consulting provider. Docket no. 7 at 2. A
representative of NSP entered into an agreement with TSG that provided TSG would examine
NSP’s tax records and account payables. Id. at 9. If TSG identified or obtained any refunds,
savings, or similar credits (“benefits”) as a result of the examination, the agreement provided that
NSP would pay TSG a certain percentage of the benefits. Id.
TSG claims that it completed its review of NSP’s records and identified $375,000 in
benefits.

Docket no. 1-1 at 7.

TSG alleges that NSP has not tendered payment for the

percentage of benefits it is entitled to under the agreement, despite several requests to be paid.
Id. As a result, TSG filed this lawsuit in the County Court at Law in Kerr County, Texas, on July
17, 2015. Id. at 3. NSP filed its Notice of Removal on August 21, 2015. Docket no. 1.
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On September 9, 2015, TSG filed its Motion to Remand. Docket no. 7. At issue is a
forum-selection clause in the agreement between the parties, which states: “The parties agree
venue for any action relating to this agreement shall be in state court in Kerr County, Texas, and
Texas law shall govern.” Id. at 9. TSG argues that this is a mandatory forum-selection clause
and constitutes a waiver of federal jurisdiction. Id. at 3. Relying on a Fifth Circuit decision,
TSG maintains that since Kerr County does not contain a federal courthouse, a forum-selection
clause that selects Kerr County is a waiver of both parties’ right to remove the case to federal
court. Id. at 3–4 (citing Collin County v. Siemens Business Services, Inc., 250 F. App’x 45, 51
(5th Cir. 2007)). The Court agrees.
ANALYSIS
I.

Motion to Remand
The key question for the Court is whether the forum-selection clause in the agreement

mandates venue be exclusively in Kerr County or whether the clause is permissive and allows
venue to be in federal court. If the clause is mandatory, then, to avoid venue in Kerr County,
NSP must establish that the forum-selection clause is unreasonable.
A. Mandatory v. Permissive
A party may remove an action from state court to federal court if the action is one over
which the federal court possesses subject matter jurisdiction. See 28 U.S.C. § 1441(a). Removal
is proper if the federal court would have had original jurisdiction. Id. If, at any time before
judgment, it appears that a district court lacks subject matter jurisdiction, the case shall be
remanded to the state court. See 28 U.S.C. § 1441(a). The removing party bears the burden of
showing that federal jurisdiction exists and that removal was proper. De Aguilar v. Boeing Co.,
47 F.3d 1404, 1408 (5th Cir. 1995). The removal statute is strictly construed in favor of remand.

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Vantage Drilling Co. v. Hsin-Chi Su, 741 F.3d 535, 537 (5th Cir. 2014) (citing Acuna v. Brown
& Root, Inc., 200 F.3d 335, 339 (5th Cir. 2000)).
Additionally, “[m]andatory forum-selection clauses that require all litigation to be
conducted in a specified forum are enforceable if their language is clear.” UNC Lear Services,
Inc. v. Kingdom of Saudi Arabia, 581 F.3d 210, 219 (5th Cir. 2009). For a forum-selection
clause to prevent a party from its exercising its right to remove a case from federal court, the
clause must be a “clear and unequivocal waiver of that right.” City of New Orleans v. Mun.
Admin. Services, Inc., 376 F.3d 501, 504 (5th Cir. 2004) (internal citations omitted). A clause
constitutes a clear and unequivocal waiver of removal rights if the clause specifically states that
it is a waiver of those rights, if it allows one party to choose the venue, or if it establishes an
exclusive venue. Id. To establish an exclusive venue, a forum-selection clause “must go beyond
establishing that a particular forum will have jurisdiction and must clearly demonstrate the
parties’ intent to make that jurisdiction exclusive.” Id. (citing Keaty v. Freeport Indonesia, Inc.,
503 F.2d 955 (5th Cir.1974)).
In evaluating forum-selection clauses, a Court must distinguish between jurisdiction and
venue. Id. An agreement conferring jurisdiction in one forum will not necessarily be interpreted
as excluding jurisdiction elsewhere. Id. As a result, “[a]lthough it is not necessary for such a
clause to use the word “venue” or “forum,” it must do more than establish that one forum will
have jurisdiction.” Id. For example, in Keaty, the Fifth Circuit held that a clause that simply
provided that the parties agreed to “submit to the jurisdiction of the courts of New York” was not
mandatory and was insufficient to constitute a waiver of the right to removal. Keaty, 503 F.2d at
957.

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Use of the word “shall,” by itself, is not always sufficient to render a forum-selection
clause mandatory rather than permissive. See Caldas & Sons, Inc. v. Willingham, 17 F.3d 123,
127–28 (5th Cir. 1994). In Caldas, an agreement between the two parties contained a forumselection clause that stated “[t]he law and courts of Zurich shall be applicable.” Id. at 127. The
Court explained that while use of the word “shall” rendered a clause “generally mandatory,” the
only thing certain about the particular clause at issue in the case was that the parties consented to
jurisdiction of Zurich courts.

Id.

As a result, the Fifth Circuit held that the clause was

permissive. Id.
If the county specified in a forum-selection clause does not contain a federal courthouse,
the absence “renders the clause at issue . . . a waiver” of federal removal rights. Collin County v.
Siemens Bus. Services, Inc., 250 F. App’x 45, 52 (5th Cir. 2007). In Collin County, the forumselection clause at issue provided that “venue for all actions in connection with this Agreement
shall lie exclusively in Collin County, Texas.” Id. at 47. At the time the case was heard, there
was no federal courthouse located within Collin County. Id. at 53. The Fifth Circuit held that
since there was no federal courthouse located within the county, the parties “never
contemplated” that the case would be heard in federal court and the forum-selection clause was a
waiver of federal removal rights. Id. at 52–53.
The forum-selection clause at issue in this case constitutes a “clear and unequivocal”
waiver of federal removal rights because it establishes state courts located in Kerr County as an
exclusive venue for bringing suit. The language of the forum-selection clause is clear—“venue
for any action relating to this agreement shall be in state court in Kerr County, Texas, and Texas
law shall govern.” Docket no. 7 at 9 (emphasis added). The specific inclusion of “state court”
leaves no doubt that the parties intended to confine the litigation to state courts and waived their

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federal removal rights. Additionally, unlike the forum-selection clause in Keaty, which simply
provided that certain courts had jurisdiction, the forum-selection clause at issue here specifically
uses the word venue. See Keaty, 503 F.2d at 957. Furthermore, inclusion of the word “shall” is
seen as “generally mandatory,” and unlike the clause in Caldas, which was held to be permissive
because it simply stated Zurich courts would be “applicable,” the clause here specifies that any
action “shall be in” state court in Kerr County. See Caldas, 17 F.3d at 127.
Moreover, Kerr County does not contain a federal courthouse. This Court, while it has
jurisdiction over cases removed from Kerr County, is based in a courthouse in Bexar County.
Just as the Fifth Circuit in Collin County found that the absence of a federal courthouse in Collin
County rendered the forum-selection clause in that case a waiver of federal removal rights, this
Court holds that the absence of a federal courthouse in Kerr County necessarily means that the
parties intended to waive their federal removal rights in agreeing to a forum-selection clause that
mandates venue be in Kerr County. See Collin County, 250 F. App’x at 52.
NSP urges the Court to deny the motion because counsel for TSG failed to confer with
NSP’s counsel before filing the motion. Docket no. 3 at 1. While Local Rule CV-7(i) does
permit the Court in its discretion to deny a motion if the parties failed to confer, the Rule does
not require it. Additionally, NSP argues that the forum-selection clause is open to more than one
interpretation, and thus must be viewed as permissive. Id. at 3. The Court, however, finds that
the clause is unambiguous and clearly confines venue to state court in Kerr County for the
reasons outlined above.
NSP also compares Collin County with Moody v. Aqua Leisure Int’l, Civ. Ac. No. H-101961, 2010 U.S. Dist. LEXIS 126122, (S.D. Tex. Nov. 30, 2012) in an attempt to maintain that
the holding of Collin County only applies if the forum-selection clause at issue contains the

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words “exclusive” or “only.” Id. at 4–5. However, a forum-selection clause need not contain
those specific words in order to be exclusive; other language may suffice as evidence of
exclusivity. Additionally, while the clause in Collin County did contain the word “exclusive,”
nothing in the Fifth Circuit’s opinion implied that the inclusion of the word was what warranted
rendering the clause to be a waiver of federal removal rights. Indeed, the whole of the Court’s
reasoning was focused on the absence of a federal courthouse in Collin County. See Collin
County, 250 F. App’x at 52. Thus, the forum-selection clause in the agreement signed by
representatives of TSG and NSP is mandatory and constitutes a waiver of federal removal rights.
B. Unreasonableness
Of course, forum-selection clauses that waive federal jurisdiction will be enforced only if
enforcement is reasonable. See In re Fireman's Fund Ins. Cos., 588 F.2d 93, 95 (5th Cir. 1979)
(“Where the parties have by contract selected a forum, it is incumbent upon the party resisting to
establish that the choice was unreasonable, unfair, or unjust.” (citing M/S Bremen v. Zapata OffShore Co., 407 U.S. 1 (1972))).

The Fifth Circuit has held that unreasonableness can be

established by showing that:
(1) the incorporation of the forum selection clause into the
agreement was the product of fraud or overreaching; (2) the party
seeking to escape enforcement “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 will deprive the plaintiff of a remedy; or (4)
enforcement of the forum selection clause would contravene a
strong public policy of the forum state.
Haynsworth v. The Corp., 121 F.3d 956, 963 (5th Cir. 1997) (citing Carnival Cruise Lines, Inc.
v. Shute, 499 U.S. 585, 595 (1991)).

The party arguing the forum-selection clause is

unenforceable bears the burden of proof as to whether or not the clause is unreasonable or unjust.
Bremen, 407 U.S. at 17.

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Here, both TSG and NSP appear to be sophisticated companies, and the contract,
including the forum-selection clause, appears to have been entered into voluntarily. Indeed,
certain provisions in the agreement have been crossed out, changed, and initialed, signaling that
the parties bargained for favorable terms in the contract.

Additionally, NSP presented no

argument of evidence in its response to suggest or allege that the forum-selection clause is
unreasonable. As a result, NSP has not met the high burden of proof required to show the forumselection clause is unenforceable.
Because the forum selection clause contained in the agreement is a mandatory forumselection clause specifying venue exclusively in state court in Kerr County and constitutes a
waiver of federal removal rights, and is enforceable, removal to this Court, which is not in Kerr
County, was improper. Accordingly, TSG’s Motion to Remand is GRANTED.
II.

Attorneys’ Fees
28 U.S.C. § 1447(c) provides that upon an order remanding the case, a court may order

payment of attorneys’ fees incurred as a result of the removal. 28 U.S.C. § 1447(c) (2012).
However, attorneys’ fees are not awarded automatically. Valdes v. Wal-Mart Stores, Inc., 199
F.3d 290, 292 (5th Cir. 2000). “[A] court may . . . deny attorney’s fees if ‘the defendant had
objectively reasonable grounds to believe the removal was legally proper.’” City of San Antonio
v. Time Warner Cable, San Antonio, L.P., Civ. Ac. No. SA-09-CV-869-XR, 2009 U.S. Dist.
LEXIS 116035 (W.D. Tex. Dec. 11, 2009) (citing Valdes, 199 F.3d at 291–93).
In its motion, TSG asked that the Court award $3,625.00 in attorneys’ fees. Docket no. 7
at 4, 34. However, upon allegations by NSP’s counsel that TSG’s counsel failed to confer and
that the amount requested was unreasonable for various reasons, TSG withdrew its application
for attorneys’ fees and requested “any claim for reasonable attorneys’ fees be continued and

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addressed with the final disposition of merits in the underlying complaint.” Docket no. 16 at 9–
10. As a result, the request for attorneys’ fees is denied at this time.
CONCLUSION
Plaintiff HJH Consulting Group, Inc., d/b/a The Salt Group’s Motion to Remand and For
Attorneys’ Fees (docket no. 7) is GRANTED IN PART as to the motion to remand and DENIED
IN PART as to the request for attorneys’ fees. Accordingly, the Clerk is directed to REMAND
this case to state court and close the case.
It is so ORDERED.
SIGNED this 8th day of December, 2015.

XAVIER RODRIGUEZ
UNITED STATES DISTRICT JUDGE

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