Bustos v. Dennis et al
ORDER GRANTING 5 Motion to Transfer Case. Signed by Judge Xavier Rodriguez. (aej)
UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
GREGG A. DENNIS, D/B/A IIS BENEFIT
INSURANCE, INC., d/b/a IIS BENEFIT
ADMINISTRATORS, SOUTHERN NEVADA '
BENEFIT ADMINISTRATORS LLC,
Civil Action No. SA-17-CV-39-XR
On this date, the Court considered Defendant Gregg Dennis’ Motion to Transfer Venue
(Docket no. 5) and Plaintiff Ernest Bustos’ Opposition (Docket no. 10). After careful
consideration, the Court GRANTS the Motion to Transfer (Docket no. 5) and TRANSFERS the
case to the United States District Court for the District of Nevada.
Plaintiff Ernest Bustos, a citizen of Texas, filed his original petition in this breach of
contract action in state court on January 14, 2016, and Defendant Dennis removed the case to
federal court on January 20, 2017. 1 Docket nos. 1, 1-2. Plaintiff has since filed an amended
complaint, in which he alleges that all defendants are citizens of Nevada. Docket no. 9.
In his live complaint, Plaintiff alleges that he entered into an insurance distribution
contract with Defendants in 2015. Docket no. 9 at 5. Plaintiff alleges that he “was to act as an
Dennis was not served with process until December 27, 2016, and Plaintiff has not challenged the propriety of
removal. Docket no. 1-3.
independent contractor for marketing and selling” Defendants’ “Tri-Funding” insurance
products. Id. at 4-5. Based on Plaintiff’s allegations, the contract describes a hierarchical sales
model and multi-level marketing distribution scheme, which would allow Plaintiff to enlist
others to sell the insurance products. Id. According to Plaintiff, the contract stipulated that he
would receive training and on-going support throughout the contract term. Id. at 7-8. Plaintiff
alleges that rather than helping him develop his “distribution system of agents,” Defendants
ignored him and instead engaged in dealings with an unlicensed third-party that recruited others
who might have otherwise joined Plaintiff’s distribution system. Id. at 8.
After removing to this Court, Defendant Dennis filed a motion to transfer venue under 28
U.S.C. § 1404(a) on January 27, 2017. Docket no. 5. Dennis bases the motion on a forumselection clause in the contract which states: “[a]ny litigation proceeding will be governed by and
in the State of Nevada.” Docket no. 5 at 2. Plaintiff filed his opposition to transfer on February
13, and Defendants replied on February 24. Docket nos. 10, 13. The Court now turns to the
motion to transfer.
I. Standard of Review
“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.”
28 U.S.C. § 1404(a). A district court has broad discretion in deciding whether to order a transfer
so long as it is within the limitations of the text of the statute and the precedents of the Supreme
Court and the Fifth Circuit Court of Appeals. In re Volkswagen of Am. (Volkswagen II), 545 F.3d
304, 311 (5th Cir. 2008).
Where a contract contains a valid forum-selection clause, the court should ordinarily
transfer the case to the specified forum. Atlantic Marine Constr. Co., Inc. v. U.S. Dist. Ct. for the
Western Dist. of Texas, 134 S. Ct. 568, 581 (2013). “A proper application of § 1404(a) requires
that a forum-selection clause be given controlling weight in all but the most exceptional cases”
because a forum-selection clause represents “the parties’ agreement as to the most proper
forum.” Id. at 579. Interpreting a forum-selection clause requires an inquiry into the terms of a
contract, and “[c]ontract interpretation is a question of law.” Alliance Health Group, LLC v.
Bridging Health Options, LLC, 553 F.3d 397, 399 (5th Cir. 2008). In diversity and federal
question cases, federal law applies in determining whether a forum-selection clause is
enforceable. Atlantic Marine, 134 S. Ct. at 581.
A forum-selection clause must be valid in order to be controlling. Id. at 581 n.5 (“Our
analysis presupposes a contractually valid forum-selection clause.”). Forum-selection clauses are
presumptively valid and enforceable. Haynsworth v. The Corp., 121 F.3d 956, 962 (5th Cir.
1997). This presumption can be overcome upon a showing that the clause is “unreasonable under
the circumstances,” which depends on a several factors:
(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.
Id. at 963 (internal quotations and citations omitted). The party challenging the clause as
unreasonable bears a “heavy burden of proof.” Id. Though not encompassed in the enforceability
requirements of Haynsworth, the Fifth Circuit also requires a forum-selection clause to be
mandatory, not permissive. Waste Mgmt. of La., L.L.C. v. Jefferson Par. ex rel. Jefferson Par.
Council, 594 F. App’x. 820, 822 (5th Cir. 2014).
II. Validity of the Forum-Selection Clause
The parties do not couch their arguments in terms of the Haynsworth factors listed above.
Instead, they dispute whether the clause is mandatory or permissive. Plaintiff argues that the
forum-selection clause is permissive, and therefore invalid, because it lacks exclusive language.
Docket no. 10 at 5–7. Plaintiff also argues that the clause is permissive because it is ambiguous
as to which Nevada courts—federal or state—are proper forums. Id. at 7. Plaintiff does not argue
that the clause was unreasonable, unenforceable, or invalid in any other ways. For the following
reasons, the Court disagrees with Plaintiff’s arguments, and finds that the clause is valid.
To be mandatory, a forum-selection clause must contain “exclusive language”; the
language must show that the parties intended the named location to serve as the forum for
disputes arising out of the contract. See Caldas & Sons v. Willinghan, 17 F.3d 123, 128 (5th Cir.
1994). In Caldas & Sons, the court found the following one-sentence forum-selection clause to
be permissive because it lacked exclusive language: “[t]he laws and courts of Zurich are
applicable.” Id. at 127. (“[T]he forum selection clause at issue at most permitted claims arising
out of the contract to be tried in the Zurich courts.”). In M/S Breman v. Zapata Off-Shore Co., by
contrast, the Supreme Court found the forum-selection clause mandatory where it specified that
“[a]ny dispute arising must be treated before the London Court of Justice.” 407 U.S. 1, 2 (1972).
The forum-selection clause here (“[a]ny litigation proceeding will be governed by and in the
State of Nevada”), like the clause in M/S Breman, satisfies the exclusive language requirement
because of the word “any”—“any litigation” means all litigation. Id. at 20 (“[T]he language of
the clause is clearly mandatory and all-encompassing.”).
Turning next to the potential ambiguity of the clause, Plaintiff argues that the clause is
permissive because it does not specify which courts may preside over controversies arising from
the contract. This argument fails for two reasons: (1) the clause is clear regarding the parties and
claims to which it applies, which is all that is required of the clause in this case; and (2) the
phrase “by and in the State of Nevada” specifies both forum and choice of law.
First, the clause is clear about which parties and claims it covers—the word “any”
indicates that all parties and all claims are included in the forum-selection clause. Docket no. 5 at
1-2. Plaintiff does not disagree that the clause applies to all parties and all claims at issue in this
suit. Docket no. 10. Thus, the clause is “unambiguous” for purposes of the transfer of venue
analysis. Next, the clause clearly refers to any court—state or federal—within the State of
Nevada. Alliance Health Group, 553 F.3d at 400 (“[T]he clause’s language allows removal to a
federal district court whose jurisdiction encompasses, as well as those courts actually regularly
sitting in [the named location]”); see also Simonoff v. Expedia, Inc., 643 F.3d 1202, 1205-06 (9th
Cir. 2011) (forum-selection clause that specifies “courts in” a state includes both state and
federal courts). The clause states that any litigation “will be governed by and in the State of
Nevada,” which includes any court located within the state, such as the lone U.S. District Court
and not just the state courts. Compare Alliance Health Group, 553 F.3d at 400. (“Accordingly,
the clause at hand, providing for venue in a specific county permits venue in either federal or
state court because a federal courthouse is located [there].”) with Dixon v. TSE Int’l Inc., 330
F.3d 396, 397 (5th Cir. 2003) (affirming the district court’s ruling that that the forum-selection
clause excluded federal courts where the clause stated that the “Courts of Texas” would have
jurisdiction because federal courts are in Texas but are not of Texas).
For these reasons, the Court finds that the clause is valid. The Court will now analyze
whether the § 1404(a) factors weigh against transfer, despite the “controlling weight” of the
forum-selection clause. Atlantic Marine, 134 S. Ct. at 579.
III. The Atlantic Marine Analysis
When a party moves to transfer based on a valid forum-selection clause, the typical §
1404(a) analysis changes. Atlantic Marine, 134 S. Ct. at 583. Typically, a court would consider
the plaintiff’s choice of venue, private interest factors, and “various public interest
considerations.” Id. at 582. Private interest factors include: “(1) the relative ease of access to
sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses;
(3) the cost of attendance for willing witnesses; and (4) all other practical problems that make
trial of a case easy, expeditious and inexpensive.” Volkswagen II, 545 F.3d at 315 (citing In re
Volkswagen of Am. I, 371 F.3d 201 (5th Cir. 2004)). Public interest factors include: “(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 [or in] the
application of foreign law.” Id. A valid forum-selection clause, however, changes the usual §
1404(a) analysis in three ways:
First, the plaintiff’s choice of forum merits no weight. Rather, as the party defying
the forum-selection clause, the plaintiff bears the burden of establishing that
transfer to the forum for which the parties bargain is unwarranted . . . Second, a
court evaluating a defendant’s 1404(a) motion . . . should not consider arguments
about the parties’ private interests. When parties agree to a forum-selection clause
they waive the right to challenge the preselected forum as inconvenient [although
public-interest factors may be considered] . . . Third . . . a 1404(a) transfer of
venue will not carry with it the original venue’s choice-of-law rules.
Id. at 581-82. Because the forum-selection clause is valid, the adjusted analysis is appropriate.
Under the adjusted analysis, the § 1404(a) factors weigh in favor of transfer. First,
Plaintiff agreed to the forum-selection clause in the contract; thus, Plaintiff has waived “the right
to challenge the preselected forum as inconvenient.” Atlanta Marine, 134 S. Ct. at 582.
Similarly, the Court will not consider private interest factors such as the inconvenience to
Plaintiff’s central witnesses because “when [Plaintiff] entered into a contract to litigate all
disputes in [the selected forum], [he] knew that a distant forum might hinder [his] ability to call
certain witnesses and might impose other burdens on [his] litigation efforts.” Id. at 584.
Last, public interest factors do not support denial of the motion to transfer. If anything,
the court congestion factor weighs in favor of transfer; Defendants point out that the number of
cases filed in the U.S. District Court in Nevada is a little over one-third of the number of cases
filed in the Western District of Texas. Docket no. 5 at 5. The local interest factor similarly does
not weigh against transfer as Plaintiff pleads no facts indicating that this case is of particular
local interest in Texas. Docket no. 10. Plaintiff alleges that the contract was a product of
“meetings . . . [that took] place in Texas,” but does not otherwise allege that Texas has a strong
interest in hearing the case. 2 Docket no. 10 at 2. The last two factors both deal with the transferee
court’s difficulty in applying unfamiliar laws; however, this is not a concern here because the
forum-selection clause dictates that the transferee court apply Nevada choice-of-law rules. Id.
Because the forum-selection clause is valid and no § 1404(a) factor weighs against transfer, the
Court transfers this case to the U.S. District Court for the District of Nevada.
For the foregoing reasons, the Court GRANTS the Motion to Transfer (Docket no. 5) and
orders the case TRANSFERRED to the United States District Court for the District of Nevada.
It is so ORDERED.
SIGNED this 17th day of March, 2017.
UNITED STATES DISTRICT JUDGE
This is in stark contrast with In re Volkswagen II, in which the court found that this factor weighed in favor of
transfer to Dallas where “the accident occurred on a freeway in Dallas, Texas; Dallas residents witnessed the
accident; Dallas police and paramedics responded and took action; a Dallas doctor performed the autopsy; the thirdparty defendant lives in Dallas county, Texas; none of the plaintiffs live in the Marshall Division; no known party or
non-party witness lives in the Marshall Division; no known source of proof is located in the Marshall Division; and
none of the fact giving rise to this suit occurred in the Marshall Division.” 545 F.3d at 317-18. Here, Plaintiff does
not allege that a similarly strong local interest exists. Plaintiff alleges only that he sold insurance in Texas, that the
contract was formed on the basis of meetings that occurred in Texas, and that the Defendants do business in Texas.
Docket nos. 9, 10.
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?