Gonzalez-Morales et al v. UBS Bank USA

Filing 35

MEMORANDUM AND ORDER re 16 Motion to transfer case; and re 19 Motion to Remand. The Court GRANTS UBS Bank's motion to transfer this case to the District Court for the District of Utah (Docket No. 16) and DENIES plaintiffs' motion to remand as moot (Docket No. 26). This case in this district is now closed for statistical purposes. Signed by Judge Francisco A. Besosa on 12/03/2014. (brc) [Transferred from Puerto Rico on 12/4/2014.]

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
CARLOS GONZALEZ-MORALES, et al.,
Plaintiffs,
Civil No. 14-1739 (FAB)

v.
UBS BANK USA,
Defendant.

MEMORANDUM AND ORDER
Besosa, District Judge.
Before the Court is defendant UBS Bank USA’s (“UBS Bank”)
motion to transfer venue.

(Docket No. 16.)1

For the reasons that

follow, the Court GRANTS defendant’s motion to transfer.
I.

Discussion
Citing a mandatory forum selection clause contained in the

credit line agreements between the parties, defendant UBS Bank
moves to transfer this case to the U.S. District Court for the
District of Utah.

(Docket No. 16-1.)

The clause at issue states,

ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATED
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY JUDGMENT ENTERED BY ANY COURT
REGARDING THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT WILL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE THIRD JUDICIAL DISTRICT COURT FOR THE

1

Also pending before the Court is plaintiffs’ motion to
remand. (Docket No. 19.) Because plaintiffs subsequently — and
correctly — conceded that federal court is the appropriate forum
for this action (Docket No. 26 at ¶ 62), the Court DENIES
plaintiffs’ motion to remand as moot.

Civil No. 14-1739 (FAB)

2

STATE OF UTAH OR IN THE UNITED STATES DISTRICT COURT FOR
THE STATE OF UTAH.
(Docket No. 16-1 at § 17(a).)

The agreements further provide that

all loan parties irrevocably submit to the jurisdiction of Utah
courts and waive any forum non conveniens objection to proceeding
in Utah Courts.

Id.

mandatory

selection

forum

clause’s validity.

The parties do not dispute that this is a
clause.

Rather,

they

dispute

the

(Docket No. 26.)

“[A] forum-selection clause may be enforced by a motion to
transfer under [28 U.S.C.] § 1404(a).”

Atl. Marine Constr. Co.,

Inc. v. U.S. Dist. Court for the W. Dist. of Tex., 134 S.Ct. 568,
575 (2013).
district

“When a defendant files such a motion . . . , a

court

should

transfer

the

case

unless

extraordinary

circumstances unrelated to the convenience of the parties clearly
disfavor a transfer.” Id.

In resisting a motion to transfer based

on a mandatory forum selection clause, the “plaintiff[s] bear[] the
burden of establishing that transfer to the forum for which the
parties bargained is unwarranted.”

Id. at 581.

Pursuant to both federal common law and Puerto Rico law, forum
selection clauses are “prima facie valid and should be enforced
unless

enforcement

is

shown

by

the

‘unreasonable’ under the circumstances.”

resisting

party

to

be

Silva v. Encyclopedia

Britannica, Inc., 239 F.3d 385, 386 (1st Cir. 2001) (quoting M/S
Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972)); see also
Stereo Gema, Inc., v. Magnadyne Corp., 941 F. Supp. 271, 276

Civil No. 14-1739 (FAB)

3

(D.P.R. 1996) (Lafitte, J.) (noting that the Puerto Rico Supreme
Court adopted the federal common law’s approach to the enforcement
of

forum

selection

clauses)

(internal

citations

omitted).

Specifically, forum selection clauses are to be enforced unless the
resisting

party

can

“clearly

show

that

enforcement

would

be

unreasonable and unjust, or that the clause was invalid for such
reasons as fraud or overreaching.”

Zapata, 407 U.S. at 15.

In

contesting the validity of a forum selection clause, the resisting
party bears a “heavy burden of proof.”

Id. at 17.

Mindful that

the validity of a forum selection clause is considered separately
from the validity of the underlying contract, Intercall Commc’ns v.
Instant Impact, Inc., 376 F. Supp. 2d 155, 160 (D.P.R. 2005)
(Garcia-Gregory, J.), the Court now addresses plaintiffs’ three
proposed grounds for invalidating the forum selection clause at
issue.
A.

Public Policy Considerations
A resisting party can defeat a forum selection clause by

showing that its “enforcement would contravene a strong public
policy of the forum in which suit is brought.”
at 15.

Zapata, 407 U.S.

In an attempt to demonstrate that the forum selection

clause at issue here would contravene a strong public policy of
Puerto Rico, plaintiffs lead the Court down a complicated path.
Plaintiffs begin by arguing the Commonwealth has a “strong public
policy against unauthorized and unsupervised financial operations

Civil No. 14-1739 (FAB)

4

in Puerto Rico,” and that Puerto Rico’s legislature has prioritized
effective supervision of the operations of banks and financial
institutions.

(Docket No. 26 at pp. 12, 15.)

In support of their

argument, plaintiffs point to the Puerto Rico law requiring foreign
banks operating in Puerto Rico to file a certificate with the
Secretary of State of Puerto Rico consenting “to be sued in the
courts of Puerto Rico in any all [sic] causes of action originated
against [them] in Puerto Rico . . . .”
7 § 181 (“section 181”).

Puerto Rico Laws Ann. tit.

This consent to suit requirement,

plaintiffs urge, exclusively confers jurisdiction in Puerto Rico
and precludes litigation of actions such as this case in any other
jurisdiction.

Plaintiffs allege that defendant UBS Bank violated

this law by operating in Puerto Rico without filing the required
certificate consenting to suit in Puerto Rico.

As a result,

plaintiffs argue, defendant UBS Bank cannot avoid litigating this
action in Puerto Rico by simply violating section 181.

(Docket

No. 26.) Plaintiffs conclude by insisting that the forum selection
clause at issue here, because it purports to require litigation
outside of Puerto Rico, contravenes Puerto Rico’s strong public
policy in favor of litigating banking disputes in Puerto Rico. Id.
For plaintiffs to prevail, the Court must accept two
propositions as true. First, the Court must agree that Puerto Rico
in fact has a strong public policy in favor of litigating banking
disputes in Puerto Rico. Second, the Court must accept plaintiffs’

Civil No. 14-1739 (FAB)
interpretation
jurisdiction

of

in

5

section

other

181

as

courts,

as

a

negative

opposed

to

exclusion
an

of

affirmative

conferral of personal jurisdiction by consent. The Court addresses
each of these two issues in turn.
1.

Whether a Strong Puerto Rico Public Policy Would be
Contravened by Enforcing the Forum Selection Clause
Plaintiffs

cite

extensive

authority

for

the

proposition that Puerto Rico’s legislature has an interest in
regulating the banking industry operating in Puerto Rico.
No. 26.)

(Docket

While this proposition goes without saying, see Fahey v.

Mallonee, 332 U.S. 245, 250 (1947)(“Banking is one of the longest
regulated and most closely supervised of public callings.”), it
does not in and of itself establish a strong public policy that
would

warrant

disregarding

a

valid

forum

selection

clause.

Plaintiffs’ argument requires the Court to infer that because
Puerto Rico’s legislature — like every other forum’s legislature —
has an interest in regulating the banking industry, it as a result
has a public policy that disfavors forum selection clauses that
permit litigation of banking disputes outside of Puerto Rico.

The

Court declines to make this leap.
Puerto

Rico

policymakers

have

been

explicit

in

expressing public policies against forum selection clauses in other
contexts.

For example,

in

2008,

the

Office

of

the Patient’s

Advocate of Puerto Rico passed a regulation “banning the inclusion
of forum selection clauses in documents that are used to secure the

Civil No. 14-1739 (FAB)

6

informed consent of medical patients.”2

Garcia-Mones v. Groupo

Hima San Pablo, Inc., 875 F. Supp. 2d 98, 105 (D.P.R. 2012)(Besosa,
J.) (citing Regulation No. 7617); see also Rivera v. Centro Medico
de Turabo, Inc., 575 F.3d 10, 23 (1st Cir. 2009)(“[Regulation No.
7617]

is

persuasive

evidence

of

Puerto

Rico’s

public

policy

today.”) (emphasis in original); Prince v. Hosp. HIMA San PabloCaguas, 943 F. Supp. 2d 280, 284 (D.P.R. 2013) (Perez-Gimenez,
J.)(“Certainly, the enactment of Regulation No. 7617 is a testament
to the public policy of prohibiting the enforcement of forum
selection clauses included in admissions documents for medical
treatment).

In fact, the First Circuit declined to find that a

forum selection clause in a consent form signed by a patient was
unenforceable as contrary to public policy where it was signed
prior to Regulation No. 7617’s implementation, even though the
subsequent

regulation

provided

Rico’s public policy today.”
Similarly,

“persuasive evidence

of

Puerto

Puerto

Rico’s

Rivera, 575 F.3d at 23.

courts

have

construed

Dealer’s Act as disfavoring forum selection clauses. The Act
states,

2

Regulation 7504 prohibits health care providers from
including in informed consent documents any “[a]spects about any
decision regarding the possibility of any act of malpractice by a
provider” or “legal clauses foreign to the sphere or field of
medicine or health . . . such as, but not limited to, forum
selection clauses.”
Office of the Patient’s Advocate of P.R.,
Regulations to Implement the Provisions of Public Law 194 of
August 25, 2000, Regulation No. 7617, Article 13, Section 8(C)(2)
(November 21, 2008) (“Regulation No. 7617”).

Civil No. 14-1739 (FAB)

7

Any stipulation that obligates a dealer to adjust,
arbitrate or litigate any controversy that comes up
regarding his dealer’s contract outside of Puerto Rico,
or under foreign law or rule of law, shall be likewise
considered as violating the public policy set forth by
this chapter and is therefore null and void.
P.R. Laws Ann. tit. 10 § 278b-2. Courts, finding that the Dealer’s
Act contains “a strong public policy that clearly disfavors forum
selection clauses,” have invalidated forum selection clauses as
contrary to public policy.

Triangle Trading Co., Inc. v. Robroy

Indus., Inc., 952 F. Supp. 75, 79 (D.P.R. 1997) (Casellas, J.).
See also Action Corp. v. Toshiba Am. Consumer Prod., Inc., 975 F.
Supp. 170, 175 (D.P.R. 1997) (Perez-Gimenez, J.) (“[The Dealer’s
Act]

sets

forth,

in

no

uncertain

terms,

the

Puerto

Rican

legislature’s intent that disputes between dealers and principals
be heard by courts within the Commonwealth of Puerto Rico.”).
Thus, although Puerto Rico public policy disfavors
forum selection clauses in the contexts of medical patients and
dealers’ contracts, plaintiffs have not provided the Court with any
authority indicating that such an explicit public policy exists as
to the banking industry.

The authority plaintiffs provide in the

banking context does not specifically mention forum selection
clauses or litigation in other fora.

In the absence of an explicit

public policy disfavoring forum selection clauses, the Court has no
grounds for invalidating the forum selection clause here.

Civil No. 14-1739 (FAB)
2.

8

Whether Section 181’s Consent to Suit is Exclusive
Even

assuming that

section

181

binds

defendant

despite defendant’s failure to file the required certificate, the
forum selection clause would only be invalid if section 181 served
as a negative exclusion of jurisdiction in other courts. The Court
does not believe this is so.

The First Circuit Court of Appeals

has interpreted a similar clause — in which the parties “expressly
submit[ted] to the jurisdiction of all Federal and State Courts
located in the State of Florida” — to constitute “an affirmative
conferral of personal jurisdiction by consent, and not a negative
exclusion of jurisdiction in other courts.”

Autoridad de Energia

Electrica de P.R. v. Ericsson Inc., 201 F.3d 15, 18-19 (1st Cir.
2000) (citing Redondo Constr. Corp. v. Banco Exterior de España
S.A., 11 F.3d 3, 6 (1st Cir. 1993)).

Under this reasoning, nothing

in section 181, were it to apply, would invalidate the forum
selection clause.
B.

Inconvenience and Overreaching
Plaintiffs

further

contend

that

the

forum

selection

clause is invalid as a result of inconvenience and overreaching.
(Docket No. 26 at ¶ 59.)
1.

Inconvenience
A clause may be “‘unreasonable’ and unenforceable if

the chosen forum is seriously inconvenient for the trial of the
action.”

Zapata, 407 U.S. at 16.

“[W]here it can be said with

Civil No. 14-1739 (FAB)

9

reasonable assurance,” however, that the parties at the time of
contracting

contemplated

the

inconvenience,

or

that

the

inconvenience was foreseeable, the clause is likely enforceable.
See id.

To overcome enforceability based on inconvenience, the

resisting party must “show that trial in the contractual forum will
be so gravely difficult and inconvenient that [he or she] will for
all practical purposes be deprived of [his or her] day in court.”
Id. at 18.
Plaintiffs cursorily object to defendant’s attempt
to

haul

numerous

Puerto

Rico

residents

to

Utah,

but

do

not

specifically remonstrate the inconvenience of the contracted-to
forum or suggest that the inconvenience was not contemplated at the
time of contracting.

(Docket No. 26 at ¶ 61.)

At any rate, had

they been lodged, specific objections would likely be unavailing in
light of the Supreme Court’s enforcement of faraway forum choices
within cruise line consumer contracts.

See Carnival Cruise Lines,

Inc. v. Shute, 499 U.S. 585, 594 (1991) (noting that “a cruise line
has a special interest in limiting the fora in which it potentially
could be

subject

to suit”)

Similarly,

in

the

security

sales

context, the First Circuit Court of Appeals has recognized that
forum

selection

concentrating

clauses

“all

serve

related

the

legitimate

litigation

in

a

interest

single

of

forum.”

Huffington v. T.C. Group LLC, 637 F.3d 18, 23 (1st Cir. 2011).

In

the same way, defendant UBS Bank, as an entity offering products to

Civil No. 14-1739 (FAB)

10

residents of multiple jurisdictions, has an interest in limiting
the

fora

in

which

it

can

be

sued

regarding

such

sales.

Accordingly, UBS Bank’s contractual requirement that litigation
take place in Utah does not invalidate the forum selection clause
on inconvenience grounds.
2.

Overreaching
“Overreaching”

refers

to

one

party’s

unfair

exploitation of its overwhelming bargaining power or influence over
the other party.”

Rivera, 575 F.3d at 21.

The mere existence of

inequality between the two parties, however, “is not enough to
render

an

agreement

unenforceable.”

Id.

(citing

Gilmer

v.

Interstate/Johnson Lane Corp., 500 U.S. 20, 32 (1991) and Outek
Caribbean Distrib., Inc. v. Echo, Inc., 206 F. Supp. 2d 263, 267
(D.P.R. 2002) (Lafitte, J.)). Similarly, “the fact that a contract
was in boilerplate form will not, by itself, render it unfair or
invalid.”

Id.

(citing Outek, 206 F. Supp. 2d at 21).

Moreover,

“the presumption in favor of enforcing a forum selection clause
applies even if the clause was not the product of negotiation.”
Id. (quoting 2215 Fifth St. Assocs., L.P. v. U-Haul Int’l., Inc.,
148 F. Supp. 2d 50, 56 (D.D.C. 2001)).
Plaintiffs argue that defendant UBS Bank “induced
plaintiffs to just sign the documents, with the representation that
the other information would be filled and garnered from the files”
and that the documents “were signed without the benefit of advice

Civil No. 14-1739 (FAB)
of counsel.”
22).)

11

(Docket No. 26 at ¶ 59 (citing Rivera, 575 F.3d at

Plaintiffs offer no authority suggesting that a forum

selection clause is only valid where the resisting party had the
advice of counsel when it signed the contract.
the

First

Circuit

Court

of

Appeals

found

In Rivera, though,
“suggestions

of

overreaching” — including the fact that appellant’s relationship
with the hospital stemmed from his serious medical condition — the
court held that appellant had not overcome the presumption in favor
of enforcing forum selection clauses.

Rivera, 575 F.3d at 22.

Here, plaintiffs point to no specific facts that would allow the
Court to conclude that the forum selection clause at issue was the
product of overreaching by defendant.

Indeed, the circumstances

here do not rise to the level of suggestion presented in Rivera,
where the First Circuit Court of Appeals nevertheless enforced the
forum selection clause.
C.

Fraud
Plaintiffs perfunctorily argue that “the forum-selection

clause is also invalid and unenforceable because plaintiffs have
alleged fraudulent actions and omissions in the loan transactions.”
(Docket No. 16 at ¶ 58.)

A forum selection clause can be defeated

where the resisting party shows that the clause is the result of
fraud.

Rivera, 575 F.3d at 18 (quoting Zapata, 407 U.S. at 15).

“A contract is voidable (and thus unenforceable) if ‘a party’s
manifestation of assent is induced by either a fraudulent or

Civil No. 14-1739 (FAB)

12

material misrepresentation by the other party upon which the
recipient is justified in relying.” Id. at 20 (quoting Restatement
Second of Contracts, § 164 (1979)).

The First Circuit Court of

Appeals did not find fraud where the appellants had alleged
that (1) no one verbally explained the forum selection
clause to appellants or told them that they could consult
an attorney; (2) appellants did not attempt to negotiate
the clause in any way, but, ‘should an opportunity [have]
been afforded’ to seek legal counsel, appellants would
have either asked that the clause be removed or sought
treatment elsewhere; and (3) appellants ultimately
misunderstood the forms and their implications.
Id. at 20.

Here, plaintiffs make even less specific allegations

regarding the existence of fraud; they merely refer to allegations
of fraud in the complaint.

Accordingly, the circumstances here

cannot support invalidating the forum selection clause as a result
of fraud.
II.

Conclusion
For the reasons articulated above, the Court finds that the

mandatory forum selection clause contained in the credit line
agreements signed by the parties is valid and enforceable.

The

Court further finds no “extraordinary circumstances unrelated to
the convenience of the parties [that] clearly disfavor a transfer.”
Atl. Marine Constr. Co., Inc., 134 S.Ct. at 575.

Accordingly, the

Court GRANTS UBS Bank’s motion to transfer this case to the
District Court for the District of Utah.

(Docket No. 16.)

This case in this district is now closed for statistical
purposes.

Civil No. 14-1739 (FAB)

13

IT IS SO ORDERED.
San Juan, Puerto Rico, December 3, 2014.
s/ Francisco A. Besosa
FRANCISCO A. BESOSA
UNITED STATES DISTRICT JUDGE