Sandy Spring Bank v. Advanced Systems Services, Inc. et al

Filing 16

MEMORANDUM ORDER denying 5 Motion to Dismiss. Signed by District Judge Gerald Bruce Lee on 3/30/2009. (rban, )

IN THE UNITED STATES
EASTERN

DISTRICT COURT
OF VIRGINIA DIVISION

FOR THE

DISTRICT

ALEXANDRIA

SANDY

SPRING

BANK,

Plaintiff,
v.

)

Case

No.

l:09CV23

(GBL)

ADVANCED SYSTEM SERVICES,
FUTURE BUSINESS SERVICES,

CORP.,
CORP.,

)
)

and,

JEAN AGBEY
Defendants.

)
)

MEMORANDUM ORDER

THIS MATTER

is

before

the

Court

on

Defendants

Advanced

System Services,
("FBS"),

Inc.

("ASSI"),

Future Business
to Dismiss

Services,

Corp.

and Jean Agbey's,

Motion

Plaintiff's 12(b)(l) and

Complaint under Federal
12(b)(3) venue. for This lack of case

Rules

of Civil

Procedure

subject matter

jurisdiction and dispute over

improper

concerns

the parties'

jurisdiction and venue on the language
and Business

in the Eastern

District

of Virginia based Promissory Note
The issue

in a

forum selection clause
between the

in a

Loan Agreement

parties.

before

the Court

is whether the

forum selection clause between
and

in the

Promissory Note and Business Loan Agreement
and Defendants this was permissive has subject or mandatory, matter

Plaintiff

if permissive, over the

whether

Court

jurisdiction

claim and whether venue

is

proper

in the

Eastern

District

of

Virginia.

The Court

denies

Defendants'

Motion to

Dismiss

because the Consent to Jurisdiction clause does
exclusive
permissive in

not provide
a

jurisdiction

in Maryland and
clause.

instead contains
venue is a

forum selection District three

Therefore, as

is proper citizen of and all of

the Eastern the

of Virginia are

Plaintiff

Maryland,

defendants reside,

citizens their

of Virginia, principal

the defendants business, in

either

or have

place

the

Eastern

District
I.

of Virginia.

BACKGROUND

Plaintiff, banking

Sandy Spring with

Bank

("Bank"), place

is

a Maryland in

corporation

its principal and FBS,

of business

Maryland.

Defendants,

ASSI

are Virginia in

corporations

with their principal Virginia,
Fairfax

places

of business is an

Fairfax County, who lives
the

and

Defendant

Jean Agbey
On,

individual
June 5,

in

County,

Virginia.

or around,

2007,

Bank

provided

a

$200,000

loan

to ASSI.

ASSI

executed

a

Promissory

Note,

a

Business

Loan Agreement,
Bank.

and a Commercial
The

Security
and

Agreement with Sandy Spring Business Loan Agreement

Promissory Note Consent to

contain identical stating: submits
court

Jurisdiction provisions Borrower
any state

irrevocably
or federal

to the

Jurisdiction of
in the State of

sitting

Maryland of out of

any

suit[,] to to that

action this

or proceeding Borrower extent have

arising

or regarding

Note.

irrevocably waives law any objection

the

fullest

permitted by now or

Borrower may

hereafter have suit[,]
and

to or
that

the
any

laying of venue
such suit[,]

of

any
or

such such court

action

proceeding brought in any such court

in any
action

any claim

proceeding brought

has been brought

in an inconvenient suit[,]
shall be be conclusive in

forum.

Final

judgment

in any such such court
subject

action or proceeding brought
and binding upon in which any court

in any

Borrower and may

enforced

Borrower is

to

jurisdiction by suit upon

such

judgment

that

service of process
applicable law.

is

effected upon

Borrower as

provided in this Note or as

otherwise permitted by

Additionally,

the

Promissory Note and Business Loan Agreement
stating that
law to the

contain Governing Law provisions
agreement are

the

loan and
that it is

governed by Maryland

extent

not preempted by federal
states:

law.

The Commercial

Security Agreement

With respect to procedural matters related to the perfection and enforcement of Lender's rights against the Collateral this Agreement will be governed by federal law applicable to Lender and to the extent not
preempted by federal law the laws of the Commonwealth

of Virginia. In all other respects this Agreement will be governed by federal law applicable to Lender and to the extent not preempted by federal law the laws of the State of Maryland without regard to its conflicts of law provisions. However if there ever is a question about whether any provision of this Agreement is valid or enforceable the provision that

is questioned will be governed by whichever state or federal law would find this provision to be valid and
enforceable. The loan transaction that is evidenced for by the Note and this Agreement has been applied

considered approved and made and all necessary loan documents have been accepted by Lender in the State of
Maryland.

Furthermore,
Commercial

on June 5,

2007,

FBS and Agbey each

executed
the

Guaranties

under which

they agreed to guarantee

"full and punctual payment and satisfaction of [ASSI] to [Sandy Spring Bank]

of the

Indebtedness

and the performance and

discharge of all

[ASSI's]

obligations under the

[Promissory] 2008, the Bank

Note and the Related Documents." sent a letter to
default

On December 11,

Defendants to inform them that ASSI was in
on the
this

on payment

Promissory Note.
action against

The

Bank
ASSI, FBS,

subsequently brought

Defendants,

and Agbey,

pursuant to the default provisions
Defendants

of the

Promissory

Note and Guaranties. alleging lack of

filed a Motion to

Dismiss

subject matter
II.

jurisdiction and improper venue.

DISCUSSION

A. Standard of Review Federal Rule of Civil Procedure 12(b)(l) allows a defendant

to move

for dismissal the

when

the

court Fed. R.

lacks Civ.

jurisdiction over P. 12(b)(1). In

the

subject matter of

action.

considering a

12(b)(1) that

motion to dismiss, federal
v.

the burden

is on the is

plaintiff to prove
proper.

subject matter
515 U.S.

jurisdiction
743
298

See United States
v.

Hays,

737,
Corp.,

(1995)
U.S. 178,

(citing McNutt

General Motors Acceptance

189

(1936));

Adams

v.

Bain,

697

F.2d

1213,

1219

(4th Cir.
of

1982).
subject See

A 12(b)(l) matter e.g.,

motion to

dismiss may over the case Co.,

attack the apart

existence

jurisdiction White v.

from the pleadings. F.Supp. 231, 233

CMA Constr.

Inc.,

947

(E.D.Va.1996); F.2d 884, States,
F.2d at
hear the

Mortensen

v.

First Fed.

Sav.

and Loan Ass'n, United

549

891

(3d Cir.1977); 304

see also Williams v. 1995)
trial

50

F.3d 299,
In
is

(4th Cir.
case, the

(citing Mortensen,
court's
549 F.2d

549

891).
case"

such a
at

"very power to
at 891. The

issue.

Mortensen,

district

court

is then
of

free to weigh the
Adams,

evidence to determine
F.2d at 1219. "No

the existence

jurisdiction.

697

presumptive truthfulness

attaches

to the plaintiff's

allegations,

and the existence
court

of disputed material
for 549

facts

will

not preclude the trial merits of

from evaluating

itself the F.2d at 891.

jurisdictional

claims." Mortensen, Procedure 12(b)(3)

Federal to move
R. Civ.

Rule of Civil of

allows

a defendant Fed.

for dismissal
P. 12(b)(3).

a claim based on
to dismiss

improper venue.

Motions

based on

forum-selection under 471 12(b)(3). 544,

clauses Sucampo

should be treated as motions Pharm., Inc., v. Astellas

to dismiss Inc.,

Pharma,

F.3d

550

(4th Cir.

2006).

After

a defendant

objects

to venue

under

12(b)(3),
is 612 proper. F.2d

a plaintiff bears
See

the burden of establishing
Va. Chiropractors overruled on Ass'n,

the venue
Inc.,

Bartholomew v. (4th

812,

816

Cir.1979),

other grounds by

Ratino v. When the

Med. court

Serv. does to

of D.C., not

718

F.2d

1260

(4th Cir.1983). hearing, showing the

hold an evidentiary a prima facie

plaintiff needs

only make

of venue.

Mitrano v.

Hawes,

377

F.3d 402,

405

(4th Cir.2004).

The

district

court

is

then

free

to dismiss

the

case filed.

if venue Fed.

is

not P.

proper in the
12(b) (3).
B. Analysis

court

in which the case was

R. Civ.

i.

The Forum Selection Clauses are Permissive because
they lack obligatory language.

The Court

holds

that the

forum selection

clause

is

permissive because it does not contain any language mandating
jurisdiction in Maryland. Since the clause does not have any

specific language excluding jurisdiction outside of Maryland,
merely confers jurisdictions in Maryland without making it

it

exclusive. Cir.
one

See IntraComm Inc., ("[A]n agreement

v.

Bajaj,

492

F.3d 285,

290

(4th

2007)

conferring jurisdiction in
excluding jurisdiction
language of exclusion.")

forum will not be
it

interpreted as
specific

elsewhere unless

contains

(quoting Imp.

John Boutari

&

Son, 22

Wines

& Spirits, 53

S.A.

v.

Attiki

and Distrib.,

Inc.,

F.3d 51,

(2d Cir.

1994)).

Several circuit courts
permissive clauses
whereas

have analyzed the scope of mandatory and
holding that mandatory

forum selection clauses,

require that
"permissive

litigation be in a designated forum,
forum selection clauses authorize

jurisdiction in a designated forum,

but do not prohibit

litigation elsewhere."

K&

V Scientific Co.

v.

BMW,

314

F.3d

494,

498

(10th Cir.

2002)
106
v.

(quoting Excell,
F.3d 318, 321

Inc.

v.

Sterling
1997));
526

Boiler & Mech.,
Orlando Holdings

Inc.,
Corp.

(10th Cir.
Trust, LLC,

Ocwen

Harvard Prop.

F.3d

1379,

1381
to

(11th Cir.

2008).

In this

case,

the

language

in the
submits in the

Consent to the

Jurisdiction

clause, any state

"[b]orrower or federal

irrevocably court it

Jurisdiction of is

sitting not

State of Maryland" obligatory are not
Co., 314

not mandatory because thereby suggesting that

does

contain courts

language,

non-Maryland See K &

excluded
F.3d at

from having
499

jurisdiction.
venue is

V Scientific

("[W]here

specified with mandatory

or

obligatory

language,

the

clause will

be

enforced;

where

only

jurisdiction is
enforced unless

specified,
there is

the

clause will
further

generally not be
indicating the

some

language

parties' Express, Cir. 378,

intent Ltd. v.

to make venue

exclusive") GmbH,

(quoting 972 F.2d

Paper 753, 494 757 (7th

Pfankuch Maschinen v.

1992)); 386

see also Phillips 2007) its

Audio Active Ltd., the forum

F.3d

(2d Cir.

(finding

selection clause is

mandatory because obligatory). Furthermore,
jurisdiction" Defendants litigation, does

language

"are

to be brought"

the
not

language
clearly

"irrevocably
indicate to be that the

submits
the

to

the

Bank and for as a

intended and

for

Maryland the

only forum

therefore

clause

should be

construed

permissive

forum clause. the court submit that to

In

S&D Coffee Inc., the

v.

GEI "both

Autowrappers, parties did not because, shall

concluded that

language

the jurisdiction

of the

English courts"

indicate

England had exclusive term "shall"

jurisdiction the court found

although the

is mandatory,

that

there

needed to be more explicit jurisdiction was

language 995

in the clause F. Supp. 607, 610 is

stating that (M.D.N.C.

exclusive. the

1997).

Additionally,

forum selection clause

most appropriately categorized as a hybrid clause because while
it does not place mandatory limitations for permissive jurisdiction upon both parties, and it

provides

in Maryland,

jurisdiction becomes mandatory upon

Defendants

if they are sued

in Maryland.

See Ocwen Orlando Holdings Corp.,
forum selection clause was a

526

F.3d at

1381

(finding that the

hybrid,

in that a party but if

the first portion of the clause was permissive because did not need to bring a suit the suit was brought there,
jurisdiction).

in Orange

County,

Florida,

the defendant had to submit to the

Finally,

the Governing Law provision has little impact
obligatory in Maryland
indicate
See K & V

in

determining whether jurisdiction is
because,
parties'

generally,
intentions

choice
with

of

law clauses

do not

regard to

jurisdiction.

Scientific Co.,

314

F.3d at

501

("[T]he parties'

choice of law

8

provision

(even

assuming

that

it

is

binding

and

controls

all

of

plaintiff's

claims)

appears

to carry

little,

if any,

weight

in

determining whether

the parties'

forum

selection clause was Moreover, of law since forum are

intended as mandatory or clauses

permissive."). issues and

involve procedural

choice

clauses

substantive,

federal

law,

not

choice of law provisions,

should

determine whether a Phillips, 4 94

forum clause 384-85.

is mandatory or permissive. finds that the forum

F.3d at

The Court

selection clause

is

permissive because lacks obligatory
is not

the phrase, language,

"borrower

irrevocably submits,"
indicating that the that

thereby
and

jurisdiction litigate

exclusive

in Maryland

Bank may

their

claim in Virginia.

ii.

Jurisdiction under 28

and Venue are Proper in § 1332(a) &

this

Court

U.S.C. has

§ 1391 (a) (1)

The district this

court

subject matter jurisdiction over in controversy exceeds
citizenship. 28

action because
there is

the amount

$75,000,
§

and because

diversity of

U.S.C.

1332(a).

Furthermore,

venue is proper

in the Eastern District
in this judicial

of Virginia because district, places

Defendant Agbey and

resides have

and Defendants ASSI in this

FBS

their principal 28 U.S.C.
Motion

of business
Hence,

judicial

district.

§
to

1391(a)(l).

this

Court

denies

Defendants'

Dismiss because and explicit

the

Consent

to

Jurisdiction that
9

clause is

lacks

clear in

language

stating

jurisdiction

exclusive

Maryland,

and therefore, is

this

Court

has

jurisdiction over District

the

matter and venue pursuant to 28

proper §

in the Eastern and §

of Virginia

U.S.C.

1332(a)
III.

1391(a)(l).

CONCLUSION

Defendants'

Motion

to

Dismiss

is

denied because

the

forum

selection Agreement

clauses do not
in

in the

Promissory Note

and the

Business

Loan

contain mandatory language,
a Maryland court permissive.

rendering
This Court has

jurisdiction

subject matter
diversity

jurisdiction
as

over

the matter pursuant
in 28 U.S.C. §

to
1332(a), and

jurisdiction

delineated

venue

is

proper
all the

in this

Court

pursuant

to

28
or

U.S.C.
have

§

1391(a)(1)

because

defendants

either

reside,

their

principal place
Virginia. For the

of business,

in the

Eastern

District

of

foregoing reasons,

it

is

hereby System Services, ("FBS"), and Inc. Jean

ORDERED that ("ASSI"), Agbey's, Future

Defendants Advanced Business Dismiss directed Services, is to

Corp.

Motion to

DENIED. forward a copy of this Order to

The Clerk is
counsel of record.

Entered this 5^ d of March, 2009. is day
,.. VS/

Alexandria,

01/o

f'

/09

Virginia

Gerald Bruce Lee
10

United States District Judge