Opinion
2:23-cv-652-MHT-CWB
07-12-2024
TINA LEE FLOWERS, Plaintiff, v. TBS FACTORING SERVICES, LLC, Defendant.
RECOMMENDATION OF THE MAGISTRATE JUDGE
CHAD W. BRYAN UNITED STATES MAGISTRATE JUDGE
I. Introduction
Before the court is a motion to dismiss (Doc. 20) filed by TBS Factoring Service, LLCseeking a dismissal of this action under Rule 12(b)(3) of the Federal Rules of Civil Procedure and 28 U.S.C. § 1406(a). TBS contends that a forum-selection clause restricts the underlying litigation to either the United States District Court for the Western District of Oklahoma or the state courts of Oklahoma County, Oklahoma. (See id. at p. 1). TBS alternatively seeks a dismissal under Rule 12(b)(7) due to Plaintiff's alleged failure to join her limited liability company as a real party in interest. (See id.). Although afforded through May 13, 2024 to file a response to TBS's arguments for dismissal (see Docs. 23, 25, & 26), Plaintiff has not offered any opposition. Upon careful review and consideration of the issues, the Magistrate Judge will recommend a dismissal without prejudice.
It appears that TBS Factoring Service, LLC was incorrectly designated by Plaintiff as TBS Factoring Services, LLC (see Doc. 20 at p. 1). The clerk of court is DIRECTED to update the docket so as to reflect TBS Factoring Service, LLC as the correctly-designated defendant.
II. Factual Background
This action arises out of an Accounts Receivable Purchase and Security Agreement executed on October 8, 2019. (See Doc. 14 at ¶ 8; see also Docs. 14-1 through 14-10). The agreement was entered into between TBS and Interstate All Forty Eight Trucking, LLC. (See Doc. 14-3 through Doc. 14-5). Plaintiff purported to act as “CEO” of that entity (see id.) but also was listed as a “personal guarantor” (see Doc. 14-1 at p. 9). Under the agreement, TBS acquired all right, title, and interest in certain accounts receivable. (Id. at ¶ 2). The agreement further set out the rates, pricing terms, and other fees and charges associated with the transaction. (Id. at ¶ 4). And, “[i]n the event of any dispute ..,” the agreement provided that “TBS shall ... have the right to charge-back ... any amounts due and outstanding.” (Id. at ¶ 14).
The crux of the Amended Complaint is Plaintiff's allegation that TBS “breached the material terms of [the] contract ... by taking money owed to her.” (Id. at ¶ 6). Plaintiff asserts (1) that TBS breached the agreement by engaging in “excessive chargebacks” and (2) that the “chargeback scheme” violated Oklahoma's Consumer Protection Act, Okla. Stat. Ann. tit. 15, §§ 751 et seq. (Id. at ¶¶ 6-7). Plaintiff additionally asserts that she has “suffered severe economic damages and was not able to keep her business operating,” that she “lost numerous jobs,” and that she “could not pay her truck loan, truck insurance, or make needed truck repairs because of lack of funding.” (Id. at ¶ 17). Plaintiff seeks to recover damages in an amount of $1,000,000. (Id. at p. 4).
Although Plaintiff refers to the “Uniform Deceptive Trades and Practices Act of Oklahoma,” the statute is actually entitled “Oklahoma Consumer Protection Act.” See 15 Okla. St. Ann. § 751.
As most relevant to the pending motion to dismiss, the written agreement contains the following choice of law provision and forum-selection clause:
These Terms of Service shall be interpreted and construed in accordance with the laws, statutes, guidelines, and rules of the State of Oklahoma. Any dispute, action or proceeding arising out of or relating to these Terms of Service or any other documents or instruments of the Parties shall be within the exclusive jurisdiction of the U.S. Western District Court of Oklahoma or in Oklahoma County, Oklahoma.(Id. at ¶ 21(e)).
III. Discussion
Rule 12(b)(3) of the Federal Rules of Civil Procedure authorizes a party to seek dismissal for “improper venue.” See Fed.R.Civ.P. 12(b)(3). A similar right is codified at 28 U.S.C. § 1406(a) (“The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.”). “These provisions ... authorize dismissal . when venue is ‘wrong' or ‘improper' in the forum in which it was brought.” Atl. Marine Const. Co. v. U.S. Dist. Ct. for W. Dist. of Texas, 571 U.S. 49, 55 (2013). “Whether venue is ‘wrong' or ‘improper' depends exclusively on whether the court in which the case was brought satisfies the requirements of federal venue laws.” Id.
Under 28 U.S.C. § 1391(b), a civil action may be filed in:
(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;
(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated; or
(3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action.28 U.S.C. § 1391(b). If a case does not fall within one of those three designated categories, “venue is improper, and the case must be dismissed or transferred under § 1406(a).” Atl. Marine, 571 U.S. at 56. On the other hand, “a case filed in a district that falls within § 1391 may not be dismissed under § 1406(a) or Rule 12(b)(3).” Id.
“In determining whether venue is proper for a breach of contract action under § 1391[(b)](2), courts consider a number of factors, including where the contract was negotiated or executed, where it was to be performed, and where the alleged breach occurred.” Etienne v. Wolverine Tube, Inc., 12 F.Supp.2d 1173, 1181 (D. Kan. 1998) (quoting PI, Inc. v. Quality Products, Inc., 907 F.Supp. 752, 758 (S.D.N.Y.1995)). “[T]he venue analysis focuses on whether a substantial part of the events or omissions giving rise to the claim occurred in th[e] district [in question], or a substantial part of the property that is the subject of the action is situated.” Robey v. JPMorgan Chase Bank, N.A., 343 F.Supp.3d 1304, 1314 (S.D. Fla. 2018) (emphasis in original). In analyzing whether “events or omissions are a ‘substantial part' of the subject claims, the court must ‘focus on relevant activities of the defendant, not of the plaintiff.' Only the defendant's activities ‘that directly give rise to a claim are relevant,' and ‘only those locations hosting a ‘substantial part' of the events are to be considered.'” Id. (citations omitted); see also Jenkins Brick Co. v. Bremer, 321 F.3d 1366, 1371-72 (11th Cir. 2003) (explaining that “this analytical framework, which considered as relevant only those acts and omissions that have a close nexus to the wrong, is a good interpretation of [§ 1391([b])(2)]”).
TBS does not present any argument or evidence suggesting that venue is improper under 28 U.S.C. § 1391(b)-contending instead that the Middle of District of Alabama is an improper venue only due to the contractual forum-selection clause. It is well settled, however, that “[w]hether the parties entered into a contract containing a forum-selection clause has no bearing on whether a case falls into one of the categories of cases listed in § 1391(b).” Atl. Marine, 571 U.S. at 56. Because TBS has not challenged venue as being improper under § 1391(b), neither Rule 12(b)(3) nor 28 U.S.C. § 1406(a) would provide a proper mechanism for dismissal. Id. at 55.
That said, nothing precludes a district court from sua sponte converting a motion to dismiss into a § 1404(a) transfer motion. See Atl. Marine, 571 U.S. at 59 (“Although a forum-selection clause does not render venue in a court ‘wrong' or ‘improper' within the meaning of 1406(a) or Rule 12(b)(3), the clause may be enforced through a motion to transfer under § 1404(a).”); Hisey v. Qualtek USA, LLC, 753 Fed.Appx. 698, 704 n.5 (11th Cir. 2018) (“[W]e have a ‘long-approved practice of permitting a court to transfer a case sua sponte [under § 1404(a)],' so long as the parties are given notice and the opportunity to respond prior thereto.”) (citation omitted). Here, Plaintiff was provided notice of the potential that this action might be transferred (see Doc. 20 at pp. 3, 10), and the undersigned thus will consider TBS's motion as arising under § 1404(a) rather than under § 1406(a).
Section 1404(a) states that “[f]or 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.” (Emphasis added). Because it “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,” § 1404(a) “provides a mechanism for enforcement of forum-selection clauses that point to a particular federal district,” and “a proper application of § 1404(a) requires that a forum-selection clause be ‘given controlling weight in all but the most exceptional cases.'” Atl. Marine, 571 U.S. at 59-60 (citation omitted).
Nonetheless, before a transfer is ordered under § 1404(a), a court must determine that the forum-selection clause is valid and enforceable. See AQuate II LLC v. Myers, 100 F.4th 1316, 1323 (11th Cir. 2024). Courts are less inclined to uphold a forum-selection clause when: “(1) [the clause's] formation was induced by fraud or overreaching; (2) the plaintiff would be deprived of its day in court because of inconvenience or unfairness; (3) the chosen law would deprive the plaintiff of a remedy; or (4) enforcement of the clause would contravene public policy.” Id. (quoting Krenkel v. Kerzner Int'l Hotels Ltd., 579 F.3d 1279, 1281 (11th Cir. 2009)); Rucker v. Oasis Legal Fin., L.L.C., 632 F.3d 1231, 1236 (11th Cir. 2011). “These factors will rarely invalidate a forum-selection clause, which is, after all, a contract between two parties. But if a party can show that ‘trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court,' the forum-selection clause will not be enforceable.” Id. (citations omitted). Stated differently, “[f]orum-selection clauses are presumptively valid and enforceable unless the plaintiff makes a ‘strong showing' that enforcement would be unfair or unreasonable under the circumstances.” Krenkel, 579 F.3d at 1281 (citation omitted).
Regarding whether “[the] formation [of the forum-selection clause] was induced by fraud or overreaching,” TBS correctly observes that the Amended Complaint does not seek to unwind or rescind any portion of the underlying agreement (Doc. 20 at p. 7). Certainly no allegation is made that the forum-selection clause itself was the result of fraud. See Rucker, 632 F.3d at 1236 (“In order for a forum-selection clause to be invalidated on the basis of the first factor, a plaintiff must specifically allege that the clause was included in the contract at issue because of fraud.”).
As to whether “the plaintiff would be deprived of its day in court because of inconvenience or unfairness,” TBS contends that Plaintiff may not avoid the forum-selection clause by asserting that litigation in Oklahoma would be inconvenient or expensive. (Doc. 20 at p. 8). The Eleventh Circuit indeed has explained that “[t]he financial difficulty that a party might have in litigating in the selected forum is not a sufficient ground by itself for refusal to enforce a valid forum selection clause.” Id. at 1237 (quoting P&S Bus. Machs., Inc. v. Canon USA, Inc., 331 F.3d 804, 807 (11th Cir. 2003)). Such potential inconvenience and expense would have been foreseeable at the time of contracting, and Plaintiff has offered nothing more for consideration.
With respect to whether “the chosen law would deprive the plaintiff of a remedy,” the agreement included a provision stating that it “shall be interpreted and construed in accordance with the laws, statutes, guidelines, and rules of the State of Oklahoma.” (Doc. 14-1 at ¶ 21(e)). Neither side disputes that Oklahoma law governs, and Plaintiff specifically alleges in the Amended Complaint that her claim is “for Breach of Contract and Deceptive Trade Practices arising under the laws of the state of Oklahoma” and that she “believes the Defendant engaged in this [chargeback] scheme in violation of accepted practices in the factoring industry and in violation of the Uniform Deceptive Trades and Practices Act of Oklahoma.” (Doc. 14 at ¶¶ 5, 7). So Oklahoma law will provide a potential remedy no matter where this action is litigated.
Finally, as to whether “enforcement of the clause would contravene public policy,” the Alabama Supreme Court has held “that enforcement of the forum-selection clause must contravene a state's public policy, not that the clause should be held unenforceable if enforcement of the contract that contains the clause would contravene a state's public policy.” Ex parte PT Sols. Holdings, LLC, 225 So.3d 37, 43 (Ala. 2016) (emphasis in original). “[W]hat matters is not whether the contract as a whole violates public policy, but whether the forumselection clause itself violates public policy.” Id. (quoting Fountain v. Oasis Legal Fin., LLC, 86 F.Supp.3d 1037, 1044 (D. Minn. 2015)) (alteration made). In that regard, “[i]t has long been established that forum-selection clauses are not against Alabama public policy.” Id. at 44 (citation omitted); see also Rucker, 632 F.3d at 1236.
With the forum-selection clause having been found valid and enforceable, the question becomes whether this action should be (1) transferred or (2) dismissed without prejudice. Normally, a transfer is appropriate when the forum-selection clause mandates a federal forum. See Atl. Marine, 571 U.S. at 59-60; Hisey, 753 Fed.Appx. at 704 n.5. The forum-selection clause here, however, provides an option for either the Western District of Oklahoma or the state courts of Oklahoma County, Oklahoma. (Doc. 14-1 at ¶ 21(e)). Given that option, Plaintiff could well choose to refile her claims in state court rather than federal court. See Hisey, 753 Fed.Appx. at 70304 (affirming dismissal where forum-selection clause provided for venue in all state and federal courts within Pennsylvania); Lightning Partners, Inc. v. SPS Commerce, Inc., No. 3:21-cv-399, 2022 WL 485228, *1-4 & n.4 (M.D. Fla. Feb. 17, 2022) (“[T]he parties' bargained-for forumselection clause provides for a state or federal court. That choice should be plaintiff's to make.”); Schrenkel v. LendUS, LLC, No. 2:18-cv-382, 2018 WL 5619358, *5, 8 (M.D. Fla. Oct. 30, 2018) (dismissing where forum-selection clause authorized suit in Delaware state or federal court); Apex Toxicology, LLC v. United Healthcare Servs., Inc., No. 17-61840-CIV, 2020 WL 2932953, *1 (S.D. Fla. May 14, 2020) (dismissing where forum-selection clause permitted suit in certain state or federal courts); Red Dragon Partners, LLC v. TruthMD, LLC, No. 23-CV-60093, 2024 WL 1531623, *6 (S.D. Fla. Mar. 1, 2024) (recommending dismissal where forum-selection clause afforded option of state court or federal court). Accordingly, the undersigned concludes that the appropriate course would be to dismiss this action without prejudice-as transferring would effectively usurp Plaintiff's right of election as to the preferred forum. Compare Pappas v.Kerzner Int'l Bah. Ltd., 585 Fed.Appx. 962, 967 n.2 (11th Cir. 2014) (explaining that “when a forum-selection clause requires a different federal forum, the clause should be enforced through a motion to transfer under 28 U.S.C. § 1404(a)”) (emphasis added).
IV. Conclusion
For the reasons stated above, the the pending motion to dismiss (Doc. 20) b without prejudice.
It is not necessary to reach TBS's alternate argument that the Amended Complaint should be dismissed under Fed.R.Civ.P. 12(b)(7) due to Plaintiff's failure to join a real party in interest (see Doc. 20 at pp. 1-2, 10-11).
It is ORDERED that all objections t July 26, 2024. An objecting party must ide legal conclusions to which objection is ma objection. Frivolous, conclusive, or general o
After receiving objections, the Distr challenged findings or recommendations. Th Recommendation or may refer the matter back