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In IMCO Recycling, Inc. v. Warshauer, 2001 WL 1041799 (N.D. Tex. Aug. 31, 2001), the court held that the defendant did not waive its right to remove by consenting to "the personal jurisdiction of the state and federal courts located in Dallas County, Texas" for any suit arising out of the contract.
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Civil Action No. 3:01-CV-1649-D
August 31, 2001
MEMORANDUM OPINION AND ORDER
Relying on a forum selection clause in a Confidentiality and Non-Disclosure Agreement ("Confidentiality Agreement") to contend that defendant waived his right of removal, plaintiff IMCO Recycling Inc. ("IMCO") and its wholly-owned subsidiary, Alchem Aluminum, Inc. ("Alchem"), move to remand this case to state court. Concluding that defendant did not contractually waive his right of removal, or that whether he did is sufficiently ambiguous that it fails the required standard for clarity, the court denies the motion. The court also allows the state court temporary restraining order to expire without extension.
The court is deciding this motion on expedited briefing pursuant to its August 27, 2001 scheduling order.
I
IMCO and Alchem sued defendant Bruce Warshauer ("Warshauer") in Texas state court on claims for misappropriation of trade secrets and confidential information, breach of contract, and breach of duty of confidentiality. Warshauer entered into two agreements with IMCO on November 14, 1997 at the time he became an employee: an Employment Agreement and the Confidentiality Agreement. Under the Employment Agreement, IMCO initially employed Warshauer as an Executive Vice President of Alchem. Warshauer also became the Senior Vice President, Commercial, Specification Alloys, of IMCO. IMCO and Alchem allege that Warshauer resigned his employment in July 2001 to become President and Chief Executive Officer of Wabash Alloys, L.L.C. ("Wabash"), an IMCO competitor. For purposes of one of the court's conclusions below, it is important to note that plaintiffs sue Warshauer on both agreements. They allege that it is likely that he is violating (or inevitably will violate) various confidentiality and non-disclosure provisions of the Employment Agreement and the Confidentiality Agreement by using and/or disclosing plaintiffs' confidential proprietary information and trade secrets. In state court, prior to removal, plaintiffs sought and obtained an ex parte temporary restraining order that appears to be based on both agreements. It prevents Warshauer from acting as President and/or Chief Executive Officer of Wabash and/or Connell Limited Partnership ("Connell"), participating in Wabash and Connell's decisions and activities in the secondary aluminum recovery or aluminum alloy business, and performing any function for Wabash and/or Connell other than financial and operations. The order also restrains Warshauer from using, copying, disclosing, or providing any person or entity access to plaintiffs' confidential information.
Plaintiffs acknowledge in their motion to remand that their lawsuit is based on both agreements. See Ps. Mot. Remand at 2. This is confirmed by reading their state court petition. See, e.g., Pet. at ¶¶ 15, 25.
Warshauer removed the case to this court based on diversity of citizenship. IMCO and Alchem move to remand. They maintain that under the following forum selection clause in the Confidentiality Agreement, Warshauer has waived his right of removal and to challenge subject matter and personal jurisdiction in the state court from which this case was removed:
Warshauer's August 22, 2001 notice of removal failed properly to invoke this court's subject matter jurisdiction because it pleaded his residence rather than his citizenship. The court on August 27, 2001 filed an order directing that he amend his notice of removal, which he did on August 29, 2001. This defect is correctable, and it does not otherwise affect the court's analysis of the forum selection clause on which plaintiffs rely.
Governing Law and Personal Jurisdiction. This Agreement will be governed by and construed according to the laws of the State of Texas, without giving effect to conflicts of law princip[le]s. [Warshauer] hereby expressly consents to the personal jurisdiction of the state and federal courts located in Dallas County, Texas, for any lawsuit filed there against [him] by IMCO arising from or related to this Agreement, and [he] hereby irrevocably and unconditionally waives any defense of an inconvenient forum, to the maintenance of any action or proceeding in any such court, any objection to venue with respect to any such action or proceeding, and any right of jurisdiction on account of the place of residence or domicile. In addition, [he] hereby irrevocabl[y] and unconditionally waives the right to a jury trial in connection with any claim arising out of or related to this Agreement or the Confidential Information.
Plaintiffs did not include this document in an appendix or cite it by specific appendix page number. N.D. Tex. Civ. R. 7.1(i)(1) provides that "[a] party who relies on documentary (including an affidavit, declaration, deposition, answer to interrogatory, or admission) or non-documentary evidence to support or oppose a motion must include such evidence in an appendix." Rule 7.2(e) states that "[i]f a party's motion or response is accompanied by an appendix, the party's brief must include citations to each page of the appendix that supports each assertion that the party makes concerning any documentary or non-documentary evidence on which the party relies to support or oppose the motion." Plaintiffs' motion to remand is based on attached exhibits-including the Confidentiality Agreement-that must be included in an appendix. Their brief does not cite an appendix because they did not submit one. In view of the expedited schedule established for deciding the remand motion, and because this defect has not materially interfered with the decisional process of the court, it has decided the remand motion without requiring re-briefing. Because adherence to Rules 7.1(i)(1) and 7.2(e) greatly assists the court, counsel must follow them in the future.
Warshauer opposes the motion, contending that (1) the forum selection clause of the Confidentiality Agreement, properly interpreted, does not waive his right to remove this case to a federal court in Dallas County, Texas; (2) plaintiffs' reliance on Waters v. Browning-Ferris Industries, Inc., 252 F.3d 796 (5th Cir. 2001), is misplaced because the forum selection clause at issue there is distinguishable; (3) the Fifth Circuit's decision in City of Rose City v. Nutmeg Insurance Co., 931 F.2d 13 (5th Cir. 1991), precludes an implied waiver of the right of removal; and (4) the Fifth Circuit's Waters decision precludes remand because, unlike Waters, but as in McDermott International, Inc. v. Lloyds Underwriters of London, 944 F.2d 1199 (5th Cir. 1991), there are two, contradictory governing law clauses at issue and there can be no implied waiver of the right of removal if the waiver is ambiguous.
II
It is settled in the Fifth Circuit that "[a] party to a contract may waive a right of removal provided the provision of the contract makes clear that the other party to the contract has the `right to choose the forum' in which any dispute will be heard." Waters, 252 F.3d at 797 (quoting Nutmeg, 931 F.2d at 16).
A
Plaintiffs rely primarily, if not exclusively, on the Fifth Circuit's recent decision in Waters.
The pertinent part of the clause in question in Waters provided:
Company irrevocably (i) agrees that any such suit, action, or legal proceeding may be brought in the courts of such state or the courts of the United States for such state, (ii) consents to the jurisdiction of each such court in any such suit, action or legal proceeding and (iii) waives any objection it may have to the laying of venue of any such suit, action or legal proceeding in any of such courts.Id. at 797. The panel held that the defendant had waived its right to remove the case because, reading the three clauses of the proviso together, it had agreed that the plaintiff could sue it in any court of Texas, consented to the jurisdiction of any court in Texas to decide the case, and waived any objection to venue in any court in Texas, including the state court in which the plaintiff had filed suit. Id. at 798. Plaintiffs maintain that the forum selection clause of the Confidentiality Agreement "is, if anything, even clearer than the forum selection clause that the Fifth Circuit considered in the Waters case." Ps. Mot. Remand at 4. They argue that under the proviso in ¶ 8 of the Confidentiality Agreement, they had the right to sue Warshauer either in state or federal court in Dallas County, and to preclude him from removing the case, because he consented, and waived any objection to, jurisdiction and venue in whatever court they chose and he agreed that he would not object "to the maintenance of any action or proceeding in any such court[.]" Ps. Mot. Remand Ex. B at ¶ 8.
Warshauer argues inter alia that the forum selection clause in the Confidentiality Agreement does not waive his right of removal to a federal court that sits in Dallas County, Texas. He acknowledges that he has consented to jurisdiction and venue in the state and federal courts of Dallas County, but contends the sentence that sets out his consent "is modified by all that follows." D. Br. at 3. He posits that the balance of the sentence makes clear that he has waived only jurisdictional objections based on his residence or domicile, none of which includes a waiver of his right of removal. Therefore, he reasons that a plain reading of the proviso makes clear that he has forgone only (1) a defense of inconvenient forum, (2) the right to transfer venue out of Dallas County, and (3) the right to object to the exercise of personal jurisdiction over him by a state or federal court in Dallas County, and that none of these waivers relinquishes his right to remove the case. Warshauer argues that because the clause lists the defenses and objections that are waived, those defenses and objections not listed are expressly excluded.
Warshauer also objects to plaintiffs' reliance on the part of the clause in which he "irrevocably and unconditionally waives any defense . . . to the maintenance of any action or proceeding in any such court." He contends this part of the sentence must be read in conjunction with the part of the sentence that precedes it: "[Warshauer] hereby irrevocably and unconditionally waives any defense of an inconvenient forum." Warshauer asserts that when the two are read together, they reveal that he only agreed to waive any defense of inconvenient forum and that the waiver of the maintenance of any action or proceeding in Dallas County is limited only to defenses of inconvenient forum. In a footnote, he argues that the presence of a comma after the word "forum" does not change his interpretation. See D. Br. at 5 n. 3. In essence, he contends the sentence should read as follows (editorial brackets have been added to aid in understanding his position): "[Warshauer] hereby irrevocably and unconditionally waives [1] any defense of an inconvenient forum to the maintenance of any action or proceeding in any such court, [2] any objection to venue with respect to any such action or proceeding, and [3] any right of jurisdiction on account of the place of residence or domicile."
Warshauer also invokes the principle of contract interpretation expressio unius est exclusio alterius. He contends that by listing the circumstances to which the agreement applies, those that are not listed are excluded. He then maintains that application of this rule is consistent with the requirement that the contract be considered in its entirety to determine the parties' intended meaning.
B
Because the forum selection clause is part of a contract, principles of contract interpretation apply. See McDermott, 944 F.2d at 1205 (applying principles of contract interpretation). The Confidentiality Agreement provides, and neither party contests, that it is to be interpreted according to Texas law. Under Texas law, the court's primary concern when interpreting a contract is to ascertain the parties' true intentions as expressed in the instrument. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983)). To achieve this objective, the court should examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Id. Additionally,
[t]he words, not the punctuation, are the controlling guide in construing a contract. If the meaning of the words is clear the court will interpret a contract according to their meaning and without regard to the punctuation marks or the want of them. While punctuation may be resorted to in order to solve an ambiguity which it has not created, punctuation or the absence of punctuation will not of itself create ambiguity.Mattison, Inc. v. W. F. Larson, Inc., 529 S.W.2d 271, 273 (Tex.App. 1975, writ ref'd n.r.e.) (quoting Anderson Kerr Drilling Co. v. Bruhlmeyer, 134 Tex. 574, 136 S.W.2d 800 (1940)).
Paragraph 8 of the Confidentiality Agreement contains three sentences. The first (choice of law) and third (waiver of right to jury trial) are not at issue here. The second sentence provides:
[Warshauer] hereby expressly consents to the personal jurisdiction of the state and federal courts located in Dallas County, Texas, for any lawsuit filed there against [him] by IMCO arising from or related to this Agreement, and [he] hereby irrevocably and unconditionally waives any defense of an inconvenient forum, to the maintenance of any action or proceeding in any such court, any objection to venue with respect to any such action or proceeding, and any right of jurisdiction on account of the place of residence or domicile.
Ps. Mot. Remand Ex. B at ¶ 8. When the court considers ¶ 8 as a whole, it concludes that Warshauer effected four waivers: (1) he waived his right to challenge personal- i.e., in personam-jurisdiction over him in a state or federal court located in Dallas County, Texas; (2) he waived his right to raise any defense of an inconvenient forum based on the maintenance of any action or proceeding in any such court; (3) he waived any objection to venue with respect to any such action or proceeding; and (4) he waived any right of jurisdiction on account of the place of residence or domicile. In accordance with these waivers, Warshauer signed himself up, lock, stock, and barrel, to litigate in a state or federal court located in Dallas County, Texas. Had he not removed the case from state court, he would have been precluded from moving to dismiss for lack of personal jurisdiction or from challenging venue. Where, as here, he removed the case, he relinquished any right to challenge this court's in personam jurisdiction over him, to seek a transfer to another court on the basis of the inconvenience of the forum or based on the comparative convenience of the alternate forum, to challenge venue in this court, or to assert any right of jurisdiction based on the place of residence or domicile. Warshauer did not, however, waive his right of removal, provided he did not remove the case to a federal court located outside Dallas County, Texas.
The court agrees with Warshauer that the most natural reading of the sentence is without the comma after the word "forum." When read this way, he relinquishes any specified defense, objection, and right.
Here, the relevant statute, 28 U.S.C. § 1446(a), and the fact that the Dallas Division of this court sits in Dallas County, has the effect of requiring that removal be to a federal court in Dallas County.
The court holds that Waters is distinguishable on its facts. Although the clause at issue there certainly has similar features to ¶ 8 of the Confidentiality Agreement, it is different in one critical respect. In Waters not only did the defendant agree to be sued in any court of Texas and waive any objection to venue in any such court, it also consented "to the jurisdiction of each such court." See Waters, 252 F.3d at 798. In the present case, Warshauer consented to the personal jurisdiction of the court.
III
Even if the court is incorrect in its interpretation of ¶ 8 or its application of Waters to the instant clause, it concludes for an independent reason that the motion to remand must be denied. Under Fifth Circuit precedent, the contractual waiver must be clear. See Waters, 252 F.3d at 797 ("A party to a contract may waive a right of removal provided the provision of the contract makes clear that the other party to the contract has the `right to choose the forum' in which any dispute will be heard." (emphasis added)). If the waiver is ambiguous, it will not be given effect. See McDermott, 944 F.2d at 1201, 1204. For reasons the court will explain, it holds that the forum selection clause on which plaintiffs rely is ambiguous when considered in tandem with a similar proviso in the Employment Agreement.
A
On November 14, 1997 IMCO and Warshauer entered into two agreements: the Employment Agreement and the Confidentiality Agreement. The Employment Agreement contains its own forum selection clause:
Governing Law. The parties hereto acknowledge and agree that it is their intention that this Agreement and performance hereunder and all suits and special proceedings hereunder be construed in accordance with and under and pursuant to the laws of the State of Texas, the state in which the principal executive offices of IMCO are located, and that in any action, special proceeding or other proceeding that may be brought, arising out of or in connection with or by reason of this Agreement, the laws of the State of Texas shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which any action or special proceeding may be instituted. Venue and jurisdiction for any action hereunder shall be in Dallas, Texas.
D. App. 8, ¶ 12. Plaintiffs do not argue that the contracts — and their respective forum selection clauses — should be interpreted and applied separately. In their reply brief, they point out that Warshauer was obligated under the Employment Agreement to sign the Confidentiality Agreement, which was attached to the Employment Agreement as an exhibit. See Ps. Rep. Br. at 5 (citing D. App. 5, ¶ 5(a)). They appear to concede the well-settled principle of Texas law that "in order to ascertain the entire agreement between contracting parties, separate documents executed at the same time, for the same purpose, and in the course of the same transaction are to be construed together." Jim Walter Homes, Inc. v. Schuenemann, 668 S.W.2d 324, 327 (Tex. 1984) (citing Jones v. Kelley, 614 S.W.2d 95 (Tex. 1981); Nevels v. Harris, 129 Tex. 190, 102 S.W.2d 1046 (1937)). Plaintiffs contend, however, that the two clauses are fully reconcilable and can be construed harmoniously.
Warshauer maintains, however, that the relevant clauses in the Employment Agreement and the Confidentiality Agreement conflict and are therefore ambiguous. He reasons that in the Confidentiality Agreement, he consents to jurisdiction in Dallas County and waives objections and defenses based on inconvenient forum, venue, and personal jurisdiction, but that the proviso does not require that suit be filed in Dallas County. Warshauer posits that, by contrast, the Employment Agreement requires that venue and jurisdiction be fixed in Dallas, Texas. Warshauer argues that because, under Waters, the right of removal is waived only when the contract makes clear that the other party has the right to choose the forum, and plaintiffs do not have that right under the Employment Agreement, there is an ambiguity that precludes the implication that Warshauer waived his right of removal.
B
Because McDermott controls the resolution of this issue, it is appropriate to discuss the opinion before turning to the two clauses. In McDermott an insured-McDermott International, Inc. ("McDermott")-brought suit in state court against its insurer-(Lloyds, London ("Underwriters")-arising from the insurer's failure to pay a claim under an insurance policy. McDermott, 944 F.2d at 1201. Underwriters demanded that McDermott submit its failure-to-pay claim to arbitration, in accordance with the policy's arbitration clause. McDermott then brought a second suit in state court seeking a declaratory judgment that it had no obligation to arbitrate its failure-to-pay claim. Underwriters removed both cases to federal court. McDermott moved to remand based on the policy's service-of-suit clause, contending Underwriters had contractually waived its right of removal. The district court granted the motion, and the Fifth Circuit reversed. Id. McDermott held that the district court had failed to consider a second, co-equal forum selection clause in the policy. Id. at 1205. That clause did not contain a waiver of the right of removal. It afforded Underwriters a right to proceed in an arbitral tribunal. Id. The court "recognize[d] two alternate readings of the policy's service-of-suit and arbitration clauses." Id. at 1204. In view of this ambiguity, the panel vacated the district court's remand order, concluding that Underwriters "did not unambiguously give McDermott the right to choose which forum would decide the arbitrability of their policy disputes." Id.
C
Although the court recognizes that, if it can, it must attempt to harmonize ¶ 8 of the Confidentiality Agreement and ¶ 12 of the Employment Agreement, see id. at 1205 ("where two seemingly conflicting contract provisions reasonably can be reconciled, a court is required to do so and to give both effect." (quoting Proyecfin de Venezuela, S.A. v. Banco Industrial de Venezuela, S.A., 760 F.2d 390, 395-96 (2d Cir. 1985)), the two clauses can reasonably be interpreted to create an ambiguity when, as here, plaintiffs sue under both. Assuming that plaintiffs are right, and the court is wrong, in interpreting ¶ 8 of the Confidentiality Agreement, Warshauer has waived his right of removal with respect to any lawsuit arising from or related to the Confidentiality Agreement. But ¶ 12 of the Employment Agreement speaks of jurisdiction and venue only in this respect: "Venue and jurisdiction for any action hereunder shall be in Dallas, Texas." It cannot possibly be read to waive a right of removal in a lawsuit "brought, arising out of or in connection with or by reason of" the Employment Agreement. Therefore, in this case, where plaintiffs sue Warshauer under both contracts, it is ambiguous whether Warshauer waived his right of removal. Plaintiffs are necessarily relying on a waiver that it limited to claims arising out of the Confidentiality Agreement to deprive Warshauer of a statutory removal right for claims brought, arising out of, or in connection with or by reason of the Employment Agreement.Accordingly, the court holds that the forum selection clauses in question are ambiguous and that Warshauer's waiver of the right of removal is not made with sufficient clarity to be enforceable.
IV
The state court entered a temporary restraining order in this case that is scheduled to expire today. Without suggesting that plaintiffs will not ultimately show themselves to be entitled to a preliminary injunction that accords them some or all the relief included in that order, the court will nevertheless allow the temporary restraining order to expire without extending it, because it would not have granted an ex parte temporary restraining order, or any temporary restraining order, on the factual record presented. The court therefore denies as moot Warshauer's August 30, 2001 motion to dissolve or modify the ex parte temporary restraining order and his August 30, 2001 motion to strike the affidavit of Richard L. Kerr. By separate order filed today, the court has entered a scheduling order for consideration of an application for a preliminary injunction.
Plaintiffs' August 24, 2001 motion to remand is denied. The state court temporary restraining order in this case shall expire of its own terms without being extended. The court will consider an application for a preliminary injunction according to the separate scheduling order filed today.
SO ORDERED.