Opinion
No. 2013-CV-130
07-31-2013
Mineracao Serras Do Oeste LTDA v. Brazilian Resources, Inc.
ORDER
Plaintiff, Mineracao Serras Do Oeste LTDA ("Mineracao"), brought this breach of contract and attachment action arising from Defendant's, Brazilian Resources, Inc. ("BZI"), nonpayment of debt. BZI has moved to dismiss this case on the ground that the parties agreed to a dispute resolution clause, which provides that disputes involving the contract must be heard in Brazil. Mineracao is a Brazilian corporation and BZI— although it is headquartered in Concord, New Hampshire—also does business in Brazil. The Court held a hearing on June 25, 2013 at which it considered the Motion to Dismiss and Mineracao's Petition to Attach. Thereafter, the parties filed supplemental memoranda. On July 31, 2013, the Court received a stipulation filed by the parties in which Mineracao voluntarily withdrew its Petition for Attachment in exchange for BZI voluntarily submitting to an attachment. After considering the parties arguments and the applicable law, BZI's Motion to Dismiss is GRANTED, and the parties' Stipulation is APPROVED.
The terms of the attachment are as follows:
BZI agree[s] that [Mineracao] shall be granted an attachment on real estate located at 125 N. State Street, Concord, New Hampshire owned by 125 North State Street, LLC . . . in the amount of $200,000 . . . In the event that the Court dismisses [Mineracao]'s complaint, the attachment will nevertheless remain in effect until any action filed in Brazil is finally resolved . . . .Stip. ¶¶ 4(a), 4(e).
I
The parties submitted a Brazilian contract, which is written in Portuguese, with a side-by-side English translation. The contract provides that it is to be construed in accordance with laws of the Federative Republic of Brazil. Def.'s Mot. Dismiss & Inc. Mem. of Law, Ex. B ¶ 15 ("Mot. Dismiss"). The critical part of the contract states:
The Parties hereby elect the Court of the city of Belo Horizonte, State of Minas Gerais, Brazil, as the exclusive jurisdiction for any claim eventually raised in connection to this Agreement.Mot. Dismiss, Ex. B ¶ 16.
As Partes, de comum acordo, elegem o foro da comarca da cidade de Belo Horizonte, Estado de Minas Gerais, Brasil, como o foro competente para dirimir quaisquer conflitos decorrentes deste instrumento.
As a general rule, an American court cannot decide foreign law but must treat it as an issue of fact for the court's determination. See United States v. Pre-Columbian Artifacts, 845 F.Supp. 544, 546 (N.D. Ill. 1993); Berman v. Alexander, 782 N.E.2d 14, 22 (Mass. App. Ct. 2003); see also Republic of Turkey v. OKS Partners, 146 F.R.D. 24, 27 (D. Mass. 1993) (discussing Fed. R. Civ. P 44.1 and the method of proving foreign law). However, neither party has introduced evidence regarding the interpretation of paragraph 16; the exclusivity provision of the contract under Brazilian law. In Dancart v. St. Albans Rubber Co., Ltd., 124 N.H. 598 (1984), the New Hampshire Supreme Court considered a forum selection clause in an English contract where neither party had addressed the choice of law issue. The Court stated:
In dealing with this issue, we note that neither party has raised a question of choice of law, or has offered evidence of the substantive rules of English law for the purpose of construing the quoted provision. Foreign law is presumed to accord with the common law of this State in the absence of contrary evidence.Id. at 601 (citing Cove Craft Industries v. B.L. Armstrong Co., Ltd., 120 N.H. 195, 198, (1980)). For that reason, despite the usual rule, the Court can determine whether the forum selection clause in paragraph 16 is enforceable under by applying principles of New Hampshire law. Vartan Garapedian, Inc. v. Anderson, 92 N.H. 390, 393 (1943); see Lakes Region Gaming v. Miller, 164 N.H. 558, 562 (2013) (explaining that contract interpretation is a question of law).
Turning next to the language of the contract, "[a]s a general rule, the proper interpretation of a contract is ultimately a question of law for this court, and [a court should] determine the meaning of the contract based on the meaning that would be attached to it by reasonable persons." Id. (quotation and citation omitted).
BZI argues that the contract's use of the term "exclusive" requires this Court to enforce the forum selection clause and cites as support Strafford Tech. v. Camcar Div. of Textron, 147 N.H. 174 (2001). In that case, the New Hampshire Supreme Court considered whether the language used in a forum selection clause simply elected a preference for a particular jurisdiction or mandated "exclusive" jurisdiction. The relevant contract language provided: "The parties agree that any controversy arising under this Order shall be determined by the courts of [Illinois] and [STI] hereby submits and consents to the jurisdiction of [Illinois] courts" Id. at 175 (emphasis omitted). Distinguishing Dancart—in which the Court held that a clause providing that all claims "shall be subject to the jurisdiction of the English courts" was not mandatory—the Court in Strafford Tech. held that the language "shall be determined by" mandated that dispositive action be reached in a particular venue. Id. at 176.
Here, where the parties used the term "exclusive" in selecting a particular Brazilian court, the intention of the parties is clearer than in Strafford Tech.; the parties intended that dispositive action would be resolved in the venue discussed in paragraph 16 of the contract. The parties' forum selection clause identifies the exclusive jurisdiction for disputes arising pursuant to the contract and is mandatory.
II
Nonetheless, Mineracao argues that RSA 508-A:3 gives the Court authority to decline to enforce an otherwise valid forum selection clause.
It is true that a court can decline to enforce forum selection clauses pursuant to RSA-A:3, but Mineracao's brief contains very little law on point. Mineracao argues that the Court should decline to enforce the clause because the process in Brazil for bringing suit against a foreign corporation is lengthy, and Mineracao is concerned that by the time a Brazilian court reaches a judgment, BZI's asserts will no longer be available. In essence, this argument is based on RSA 508-A:3, II and III; in that, it avers that—due to the inefficiency of the Brazilian legal system—Mineracao cannot obtain relief in Brazil and that the Superior Court is a more convenient forum. Although this claim arguably within the language of RSA 508-A:3, the statutory interpretation Mineracao posits is not reasonable.
These sections state: "II. The plaintiff cannot secure effective relief in the other state, for reasons other than delay in bringing the action; III. The other state would be a substantially less convenient place for the trial of the action than this state; . . . ."
"The purpose of RSA 508-A:3 is to enforce forum selection clauses that are bargained for by contracting parties, provided that they confer exclusive jurisdiction." Strafford Tech., 147 N.H. at 177. As the United States Supreme Court noted, in its seminal forum selection case:
The expansion of American business and industry will hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our laws and in our courts. Absent a contract forum, the considerations relied on by the Court of Appeals would be persuasive reasons for holding an American forum convenient in the traditional sense, but in an era of expanding world trade and commerce, the absolute aspects of the doctrine of the Carbon Black case have little place and would be a heavy hand indeed on the future development of international commercial dealings by Americans.M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 9 (1972).
Other pertinent factors courts consider in evaluating forum selection clauses include whether: the parties entered into the contract at arm's length; the contract was affected by fraud, overreaching, or unequal bargaining power; the challengers were aware of their potential liability; the challengers were experienced business people; the forum-selection clause was hidden; alleged fraud-in-the-inducement has any connection to the forum-selection clause; and enforcement of the forum-selection clause would deprive the challenger of his or her "day in court." 32A AM. JUR. 2D Federal Courts § 1148 (2013).
In this case, the parties negotiated, in an arm's length transaction, for the Brazilian court referenced in paragraph 16 of the contract to have exclusive jurisdiction. Mineracao has not argued that the nature of the court system in Brazil has changed such that it would now be unconscionable to enforce the forum selection clause, but that at the time the parties negotiated the contract it was fair and just. Rather, Mineracao simply argues that the Brazilian court's procedure is complicated and time consuming, a fact Mineracao must have been aware of—or could and should have been aware of— when it originally signed the contract containing a Brazilian court forum selection clause. Mineracao's reliance on RSA 508-A: 3 is unpersuasive because it bargained for the procedure of which it now complains.
Moreover, RSA 508-A is a uniform law, adopted in many jurisdictions. Mineracao has submitted no authority supporting its hardship argument. The paucity of supporting authority interpreting the uniform act demonstrates that this argument is not a meritorious one. In fact, most jurisdictions have held that parties seeking to set aside a forum selection clause bear a heavy burden and must do more than show mere inconvenience. See e.g., In re Mercurio, 402 F.3d 62, 66 (1st Cir. 2005). Minercao has not sustained its burden.
III
Mineracao's also argues that BZI waived enforcement of the forum selection clause. Mineracao's waiver argument is twofold: (1) it argues that by agreeing to transfer this case to the Business and Commercial Dispute Docket ("BCDD"), BZI waived its challenge to venue; and (2) it argues that BZI alleges it brought counterclaims, and that by raising those counterclaims, BZI waived its right to enforce the forum selection clause. However, Mineracao's arguments cannot succeed.
First, Superior Court Rule 214—which governs procedure in and transfer to, the BCDD—specifically states that transfer to the BCDD is not a waiver of jurisdiction. It provides in relevant part, "by agreeing to submit a dispute to the BCDD, no party shall be deemed to have waived its right to challenge the personal or subject matter jurisdiction of the courts of New Hampshire over the matter in controversy." Super. Ct. R 214, IV. Thus, the act of agreeing to transfer alone does not waive BZI's challenge to venue in the Superior Court.
Mineracao also alleges that BZI filed an objection to Mineracao's Petition to Attach before it ever moved to dismiss. Moreover, BZI stated: "BZI has valid and meritorious counterclaims . . . far in excess of the amount claimed by [Plaintiff], which will serve as a set-off to whatever amounts Plaintiff may recover . . . ." Obj. Pet. Attach. ¶3. Further, BZI stated that it "intends to file a counterclaim against MSOL and join Jaguar as an indispensable party . . . ." Id. ¶6. Mineracao cites these statements for the proposition that BZI has waived its challenge to venue in the Superior Court. However, the waiver issue in this case is not a claim of waiver of personal jurisdiction but is a claim of waiver of subject matter jurisdiction.
See e.g., Chick v. C & F Enters., LLC, 156 N.H. 556, 557-58 (2007) (finding personal jurisdiction where a party filed a counterclaim thereby submitting itself to the jurisdiction of the court).
Mineracao's motion raises two issues: (1) whether a party can impliedly waive enforcement of the forum selection clause; and (2) whether simply stating that counterclaims exist is a sufficient invocation of the Court's jurisdiction to waive enforcement of a forum selection clause.
BZI's waiver, if there was one, would have to have been implied because neither party disputes that BZI never affirmatively waived venue.
The parties have cited little law on the issue of what conduct constitutes waiver of a forum selection clause, and the Court has not been able to find any controlling law. But, because forum selection clauses and arbitration agreements are both voluntary contractual agreements—which result in parties agreeing to submit themselves to a particular jurisdiction—the Court finds that a determination of what conduct constitutes waiver of a forum selection clause can be analyzed by referring to what constitutes a waiver of arbitration rights. See Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974) ("An agreement to arbitrate before a specified tribunal is, in effect, a specialized kind of forum-selection clause that posits not only the situs of suit but also the procedure to be used in resolving the dispute.").
[W]aiver is not to be lightly inferred, thus reasonable doubts as to whether a party has waived the right to arbitrate should be resolved in favor ofTyco Int'l (U.S.) Ltd. v. Swartz (In Re Tyco Int'l Ltd. Sec. Litig.), 422 F.3d 41, 44 (1st Cir. 2005). A litigant can impliedly waive his or her right to enforce arbitration through delay, meaning the same must be true for a forum selection clause. However, the issue remains, what acts beyond delay constitute an implied waiver.
arbitration. However, an arbitration provision has to be invoked in a timely manner or the option is lost. Waivers of arbitral rights need not be express, but may be implied from the particular circumstances.
In Tothill v. Richey Ins. Agency, Inc., defendant failed to select two arbitrators when plaintiff defaulted in selecting two, as required by an arbitration provision, defended an attachment action, and filed a counterclaim. 117 N.H. 449, 452-54 (1977). The Supreme Court recited the familiar principle that a waiver "requires a finding of an actual intention to forego a known right. Whether a party has waived its right to arbitrate is usually a question of fact for the Court . . . ." Id. at 454. The Court concluded: "Under the circumstances of this case, we cannot say as a matter of law that the defendant's conduct manifested an affirmative acceptance of the judicial forum and thereby constituted waiver." Id. In other jurisdictions, parties have been held to have waived the right to arbitrate by filing responses, affirmative defenses, including counterclaims, and participating in litigation without raising the right to arbitrate. See 4 AM. JUR. 2D Alternative Dispute Resolution § 105 (2013); 98 A.L.R.3d § 767 (1980).
See Averill v. Cox, 145 N.H. 328, 336 (2000) (finding a party does not waive his right to enforce an arbitration agreement simply by inquiring about the process and cost of arbitration); see also Marie v. Allied Home Mortgage Corp., 402 F.3d 1, 3 (1st Cir. 2005) (holding that a party's inconsistent activity in another forum can serve as some evidence of waiver of the right to enforce an arbitration agreement in a different forum in the future); Home Prods. Int'l-N. Am. v. PeopleSoft USA, 201 F.R.D. 42, 47-48 (D. Mass. 2001) (filing suit in one division of a district where a forum selection clause required it to be filed in a different division did not waive the right to enforce the clause).
Mineracao claims that BZI has participated in this litigation to such an extent that it has waived its right to enforce the forum selection clause. However, Mineracao is only able to point to a few procedural facts.
First, BZI filed an objection to Mineracao's Petition to Attach in which it stated that it had affirmative defenses by way of counterclaim to raise against Mineracao. BZI filed this objection without mentioning the forum selection clause, and indeed, filed the objection before it filed its Motion to Dismiss. On the other hand, BZI filed a special appearance before it filed its Motion to Dismiss. Additionally, BZI's Motion to Dismiss states that it "should not have to address Plaintiff's Motion for Attachment until after the Court rules on BZI's Motion to Dismiss." Def.'s Supp. Mem. in Support of Mot. Dismiss & Obj. to Attachment 8. Although the Court agrees with this statement as a matter of law, its timing does not support BZI's argument. Because BZI acknowledges that it does not need to address the merits of the claims Mineracao raised until after the Court addresses the enforceability of the forum selection clause, it is clear BZI understood that to do so could waive its right to enforce the clause. In other words, the argument BZI raised in support of its motion to dismiss—due to the timing of that argument and motion—actually undercuts BZI's motion to dismiss.
BZI's supplemental memorandum was filed on July 9, 2013. It filed its Objection to the Petition to Attach on May 6, 2013.
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Nonetheless, the timing of BZI's Motion to Dismiss is not dispositive. BZI has not responded to the substance and merits of the breach of contract action that Mineracao brought, except to vaguely assert that it has affirmative defenses that it could raise and to file the pending Motion to Dismiss. On these facts, the Court cannot say that BZI's conduct taken as a whole constitutes "an affirmative acceptance of the judicial forum and thereby [a] waiver." Tothill, 117 N.H. at 754.
For this reason and the reasons detailed above, the Court finds the forum selection clause to be enforceable. It follows that BZI's Motion to Dismiss must be GRANTED.
SO ORDERED.
________
Richard B. McNamara,
Presiding Justice