Title: Ex Parte Leasecomm Corp.

State: alabama

Issuer: Alabama Supreme Court

Document:

886 So. 2d 58 (2003)
Ex parte LEASECOMM CORPORATION and MicroFinancial, Inc. and
Ex parte Galaxy Mall, Inc.
(In re Aaron Cobb et al.
v.
Galaxy Mall, Inc., et al.)
1021281 and 1021308.

Supreme Court of Alabama.
November 21, 2003.
Rehearing Applications Denied February 20, 2004.
*59 Roger L. Bates and E. Shane Black of Hand Arendall, L.L.C., Birmingham, for petitioners Leasecomm Corporation and MicroFinancial, Inc.
William H. Brooks and William H. Morrow of Lightfoot, Franklin & White, L.L.C., Birmingham, for petitioner Galaxy Mall, Inc.
Charles A. McCallum III and R. Brent Irby of the McCallum Law Firm, LLC, Vestavia Hills, for respondents.
WOODALL, Justice.
Galaxy Mall, Inc., a Utah company, and MicroFinancial, Inc., and its subsidiary, Leasecomm Corporation, Massachusetts companies (the Massachusetts companies *60 will hereinafter be collectively referred to as "Leasecomm"), petition this Court for writs of mandamus directing the trial court to vacate its order denying their motions to enforce outbound forum-selection clauses in contracts between them and Aaron Cobb. We deny the petitions.
On August 22, 2002, Cobb filed a putative class action against Galaxy Mall and Leasecomm. The complaint contained the following pertinent factual averments:
The complaint sought compensatory and punitive damages "in an amount not to exceed $74,000 per class member." Recovery was sought on theories of (1) breach of contract, (2) fraud, (3) fraudulent suppression, (4) conspiracy, (5) theft by deception, (6) conversion, and (7) violation of statutory usury laws.
On October 29, 2002, Galaxy Mall filed a "Motion to Enforce Forum Selection Clause." The motion was based on a clause on the reverse side of the order form provided by Galaxy Mall and signed by Cobb, which provided: "[T]he parties agree that any and all disputes arising out of this transaction ... shall be resolved in the courts of the State of Utah in the County of Utah or the United States District Court for the State of Utah." (Emphasis added.) Specifically, the motion stated: "All of Cobb's allegations against Galaxy Mall arise directly out of the transaction memorialized by the [order form] executed by ... Cobb.... Accordingly, the forum selection agreement entered into by the parties is due to be enforced, and this case should be dismissed." (Emphasis added.)
Leasecomm had filed a similar motion on September 25, 2002, based on a forum-selection clause in the lease agreement entered into between Leasecomm and Cobb; that clause provided:
(Some emphasis added; boldface type and some emphasis deleted.) More specifically, Leasecomm's motion stated:
(Emphasis added.)
On April 1, 2003, the trial court denied the motions, stating: "[E]nforcement of either forum selection clause would be unreasonable under the circumstances because the clauses effectively deny [Cobb] and remaining Alabama customers ... their day in court." More specifically, the court said:
"[A] petition for a writ of mandamus is the proper vehicle for obtaining review of an order denying enforcement of an `outbound' forum-selection clause when it is presented in a motion to dismiss." Ex parte D.M. White Constr. Co., 806 So. 2d 370, 372 (Ala.2001); see Ex parte CTB, Inc., 782 So. 2d 188, 190 (Ala.2000). "[A] writ of mandamus is an extraordinary remedy, which requires the petitioner to demonstrate a clear, legal right to the relief sought, or an abuse of discretion." Ex parte Palm Harbor Homes, Inc., 798 So. 2d 656, 660 (Ala.2001). "[T]he review of a trial court's ruling on the question of enforcing a forum-selection clause is for an abuse of discretion." Ex parte D.M. White Constr. Co., 806 So. 2d  at 372.
At the outset, we note that the issue in this case is not whether an outbound forum-selection clause can be enforced. That issue was settled in Professional Insurance Corp. v. Sutherland, 700 So. 2d 347 (Ala.1997). Since then, it has been well established that such a clause will be "upheld unless the party challenging the clause clearly establishes that it would be unfair or unreasonable under the circumstances to hold the parties to their bargain." Ex parte CTB, Inc., 782 So. 2d  at 190-91. The showing is sufficient where it is clearly established "'(1) that enforcement of the forum selection clause[ ] would be unfair on the basis that the contract [ ] [was] affected by fraud, undue influence, or overweening bargaining power or (2) that enforcement would be unreasonable on the basis that the chosen ... forum would be seriously inconvenient for the trial of the action.'" Id. at 191 (emphasis added). "Inconvenience" sufficient to void a forum-selection clause is present where a "trial in that forum *63 would be so gravely difficult and inconvenient that the challenging party would effectively be deprived of his day in court." Ex parte Rymer, 860 So. 2d 339, 342 (Ala.2003). See also Sutherland, 700 So. 2d  at 353-54 (Maddox, J., concurring in the result). "The enforcement of a forum-selection clause creates a serious inconvenience if it would result in two lawsuits involving similar claims or issues being tried in separate courts." Alpha Sys. Integration, Inc. v. Silicon Graphics, Inc., 646 N.W.2d 904, 909 (Minn.Ct.App.2002) (emphasis added). "A forum-selection clause is also unreasonable if its enforcement would contravene a strong public policy of the forum in which the suit is brought." Id. at 910.
In its mandamus petition, Galaxy Mall states:
Galaxy Mall's mandamus petition, at 3-4 (emphasis added). Leasecomm, on the other hand, states in its petition:
Leasecomm's mandamus petition, at 30 (emphasis added).
Elsewhere, Leasecomm argues that the forum-selection clause in Galaxy Mall's order form, which purports to establish Utah as the forum for claims against Galaxy Mall, does not affect the enforceability of the forum-selection clause in the lease agreement, which purports to establish Massachusetts as the forum for claims against Leasecomm, because, Leasecomm insists, "Cobb signed both contracts, and, upon doing so, it was entirely foreseeable that a dispute involving both defendants might be required to be asserted in two separate forums." Leasecomm's mandamus petition, at 24-25 (emphasis added). Indeed, it is undisputed that Galaxy Mall and Leasecomm anticipate the splitting of Cobb's claims for separate trials against Galaxy Mall and Leasecomm in Utah and Massachusetts, respectively.
Thus, this case involves not one  but two  forum-selection clauses, each purporting to establish venue for the trial of a portion of the plaintiff's case in a different forum. This Court has not addressed a similar issue since Sutherland.
Alabama has a strong policy against splitting causes of action or claims. This policy finds expression in the "liberal joinder of claims and of parties," Ala. R. Civ. P. 82(c), Committee Comments (emphasis added), which is facilitated by the Alabama Rules of Civil Procedure. The policy promotes judicial economy, as well as convenience and fairness to the parties. See Century 21 Preferred Props., Inc. v. Alabama Real Estate Comm'n, 401 So. 2d 764, 769 (Ala.1981) (discussing the rationale for federal pendent jurisdiction). *64 "`"[T]he whole tendency of our decisions is to require a plaintiff to try his whole cause of action and his whole case at one time."'" Id. (quoting United Mine Workers of America v. Gibbs, 383 U.S. 715, 724, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966)). "The prohibition against splitting a cause of action is for the purpose of avoiding vexatious litigation and a multiplicity of lawsuits." Terrell v. City of Bessemer, 406 So. 2d 337, 339 (Ala.1981).
On similar policy grounds, "courts have held that where a plaintiff's suit is truly broader than the forum selection clause and the structure of the complaint is not an attempt to avoid the forum selection clause, enforcement of the forum selection clause would be unreasonable." Pegasus Transp., Inc. v. Lynden Air Freight, Inc., 152 F.R.D. 574, 577 (N.D.Ill.1993) (forum-selection clause that purported to require the splitting and remand to state court of some of the plaintiff's claims was unreasonable and therefore unenforceable). See, e.g., Personalized Marketing Serv., Inc. v. Stotler & Co., 447 N.W.2d 447 (Minn.Ct.App.1989), on which Cobb relies.
Stotler arose out of transactions involving Personalized Marketing Services, Inc. ("PMS"), a Minnesota commodities broker; Stotler & Company ("Stotler"), an Illinois commodities broker; and numerous clients of PMS ("the clients"). PMS sued Stotler and the clients, who, in turn, counterclaimed against PMS and cross-claimed against Stotler. 447 N.W.2d  at 449. Stotler invoked a forum-selection clause contained in "customer agreements" between Stotler and all the clients purporting to require resolution in Illinois of disputes "related to" the customer agreements. Id. Consequently, the trial court dismissed the clients' cross-claims without prejudice, on the basis of those forum-selection clauses. Id. The clients appealed, contending that "enforcement of the forum-selection clause [was] unreasonable." 447 N.W.2d  at 450.
The Minnesota Court of Appeals reversed, concluding that the clients' cross-claims against Stotler were "intertwined with PMS's claims against Stotler," 447 N.W.2d  at 453, and, therefore, that "[e]nforcement of the forum selection clause ... would result in two lawsuits involving the same or similar issues creating serious inconvenience." 447 N.W.2d  at 452 (emphasis added). The court explained:
447 N.W.2d  at 453 (emphasis added). Cf. Farmland Indus., Inc. v. Frazier-Parrott Commodities, Inc., 806 F.2d 848 (8th Cir.1986) (refusing to enforce a forum-selection clause, in part because enforcement would result in "piecemeal resolution of [the] case"), abrogated on other grounds by Lauro Lines S.R.L. v. Chasser, 490 U.S. 495, 109 S. Ct. 1976, 104 L. Ed. 2d 548 (1989).
To be sure, Stotler did not, as Galaxy Mall points out, involve competing forum-selection clauses, as does this case. However, that distinction is not significant. By affidavit, Cobb stated:
(Emphasis added.)
Galaxy Mall and Leasecomm do not dispute that the purpose of the lease agreement was to finance the participants' transactions with Galaxy Mall. Indeed, Leasecomm describes its role as that of a "finance lessor of business software and equipment." Leasecomm's mandamus petition, at 1. Leasecomm further states: "On November 9, 2000, [Cobb] attended [a workshop] where Galaxy Mall promoted its virtual storefront operation.... It is undisputed that during that workshop, Cobb executed a [lease agreement]...." Thus, it must be conceded that the execution of the order form and the lease agreement constituted a single transaction.
The claims against Galaxy Mall and Leasecomm are, therefore, inextricably intertwined, as were the claims in Stotler. In fact, enforcement of the forum-selection clauses in this case would split the claims and require litigation of the intertwined issues in forums far removed, not only from Alabama, in which the cause of action arose, but from each other. The policy considerations underlying Stotler weigh heavily against enforcement of the forum-selection clauses in this case. Galaxy Mall and Leasecomm cite no published case enforcing two or more outbound forum-selection clauses, thereby splitting claims arising out of a single transaction. Certainly, Clinton v. Janger, 583 F. Supp. 284 (N.D.Ill.1984), cited by both petitioners, is not such a case.
The complaint filed in Clinton challenged the administration of three trust agreements, which were executed in 1968 ("Trust One"), 1979 ("Trust Two"), and 1981 ("Trust Three"). Each of the agreements named a different trustee, and each contained a unique forum-selection clause. Id. at 286. Trust One purported to establish venue in the Bahama Islands; Trust Two in Jersey, Channel Islands; and Trust Three in Guernsey, Channel Islands. *66 Id. Thus, unlike this case, the dispute in Clinton arose out of a "related series of occurrences," 583 F. Supp.  at 288 (emphasis added), spanning approximately 13 years.
The defendants in Clinton, which included former trustees, moved to dismiss the action, pursuant to Fed.R.Civ.P. 12, on the bases of the three forum-selection clauses in their respective trust agreements. 583 F. Supp.  at 286. In considering the motions to dismiss, the district court stated:
583 F. Supp.  at 289 (emphasis added). The district court found that "at least one, if not all, of the forum selection causes [was] reasonable." 583 F. Supp.  at 290. Consequently, it dismissed the action "without prejudice to the right of the plaintiffs to attempt to refile it in another forum." 583 F. Supp.  at 290.
Contrary to the proposition for which Galaxy Mall and Leasecomm cite Clinton, the Clinton court did not split and disperse, geographically, the plaintiffs' claims. Because it merely dismissed the action, the trial court specifically enforced no particular forum-selection clause. Indeed, part of the court's purpose in dismissing the action was to prevent claim splitting. Specifically, the court stated:
583 F. Supp.  at 288 (emphasis added). In short, Clinton provides little support for enforcement of the forum-selection clauses in this case.
Street, Sound Around Electronics, Inc. v. M/V Royal Container, 30 F. Supp. 2d 661 (S.D.N.Y.1999), cited by Leasecomm, is also distinguishable. That case involved an action for "misdelivery and/or nondelivery of five shipments of merchandise delivered on three occasions to defendants in Hong Kong for transport to Brazil." 30 F. Supp. 2d  at 662 (emphasis added). It involved a single foreign forum. More significantly, the bill of lading for each shipment contained a "Himalaya clause,"[1] which, the court explained, would prevent case splitting, 30 F. Supp. 2d  at 663, such as would result from enforcement of the forum-selection clauses in this case.
In summary, the trial court in this case held that enforcement of the outbound forum-selection clauses would be "seriously inconvenient," and "unreasonable under the circumstances." Cobb's claims arise out of a single transaction consummated in Alabama. The order form and the lease agreement were printed forms, drafted by Galaxy Mall and Leasecomm, respectively, *67 each purporting simultaneously to establish venue in different states. Because of the roles assumed by Galaxy Mall and Leasecomm in the presentation of the order form and lease agreement to Cobb and the other participants in the meeting, the claims against them are inextricably intertwined. Enforcement of the forum-selection clauses  as requested by Galaxy Mall and Leasecomm  would result in splitting the claims for trial in two foreign, remote states, contrary to the policy of this State in favor of liberal joinder of parties and claims for resolution in one action. Under the circumstances of this case, we cannot conclude that the trial court exceeded its discretion in denying the petitioners' motions. The petitions are, therefore, denied.
1021281  PETITION DENIED.
1021308  PETITION DENIED.
HOUSTON, SEE, LYONS, BROWN, JOHNSTONE, HARWOOD, and STUART, JJ., concur.
[1]  "A Himalaya clause is a clause in a bill of lading that extends the carrier's defenses and limitations of liability under the bill to the carrier's agents and subcontractors." James N. Kirby, Pty Ltd. v. Norfolk Southern Ry., 300 F.3d 1300, 1302 (11th Cir.2002), cert. filed (January 6, 2003). "Himalaya clauses take their name from an English case which involved a vessel called the HIMALAYA." 300 F.3d  at 1302 n. 1.