Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-01332/USCOURTS-cand-3_06-cv-01332-3/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

LAUREL VILLAGE BAKERY LLC,

 Plaintiff,

 v.

GLOBAL PAYMENTS DIRECT INC,

Defendant. /

No. C06-01332 MJJ

ORDER RE DEFENDANTS’ MOTIONS

TO DISMISS

Pending before the Court is Defendants Global Payments Direct, Inc., HSBC Bank USA, N.A.,

and Mercury Payment Systems, LLC’s (collectively, “Defendants”) Motion to Dismiss Complaint due

to Improper Venue or, Alternatively, for Failure to State a Claim Upon Which Relief can be Granted

(Doc. #7). Plaintiff Laurel Village Bakery, LLC has filed an Opposition (Doc. #14), to which

Defendants filed a Reply (Doc. #20). For the following reasons, the Court GRANTS Defendants’

Motion to Dismiss for Improper Venue, and DENIES AS MOOT Defendants’ Motion to Dismiss for

Failure to State a Claim. 

I. Background

This case centers around a Card Services Agreement between Plaintiff and Defendants Global

Payments and HSBC wherein Defendants agreed to process Plaintiff’s debit and credit card transactions

in exchange for certain fees. Specifically, Plaintiff alleges that “Defendants represented to Plaintiff’s

[sic] in the Card Services Agreement that Plaintiff would be charged a Discount Rate of 1.69 percent

per transaction and $.20 per transaction.” However, Plaintiff alleges that Defendants charged Plaintiff

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and other putative class members fees that exceeded those disclosed in the Card Services Agreement.

According to Plaintiff, “[t]hese unauthorized charges were beyond and contrary to the agreed Discount

Rates stated in the Card Services Agreement, and were without any specific authorization by Plaintiff

and other class members. Moreover, [] the amounts of these surcharges were in excess of the [NonQualified Surcharge] charges imposed by credit card associations and/or the card insurers. Each

representation to a bank of amounts owed that exceeded the contract rate was an intentionally fraudulent

representation.” With respect to Defendant Mercury, Plaintiff alleges that “Mercury, working on behalf

of Global and HSBC, solicited Plaintiff to sign the Card Services Agreements with representations that

the fixed percentage fees contained in the Card Services Agreements, and other charges set forth in that

contract, were the amounts to be charged by Global and HSBC.” 

Based on these allegations, Plaintiff filed a Class Action Complaint against Defendants asserting

claims for: (1) breach of contract; (2) fraud; and (3) unlawful business acts/unlawful business practices

in violation of California Business & Professions Code § 17200. Defendants now move to dismiss

Plaintiff’s Complaint pursuant to Federal Rule of Civil Procedure 12(b)(3) for improper venue and

pursuant Rule 12(b)(6) for failure to state claim. Because the Court finds Defendants’ argument with

respect to venue dispositive, it turns to that issue first. 

II. Motion to Dismiss due for Improper Venue

Paragraph 17 of the Card Services Agreement between the parties contains a forum selection

clause providing: 

Global Direct, Member [i.e., HBSC], and Merchant [i.e., Plaintiff] agree

that all disputes arising out of or relating to this Card Services Agreement

shall be governed by the laws of the State of Georgia, notwithstanding

any conflicts of law rules. Global Direct, Member, and Merchant agree

that all actions arising out of or relating to this Card Services Agreement

shall be brought in the courts of the State of Georgia sitting in DeKalb

County and expressly agree to the exclusive jurisdiction of such courts.

(Doc. #15, ex. 2 at 7.) Relying on this provision, Defendants argue that venue in the Northern District

of California is improper, subjecting Plaintiff’s case to dismissal. Plaintiff, however, contends that the

forum selection clause is unenforceable and maintains that the Northern District of California is a proper

venue for this action. 

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Pursuant to 28 U.S.C. § 1406(a), the Court may also transfer an action if it is filed in a district

other than that designated in the forum selection clause. Because the forum selection clause in this

matter limits the parties to Georgia state court, transfer is not an option. 

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A. Legal Standard

A motion to enforce a forum selection clause is treated as a motion to dismiss for improper venue

pursuant to Federal Rule of Civil Procedure 12(b)(3).1

 See Arguenta v. Banco Mexicano, S.A., 87 F.3d

320, 324 (9th Cir. 1996). In reviewing a 12(b)(3) motion, the Court need not accept the pleadings as true

and may properly consider facts outside the pleadings. See id.; Kukje Hwajae Ins. Co. v. The “M/V

Hyundai Liberty”, 408 F.3d 1250, 1254 (9th Cir. 2005). If resolution of a 12(b)(3) motion depends on

facts that are genuinely disputed, the court can hold an evidentiary hearing to resolve the factual dispute.

Murphy v. Schneider Nat’l, Inc., 362 F.3d 1133, 1137 (9th Cir. 2004). 

Generally, interpretation and enforcement of contractual forum selection clauses are procedural

issues to be decided pursuant to federal law. See Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509,

513 (9th Cir. 1988). Under federal law, a forum selection clause is presumptively valid and should not

be set aside unless the party challenging the clause shows that enforcement would be unreasonable under

the circumstances. See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972); Sariento v. BMG

Entm’t, 326 F. Supp. 2d 1108, 1110 (C.D. Cal. 2003) (citing M/S Bremen). A court may repudiate a

forum selection clause if: (1) the clause was included as a result of fraud, undue influence, or

overreaching; (2) enforcement of the clause will deprive the opposing party of its day in court because

of grave inconvenience or unfairness of the selected forum; or (3) public policy strongly favors

resolution in the forum in which the suit is brought. See Richards v. Lloyd’s of London, 135 F.3d 1289,

1294 (9th Cir. 1992); Sariento, 326 F. Supp. 2d at 1110. 

B. Discussion

As indicated above, contractual choice of forum clauses are presumptively valid. Thus, as the

party seeking to file this lawsuit in a location other than that specified in the clause, Plaintiff bears the

burden of establishing that the forum selection clause in Paragraph 17 of the Card Services Agreement

is unenforceable. Toward this end, Plaintiff argues that the clause selecting DeKalb County as the

exclusive forum for disputes contravenes Georgia law regarding venue in civil cases, and is therefore

unenforceable. Specifically, Plaintiff argues that in Fidelity & Deposit Co. of Maryland v. Gaineseville

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Iron Works, Inc., 189 S.E.2d 130 (Ga. Ct. App. 1972), the Georgia Court of Appeals held that contracts

that seek to set venue in counties other than those specified by state statute are void. Citing Georgia

Code § 14-2-510(b)(1), Plaintiff contends that venue in civil actions against a corporation is the county

where the corporation maintains its registered office. Because Global’s principal place of business is

in Fulton County, Plaintiff asserts that, under Georgia law, venue is only proper in that county and the

Card Services Agreement’s attempt to restrict venue to DeKalb County contradicts Georgia law and is

therefore void. Relatedly, Plaintiff argues that the clause is invalid because Georgia law does not allow

for contractual venue selection provisions, and cites Regency Mall Associates v. G.W.’s Restaurant, Inc.,

444 S.E.2d 572 (Ga. Ct. App. 1994), and Huddle House, Inc. v. Paragon Foods, Inc., 587 S.E.2d 845

(Ga. Ct. App. 2003), in support. 

Defendants reply that federal law - not Georgia law - governs the enforceability analysis, and

assert that Plaintiff has failed to make any argument under federal law preventing enforcement of the

clause. Further, to the extent that Plaintiff relies on Georgia law, Defendants argue that Plaintiff

misconstrues Georgia’s venue laws. Particularly, Defendants argue that the Fidelity decision on which

Plaintiff relies is limited to cases when a contractual choice of forum clause purports to restrict venue

to a particular county within Georgia and the case involves “an intrastate conflict and there is an

applicable Georgia statute, which governs venue,” and that statute restricts venue to a different county

than the one specified by the clause. Because this case stems from an interstate conflict, Defendants

assert that the Fidelity doctrine does not apply, and Plaintiff’s argument that the forum selection clause

in unenforceable in light of Georgia’s public policy fails. 

The Court has considered the parties’ arguments and agrees with Defendants. As detailed above,

federal law governs the enforceability of forum selection clauses and the Ninth Circuit has recognized

three potential grounds upon which Plaintiff may seek to avoid enforcement of the forum selection

clause. Here, Plaintiff has not argued that the clause was the result of fraud or overreaching, and has

not made any argument that forcing Plaintiff to litigate in Georgia is either unfair or prejudicial. Rather,

Plaintiff’s argument is that the clause offends Georgia law, and the Court should therefore allow

Plaintiff to litigate the case in the Northern District. Assuming that this argument falls within the third

bases for unenforceability set forth in Richards, the question then becomes: is the forum selection clause

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The clause stated; “Any action, suit or proceeding relating to, rising out of or in connection with

the terms, conditions and covenants of this lease may be brought by lessor against lessee in the Court

of Common Pleas of Mahonig County, Ohio. Lessee hereby waives any objection to jurisdiction or

venue in any proceeding before said court.” 

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invalid under Georgia law, such that enforcing the clause is contrary to public policy. On this issue, the

Court agrees with Defendants. 

Plaintiff proffers that the forum selection violates Georgia law for two reasons. First, it argues

that § 14-2-510(b)(1) fixes the venue in civil actions against a corporation in the county where the

corporation maintains its registered office. Because Global’s headquarters are in Fulton County,

Plaintiff argues that “the clause in the Card Services Agreement establishing DeKalb County as the

forum for all claims between the parties is unenforceable under Georgia law.” Second, Plaintiff argues

that “Georgia law does not allow for contractual venue selection provisions.” (Opp. at 3.) However,

as Defendants point out, Plaintiff’s assessment of Georgia law is inaccurate. Plaintiff relies on three

decisions in support of its position: Fidelity, Regency Mall Associates, and Huddle House. 

In Fidelity, the plaintiffs sued defendant sureties on a labor and material payment bond, and the

defendants moved to dismiss based on a forum selection clause limiting venue for suit to counties in

which the underlying construction project was situated. 189 S.E.2d at 130-31. The trial court denied

the motion, and defendants appealed. On appeal, the court noted that Georgia Insurance Code § 56-1201

declared the public policy of the state in fixing venue of actions against insurers to include the county

where the principal office is located, any county where there is an agent or place of business, any county

where there was an agent or place of business when the claim accrued or the contract was made, and any

county where property covered by the claim is located or where the claimant is a legal resident. Id. at

131. In light of this statute, the court held: “We think it follows that the provisions of the bond, in

limiting venue solely to forums of the county or other political subdivision where the project is situated,

are unenforceable as contrary to public policy.” Id. 

Plaintiff also relies on Regency Mall Associates. In that case, a Georgia trial court invalidated

a judgment that the plaintiff Regency Mall obtained from an Ohio court against G.W. Restaurant, Inc,

a Georgia company, on the basis that a provision in a contract between the parties fixing jurisdiction in

an Ohio court was void as against the public policy of Georgia.2

 444 S.E.2d at 572. In reviewing the

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Specifically, the trial court found that Paragon’s claims for breach of contract and tortious

interference with contractual relations were subject to the forum selection clause, and thus Paragon had

to bring them in DeKalb County. However, the court held that Paragon’s trespass claim was not

controlled by the forum selection provision. 

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plaintiff’s appeal from the trial court’s ruling, the appellate court first noted that: “While it is the public

policy of this state that provisions fixing the venue of an action on the contract are void [], the contract

provision in this appeal is not such a provision. Instead, this type of provision is a forum selection

clause which does not offend the principles of Fidelity[.]” Id. The court further noted that the Georgia’s

Court of Appeals’ statements in a prior decision referring to “broad considerations of public policy

against limiting venue by contract” was later disapproved in a subsequent decision from the court in

Harry S. Peterson Co. v. National Union Fire Insurance Co., 434 S.E.2d 778 (Ga. Ct. App. 1993). Id.

Rather, the court concluded that the appeal was governed by cases “upholding the validity of forum

selection clauses in contracts.” Id. The court therefore reversed the trial court’s ruling canceling the

Ohio judgment against the Georgia defendant. Id. at 573.

Finally, Plaintiff cites Huddle House in support of its challenge. In that case, Paragon Foods

sued Huddle House in Dougherty County for trespass, breach of contract, and tortious interference with

contractual relations. 587 S.E.2d at 846. After the trial court denied in part Huddle House’s motion to

dismiss for improper venue or to transfer venue to DeKalb County, Huddle House appealed.3

 The Court

of Appeals, however, affirmed the trial court’s ruling. In reaching its decision, the court reasoned: 

In Brinson v. Martin, [469 S.E.2d 537 (Ga. Ct. App. 1996)], which is

relied upon by Huddle House, we held that cases “where no Georgia law

specifically governs venue, and where more than one state and its

citizens are involved, [forum selection] clauses are prima facie valid and

should be enforced unless enforcement is shown by the restisting party

to be ‘unreasonable’ under the circumstances.” In this case, however,

both paragon and Huddle House are Georgia corporations and all acts

giving rise to the action were alleged to have occurred in Georgia.

Fidelity & Co. of Maryland v. Gainesville Iron Works applies to this

action because this is an intrastate conflict and there is an applicable

Georgia statute, OCGA § 14-2-510, which governs venue. [] In such a

case, Fidelity holds that a contractual provision limiting venue is

unenforceable against public policy. []

Id. at 846. Accordingly, the Court of Appeals held that “because the venue selection provisions were

unenforceable the trial court did not err to the extent that it found those provisions did not apply to the

tort claims.” Id. at 847. 

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Although not cited by Plaintiff, the Georgia Court of Appeals’ decision in Harry S. Peterson

Company, Inc. v. National Union Fire Insurance Company, 434 S.E.2d 778 (Ga. Ct. App. 1993),

rejected an argument premised on Fidelity similar to the one Plaintiff advances. In that case, the trial

court granted a defendant’s motion to dismiss for improper venue based on a forum selection clause in

a surety bond on which the plaintiff was suing. 434 S.E.2d at 779. The clause restricted the parties to

litigating disputes in the state or district court where the construction project was situated. Id. at 781.

 Although the construction project in that case was situated in Virginia, the plaintiff filed suit in Georgia.

Id. at 779. The trial court granting the defendant’s motion to dismiss for improper venue, and the

plaintiff appealed. On appeal, the plaintiff argued that Fidelity and Cartridge Rental Network v. Video

Entertainment, 209 S.E.2d 132 (Ga. Ct. App. 1974), established that “[a]ll venue selection contract

clauses are against Georgia public policy and will not be enforced by Georgia courts.” Id. at 782. The

court, however, rejected the plaintiff’s argument that Fidelity and Cartridge controlled, noting that “both

of these cases deal with intrastate transaction.” Id. 

Examining these decisions, the Court agrees with Defendants that the proposition that Plaintiff

relies on from Fidelity that forum selection clauses designating a venue different from one set by state

statute are void is limited to cases involving intrastate disputes between Georgia companies.

Particularly, in both Regency Mall and Harry S. Peterson Company, the Georgia Court of Appeals

expressly stated that Georgia’s public policy against contractual choice of forum provisions does not

extend to situations where one of the contracting parties is a non-Georgia entity and the contractual

dispute exceeds Georgia’s borders, thereby limiting the reach of the principle articulated in Fidelity.

This assessment is bolstered by a treatise on Georgia contract law, which summarizes the current state

of Georgia’s law regarding contractual forum selection provisions as follows: 

In two cases in the early 1970s, the Georgia Court of Appeals

held that contractual provisions providing for venue in certain counties

were contrary to public policy and therefore void. [] Later cases,

however, have limited the holdings of these cases to intrastate contracts

only. [] Although there is some confusion in the cases between venue and

personal jurisdiction, [] it appears that Georgia courts will enforce a

forum or venue selection clause involving parties residing in different

states, including a clause that requires that litigation be brought in a

particular Georgia county. [] 

John K. Larkins, Jr., Georgia Contracts: Law & Litigation §1-9 (2005). This statement of the law is

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consistent with this Court’s reading of Georgia decisional law regarding the validity of forum selection

clauses. Here, the dispute underlying Plaintiff’s Complaint concerns interstate commerce between

Georgia-based and non-Georgia-based companies. Thus, based on the foregoing cases, the forum

selection clause is not subject to the rule set forth in Fidelity. Rather, the forum selection clause is

prima facie valid. See Huddle House, 587 S.E.2d at 846. Because Plaintiff has failed to present any

argument persuading this Court that the choice of forum clause in the Card Services Agreement offends

Georgia law or public policy, Defendants are entitled to enforce the clause. 

Nevertheless, Plaintiff makes two subsidiary arguments against enforcement of the choice of

forum clause. First, Plaintiff argues that because the Class Action Fairness Act had not been enacted

at the time the parties executed the card Services Agreement in July 2004, Plaintiff “could not have

waived federal court jurisdiction because none existed.” Plaintiff’s argument, however, is unconvincing.

As Defendant points out, Plaintiff’s argument presumes that, at the time Plaintiff signed the Card

Services Agreement, Plaintiff could not have conceived that its dealings with Defendants might lead to

a dispute that Plaintiff could litigate in federal court - whether founded on a federal question or on

diversity jurisdiction. Plaintiff has not presented any reason why it could not have made this assessment

at the time of contracting. Moreover, the fact that Congress provided a new basis for federal jurisdiction

subsequent to the parties’ execution of their agreement does not vitiate the choice of forum provision.

The Court therefore rejects this argument as a basis for not enforcing the provision. 

Second, Plaintiff argues that, because Mercury is not a party to the card Services Agreement, it

lacks standing to raise the forum selection clause as a basis for dismissal. In response, Defendants argue

that Plaintiff’s allegations support a finding that Mercury has standing to enforce the forum selection

clause. In support, Defendants argue that in Manetti-Farrow, the Ninth Circuit recognized that a nonparty may enforce a forum selection clause if the non-party’s alleged conduct is “so closely related to

the contractual relationship” that the clause should apply to it, as well. 858 F.2d at 514 n.5. Defendants

point out that Plaintiff has alleged that “Mercury, working with and on behalf of Global and HSBC,

solicited Plaintiff to sign the Card Services Agreement,” and that “Mercury concealed the fact that it

would, as the billing agent for Global and HSBC, assist Global and HSBC in over-billing Plaintiff on

its monthly bills for amounts not disclosed in the card Services Agreements.” (Compl. ¶29.)

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Additionally, Plaintiff alleged that “For its work in securing Plaintiff as a customer, Mercury receives

a portion of the monies generated from the processing of Plaintiff’s credit and debit card processing

transactions.” (Id.) Based on these allegations, Defendants contend that the instant case is

distinguishable from those Plaintiff has cited, where the non-party did not begin dealing with the

signatories until years after the contract was executed and demonstrated an unwillingness to be bound

by its terms. The Court agrees with Defendants. According to the allegations in Plaintiff’s Complaint,

Mercury was actively involved in both procuring the Card Services Agreement for the other Defendants,

and in billing and collecting fees under the Card Services Agreement for the other Defendants. Thus,

the Court finds that Mercury’s alleged conduct is so closely related to the Card Services Agreement

between Plaintiff and the other Defendants, that Mercury has standing to enforce the provision. 

C. Conclusion

In sum, the Court finds that Plaintiff has failed to present any meritorious basis preventing

enforcement of the forum selection clause in Paragraph 17 of the parties’ Card services Agreement.

Accordingly, because the parties agreed that all disputes relating to the Agreement shall be litigated in

DeKalb County Court in Georgia, venue in the Northern District of California is improper. The Court

therefore GRANTS Defendants’ Motion to Dismiss under Rule 12(b)(3). 

III. Motion to Dismiss for Failure to State a Claim

Alternatively, Defendants move to dismiss Plaintiff’s claim for violation of California’s Unfair

Competition Law pursuant to Rule 12(b)(6) on the ground that the Agreement specifies that Georgia law

governs all disputes arising out of or relating to the Agreement. Because the Court finds that dismissal

is proper pursuant to Rule 12(b)(3) for improper venue, the Court DENIES Defendants’ 12(b)(6)

Motion as moot. 

/ / /

/ / /

/ / /

/ / /

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IV. Conclusion.

For the foregoing reasons, the Court GRANTS Defendants’ Motion to Dismiss Plaintiff’s

Complaint due to Improper Venue; and DENIES AS MOOT Defendants’ Motion to Dismiss for failure

to state a claim. 

IT IS SO ORDERED.

Dated: 9/25/2006 

MARTIN J. JENKINS

UNITED STATES DISTRICT JUDGE

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