Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-almd-2_08-cv-00906/USCOURTS-almd-2_08-cv-00906-0/pdf.json

Parties Involved:
Alfred Cardet
Counter Claimant
First Lowndes Bank
Counter Defendant
KMC Group, LLC
Counter Claimant
KMC Group, LLC/M&Z Development, Inc.
Counter Claimant
Christo Koulisis
Counter Claimant
M&Z Development, Inc.
Cross Defendant
Allen R. McGinnis
Counter Claimant
Mark Richards
Defendant
Zack S. Smith
Defendant

Document Text:

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF ALABAMA

 NORTHERN DIVISION

FIRST LOWNDES BANK, an Alabama )

banking corporation, )

 )

Plaintiffs, )

 )

v. ) CIVIL ACTION NO. 2:08cv906-WHA

 )

 ) (WO)

KMC GROUP, LLC/M&Z )

DEVELOPMENT, INC., LLC, etc., et al., )

 )

Defendant. )

MEMORANDUM OPINION

I. INTRODUCTION

This cause is before the court on a Motion to Remand, filed by the Plaintiff, First

Lowndes Bank. The Plaintiff originally filed a Complaint in the Circuit Court for Butler County,

Alabama. The Plaintiff brings claims against KMC Group, LLC/M&Z Development, Inc.; KMC

Group, LLC; M&Z Development, Inc.; Allen R. McGinnis; Zack S. Smith; Christo Koulisis;

Alfred Cardet; and Mark Richards. The Plaintiff has demanded an equitable lien, reformation of

mortgages, specific performance, and judicial foreclosure. The Plaintiff also has sought

judgment against the individual Defendants as makers, co-makers, and guarantors, under two

separate loans with the Plaintiff. 

The Defendants removed the case to this court on the basis of diversity jurisdiction. The

Plaintiff, although not conceding that jurisdiction is proper, has moved to remand on the basis of 

a forum selection clause which the Plaintiff contends is a waiver of the right to remove the case

to federal district court.

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For reasons to be discussed, the Motion to Remand is due to be GRANTED.

II. MOTION TO REMAND STANDARD

A forum selection clause may constitute a waiver of a defendant’s right to remove an

action to federal court. Snapper, Inc. v. Redan, 171 F.3d 1249 (11th Cir. 1999). The

determination of whether a forum selection clause constitutes a waiver, in the context of removal

based solely on diversity jurisdiction, is governed by ordinary contract principles. Id. at 1261.

Where ordinary contract principles fail to reveal a single reasonable interpretation of the clause,

but the clause is subject to opposing, yet reasonable, interpretations, the ambiguous provision is

interpreted against the drafter. Global Satellite Comm. Co. v. Starmill U.K. Ltd., 378 F.3d 1269,

1271 (11th Cir. 2004). 

III. FACTS

The Plaintiff, First Lowndes Bank (“FLB”), approved a loan to build a motel in

Crenshaw County, Alabama. A loan agreement was entered into by FLB and KMC Group, LLC

and M&Z Development, Inc. Individual Defendants Alfred H. Cardet, Christo Koulisis, and

Alan R. McGinnis make up KMC, Group, LLC. Zack S. Smith and Mark Richards make up

M&Z Development, Inc. Individual defendants signed the loan agreement only in their official

capacities, but have been sued in their individual capacities. 

FLB points to language in the loan agreement as waiving KMC Group, LLC and M&Z

Development’s right to remove litigation to federal court. The language pointed to is as follows:

The borrower agrees that the venue for any action or proceeding arising out of or

in any way relating to the loan agreement shall be in the State of Alabama and

any litigation arising out of or relating to this agreement, the loan, or the

relationship between the borrower and FLB shall be commenced and conducted in

the courts of Butler County, Alabama. 

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Exhibit C to the Complaint.

In addition to the loan agreement, personal guarantees were executed by individual

defendants, but those guarantees do not contain the forum selection clause language quoted

above.

IV. DISCUSSION

The Plaintiff, FLB, insists that this case is due to be remanded because the parties in the

case contractually agreed that Butler County Circuit Court is the proper venue and waived the

right to remove the case to federal district court.

In Snapper, Inc. v. Redan, 171 F.3d 1249, 1261 (11th Cir. 1999), the court held that a

forum selection clause may constitute a waiver of a defendant’s right to remove an action to

federal court. The determination of whether a forum selection clause constitutes a waiver, in the

context of removal based solely on diversity jurisdiction, is governed by ordinary contract

principles. Id. Where ordinary contract principles fail to reveal a single reasonable

interpretation, an ambiguous provision is interpreted against the drafter. Global Satellite Comm.

Co. v. Starmill U.K. Ltd., 378 F.3d 1269, 1271 (11th Cir. 2004). The removing defendant has the

burden of demonstrating that the forum selection clause is ambiguous before the court can adopt

an interpretation that operates against the drafter. Travelers Property Casualty Co. of Am. v.

Onesource Facility Services, Inc., No. 3:05cv618, 2006 WL 75295 at *1 (M.D. Ala. March 23,

2006) (Watkins, J.). It is not disputed that FLB was the drafter of the clause at issue in this case.

The Defendants have advanced two arguments, based on the relevant contracts, which

they assert establish that they have not waived the right to remove this case to federal court. 

First, the Defendants point out that some of the Defendants in this case, that is, individual

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Defendants, did not sign an agreement in their individual capacities which contained the forum

selection clause at issue. The Defendants contend, therefore, that those Defendants cannot be

bound by any waiver of the right to remove.

FLB responds that all parties ought to be bound by the forum selection clause because the

individual guarantors guaranteed all debts, and debt is defined as including all obligations of the

borrower. The court need not decide whether such a rule would apply in this case, however,

because all defendants must be unanimous in removing a case to federal court. Russell Corp. v.

American Home Assur. Co., 264 F.3d 1040, 1050 (11th Cir. 2001). If some defendants are

prevented by a contractual waiver from agreeing to removal, the defendants cannot meet the

unanimity requirement, and the case must be remanded. See Medtronic, Inc. v. Endologix, Inc.,

530 F. Supp. 2d 1054, 1058 (D. Minn. 2008); Holiday Hospitality Franchising, Inc. v. The Inn at

Gulf Shores, Inc., No. 1:05cv2613, 2006 WL 358271 at *1 (N.D. Ga. Feb. 15, 2006); Periodical

Graphics, Inc. v. Spitz, No. 94cv3286, 1994 WL 502506 at *1 (E.D. Pa. Sept. 14, 1994). 

Therefore, the court looks to the Defendant’s second argument. The critical issue before the

court is whether the Defendants bound by the agreement containing the forum selection clause

waived their rights to remove the case commenced in Butler County, Alabama to the United

States District Court for the Middle District of Alabama, Northern Division, sitting in

Montgomery, by virtue of the following language: “The borrower agrees that . . . any litigation .

. . between the borrower and FLB shall be commenced and conducted in the courts of Butler

County, Alabama.” Exhibit C to the Complaint.

The Defendants contend that the language “courts of Butler County, Alabama” in the

clause is ambiguous, and must be construed against FLB, so that there is no waiver of the right to

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remove. They posit two interpretations which they argue are opposing, yet reasonable, as

creating the ambiguity. (Def. Response, Doc. #15, at p.7). The Defendants first state that “of”

the courts of Butler, County could be interpreted to refer to no courts, because the state courts

derive their sovereignty from the State of Alabama, not the county, and federal courts are courts

of the United States of America. The court does not agree, however, that an interpretation

which makes the contract refer to no courts at all is a reasonable one.

Second, the Defendants advance an interpretation that, although there is no federal

courthouse in Butler County, “the courts of Butler, County, Alabama” include this federal

district court because the Middle District of Alabama is a federal district court which has a

division, sitting in Montgomery County, that includes Butler County, Alabama in its boundaries. 

The Eleventh Circuit has found a forum selection clause to be ambiguous which limited

litigation to venue in Broward County, and waived rights to contest venue or in personam

jurisdiction, requiring the parties to submit to the “jurisdiction of Broward County, Florida.” 

See Global Satellite Comm. Co. v. Starmill U.K. Ltd., 378 F.3d 1269 (11th Cir. 2004). While

the language at issue in Global Satellite did include “of Broward County,” there is a distinction

between that case and the instant case, in that the court noted that one location of the district

court for the Southern District of Florida is in a city in Broward County. Id. at *1271-72. In

examining the venue provision, the court reasoned that the venue provision used the imperative

“shall,” making it mandatory, and then noted that venue could be proper in “the Seventeenth

Judicial District of Florida, or in the Fort Lauderdale Division of the Southern District of Florida,

both of which are located in Broward County . . .”Id. at 1272. The court then went on to state

that separate waiver language in the contract was ambiguous because it “names a geographical

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unit, host to several forums . . .” Id. at 1274. The fact that there was a federal court located in

the specified county, therefore, was significant in the court’s holding that the venue provision

was ambiguous. See Alliance Health Group, LLC v. Bridging Health Options, LLC, __ F.3d. __,

2008 WL 5206911 at *3 (5th Cir. Dec. 15, 2008) (interpreting Global Satellite to place

significance on the fact that a federal courthouse was located in the state forum).

In Travelers, another judge in this district concluded that the forum selection provision at

issue, which stated that legal proceedings “shall be brought and maintained in City of Tuskegee,

Macon County, Alabama,” was unambiguous. Travelers, 2006 WL 752925 at *1. The court

reasoned that the only forum in Tuskegee is the Circuit Court of Macon County, Alabama. Id. at

*3. Therefore, the court determined that the right of removal was waived, and remanded the

case. Id. 

The language in the instant case, of course, is different from the language in Travelers,

because the language of the purported waiver at issue here is not limited to a particular city and,

therefore, does not as clearly exclude a federal court which provides service to the county. The

reasoning, however, can still apply; namely, that if only one forum has a presence in the

identified venue, the provision is not ambiguous. In fact, this reasoning has been adopted in the

Fifth Circuit, although in a case involving forum selection language “sitting in” a county, rather

than “of” a county. See Paolino v. Argyll Equities, LLC, No. SA-05-CZ-342-XR, 2005 WL

2147931 (W.D. Tex. Aug. 31, 2005); aff’d, 211 Fed. Appx. 317, 2006 WL 3821812 (5th Cir.

Dec. 28, 2006) (unpublished); see also Collin County v. Siemens Business Serv., Inc., 250 Fed.

Appx. 45, 2007 WL 2908926 at *6 (5th Cir. Oct. 3, 2007) (finding “persausive [a] distinction

between courts encompassing an area and those sitting in or hearing cases in an area.”); cf. Dixon

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v. TSE Int’l Inc., 330 F.3d 396, 398 (5th Cir. 2003) (holding that “of” courts of Texas did not

include federal courts).

In Paolino, the court collected cases applying venue selection provisions and determined

that when a forum selection clause “sets exclusive venue in a county in which no federal court is

located, the clause cannot reasonably be interpreted to include a federal district court located in

another county even though the designated county is within the district or division served by the

federal court.” 2005 WL 2147931 at * 5.

This court finds that interpreting the forum selection clause mandating that litigation be

“commenced and conducted in the courts of Butler County, Alabama” to include this federal

district court located in Montgomery County would certainly be a strained interpretation, and not

a reasonable one. See Infinite Tech., Inc. v. Rockwell Electronic Commerce Corp., No. 01-C1025, 2001 WL 527357 at *2 (N.D. Ill. May 16, 2001) (noting that interpreting the “courts of

DuPage County” to include a federal court located in Cook County “would be a strained

interpretation.”). The court is persuaded that, given the holding in Global Satellite, the Eleventh

Circuit follows a rule that where a forum selection provision identifies a county, and the county

designated is not one in which the federal district court has a physical presence, a clause which

restricts litigation to that county cannot reasonably be interpreted to include a federal district

court sitting elsewhere. Accordingly, the forum selection clause at issue in this case is not

ambiguous and is due to be enforced.

IV. CONCLUSION

For the reasons discussed, the court concludes that the forum selection clause agreed to

by some of the Defendants is mandatory and unambiguous as to those Defendants, requiring that

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the litigation be commenced in and conducted in “the courts of Butler County, Alabama,” so that

they have waived their right to remove the case to this federal court sitting in Montgomery

County, Alabama. Having waived the right of removal, those Defendants are unable to consent

to removal, and the case is due to be REMANDED to the Circuit Court of Butler Co., Alabama. 

A separate Order will be entered in accordance with this Memorandum Opinion.

DONE this 26th day of January, 2009.

/s/ W. Harold Albritton 

W. HAROLD ALBRITTON

SENIOR UNITED STATES DISTRICT JUDGE

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