Opinion ID: 2569835
Heading Depth: 1
Heading Rank: 10

Heading: Forum-Selection Clause

Text: {58} In the instant case, some class member policies, issued in certain states, contain forum-selection clauses designating the state where the insured entered into the policy as the forum. Allstate contends that these forum-selection clauses preclude class certification in New Mexico. We reach this issue because, unlike the Court of Appeals, we affirm the district court's certification decision. See Ferrell, 2007-NMCA-017, ¶ 5. {59} Plaintiffs argue that Allstate waived this defense by not raising it in its first responsive pleading because forum-selection clauses are properly treated as venue defenses under Rule 1-012(B)(3) NMRA. The district court agreed and concluded that Allstate had waived the defense. Allstate counters that forum-selection clauses are properly brought as motions to dismiss for failure to state a claim under Rule 1-012(B)(6), which may be raised at any time. See Rule 1-012(H)(2). While our courts have discussed in general terms the nature and effect of forum-selection clauses, our courts have yet to determine whether a forum-selection clause should be brought as a motion to dismiss for failure to state a claim or as a motion to dismiss based on improper venue. Thus, we now consider the proper analysis for a forum-selection clause defense. {60} Courts disagree about the proper procedural mechanism a party must use to raise a forum-selection clause defense. The majority of circuit courts that have considered the issue have concluded that forum-selection clauses are properly raised under Federal Rule of Civil Procedure 12(b)(3), improper venue. See Sucampo Pharm., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th Cir.2006); Silva v. Encyclopedia Britannica Inc., 239 F.3d 385, 387 n. 3 (1st Cir.2001) (noting that the Seventh, Ninth, Eleventh, and District of Columbia Circuits consider[ ] such motions as based on Rule 12(b)(3)); Calchem Corp. v. Activsea USA LLC, No. CV-06-1585, 2007 WL 2127188, at  n. 2 (E.D.N.Y.2007) (noting that courts in the Fifth Circuit have considered motions to dismiss based on forum-selection clauses as falling under Rule 12(b)(3) based on improper venue). The First and Third Circuits have decided that forum-selection clauses are properly raised in Rule 12(b)(6) motions to dismiss, see Silva, 239 F.3d at 387 n. 3, while the Second Circuit has concluded that a motion to dismiss based on a forum-selection clause should be brought as a Rule 12(b)(1) motion. See AVC Nederland B.V. v. Atrium Inv. P'ship, 740 F.2d 148, 153 (2d Cir.1984). The Tenth Circuit, while not specifically deciding that such a defense must be raised as a Rule 12(b)(3) motion, has noted that [a] motion to dismiss based on a forum selection clause frequently is analyzed as a motion to dismiss for improper venue under Fed. R.Civ.P. 12(b)(3). K & V Scientific Co. v. Bayerische Motoren Werke Aktiengesells-chaft (BMW), 314 F.3d 494, 497 (10th Cir. 2002) (quoted authority omitted). {61} We find the Fourth Circuit's analysis in Sucampo, 471 F.3d at 547-49 persuasive and conclude that forum-selection clauses are properly treated as venue defenses. In Sucampo, the court rejected an analysis of such a motion under Rule 12(b)(1), in part, because a motion to dismiss under Rule 12(b)(1) is non-waivable and may be brought at any time  even on appeal  regardless of whether a litigant raised the issue in an initial pleading. Sucampo, 471 F.3d at 548. The court expressed its concern that a litigant's choice to wait to assert a forum-selection clause could result in a waste of judicial resources and allow defendants to `test the waters' of the plaintiff's chosen forum, before invoking their rights under the forum-selection clause. Id. at 549. The court rejected an analysis of such a motion under Rule 12(b)(6) because a Rule 12(b)(6) motion can be raised at any time before an adjudication on the merits and would present some of the same timing concerns as in the 12(b)(1) context. Sucampo, 471 F.3d at 549. The court also noted that [U.S.] Supreme Court precedent suggests that 12(b)(6) is not the appropriate motion for enforcing a forum-selection clause. Id. {62} Having rejected an analysis under Rule 12(b)(1) and Rule 12(b)(6), the court determined that a motion to dismiss based on a forum-selection clause is properly treated as a Rule 12(b)(3) motion. Id. The court concluded that such an analysis would avoid the ... timing disadvantages of utilizing Rule 12(b)(1) or (6) and [would] be consistent with Supreme Court precedent. Id. One particular benefit of utilizing Rule 12(b)(3), noted the court, is judicial efficiency because a defendant will have to raise the forum selection issue in her first responsive pleading or waive the clause. Id. This will result in an efficient disposition of cases involving forum-selection clauses and not waste judicial resources on a case that ultimately will have to be dismissed and relitigated in another forum. Id. {63} We find this reasoning particularly persuasive when dealing with multi-state class actions certified under Rule 1-023(B)(3) of our class action rule. Allowing a defendant to wait to raise a forum-selection clause defense until after certification, i.e., testing the waters of the class proponents' chosen forum, is inefficient and may result in a waste of judicial resources. The district court would have spent unnecessary time and effort analyzing the laws of each implicated state to ensure that the predominance and superiority requirements were met. Thus, allowing a defendant to raise a forum-selection clause defense at any time during the litigation undermines the economies of time, effort, and expense sought to be achieved by Rule 1-023(B)(3). Berry, 2004-NMCA-116, ¶ 47 (quoted authority omitted). {64} Instead, treating a motion to dismiss based on a forum-selection clause as a Rule 1-012(B)(3) motion comports with the goals underlying our class action rule  judicial efficiency and the need to provide a forum for the vindication of dispersed losses. Berry, 2004-NMCA-116, ¶ 47. Because a defendant would have to alert the district court of its forum-selection clause defense in the initial pleading or motion, or waive the defense, the court would not waste judicial resources on an unnecessary predominance and superiority analysis. See Rule 1-012(H); Sundance Mech. & Util. Corp. v. Atlas, 109 N.M. 683, 690, 789 P.2d 1250, 1257 (1990) (Certain defenses (lack of personal jurisdiction, improper venue, insufficiency of process or service of process) must be asserted at the outset of an action; otherwise these defenses are waived.). Thus, a motion to dismiss based on a forum-selection clause is properly analyzed under Rule 1-012(B)(3). {65} Because Allstate did not raise the forum-selection clause as a defense in its motion to dismiss, or any other pleading prior to the certification hearing, we affirm the district court's ruling that Allstate waived the defense. See Steward v. Up N. Plastics, Inc., 177 F.Supp.2d 953, 958 (D.Minn.2001) ([D]endants failed to raise any objection to venue in their first responsive pleading, as required under the rules. Additionally, a significant amount of time and motion practice has already taken place, including the filing of a motion for summary judgment, thus further establishing defendants' waiver.).