Opinion ID: 1288202
Heading Depth: 2
Heading Rank: 1

Heading: Forum Selection Clause

Text: The majority approached the forum selection clause issue in this appeal with the single-minded purpose of nullifying the work of the Boone County Circuit Court. In so doing, the majority unnecessarily formulated the law of this state regarding forum selection clauses in a variety of ways. The new law was created to achieve the ultimate result desired in the case before us and by so doing falls short of advancing justice in this case and no doubt in others to come.
At the outset, the majority furthered its cause by needlessly changing this state's law governing the standard of review applied to forum selection clauses. As related in the majority opinion, Appellants attempted to enforce the forum selection clause before the lower court by motion to dismiss based on venue. The majority correctly noted that this Court employs an abuse of discretion standard when reviewing motions to dismiss based on venue. Syl. Pt. 1, United Bank, Inc. v. Blosser, 218 W.Va. 378, 624 S.E.2d 815 (2005). With the ink hardly dry on the 2005 opinion announcing this standard, the majority proclaimswithout expressing any reason for trumping the rule of stare decisisthat review of the applicability and enforceability of a forum selection clause is de novo.  Syl. Pt. 2, Caperton v. Massey, ___ W.Va. ___, 679 S.E.2d 223 (No. 33350, filed April 3, 2008). For some inexplicable reason, the majority has decided that the deference this Court normally affords lower court decisions regarding application of the law to the facts is suspended when the matter under consideration involves applicability and enforceability of a forum selection clause. Id.
We are equally perplexed with the majority's position that this Court has generally approved forum selection clauses. While this Court in General Electric Company v. Keyser, 166 W.Va. 456, 275 S.E.2d 289 (1981), acknowledged in a footnote [3] that such clauses are not per se invalid, it was further recognized in that footnote that even though our law on this point is skeletal, it does indicate that [forum selection] contract clauses which affect such matters as jurisdiction and the like should be carefully analyzed. Id. at 461-62 n. 2, 275 S.E.2d at 292-93 n. 2. While omitting this portion of the footnote from its quotation [4] the majority did include the paragraph noting: As the Federal court observed, West Virginia appears not to subscribe to the rule that choice of forum clauses are void per se. `Rather the rule of most jurisdictions and the rule that this Court believes that West Virginia should and would adopt is that such clauses will be enforced only when found to be reasonable and just'. Leasewell, Ltd. v. Jake Shelton Ford Inc., 423 F.Supp. 1011, 1015 (S.D.W.Va.1976). See also, Kolendo v. Jerell, Inc., 489 F.Supp. 983 (S.D.W.Va.1980). See Op. at 235. By selectively quoting from Keyser, the majority reaches the sweeping conclusion that the law of this state favors enforcing forum selection clauses. An objective reading of the entire footnote hardly supports such a conclusion. Moreover, there are no subsequent cases in our jurisprudence suggesting a move in that direction in this area of our law. The extensions of forum selection clause law in this case to cover and govern the tort claims brought in the West Virginia suit before us ignores the very spirit of a reasonable and just outcome contemplated by the Court in Keyser. The majority likewise ignores the express caution in Keyser that forum selection clauses affecting jurisdiction and the likee.g., venueshould be carefully analyzed. 166 W.Va. at 461 n. 2, 275 S.E.2d at 292 n. 2. As a result of the majority's reliance on selective portions of a footnote, Mr. Caperton's individual right to due process and a fair and just determination of his claims has been foreclosed. [5] Mr. Caperton as an individual was not a party to the coal supply agreement (hereinafter also referred to as CSA) and did not have standing in his individual capacity to enforce the CSA. The majority has left him without remedy or a place where one could be sought. The long and the short of it is that the majority simply pushed right past the cautious and judicious language of Keyser to construct and apply sweeping new law clearly fashioned to unequivocally deprive Plaintiffs, both corporate and individual, of the relief to which they are entitled.
Not only did the majority institute new law regarding forum selection clauses on doubtful precedent, it also applied the new law by consistently turning a blind eye toward the actual facts of this case. The majority continuously repeats its assertion that the forum selection clause in the 1997 CSA is the basis for the conflicts giving rise to this lawsuit, [6] yet the majority fails to explain how Massey's conduct, conduct subsequent to Wellmore's declaration of force majeure, is related to the CSA. [7] Moreover, the trial court specifically found that Massey's actions were not connected with the 1997 CSA, a factual finding that is entitled to deference by this Court. As determined by the trial court, some of Massey's unsavory conduct was performed prior to Massey's acquisition of United, Wellmore's parent company. It was also proven that even more of Massey's unsavory conduct was performed after Massey had sold Wellmore. Despite these proven facts, the majority says that all of Massey's conduct is somehow related to the CSA. The majority improperly substitutes its own judgment without acknowledging the relevant findings of the lower court or declaring the findings of the trial court to be clearly erroneous. The majority says that [i]n the absence of the declaration of force majeure, the Harman Companies would not have been forced into bankruptcy and their prospective contractual relationships would not have been impeded by Massey. Caperton, ___ W.Va. at ____, 679 S.E.2d at 242. Not only is this argument circularthat is, in the absence of Massey's deceitful plan, Wellmore would have never declared force majeure and the Harman companies would not have been impeded by Masseybut it also does not reconcile with the facts of the case. Summarizing the findings of the circuit court, the majority noted that subsequent to Wellmore's declaration of force majeure, Massey continued in negotiations with the Harman companies and Mr. Caperton for Massey's purchase of the Harman Mine, and the parties agreed to close the transaction on January 31, 1998. However, Massey delayed and, as the circuit court found, ultimately collapsed the transaction in such a manner so as to increase [the Harman companies'] financial distress. In addition, Massey utilized the confidential information it had obtained from the Harman companies to take further actions, such as purchasing a narrow band of the Pittston coal reserves surrounding the Harman Mine, in order to make the Harman Mine unattractive to others and thereby decrease its value. During the negotiations for the sale of the Harman Mine to Massey, Massey had also learned that Mr. Caperton had personally guaranteed a number of the Harman companies' obligations. Subsequently, the Harman companies filed for bankruptcy. The majority provides no explanation whatsoever as to how these acts committed by Massey are related to Wellmore's declaration of force majeure, and the failure to do so is because they bear no relationship to Wellmore's declaration of force majeure. Using the majority's line of reasoning, had Massey not entered into sham negotiations with the Harman companies and Mr. Caperton for Massey's purchase of the Harman Mine, the Harman companies may not have been forced into bankruptcy. Or had Massey not purposefully collapsed the transaction, after multiple delays, the Harman companies may not have been forced into bankruptcy. Or had Massey not improperly used Mr. Caperton and the Harman companies' confidential information for Massey's personal benefit, the Harman companies may not have been forced into bankruptcy. To say that Massey's deceitful conduct flowed from Wellmore's declaration of force majeure is utterly unjustifiable. Wellmore's declaration may have made the Harman companies more vulnerable to this attack by Massey. However, it was Massey's subsequent actions that were the proximate cause of the Harman companies destruction. With respect to the Harman companies' claim of tortious interference with existing business relationships, the majority says Count I of the amended complaint alleges tortious interference with existing contractual relations, and specifically identifies existing contracts with Wellmore (the 1997 CSA), Penn Virginia (the lease of the Harman Coal reserves), and the UMWA (a labor contract). Certainly a claim of interference with the 1997 CSA itself is related to that contract. With respect to the Penn Virginia and UMWA contracts, it was Wellmore's declaration of force majeure that placed the Harman Companies and Mr. Caperton in the position of being unable to fulfill their contractual obligations. Caperton, ___ W.Va. at ____, 679 S.E.2d at 241. Contrary to this assertion by the majority, the trial court specifically found that it was Massey's conduct subsequent to the force majeure declaration that affected the lease of the Harman Coal reserves and the labor contract. Had Massey not engaged in its deceptive conductpretending to carry on purchase negotiations in order to gain confidential information for use against the Harman companies and Mr. Capertonwho knows what the outcome may have been. Not surprisingly, that was the question presented to the Boone County jury: had Massey not engaged its deceptive actions, what position would Mr. Caperton and the Harman companies have been in? Stated another way, what injuries did Massey inflict on Mr. Caperton and the Harman companies by engaging in its deceptive actions? Although unsupported by the evidence, the majority sweepingly states that insofar as the claims asserted in this action all flow from the allegedly wrongful declaration of force majeure, they would require interpretation of the contract to determine whether the declaration was indeed wrongful. Caperton, ___ W.Va. at ____, 679 S.E.2d at 242 n. 24. The majority inaccurately indicates that a wrongful declaration of force majeure is necessary to the claims presented in this case. According to the majority, had Wellmore rightfully declared force majeure, the Harman companies and Mr. Caperton would not have a claim against Massey. The majority's new formulation of the law now permits companies to enter into sham negotiations and thereby acquire confidential information, only to use that information to drive their competitors out of business.
The manner in which the majority applied its newly announced four-part test for determining whether a forum selection clause should be enforced violates the due process rights of not only Mr. Caperton, but the corporate appellees as well. As the majority points out by reference to multiple pages of authority, retroactive application by courts of a newly announced law is not a per se violation of due process. However, when a new burden is placed on a party as part of that new law and the party charged with carrying the burden is not permitted an opportunity to go forward with evidence to meet the burden, procedural due process guarantees are violated. [A] State may not deprive a person of all existing remedies for the enforcement of a right, which the State has no power to destroy, unless there is, or was, afforded to him some real opportunity to protect it. Brinkerhoff-Faris Trust & Sav. Co. v. Hill, 281 U.S. 673, 682, 50 S.Ct. 451, 74 L.Ed. 1107 (1930); see also Harper v. Virginia Dept. of Taxn., 509 U.S. 86, 101, 113 S.Ct. 2510, 125 L.Ed.2d 74 (1993). There is absolutely no way that the corporate appellees or Mr. Caperton could have heretofore attempted to meet the burden the new standard imposes in order to overcome the presumption of enforceability. The majority affords no opportunity after announcing the new standard for the affected parties to meet the newly established burden. Obviously, Appellees' rights to due process have been abridged.
To attain its objective in this case, the majority has also ignored one of the most basic principles of contract law, that being the primary purpose and function of the court in interpreting a contract is to ascertain the parties' intention so as to give effect to that intention. 11 Williston on Contracts § 32:2 at 397 (4th ed.1999); see also Restatement (Second) of Contracts § 201. Courts are obligated to interpret and give effect to the mutual intention of the parties at the time of contracting. Parties to a contract may create rights in third parties by manifesting an intention to do so within the contract or by the circumstances surrounding the making of the contract. However, in order to be entitled to relief as a third-party beneficiary, the protection afforded must have been in the contemplation of the parties at the time of the execution of the contract. 17B C.J.S. Contracts § 621 (1999); see also W.Va.Code § 55-8-12 (1923) (Repl.Vol.2000). It is inconceivable that any of the parties to the CSA could have or should have foreseen or expected at the time of contracting that Massey would unlawfully undertake to do irreversible harm to the Harman mining operation, and to Mr. Caperton as an individual, since he was not a party to the contract in his individual capacity. Even though the contract played a role in different facets of the case brought in West Virginia, Appellees' tort claims against Massey embraced more than the obligations and duties arising out of the CSA or conduct undertaken pursuant to the CSA. In syllabus point eleven, the majority announces a new rule, that [a] defendant who is a non-signatory to a contract containing a forum-selection clause may enforce that clause when it is shown that the claims against him or her are closely related to the contract. In the first case cited by the majority in support of this rule, Hellenic Inv. Fund, Inc. v. Det Norske Veritas, 464 F.3d 514, (5th Cir.2006), the reviewing court enforced a forum selection clause against a nonsignatory to the contract on the basis that the non-signatory benefitted from performance of the contract. The same cannot be said for the instant case where Massey benefitted from the destruction of the 1997 CSA. The trial court found that Harman Development and Wellmore had formed a strong coal supply relationship with LTV Steela relationship that Massey desperately wanted, and apparently would stop at nothing to get. Massey developed and executed a very risky plan to obtain LTV's business [8] , and when that plan failed, Massey refused to accept responsibility for it actions. Massey admits that it did a cost-benefit analysis and determined that it was in its best interest to declare force majeure. However, it does not seem the declaration was in Wellmore's best interest, as the trial court found that Wellmore sold and shipped nearly two-thirds of the coal purchased from the Harman companies to LTV Steel. The majority's casting of the Wellmore-Massey relationship as being closely connected in interest is simply not correct according to the facts. Even though Massey owned Wellmore for a brief period of timeless than eight monthsMassey did not further the interests of Wellmore by destroying Wellmore's relationship with LTV Steel and then with the Harman companies. The majority emphasizes that Mr. Caperton or the Harman companies could reasonably foresee that they would be bound by the forum selection clause. However, could Mr. Caperton or the Harman companies reasonably foresee that Massey would acquire Wellmore's parent company of United Coal for a brief eight-month period, by which Massey would be able to enforce the forum selection clause? Could Mr. Caperton or the Harman companies reasonably foresee the actions Massey took after it had sold Wellmore which removed any type of contractual relationship whatsoever between the parties would still fall within the forum selection clause in the 1997 CSA? Apparently the majority believes Mr. Caperton and the Harman companies should have anticipated all of the peculiarities arising in this case. Ultimately, by placing such unrealistic requirements as to foreseeability on contracting parties, the majority makes West Virginia a truly vulnerable place to do business. Another basic tenet of contract law is that the parties approach the contracting process act with good faith and the intent to deal fairly. As summarized by one authority, there is an implied covenant of good faith and fair dealing in every contract, whereby neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.... The scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract. 17A Am.Jur.2d Contracts § 370. Initially, Harman had included in its Virginia suit a claim sounding in contract for breach of the duty of good faith and fair dealing, [9] but withdrew the claim before the trial in that case. Withdrawal of the claim is fully understandable because only Wellmore, as a party to the CSA, could be bound by the contractual duty of good faith and fair dealing. As the lower court herein concluded from the evidence before it, manipulation of the CSA and its forum selection clause was just one of many tools Massey used both before, during and after its ownership of Wellmore. The aim of Massey's plan was either to directly cause the demise of the Harman corporations and the financial ruin of Mr. Caperton as an individual, or at least use the Harman coal operation and Mr. Caperton as pawns to force United to accept the lower grade Massey coal for the premium coal produced from the Harman mine. There was no indication that Wellmore was aware of Massey's plan to eliminate the Harman mining operation or could have foreseen the implementation of such a plan when it entered and renewed the CSA with the corporate appellees. Essentially, the majority, by extending the right to enforce a forum selection clause under the circumstances of this case to Massey as a non-signatory to the CSA, has created a loophole whereby a non-party to a contract may gain the benefit of enforcing a forum selection clause without having the burden of accountability for acting in good faith and dealing fairly. Massey and others like Massey can simply ride the coattails of good business citizens in order to accomplish covert, questionable and reprehensible acts. We hardly find this conducive to promoting trust in the contracting process or otherwise furthering commerce and business interestsnor does it foster trust in the judicial process.
Even if one acknowledges the suitability in the abstractof the test made applicable to forum selection clauses by the majority opinion, two very serious problems are readily apparent with the application to the case sub judice of the new test announced by the majority in syllabus point six. First, as mentioned earlier, retroactive application of this test does not allow parties the opportunity to overcome the newfound presumption of enforceability, thereby depriving the parties opposing enforcement of the clause their due process rights. Our second concern rests with the new test not giving trial courts, charged with weighing the evidence regarding forum selection clause issues, the freedom to decide that the presumption of enforceability has been rebutted purely on the circumstances as revealed in the record before them. This flexibility, placed in the hands of our capable trial court judges, would serve to eliminate unnecessary expenditure of time and resources in appropriate cases. We fear that the readily apparent flaws in the new standards embraced by the majority as governing enforcement of forum selection clauses in this state represent only the tip of the iceberg of problems which will surface upon pragmatic application of the standards in the courtrooms of this state. All lawyers know that the law can be read and written to accommodate the needs of a situation, and that the law has to be malleable in order to address a variety of ever-evolving circumstances. Consequently, good, enduring and meaningful law must be written in such a manner as to promote the noble cause of the larger good and not merely support the agenda of a few. Unfortunately, the new law governing forum selection clause issues which the majority has designed in this case reaches unreasonable and unjust results not only for the affected parties, but also for the judge and jury who heard this case and all businesses and individuals who will be impacted by anticipated as well as unexpected results.