Court Opinion

ID: 6331537
Source: CourtListenerOpinion
Date Created: 2022-04-14 16:02:34.358563+00
Date Added: 2024-06-11T09:23:12.729792
License: Public Domain

IN THE
             ARIZONA COURT OF APPEALS
                             DIVISION ONE

      RT AUTOMOTIVE CENTER, INC., et al., Plaintiffs/Appellants,

                                    v.

             WESTLAKE SERVICES LLC, Defendant/Appellee.

                          No. 1 CA-CV 21-0148
                            FILED 04-12-2022

          Appeal from the Superior Court in Maricopa County
                         No. CV2020-000834
             The Honorable Margaret R. Mahoney, Judge

                                 AFFIRMED

                                 COUNSEL

Iannitelli Marcolini, P.C., Phoenix
By Claudio E. Iannitelli, Jason K. Thomas
Counsel for Plaintiffs/Appellants

Husch Blackwell LLP, Phoenix
By Brian J. Hembd
Counsel for Defendant/Appellee
                  RT AUTOMOTIVE, et al. v. WESTLAKE
                         Opinion of the Court

                                 OPINION

Judge Maurice Portley1 delivered the opinion of the Court, in which
Presiding Judge Jennifer B. Campbell and Judge Samuel A. Thumma joined.

P O R T L E Y, Judge:

¶1            Plaintiff RT Automotive Center, Inc., d/b/a Riverview
Toyota (“Riverview”), challenges the enforcement of a forum selection
clause in a contract it disputes and the dismissal of its complaint without
prejudice. For the following reasons, we affirm.

             FACTS AND PROCEDURAL BACKGROUND

¶2            Riverview, an automotive dealership, sued Westlake Services
LLC (“Westlake”), a lender, for breach of contract and related claims
alleging that Westlake had refused to fund two motor vehicle purchases
despite receiving sale contract assignments and first position vehicle liens.
In its answer, Westlake alleged that Riverview sued in an improper venue
because the parties’ Master Dealer Agreement (“MDA”) designated Los
Angeles County, California, as the proper forum for litigation. Westlake
also asserted a counterclaim alleging breach of contract and unjust
enrichment.

¶3              Westlake later moved to dismiss the complaint, see Ariz. R.
Civ. P. (“Rule”) 12(b)(3), or in the alternative for judgment on the pleadings,
see Ariz. R. Civ. P. 12(c), on the same grounds alleged in its answer, offering
a copy of the MDA and a faxed signature page signed in 2011 by
Riverview’s general manager, Brent Berge. In response, Riverview argued
that (1) it had not agreed to the MDA; (2) Berge’s signature was forged; and
(3) Berge lacked authority at that time to sign dealer contracts on
Riverview’s behalf.

¶4           The superior court granted Westlake’s motion. The court
noted that no evidentiary hearing was requested and found oral argument
unnecessary. The court then determined that it would be “illogical and

1      The Honorable Maurice Portley, Retired Judge of the Court of
Appeals, Division One, has been authorized to sit in this matter pursuant
to Article 6, Section 3, of the Arizona Constitution.

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                  RT AUTOMOTIVE, et al. v. WESTLAKE
                         Opinion of the Court

circular to parse out the questions of formation or validity . . . when the
forum selection clause itself expressly encompasses ‘actions pertaining to
the formation, [and] validity’ of the [MDA].” As a result, the court reasoned
that it “should find the forum-selection clause enforceable and leave all the
remaining questions to be addressed and resolved before a court in the
venue clearly selected in the [MDA].”

¶5           Riverview moved for reconsideration, offering additional
evidence to support its contention that Berge’s signature had been forged
and contending that the court should have held an evidentiary hearing
before dismissing the complaint. The court denied the motion and awarded
Westlake attorneys’ fees and costs.

¶6            After entry of a final judgment dismissing the matter without
prejudice, Riverview timely appealed, and we have jurisdiction pursuant
to Arizona Revised Statutes (“A.R.S.”) section 12-2101(A)(3). See Dunn v.
FastMed Urgent Care PC, 245 Ariz. 35, 38, ¶ 9 (App. 2018) (“Dismissal
pursuant to a forum-selection clause with leave to refile in another state is
an appealable order under A.R.S. § 12–2101(A)(3).”).

                                 ANALYSIS

¶7            We review the dismissal of a complaint based on a forum
selection clause de novo. Bennett v. Appaloosa Horse Club, 201 Ariz. 372, 375,
¶ 11 (App. 2001); see also Muscat by Berman v. Creative Innervisions LLC, 244
Ariz. 194, 197, ¶ 7 (App. 2017) (reviewing a superior court’s legal ruling on
a motion for judgment on the pleadings de novo).2

¶8              Fifty years ago, the United States Supreme Court held forum
selection clauses presumptively enforceable in M/S Bremen v. Zapata Off-
Shore Co., 407 U.S. 1, 10 (1972) (adopting the view “that such clauses are
prima facie valid and should be enforced unless enforcement is shown by
the resisting party to be ‘unreasonable’ under the circumstances” (citations
omitted)). Seven years later, our supreme court held that “a forum selection
clause that is fairly bargained for and not the result of fraud will be enforced

2      Riverview makes no claim that Westlake waived the ability to file a
motion to dismiss by answering and then filing its motion to dismiss
approximately two months later, contrary to Rule 12(b). See Ariz. R. Civ. P.
12(b) (“A motion asserting any of these defenses must be made before
pleading if a responsive pleading is allowed.”). In any event, we may treat
the court’s dismissal of Riverview’s complaint as one granting a motion for
judgment on the pleadings under Rule 12(c).

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                  RT AUTOMOTIVE, et al. v. WESTLAKE
                         Opinion of the Court

so long as to do so is reasonable at the time of litigation and does not
deprive a litigant of his day in court.” Societe Jean Nicolas Et Fils v. Mousseux,
123 Ariz. 59, 61 (1979). Its holding came after reviewing the Restatement
(Second) of Conflict of Laws § 80 (1971) and common law decisions from
the United States Supreme Court and other federal and state courts. See id.
at 60-61. As a result, we follow its lead. See, e.g., Bennett, 201 Ariz. at 377,
¶ 20; Morgan Bank (Del.) v. Wilson, 164 Ariz. 535, 537 (App. 1990).

¶9             Arizona has not directly addressed when a forum selection
clause can be invalidated. Mousseux suggests that a forum selection clause
could be invalidated if it was the result of fraud or its enforcement at the
time of litigation is so unreasonable that it deprives a litigant of his day in
court. 123 Ariz. at 613; Bennett, 201 Ariz. at 377, ¶¶ 19-20. Similarly, the
Ninth Circuit Court of Appeals has stated that a forum selection clause can
be invalidated:

       (1) “if the inclusion of the clause in the agreement was the
       product of fraud or overreaching”;

       (2) “if the party wishing to repudiate the clause would
       effectively be deprived of his day in court were the clause
       enforced”; [or]

       (3) “if enforcement would contravene a strong public policy
       of the forum in which suit is brought.”

Petersen v. Boeing Co., 715 F.3d 276, 280 (9th Cir. 2013) (quoting Murphy v.
Schneider Nat’l, Inc., 362 F.3d 1133, 1140 (9th Cir. 2004) (quoting Richards v.
Lloyd’s of London, 135 F.3d 1289, 1294 (9th Cir. 1998))). The common view
among courts today is that forum selection clauses should be enforced
unless they fall within an enunciated exception. See Cagle v. Mathers Fam.
Tr., 295 P.3d 460, 464, ¶ 14 (Colo. 2013).

3       In Mousseux, our supreme court first recognized that Bremen
“criticized traditional judicial reluctance to enforce [forum selection]
clauses and held that the federal courts should uphold them so long as the
agreement was unaffected by fraud, freely negotiated, and not so
unreasonable as to deprive either party of its day in court.” 123 Ariz. at 60
(citing Bremen, 407 U.S. at 15, 18).

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                  RT AUTOMOTIVE, et al. v. WESTLAKE
                         Opinion of the Court

I.     Riverview Did Not Allege or Establish Fraud Specific to the Forum
       Selection Clause.

¶10            Citing Berge’s declaration that his signature was forged,
Riverview contends the MDA was the result of fraud. Westlake contends,
however, that a showing of fraud only invalidates a forum selection clause
if it is “aimed at procuring the forum selection clause itself, not the contract
as a whole.” See, e.g., Haynsworth v. The Corp., 121 F.3d 956, 963 (5th Cir.
1997). Westlake’s position is consistent with Supreme Court precedent:

       [F]orum-selection clauses “should be given full effect” when
       “a freely negotiated private [] agreement (is) unaffected by
       fraud . . . .” [Bremen,] 407 U.S. at 13 . . . . This qualification
       does not mean that any time a dispute arising out of a
       transaction is based upon an allegation of fraud, . . . the clause
       is unenforceable. Rather, it means that an arbitration or
       forum-selection clause in a contract is not enforceable if the
       inclusion of that clause in the contract was the product of
       fraud or coercion. Cf. Prima Paint Corp. v. Flood & Conklin Mfg.
       Co., 388 U.S. 395 [(1967)].

Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 n.14 (1974) (emphasis added).
The distinction is important because courts often treat a forum selection
clause as a separate agreement from the other obligations created by the
contract. Marra v. Papandreou, 216 F.3d 1119, 1123 (D.C. Cir. 2000); see also
Intercall Telecomms., Inc. v. Instant Impact, Inc., 376 F. Supp. 2d 155, 160
(D.P.R. 2005) (“Courts must distinguish between challenges to the validity
of the underlying contract . . . and to the validity of the forum selection
clause in particular . . . . Under the purview of this separability doctrine, a
forum selection clause is deemed to be separate from, and independent of,
the contract containing it.”). Courts therefore can “ensure that more general
claims of fraud will be litigated in the chosen forum, in accordance with the
contractual expectations of the parties.” Lipcon v. Underwriters at Lloyd’s,
London, 148 F.3d 1285, 1296 (11th Cir. 1998) (emphasis omitted).

¶11           Riverview maintains on appeal that Berge’s signature was
forged and that it never entered the MDA. Its arguments go beyond the
forum selection clause and therefore do not support invalidating it. See
Rawdon v. Starwood Cap. Grp., 453 P.3d 516, ¶ 26 (Okla. Civ. App. 2019)
(“[W]here a party has alleged the invalidity of a contract generally, but has
not challenged the validity of the forum selection clause itself, the court need
not rule upon the issue of the contract’s validity prior to enforcing the
forum selection clause.”); Young v. Valt.X Holdings, Inc., 336 S.W.3d 258, 266

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                  RT AUTOMOTIVE, et al. v. WESTLAKE
                         Opinion of the Court

(Tex. App. 2010) (holding that alleged fraud “must involve the negotiation
of the forum-selection clause itself” and “a general allegation of fraud is not
sufficient to bar operation of a forum selection clause” (citations omitted));
Nat’l Union Fire Ins. Co. of Pittsburgh, PA. v. Seneca Fam. of Agencies, 255 F.
Supp. 3d 480, 488 (S.D.N.Y. 2017) (rejecting a challenge to a forum selection
clause where a party “plainly challeng[ed] the entire Payment
Agreement”); see also MacPhail v. Oceaneering Int’l, Inc., 170 F. Supp. 2d 718,
724 (S.D. Tex. 2001) (“[A] court may consider a claim that a party was
fraudulently induced to include a forum selection clause in an agreement,
but may not entertain a claim that the entire agreement was procured by
fraud.”). Thus, “general allegations of fraud do not speak to the validity of
the forum selection clause specifically.” Rawdon, 453 P.3d at ¶ 27.
Moreover, the forum selection clause in this case provides that the selected
forum will resolve “actions pertaining to the formation, validity,
interpretation, or alleged breach” of the MDA.

¶12           Riverview also contends it specifically challenged the forum
selection clause, citing evidence submitted with its motion for
reconsideration to support its argument that it negotiated with Westlake
toward designating Maricopa County as the appropriate forum for MDA-
based disputes. We typically do not consider matters raised for the first
time in a motion for reconsideration unless the facts or arguments
presented were not available when the court entered the challenged ruling.
See Ramsey v. Yavapai Fam. Advoc. Ctr., 225 Ariz. 132, 137, ¶ 18 n.8 (App.
2010). Riverview did not contend the cited evidence was unavailable before
the superior court granted Westlake’s motion; Riverview only stated that it
found the evidence “on back-up servers.”

¶13            Moreover, the cited evidence relates to 2010 negotiations
between Westlake and a different dealership, Bell Ford. For example, the
“Addendum” Riverview cites to contend that “the language upon which
Westlake relied had been modified . . . to designate Maricopa County,
Arizona as the exclusive legal venue” only names Bell Ford and Westlake
and is unsigned. And although the other documents evince negotiations
toward a potential MDA, Riverview suggests that Bell Ford, like itself,
never entered the MDA. Riverview therefore did not offer any evidence to
specifically challenge the MDA’s forum selection clause.

II.    The Superior Court Was Not Obligated to Conduct an Evidentiary
       Hearing Before Dismissing the Complaint.

¶14          Riverview also contends the superior court erred by not
holding an evidentiary hearing before dismissing the complaint. The court

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                  RT AUTOMOTIVE, et al. v. WESTLAKE
                         Opinion of the Court

may, but is not obligated to, hold an evidentiary hearing on a Rule 12(b)(3)
motion. See Murphy, 362 F.3d at 1139; see also Anserv Ins. Servs., Inc. v.
Albrecht, 192 Ariz. 48, 49, ¶ 5 (1998) (“Because Arizona has substantially
adopted the Federal Rules of Civil Procedure, we give great weight to the
federal interpretations of the rules.” (citation omitted)); Giles v. Hill Lewis
Marce, 195 Ariz. 358, 359, ¶ 2 (App. 1999) (recognizing that a motion for
judgment on the pleadings tests the sufficiency of the complaint and, on
review, we generally treat the allegations of the complaint as true). If the
court does not hold a hearing, it must construe the facts in a light most
favorable to the non-moving party. Murphy, 362 F.3d at 1140.

¶15             We discount Riverview’s contention for two reasons. First,
Riverview did not request an evidentiary hearing in its response to
Westlake’s motion or at any time before the court granted the motion. See
Ruesga v. Kindred Nursing Ctrs., L.L.C., 215 Ariz. 589, 596, ¶ 24 (App. 2007)
(“[T]he party claiming that there is a dispute of fact regarding arbitrability
has the burden of requesting an evidentiary hearing.” (citation omitted));
see also Scherk, 417 U.S. at 519 (“An agreement to arbitrate before a specified
tribunal is, in effect, a specialized kind of forum-selection clause . . . .”).
Riverview requested a hearing in its motion for reconsideration, but it cited
no authority suggesting the superior court must hold a hearing on a motion
for reconsideration when one is requested. The applicable rule does not
provide for one. See Ariz. R. Civ. P. 7.1(e)(2) (stating that motions for
reconsideration “must be submitted without oral argument . . . unless the
court orders otherwise”).

¶16            Second, as discussed above, Riverview only challenged the
validity of the entire MDA, not the forum selection clause specifically. For
example, Riverview contends Westlake knew Berge lacked authority to
sign the MDA, citing Berge’s declaration and the declaration of Westlake
representative Heather Holstad. But while Holstad acknowledged that
MDAs with Berge Group dealerships, such as Riverview and Bell Ford, had
to be approved by other Berge Group personnel, she also said she
understood that MDAs “were forwarded to corporate counsel . . . for review
and approval, and forwarded back to the dealership for signing and
execution.” This evidence does not create fact questions regarding whether
the specific forum selection clause at issue should be enforced. See Petersen,
715 F.3d at 283 (finding the district court abused its discretion by not
“holding an evidentiary hearing as to whether Petersen was induced to
assent to the forum selection clause through fraud or overreaching”
(emphasis added)); Haynsworth, 121 F.3d at 963 (“Fraud and overreaching
must be specific to a forum selection clause in order to invalidate it.”).

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                  RT AUTOMOTIVE, et al. v. WESTLAKE
                         Opinion of the Court

Accordingly, the court did not err by failing to conduct an evidentiary
hearing.

III.   Riverview Is Not Precluded From Asserting Its Challenges to the
       Entire MDA in the Proper Forum.

¶17            Citing Offshore Sportswear, Inc. v. Vuarnet International, B.V.,
114 F.3d 848 (9th Cir. 1997), Riverview also contends a finding that the
forum selection clause is valid would preclude it from challenging the
clause in California. We disagree. There, the plaintiffs filed a state court
lawsuit after their federal court lawsuit was dismissed, see id. at 849, based
on a forum selection clause, stating that “[t]he Courts of Geneva
[Switzerland] shall be exclusively competent,” id. at 849 n.1. The plaintiffs
did not appeal from the federal court dismissal. Id. at 849-50. Following
removal to federal court, the second complaint was dismissed without
prejudice, id. at 850, with the district court again pointing out that
“[p]laintiffs are able to bring their claims in Switzerland pursuant to the
Agreement,” id. at 851.

¶18           Unlike Offshore Sportswear, Riverview is challenging the
dismissal of its first lawsuit, not a second or subsequent lawsuit. There is
no record evidence to suggest that Riverview has filed a second lawsuit in
any forum. Consistent with Offshore Sportswear, Riverview can still litigate
the merits of this dispute “[i]n the proper venue, or forum.” Id.; see also
Cagle, 295 P.3d at 464, ¶ 15 (”[A] state court that finds a forum selection
clause enforceable and grants a motion to dismiss can only dismiss the case
so that the plaintiff may re-file it in the specified forum.” (citations
omitted)).

¶19         For these reasons, we affirm the dismissal of Riverview’s
complaint and the associated attorneys’ fee award.

IV.    Attorneys’ Fees Are Awarded on Appeal.

¶20           Westlake requests attorneys’ fees incurred in this appeal
under A.R.S. § 12-341.01(A), which permits a discretionary award to the
successful party in an action arising out of a contract. Although we do not
reach the merits of Riverview’s challenges to the MDA as a whole, the
present dispute arises out of a purported contract, and specifically, the
MDA’s forum selection clause. See Keystone Floor & More, LLC v. Ariz.
Registrar of Contractors, 223 Ariz. 27, 30, ¶ 10 (App. 2009) (“Fees may be
recovered when a contract is the ‘cause or origin’ of the dispute.” (citation
omitted)). We award Westlake its reasonable attorneys’ fees and taxable
costs incurred in this appeal upon compliance with Arizona Rule of Civil

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                RT AUTOMOTIVE, et al. v. WESTLAKE
                       Opinion of the Court

Appellate Procedure 21. See Dunn, 245 Ariz. at 41-42, ¶ 25 (awarding
attorneys’ fees under § 12-341.01(A) and taxable costs to the successful
party in a forum selection clause challenge).

                            CONCLUSION

¶21          For the foregoing reasons, we affirm the dismissal of
Riverview’s complaint based on a forum selection clause.

                       AMY M. WOOD • Clerk of the Court
                       FILED:    HB

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