Court Opinion

ID: 9731220
Source: CourtListenerOpinion
Date Created: 2023-08-26 15:39:06.345589+00
Date Added: 2024-06-11T18:26:16.144575
License: Public Domain

Donald L. Corbin, Justice, dissenting. I dissent from the majority’s conclusion that the Louisiana courts lack subject-matter jurisdiction of this case. Although at first glance this case looks like an in rem proceeding, it is really an action for breach of contract. The complaint filed by Appellee Metroplex, Inc.,1 first requests a judgment against Appellant RMP Rentals, LLC, for its breach of contract for failing to pay Metroplex for its electrical work. The complaint then requests that the judgment be declared a lien on the real property. Finally, in the event the judgment is not paid in a timely manner, the complaint requests that the real property be sold under foreclosure sale to satisfy the judgment. The way I see it, the essence of this case is the claim for breach of contract, which is exactly the type of claim that the parties agreed to Htigate in the courts of Louisiana. For this reason, I would uphold the parties’ agreement and require them to Htigate the issue of breach in Louisiana. This court has only dealt with forum clauses twice. See Nelms v. Morgan Portable Bldg. Corp., 305 Ark. 284, 808 S.W.2d 314 (1991); SD Leasing, Inc. v. Al Spain & Assoc., Inc., 277 Ark. 178, 640 S.W.2d 451 (1982). In both cases, this court held that such clauses are enforceable if they are fair and reasonable. In Nelms, this court held: Such choice of forum clauses in contracts have generally been held binding, unless it can be shown that the enforcement of the forum selection clause would be unreasonable and unfair. 305 Ark. at 289, 808 S.W.2d at 316 (emphasis added). To support this holding, this court relied on the Supreme Court’s holding in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). In M/S Bremen, the Court reversed the Fifth Circuit’s refusal to enforce a forum clause in a shipping contract that named London, England, as the forum of choice. In doing so, that Court noted that, historically, such provisions had been viewed as contrary to public policy, because they tended to oust a court of jurisdiction. However, the more modern trend “is 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.” Id. at 10 (footnote omitted). Thus, the burden is on the party seeking to avoid enforcement of the forum clause to prove that the clause is unfair and unreasonable. Because Appellees are the resisting parties in this case, they bore the burden of showing that the forum- clause was unreasonable and unfair. The question then is what is meant by unreasonable and unfair. The answer is that it depends upon the factual circumstances of each case. However, claims of inconvenience or a waste of judicial resources do not rise'to the level of being unreasonable and unfair. The M/S Bremen Court specifically rejected the view that a forum clause may be unreasonable if the chosen forum is inconvenient, because the parties contemplated such inconvenience when they entered into the agreement. The Court explained: Whatever “inconvenience” Zapata would suffer by being forced to litigate in the contractual forum as it agreed to do was clearly foreseeable at the time of contracting. In such circumstances it should be incumbent on the party seeking to escape his contract to show that trial in the contractualforum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court. Absent that, there is no basis for concluding that it would be unfair, unjust, or unreasonable to hold that party to his bargain. Id. at 17-18 (emphasis added). Thus, for a forum clause to be unreasonable or unfair, it must do more than inconvenience a party; it must effectively deprive the party of its day in court. The Court expanded upon its holding in M/S Bremen in Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991). There, a passenger on one of Carnival’s ships brought suit in her home state of Washington for personal injuries arising out of an accident that occurred during the cruise. Carnival moved to dismiss the action on the ground that the passenger’s contract ticket contained a forum clause requiring all suits to be brought in Florida. The Ninth Circuit refused to enforce the forum clause due to the unequal bargaining power of the parties and the lack of negotiations involved in the contract. The Court reversed the circuit court’s holding on the ground that Florida was not a “remote alien forum,” as Carnival’s principle place of business was in Florida, most cruises departed from and returned to Florida, and the accident occurred off the coast of Mexico. Id. at 594 (quoting M/S Bremen, 407 U.S. 1, 17). The Court held that the passenger had failed to meet her heavy burden of proof and, instead, had offered only evidence that would demonstrate inconvenience. The Court held further that there was no evidence that Carnival had chosen the forum of Florida for the purpose of discouraging passengers from pursuing legitimate claims or that Carnival had obtained the passengers’ accession to the clause by fraud or overreaching. The contracts at issue in this case unmistakably state that the parties agree to bring any civil suit arising under the contract in the courts of Rapides Parish, Louisiana. Under this court’s case law and that of the Supreme Court, Appellees, as the resisting parties, bore the heavy burden of demonstrating that the clause was unreasonable and unfair, i.e., that the forum chosen was so gravely inconvenient or difficult that they would have been effectively deprived of their day in court. Appellees have not met this heavy burden. Appellees failed to offer any evidence to support their claim that enforcement of the forum clause would be unfair and unreasonable. Nor did they offer evidence of fraud on RMP’s part in obtaining the agreement or that RMP’s selection of Louisiana was made for the purpose of discouraging Appellees from pursuing legitimate claims against it. Moreover, Appellees did not offer any evidence showing that the forum of Louisiana was a remote alien forum lacking minimum contacts with the parties or the contract. Instead, Appellees merely claimed that the chosen forum would be inconvenient, because Louisiana could not enforce their liens on RMP’s property. Appellees argued, and the trial court agreed, that it would be a waste of judicial resources to require Appellees to first litigate the breach-of-contract claim in Louisiana and then litigate the enforcement of their liens in Arkansas. However, the fact that Appellees may have to take additional steps to enforce their liens hardly demonstrates that they will be deprived of their day in court. The case of A.C.E. Elevator Co., Inc. v. V.J.B. Construction Corp., 192 Misc. 2d 258, 746 N.Y.S.2d 361 (N.Y. Sup. Ct. 2002), is instructive. There, a contractor filed a mechanic’s lien and foreclosure action in Kings County for work it had done on a construction project. The owner moved to have the case removed to New York County, pursuant to a forum clause in the parties’ contract. The contractor objected on the ground that the land was situated in Kings County and that state statute required all foreclosure actions to be brought in the county in which the land is situated. The court ruled that the forum clause was valid and enforceable and that it trumped the state venue statute. In so holding, the court rejected the contractor’s contentions that enforcing the forum clause (1) would be inconvenient and result in multiple suits, and (2) would impair its rights under the lien laws. The court explained: With regard to the multi-county scenario, I have no doubt that this creates some difficulties to a foreclosing Hen holder who will be forced to proceed through various procedural hoops and submit filings in two counties. For example, if a trial in New York County results in a judgment of foreclosure, [the contractor] will have to obtain a certified copy of the judgment and file it in Kings County in order to enforce the judgment. However, whatever burden is imposed by these additional procedural hoops is a burden of [the contractor’s] own creation and one arising out of its decision to enter into the subject construction contract. I also note that, to the extent that [the contractor] will be compelled to perform additional procedural steps to enforce its lien, this is hardly tantamount to losing its rights under the Lien Law, as it has claimed. Id. at 262-63, 746 N.Y.S.2d at 364 (citation and footnote omitted) (emphasis added). The majority concludes that the decision in A.C.E. Elevator is distinguishable, in that New York statutory law provided that a written agreement fixing the place of trial shall be enforced upon a motion for change of venue. The majority then states that our law in effect at the time that this case was filed made it clear that the chancery court in the county where the property is located has exclusive jurisdiction to enforce a lien on the property. This is a distinction without a difference, as the majority fails to recognize the significance of the New York holding, which is that parties who agree in writing to take their disputes to a particular court must do so, even if a mechanic’s or materialmen’s lien is part of the remedy. From my view, the present case is comparable to the situation presented in A.C.E. Elevator. Both cases involve (1) contracts with forum clauses; (2) contractors alleging that they were not paid according to the contracts; and (3) the use of mechanic’s or materialmen’s liens to ensure payment under the contracts. The only real difference is that in this case, the forum clause placed venue in an adjacent state, rather than an adjacent county. Despite this minor difference, the reasoning set forth in that case is equally sound when applied to this case. Under the forum clause in this case, Appellees were required to bring their breach-of-contract claim in Louisiana. The fact that they may be faced with having to bring a second action in Arkansas to pursue their statutory lien rights does not render the forum clause unfair and unreasonable. Whatever inconvenience that was created by these additional steps is of the Appellees’ own making, and they must honor the bargain that they struck. As the Supreme Court observed in M/S Bremen, 407 U.S. 1, such inconvenience was foreseeable at the time of the contracting, and it falls well short of depriving Appellees of their day in court. The majority’s characterization of this case as purely a foreclosure action misses the mark. True, the complaint is styled “FORECLOSURE COMPLAINT.” However, a cursory review of the complaint reveals that it is, in reality, an action for breach of contract. The liens and the attempt to foreclose on them are merely remedies for the breach of contract. In other words, there can be no foreclosure on the liens without first establishing a breach of contract. By refusing to examine the contents of the complaint, the majority has effectively placed form over substance, something this court has traditionally refused to do. See, e.g., Dodge v. Lee, 352 Ark. 235, 100 S.W.3d 707 (2003) (holding that the trial court erred in looking only to the title of the complaint, while ignoring its contents); Glover v. Woodhaven Homes, Inc., 346 Ark. 397, 57 S.W.3d 211 (2001) (holding that the rights of the parties must not be sacrificed by placing form over substance); Wise Co., Inc. v. Clay County Circuit Court, 315 Ark. 333, 869 S.W.2d 6 (1993) (denying a writ of prohibition where substance of the petition revealed that the action was essentially an improper appeal from the denial of summary judgment); Cornett v. Prather, 293 Ark. 108, 737 S.W.2d 159 (1987) (holding that courts should not be guided blindly by titles but should look to the substance of pleadings to ascertain what they seek); Jack Wood Constr. Co., Inc. v. Ford, 258 Ark. 47, 522 S.W.2d 408 (1975) (holding that this court regards the substance of pleadings, rather than their label). The majority also states that Appellees, as materialmen, have an absolute right to file a lien on the real property under Ark. Code Ann. § 18-44-101 (a) (Repl. 2003). While I do not disagree with this statement, as far as it goes, I disagree with the implication that such a statutory right cannot be bargained away. RMP’s point is well taken that by agreeing to pursue any civil suit arising out of the contract in Louisiana, Appellees chose to limit their right to pursue materialmen’s liens, at least until the underlying cause of action may be determined by the courts of Louisiana. In this respect, I agree with the New York court that requiring Appellees to take additional steps to enforce their liens, pursuant to their own bargain, does not equate to stripping them of their statutory rights under our lien laws. Moreover, in my opinion, there is no merit to Appellees’ claim that their materialmen’s liens will be substantially impaired if the forum clause is enforced. The facts of this case demonstrate that Appellees succeeded in filing their liens against RMP’s property, and those liens remain on file with the circuit clerk. Additionally, they commenced their suit against RMP within the fifteen months provided in Ark. Code Ann. § 18-44-119 (Repl. 2003). Thus, for all practical purposes, Appellees’ lien rights have been preserved and will not be affected by requiring them to litigate the breach issue in Louisiana, as they agreed to do when they signed the contract and accepted the work. In the event that the Louisiana court finds in their favor, and in the event that RMP fails to satisfy the judgment, Appellees may then pursue their action in Arkansas to enforce their liens. In sum, while I agree with the majority that foreclosure proceedings are in rent, I disagree with its conclusion that Louisiana courts lack subject-matter jurisdiction over the claims made in this case. This is a multi-step process. The first and most important step requires a determination of whether RMP breached the terms of its contracts with Metroplex and Williams. This determination can be made by any court having jurisdiction over the parties, regardless of where the land is situated. Here, Louisiana has jurisdiction over the parties, as RMP is a Louisiana company; the contracts were executed by RMP in Louisiana and were approved and administered out of Louisiana; and the parties agreed in their contracts that Louisiana would have exclusive jurisdiction over claims arising out of obligations under the contract. See Nelms, 305 Ark. 284, 808 S.W.2d 314 (citing International Shoe Co. v. Washington, 326 U.S. 310 (1945)). Depending on how the Louisiana courts resolve the first step, the remainder of the case may or may not present an in rem proceeding. By ruling as it does today, the majority has put the proverbial cart before the horse. Accordingly, I dissent. Hannah, J., joins in this dissent.   The cross-claim filed by Appellee Bobby Joe Williams contains the same three-part request.