Court Opinion

ID: 2998753
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:46:55.71258+00
Date Added: 2024-06-11T18:01:41.187311
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                         ____________

No. 05-2636
PRATIMA J. MUZUMDAR and TRANQUIL PASSAGE,
                                           Plaintiffs-Appellants,
                                v.

WELLNESS INTERNATIONAL NETWORK, LTD.,
WIN NETWORK, INC., RALPH OATS, CATHY OATS,
and SHERI MATTHEWS,
                                 Defendants-Appellees.
                    ____________
           Appeal from the United States District Court
      for the Northern District of Illinois, Eastern Division.
         No. 04 C 6175—Charles R. Norgle, Sr., Judge.
                         ____________

Nos. 05-2686 & 05-2827
RICHARD SHARIF, ABDUL RASHID, et al.,
                                           Plaintiffs-Appellants,
                                v.

WELLNESS INTERNATIONAL NETWORK, LTD.,
WIN NETWORK, INC., RALPH OATS, CATHY OATS,
and SHERI MATTHEWS,
                                 Defendants-Appellees.
                    ____________
           Appeals from the United States District Court
       for the Northern District of Illinois, Eastern Division.
  Nos. 02 C 3047 & 02 C 5801—Samuel Der-Yeghiayan, Judge.
                         ____________
 ARGUED JANUARY 12, 2006—DECIDED FEBRUARY 17, 2006
                    ____________
2                         Nos. 05-2636, 05-2686 & 05-2827

  Before FLAUM, Chief Judge, and BAUER and EVANS,
Circuit Judges.
  EVANS, Circuit Judge. These cases are before us again:
this time the issue involves forum selection clauses. Previ-
ously, in Sharif v. Wellness International Network, Ltd., 376
F.3d 720 (7th Cir. 2004)1, we reviewed and reversed a
denial of a motion to compel arbitration with the result that
claims of less than $100,000 were subject to arbitration.
That left some claims for consideration by the court. Before
us now the question is “what court?”
   The cases were filed in the United States District Court
for the Northern District of Illinois. The Muzumdar case
comes to us from Judge Charles R. Norgle, Sr. and the
Sharif and Rashid cases from Judge Samuel Der-
Yeghiayan. The result in all three was the same: They were
dismissed without prejudice pursuant to forum selection
clauses found in the relevant contracts. Both judges found
that the proper forum was Dallas County, Texas. The plain-
tiffs appeal.
  A challenge to venue based upon a forum selection clause
can appropriately be brought as a motion to dismiss the
complaint under Federal Rule of Civil Procedure 12(b)(3).
Our review of the enforceability of a forum selection
clause is de novo. Continental Ins. Co. v. M/V Orsula,
354 F.3d 603 (7th Cir. 2003).
  The lawsuits involve distributorship contracts that the
plaintiffs had with Wellness International Network (WIN).
The appellants contend that while WIN claims to be in the
business of selling health and wellness products, it

1
  The Sharif and Rashid actions were consolidated and were
the subject of the first decision in this court. The Muzumdar
plaintiffs withdrew from the first appeal.
Nos. 05-2636, 05-2686 & 05-2827                            3

was actually engaged in an illegal pyramid scheme. The
appellants assert a number of claims, including violations of
the Racketeer Influenced and Corrupt Organizations Act
(18 U.S.C. § 1962), federal securities laws, and various
Illinois statutes.
  Each appellant signed either an associate agreement
or a distributor agreement. The associate agreement says:
    JURISDICTION AND VENUE OVER ANY DISPUTES
    ARISING OUT OF THIS AGREEMENT SHALL BE
    PROPER ONLY IN THE FEDERAL OR STATE
    COURTS IN DALLAS COUNTY, TEXAS.
The distributor agreement says:
    ANY DISPUTE OR CLAIM ARISING UNDER OR IN
    CONNECTION WITH THIS AGREEMENT OR WITH
    RESPECT TO THE BUSINESS RELATIONSHIP
    ESTABLISHED BY THIS AGREEMENT . . . SHALL
    BE PROPER ON/BEFORE AN ARBITRATION
    PANEL CONVENED, OR IN A STATE OR FEDERAL
    COURT PRESIDING IN, DALLAS, DALLAS COUNTY,
    TEXAS . . . .
The clauses certainly seem clear enough, especially because
under either federal or Illinois law, forum selection clauses
are valid and enforceable. IFC Credit Corp. v. Aliano Bros.
Gen. Contractors, Inc., 2006 WL 230179, ___ F.3d ___ (7th
Cir. Feb. 1, 2006).2 There is no ambiguity about where the
parties agreed to litigate this dispute. What, then, do the
appellants argue?

2
  IFC held open the question as to whether state or federal
law applies in a dispute over a forum selection clause when
the case is dismissed rather than transferred pursuant to 28
U.S.C. § 1404(a). We see no need to examine that question in
this case.
4                         Nos. 05-2636, 05-2686 & 05-2827

  They contend that language in the WIN rules and
regulations negates the mandatory forum selection clause.
The WIN rules state:
    Each distributor hereby irrevocably and unconditionally
    submits themselves and their property to the non-
    exclusive jurisdiction of any arbitration panel convened,
    or a court of competent jurisdiction in Dallas, Dallas
    County, Texas, whichever is applicable, it be-
    ing acknowledged that the relationship between any
    distributor and WIN is performable, in part, in Dallas
    County, Texas, and further irrevocably and uncondi-
    tionally waives, to the fullest extent that a distributor
    may legally and effectively do so, any objection that
    such distributor may have now or hereafter to such
    venue, including the defense of an inconvenient forum.
This provision, written in the usual mumbo-jumbo of
lawyer-speak, supersedes the contract language, appellants
argue, because the contract says so. The associate contract
and the distributor contract state:
    I HAVE READ THE WIN RULES & REGULATIONS
    AND I AGREE THAT THEY ARE INCORPORATED
    BY REFERENCE INTO THIS AGREEMENT IN
    PRESENT FORM AND THAT THEY ALSO MAY
    BE AMENDED BY WIN FROM TIME TO TIME.
The distributor agreement further states:
    IN THE EXTENT THAT THERE ARE ANY CON-
    FLICTS BETWEEN THIS AGREEMENT AND THE
    WIN RULES & REGULATIONS, THE WIN RULES &
    REGULATIONS SHALL GOVERN.
  The argument is that the WIN rules contain lan-
guage—“non-exclusive jurisdiction”—which renders the
forum selection clauses permissive; because the WIN
Rules govern, the argument continues, the forum selec-
tion clauses are merely permissive. Appellants leap from
Nos. 05-2636, 05-2686 & 05-2827                               5

the phrase “non-exclusive jurisdiction” to the issue of forum,
or venue, because the provision in the WIN rules is entitled
“Venue.” However, that word cannot carry so much weight.
The WIN rules also provide that titles and subtitles are
inserted for convenience and do not affect the meaning of
the rules, and the provision itself refers only to jurisdiction.
  Therefore, what the WIN rules provide is a nonexclu-
sive jurisdictional provision, requiring the appellants to
submit to the personal jurisdiction of the Texas courts. We
cannot find that a provision which requires appellants to
submit to the “non-exclusive” jurisdiction of Texas courts
somehow undermines a very strongly worded forum selec-
tion clause containing mandatory language: “SHALL BE
PROPER ONLY” or “SHALL BE PROPER” in Dallas
County, Texas. We have found such mandatory language to
require enforcing a forum selection clause. We have
said that where venue is specified with mandatory or
obligatory language, the clause will be enforced; where only
jurisdiction is specified, the clause will generally not be
enforced unless there is some further language indicating
the parties’ intent to make venue exclusive. See Paper
Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d
753 (7th Cir. 1992).
  Appellants also spend a good deal of time trying to
convince us that because the contracts themselves are void
and unenforceable as against public policy—i.e., they set
out a pyramid scheme—the forum selection clauses are also
void. The logical conclusion of the argument would be that
the federal courts in Illinois would first have to determine
whether the contracts were void before they could decide
whether, based on the forum selection clauses, they should
be considering the cases at all. An absurdity would arise if
the courts in Illinois determined the contracts were not void
and that therefore, based on valid forum selection clauses,
the cases should be sent to Texas—for what? A determina-
tion as to whether the contracts are void?
6                         Nos. 05-2636, 05-2686 & 05-2827

  What is true is that a forum selection clause can be found
invalid because the clause itself was procured by fraud. As
the Court established in The Breman v. Zapata Off-Shore
Co., 407 U.S. 1, 15 (1972), a forum selection clause will be
enforced unless it can be clearly shown “that enforcement
would be unreasonable and unjust, or that the clause was
invalid for such reasons as fraud or overreaching.” Appel-
lants make no attempt to show that the forum selection
clause was itself obtained by fraud.
  The appellants contend, however, that this contract was a
contract of adhesion. We reject that contention.
The appellants were parties to a somewhat sophisticated
business deal. It is hard to conclude that they would have
signed a contract worth more than $100,000 without
considering its provisions. Contrast this situation with
one involving a truly nonnegotiated contract. In Carnival
Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991), the Su-
preme Court held that even a forum selection clause in a
commercial passage contract—that is, a ticket for a
cruise—was enforceable. The forum selection clauses in
these cases are enforceable.
 Accordingly, the judgments of the district courts dis-
missing these cases are AFFIRMED.

A true Copy:
      Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit

                   USCA-02-C-0072—2-17-06