Court Opinion

ID: 4155800
Source: CourtListenerOpinion
Date Created: 2017-03-27 17:00:46.648698+00
Date Added: 2024-06-11T14:26:57.720305
License: Public Domain

NOT PRECEDENTIAL
                        UNITED STATES COURT OF APPEALS
                             FOR THE THIRD CIRCUIT
                                  ___________

                                       No. 15-3372
                                       ___________

                    JEFFREY PODESTA; STREET SEARCH, LLC,
                                         Appellants

                                             v.

      JOHN F. HANZEL, Esquire; JOHN F. HANZEL, P.A. Attorneys at Law;
    HONEYWOOD ENERGY LLC, formerly known as Blackwood Energy, LLC;
     JAYSON COLAVALLA; John Does 1–10; TONY C. SCOTT; SAMUEL V.
   WATKINS; TALC PROPERTIES FL, LLC; TALC PRIVATE VENTURES, LLC
                 ____________________________________

                     On Appeal from the United States District Court
                         for the Middle District of Pennsylvania
                                (M.D. Pa. No. 3-15-cv-375)
                      District Judge: Honorable James. M. Munley
                      ____________________________________

                       Submitted under Third Circuit LAR 34.1(a)
                                  on October 27, 2016

             Before: FISHER, VANASKIE, and KRAUSE, Circuit Judges

                             (Opinion filed: March 27, 2017)

                                      O P I N I O N

       
       Honorable D. Michael Fisher, United States Circuit Judge for the Third Circuit,
assumed senior status on February 1, 2017.

       
         This disposition is not an opinion of the full Court and, pursuant to I.O.P. 5.7,
does not constitute binding precedent.
KRAUSE, Circuit Judge

      Jeffrey Podesta and Street Search, LLC challenge the District Court’s dismissal of

their Amended Complaint on the basis of a forum selection clause in an escrow contract.

For the reasons stated below, we will affirm.

I.    Background1

      This case arises out of allegations of fraud in a real estate investment deal.

According to the Amended Complaint, Podesta was approached by a business

acquaintance about an opportunity to invest in a real estate transaction. Podesta, a New

Jersey resident, was introduced to a prospective property buyer who told Podesta that he

had a pending agreement to purchase the Blackwood Mine in central Pennsylvania. The

buyer told Podesta he needed an influx of cash to close on the property and secure a line

of credit. Podesta agreed to loan the buyer $300,000 in exchange for a promise that

Podesta would immediately receive $1.5 million as soon as the closing occurred and the

line of credit was made available. The buyer was represented by John F. Hanzel, an

attorney licensed in North Carolina, who told Podesta that he would review all documents

regarding the sale of the property, organize the financing, and manage the escrow account

for the closing on the property. Podesta, on behalf of his company Street Search, LLC,

signed an Escrow Agreement with Hanzel and the property buyer’s company designating

Hanzel as the agent for the escrow account. Hanzel told Podesta that the financing was in

      1
         Because we write primarily for the parties, we provide background only as
relevant to the issues on appeal.
                                            2
place and instructed him to wire the $300,000 to the escrow account. Podesta transferred

the funds but then soon discovered that the purported property buyer did not have a valid

purchase or loan agreement as indicated. Podesta requested the return of the funds per

the terms of the Escrow Agreement, but Hanzel allegedly kept $25,000 for himself and

wrongfully released the remaining funds to parties associated with the buyer.

       Podesta and Street Search (collectively “Podesta”) commenced this action in the

United States District Court for the Middle District of Pennsylvania, bringing claims for

fraud, breach of contract, breach of fiduciary duty, negligence, and civil conspiracy

against Hanzel and his law firm, John F. Hanzel, P.A. (collectively “Hanzel”), as well as

other defendants. Hanzel filed a motion to dismiss the Amended Complaint pursuant to

Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6). The District Court granted the

motion and dismissed the claims on the basis that a forum selection clause in the Escrow

Agreement required suit to be filed in North Carolina, and, in the alternative, on the basis

that the court lacked personal jurisdiction over Hanzel. Podesta filed this timely appeal.

II.    Discussion2

       Podesta argues that the District Court erred by giving effect to the forum selection

clause and by considering Hanzel’s irrelevant out-of-state activities in its analysis of

       2
          The District Court had jurisdiction pursuant to 28 U.S.C. § 1332. We note that
Appellees’ motion requested only the dismissal of claims asserted against them. In
response, however, it appears the District Court granted the motion without prejudice to
filing in North Carolina and directed the clerk of court to close the case. Accordingly, the
District Court’s order of dismissal is a final, appealable order over which we may
exercise jurisdiction pursuant to 28 U.S.C. § 1291.
                                                3
personal jurisdiction. Because we find the forum selection clause dispositive, we need

not consider the court’s personal jurisdiction.

         We exercise plenary review over the interpretation and enforcement of a forum

selection clause. Salovaara v. Jackson Nat. Life Ins. Co., 246 F.3d 289, 295 (3d Cir.

2001).

         A.     Waiver

         As a threshold matter, Podesta argues that the District Court erred by construing

Hanzel’s motion to dismiss as a request for enforcement of the forum selection clause.

According to Podesta, because Hanzel did not label the motion as one to transfer venue

under 28 U.S.C. § 1404, the District Court should have regarded any objections on the

basis of the forum selection clause as waived. On the contrary, the District Court

reasonably construed the intent of the motion and identified Rule 12(b)(6) as a proper

vehicle for enforcing the clause.

         First, the District Court was permitted to construe the motion as a request to

enforce the forum selection clause even if it was not explicitly labeled as one. In

determining how to construe an ambiguous motion, we have instructed courts to focus

“on the function of the motion, not its caption.” Turner v. Evers, 726 F.2d 112, 114 (3d

Cir. 1984); see also Hook v. Hook & Ackerman, Inc., 213 F.2d 122, 128 (3d Cir. 1954)

(“The label does not determine the nature of the motion.”). The District Court correctly

applied that principle here when it recognized that the motion quoted the forum selection

clause in the Escrow Agreement and argued that the Middle District of Pennsylvania was
                                               4
not the proper forum for the action. Indeed, Podesta’s Response to Hanzel’s motion to

dismiss demonstrates that he, too, recognized Hanzel’s motion as presenting a forum

selection clause argument and took the opportunity to respond to that argument.

       Furthermore, while Podesta is correct that a party may move under 28 U.S.C.

§ 1404(a) to transfer a case to another federal court based on a valid forum selection

clause, a Rule 12(b)(6) dismissal is also an acceptable means of enforcing such a clause

when, as here, the clause allows for suit in either a state or federal forum. Salovaara, 246

F.3d at 298; see also Atl. Marine Constr. Co. v. U.S. Dist. Court for W. Dist. of Texas,

134 S. Ct. 568, 580 (2013) (recognizing in dictum the possibility that Rule 12(b)(6)

would be a valid mechanism for enforcing a forum selection clause). Therefore, the

District Court did not err in construing Hanzel’s motion as requesting enforcement of the

forum selection clause and in dismissing on that basis.

       B.     Enforceability

       Podesta argues that even if the forum selection clause is considered, it should not

be enforced, but we agree with Appellees that the District Court correctly concluded

Podesta failed to overcome the clause’s presumed validity. Contract clauses reflecting a

chosen forum are typically “prima facie valid and should be enforced” unless a plaintiff

can demonstrate that “enforcement would be unreasonable and unjust, or that the clause

was invalid for such reasons as fraud or overreaching.” M/S Bremen v. Zapata Off-Shore

Co., 407 U.S. 1, 10, 15 (1972). In assessing the reasonableness of the chosen forum, we
                                             5
must keep in mind that “[w]hen parties agree to a forum-selection clause, they waive the

right to challenge the preselected forum as inconvenient or less convenient for themselves

or their witnesses, or for their pursuit of the litigation.” Atl. Marine, 134 S. Ct. at 582.

       The only argument that Podesta makes against the enforceability of the forum

selection clause is that a North Carolina forum “would offend reasonableness and would

be vexatious” since the claims involve what he describes as “a Pennsylvania transaction”

and “a Pennsylvania seller.” Appellants’ Br. 11, 16. While there is some nexus to

Pennsylvania, the Amended Complaint makes clear that events and omissions occurred in

other locations, as well, including in North Carolina. The Escrow Agreement also

provides that it is to be “governed and construed in accordance with” North Carolina law.

App, Vol. II, 28. Podesta fails to explain how laying venue in North Carolina would be

so unreasonable or unjust that it could override the parties’ venue preferences expressed

in the forum selection clause.3 The District Court therefore correctly concluded that

Podesta failed to meet his burden of demonstrating that the forum selection clause should

not be enforced.

       3
         Podesta also argues that he should have been permitted limited discovery. In
some cases “where issues arise as to jurisdiction or venue, discovery is available to
ascertain the facts bearing on such issues.” Oppenheimer Fund, Inc. v. Sanders, 437 U.S.
340, 351 n.13 (1978). A district court’s decision to deny such limited discovery is
reviewed for abuse of discretion. See Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446,
455 (3d Cir. 2003). In this case, Podesta sought “jurisdictional” discovery solely “to
determine Hanzel’s Pennsylvania directed involvement” and support his argument that
the court could exercise personal jurisdiction over Hanzel. App. Vol. II, 123. He fails to
explain, however, how this request is relevant to the forum selection clause. The District
Court did not abuse its discretion in implicitly denying these requests.

                                               6
       C.     Applicability

       To the extent Podesta’s argument also can be construed as challenging the

applicability of the forum selection clause to the full breadth of the claims he now raises,

we conclude that the District Court correctly interpreted the clause as covering all claims

asserted against Hanzel.4 The parties provide no guidance as to which state’s law on

contract interpretation applies, but that is of no consequence because both North Carolina

and the forum state of Pennsylvania apply the traditional contract principle that when the

language of a contract is clear and unambiguous on its face, we must give effect to that

plain meaning as a reflection of the intent of the parties. See Kripp v. Kripp, 849 A.2d

1159, 1163 (Pa. 2004); Weyerhaeuser Co. v. Carolina Power & Light Co., 127 S.E.2d

539, 541 (N.C. 1962).

       The clause at issue here—which extends to “any action concerning any and all

claims, disputes or controversies arising out of or relating to” the agreement—plainly

covers the claims brought against Hanzel. App. Vol. II, 28. While Podesta asserts claims

in addition to breach of contract, “pleading alternate non-contractual theories is not alone

enough to avoid a forum selection clause if the claims asserted arise out of the contractual

relation and implicate the contract’s terms.” Crescent Int’l, Inc. v. Avatar Cmtys., Inc.,

       4
         As noted above, the District Court dismissed the action as to all the defendants.
On appeal, however, Podesta only appears to challenge the applicability of the forum
selection clause in the Escrow Agreement as to Hanzel. Because Podesta did not
challenge the applicability of the forum selection clause to the other Appellees in his
opening brief, the issue was waived. See Laborers’ Int’l Union of N. Am., AFL-CIO v.
Foster Wheeler Energy Corp., 26 F.3d 375, 398 (3d Cir. 1994).
                                             7
857 F.2d 943, 944 (3d Cir. 1988). An action need not allege contract-based claims in

order for a forum selection clause in a contract to be enforced so long as the claims “stem

from the contractual relationship.” Carlyle Inv. Mgmt. LLC v. Moonmouth Co. SA, 779

F.3d 214, 220 (3d Cir. 2015).

       As it is clear that there is a causal connection between the Escrow Agreement and

each of the claims asserted against Hanzel in the Amended Complaint, the District Court

correctly concluded that the forum selection clause requires all of those claims to be

brought in North Carolina.

III.   Conclusion

       For the foregoing reasons, we will affirm the District Court’s order of dismissal.

                                             8