Court Opinion

ID: 4441311
Source: CourtListenerOpinion
Date Created: 2019-09-25 15:05:51.792692+00
Date Added: 2024-06-11T13:55:28.767262
License: Public Domain

The summaries of the Colorado Court of Appeals published opinions
  constitute no part of the opinion of the division but have been prepared by
  the division for the convenience of the reader. The summaries may not be
    cited or relied upon as they are not the official language of the division.
  Any discrepancy between the language in the summary and in the opinion
           should be resolved in favor of the language in the opinion.

                                                                 SUMMARY
                                                             August 22, 2019

                               2019COA129

No. 18CA1331, Avicanna Inc. v. Mewhinney — Contracts —
Forum Selection — Unilateral Waiver

     A division of the court of appeals holds that a plaintiff cannot

unilaterally waive a forum selection clause when the clause was not

included exclusively for the plaintiff’s benefit.
COLORADO COURT OF APPEALS                                         2019COA129

Court of Appeals No. 18CA1331
Pitkin County District Court No. 17CV30089
Honorable Christopher G. Seldin, Judge

Avicanna Inc.,

Plaintiff-Appellant,

v.

Timothy Mewhinney, Steven Garcia, and The Laughing Dog Group, LLC, a
Colorado limited liability company,

Defendants-Appellees.

                             JUDGMENT AFFIRMED

                                   Division I
                           Opinion by JUDGE GROVE
                       Taubman and Hawthorne, JJ., concur

                           Announced August 22, 2019

Dentons US LLP, Karen Ashley Phillips, Robert A. Hammeke, Denver, Colorado,
for Plaintiff-Appellant

Law Office of Corry & Associates, Robert J. Corry, Jr., Abbey G. Moffitt, Denver,
Colorado, for Defendants-Appellees
¶1    In this commercial dispute, we consider whether plaintiff,

 Avicanna Inc., should have been permitted to sue defendants in

 Pitkin County District Court or whether, as the district court found,

 Avicanna was bound by a forum selection clause that designated

 the courts of Ontario, Canada, as the forum for the resolution of

 any disputes between Avicanna and its contractual counterparties.

 Because nothing in the parties’ contract showed that the forum

 selection clause was included exclusively for Avicanna’s benefit, we

 conclude that Avicanna could not unilaterally waive that provision.

 We therefore affirm the district court’s order enforcing the forum

 selection clause and dismissing Avicanna’s complaint without

 prejudice.1

                            I.    Background

¶2    As the district court described it, this case involves a “topsy-

 turvy expression of incentives” in which a Canadian plaintiff filed

 1 Most of the time a dismissal without prejudice is not a final,
 appealable order. Norby v. Charnes, 764 P.2d 407, 408 (Colo. App.
 1988). Where, as here, however, the circumstances of the case
 indicate that the action cannot be saved and that the district court’s
 order precludes further proceedings, dismissal without prejudice
 qualifies as a final judgment for the purposes of appeal. Id.; see
 also Brody v. Bock, 897 P.2d 769, 777 (Colo. 1995).

                                    1
 suit in Colorado against Colorado defendants, and then

 unsuccessfully opposed a motion by those Colorado defendants to

 move the litigation off of their home turf and back to Canada.

¶3    Avicanna is a Canadian corporation with its principal place of

 business in Ontario, Canada. It contracted with St. J Distribution

 LLC, a Colorado limited liability company, and several of its

 members to purchase certain assets from that business. 2 Among

 other things, the asset purchase agreement included the following

 choice of law and forum selection provision:

           9.10 Governing Law; Attornment

           This Agreement will be construed, interpreted
           and enforced in accordance with the laws of
           the Province of Ontario and the federal laws of
           Canada applicable therein. Each Party
           irrevocably attorns and submits to the
           exclusive jurisdiction of the courts of Ontario
           and irrevocably waives objection to the venue
           of any proceeding in those courts or that those
           courts provide an inconvenient forum.

 2 The individual defendants each executed subsidiary independent
 contractor agreements. These agreements each included a forum
 selection clause that was materially identical to the clause that
 appears in the asset purchase agreement, so we only conduct a
 single analysis of the forum selection question in this opinion.

                                   2
¶4    Alleging breach of contract, Avicanna sued all of the

 contractual counterparties, along with Laughing Dog Group, LLC,3

 in Pitkin County. Two of the defendants, St. J Distribution LLC and

 John David Robinson (collectively, St. J), then filed cross-claims

 against the remaining defendants — Timothy Mewhinney, Steven

 Garcia, and The Laughing Dog Group, LLC (collectively, the

 Mewhinney defendants).

¶5    The Mewhinney defendants moved to dismiss both the

 complaint and St. J’s cross-claims for failure to state a claim on

 which relief may be granted. Neither motion mentioned the forum

 selection clause. Instead, the Mewhinney defendants kept quiet

 about the issue until filing their reply in support of their motion to

 dismiss Avicanna’s complaint, when they argued that the forum

 selection clause deprived the trial court of jurisdiction over the

 dispute.

¶6    Because the Mewhinney defendants raised it for the first time

 in a reply (and because it did not implicate the district court’s

 subject matter jurisdiction, see Nickerson v. Network Sols., LLC,

 3The Laughing Dog Group, LLC was owned and/or managed by one
 or more of the members of St. J. Distribution LLC.

                                    3
 2014 CO 79, ¶ 13), the district court declined to consider the

 Mewhinney defendants’ forum selection argument as part of the

 motions to dismiss. In a subsequent sua sponte order, however,

 the court stated that “the issue is significant, and if a party wishes

 to enforce [the forum selection clause] . . . it should be afforded an

 opportunity to present argument to that effect.” The court invited

 briefing on the issue and, shortly thereafter, the Mewhinney

 defendants moved to enforce the forum selection clause.

¶7    In a detailed written order, the district court ruled that the

 forum selection clause “unambiguously states that each party

 submits to the jurisdiction of [the courts of] Ontario,” and that

 because nothing in the parties’ agreement showed that the clause

 was included “solely for Avicanna’s benefit,” Avicanna could not

 unilaterally waive it. The district court also rejected Avicanna’s

 argument that the Mewhinney defendants “relinquished any right to

 enforce the clause by failing to raise it earlier,” thereby waiving their

 right to invoke its protections. Although the court stated that the

 Mewhinney defendants’ tardiness in raising the issue made it “a

 close case,” the court ultimately concluded that Avicanna was not

 prejudiced by the delay. As a result, the court granted the

                                    4
  Mewhinney defendants’ motion to enforce the forum selection

  clause and dismissed the case without prejudice.

       II.      Avicanna Could Not Unilaterally Waive the Forum Selection
                                         Clause

¶8           Avicanna argues that the forum selection clause in the

  contract was intended for its sole benefit, and that it was therefore

  entitled to unilaterally waive its protections and file suit in

  Colorado. We disagree.

                                A. Standard of Review

¶9           We review de novo a district court’s application of a forum

  selection clause. Adams Reload Co. v. Int’l Profit Assocs., Inc., 143
P.3d 1056, 1058 (Colo. App. 2005).

                                      B. Analysis

¶ 10         Our goal in interpreting a contract is “to determine and give

  effect to the intention of the parties.” USI Props. E., Inc. v. Simpson,

  938 P.2d 168, 173 (Colo. 1997). To discern the parties’ intent, we

  look first to “the language of the instrument itself.” City of Aurora v.

  N. Colo. Water Conservancy Dist., 236 P.3d 1222, 1226 (Colo. 2010).

  If that language is unambiguous, we will enforce the contract

  consistent with the plain and ordinary meanings of its terms. Id.

                                         5
¶ 11   A forum selection clause will be enforced unless the party

  seeking to avoid its effect — Avicanna in this case — proves that

  enforcement of the clause would be unfair or unreasonable. Edge

  Telecom, Inc. v. Sterling Bank, 143 P.3d 1155, 1159 (Colo. App.

  2006). Avicanna likewise carries the burden of demonstrating that

  it was entitled to unilaterally waive the forum selection clause. See

  ABC Mobile Sys., Inc. v. Harvey, 701 P.2d 137, 139 (Colo. App.

  1985). “[T]he mere fact that a defendant seeking to enforce the

  forum selection clause is a resident of the state where the action is

  commenced will not render the clause ineffective.” Id. at 139-40

  (citing Societe Jean Nicholas Et Fils v. Mosseux, 597 P.2d 541 (Ariz.

  1979)). Rather, the contractual forum must be so gravely difficult

  and inconvenient that parties seeking to escape their contract will

  for all practical purposes be deprived of their day in court. Id.

¶ 12   Avicanna does not contend that the forum selection clause is

  ambiguous. Nor does it assert that enforcement of the clause would

  be unfair or unreasonable. Instead, relying in large part on the

  analysis in Rizas v. Vail Resorts, Inc., No. 08-CV-139-J, 2009 WL
10664834 (D. Wyo. Oct. 1, 2009), Avicanna argues that it was

  entitled to unilaterally waive enforcement of the forum selection

                                     6
  clause because that provision was included in the contract

  exclusively for its benefit.

¶ 13   It is well-settled that a party may waive a provision that was

  included in a contract for that party’s sole benefit. See Fravert v.

  Fesler, 11 Colo. App. 387, 391, 53 P. 288, 290 (1898) (“Any person

  may waive a formal condition inserted in a contract for his benefit,

  and the waiver need not be express.”); see also 13 Williston on

  Contracts § 39:24, Westlaw (4th ed. database updated May 2019).

  But it is equally true that “a waiver of contract requirements and

  conditions may not be made unilaterally when it would deprive the

  nonwaiving party of a benefit under the provision in question.” 13

  Williston on Contracts at § 39:24. Accordingly, Avicanna could

  unilaterally waive the forum selection clause if — but only if — it

  demonstrated that the clause was intended to benefit Avicanna

  alone.

¶ 14   Because the forum selection clause is unambiguous, Avicanna

  may not rely on extrinsic evidence to show that it was the sole

  beneficiary of that provision. ABC Mobile, 701 P.2d at 140.

  Instead, Avicanna argues that its sole beneficiary status may be

  gleaned from the four corners of the contract itself — and in

                                     7
  support of its position it points out that it was the only signatory

  that was a resident of Ontario, while all the other parties were from

  Colorado. Thus, Avicanna argues, “the Ontario choice of forum

  clauses were drafted for the sole benefit of Avicanna, the only party

  that is an Ontario resident.”

¶ 15   For three reasons, we disagree that Avicanna’s status as the

  only Canadian resident, standing on its own, is enough to show

  that the parties incorporated the forum selection clause into this

  complex arm’s-length agreement exclusively for Avicanna’s benefit.

¶ 16   First, inferring the substance of the parties’ negotiations from

  the four corners of the contract is impossible. Mewhinney and

  Garcia may have agreed to the forum selection clause as drafted —

  or perhaps even requested it in the first instance — for any number

  of reasons. For example, they may have believed that Canadian

  courts resolve disputes quicker, more fairly, or more efficiently. Or

  perhaps they concluded that, in the event of a breach, substantive

  Ontario law would be more favorable to them than Colorado law.

  Or they might have reluctantly agreed to a bilateral forum selection

  clause in exchange for the inclusion of more favorable terms

  elsewhere in the contract.

                                     8
¶ 17   Second, the forum selection clause, by its plain terms, applies

  to “Each Party.” As demonstrated by the differing outcomes in

  Open Text Corp. v. Grimes, 262 F. Supp. 3d 278 (D. Md. 2017), and

  Imperium Insurance Co. v. Allied Insurance Brokers, Inc., No. CIV.

  CCB-12-1373, 2012 WL 4103889 (D. Md. Sept. 17, 2012), two

  cases that considered forum selection clauses with substantial

  similarities to the clause in dispute here, this language of mutuality

  signals an intent to apply the forum selection clause to every

  signatory to the contract.

¶ 18   In Open Text, the court considered an employment contract

  between a Maryland-based employee (Grimes) and a Canadian

  corporation (Open Text) that was based in Ontario. The contract

  included a promise by the employee that “I hereby irrevocably

  attorn to the jurisdiction of the courts of the Province of Ontario.”
262 F. Supp. 3d at 281. After the corporation sued the employee in

  Maryland, the employee moved to dismiss, arguing that the forum

  selection clause required suit to be filed in Ontario. Relying on “the

  specific language of the Grimes Agreement,” which “only include[d]

  a promise by Grimes,” the court concluded that “[t]he mere fact that

  Grimes agreed to ‘irrevocably attorn to the jurisdiction of the courts

                                     9
  of the Province of Ontario’ did not foreclose Open Text’s ability to file

  suit in Grimes’ home state.” Id. at 286.

¶ 19   In reaching this conclusion, the Open Text court distinguished

  Imperium, a case involving a forum selection clause that, instead of

  including a promise by only one of the litigants, bound “each party.”

  The clause at issue in Imperium stated as follows:

             Each party . . . stipulates that the State and
             Federal courts located in the County of New
             York, State of New York shall have in
             personam jurisdiction and venue over each of
             them for the purpose of litigating any dispute,
             controversy, or proceeding arising out of or
             related to this Agreement.

  Imperium, 2012 WL 4103889, at *1. This clause, the court

  determined, was “bilateral” — that is, intended to benefit both

  parties — particularly when it was considered together with other

  portions of the contract that specifically allotted authority and

  responsibilities to one party or the other. Id. And because the

  clause was a “mutually beneficial provision,” it could not be

  unilaterally waived by either party. Id. at *3.

¶ 20   We agree with the reasoning in Open Text and Imperium. And,

  taking the same approach that the courts applied in those cases, we

  conclude that Rizas — the centerpiece of Avicanna’s argument —

                                     10
actually supports the district court’s conclusion in this case. Most

importantly, as in Open Text, the provision at issue in Rizas, which

included both forum selection and choice of law clauses, did not

purport to protect “each party.” To the contrary, it provided in

pertinent part that

          [i]t is agreed by [the tour operator] and
          the Tour Member that all legal claims,
          actions, and proceedings against [the
          tour operator] under, in connection with,
          resulting from or incident to a tour may
          be instituted, if at all, only in a state or
          federal court within the State of
          Connecticut, USA, to the exclusion of the
          courts of or in any other state or
          jurisdiction. It is further agreed that all
          such claims, actions and proceedings
          shall be governed by and decided in
          accordance with the laws of the State of
          Connecticut.

Rizas, 2009 WL 10664834, at *2. While this clause prescribed the

forum and governing law for lawsuits filed against the tour

operator, it did not designate the forum or governing law for a

lawsuit that might be filed by the tour operator against a tour

member. In other words, the provision at issue in Rizas protected

only one party to the transaction and, as a result, was the very

definition of a provision that is not mutually beneficial. Because it

                                  11
  protected only the tour operator, the Rizas court correctly found

  that the forum selection clause and choice of law language were

  included for the tour operator’s sole benefit. And because the

  provision at issue protected only the tour operator, that party was

  permitted to unilaterally waive it.

¶ 21   Third, we find significant the forum selection clause’s proviso

  that each party “irrevocably attorns and submits to the exclusive

  jurisdiction of the courts of Ontario.” (Emphasis added.)

  “Irrevocable” means “[u]nalterable; committed beyond recall.”

  Black’s Law Dictionary 994 (11th ed. 2019). Allowing Avicanna to

  sidestep the forum selection clause — that is, to revoke its

  ostensibly irrevocable commitment to abide by its terms — would

  render this language meaningless, a result we strive to avoid. See

  Pepcol Mfg. Co. v. Denver Union Corp., 687 P.2d 1310, 1313 (Colo.

  1984) (“An integrated contract in the first instance is to be

  interpreted in its entirety with the end in view of seeking to

  harmonize and to give effect to all provisions so that none will be

  rendered meaningless.”).

¶ 22   For these reasons, we agree with the district court’s

  conclusion that Avicanna failed to carry its burden of showing by a

                                    12
  preponderance of the evidence that it was the sole beneficiary of the

  forum selection clause.

       III.   The Mewhinney Defendants Did Not Waive the Forum
                           Selection Clause

¶ 23   Avicanna next contends that the Mewhinney defendants

  waived any opportunity to enforce the forum selection clause by

  failing to timely raise the issue in the district court. We disagree.

                            A. Standard of Review

¶ 24   Ordinarily, waiver is a factual matter determined by the trial

  court. Vessels Oil & Gas Co. v. Coastal Ref. & Mktg., Inc., 764 P.2d
391, 392 (Colo. App. 1988). But where, as here, the facts bearing

  on waiver are uncontested and the evidence before the trial court is

  entirely documentary, waiver becomes a matter of law, and we are

  not bound by the trial court’s findings. Id.

                                 B. Analysis

¶ 25   Waiver is the intentional relinquishment of a known right.

  Vanderbeek v. Vernon Corp., 25 P.3d 1242, 1248 (Colo. App. 2000),

  aff’d, 50 P.3d 866 (Colo. 2002). A party waives a contractual right,

  including the right to rely on a forum selection clause, if the party

  acts inconsistently with the right and prejudice accrues to the other

                                    13
  parties to the contract. Id. (holding that plaintiffs waived the right

  to rely on forum selection clause when they filed an action in a

  different forum); see also Gallagher’s NYC Steakhouse Franchising,

  Inc. v. 1020 15th St., Inc., Nos. 08-cv-01639-PAB-BNB, 08-cv-

  01896-PAB-BNB, 2009 WL 1796297, at *4 (D. Colo. June 23, 2009)

  (unpublished opinion) (holding that plaintiff waived the right to

  enforce Florida forum selection clause when it filed the case in

  Colorado); cf. Vessels Oil & Gas Co., 764 P.2d at 392 (holding that

  merely filing an answer, commencing discovery, and engaging in

  settlement negotiations outside selected venue did not constitute

  waiver of forum selection clause). “Waiver may be express, or it

  may be implied when a party’s actions manifest an intent to

  relinquish a right or privilege.” Venard v. Dep’t of Corr., 72 P.3d
446, 450 (Colo. App. 2003). However, in establishing implied waiver

  by conduct, “the conduct itself should be free from ambiguity and

  clearly manifest the intention not to assert the benefit.” Dep’t of

  Health v. Donahue, 690 P.2d 243, 247 (Colo. 1984).

¶ 26   In Vessels, a division of this court considered whether a

  defendant had relinquished its right to enforce a forum selection

  clause by failing to raise the issue for three months after the

                                    14
  complaint was filed. During that period, the defendant filed its

  answer to the complaint, engaged in settlement negotiations, and

  served discovery requests on the plaintiff. Vessels, 764 P.2d at 392.

  In rejecting the plaintiff’s waiver argument, the division noted that

  “filing an answer on the merits, or commencing discovery, without

  more, does not constitute a waiver as a matter of law.” Id.

¶ 27   Here, the district court looked to Vessels to conclude that,

  while it was a “close case . . . the only substantive acts in the

  litigation actually initiated by” the Mewhinney defendants were their

  various motions to dismiss. The court also noted the Mewhinney

  defendants’ “noncompliance with certain features of the Rules [of

  Civil Procedure],” their procedural motions practice, and their

  answers to the cross-claims filed by the St. J defendants, but the

  court ultimately concluded that “only the motions to dismiss

  potentially constitute sufficient engagement with this forum to

  support a finding of waiver.”

¶ 28   Next, turning to the requirements for a finding of waiver — the

  intentional relinquishment of a known right and prejudice — the

  district court pointed out that the Mewhinney defendants had first

  raised the forum selection issue in the replies that they submitted

                                     15
  in support of their motions to dismiss, rather than in separate

  papers after briefing was closed. These circumstances, the court

  noted, “suggest[ed] not so much an intentional relinquishment of a

  known right by a party as it [did] an oversight by counsel in the

  early stages of the case.” With respect to prejudice, the court found

  that the fee shifting provision of the contract, together with the

  possibility that “fees will be recoverable . . . in the Canadian courts,

  where fee-shifting is apparently the rule,” were enough to overcome

  Avicanna’s claim that it would be unfairly harmed if the forum

  selection clause were enforced.

¶ 29   We agree with the district court. To be sure, the Mewhinney

  defendants waited longer than the defendant in Vessels to raise the

  forum selection issue, but their level of engagement in the case —

  which is a more important factor in our view — was actually less.

  Importantly, the Mewhinney defendants never independently

  attempted to invoke the district court’s jurisdiction by, for example,

  filing counterclaims against Avicanna, cross-claims against St. J, or

  impleading third parties who were not named in either complaint.

  Indeed, the only reason that the Mewhinney defendants filed

  anything in the district court was because Avicanna attempted to

                                     16
  unilaterally contravene the forum selection clause in the first place

  by filing suit in Colorado.

¶ 30   Given the Mewhinney defendants’ limited substantive

  engagement in the case and the possibility of fee-shifting under the

  terms of the contract or pursuant to Canadian law, we conclude

  that the prejudice suffered by Avicanna is not sufficient to support

  a finding of waiver by the Mewhinney defendants. While counsel

  certainly should have been more attentive, we decline to hold that

  his tardiness in recognizing the issue was a clear manifestation of

  the Mewhinney defendants’ intent to waive the choice of forum

  provision.

¶ 31   We are not persuaded otherwise by the fact that the

  Mewhinney defendants relied on Colorado law in their motions to

  dismiss. At the threshold, for many of the reasons that we have

  already discussed in the context of the forum selection clause, it is

  doubtful that either party could have unilaterally waived the choice

  of law provision. The contract reflects the parties’ mutual

  agreement to apply Canadian law. And because nothing within the

  four corners of the contract suggests that provision was included

                                    17
  solely for the benefit of the Mewhinney defendants, it follows that

  the Mewhinney defendants could not unilaterally waive it.

¶ 32   In any event, nothing in the record suggests that the

  Mewhinney defendants’ failure to assert defenses under Canadian

  law was intentional, rather than yet another oversight on the part of

  counsel. Under the circumstances here, we decline to infer from

  counsel’s initial reliance on Colorado law an intention on the part of

  the Mewhinney defendants to waive the choice of law provision of

  the parties’ contract.

                           IV.   Appellate Attorney Fees

¶ 33   The Mewhinney defendants request an award of attorney fees

  and costs pursuant to C.A.R. 38(b) and 39.1. Although Avicanna

  did not succeed in this appeal, it advanced cogent and

  well-supported arguments. See Mission Denver Co. v. Pierson, 674
P.2d 363, 365 (Colo. 1984) (“Standards for determining whether an

  appeal is frivolous should be directed toward penalizing egregious

  conduct without deterring a lawyer from vigorously asserting his

  client’s rights.”); see also Janicek v. Obsideo, LLC, 271 P.3d 1133,

  1140 (Colo. App. 2011) (“[A] claim is not frivolous ‘if it is meritorious

  but merely unsuccessful[.]’” (quoting Hamon Contractors, Inc. v.

                                       18
  Carter & Burgess, Inc., 229 P.3d 282, 299 (Colo. App. 2009))). We

  therefore decline to award appellate attorney fees.

                             V.    Conclusion

¶ 34   We affirm the district court’s judgment and deny the

  Mewhinney defendants’ request for attorney fees and costs.

       JUDGE TAUBMAN and JUDGE HAWTHORNE concur.

                                   19