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Sysco Charlotte, LLC v. Comer

United States District Court, M.D. North Carolina

March 26, 2019

BRANDY LEE COMER, et al., Defendants.


          OSTEEN, JR., District Judge

         Currently before this court are Plaintiff's motion to remand, (Doc. 8), and Defendants' motion to dismiss. (Doc. 5.) Plaintiff asks this court to remand the case to state court pursuant to a forum selection clause in the credit agreement between Plaintiff and certain Defendants. Defendants move to dismiss certain of Plaintiff's claims pursuant to Fed.R.Civ.P. 12(b)(6). For the following reasons, this court finds that Plaintiff's motion to remand should be denied because Defendants did not waive their right to remove this dispute to federal court. This court further finds that Defendants' motion to dismiss should be granted in part and denied in part as set forth herein.


         Plaintiff Sysco Charlotte, LLC sells food and restaurant supplies. (Complaint (“Compl.”) (Doc. 2) ¶ 1.) Defendants are individuals and corporations involved in the restaurant business. (Id. ¶ 6.) Defendant Comer Khori LLC (“Debtor”) took out a line of credit with Plaintiff, secured by certain assets of Debtor. (See Defs.' Not. of Removal (“Removal Not.”) (Doc. 1) at 38; Doc. 8-1.)[1] This line was personally guaranteed by Defendants Brandy Lee Comer and Fareed Al-Khori (collectively, the “Individual Defendants”). (See Compl. Ex. B (Doc. 2-2).)[2]Defendants purchased food and other supplies for their restaurant business from Plaintiff using the line of credit. (Compl. (Doc. 2) ¶¶ 7-9.) The sales included “food purchased under the Federal Perishable Agricultural Commodities Act”, or PACA. (Id. ¶ 10.)

         According to the Complaint, the Individual Defendants are the managing members of Debtor and each of the following entities: Comer-Khori, LLC[3]; Ferrell Group LLC; Murray-Comer-Khori, LLC; HJHN Properties, LLC; and Barn 3203, LLC (collectively, the “LLC Defendants”). (Id. ¶¶ 3-4.)

         The credit agreement[4] between Plaintiff and Debtor includes the following provision:

The parties agree to designate the federal and state courts of North Carolina as the exclusive place of venue and jurisdiction for any dispute between them; and Customer waives any right Customer may have to transfer or change venue regarding Customer's obligations to Sysco. . . . Applicant and guarantors agree to waive exemptions from execution and agree that venue shall be proper in any forum selected by Sysco.

(Doc. 8-1. (emphasis added).) The personal guarantee contains a similar forum selection clause.[5] (Compl. Ex. B (Doc. 2-2).)

         Plaintiff alleges that Defendants have breached the credit agreement by failing to pay and that Defendants have “appropriated the proceeds of the PACA food to their own use.”[6] (Compl. (Doc. 2) ¶ 15.) Plaintiff brings the following claims:

account stated; breach of contract; breach of the implied duty of good faith and fair dealing; unjust enrichment; fraud; constructive fraud; breach of fiduciary duty; conversion; and unfair or deceptive trade practices. (Id. ¶¶ 18-46.) Plaintiff also argues that the Individual Defendants are personally liable for the acts of Debtor and the LLC Defendants based on both piercing the corporate veil and on the individual Defendants' personal guarantee. (Id. ¶¶ 47-49.)

         Plaintiff originally filed suit in the District Court of Cabarrus County, and Defendant Brandy Lee Comer later removed the action to this court as a federal-question case. (See Removal Not. (Doc. 1).) Plaintiff filed a motion to remand, [7](Doc. 8), and a brief in support of that motion, (Pl.'s Br. Supp. Mot. to Remand (“Pl.'s Remand Br.”) (Doc. 10).) Defendants filed a response objecting to remand. (See Doc. 17.) Defendants also moved to dismiss certain claims in the Complaint pursuant to Rule 12(b)(6), (Doc. 5), and submitted a brief in support of that motion, (Defs.' Br. in Supp. of Mot. to Dismiss (“Defs.' Br.”) (Doc. 7).) Plaintiff responded opposing the motion to dismiss, (Doc. 12), and Defendants did not file a reply.


         A. Standard of Review

         “The burden of establishing federal jurisdiction is placed upon the party seeking removal.” Mulcahey v. Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994). Out of “[d]ue regard for the rightful independence of state governments . . . [federal courts must] scrupulously confine their own jurisdiction to the precise limits which the statute has defined.” Healy v. Ratta, 292 U.S. 263, 270 (1934). Matters can be removed to federal court only when they could have been brought in federal court in the first instance. See 28 U.S.C. § 1441(a). For example, federal courts have jurisdiction over any case that implicates a question of federal law, and such a case can therefore generally be removed to federal court. See 28 U.S.C. § 1331.

         However, a contractual forum selection clause is enforceable absent fraud or bad faith. See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972). It is also well-settled that a party may waive its right to remove an otherwise removable case through a forum selection clause. See Bartels v. Saber Healthcare Grp., Inc., 880 F.3d 668, 674-75 (4th Cir. 2018) (collecting cases); accord Find Where Holdings, Inc. v. Sys. Env't Optimization, LLC, 626 F.3d 752, 755 (4th Cir. 2010). The burden of proving that a forum selection clause waives the right to remove falls on the party seeking to enforce the clause. See, e.g., Bartels, 880 F.3d at 680-81 (stating that a forum selection clause blocking removal “essentially operates as an affirmative defense to removal” and, therefore, the party invoking the affirmative defense bears the burden of proof); Docs Billing Sols., LLC v. GENETWORx LLC, Civil No. No. 3:18-cv-35 (MHL), 2018 WL 4390786, at *3 (E.D. Va. Aug. 30), Report and Recommendation adopted by 2018 WL 4390739 (E.D. VA. Sept. 14, 2018).

         There are two types of forum selection clauses: permissive and mandatory. “A permissive clause authorizes jurisdiction in a designated forum but does not prohibit litigation elsewhere. A mandatory clause, in contrast, dictates an exclusive forum for litigation under the contract.” Glob. Satellite Commc'n Co. v. Starmill U.K. Ltd., 378 F.3d 1269, 1272 (11th Cir. 2004). Federal law governs the question of whether a forum selection clause is valid. See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 32 (1988). State contract law, on the other hand, governs the interpretation and construction of the clause itself. See, e.g., Collins v. Mary Kay, Inc., 874 F.3d 176, 181-83 (3d Cir. 2017); Weber v. PACT XPP Techs., AG, 811 F.3d 758, 770-71 (5th Cir. 2016).

         B. Arguments

         Plaintiff argues, in summary, that the term “venue” should be interpreted according to its ordinary meaning and that Defendants have waived the right to remove this case to federal court because that would entail moving the case to a different “place” from where it was initially filed. (Pl.'s Remand Br. (Doc. 10) at 6.) Plaintiff further contends that the final sentence of the forum selection clause gives Plaintiff the exclusive right to select the court in which a dispute is litigated. (Id.) In response, Defendants argue that the forum selection clause “does not operate as a waiver of Defendants' right of removal” because it restricts only transfers outside of, not among, the specified forum courts (North Carolina state and federal courts). (Doc. 17 at 6.) Defendants further assert that Plaintiff's proposed meaning of venue “stands in direct conflict with the Federal Rules of Civil Procedure” and that, even if this court finds the word ambiguous, “it must be construed against the drafter - here, Plaintiff.” (Id. at 9-11.)

         C. Analysis

         Here, the forum selection clause is mandatory in the sense that any dispute between the parties must be litigated in North Carolina state or federal court. Defendants also waive any right “to transfer or change venue . . . and agree that venue shall be proper in any forum selected by” Plaintiff. While Plaintiff urges this court to find that these two clauses preclude Defendants from requesting any change to the initial forum selected by Plaintiff, (Pl.'s Remand Br. (Doc. 10) at 5-7), including by removing the case from state to federal court, this court cannot agree. This court finds that the word “venue” has a specialized meaning pursuant to federal and state statute and that this meaning is more specific than simply the place or location of a courthouse. Rather, the term “venue” refers to the judicial district or districts where a certain case may properly be brought. See 28 U.S.C. § 1391; see also N.C. Gen. Stat. § 1-82. And the phrase “transfer or change venue” refers to either (1) a motion under 28 U.S.C. § 1404 to transfer the case to a different federal venue that would have been proper initially, or (2) a motion pursuant to N.C. Gen. Stat. § 1-83 to change venue to a different, proper North Carolina county.[8]

         Applying these findings to the forum selection clause here, this court finds that Defendants waived only their right to make a motion to transfer or change venue from the initial court selected by Plaintiff, pursuant to either 28 U.S.C. § 1404 or N.C. Gen. Stat. § 1-83, assuming that court was a North Carolina state or federal court.[9] For example, Defendants could not now move to transfer this case to the Western District of North Carolina because they have waived that right in the credit agreement. Defendants did not, however, unconditionally agree that Plaintiff's choice of forum would be final.

         Even assuming for argument that the forum selection clause is ambiguous and could reasonably be interpreted as either waiving the right to transfer venue or waiving the right to change the forum in any way, [10] this court finds that the language should be construed against Plaintiff under North Carolina law. See, e.g., Chavis v. So. Life Ins. Co., 318 N.C. 259, 262, 347 S.E.2d 425, 427 (1986) (“One of the most fundamental principles of contract interpretation is that ambiguities are to be construed against the party who prepared the writing.”). In other words, Plaintiff, as the drafter of the credit agreement, bears the burden of clarifying the meaning of any ambiguous terms. If Plaintiff believed the word “venue” referred to its colloquial meaning of “place, ” Plaintiff should have used the word “place” to eliminate any ambiguity.

         Plaintiff relies solely on arguments relating to contract interpretation and does not appear to contend that, if this court should reject its preferred meaning of “venue, ” this court should nevertheless find that Defendants have waived their right to remove. This court agrees, but also finds it necessary to distinguish the forum selection language at issue here from two situations where courts often find that a party has waived its right to remove. First, courts frequently find that a forum selection clause in which Party A agrees to submit to any court of competent jurisdiction selected by Party B constitutes a waiver of Party A's right to remove. See, e.g., Foster v. Chesapeake Ins. Co., Ltd., 933 F.2d 1207, 1216 (3d Cir. 1991) (the clause stated that one party would “submit to the jurisdiction of any court of competent jurisdiction within the United States” at the request of the other party). Similarly, when one party “waives any objection it may have to the laying of venue of any” lawsuit arising from the agreement, that party waives the right to remove. Waters v. Browning-Ferris Indus., Inc., 252 F.3d 796, 797 (5th Cir. 2001). However, the clause at issue here is different. Defendants agree only that venue shall be proper and waive only their right to make a motion to transfer or change venue pursuant to 28 U.S.C. § 1404, while retaining other objections. Had the parties wished to agree that Plaintiff would have the absolute right to choose the forum court, they would have specified that Defendants waived any objections and submitted to the exclusive jurisdiction of the chosen court.[11] Therefore, this line of cases does not govern the inquiry here.

         Second, some decisions apply the ordinary or plain meaning of “transfer” to interpret a forum selection clause. For example, in FindWhere, the Fourth Circuit confronted a forum selection clause stating that “any dispute or legal action brought by either party arising out of or relating to this Agreement . . . shall lie exclusively in, or be transferred to, the courts of the State of Virginia.” 626 F.3d at 754. The court found that the phrase “or be transferred to” encompassed any geographic movement of the proceedings, including a transfer between different state courts. Id. at 756. The Eleventh Circuit, interpreting a clause pursuant to which one party “waive[d] any right to transfer any such action filed in any court to any other court, ” similarly found that the clause referred to any movement or conveyance and thus waived the right to remove to federal court. See Ocwen Orlando Holdings Corp. v. Harvard Prop. Trust, LLC, 526 F.3d 1379, 1381 (11th Cir. 2008). However, in neither of these cases did the forum selection clause use the word “transfer” specifically in relation to the word “venue”; rather, in each case, the word “transfer” was used in the sense of transferring the dispute or action. Here, this court finds that the forum selection clause uses “transfer” solely to modify the object noun “venue” and that this combination imbues the phrase with a particular meaning that is, at the least, reasonable and sufficient to render the provision ambiguous. Even applying the ordinary, plain meaning of “transfer, ” this court does not find that Defendants have waived their right to remove. Therefore, Plaintiff's motion to remand will be denied.[12]

         III. SUBJECT ...

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