DOREL STEEL ERECTION CORPORATION v. CAPCO STEEL CORPORATION

392 F.Supp.2d 110 (2005) | Cited 2 times | D. Massachusetts | October 13, 2005

MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS (#19)

I. Introduction

On or about June 8, 2005, Capco Steel Corporation ("thedefendant") moved to dismiss without prejudice Dorel SteelErection Corporation's ("the plaintiff") three-count breach ofcontract action filed in Massachusetts pursuant toFed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. The defendant argued that the forum selection clauseincluded in the parties' agreement titled "Memorandum ofUnderstanding" (the "contract") provided that the forum forlitigation could only be in a Rhode Island state or districtcourt (#19). The defendant also filed a memorandum in support ofits motion to dismiss on that date (#20). On June 16, 2005, theplaintiff filed a memorandum in opposition to the defendant'smotion (#21), arguing that the forum selection clause in thecontract was "permissive," not "exclusive," and therefore, thatthis suit was properly filed in Massachusetts. For the reasonsdiscussed below, the defendant's motion to dismiss shall bedenied.

II. The Facts1

On or about July 19, 2001, four parties, including theplaintiff and the defendant, entered a contract relating to aconstruction project referred to as "Boston Convention andExhibition Center" (#3 ["State Court Record"], Ex. 2). Thecontract provided that the plaintiff would be a subcontractor ofthe defendant in the construction project (Canam SteelCorporation and the two other parties to the contract were theother subcontractors) and would perform one-quarter of the workin exchange for $8,750,000 (Id.). Section 12.9 of the contract was titled "Governing Law" and included the followingprovision: This Agreement shall be construed and enforced in accordance with the laws of the State of Rhode Island. In any litigation connected with this Agreement, the parties hereto hereby consent to and confer jurisdiction on the courts of the State of Rhode Island, United States of America and on the United States District Court for the District of Rhode Island, and hereby expressly waive any objections to venue in such courts. THE PARTIES HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION THEREWITH.(#20, pp. i-ii) (emphasis in original).

The plaintiff filed a three-count complaint in MassachusettsSuperior Court on or about March 21, 2005 alleging that it wasnot paid in full for its services and requesting relief for (I)breach of contract, (II) quantum meruit, and (III) reach andapply (Id.). The complaint was subsequently removed to thisCourt by the defendant and Canam Steel Corporation on March 30,2005.

The defendant moved to dismiss the plaintiff's complaint forfailure to state a claim on or about June 8, 2005, arguing thatthe plaintiff should have filed its complaint in a Rhode Islandstate or federal district court, as required by the forum selection clause included as part of the contract(#20, p. iv).2 The plaintiff asserts in opposition thatthe clause is "permissive," not "mandatory," entitling it tobring suit in Massachusetts, the state in which almost allparties in the litigation have their principal places of business(#21, pp. 1-2).

III. Analysis

The main dispute in this case is whether the contract's forumselection clause is "mandatory," requiring this suit to bebrought in Rhode Island, or "permissive," allowing this suit tobe brought in Rhode Island but also in any other court that haspersonal jurisdiction over the parties. Both parties agree thatRhode Island law should apply to the issue of whether the forumselection clause is "mandatory" or "permissive" because thecontract provides that it "shall be construed and enforced inaccordance with the laws of the State of Rhode Island" (#20, pp.i-ii), and, absent a "substantial Massachusetts public policyreason," Massachusetts courts apply the law of the state selectedby the parties when analyzing the effect of a forum selectionclause. Jacobson v. Mail Boxes Etc. USA, Inc., 419 Mass. 572,575, 646 N.E.2d 741, 744 (1995). Here, there is no substantial public policy reason to applyMassachusetts law, rather than Rhode Island law, on the issue offorum selection.

Rhode Island law on the subject of forum selection clauses issparse. However, Rhode Island case law does provide that partiescan agree on a forum for litigation provided that the chosenjurisdiction "has a real relation to the contract." Owens v.Hagenback-Wallace Shows Co., 58 R.I. 162, 164, 192 A. 158(1937), reargument denied, 58 R.I. 268, 192 A. 464 (1937). Bothparties agree that Rhode Island is a proper state on whichjurisdiction can be conferred — the defendant is a Rhode Islandcorporation with its principal place of business located inProvidence, Rhode Island (#20, p. iii). In other words, RhodeIsland has a real relation to the contract.

Rhode Island case law also specifically holds that "courts[should] employ the standard principles of contract law" wheninterpreting the language of forum selection clauses. DeCesarev. Lincoln Benefit Life Co., 852 A.2d 474, 482 (R.I., 2004)."[T]hese principles include the familiar maxims that unambiguousterms will be given their plain and ordinary meaning." Id.,citing Perry v. Garey, 799 A.2d 1018, 1023 (R.I., 2002), citingDubis v. East Greenwich Fire District, 754 A.2d 98, 100 (R.I.,2000). "[A] contract is ambiguous only when it is reasonably andclearly susceptible of more than one interpretation." Samos v. 43 East Realty Corp., 811 A.2d 642,643 (R.I., 2002) quoting from Paradis v. Greater ProvidenceDeposit Corp., 651 A.2d 738, 741 (R.I., 1994), citing W.P.Associates v. Forcier, Inc., 637 A.2d 353, 356 (R.I., 1994).

Thus, it is necessary first to determine whether the forumselection clause in the instant contract is ambiguous. Therelevant part of the forum selection clause states that "[i]n anylitigation connected with [the contract], the parties . . .consent to and confer jurisdiction on" Rhode Island state andfederal district courts and "waive any objections to venue insuch courts." The first phrase is not ambiguous because the onlyreasonable interpretation to which it is susceptible is that theparties to the contract are agreeing to allow each other tolitigate in Rhode Island courts for matters connected to thecontract. This phrase does not explicitly exclude the courts ofother states, nor is there any language mandating that alllitigation take place in Rhode Island or that the parties to thecontract litigate only in Rhode Island in connection with thecontract.

Similarly, the second phrase which says that the parties "waiveany objections to venue in [Rhode Island] courts" also isunambiguous. The only reasonable interpretation of this phrase isthat the parties to the contract agree not to object to any litigation brought within Rhode Island onthe basis of venue. Therefore, no part of the forum selectionclause is ambiguous.

It is clear, therefore, that the plain and ordinary meaning ofthe forum selection clause indicates that the clause ispermissive in nature rather than mandatory. "`To be mandatory, aforum selection clause must contain language that clearlydesignates a forum as the exclusive one'." Trans Nat'l Travel,Inc. v. Sun Pac Int'l Inc., 10 F. Supp.2d 79, 82 (D. Mass.,1998), quoting from Northern California Dist. Council ofLaborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1037(9 Cir., 1995). "Permissive" forum selection clauses "act toconfer jurisdiction in a forum over disputes arising out of acontract. These clauses do not include exclusionary language thatdesignates a specific forum to settle claims." Action Corp. v.Toshiba America Consumer Products, Inc., 975 F. Supp. 170, 176(D.P.R., 1997). To say that a forum selection clause is"permissive" does not mean that it is "effectively read out ofthe contract." Snapper, Inc. v. Redan, 171 F.3d 1249, 1262 n.24 (11 Cir., 1999). It only means that the forum selection clausedoes not prohibit a party from bringing suit in anotherappropriate forum. Snapper, 171 F.3d at 1262 n. 24.

Although there are no Rhode Island cases on point, similarforum selection clauses in other jurisdictions have also beendeemed "permissive." For instance, in Hunt Wesson Foods, Inc. v. Supreme Oil Co.,817 F.2d 75 (9 Cir., 1987), the court deemed the following forumselection clause to be "permissive": "The courts of California,County of Orange, shall have jurisdiction over the parties in anyaction at law relating to the subject matter of this contract."Id. at 76. This clause is almost identical to the clause athand with respect to phrasing, with both clauses making referenceto "any"3 litigation and conferring jurisdiction on aparticular state without language rendering that state theexclusive forum.

Additionally, in John Boutari and Son, Wines and Spirits, S.A.v. Attiki Importers and Distributors Inc., 22 F.3d 51 (2 Cir.,1994) the parties' contract contained the following clause: "Anydispute arising between the parties hereunder shall come withinthe jurisdiction of the competent Greek Courts, specifically ofthe Thessaloniki Courts." John Boutari and Son, Wines andSpirits, S.A., 22 F.3d at 52. The court deemed the clause to be"permissive," reaffirming the general rule applied in manycircuits that "`[w]hen only jurisdiction is specified the clausewill generally not be enforced without some further languageindicating the parties' intent to make jurisdiction exclusive'." Id., quoting from Docksider, Ltd. v. Sea Technology, Ltd.,875 F.2d 762, 764 (9 Cir., 1989).

The parties in the case at hand could have made the forumselection clause "mandatory" had they added such excludinglanguage. The clause could have, for example, provided that theparties consent to confer jurisdiction "solely" or "only" or"exclusively" on the courts of the state of Rhode Island, or that"all" litigation "must" be brought within the state of RhodeIsland. Forum selection clauses which employ terms such as thesehave been deemed "mandatory." See, e.g., Lambert v. Kysar,983 F.2d 1110, 1112-13 (1 Cir., 1993) (forum selection clause stating"[i]n the event any action is brought to enforce [such] terms andconditions, venue shall lie exclusively in Clark County,Washington" was deemed "mandatory"); Pelleport Investors, Inc.v. Budco Quality Theatres, Inc. 741 F.2d 273, 275, 280 (9 Cir.,1984) (forum selection clause stating that ". . . any and alldisputes arising out of or in connection with this Agreementshall be litigated only in the Superior Court for Los Angeles,California (and in no other) . . ." was deemed "mandatory").However, because the parties in the case at bar did not includelanguage in the clause to the effect that Rhode Island was theonly forum in which claims could be brought, the clause must beinterpreted to be "permissive." The defendant makes a secondary argument that the forumselection clause should be interpreted as "mandatory" because "ifthe parties were allowed to bring suit in any other jurisdiction,there would be no reason to state that objections to venue [inRhode Island] are waived." (#20, p. vi) However, a reason thatthe parties to the contract might have chosen to include aprovision stating that objections to venue in Rhode Island arewaived was that they wanted to ensure that parties to thecontract would always have the option to litigate in Rhode Islandwithout the possibility of another party objecting. In fact, itmakes more sense that this provision would have been included aspart of a "permissive" forum selection clause — if Rhode Islandwere the only state in which parties to the contract could bringsuit, there would be no need for the parties to waive objectionsto litigation there. The defendant's arguments therefore fail,and the forum selection clause is "permissive."

IV. Conclusion and Order

For the reasons stated above, the forum selection clause inSection 12.9 of the "Memorandum of Understanding" is"permissive." Thus, the case at hand was properly brought inMassachusetts, and it is hereby ORDERED that the Motion toDismiss(#19) be, and the same hereby is, DENIED.

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