Muzumdar v. Wellness Intern. Network, Ltd.

• Decision Date: 17 February 2006
• Docket Number: No. 05-2636.,No. 05-2827.,No. 05-2686.,05-2636.,05-2686.,05-2827.
• Citation: 438 F.3d 759
• Parties: 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. 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.
• Court: U.S. Court of Appeals — Seventh Circuit

438 F.3d 759

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.

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.

No. 05-2636.

No. 05-2686.

No. 05-2827.

United States Court of Appeals, Seventh Circuit.

Argued January 12, 2006.

Decided February 17, 2006.

Robert Plotkin, Michael Curletti (argued), Plotkin Law Firm, Chicago, IL, for Plaintiffs-Appellants.

Rebecca Alfert, Wildman, Harrold, Allen & Dixon, Chicago, IL, John F. Martin, Godwin Gruber, Brian N. Hail (argued), Gruber, Hurst, Johansen & Hail, Dallas, TX, for Defendants-Appellees.

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. Previously, 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 plaintiffs 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 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., 437 F.3d 606 (7th Cir.2006).² There is no ambiguity about where the parties agreed to litigate this dispute. What, then, do the appellants argue?

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 being acknowledged that the relationship between any distributor and WIN is performable, in part, in Dallas County, Texas, and further irrevocably and unconditionally 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 CONFLICTS BETWEEN THIS AGREEMENT AND THE WIN RULES & REGULATIONS, THE WIN RULES & REGULATIONS SHALL GOVERN.

The argument is that the WIN rules contain language—"non-exclusive jurisdiction"—which renders the forum selection clauses permissive; because the WIN Rules govern, the argument continues, the forum selection clauses are merely permissive. Appellants leap from 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...