702 F.3d 436 (7th Cir. 2012), 11-3576, Adams v. Raintree Vacation Exchange, LLC

Docket Nº:11-3576.
Citation:702 F.3d 436
Opinion Judge:POSNER, Circuit Judge.
Party Name:Charles ADAMS, et al., Plaintiffs-Appellants, v. RAINTREE VACATION EXCHANGE, LLC, et al., Defendants-Appellees.
Attorney:David A. Novoselsky (argued), Attorney, Novoselsky Law Offices, Chicago, IL, for Plaintiffs-Appellants. James J. Ormiston (argued), Attorney, Looper, Reed & McGraw, P.C., Houston, TX, Catherine Basque Weiler, Attorney, Swanson, Martin & Bell, LLP, Steven P. McKey (argued), Attorney, Bryan Cave, C...
Judge Panel:Before POSNER, KANNE, and ROVNER, Circuit Judges.
Case Date:December 20, 2012
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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702 F.3d 436 (7th Cir. 2012)

Charles ADAMS, et al., Plaintiffs-Appellants,

v.

RAINTREE VACATION EXCHANGE, LLC, et al., Defendants-Appellees.

No. 11-3576.

United States Court of Appeals, Seventh Circuit.

December 20, 2012

Argued Oct. 29, 2012.

Page 437

David A. Novoselsky (argued), Attorney, Novoselsky Law Offices, Chicago, IL, for Plaintiffs-Appellants.

James J. Ormiston (argued), Attorney, Looper, Reed & McGraw, P.C., Houston, TX, Catherine Basque Weiler, Attorney, Swanson, Martin & Bell, LLP, Steven P. McKey (argued), Attorney, Bryan Cave, Chicago, IL, for Defendants-Appellees.

Before POSNER, KANNE, and ROVNER, Circuit Judges.

POSNER, Circuit Judge.

This appeal requires us to consider the enforceability of a forum selection clause by entities not named as parties to the contract in which the clause appears.

The plaintiffs are 250 purchasers of timeshare interests in villas at a resort known as Club Regina, or alternatively as the Residence Club at Grand Regina. The resort is in San José del Cabo, a resort

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area on the Pacific Coast in Baja California (which despite its name is part of Mexico). The plaintiffs bought these interests between 2004 and 2006 from a Mexican company named Desarrollos Turísticos Regina, S. de R.L. de C.V., which the parties call DTR. DTR is not a party to the appeal and indeed no longer exists, having become a Raintree affiliate named CR Resorts Holding, S. de R.L. de C.V., through a series of mergers in 2007 and 2009.

Each contract between a timeshare purchaser and DTR stated that " in case of controversy on the interpretation and compliance with the rights and obligations of this Agreement, the parties hereby agree to submit themselves to the applicable laws and competent courts of the City of Mexico, Federal District, expressly waiving any other forum that may correspond to them by reason of their present or future domiciles." (Not very good English, but DTR is, as we said, a Mexican company.)

Notice that the clause is a choice of law provision as well as a forum selection clause, implying that the law governing the enforceability of the forum selection clause is Mexican law, since the clause is, obviously, a term in the contract. But neither side has asked either the district judge or us to apply Mexican law to the clause; their debate over its enforceability is framed entirely as a dispute about American law, and so the issue of the applicable law has been waived. Abbott Laboratories v. Takeda Pharmaceutical Co. Ltd., 476 F.3d 421, 423 (7th Cir.2007); Phillips v. Audio Active Ltd., 494 F.3d 378, 385-86 (2d Cir.2007).

We are mindful that in Yavuz v. 61 MM, Ltd., 465 F.3d 418, 421, 426-31 (10th Cir.2006), another case in which the district court and the parties had analyzed a forum selection clause under American law even though the contract that contained the clause made foreign law govern, the court of appeals on its own initiative remanded the case with directions that the district court apply the designated foreign law. We're puzzled by that outlier decision. We don't see why the district court should be put to the bother of investigating foreign law when no party is asking it to do so. Parties to a contract are free within broad limits to specify the law that shall govern its interpretation, and also free to modify the specification contained in the contract (in effect amending the contract). By ignoring Mexican law and citing only federal cases in their briefs, the parties have disclaimed reliance on any distinctive features of Mexican law in interpreting their forum selection clause. In effect they've decided that general common law shall govern that interpretation instead. Phillips v. Audio Active Ltd., supra, 494 F.3d at 386, We accept that decision.

The plaintiffs allege that defendant Raintree Vacation Exchange, LLC, in cahoots with defendant Starwood Vacation Ownership, Inc. (together with affiliates of Raintree and Starwood that we can ignore, along with other defendants that we can also ignore), defrauded them by " pretend[ing] to have a Mexican subsidiary (DTR) take in money for [building the villas that the plaintiffs thought they were buying interests in] that would never be built." Raintree and Starwood are in the vacation resort business. Raintree operates a " vacation club" that consists of multiple timeshare resorts, see Bloomberg Businessweek, " Raintree Resorts International, Inc." http:// investing. businessweek. com/ research/ stocks/ private/ snapshot. asp? privcap Id= 1879752, while Starwood owns and operates a number of hotels and resorts including the Westin hotel chain. See Starwood Hotels & Resorts, www.

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starwoodhotels. com/ corporate/ company_ info. html. The plaintiffs' villas were to be built adjacent to the Westin Resort & Spa Los Cabos. See www. starwoodhotels. com/ westin/ property/ overview/ index. html? property ID = 1087. (The websites we've cited were all visited on Nov. 17, 2012.)

The plaintiffs filed their suit in an Illinois state court. The defendants removed it to the federal district court in Chicago pursuant to the Class Action Fairness Act of 2005, which allows removal to federal district court not only of any class action in which the stakes exceed $5 million and there is diversity of citizenship even if it is not complete, but also of any " mass action," defined as a suit by more than 100 plaintiffs that satisfies the other requirements for removal under the Act. See 28 U.S.C. § 1332(d)(11)(B)(i). Having removed the suit, the defendants moved to dismiss it on the basis of the forum selection clause quoted above. The judge granted the motion after an evidentiary hearing and so dismissed the suit for improper venue, precipitating this appeal.

The plaintiffs' opening appellate brief cites no authority for the proposition, fundamental to the appeal, that Raintree and Starwood cannot be allowed to invoke the forum selection clause because they are not parties to the contract in which it appears. When there are authorities to cite for a key...

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