Cullman Sec. Servs., Inc. v. United Propane Gas, Inc. (Ex parte United Propane Gas, Inc.)

• Decision Date: 02 February 2018
• Docket Number: 1160891
• Citation: 258 So.3d 1103
• Parties: EX PARTE UNITED PROPANE GAS, INC. (In re: Cullman Security Services, Inc., on behalf of itself and other similarly situated entities v. United Propane Gas, Inc.)
• Court: Alabama Supreme Court

258 So.3d 1103

EX PARTE UNITED PROPANE GAS, INC.(In re: Cullman Security Services, Inc., on behalf of itself and other similarly situated entities

v.United Propane Gas, Inc.)

1160891

Supreme Court of Alabama.

February 2, 2018

Joseph H. Driver and R. Brett Adair of Carr Allison, Birmingham, for petitioner.

Frank H. Tomlinson of Tomlinson Law, LLC, Birmingham; Matthew K. Carter of Fuller, Willingham, Fuller & Carter, LLC, Cullman; Robert W. "Joe" Bishop and John S. Friend of Bishop Korus Friend, PSC, Louisville, Kentucky; and Michael M. Pitman of Haverstock, Bell & Pitman, Murray, Kentucky, for respondent.

BOLIN, Justice.

United Propane Gas, Inc. ("United Propane"), seeks a writ of mandamus compelling the Cullman Circuit Court to vacate its order denying United Propane's motion to dismiss an action filed by Cullman Security Services, Inc. ("CSS"), and to enter an order dismissing the action. The trial court denied the motion to dismiss on the ground that "the outbound forum-selection clause contained in the parties' contract is unfair or unreasonable because it deprives [CSS] of the ability to file a class action in contravention of a recognized Alabama public policy" and found that the parties' contract was a contract of adhesion. We grant the petition and issue the writ.

Facts and Procedural History

United Propane, a Kentucky corporation, offers pre-purchase contracts to its customers, pursuant to which the customers agree to purchase their anticipated fuel usage for a season based upon a fixed price per gallon of gas. A pre-purchase contract gives the customer the advantage of locking in the price of the gas to be supplied for a determined time and gives the supplier of propane and propane accessories the advantage of receiving payment for a known purchase of a supply of gas from the customer for that period.

CSS, a corporation with its principal place of business in Cullman, Alabama, was a customer of Golden Propane Gas, Inc., an affiliate and agent of United Propane.¹ On September 30, 2013, CSS entered into a pre-purchase contract with United Propane. CSS agreed to purchase 550 gallons of propane at the fixed price of $1.6990 per gallon from October 1, 2013, through March 31, 2014. The contract also included the following outbound forum-selection clause:

"Customer agrees to pay all costs incurred by Corporation if it must enforce any of the terms of this Agreement, including but not limited to, reasonable attorneys fees, and further agrees to pay all applicable delivery, finance, system check and motor fuel charges. This agreement shall be governed by the laws of Kentucky and the parties agree that the state courts sitting in McCracken County, Kentucky have exclusive jurisdiction and venue of any dispute arising hereunder."

(Emphasis added.)

Upon signing the contract, CSS paid an outstanding bill for $607.82 and also paid $1,382.52² to guarantee the delivery of 550 gallons of propane gas during the upcoming 2013–2014 winter season. In October 2013, United Propane delivered 200 gallons of propane gas to CSS. When CSS requested the delivery of additional propane gas in January 2014, United Propane advised that the only way CSS could acquire the gas would be to purchase it at the rate of $3.599 per gallon. Consequently, CSS purchased gas from another distributor at the higher market rate.

In April 2014, CSS, on its behalf and on behalf of other similarly situated gas consumers, filed a class-action lawsuit against United Propane in the circuit court in McCracken County, Kentucky. Kentucky circuit courts have jurisdiction in civil cases when the amount in controversy exceeds $5,000, exclusive of interest and costs, in matters affecting title to real estate, and in matters of equity. See Ky. Rev. Stat. §§ 23A.010(1) and 24A.120(1). Kentucky law provides, however, that a class action based on breach of contract cannot be maintained in a state circuit court where none of the individual claims is equal to the statutory jurisdictional amount. See Lamar v. Office of Sheriff Daviess Cty., 669 S.W.2d 27 (Ky. Ct. App. 1984). Consequently, the Kentucky court dismissed the complaint without prejudice because "no claim in [CSS's] amended complaint alleges an amount in controversy over $5,000; [CSS's] claims do not affect title to real estate; and [CSS] has not asserted a valid claim for equitable relief." The Kentucky Court of Appeals affirmed the circuit court's dismissal.

On February 11, 2017, CSS filed in the Cullman Circuit Court a "nationwide class action, on behalf of itself and all other commercial entities and business associations similarly situated," seeking redress for "[United Propane]'s policy and practice to breach uniform written pre-paid contracts, and to systematically violate its duty of good faith and fair dealing by uniformly raising prices on pre-paid commercial contracts and failing to honor the contracts." The complaint sought damages, a declaratory judgment, and injunctive relief.

On April 11, 2017, United Propane filed a Rule 12(b)(3), Ala. R. Civ. P., motion to dismiss CSS's action as having been filed in an improper venue. United Propane argued that the outbound forum-selection clause in the pre-purchase contract required CSS to bring the action in Kentucky and that the case had been previously dismissed by the Kentucky circuit court for failing to meet the statutory jurisdictional amount. In response, CSS argued that both it and the class it seeks to represent were denied the ability to seek any practical relief in the designated forum because Kentucky, unlike Alabama, does not allow a class to aggregate damages to meet the threshold jurisdictional amount. CSS asserted that it was not economically feasible to litigate smaller individual claims in a Kentucky small-claims court, especially given that the court is located a considerable distance from Cullman, Alabama.

Following a hearing on the Rule 12(b)(3) motion, the trial court denied United Propane's motion to dismiss. United Propane timely filed a petition for writ of mandamus.

Standard of Review

" ‘Mandamus is a drastic and extraordinary writ, to be issued only where there is (1) a clear legal right in the petitioner to the order sought; (2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so; (3) the lack of another adequate remedy; and (4) properly invoked jurisdiction of the court.’ Ex parte Integon Corp., 672 So.2d 497, 499 (Ala. 1995)."

Ex parte CTB, Inc., 782 So.2d 188, 190 (Ala. 2000).

"[A]n attempt to seek enforcement of the outbound forum-selection clause is properly presented in a motion to dismiss without prejudice, pursuant to Rule 12(b)(3), Ala. R. Civ. P., for contractually improper venue. Additionally, we note that a party may submit evidentiary matters to support a motion to dismiss that attacks venue. Williams v. Skysite Communications Corp., 781 So.2d 241 (Ala. Civ. App. 2000), quoting Crowe v. City of Athens, 733 So.2d 447, 449 (Ala. Civ. App. 1999)."

Ex parte D.M. White Constr. Co., 806 So.2d 370, 372 (Ala. 2001). "On appeal, the review of a trial court's ruling on the question of enforcing a forum-selection clause is for an abuse of discretion." Id. (citing O'Brien Eng'g Co. v. Continental Machs., Inc., 738 So.2d 844 (Ala. 1999) ).

Discussion

"An outbound forum-selection clause—a clause by which parties specifically agree to trial outside the State of Alabama in the event of a dispute—implicates the venue of a court rather than its jurisdiction. See Ex parte CTB, Inc., 782 So.2d 188 (Ala. 2000) ; and O'Brien Eng'g Co. v. Cont'l Machs., Inc., 738 So.2d 844, 845 n. 1 (Ala. 1999)." Ex parte Leasecomm Corp., 879 So.2d 1156, 1158 (Ala. 2003). In F.L. Crane & Sons, Inc. v. Malouf Construction Corp., 953 So.2d 366, 373 (Ala. 2006), this Court held that "an outbound forum-selection clause raises procedural issues and is governed by the law of the forum jurisdiction," which, in that case, was Alabama. The Crane Court relied on Ex parte Procom Services, Inc., 884 So.2d 827 (Ala. 2003), in which this Court decided the validity of an outbound forum-selection clause under Alabama law despite a choice-of-law clause in the contract stating that Texas law governed disputes between the parties. In this case, the parties do not dispute that Kentucky law is applicable to the claims set forth in CSS's complaint. The parties, however, dispute whether the claims should be litigated in a small-claims court in McCracken County, Kentucky, or in the circuit court in Cullman County, Alabama.

In M/S Bremen v. Zapata Off–Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), the United States Supreme Court held that, under federal law, outbound forum-selection clauses "are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be ‘unreasonable’ under the circumstances." This Court in Professional Insurance Corp. v. Sutherland, 700 So.2d 347 (Ala. 1997), agreed that an outbound forum-selection clause should be enforced so long as its enforcement is neither unfair nor unreasonable under the circumstances.

Summarizing the factors to consider as set forth in Sutherland and Bremen, this Court in Professional Insurance determined that an outbound forum-selection clause is enforceable unless the party challenging the clause can clearly establish that enforcement of the clause would be (1) unfair on the basis that the contract was affected by fraud, undue influence, or overweening bargaining power or (2) that enforcement would be unreasonable on the basis that the chosen forum would be seriously inconvenient for the trial of the action. Ex parte Leasecomm Corp., 879 So.2d at 1159. The burden on the challenging party is difficult to meet. See Ex parte PT Sols. Holdings, LLC, 225 So.3d 37, 42 (Ala. 2016) (citing Ex parte D.M. White Constr. Co., 806 So.2d 370, 372 (Ala. 2001) ).

In this case, the Cullman Circuit Court applied the Bremen factors as set forth in Rucker v. Oasis Legal...