Duffield v. MPC Pipelines, Inc.
| Decision Date | 10 January 2017 |
| Docket Number | CIV. 16-5038-JLV |
| Parties | JOHN DUFFIELD and KAYE DUFFIELD, Plaintiffs, v. MPC PIPELINES, INC., DUFFIELD CONSTRUCTION, LLC, MURPHY PIPE AND CIVIL, LLC, and DAVID KINSELLA, Defendants. |
| Court | U.S. District Court — District of South Dakota |
On April 27, 2016, plaintiffs John and Kaye Duffield ("the Duffields") filed a lawsuit in South Dakota state court. (Docket 1-2). Defendants Duffield Construction, LLC ("Duffield Construction"), David Kinsella, MPC Pipelines, Inc. ("MPC") and Murphy Pipe and Civil, LLC ("Murphy Pipe"), removed the case to this court on May 31, 2016. (Docket 1). Plaintiffs filed an amended complaint on June 6, 2016. (Docket 7). On June 20, 2016, defendants filed a motion to change venue pursuant to 28 U.S.C. § 1404(a). (Docket 11). Defendants also filed a motion to dismiss the complaint for failure to state a claim, or alternatively, a motion for a more definite statement. (Docket 8). Plaintiffs filed briefs opposing defendants' motions. (Dockets 15 & 16). Defendants filed briefs in reply to plaintiffs' opposition briefs. (Dockets 21 & 22).
John and Kaye Duffield started the construction business Duffield Construction in Rapid City, South Dakota, in 1991. (Docket 7 at p. 4). They grew the business for over two decades and developed construction specialties. Id. In 2014, MPC, a global pipeline business, approached the Duffields about purchasing Duffield Construction. Id. at pp. 4-5.
In 2015, the Duffields agreed to sell Duffield Construction to MPC by executing a stock purchase agreement. Id. at p. 5. Murphy Pipe, a business entity related to MPC, agreed to employ John Duffield for three years by executing an employment agreement. Id. at pp. 5-6. David Kinsella, the General Manager and President of Murphy Pipe, executed the employment agreement on behalf of the company. (Docket 10-1). The employment agreement Mr. Duffield and Murphy Pipe signed in 2015 entitled Mr. Duffield to specific payments in addition to a salary: 3 percent of the revenue from MPC's contracts in the United States up to $50 million in revenue, and 1 percent of the revenue beyond $50 million. (Docket 7 at p. 5). Plaintiffs refer to these payments as equity payments. Id. at pp. 5-6.
Later in 2015, Mr. Kinsella terminated Mr. Duffield's employment with Murphy Pipe. Id. at p. 8. Plaintiffs allege Mr. Duffield stopped receiving equity payments from Murphy Pipe on November 9, 2015. Id. Plaintiffs claim during Mr. Duffield's employment with Murphy Pipe, Mr. Kinsella made oral statements to third parties asserting Mr. Duffield committed criminal acts, is dishonest and is a thief. Id. at pp. 8-9.
After defendants removed the lawsuit to federal court, plaintiffs filed an amended complaint stating nine causes of action. Id. at pp. 9-18. Plaintiffs allege fraud, negligent misrepresentation, tortious interference, breach of contract, constructive trust, unjust enrichment, money had and received, aiding and abetting, and slander. Id.
In their motion to change venue, defendants argue under the employment agreement's forum selection clause and 28 U.S.C. § 1404(a) the court should transfer this case to the United States District Court for the District of Colorado. (Docket 12 at p. 1).
The court has diversity jurisdiction over this case. 28 U.S.C. § 1332. Federal courts hearing cases in diversity apply the forum state's choice of law rules. See Retail Associates, Inc. v. Macy's East, Inc., 245 F.3d 694, 697 (8th Cir. 2001). South Dakota courts have "generally recognized that parties may agree to be bound by the law of a particular state," and are free to choose which state's law will apply, subject to "overriding public policy concerns." See Butler Mach. Co. v. Morris Const. Co., 682 N.W.2d 773, 776 (S.D. 2004) (citations omitted).
Although the parties dispute issues surrounding the employment agreement's forum selection clause, they do not directly contest theagreement's choice of law provision. The employment agreement provides Colorado law will apply to interpretation of the contract and litigation arising from the contract.1 (Docket 22-2 at pp. 4-5). The court considers any tension between Colorado law and South Dakota public policy issue-by-issue.
The court proceeds applying Colorado law.2
The parties disagree on whether to construe the employment and stock purchase agreements together. The court addresses this issue at the outset because it is central to plaintiffs' argument against defendants' motion to change venue.
Plaintiffs argue the court must construe the agreements as a whole. (Docket 16 at p. 6). Plaintiffs point out each agreement refers to the other at one point, and the parties executed them on the same day. Id. at pp. 5-6. In plaintiffs' view, the applicable law supports interpreting both agreements as a whole. Id. at pp. 6-7. Plaintiffs go on to argue once the court reads the agreements together, the forum selection clause in the employment agreementbecomes invalid because it conflicts with the stock purchase agreement's forum selection clause. Id. at pp. 7-8.
Defendants' position is the agreements should not be read together as plaintiffs request. (Docket 22 at pp. 4-7). Defendants claim the proper reading of the cross-references between the agreements does not lead to interpreting the documents as a whole. Id. Defendants assert the applicable case law goes against plaintiffs' position on contract construction. Id. at p. 6.
Under Colorado law, "[i]f a simultaneously executed agreement between the same parties, relating to the same subject matter, is contained in more than one instrument, the documents must be construed together to determine intent as though the entire agreement were contained in a single document."3 O'Reilly v. Physicians Mut. Ins. Co., 992 P.2d 644, 648 (Colo. App. 1999); see In re Application for Water Rights of Estes Park v. Northern Colorado Water Conservancy District, 677 P.2d 320, 327 (Colo. 1984). MPC and the Duffields executed the stock purchase agreement. (Docket 22-1 at p. 1). Murphy Pipe, through David Kinsella, and John Duffield executed the employment agreement. (Docket 22-2 at p. 1). The parties executed both agreements on April 30, 2015. (Docket 16 at p. 5). Each agreement mentions the existence of the other agreement at a particular point. Id. at pp. 5-6. Applying Colorado law to these facts, plaintiffs claim interpreting the agreements togethernecessarily invalidates the forum selection clauses because they call for different jurisdictions in the event of litigation. Id. at pp. 7-8.
However, even if the court reads the employment and stock purchase agreements together, plaintiffs' argument does not prevail. The purpose of the contract construction plaintiffs seek is to determine the intent of the contracting parties. See In re Application for Water Rights of Estes Park, 677 P.2d at 327; Sterling Colo. Agency, Inc. v. Sterling Ins. Co., 266 F.2d 472, 476 (10th Cir. 1959). Applying this general interpretation does not entail fusing each provision of the separate instruments. See Sterling, 266 F.2d at 476; LPG Holdings, Inc. v. Casino America, Inc., No. 99-1037, 2000 WL 1637536, at *8-9 (10th Cir. Nov. 1, 2000) (unpublished).
Section 13 of the employment agreement states Colorado law shall govern the agreement and any litigation arising under the agreement shall take place "in the federal or state courts located in Denver County, Colorado." (Docket 22-2 at p. 4). Section 17 reiterates some of Section 13 but is slightly broader, providing any legal theory "arising out of or relating to [the employment agreement] or [Mr. Duffield's] employment with [MPC] shall" be litigated as Section 13 directs. Id. at pp. 4-5. In the stock purchase agreement, Section 10.9 states the laws of Delaware govern the agreement, and any litigation arising from the agreement shall occur in Delaware federal or state courts. (Docket 22-1 at p. 5).
If the court reads the two agreements together, the most natural understanding of the forum selection clauses is the parties intended to resolveissues connected with employment as provided in the employment agreement's clauses on law and forum choice. As for disagreements related to the stock transaction, it is most natural to conclude the parties intended to follow the law and forum choices in the stock purchase agreement. The interpretation applied by plaintiffs does not achieve their goal of invalidating the forum selection clauses. See Sterling, 266 F.2d at 476; LPG Holdings, Inc., 2000 WL 1637536, at *8-9.
Even if the court interprets the employment and stock purchase agreements as a whole, the court finds the result is not the invalidation of each agreement's forum selection clause.
Because defendants seek enforcement of the employment agreement's forum selection clause, the court must determine whether the clause is enforceable.
The United States Supreme Court established the federal standard for determining a forum selection clause's enforceability in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972). In resolving a motion to dismiss, the United States Court of Appeals for the Eighth Circuit held "a district court sitting in diversity jurisdiction and applying federal law must apply the standard articulated in Bremen to the question of whether to enforce a forum selection clause . . . ." Union Elec. Co. v. Energy Ins. Mut. Ltd., 689 F.3d 968, 973 (8th Cir. 2012). The Eighth Circuit explained "[w]hile Bremen provides the proper analysis for determining the enforceability of a forum selection clause,in this circuit, consideration of the public policy of the forum state must be part of that analysis." Id. at 974 (citation omitted); see also JTV Mfg., Inc. v. Braketown USA, Inc., 110 F. Supp. 3d 900, 905-06 (N.D. Iowa 2015) (...
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