Ex parte Leasecomm Corp.

Decision Date21 November 2003
PartiesEx parte LEASECOMM CORPORATION and MicroFinancial, Inc. and Ex parte Galaxy Mall, Inc. (In re Aaron Cobb et al. v. Galaxy Mall, Inc., et al.)
CourtAlabama Supreme Court

Roger L. Bates and E. Shane Black of Hand Arendall, L.L.C., Birmingham, for petitioners Leasecomm Corporation and MicroFinancial, Inc.

William H. Brooks and William H. Morrow of Lightfoot, Franklin & White, L.L.C., Birmingham, for petitioner Galaxy Mall, Inc.

Charles A. McCallum III and R. Brent Irby of the McCallum Law Firm, LLC, Vestavia Hills, for respondents.

WOODALL, Justice.

Galaxy Mall, Inc., a Utah company, and MicroFinancial, Inc., and its subsidiary, Leasecomm Corporation, Massachusetts companies (the Massachusetts companies will hereinafter be collectively referred to as "Leasecomm"), petition this Court for writs of mandamus directing the trial court to vacate its order denying their motions to enforce outbound forum-selection clauses in contracts between them and Aaron Cobb. We deny the petitions.

On August 22, 2002, Cobb filed a putative class action against Galaxy Mall and Leasecomm. The complaint contained the following pertinent factual averments:

"2. Defendant Galaxy Mall is the entity described herein [that] solicited [Cobb] and [putative] class members to establish a turnkey `internet business,' and offered a purported `mentoring program' for the internet business....
"....
"6. On or about November 9, 2000, [Cobb] and other [putative] class members were solicited by representatives of Defendant Galaxy Mall to attend a meeting at the Governor's House Motel in Montgomery, Alabama, whereby Galaxy Mall representatives provided a presentation of its internet `mentoring program,' which would help small businesses and persons make money [on] the internet by assisting these individuals in establishing a turnkey `internet business.' ...
"7. Galaxy Mall was to set up a market source on the internet for the participants at the meeting. This would include the custom design of a website, listing of online shopping mall sites, marketing support, and other services and materials provided by Galaxy Mall. In Plaintiff Aaron Cobb's case, he intended to establish an internet business which marketed and sold certain dietary products.
"8. At this meeting, participants [signed] up for the mentoring program [by executing a Galaxy Mall, Inc., order form] for a `tuition' in the amount of $2,995....
"9. Defendant Galaxy Mall, in conjunction with ... Defendants Leasecomm and MicroFinancial, induced [Cobb] and [putative] class members to purportedly `finance' this tuition in the form of a lease to be paid at a rate of $137 per month for 36 months....
"10. The purported `tuition' for the Galaxy Mall program was payable in the form of a non-cancelable lease agreement [the `Lease Agreement'] through [Leasecomm]. The Galaxy Mall representatives present at this meeting had Leasecomm [Lease Agreement] applications and agreements on hand and presented them to [Cobb] and [putative] class members as the only available method to `lease' the `tuition' in this manner....
"11. In truth, these Lease Agreements were not for `tuition,' but rather were for the leasing of certain computer-related equipment from a third party. That is, these Lease Agreements allowed Leasecomm to purchase certain computer-related equipment from a third party and then `lease' the equipment back to the participant. Upon information and belief, [Cobb's] lease was actually for equipment or software needed to process credit cards on the internet.... At no time were these facts disclosed to either [Cobb] or the [putative] class members.
"12. The $137 monthly payments were automatically deducted by Leasecomm from [Cobb's] bank account....
"13. Shortly after [Cobb] and [putative] class members signed up for the purported `mentoring program' and entered into a lease for what was believed to be `tuition' for this program, [they] never heard from Galaxy Mall again. [Cobb] made numerous attempts to contact Galaxy Mall about the program and market support that Galaxy Mall was to provide, but all to no avail. Moreover, [Cobb] never received any leased `equipment' from Leasecomm or any other defendant.
"14. Because of the Defendants' scam and Galaxy Mall's subsequent disappearance, [Cobb] and [putative] class members were stuck with non-cancelable Lease Agreements which Leasecomm was aggressively trying to collect on....
"15. Leasecomm made wrongful deductions from [Cobb's] bank account for the worthless lease for ... over a year. These deductions by Leasecomm included not only the monthly $137 lease payment, but also included certain other bogus and unauthorized charges. Some of the bogus charges include, but are not limited to, a $15 `payment charge back fee,' and a $5 `statement billing charge' simply to send out a bill....
"....
"16. The entire artifice and scheme described herein was developed by the Defendants collectively in order to induce unknowing individuals to enter into certain non-cancelable Lease Agreements for items purchased by Leasecomm and purportedly `leased' back to the individual, then leaving those individuals stuck in a non-cancelable Lease Agreement for an item that is of no use to them."

The complaint sought compensatory and punitive damages "in an amount not to exceed $74,000 per class member." Recovery was sought on theories of (1) breach of contract, (2) fraud, (3) fraudulent suppression, (4) conspiracy, (5) theft by deception, (6) conversion, and (7) violation of statutory usury laws.

On October 29, 2002, Galaxy Mall filed a "Motion to Enforce Forum Selection Clause." The motion was based on a clause on the reverse side of the order form provided by Galaxy Mall and signed by Cobb, which provided: "[T]he parties agree that any and all disputes arising out of this transaction ... shall be resolved in the courts of the State of Utah in the County of Utah or the United States District Court for the State of Utah." (Emphasis added.) Specifically, the motion stated: "All of Cobb's allegations against Galaxy Mall arise directly out of the transaction memorialized by the [order form] executed by ... Cobb.... Accordingly, the forum selection agreement entered into by the parties is due to be enforced, and this case should be dismissed." (Emphasis added.)

Leasecomm had filed a similar motion on September 25, 2002, based on a forum-selection clause in the lease agreement entered into between Leasecomm and Cobb; that clause provided:

"The Parties hereby ... consent and submit to the exclusive jurisdiction of the Courts of the Commonwealth of Massachusetts and expressly agree to such exclusive forum for the bringing of any suit, action or other proceeding arising out of their obligations hereunder, and expressly waive any objection to venue in any such Courts...."

(Some emphasis added; boldface type and some emphasis deleted.) More specifically, Leasecomm's motion stated:

"Cobb's lawsuit clearly arises out of the Lease.... Indeed, Cobb's entire case is asserted to dispute any obligations under the Lease.
"13. Therefore, this Court should enforce the forum selection clause in the Lease, and dismiss this case for improper venue. Cobb should bring this case in Massachusetts pursuant to the forum selection clause."

(Emphasis added.)

On April 1, 2003, the trial court denied the motions, stating: "[E]nforcement of either forum selection clause would be unreasonable under the circumstances because the clauses effectively deny [Cobb] and remaining Alabama customers ... their day in court." More specifically, the court said:

"The court ... finds that enforcement of either clause would be unreasonable because either Massachusetts or Utah would be seriously inconvenient for the trial of this matter. [Cobb] seeks to represent an Alabama only class. The Galaxy Mall presentation where the alleged misrepresentations were made took place in Montgomery, Alabama. Accordingly, all potential class members and material witnesses to the alleged fraud are located in Alabama. These witnesses are arguably beyond the subpoena power of a Massachusetts [or Utah] court. To conduct the trial of a case challenging misrepresentations made to Alabama citizens in a foreign jurisdiction raises serious inconvenience concerns.
"Additionally, forcing [Cobb] to file separate actions on opposite ends of the country when the claims against [all] Defendants (who are named as co-conspirators) are so closely intertwined raises concerns of judicial efficiency. Alabama is the only place where all the transaction elements and participants converge. The evidence indicates that the Defendants are nationally active with employees and lawyers positioned across the country. [Cobb] has offered evidence demonstrating that Leasecomm actually litigates in Alabama when attempting to enforce default judgments obtained against Alabama citizens in Massachusetts."
These petitions challenge that order.

"[A] petition for a writ of mandamus is the proper vehicle for obtaining review of an order denying enforcement of an `outbound' forum-selection clause when it is presented in a motion to dismiss." Ex parte D.M. White Constr. Co., 806 So.2d 370, 372 (Ala.2001); see Ex parte CTB, Inc., 782 So.2d 188, 190 (Ala.2000). "[A] writ of mandamus is an extraordinary remedy, which requires the petitioner to demonstrate a clear, legal right to the relief sought, or an abuse of discretion." Ex parte Palm Harbor Homes, Inc., 798 So.2d 656, 660 (Ala.2001). "[T]he review of a trial court's ruling on the question of enforcing a forum-selection clause is for an abuse of discretion." Ex parte D.M. White Constr. Co., 806 So.2d at 372.

At the outset, we note that the issue in this case is not whether an outbound forum-selection clause can be enforced. That issue was settled in Professional Insurance Corp. v. Sutherland, 700 So.2d 347 (Ala.1997). Since then, it...

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