Ex parte Sunset Dig. Commc'ns

• Decision Date: 02 December 2022
• Docket Number: SC-2022-0422
• Parties: Ex parte Sunset Digital Communications, Inc. v. Sunset Digital Communications, Inc.) (In re: Point Broadband, LLC, and Point Broadband Fiber Holding, LLC
• Court: Alabama Supreme Court

Ex parte Sunset Digital Communications, Inc.

(In re: Point Broadband, LLC, and Point Broadband Fiber Holding, LLC v. Sunset Digital Communications, Inc.)

No. SC-2022-0422

Supreme Court of Alabama

December 2, 2022

(Lee Circuit Court, CV-21-900189)

PETITION FOR WRIT OF MANDAMUS

WISE JUSTICE

Sunset Digital Communications, Inc. ("Sunset"), the defendant below, petitions this Court for a writ of mandamus directing the Lee Circuit Court to vacate its February 9 2022, order denying its motion to dismiss the complaint filed by the plaintiffs below, Point Broadband, LLC ("Point Broadband"), and Point Broadband Fiber Holding, LLC ("PBFH") (collectively referred to as "the plaintiffs"), and to enter an order dismissing the plaintiffs' complaint. We grant the petition and issue the writ.

Facts and Procedural History

On May 29, 2018, Sunset and Sunset Fiber, LLC, entered into a "First Amended and Restated Asset Purchase Agreement" ("the APA") with PBFH, which was then known as Sunset Digital Holding, LLC; PBFH is a wholly owned subsidiary of Point Broadband, which has its headquarters and principal place of business in Lee County. Section 10.11 of the APA provides:

"This Agreement shall be governed by and construed in accordance with the internal laws of the Commonwealth of Virginia without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Virginia or any other jurisdiction).

"ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA OR THE COURTS OF THE COMMONWEALTH OF VIRGINIA IN EACH CASE LOCATED IN THE CITY OF BRISTOL,

VIRGINIA, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT ACTION OR PROCEEDING. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY'S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM."

(Capitalization in original; bold typeface omitted; emphasis added.)

On June 11, 2021, the plaintiffs filed a complaint against Sunset in the Lee Circuit Court, seeking a judgment declaring that PBFH was not liable for certain unpaid taxes and penalties; that PBFH did not owe defense or indemnity obligations to Sunset relating to those unpaid taxes; that PBFH did not owe legal fees in connection with any audits or other investigations relating to Sunset's tax liability; and that Sunset owed PBFH defense and indemnity obligations in the event a third party sought to bring a claim or attempted to collect any unpaid taxes from PBFH. On July 19, 2021, Sunset filed a motion to dismiss the complaint pursuant to Rule 12(b), Ala. R. Civ. P., in which it alleged, among other things, that the APA included a mandatory outbound-forum selection clause that "requires the parties to submit exclusively to the jurisdiction of the United States federal courts or the Virginia state courts located in Bristol, Virginia."

On November 19, 2021, the plaintiffs filed their response to the motion to dismiss. In their response, the plaintiffs argued, in pertinent part: "To the extent Section 10.11 can be characterized as a 'forum selection clause' (the APA does not characterize it as such), then its employment of the word 'MAY' makes it a permissive forum selection clause." (Emphasis omitted; capitalization in original.)

On February 9, 2022, after conducting a hearing and giving the parties an opportunity to file additional briefs and/or caselaw regarding the applicability of § 10.11 of the APA, the trial court denied Sunset's motion to dismiss. In its order denying the motion to dismiss, the trial court stated, in pertinent part:

"At issue is if the language ('may') creates a mandatory forum selection clause or clause that consents to jurisdiction. Language such as 'shall' or 'must' would be used in cases where the clause was to be considered mandatory. As this is a consent to jurisdiction clause and not a mandatory one, Alabama Courts have held that imperative language such as 'shall' or 'must' are required to find that the clause is a mandatory one. However, the word 'may' results in language that is much more permissive or rather a 'consent to jurisdiction' clause. Ex parte B2K Systems, LLC, 162 So.3d 896, 902-903 (Ala. 2014)."

Subsequently, Sunset filed a petition asking this Court to issue a writ of mandamus directing the trial court to vacate the February 9, 2022, order denying its motion to dismiss, and to enter an order dismissing the plaintiffs' complaint on the basis that § 10.11 of the APA requires that the action be instituted in a state or federal court located in Bristol, Virginia.^[1]

Standard of Review

"This Court has held that an order denying enforcement of an outbound forum-selection clause is properly reviewable by a petition for a writ of mandamus:

" '"'[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). … "' "Ex parte Textron, Inc., 67 So.3d 61, 65-66 (Ala. 2011) (quoting Ex parte Leasecomm Corp., 886 So.2d 58, 62 (Ala. 2003))."

Ex parte B2K Sys., LLC, 162 So.3d 896, 901 (Ala. 2014). "We review the trial court's holding regarding this issue to determine if it exceeded its discretion. Ex parte D.M. White Constr. Co., 806 So.2d 370, 372 (Ala. 2001)." Castleberry v. Angie's List, Inc., 291 So.3d 37, 42 (Ala. 2019).

Discussion

Sunset argues that the trial court erroneously found that § 10.11, the forum-selection clause in the APA, was permissive rather than mandatory. Specifically, it asserts that the trial court "wholly ignored the 'exclusive jurisdiction' language of the forum selection clause." Petition at 9. Therefore, it argues, the trial court erroneously denied its motion to dismiss on that ground.

"At the outset, we note that '[a]n 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. Continental Machs., Inc., 738 So. [2d] 844, 845 (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 -- in this case, the law of 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, for purposes of 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, 351 (Ala. 1997), adopted the Supreme Court's reasoning, stating that 'a forum selection clause should be enforced so long as enforcing it is neither unfair nor unreasonable under the circumstances.' This Court has stated that an outbound forum-selection clause is enforceable unless the party challenging the clause can clearly establish that enforcement of the clause (1) would be unfair on the basis that the contract was affected by fraud, undue influence, or overweening bargaining power or (2) would be seriously inconvenient for the trial of the action. Ex parte Leasecomm Corp., 879 So.2d 1156 (Ala. 2003). A party seeking to dismiss an action filed in Alabama based on the existence of an outbound forum-selection clause must initially establish the existence of a contract containing an outbound forum-selection clause. The burden then shifts to the party challenging the enforcement of the clause to establish that enforcement of the clause would be unfair or unreasonable under the circumstances. Ex parte PT Solutions Holdings, LLC, 225 So.3d 37 (Ala. 2016). This Court has noted that '[t]he burden on the challenging party is difficult to meet.' D.M. White Constr., 806 So.2d at 372."

Ex parte Terex USA, LLC, 260 So.3d 813, 816 (Ala. 2018). ^[2] The forum-selection clause at issue in this case provides:

"Any legal suit, action or proceeding arising out of or based upon this agreement, the other transaction documents or the transactions contemplated hereby or thereby may be instituted in the federal courts of the United States of America or the courts of the Commonwealth of Virginia in each case located in the city of Bristol, Virginia, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding."

(Capitalization and bold typeface omitted.)

In its order denying Sunset's motion to dismiss, the trial court determined that the use of the term "may" rendered the forum-selection...