Lakeside Surfaces, Inc. v. Cambria Co.
| Decision Date | 15 October 2021 |
| Docket Number | No. 20-1335,20-1335 |
| Citation | 16 F.4th 209 |
| Parties | LAKESIDE SURFACES, INC., a Michigan Corporation, Plaintiff-Appellant, v. CAMBRIA COMPANY, LLC, a Foreign Limited Liability Company, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
ARGUED: Scott R. Murphy, BARNES & THORNBURG LLP, Grand Rapids, Michigan, for Appellant. Bryan Freeman, MASLON LLP, Minneapolis, Minnesota, for Appellee. ON BRIEF: Scott R. Murphy, Anthony Sallah, BARNES & THORNBURG LLP, Grand Rapids, Michigan, for Appellant. Bryan Freeman, James J. Long, Jevon C. Bindman, MASLON LLP, Minneapolis, Minnesota, for Appellee.
Before: GIBBONS, WHITE, and READLER, Circuit Judges.
Plaintiff Lakeside and Defendant Cambria entered into a business agreement with a forum-selection clause requiring all lawsuits to be brought in a Minnesota state court. Lakeside sued Cambria in a federal district court in Michigan. Cambria moved to dismiss, invoking the forum-selection clause, and the district court granted the motion. Lakeside appeals, arguing that the forum-selection clause is unenforceable. We agree and reverse.
Plaintiff Lakeside Surfaces, Inc., a Michigan corporation, is a large fabricator of stone countertops in Michigan. Defendant Cambria Company, LLC, a Minnesota company, is a leading nationwide manufacturer of countertop products—i.e., the stone slabs used to make countertops. Lakeside buys "solid surface products" from manufacturers like Cambria, fabricates countertops based on specifications provided by customers, and sells the fabricated products to retailers, builders, designers, commercial firms, and local kitchen and bath stores. R. 34 PID 370. Cambria's countertops are a top seller for many designers and home builders throughout Michigan and the rest of the country, and they accounted for a large percentage of Lakeside's sales. In 2011, Cambria recognized Lakeside's considerable sales of Cambria products and made Lakeside Cambria's fourteenth "Lexus Partner" in North America. R. 34 PID 370. On October 11, 2011, the two sides memorialized their relationship by executing a series of agreements, collectively titled the "Business Partner Agreements" (BPA). R. 34 PID 370.
The BPA is a fifteen-page document consisting of five separate "agreements": (1) the Credit Agreement; (2) the Security Agreement; (3) Order Terms and Conditions; (4) Lifetime Limited Warranty; and (5) the Business Operating Requirements Manual Acknowledgment Form (BORM). R. 4-1 PID 53-68. All are part of a single, consecutively numbered document with a shared cover sheet titled, "Cambria Lexus Partner Program Business Partner Agreements." Id.
The BPA described twenty-nine requirements for Lakeside to retain Lexus Partner status. Some focused on infrastructure—e.g., possession of a forklift that can lift at least 7,500 pounds and capability to fabricate at least 10,000 square feet of Cambria product per month. Others focused on loyalty to the Cambria brand. Lakeside had to maintain monthly sales of at least two truckloads of Cambria product, meet yearly sales goals set by Cambria, and make Cambria products the "lead quartz surfacing product offered (80% of business)." R. 4-1 PID 67. Lakeside had to employ at least two full-time Cambria-focused sales reps, have company personnel attend "Cambria University" in Minnesota for training, "[p]romote[ ] Cambria brand only on all vehicle graphics," and invest "more than $50,000 in Cambria point of sale materials per year." Id.
The BPA had a choice-of-law provision and a forum-selection clause. Both are in a single paragraph:
This agreement shall be governed by and construed in accordance with the laws of the State of Minnesota. Any proceeding involving this Agreement and/or any claims or disputes relating to the agreements and transactions between the parties shall be in the District Court of Le Sueur County, State of Minnesota, and the undersigned hereby submits to the jurisdiction and venue of that Court. The undersigned agrees not to raise and waives any objection or defense based upon the venue of such Court and any objection or defense based on forum non conveniens. The Customer also agrees to the terms and conditions of the other agreements included herein, Cambria Order Terms and Conditions, the Cambria Natural Quartz Lifetime Limited Warranty, and the Security Agreement (if any) which are hereby made a part of this Agreement.
R. 4-1 PID 56. The same page containing these provisions states that "This Agreement sets forth contractual terms between Cambria and the undersigned as to all business transactions between them, now and in the future."1 Id.
For several years, Lakeside exceeded its contractual obligations. From 2015 to 2017, for example, it steadily increased the percentage of Cambria product it sold (relative to overall inventory), from 86.6% ($19.1 million) in 2015 to 98% ($23.4 million) in 2017. Lakeside spent $30,000 sending employees to Minneapolis for Cambria-related training, and between 2015 and 2017, invested $922,270 in advertising materials to promote Cambria products. In 2016 and 2017, at Cambria's request, Lakeside also spent over $1 million to build a "Cambria Design Gallery" in Grand Rapids, Michigan, and spent over $6.2 million to build a new fabrication facility. R. 34 PID 372.
Lakeside says it built the fabrication facility in response to increased pressure from Cambria "push[ing] its fabricators ... to increase capacity to handle at least 50,000 square feet of Cambria slabs per month and to sell ‘exclusively’ Cambria products." R. 34 PID 372. Lakeside more than doubled its fabrication capacity. And Lakeside alleges that its increase in Cambria sales to 98% in 2017 was a result of the same pressure. Lakeside says Cambria led it to expect that if it built the facility and increased Cambria sales to 98%, Cambria would make Lakeside the exclusive seller of Cambria products in Michigan.
The fabrication facility opened in April 2017. A few months later, in August, Lakeside met with Cambria's CEO in Cambria's Minnesota headquarters to discuss exclusivity. In the meeting, Lakeside "expressed its desire and expectation that Cambria consolidate the Michigan market by making Lakeside the sole fabricator." R. 34 PID 372. Talk continued after the meeting; in mid-October, Cambria said it would review Lakeside's strategic plan for servicing Michigan and northern Ohio as the sole Lexus Partner in Michigan.
In the meantime, Cambria heard that Lakeside was carrying a new quartz product made by another company. Unhappy, on January 3, 2018, Cambria sent an email asking about this development. Six days later, it told Lakeside it was terminating its relationship because Lakeside breached the Lexus Partner requirements. According to Lakeside, Cambria never specified how Lakeside breached, and never gave Lakeside a chance to cure any breach. Cambria immediately stopped all shipments of Cambria product to Lakeside and informed Lakeside's customers of the termination.
Invoking diversity jurisdiction, Lakeside filed suit in the Western District of Michigan. Lakeside's operative complaint brings claims for (i) breach of contract; (ii) violations of the Michigan Franchise Investment Law (MFIL); (iii) violation of the Uniform Commercial Code (UCC); and (iv) promissory estoppel.
Cambria filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), invoking the forum-selection clause. Lakeside responded that the forum-selection clause was unenforceable under M/S Bremen v. Zapata Off-Shore Co. , 407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). In Bremen , the Supreme Court stated, among other things, that a forum-selection clause is unenforceable when it contravenes a strong public policy of the forum state. Id. Lakeside argued that the forum-selection clause contravened a strong public policy of Michigan because the BPA is a franchise agreement and the MFIL—which represents Michigan public policy—specifically provides that forum-selection clauses in franchise agreements are void. Cambria responded that the BPA's choice-of-law provision provided that Minnesota law governed, rendering the MFIL inapplicable. Lakeside replied that the choice-of-law provision did not extend to its MFIL claims and that the choice-of-law provision was unenforceable under Michigan's conflict-of-law principles.
The district court sided with Cambria. It first expressed doubt that Bremen choice-of-law provision was enforceable and, therefore, rendered the MFIL inapplicable. The court then dismissed the case under the doctrine of forum non conveniens. Lakeside timely appealed.
The only question the parties raise on appeal is whether the parties’ forum-selection clause is enforceable. In Bremen , the Supreme Court held that a forum-selection clause "should control absent a strong showing that it should be set aside." 407 U.S. at 15, 92 S.Ct. 1907. Our case implicates one of the exceptions to enforceability that Bremen recognized: "[a] contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought ...." Id. Lakeside contends that the forum-selection clause here is unenforceable under Bremen ’s public-policy exception. Cambria disagrees and also argues that Bremen ’s public-policy exception is not part of the enforceability analysis. Before resolving that issue, however, we first clarify the overall analytical framework.
A.
Where, as here, "a forum-selection clause indicates that a matter should be heard by a state or foreign court, then forum non conveniens is the appropriate method of enforcement." Boling v. Prospect Funding Holdings, LLC , 771 F. App'x 562,...
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