Melia v. Zenhire, Inc.

• Decision Date: 08 May 2012
• Docket Number: SJC–10959.
• Citation: 462 Mass. 164,967 N.E.2d 580
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: Edward MELIA v. ZENHIRE, INC., & another.

462 Mass. 164

967 N.E.2d 580

Edward MELIA

v.ZENHIRE, INC., & another.¹

SJC–10959.

Supreme Judicial Court of Massachusetts, Suffolk.

Submitted Jan. 3, 2012.

Decided May 8, 2012.

John P. Carr, Boston (Christine Ann Faro with him) for the plaintiff.

Daniel S. Field, Boston, for the defendants.

Benjamin G. Robbins & Martin J. Newhouse, Boston, for New England Legal Foundation, amicus curiae, submitted a brief.

Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, DUFFLY, & LENK, JJ.

CORDY, J.

In April, 2007, the plaintiff, Edward Melia, a Massachusetts resident, entered into an executive employment contract with the defendant Zenhire, Inc. (Zenhire). A forum selection clause dictated that all disputes arising out of the contract or the employment relationship were to be resolved in courts situated in Erie County, New York, Zenhire's principal place of business. Zenhire allegedly failed to pay Melia's salary from August, 2007, through February, 2008.

Melia commenced the present action in the Superior Court, alleging breach of contract, fraud, quantum meruit, and violations of the Massachusetts Wage Act, G.L. c. 149, §§ 148, 150 (Wage Act). With respect to the latter claim, Melia contended that the forum selection clause operated as a “special contract” that impermissibly exempted his employer from the requirements of the Wage Act. A judge in the Superior Court granted the defendants' motion to dismiss, pursuant to Mass. R. Civ. P. 12(b)(6), 365 Mass. 754 (1974),² reasoning that Melia could pursue his Wage Act claim in New York. Melia appealed, and we transferred the case to this court on our own motion.

We conclude that a forum selection clause operates as a special contract only when three conditions are met: the employee's claim is covered by the Wage Act; the court of the forum State, applying its choice-of-law principles, would choose a law other than that of Massachusetts to govern the dispute; and application of the foreign law will deprive the employee of a substantive right guaranteed by the Wage Act. Under modern choice-of-law doctrines, these conditions will rarely coincide. On the facts alleged in the present case, a New York court, applying New York's choice-of-law doctrine, would certainly apply the Wage Act to this dispute. Because enforcement of the forum selection clause would not deprive Melia of the protections of the Wage Act, we affirm the judge's dismissal of the action.³

1. Background. In reviewing a dismissal under rule 12(b)(6), we may consider the allegations in the complaint, items appearing in the record, and exhibits attached to the complaint. Schaer v. Brandeis Univ., 432 Mass. 474, 477, 735 N.E.2d 373 (2000), quoting 5A C.A. Wright & A.R. Miller, Federal Practice and Procedure § 1357, at 299 (1990). We accept as true the factual allegations in the complaint, as well as any favorable inferences drawn therefrom. Ginther v. Commissioner of Ins., 427 Mass. 319, 322, 693 N.E.2d 153 (1998).

Zenhire is a Delaware corporation with a principal place of business in Amherst, New York, a suburb of Buffalo. Zenhire was founded in 2003 to develop Internet-based tools and services for the recruiting industry. The defendant Robert H. Fritzinger, a New York resident, was at all pertinent times Zenhire's president and chief executive officer.

On April 2, 2007, Melia and Zenhire entered into an executive employment contract, pursuant to which Zenhire hired Melia as its vice-president of product and business development. Melia accepted a three-year period of employment with automatic renewal of additional one-year terms, unless either party objected. Zenhire reserved the right to terminate Melia at any time for cause. Zenhire agreed to compensate Melia with an initial base salary of $150,000. Melia was also eligible to participate in an executive bonus plan and a stock option plan.

The contract contained choice-of-law and forum selection clauses, as follows:

“This agreement shall be binding upon the parties hereto, and shall be governed and construed in accordance with the laws of the State of New York. Further, Company and Employee (i) agree that any and all disputes arising out of this Agreement or the employment relationship created thereby shall be resolved in the courts situated in the State of New York, County of Erie and (ii) consent to the venue of all courts situated in the State of New York, County of Erie.”

Melia worked out of an office in Boston. At the inception of the contract, he regularly spent time in the Buffalo area, but at all times he resided in Boston. Melia conducted meetings with prospective customers of Zenhire only in Massachusetts. Zenhire withheld Massachusetts income taxes, paid Massachusetts unemployment insurance, and obtained Massachusetts workers' compensation insurance for Melia's benefit.

Through August 29, 2007, both parties performed their obligations under the contract. Zenhire then experienced financial difficulties and stopped paying Melia. On September 28, 2007, Fritzinger told Melia that he was finalizing a deal that would provide Zenhire with financing. On November 16, 2007, Fritzinger again confirmed that Zenhire would compensate Melia for his work. Melia alleges he continued performing his duties pursuant to the contract through February, 2008, relying on Zenhire's repeated promises to compensate him. In February, 2008, Melia alleges he was forced to leave Zenhire for financial reasons and began to collect unemployment compensation. As of the end of February, 2008, Melia was allegedly owed $103,400, including unpaid wages of $75,000, vacation and sick day wages, severance pay, and unreimbursed expenses.

In September, 2008, Melia filed a complaint with the Attorney General with respect to Zenhire's alleged violation of the Wage Act. The Attorney General granted Melia the authority to file a civil action against Zenhire. Melia then commenced the present action in the Superior Court in May, 2009, against Zenhire, Fritzinger, and Deborah Fritzinger (Fritzinger's wife and a director of Zenhire), alleging violation of the Wage Act, breach of contract, quantum meruit, and fraud. The defendants moved to dismiss the entire action on the basis of the forum selection clause, and they also moved to dismiss each count on specific grounds. Melia voluntarily waived his claims against Deborah Fritzinger (see note 1, supra ) and the count claiming quantum meruit.

The judge initially denied the defendants' motion to dismiss Melia's Wage Law claim, based on his understanding that the contract's choice-of-law provision called for application of New York law to all counts. He further concluded that application of New York's Payment of Wages Law, which was less protective of employees than the Wage Act, would conflict with fundamental Massachusetts policy.⁴ Consequently, the judge concluded that the forum selection clause would be unfair and unreasonable to Melia.⁵

The defendants moved for reconsideration. After considering arguments from both parties, the judge reversed his prior ruling with respect to the forum selection clause, holding that enforcement of the forum selection clause was fair and reasonable because there was no evidence of fraud, duress, or substantial imbalance of bargaining power between the parties; and that a New York court would engage in the same choice-of-law analysis as a Massachusetts court, and “may apply” the Wage Act to Melia's claims. Melia appealed.

2. Validity of the forum selection clause in general. We first examine the validity of the forum selection clause irrespective of the Wage Act claim. Because the contract states that it is to be governed and construed according to the laws of New York, we determine the validity of the forum selection clause according to the law of our sister State. See Jacobson v. Mailboxes Etc. U.S.A., Inc., 419 Mass. 572, 575, 646 N.E.2d 741 (1995).

Like Massachusetts courts, see id. at 574–575, 646 N.E.2d 741, New York courts consider forum selection clauses to be “prima facie valid and enforceable unless shown by the resisting party to be unreasonable.” Brooke Group Ltd. v. JCH Syndicate 488, 87 N.Y.2d 530, 534, 640 N.Y.S.2d 479, 663 N.E.2d 635 (1996), citing The Bremen v. Zapata Off–Shore Co., 407 U.S. 1, 15–18, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). A “forum selection clause is prima facie valid and enforceable unless it is shown by the challenging party to be unreasonable, unjust, in contravention of public policy, invalid due to fraud or overreaching, or it is shown that a trial in the selected forum would be so gravely difficult that the challenging party would, for all practical purposes, be deprived of its day in court.” Adler v. 20/20 Cos., 82 A.D.3d 918, 919, 919 N.Y.S.2d 38 (N.Y.2011), and cases cited. “Forum selection clauses are enforced because they provide certainty and predictability in the resolution of disputes.” Boss v. American Express Fin. Advisors, Inc., 6 N.Y.3d 242, 247, 811 N.Y.S.2d 620, 844 N.E.2d 1142 (2006), quoting Brooke Group Ltd. v. JCH Syndicate 488, supra.

New York courts have enforced broadly worded forum selection clauses to dismiss statutory causes of action arising from the employment relationship. Boss v. American Express Fin. Advisors, Inc., supra at 245–247, 811 N.Y.S.2d 620, 844 N.E.2d 1142 (requiring plaintiffs to litigate alleged violations of N.Y. Lab. Law § 193 [McKinney 2009] [impermissible deduction from wages] and § 198–c [McKinney 2009] [failure to pay wages] in Minnesota); Adler v. 20/20 Cos., supra at 920, 919 N.Y.S.2d 38 (requiring plaintiffs to litigate alleged violation of N.Y. Lab. Law § 215 [McKinney 2012 Supp.] [prohibiting retaliation] in Texas).

In the present case, the forum selection clause is enforceable under New York law. Melia has not demonstrated, or even argued, that litigating his claims in New York would be unreasonable, unjust, or for all practical purposes deprive him of his day in court. The forum selection clause is broadly...