Pelleport Investors, Inc. v. Budco Quality Theatres, Inc.
| Decision Date | 24 August 1984 |
| Docket Number | Nos. 83-6228,83-7678,s. 83-6228 |
| Parties | PELLEPORT INVESTORS, INC., a corporation, Plaintiff-Appellee, v. BUDCO QUALITY THEATRES, INC., a corporation, doing business as Budco, Inc., Defendant-Appellant, and Does 1 through 100, Defendants. BUDCO QUALITY THEATRES, INC., Petitioner, v. UNITED STATES DISTRICT COURT FOR the CENTRAL DISTRICT OF CALIFORNIA, Respondent, Pelleport Investors, Inc., Real Party. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Karen A. von Dreusche, Busch & Schramm, Bala-cynwdy, Pa., for defendant-appellant.
Jay R. Ziegler, Buchalter, Nemer, Fields, Chyrstie & Younger, Los Angeles, Cal., for plaintiff-appellee.
On appeal from the United States District Court for the Central District of California.
Before SNEED and BOOCHEVER, Circuit Judges, and SOLOMON, * Senior District Judge.
Budco Quality Theatres, Inc. (Budco) appeals the district court's order, 569 F.Supp. 612, remanding this case to the state court from which it was removed. Budco additionally petitions this court for a writ of mandamus to prevent the remand. Both the appeal and petition question the enforceability of a forum selection clause governing disputes arising under a motion pictures rental agreement between the parties. We also must determine whether the remand order is reviewable. We conclude that we have jurisdiction of the appeal and we affirm the order.
In April 1981 American Cinema Releasing (ACR), a motion picture supplier located in California, entered into a contract with Budco, a Pennsylvania corporation, for the rental and exhibition of certain motion pictures. The contract contained the following provision, which is at issue in this case:
Exhibitor [Budco] expressly agrees that any and all disputes arising out of or in connection with this Agreement shall be litigated only in the Superior Court for Los Angeles, California (and in no other), and Exhibitor hereby consents to the jurisdiction of said court.
ACR allegedly entered into similar rental agreements containing an identical forum selection clause with other exhibitors, designated as Does 1-100.
Through a bankruptcy discharge Pelleport Investors, Inc. (Pelleport), a New York corporation, became the assignee of ACR's interest in the rented films. On May 5, 1983, Pelleport brought an action in the California Superior Court against Budco and 100 Doe defendants, alleging that the defendants owed a total of $246,319.73 in rental fees. Pelleport served the complaint only on Budco.
On June 8, 1983, Budco petitioned the United States District Court for the Central District of California for removal of the case based on diversity of citizenship and filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), or, in the alternative, to transfer the action to the Eastern District of Pennsylvania pursuant to 28 U.S.C. Sec. 1404(a).
In response, Pelleport filed a motion to remand the case to state court on the grounds that the forum selection clause should be enforced and that the district court lacked subject matter jurisdiction, because the jurisdictional amount was not met with respect to each defendant, and diversity of citizenship was defeated by inclusion of the Does. Budco opposed the motion to remand on the ground that the forum selection clause did not apply to all defendants, was not enforceable by an assignor, was unenforceable as against public policy, and was unenforceable because unreasonable under the circumstances.
The district court indicated that diversity jurisdiction existed between Pelleport and Budco, the only defendant appearing in the action. The court granted Pelleport's motion to remand to state court on the grounds that the forum selection clause was valid and enforceable. Applying the standard established in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 1916, 32 L.Ed.2d 513 (1972), the court found the clause reasonable under the circumstances.
28 U.S.C. Sec. 1447(d) generally forbids review of remand orders:
An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it is removed pursuant to section 1443 of this title shall be reviewable by appeal or otherwise. 1
In reliance upon section 1447(d), the district court denied Budco's motion to stay the remand order pending appeal. We do not agree with the district court's characterization of its decision as falling within the scope of the general non-reviewability rule of section 1447(d). The court had before it a remand motion based on two alternative theories: (1) that diversity was defeated by the inclusion of Doe defendants, and thus the district court lacked jurisdiction to hear the case, and (2) that the parties' agreement to litigate all contract disputes in state court was valid and enforceable. Had the district court based its remand order on the first theory, section 1447(d) would no doubt apply, because, even if clearly erroneous, a district court's decision that it lacks subject matter jurisdiction to hear a case is not reviewable. See Thermtron Products, Inc. v. Hermansdorfer, 423 U.S. 336, 343, 96 S.Ct. 584, 589, 46 L.Ed.2d 542 (1976). But the court did not base its remand order on lack of subject matter jurisdiction. It relied instead upon the forum selection clause. The novel question before this court, then, is whether a remand order based on the enforceability of such a clause is reviewable. We believe it is.
The parties have framed the issue in this case around the applicability of the Supreme Court's decision in Thermtron. In Thermtron, the Supreme Court held that the extraordinary relief of mandamus was available to prevent a district court which had subject matter jurisdiction over a case from remanding it solely on the ground that its docket was more congested than that of the state court. The Court concluded that the appellate courts have the power "to correct a district court that has not merely erred in applying the requisite provision for remand but has remanded a case on grounds not specified in the statute and not touching the propriety of the removal." Id. at 352, 96 S.Ct. at 593.
Budco argues that, because enforceability of a forum selection clause, like court congestion, is a ground "wholly different" from the grounds for remand specified in section 1447(c), section 1447(d) does not apply, and the remand order is reviewable. See Thermtron, 423 U.S. at 344, 96 S.Ct. at 589. Although we agree that enforceability of a forum selection clause is not a ground specified in section 1447(c), equating this case with Thermtron is difficult.
The confusion appears to be generated by the label of remand. Once the fact of remand is separated from the reason for its issuance, however, it becomes clear that the district court did not merely remand this case to the state court; it reached a substantive decision on the merits apart from any jurisdictional decision. Consequently, we find the Supreme Court's decision in Waco v. United States Fidelity & Guaranty Co., 293 U.S. 140, 55 S.Ct. 6, 79 L.Ed. 244 (1935), instructive. There, a Texas state court case was removed to federal court on the diversity petition of a third party defendant. The district court granted a motion by the plaintiff to dismiss the third party action on the ground that the third party defendant was an unnecessary and improper party. Because the dismissal left the court without diversity jurisdiction over the remaining parties, it remanded to state court. In holding that the district court's dismissal of the third party was reviewable, the Court stated:
True, no appeal lies from the order of remand; but in logic and in fact the decree of dismissal preceded that of remand and was made by the District Court while it had control of the cause. Indisputably this order is the subject of an appeal; and, if not reversed or set aside, is conclusive upon the petitioner.
Id. at 143, 55 S.Ct. at 7. See also, Armstrong v. Alabama Power Co., 667 F.2d 1385, 1387 (11th Cir.1982) ().
Budco presents an even stronger case for review. In Waco and Armstrong, the district courts issued remand orders based on lack of subject matter jurisdiction, a basis clearly enumerated in section 1447(c). The cases stand for the proposition that although the final determination that diversity is lacking is not reviewable, the earlier determination that a third party defendant must be dismissed from the action is. Here, the district court ordered the case remanded to state court after it found the parties' agreement to litigate in state court enforceable. Not only did the court's determination that the forum selection clause was valid and enforceable precede the remand order, it formed the basis of that order. Like the dismissal in Waco, the court's decision that the contract clause is enforceable, if not reversed or set aside, is conclusive upon Budco, and, therefore, must be reviewed. To hold otherwise would deprive Budco of its...
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