Rucker v. Finance

• Decision Date: 11 February 2011
• Docket Number: No. 09–14695.,09–14695.
• Citation: 632 F.3d 1231
• Parties: John RUCKER, Carolyn Williams, Wanda Anderson, Melanie House, Thomas R. Prince, Jr., on behalf of themselves and others similarly situated, Plaintiffs–Appellees,v.OASIS LEGAL FINANCE, L.L.C., Defendant–Appellant,Global Financial Credit, L.L.C., et al., Defendants.
• Court: U.S. Court of Appeals — Eleventh Circuit

632 F.3d 1231

78 Fed.R.Serv.3d 1053

22 Fla. L. Weekly Fed. C 1781

John RUCKER, Carolyn Williams, Wanda Anderson, Melanie House, Thomas R. Prince, Jr., on behalf of themselves and others similarly situated, Plaintiffs–Appellees,

v.OASIS LEGAL FINANCE, L.L.C., Defendant–Appellant,Global Financial Credit, L.L.C., et al., Defendants.

No. 09–14695.

United States Court of Appeals, Eleventh Circuit.

Feb. 11, 2011.

Joshua Kerry Payne, Sara Anne Ford, Ivan B. Cooper, Lana K. Alcorn, Lighfoot Franklin & White, LLC, Birmingham, AL, Brad E. Rago, William M. McErlean, Barnes & Thornburg LLP, Chicago, IL, for Defendant–Appellant.Michael C. Quillen, Samuel M. Hill, Law Offices of Sam Hill, LLC, Hoover, AL, Brian D. Turner, Jr., Hill Turner, LLC, Birmingham, AL, for Plaintiffs–Appellees.

Appeal from the United States District Court for the Northern District of Alabama.Before BLACK, MARTIN and COX, Circuit Judges.MARTIN, Circuit Judge:

This case presents the issue of the enforceability of a forum selection clause. The plaintiffs, on behalf of themselves and a purported class of others similarly situated, filed a declaratory judgment action outside of the contractually chosen forum, and the defendant moved to dismiss based on improper venue. The District Court denied the defendant's motion, concluding that giving effect to the forum selection clause would be unreasonable under the circumstances. After thorough review, we reverse and remand with instructions to enforce the clause and dismiss this action without prejudice on the basis of improper venue.

I.

The defendant, Oasis Legal Finance, L.L.C., provides “non-recourse funding” to plaintiffs involved in pending litigation. The plaintiffs are Alabama residents who entered into “purchase agreements” with Oasis. Under the terms of the purchase agreements, the plaintiffs sold an interest in the proceeds of their pending legal claims to Oasis in exchange for a fixed sum. The purchase agreements provided that if the plaintiffs recover nothing on their legal claims, they have no obligation to repay Oasis.

The purchase agreements also included choice of law and forum selection clauses. The choice of law clause states that: “all lawsuits, disputes, claims, or proceedings arising out of or relating to this Purchase Agreement ... shall be governed, construed and enforced in accordance with the laws of the State of Alabama.” The forum selection clause requires all disputes between the parties to be litigated in the Circuit Court of Cook County, Illinois. Specifically, the forum selection clause provides that:

The Parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the Circuit Court of Cook County, Illinois for any disputes, claims or other proceedings arising out of or relating to this Purchase Agreement, or the relationships that result from this Purchase Agreement, and agree not to commence any such lawsuit, dispute, claim, or other proceeding except in the Circuit Court of Cook County, Illinois. The parties hereby irrevocably and unconditionally waive any objection to the laying of venue of any lawsuit, dispute, claim or other proceeding arising out of or relating to this Purchase Agreement, or the relationships that result from this Purchase Agreement, in the Circuit Court of Cook County, Illinois, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in the Circuit Court of Cook County, Illinois that any such lawsuit, dispute, claim or other proceeding brought in the Circuit Court of Cook County, Illinois has been brought in an inconvenient forum.

(emphasis added).

In March 2009 the plaintiffs filed this purported class action in the Northern District of Alabama seeking a declaratory judgment that the purchase agreements they entered into with Oasis were void under Alabama law as illegal gambling contracts. Oasis moved to dismiss the action for improper venue on the basis of the forum selection clause in the purchase agreements. See Fed.R.Civ.P. 12(b)(3); Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285, 1290 (11th Cir.1998). The District Court denied Oasis's motion, concluding that enforcement of the forum selection clause would be unreasonable because it would require the parties to litigate a pure question of Alabama law in Illinois. This is the interlocutory appeal of the District Court's order. See 28 U.S.C. § 1292(b).

II.

We must first determine the proper standard of review to apply when reviewing the District Court's decision regarding this forum selection clause. This Court has previously reviewed the enforceability of a forum selection clause in an international agreement de novo. See Lipcon, 148 F.3d at 1290–91. Plaintiffs argue that the District Court's decision not to enforce the forum selection clause in their contract, however, should be reviewed only for an abuse of discretion because the clause was included in a domestic, rather than international, agreement.

It is true that we generally review the dismissal of a lawsuit for improper venue under an abuse of discretion standard. Home Ins. Co. v. Thomas Indus., Inc., 896 F.2d 1352, 1355 (11th Cir.1990). However, when considering the dismissal of a lawsuit for improper venue based on a forum selection clause in an international agreement, we concluded that there is “good reason” to review a district court's decision regarding the enforceability of a forum selection clause de novo. Lipcon, 148 F.3d at 1290. We explained that such an inquiry requires us to interpret a provision of a contract—a question of law subject to de novo review. Id. We also noted that in the context of international agreements, there may be questions of “fundamental fairness and public policy,” determinations which we explained were “quintessentially legal.” Id. at 1290–91.

Despite the distinction that plaintiffs attempt to make, the enforceability of a forum selection clause in a domestic contract is just as much a question of law as the enforceability of a forum selection clause in an international contract. We review questions of law de novo, and we have concluded, like many of our sister circuits, that the wiser course of action is to apply that standard here. See Ginter ex rel. Ballard v. Belcher, Prendergast & Laporte, 536 F.3d 439, 441 (5th Cir.2008); Pee Dee Health Care, P.A. v. Sanford, 509 F.3d 204, 209 (4th Cir.2007); Preferred Capital, Inc. v. Assocs. in Urology, 453 F.3d 718, 721 (6th Cir.2006); Silva v. Encyclopedia Britannica, Inc., 239 F.3d 385, 387 (1st Cir.2001); see also 14D Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3803.1 (3d ed. 2009) (“Some courts of appeal have held that the enforceability of a forum selection clause is reviewed for abuse of discretion. But many recent cases have held—correctly it seems—that the meaning, scope, and applicability questions relating to the clause are questions of law so that the district court's decision is reviewable de novo.” (footnotes omitted)).

III.

We decide whether state versus federal law governs a particular issue, such as the enforceability of a forum selection clause, in federal diversity cases by applying the Erie doctrine. See Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427, 116 S.Ct. 2211, 2219, 135 L.Ed.2d 659 (1996). Under the Erie doctrine, we conduct a multi-step analysis. Esfeld v. Costa Crociere, S.P.A., 289 F.3d 1300, 1306–07 (11th Cir.2002). The first step is “to determine whether state and federal law conflict with respect to the disputed issue before the district court. If no conflict exists, then the analysis need proceed no further, for the court can apply state and federal law harmoniously to the issue at hand.” Id.

In this case, there is no conflict between Alabama and federal law regarding the validity of forum selection clauses. Under federal law, the analysis in M/S Bremen v. Zapata Off–Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), is instructive in deciding this issue. Where, as here, the forum selection clause requires filing in state court and a party seeks to enforce the clause by moving to dismiss, other circuits have evaluated the forum selection clause under Bremen. See Doe 1 v. AOL LLC, 552 F.3d 1077, 1082–84 (9th Cir.2009); Ginter ex rel. Ballard, 536 F.3d at 441; Int'l Software Sys., Inc. v. Amplicon, Inc., 77 F.3d 112, 115 (5th Cir.1996); Jones v. Weibrecht, 901 F.2d 17, 19 (2d Cir.1990); see also 14D Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3803.1 (3d ed.2009) (recognizing that a majority of the courts of appeal have analyzed the enforceability of a forum selection clause under the Bremen framework when the clause selects a state court forum). The analysis is the same under Alabama law. See Prof'l Ins. Corp. v. Sutherland, 700 So.2d 347, 350 (Ala.1997) (holding that forum selection clauses are not void per se as against the public policy of Alabama and finding “the Supreme Court's reasoning in M/S Bremen on [the issue of enforceability of forum selection clauses] to be persuasive”). Consequently, we can apply both federal and Alabama law harmoniously in deciding the validity of the forum selection clause in this case.

IV.

In conducting the Bremen analysis, we have said that “[f]orum selection clauses are presumptively valid and enforceable unless the plaintiff makes a ‘strong showing’ that enforcement would be unfair or unreasonable under the circumstances.” Krenkel v. Kerzner Int'l Hotels Ltd., 579 F.3d 1279, 1281 (11th Cir.2009). The Bremen factors provide that a forum selection clause is unenforceable when: “(1) its formation was induced by fraud or overreaching; (2) the plaintiff would be deprived of its day in court because of inconvenience or unfairness; (3) the chosen law would deprive the plaintiff of a remedy; or (4) enforcement of the clause would contravene public policy.” Krenkel, 579 F.3d at 1281.

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