Scrum All., Inc. v. Scrum, Inc.
| Decision Date | 26 February 2021 |
| Docket Number | 4:21CV171,Civil Action No. 4:20-CV-227 |
| Parties | SCRUM ALLIANCE, INC., Plaintiff, v. SCRUM, INC., JEFF SUTHERLAND, and JJ SUTHERLAND, Defendants. |
| Court | U.S. District Court — Eastern District of Texas |
MEMORANDUM OPINION & ORDER
Pending before the Court is Defendants' Motion to Dismiss or, In the Alternative, to Transfer (Dkt. #107). Having considered the relevant pleadings, the Court finds the Motion should be granted in part and denied in part.
A more thorough factual background can be found in the Court's July 16, 2020 Memorandum Opinion and Order (Dkt. #72 at pp. 1-3). Briefly, this case arises out of Plaintiff's allegations that Defendants used Plaintiff's trademarks without authorization to create a competing line of certification courses that teaches the Scrum framework. Defendants deny these allegations.
Importantly here, the Motion pertains to the individual defendants, Dr. Jeff Sutherland and JJ Sutherland (collectively, the "Sutherlands"), and the single cause of action Plaintiff asserts against them—breach of contract.1 The Sutherlands argue, among other things, that the forum-selection clause (the "Clause") in their respective license agreements with Plaintiff requirethe Court to transfer the case to the United States District Court for the District of Colorado (Dkt. #107 at p. 8). When the Sutherlands first entered their license agreements with Plaintiff, the Clause read, in relevant part:
[Sutherland] and [Plaintiff] irrevocably consent to the exclusive jurisdiction and venue of the federal and state courts located in Denver, Colorado, and each irrevocably waives the right to trial by jury.
(Dkt. #22, Exhibit 5 at § 8.5; Dkt. #22, Exhibit 6 at § 8.5). After litigation commenced, Plaintiff, pursuant to its purported contractual authority (see Dkt. #22, Exhibit 5 at § 8.8; Dkt. #22, Exhibit 6 at § 8.8), retroactively amended the same part of the Clause to read:
[Sutherland] and [Plaintiff] irrevocably consent to the exclusive jurisdiction and venue of the federal and state courts located in Colorado and Texas.
(Dkt. #33, Exhibit 16 at p. 2).
On October 29, 2020, Defendants filed their Motion to Dismiss or, In the Alternative, to Transfer (Dkt. #107), currently before the Court. On November 12, 2020, Plaintiff filed its response (Dkt. #114). On November 19, 2020, Defendants filed their reply (Dkt. #117). And on November 27, 2020, Plaintiff filed its sur-reply (Dkt. #121).
The Sutherlands present several arguments, but because the forum-selection clause resolves the Motion, the Court assumes without deciding that personal jurisdiction exists over the Sutherlands and proceeds to the forum-selection-clause issue.2
Forum-selection clauses are "contractual provision[s] in which . . . parties establish the place (such as the country, state, or type of court) for specified litigation between them." Forum-Selection Clause, BLACK'S LAW DICTIONARY (11th ed. 2019). "[T]he appropriate way toenforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of forum non conveniens," Atl. Marine Const. Co., Inc. v. U.S. Dist. Court for W. Dist. of Tex., 571 U.S. 49, 60 (2013), which allows courts to "decline to exercise [their] jurisdiction and dismiss a case that is otherwise properly before [them] so that the case can be adjudicated in another forum," PCL Civ. Constructors, Inc. v. Arch Ins. Co., 979 F.3d 1070, 1073 (5th Cir. 2020). See Sierra Frac Sand, L.L.C. v. CDE Glob. Ltd., 960 F.3d 200, 203 (5th Cir. 2020) . "[F]or the subset of cases in which the transferee forum is within the federal court system," Congress codified the doctrine of forum non conveniens in 28 U.S.C. § 1404(a), "replac[ing] the traditional remedy of outright dismissal with transfer." Atl. Marine, 571 U.S. at 60. Even though forum-selection clauses are products of state contract law, federal law governs their enforceability. Liverpool FC Am. Mktg. Grp., Inc. v. Red Slopes Soccer Found., No. 4:17-CV-00756, 2018 WL 2298388, at *5 (E.D. Tex. May 21, 2018); see Bruckner Truck Sales, Inc. v. Hoist Liftruck Mfg., LLC, No. 2:20-CV-180-M-BQ, 2020 WL 6799179, at *4 (N.D. Tex. Nov. 19, 2020) .
In cases not involving a forum-selection clause, § 1404(a) requires courts to "evaluate both the convenience of the parties and various public-interest considerations" to determine the propriety of transfer. Atl. Marine, 571 U.S. at 62; see Garrett v. Hanson, 429 F. Supp. 3d 311, 317 (E.D. Tex. 2019). "But in cases where there is a valid forum-selection clause, 'the calculus changes,' because the clause 'represents the parties' agreement as to the most proper forum.'" Van Rooyen v. Greystone Home Builders, LLC, 295 F. Supp. 3d 735, 745 (N.D. Tex. 2018) (quotingAtl. Marine, 571 U.S. at 63). Before conducting this analysis, several threshold determinations must be made regarding the forum-selection clause in question.
At the outset, a court must determine whether the forum-selection clause is part of a valid contract. Oxysure Sys., Inc. v. Castaldo, No. 4:15-CV-324, 2016 WL 1031172, at *2 (E.D. Tex. Mar. 15, 2016). Additionally, the dispute at issue must "unquestionably fall[] within the scope of that contract." Indus. Print Techs. LLC v. Canon U.S.A., Inc., No. 2:14-CV-00019, 2014 WL 7240050, at *2 (E.D. Tex. Dec. 19, 2014). Once past these hurdles, a court must then analyze whether the forum-selection clause is mandatory or permissive. Sabal Ltd. LP v. Deutsche Bank AG, 209 F. Supp. 3d 907, 917 (W.D. Tex. 2016). And only after making this determination can a court reach the final preliminary inquiry and evaluate the enforceability of a forum-selection clause. Weber v. PACT XPP Techs., AG, 811 F.3d 758, 770 (5th Cir. 2016).
If the forum-selection clause satisfies these inquiries, the next step is to conduct the venue-transfer analysis the Supreme Court outlined in Atlantic Marine. In re Rolls Royce Corp., 775 F.3d 671, 678 (5th Cir. 2014). This analysis is identical to that of a standard § 1404(a) analysis—with three exceptions. First, because a plaintiff effectively exercises their "venue privilege" prior to the litigation by executing a contract containing a forum-selection clause, plaintiff's "choice of forum" when filing the lawsuit "merits no weight." Atl. Marine, 571 U.S. at 63. Second, because parties to a forum-selection clause "waive the[ir] right to challenge the preselected forum," a court must find "the private-interest factors to weigh entirely in favor of th[at] preselected forum."3 Id. at 64. And third, "when a party bound by a forum-selection clauseflouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue's choice-of-law rules—a factor that in some circumstances may affect public-interest considerations." Id. "Accordingly, in a case involving a forum-selection clause, 'a district court should transfer the case unless extraordinary circumstances unrelated to the convenience of the parties clearly disfavor a transfer.'" Mallory v. Lease Supervisors, LLC, No. 3:17-CV-3063-D, 2020 WL 3452980, at *2 (N.D. Tex. June 24, 2020) (quoting Atl. Marine, 571 U.S. at 52); see In re: Howmedica Osteonics Corp., 867 F.3d 390, 397 (3d Cir. 2017) .
The parties do not contest that Plaintiff's breach-of-contract claim against the Sutherlands falls within the scope of the Clause and that the Clause is mandatory—they only disagree as to the Clause's validity and enforceability. Because the enforceability issue is dispositive, the Court assumes without deciding that the Clause is part of a valid contract and proceeds to the enforceability analysis.
Plaintiff and the Sutherlands couch their positions regarding the Clause's enforceability in state-law terms.5 The Sutherlands argue that, absent their consent, Plaintiff's "unilateral andretroactive amendment" to the Clause adding Texas as a potential forum is "plainly impermissible" under Colorado law (Dkt. #107 at p. 25). Plaintiff counters that the addition of Texas as a possible forum to the Clause's language is within its rights under the contract and valid under Colorado law (Dkt. #114 at pp. 30-31).
These arguments concern the Clause's validity—specifically, which version of the Clause is operative. In reality, the pivotal issue here is the Clause's enforceability, a determination which federal law governs. SGIC Strategic Glob. Inv. Cap., Inc. v. Burger King Europe GmbH, 839 F.3d 422, 426 (5th Cir. 2016); see Haynsworth v. The Corp., 121 F.3d 956, 962 (5th Cir. 1997) (). Applying Colorado law to the extent either side urges would not affect the analysis the Court finds determinative. See Collins v. Mary Kay, Inc., 874 F.3d 176, 181 (3d Cir. 2017) . In other words, whether the Court determines that Plaintiff's amendment to the Clause is valid as a matter of state contract law does not impact the immediate result. As such, the Court focuses on the Clause's enforceability.
Normally, determining the enforceability of a forum-selection clause...
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