Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

First Bank & Trust v. Complete Communications, Inc.

United States District Court, D. South Dakota, Southern Division

June 24, 2019

FIRST BANK & TRUST d/b/a FIRSTLFNE FUNDING GROUP, Plaintiff,
v.
COMPLETE COMMUNICATIONS, INC., JAMES GARRETT CONNOR and SARAH BETH CONNOR, Defendants.

          MEMORANDUM OPINION AND ORDER

          LAWRENCE L. PIERSOL UNITED STATES DISTRICT JUDGE

         Pending before the Court is Defendants Complete Communications, Inc., James Garrett Connor, and Sarah Beth Connor's ("Defendants") Motion to Dismiss. (Doc. 7.) In addition, Plaintiff First Bank & Trust d/b/a Firstline Funding Group ("Firstline"), moves to amend its Complaint. (Doc. 11.) For the following reasons the motion to amend will be granted. The Court will construe the motion to dismiss as amotionto transfer under 28 U.S.C. § 1404(a), and will allow more briefing by the parties before ruling on the motion.

         FACTUAL BACKGROUND

         Firstline, a South Dakota banking corporation, brought this action against Defendants in the Circuit Court of Minnehaha County, South Dakota, seeking $92, 062.69 in damages. On September 24, 2018, Defendants removed the action to this Court based on diversity of citizenship. Defendant Complete Communications, Inc. ("Complete") is a resident of North Carolina, and Defendants Sarah Connor and James Connor are residents of Colorado.

         The initial Complaint alleges that Firstline entered into a factoring and security agreement ("Agreement") with Complete wherein Firstline agreed to purchase accounts of Complete on a full recourse basis. Pursuant to the Agreement, Firstline became the assignee and owner of all Complete accounts with the sole right to collect the proceeds thereof. Firstline claims that James Connor and Sarah Connor each executed a guaranty to Firstline guaranteeing the obligations of Complete to Firstline. Defendants allegedly submitted multiple invoices to Firstline that they knew were subject to claims, deductions, setoff and defenses. They sold invoices to Firstline that their account debtors, in particular DAB Drilling, were unable or unwilling to pay. The complaint asserts five causes of action against Defendants: 1) breach of contract by Complete; 2) enforcement of security interest against Complete; 3) promissory estoppel against Complete; 4) breach of guaranty agreement by Beth Connor; and 5) breach of guaranty agreement by Garrett Connor.

         The initial Complaint states that jurisdiction is proper because Defendants executed a contract agreeing that the proper jurisdiction for all disputes is South Dakota, with South Dakota law applying in all respects.

         On October 1, 2018, Defendants filed an Answer denying that they entered into the Agreement with Firstline. (Doc. 3.) Rather, Defendants entered into the Agreement and the two individual guarantees with a Washington corporation called DB Squared. Defendants' Agreement with DB Squared has a clause in which the parties expressly agreed to apply Washington law and to litigate any disputes in Washington:

EXCEPT AS EXPRESSLY AGREED IN WRITING BY DB SQUARED, THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF WASHINGTON SHALL HAVE SOLE AND EXCLUSIVE JURISDICTION OF ANY AND ALL CLAIMS, DISPUTES, AND CONTROVERSIES ARISING UNDER OR RELATING TO THIS AGREEMENT. NO LAWSUIT, PROCEEDING, ALTERNATIVE DISPUTE RESOLUTION, OR ANY OTHER ACTION RELATING TO OR ARISING UNDER THIS AGREEMENT MAY BE COMMENCED OR PROSECUTED IN ANY OTHER FORUM, EXCEPT AS EXPRESSLY AGREED IN WRITING BY DB SQUARED.

         (Doc. 9-1 at ¶ 32.) DB Squared assigned the Agreement to Firstline. Subsequently, Defendants entered into an addendum with Firstline which detailed some additional fees but did not otherwise revise any of the terms of Defendants' Agreement with DB Squared. (Doc. 9-5.) that it has the right to unilaterally change the forum to South Dakota and that it did so by filing the lawsuit here.

         In addition, Firstline points out that a motion to dismiss for lack of jurisdiction under Rule 12(b)(1) is not the appropriate means to enforce a forum selection clause. See City of Benkelman, Neb. v. Baseline Eng'g Corp., 867 F.3d 875, 881 (8th Cir. 2017) (holding district court erred by ruling it lacked subject matter jurisdiction under Rule 12(b)(1) due to an arbitration clause in a contract signed by both parties). In Benkelman, the Eighth Circuit held that a Rule 12(b)(6) motion to dismiss or summary judgment under Rule 56 are the appropriate vehicles to compel arbitration. Id. at 881. The Eighth Circuit noted that, to the extent the defendant sought to enforce the forum-selection clause independent of the arbitration agreement, it "should have invoked the forum non conveniens doctrine." Id. at 882 n. 6 (citing Atlantic Marine Constr. Co. v. U.S. Dist. Court for the Western Dist. Of Texas, 571 U.S. 49, 60 (2013)).

         In their reply brief, Defendants say that the Eighth Circuit has not been clear whether a case can be dismissed based on a valid forum selection clause, and they cite M.B. Restaurants, Inc. v. CKE Restaurants, Inc., 183 F.3d 750 (8th Cir. 1999). There, the Eighth Circuit affirmed the district court's dismissal of the lawsuit for improper venue because the parties' agreement contained a forum clause providing that any litigation be conducted in Utah. See Id. at 753.

         The landscape has changed since the Eighth Circuit's 1999 opinion in Mi?. Restaurants. In 2013, the United States Supreme Court provided guidance on the procedure for federal courts presented with a motion to dismiss or transfer based on a forum selection clause. See Atlantic Marine, 571 U.S. 49. The Supreme Court foreclosed the use of Rule 12(b)(3) motions to dismiss to enforce mandatory forum selection clauses. Id. at55-56. The Court explained that "Rule 12(b)(3) allow[s] dismissal only when venue is 'wrong' or/improper.' Whether venue is 'wrong' or 'improper' depends exclusively on whether the court in which the case was brought satisfies the requirements of federal venue laws, and those provisions say nothing about a forum-selection clause." Id. at 55 (citing 28 U.S.C. § 1406(a) and Fed.R.Civ.P. 12(b)(3)); see also In re Union Elec. Co., 787 F.3d 903, 907 (8th Cir. 2015) (stating that Atlantic Marine "clearly eliminated the possibility of using Rule 12(b)(3) as a means to enforce a forum-selection clause").

         The lower courts in Atlantic Marine had rejected transfer because the party seeking to enforce the forum selection clause had not demonstrated that the factors in the transfer statute, 28 U.S.C. § 1404(a), were met. The Supreme Court disagreed and stated that "the appropriate way to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of forum non conveniens." 28 U.S.C. § 1404(a), which "is merely a codification of the doctrine of forum non conveniens for the subset of cases in which the transferee forum is within the federal court system," does not govern most situations where the forum selection clause points to a non-federal venue. Nevertheless, the Court determined that § 1404(a) provides the appropriate procedural avenue for evaluating those situations, too. It authorizes courts to transfer cases "to any other district or division where it might have been brought or to any district or division to which all parties have consented." In cases that do no not involve a forum selection clause, a district court must balance "the convenience of parties and witnesses" and "the interest of justice." Id. at 62. If there is a valid forum selection clause, however, courts applying § 1404(a) must give forum selection clauses "controlling weight in all but the most exceptional cases." Id. at 63. "When parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the litigation. A court accordingly must deem the private-interest factors to weigh entirely in favor of the preselected forum." Id. at 64. Forum selection clauses thus will be enforced under § 1404(a) except where unusually strong public interest factors counsel against such a transfer. "Public-interest factors may include 'the administrative difficulties flowing from court congestion; the local interest in having localized controversies decided at home; [and] the interest in having the trial of a diversity case in a forum that is at home with the law.'" Id. at 62 n. 6 (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241, n. 6 (1981)).

         Firstline does not challenge the validity or enforceability of the forum selection clause. There are only two narrow issues before the Court regarding the selection clause in this case. First, Firstline argues that it was allowed to change, and did change, the forum to South Dakota. Second, if Firstline is wrong, this Court must decide if the case should be ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.