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Old Republic Insurance Co. v. City Plan Development Inc.

United States District Court, D. Nevada

February 7, 2017



         Presently before the court is plaintiff Old Republic Insurance Company's (“Old Republic”) brief in response to this court's October 26, 2016, order to show cause regarding this case's progression in the United States District Court, District of Nevada, because a contract forum-selection clause or choice-of-law clause may apply.[1] (ECF Nos. 60, 76). Pursuant to that order, defendants City Plan Development, Inc., Ernesto Savino, and Cynthia Wilson filed a response to plaintiff's brief.[2] (ECF Nos. 60, 77). This court also considers plaintiff's motion for leave to file a second amended complaint. (ECF No. 50).

         I. Introduction

         On May 2, 2016, plaintiff filed its amended complaint, alleging that defendants breached the parties' indemnity agreement because they have not compensated plaintiff for monies paid to defendants' subcontractors or suppliers made under labor and material payment bond no. 1238636. (ECF No. 8).

         On October 26, 2016, this court expressed its concern about this action's forum and choice of law, in light of the terms of indemnity agreement paragraph ZC. (ECF No. 60). That clause of the contract appeared to suggest that the parties agreed to resolve disputes in a Pennsylvania or Wisconsin forum, under Pennsylvania or Wisconsin law. (ECF No. 8-1).

         On December 28, 2016, plaintiff submitted its brief, first arguing that the list of eight non-exhaustive considerations mentioned in Jones v. GNC Franchising, Inc., 211 F.3d 495 (9th Cir. 2000), outweighs the presumptive validity of the forum-selection clause. (ECF No. 76). Next, Old Republic asserted that the parties have waived the forum-selection clause and choice-of-law provision. (Id.). Finally, plaintiff suggested that, if this court did not find those clauses to be waived, the applicable forum would be the United States District Court for the Eastern District of Wisconsin and that Pennsylvania law would apply. (Id.).

         On January 1, 2017, defendants submitted a response to plaintiff's submission, agreeing with plaintiff that venue is proper in this court and that Nevada law should apply in the instant case. (ECF No. 77). They assert that: (1) the relevant clauses are merely permissive-not obligatory; (2) “nearly all factors used to determine if venue is proper weigh in favor of maintaining venue in the district of Nevada”; and (3) the parties have agreed to conduct suit in this district. (Id. at 2-3).

         II. Legal Standard

         Forum selection clauses in contracts are “presumptively valid; the party seeking to avoid a forum selection clause bears a ‘heavy burden' to establish a ground upon which [the court] will conclude the clause is unenforceable.” Doe 1 v. AOL LLC, 552 F.3d 1077, 1083 (9th Cir. 2009) (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 17 (1972)). A forum-selection clause is unenforceable “if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision.” M/S Bremen, 407 U.S. at 15.

         “Because a valid forum selection clause is bargained for by the parties and embodies their expectations as to where disputes will be resolved, it should be ‘given controlling weight in all but the most exceptional cases.'” In re Orange, S.A., 818 F.3d 956, 961 (9th Cir. 2016) (quoting Atl. Marine Constr. Co., Inc. v. U.S. Dist. Court for W. Dist. of Texas, 134 S.Ct. 568, 581 (2013)).

         Moreover, a court should evaluate relevant contract language of an applicable forum-selection clause to determine whether its terms are permissive or exclusive. See Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77-78 (9th Cir. 1987); see also Docksider, Ltd. v. Sea Tech., Ltd., 875 F.2d 762, 764 (9th Cir. 1989).[3] “To be mandatory, a clause must contain language that clearly designates a forum as the exclusive one.” N. California Dist. Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1037 (9th Cir. 1995).

         III. Analysis

         a. Contract clauses

         Defendants' discussion of the permissive construction of contract paragraph ZC is persuasive. (ECF No. 77). Both the forum-selection clause and the choice-of-law provision are couched in terms indicating that the clauses may be exercised at plaintiff's option. See (ECF No. 8-1).

         First, the forum selection clause at issue relevantly reads: “The Surety, at its option, shall be entitled to enforce this Agreement by an action . . . brought in the said State of Incorporation or in the State where Surety's principle office is located . . . .” (Id. at 5). Second, the choice-of-law provision states: “Interpretation and enforcement of this Agreement, at the Option of Surety, ...

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