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No. 00-1539 UNITED STATES COURT OF
APPEALS FOR THE FIRST CIRCUIT 239 F.3d 385; 2001
U.S. App. LEXIS 2397 February 14, 2001,
Decided PRIOR HISTORY: [*1] APPEAL FROM THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO. [Hon. Hector M.
Laffitte, U.S. District Judge]. COUNSEL: Osvaldo Perez-Marrero, was on brief, for appellant. Maria I. Santos-Rivera, with whom Fiddler, Gonzalez &
Rodriguez, LLP, were on brief, for appellee. JUDGES: Before Torruella, Chief Judge, Lynch and Lipez,
Circuit Judges. OPINION BY: TORRUELLA OPINION: TORRUELLA, Chief Judge. Plaintiff-appellant Heriberto Silva
brought suit in the District of Puerto Rico against his employer, Encyclopedia
Britannica, Inc. and Encyclopedia Britannica U.S.A. (collectively “Britannica”),
for breach of contract. The contract, which granted appellant commissions for
selling products manufactured by Britannica, contained the following
choice-of-law and forum-selection clause: “This agreement shall be
governed and construed by the laws of the State of Illinois and all actions
involving this agreement must be brought in the State of Illinois.” The
district court concluded that the forum-selection clause was valid, enforceable
and mandatory and dismissed the suit without prejudice. For the reasons set
forth below, we affirm. DISCUSSION The prevailing [*2] view towards contractual
forum-selection clauses is that “such clauses are prima facie valid
and should be enforced unless enforcement is shown by the resisting party to be
‘unreasonable’ under the circumstances.” M/S
Bremen v. Zapata Off-Shore Co., 407
U.S. 1, 10, 32 L. Ed. 2d 513, 92 S. Ct. 1907 (1972). n1 Appellant
advances three arguments against enforcing the forum-selection clause here.
First, according to Silva, Britannica waived its venue defense by failing to
assert it timely and properly. Silva also contends that the forum-selection
clause at issue is permissive, rather than mandatory. Finally, Silva re-asserts
the grounds rejected by the district court in support of his claim that the
clause is unreasonable and should not be enforced. We review a district court’s
dismissal based on a forum-selection clause de novo. Lambert v. Kysar, 983 F.2d 1110, 1111
(1st Cir. 1993). - - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - -
- n1 As the district court noted, there is no conflict between
federal common law and Puerto Rico law regarding the enforceability of
forum-selection clauses. See Stereo Gema, Inc. v. Magnadyne Corp., 941 F. Supp. 271,
276 (citing Unisys Puerto Rico v. Ramallo Bros. Printing, Inc., 91 J.T.S. 69,
8855-56 (1991) (D.P.R. 1996)) (stating that the Puerto Rico Supreme Court has
adopted the federal jurisprudence regarding general enforceability of
forum-selection clauses). We therefore follow the reasoning of the district court
and do not reach the Erie issue of which law should apply to
forum-selection clauses in suits based upon diversity of citizenship. See Lambert
v. Kysar, 983 F.2d 1110, 1116 & n.10 (1st. Cir. 1993) (declining to
confront “the daunting question whether forum-selection clauses are to
be treated as substantive or procedural for Erie purposes,” observing
that the Supreme Court has not yet resolved the issue, and noting circuit split
on proper approach). - - - - - - - - - - - - End Footnotes- - - - - - - - - - - - -
- [*3] A. Shortly after commencement of this suit, Britannica filed a motion
to dismiss for lack of subject-matter jurisdiction against all plaintiffs
except Silva. n2 See Fed. R. Civ. P. 12(b)(1). The court granted the motion as
to these plaintiffs, and discovery continued with respect to only Silva’s
claims. Over a year later, Britannica filed the motion to dismiss which is the
subject of this appeal. Appellant argues that by failing to consolidate this
defense with its initial 12(b) motion against the other plaintiffs, Britannica
was barred from raising the issue later by Fed. R. Civ. P. 12(g), which reads: A party who makes a motion under this rule may
join with it any other motions herein provided for and then available to the
party. If a party makes a motion under this rule but omits therefrom any
defense or objection then available to the party which this rule permits to be
raised by motion, the party shall not thereafter make a motion based on the
defense or objection so omitted, except a motion as provided in subdivision
(h)(2) hereof on any of the grounds there stated. Silva claims that for the same reason, Britannica has waived its
defense under Fed. [*4] R. Civ. P. 12(h)(1)(A), which states
that “[a] defense of lack of jurisdiction over the person, improper
venue, insufficiency of process, or insufficiency of service of process is
waived if omitted from a motion in the circumstances described in subdivision
(g).” - - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - -
- n2 The original complaint was filed by Silva and sixteen other
former independent contractors employed by Britannica. The court dismissed the
fifteen remaining plaintiffs for failing to meet the required amount in
controversy for diversity jurisdiction. See 28 U.S.C. § 1332(a). - - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - Appellant misconstrues the law of this Circuit, under which a
motion to dismiss based upon a forum-selection clause is treated as one
alleging the failure to state a claim for which relief can be granted under
Fed. R. Civ. P. 12(b)(6). n3 Lambert, 983 F.2d at 1112 n.1; LFC Lessors, Inc.
v. Pacific Sewer Maint. Corp., 739 F.2d 4, 7 (1st Cir. 1984); cf. Ninigret
Dev. Corp. v. Narragansett Indian Wetuomuck Hous. Auth., 207 F.3d 21, 34
(1st Cir. 2000) [*5] (vacating judgment focusing on
forum-selection clause under Rule 12(b)(6) for reconsideration of exhaustion of
tribal remedies under Rule 12(b)(1)). Consequently, in this Circuit, a motion
to dismiss by reason of a forum-selection clause is covered by Rule 12(h)(2),
which states that “[a] defense of failure to state a claim upon which
relief can be granted … may be made in any pleading permitted or
ordered under Rule 7(a), or by motion for judgment on the pleadings, or at the
trial on the merits.” Fed. R. Civ. P. 12(h)(2). This provision
constitutes an exception to the consolidation requirement of Rule 12(g) and
therefore a motion to dismiss on forum-selection grounds is not bound to the
strict limitations of 12(h)(1). n4 See Frietsch v. Refco, Inc., 56 F.3d 825, 830
(7th Cir. 1995) (observing that if the motion to dismiss were based on
12(b)(6), defendant “would escape the clutches of Rule 12(h)(1)”). - - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - -
- n3 This is only one of the variegated views among the circuits
concerning the appropriate vehicle for a motion to dismiss based on a
forum-selection clause. The Third Circuit joins this Court in characterizing
the motion as a Rule 12(b)(6) defense, see Instrumentation Assocs., Inc. v.
Madsen Elecs. (Canada) Ltd., 859 F.2d 4, 6 n.4 (3d Cir. 1988), while other circuits
have considered such motions as based on Rule 12(b)(3) (improper venue), see Lipcon
v. Underwriter’s at Lloyd’s, London, 148 F.3d 1285, 1289 (11th Cir.
1998); Richards v. Lloyd’s of London, 135 F.3d 1289, 1292 (9th Cir. 1998);
Frietsch v. Refco, Inc., 56 F.3d 825, 830 (7th Cir. 1995); Commerce
Consultants Int’l v. Vetrerie Riunite, 276 U.S. App. D.C.
81, 867 F.2d 697, 698 (D.C. Cir. 1989), or on Rule 12(b)(1) (lack of subject
matter jurisdiction), see AVC Netherland B.V. v. Atrium Inv. P&146;ship, 740 F.2d 148, 153
(2d Cir. 1984). Still others have not yet decided the issue. See Haynsworth
v. Lloyd’s of London, 121 F.3d 956, 961 (5th Cir. 1997) (refraining from
resolving the “enigmatic question of whether motions to dismiss on the
basis of forum-selection clauses are properly brought as motions under Fed. R.
Civ. P. 12(b)(1), 12(b)(3), or 12(b)(6), or 28 U.S.C. § 1406(a)”);
Shell v. R.W. Sturge, Ltd., 55 F.3d 1227, 1229 (6th Cir. 1995) (stating only that the
enforceability of a forum-selection clause is reviewable de novo); Riley v.
Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 956 (10th Cir. 1992) (observing that such
motions are “frequently analyzed as [motions] to dismiss for improper
venue under Fed. R. Civ. P. 12(b)(3),” but failing to resolve the
question). [*6] n4 For this reason, we do not address whether Britannica was
required to join its defenses against all plaintiffs into a single motion. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - - Accordingly, a motion to dismiss based on a forum-selection clause
may be raised at any time in the proceedings before disposition on the merits.
Cf. Brown v. Trustees of Boston Univ., 891 F.2d 337, 357 (1st Cir. 1989) (holding
that by waiting until after the jury reached its verdict, University had waived
its Rule 12(b)(6) defense). Britannica met this requirement by filing its
motion to dismiss before the completion of discovery. n5 Although, as appellant
points out, Britannica erroneously characterized this motion to dismiss as one
based on improper venue, “we are not bound by the label below, and
agree that the case should have been dismissed.” LFC Lessors, Inc., 739 F.2d at 7
(citing Carr v. Learner, 547 F.2d 135, 137 (1st Cir. 1976)). - - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - -
- n5 We do not consider Britannica’s assertion that it
raised this defense in its answer to appellant’s complaint. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - - -
- [*7] B. We next turn to whether the language of the forum-selection clause
is permissive or mandatory. To support his contention in favor of the former,
appellant cites our recent opinion in Autoridad de Energia Electrica de P.R.
v. Ericsson Inc., 201 F.3d 15 (1st Cir. 2000). In that case, we evaluated a
forum-selection clause which provided: “The parties agree to submit to
the jurisdiction of the courts of Puerto Rico.” This Court read that
language as “an affirmative conferral of personal jurisdiction by
consent, and not a negative exclusion of jurisdiction” in the federal
district court. Id. at 18-19. Appellant argues that the same interpretation applies
in the instant case. We disagree. Our holding in Ericsson did not create a general rule for
forum-selection clauses, as Silva intimates in his brief. Rather, we based our
conclusion on the specific language of the contract at issue. In fact, we
explicitly noted that had they so desired, the parties “could easily
have drafted the contract to provide for exclusive jurisdiction in the
Commonwealth courts.” n6 Id. at 19. The contract here reflects precisely
such a case: the [*8] word “must” expresses
the parties’ intention to make the courts of Illinois the exclusive
forum for disputes arising under the contract. See Zapata, 407 U.S. at 2
(holding that a contract stating that “any dispute arising must be
treated before the London Court of Justice” required the court to
exercise its jurisdiction no further than necessary to enforce the
forum-selection clause) (emphasis added); accord Keaty v. Freeport Indon., 503 F.2d 955,
956-57 (5th Cir. 1974) (citing Zapata as an example of “a situation where
the contract, on its face, clearly limited actions thereunder to courts of a
specified locale”). We therefore conclude that the forum-selection
clause is mandatory. - - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - -
- n6 We emphasize, however, that even a mandatory forum-selection
clause does not in fact divest a court of jurisdiction that it otherwise
retains. See Zapata, 407 U.S. at 12 (“No one seriously contends …
that the forum-selection clause ‘ousted’ the District Court
of jurisdiction over Zapata’s action.”); LCF Lessors, Inc.,
739 F.2d at 6 (“Such a provision does not oust the jurisdiction of the
courts.”) (quoting Central Contracting Co. v. Maryland Cas. Co., 367 F.2d 341, 345
(3d Cir. 1966)); cf. Brown, 891 F.2d at 357 (“It is well
settled that the failure to state a proper cause of action calls for a judgment
on the merits and not for a dismissal for want of jurisdiction.”)
(quoting Bell v. Hood, 327 U.S. 678, 682, 90 L. Ed. 939,
66 S. Ct. 773 (1946)). Rather, “[the clause] merely constitutes a
stipulation in which the parties join in asking the court to give effect to
their agreement by declining to exercise its jurisdiction.” LCF
Lessors, Inc., 739 F.2d at 6 (quoting Central Contracting Co., 367 F.2d at
345). “Exclusive jurisdiction” in this context thus refers to
the intent of the parties rather than the actual power of the court. - - - - - - - - - - - - End Footnotes- - - - - - - - - - - - -
- [*9] C. Since the motion to dismiss was timely raised and the clause is
mandatory, we will uphold the district court’s decision unless
“enforcement would be unreasonable and unjust, or … the
clause [is] invalid for such reasons as fraud or overreaching.” Zapata, 407 U.S. at 15.
Silva points out that the contract contained boilerplate provisions not subject
to negotiation and that the forum-selection clause was in small print on the
back of the contract. He also places great weight on the “overwhelming
bargaining power and influence” of Britannica in the hiring process to
support his view that the clause is unenforceable. These reasons fall short of
meeting the required criteria for establishing “fraud or overreaching,”
id.,
nor do these reasons render the enforcement of the clause “unreasonable
and unjust.” Id. First, that the forum-selection clause is a “boilerplate”
provision does not ipso facto render it invalid. “It is not the law
that one must bargain for each and every written term of a contract.” Lambert, 983 F.2d at 1119-20
(internal quotation omitted); see also Carnival Cruise Lines, Inc. v. Shute, 499
U.S. 585, 593, 113 L. Ed. 2d 622, 111 S. Ct. 1522 (1991) [*10]
(refusing to find a nonnegotiated forum-selection clause in a form
ticket unenforceable “simply because it is not the subject of
bargaining”). Similarly, the placement of the clause on the reverse
side of the contract is of little consequence where, as here, it is printed
clearly in plain language and in a contract of reasonable length. Lambert, 983 F.2d at 1120.
Finally, Britannica’s alleged bargaining power is not relevant on
these facts. Britannica used its bargaining power to do nothing more than offer
an appealing employment opportunity to appellant, and no evidence suggests that
he was coerced into entering the agreement. All that remains, then, is an
arms-length transaction, the terms of which are binding on both parties. As
such, the enforcement of those terms is not unreasonable, and hence the case
was properly dismissed. CONCLUSION The order of the district court is affirmed. |