This appeal concerns the application of an "outbound" forum-selection clause.
On April 4, 1997, O'Brien Engineering Company, Inc. ("O'Brien"), sued Continental Machines, Inc. ("Continental"), a Minnesota corporation; Control and Power, Inc. ("Control"), an Alabama corporation; and Larry A. Sichmeller, Continental's vice president for sales and marketing. O'Brien alleged that Continental and Sichmeller had committed promissory fraud by terminating O'Brien as an authorized distributor of Continental products. The trial court dismissed O'Brien's complaint, without prejudice, based on the forum-selection clause set out in the contract entered into by the parties. The trial court's April 13, 1998, judgment of dismissal stated:
(C.R.492.) O'Brien appealed.
O'Brien was an authorized distributor for Continental's hydraulic pumps and valves, under a 1984 distribution agreement. The agreement contained a choice-of-law provision and an outbound forum-selection clause.
(Deposition of J.A. O'Brien, defendant's exhibit 3.)
On October 10, 1996, Continental terminated its distributorship agreement with O'Brien. On April 4, 1997, O'Brien filed a complaint in the Circuit Court of Jefferson County, Alabama, against Continental and Sichmeller, alleging promissory fraud; and against Control, claiming tortious interference with business relations. The defendants answered on May 12, 1997. On May 19, 1997, Continental filed a counterclaim against O'Brien, alleging a breach of the 1984 distribution agreement. The defendants moved for a summary judgment on February 9, 1998. O'Brien amended its complaint on February 19, 1998, to include claims based on promissory estoppel and breach of an oral contract. In response to O'Brien's amended complaint, the defendants immediately moved to dismiss the action, pursuant to the forum-selection clause contained in the parties' 1984 distribution agreement. On April 14, 1998, the trial court dismissed the case, without prejudice.
Initially, we must determine the applicable standard of review for an appeal from a trial court's order dismissing a case because of a forum-selection clause. Relying on M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), this Court has held that forum-selection clauses are not against the public policy of Alabama and "that such a provision should be enforced unless to do so would be unfair or unreasonable under the circumstances." Professional Insurance Corp. v. Sutherland, 700 So.2d 347, 348 (Ala.1997). However, we did not explicitly state in Professional Insurance Corp. v. Sutherland what standard of review we would use in reviewing a dismissal based on a forum-selection clause.
O'Brien argues that the trial court erred in determining that its claims against the defendants are governed by the forum-selection clause in the parties' 1984 distribution agreement. This Court has held that it is not unfair or unreasonable to enforce a forum-selection clause if the clause is part of a contract that "[has] been freely entered into, without the existence of fraud, undue influence, or overweening bargaining power; and [if] the chosen forum [is] reasonable and not seriously inconvenient." Professional Insurance Corp. v. Sutherland, 700 So.2d at 350 (citing M/S Bremen, 407 U.S. at 13, 17-18, 92 S.Ct. 1907). O'Brien does not argue, and the record does not reflect, that O'Brien entered into the contract against its will, that O'Brien was subject to undue influence in the negotiation or execution of the contract, or that Continental had overweening bargaining power over O'Brien. Further, the chosen forum—Minnesota—is not unreasonable or seriously inconvenient, because Minnesota is the home state of Continental, several witnesses live and work in Minnesota, and a substantial number of the documents related to the case are located in Minnesota. Accordingly, we are unable to say that the trial court abused its discretion by enforcing the forum-selection clause.
O'Brien also argues that the defendants waived their right to invoke the forum-selection clause. It is undisputed that when O'Brien filed its action in the Jefferson Circuit Court, forum-selection clauses were considered to be void and unenforceable in Alabama. Redwing Carriers, Inc. v. Foster, 382 So.2d 554 (Ala. 1980). During the pendency of O'Brien's case, however, this Court decided Professional Insurance Corp., supra, reversing the rule stated in Redwing Carriers. On February 19, 1998, in open court, the trial judge granted O'Brien's motion to amend its complaint to include claims based on the doctrine of promissory estoppel and alleging breach of an oral contract. Immediately, Continental moved to dismiss the case pursuant to the forum-selection clause, and the court subsequently granted Continental's motion. O'Brien argues that Continental waived its right to enforce the forum-selection clause by not objecting to
The judgment of the Jefferson Circuit Court dismissing O'Brien's case is affirmed.
HOOPER, C.J., and MADDOX, KENNEDY, COOK, BROWN, and JOHNSTONE, JJ., concur.
HOUSTON, J., concurs specially.
SEE and LYONS, JJ., dissent.
HOUSTON, Justice (concurring specially).
Forum-selection clauses are not always enforceable. To be enforceable, such a clause must have been freely entered into, without the existence of fraud, undue influence, or overweening bargaining power; and the chosen forum must be reasonable and not seriously inconvenient. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 13, 17-18, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972); Professional Insurance Corp. v. Sutherland, 700 So.2d 347, 350 (1997). For that reason, in addition to the reasons stated in the per curiam opinion, I am of the opinion that the standard of review applicable to the trial court's decision to enforce the forum-selection clause is the abuse-of-discretion standard rather than the de novo standard.
SEE, Justice (dissenting).
This Court holds that the defendants did not waive their defense of improper venue, which is premised on a contractual forum-selection provision. I respectfully dissent.
In Redwing Carriers, Inc. v. Foster, 382 So.2d 554 (Ala.1980), this Court held that "outbound" forum-selection clauses were contrary to public policy and, therefore, invalid and unenforceable. Id. at 556. This Court based its holding on the erroneous view that forum-selection clauses invest a court with, or divest a court of, subject-matter jurisdiction. In concluding that the contractual forum-selection clause, which required that any action be brought in the courts of Tampa, Hillsborough County, Florida, was unenforceable, this Court gave this rationale:
Id. at 555-56 (citations omitted). Thus, under Redwing Carriers, forum-selection clauses were viewed as an attempt by parties to bestow subject-matter jurisdiction
In Sutherland, this Court overruled the holding of Redwing Carriers and its progeny, ruling that an outbound forum-selection clause is enforceable unless to enforce it would be unfair or unreasonable under the circumstances. See 700 So.2d at 350. However, in Sutherland this Court also suggested that it had not abandoned the jurisdictional view established in Redwing Carriers.
700 So.2d at 351 (citation omitted). Thus, the Sutherland Court apparently retained the view of the Redwing Carriers Court, that forum-selection clauses invest a court with, or divest a court of, subject-matter jurisdiction.
The Sutherland Court's retaining the jurisdictional view was incorrect and was not necessary to the result in that case. As the Sutherland Court explained, even if the forum-selection clauses in that case affected venue, they were not prohibited by Ala.Code 1975, § 6-3-1. See 700 So.2d at 351. Although § 6-3-1 declares void any agreement that would change the statutorily prescribed venue of an Alabama court, this Court interpreted that section to permit parties to "agree to restrict actions to a particular forum that is authorized under the venue statutes." Id.
I do not agree that forum-selection clauses invest a court with, or divest a court of, subject-matter jurisdiction. "Jurisdiction over the subject matter is the power of a particular court to hear and to determine the cause of action, the relief sought, or the general question that is then before it." Hixson v. Haygood, 516 So.2d 694, 694-95 (Ala.Civ.App.1987) (citing Constantine v. Constantine, 261 Ala. 40, 72 So.2d 831 (1954); Farrell v. Farrell, 243 Ala. 389, 10 So.2d 153 (1942); Moffatt v. Cassimus, 238 Ala. 99, 190 So. 299 (1939); Ex parte Kelly, 221 Ala. 339, 128 So. 443 (1930); and Woolf v. McGaugh, 175 Ala. 299, 57 So. 754 (1911)). As this Court has stated, "Subject matter jurisdiction can neither be conferred by agreement nor can it be waived." International Longshoremen's Ass'n v. Davis, 470 So.2d 1215, 1216 (Ala.1985). Further, as the United States Court of Appeals for the Eleventh Circuit explained in Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285 (11th Cir.1998):
Id. at 1289.
Accordingly, a motion to dismiss based on a forum-selection clause should be made pursuant to Rule 12(b)(3), Ala. R. Civ. P., as a motion asserting the defense of improper venue. Under Rule 12(h)(1), Ala. R. Civ. P., a defense of improper venue is waived if it is omitted from the first responsive pleading or from a Rule 12 motion filed before the first responsive pleading. I agree with Justice Lyons that, because the venue question and the outbound forum-selection provision were apparent when the original complaint was filed, the defendants waived their improper-venue defense by failing to assert that defense in their first responsive pleading. See Jerome A. Hoffman & Sandra Guin, Alabama Civil Procedure § 4.82 (1990). I therefore dissent.
LYONS, Justice (dissenting).
I respectfully dissent. I would reverse the trial court's judgment on the basis that Continental waived its right to invoke the contract's forum-selection clause as a defense of improper venue.
The question presented by this case has generated a split in authority among the United States Circuit Courts of Appeals that have addressed it. Those courts have considered whether a motion to dismiss on the basis of a forum-selection clause should be filed under Rule 12(b)(6), Fed.R.Civ.P. (failure to state a claim), or under Rule 12(b)(3) (improper venue). See Frietsch v. Refco, Inc., 56 F.3d 825, 830 (7th Cir.1995) (embracing the majority view that the right to assert a forum-selection clause is a defense of improper venue and therefore is waivable, under Rule 12(h)(1), Fed.R.Civ. P.). Frietsch was followed in Sharpe v. Jefferson Distributing Co., 148 F.3d 676, 679 (7th Cir. 1998), abrogated on other grounds by Papa v. Katy Industries, Inc., 166 F.3d 937 (7th Cir.1999). See, also, Mitsui & Co. (USA), Inc. v. Mira M, 111 F.3d 33 (5th Cir.1997); Argueta v. Banco Mexicano, S.A., 87 F.3d 320 (9th Cir.1996); Riley v. Kingsley Underwriting Agencies, Ltd., 969 F.2d 953 (10th Cir.), cert. denied, 506 U.S. 1021, 113 S.Ct. 658, 121 L.Ed.2d 584 (1992). But see Lambert v. Kysar, 983 F.2d 1110 (1st Cir.1993); Instrumentation Associates, Inc. v. Madsen Electronics (Canada) Ltd., 859 F.2d 4 (3d Cir.1988).
In my opinion, the majority view is the better reasoned view. If the right to assert a forum-selection clause is a defense of improper venue, then it is deemed waived if not made in the first responsive pleading or in a motion filed before the first responsive pleading. I find the federal caselaw persuasive in this case, because Rule 12(h)(1), Ala. R. Civ. P., is identical to its federal counterpart. Continental did not assert the defense of improper venue either by motion filed before its first responsive pleading or in its first responsive pleading. I would adopt the majority view and hold that Continental waived its right to invoke the forum-selection clause as a defense of improper venue.
However, because forum-selection clauses were unenforceable at the time Continental filed its first responsive pleading, the majority holds that Continental did not
The "then available" limitation recognized in Ex parte Till, 595 So.2d 871 (Ala. 1992), should be applied to matters presented in the action such as venue defenses accruing after an amendment, and not to changes in decisional law. In adopting this limitation in Ex parte Till, this Court stated: "[A]n objection to the venue of an action may be raised after an amended complaint is filed, if the impropriety of venue appears for the first time in the complaint as amended." 595 So.2d at 872 (emphasis in original). Thus, the limitation was recognized to prevent waiver of a defense of which the plaintiff's complaint did not make the defendant aware. The treatise from which the Court adopted the "then available" limitation, Jerome A. Hoffman & Sandra Guin, Alabama Civil Procedure § 4.82 p. 256 (1990), gave the following as an example of nonwaiver of such a defense:
The contractual right to object to improper venue was apparent as soon as O'Brien filed its complaint. The original complaint was based on an alleged breach of the contract containing the forum-selection clause. Thus, Continental was aware of the defense, and the defense did not appear for the first time in the complaint as amended. Continental, however, chose not to plead the clause as a defense of improper venue, apparently relying on this Court's decision in Redwing Carriers, Inc. v. Foster, 382 So.2d 554 (Ala.1980), overruled, Professional Ins. Corp. v. Sutherland, 700 So.2d 347 (Ala.1997).
Continental could have taken the same path that the defendant took in Sutherland. Continental could have pleaded the clause as a defense or moved to dismiss the action on the basis of the clause, obtained a ruling from the trial court, and challenged the Redwing holding on appeal, just as the defendant in Sutherland did. Continental waited seven months after Sutherland was decided before invoking the forum-selection clause; it now seeks to reap the benefits of the actions taken by the defendant in Sutherland. During that delay, both parties engaged in extensive discovery, at a significant cost to O'Brien. I would not relieve Continental of the consequences of its waiver, because it should not be rewarded for failing to attempt to seek a favorable interpretation as to the effect of the forum-selection clause.
Accordingly, I would hold that Continental waived its right to assert the forum-selection clause as a defense of improper venue, and I dissent from the majority's holding to the contrary.