United States District Court, W.D. Louisiana, Lafayette Division
MEMORANDUM RULING (Rec. Doc. 11)
PATRICK J. HANNA, Magistrate Judge.
Currently pending before the undersigned, on referral from the district judge for ruling, is the defendants' Motion to Transfer to the Western District of North Carolina pursuant to 28 U.S.C. §1404(A) [Rec. Doc. 11]. After considering the applicable law, the written submissions and arguments of the parties, and for the following reasons, the motion is granted.
FACTUAL AND PROCEDURAL BACKGROUND
This is an action by Zloop LA, LLC and its sole owner Kendall G. Mosing against Zloop, LLC and its successor, Zloop, Inc., Robert Boston and Robert LaBarge for alleged violations of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78a et seq .; SEC Rule 10b-5, 17 C.F.R. §240.10b-5; Sections 11, 77d and 77l of the Securities Act of 1933, 15 U.S.C.A. § 77a et seq .; SEC Regulation D, 17 C.F.R. § 230.500 et seq .; the Louisiana Securities Law, La. R.S. 51:701 et seq .; the Louisiana Business Opportunity Law, La. R.S. 51:1821 et seq .; the Louisiana Unfair Trade Practice Act, La. R.S. 51:1401; fraud; conversion; breach of contract; negligent misrepresentation and detrimental reliance. Kendall Garrett Mosing is a Louisiana resident and sole member of Zloop LA, LLC, a Louisiana limited liability company. Defendant Zloop, LLC was a Delaware LLC with its principal place of business in North Carolina; ZLOOP, Inc. is a Delaware corporation with its principal place of business in North Carolina; Robert Labarge is a citizen of South Carolina who resides in North Carolina; and Robert Boston is a citizen and resident of Maryland. Both Labarge and Boston are alleged to be officers and directors of ZLOOP, Inc. [Rec. Doc. 1, pp. 7-8]. In a 102 page Complaint, the plaintiffs detail a long and complicated chronology of events alleged to have been initiated by the defendants which they contend constituted fraud, deception, misrepresentation, forgery and other dishonest acts designed to induce Mosing to invest in the Zloop franchise enterprises described to him.
According to the Complaint, the defendants generally communicated with Mosing through his trusted friend, and on numerous occasions Mosing was persuaded to invest in Zloop franchises, to loan money to Zloop and to establish lines of credit for Zloop, secured by Mosing's money. Specifically, the plaintiffs allege that beginning on September 25, 2012, the defendants began making overtures to Mosing regarding prospects for Zloop franchises in Louisiana and Ohio. On October 4, 2012, Mosing signed franchise disclosure documents related to the possible purchases of three Louisiana Zloop franchises. [Rec. Doc. 11-3] The documents disclosed various aspects of the contemplated franchise agreement, including specifically identified risk factors to be considered by potential purchasers. Included were the following provisions:
1. THE FRANCHISE AGREEMENT REQUIRES THAT ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER IN ANY COURT SHALL BE BROUGHT WITHIN THE STATE OF NORTH CAROLINA. OUT OF STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST YOU MORE TO LITIGATE IN NORTH CAROLINA THAN IN YOUR HOME STATE. THIS PROVISION IS SUPERSEDED BY CERTAIN STATE LAWS.
2. THE FRANCHISE AGREEMENT STATES THAT NORTH CAROLINA LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
[Rec. Doc, 11-3, p. 2]. The page on which these provisions appear bears the initials "KGM" in the bottom, right corner. Mosing's full signature, as "Franchisee, " appears at page 56 of the document.
Eleven days later, on October 15, 2012, Mosing signed three franchise agreements for the purchase of the Louisiana franchises by/for three limited liability companies, which the plaintiffs assert were not in existence at the time and were never formed. Mosing initialed each page of the agreements. [Rec. Doc. 11-3, pp. 57-168]. Each franchise agreement contains the following identical provision, at art. XXIV(B):
The parties agree that any action brought by either party against the other in any court, whether federal or state, shall be brought within the State of North Carolina and do hereby waive all questions of personal jurisdiction or venue for the purpose of carrying out this provision.
On September 23, 2013, Mosing executed the option to purchase eight Texas franchises. The Texas franchise agreements purport to have been signed by Kendall Mosing as franchisee on January 2, 2014, but Mosing has declared he has no memory of ever signing the Texas documents, and he disputes the date on the documents. He does not declare that he never signed the agreements, or that he never owned the Texas franchises, and in briefs the plaintiffs state that he maintained his position as owner of all franchise rights in Louisiana and Texas as of April 30, 2014. [Rec. Doc. 23, p. 15]. The Texas franchise agreements contain the identical forum-selection provision cited above from the Louisiana franchises. [Rec. Doc. 11-4, pp. 1-146].
The defendants seek to have this litigation transferred to North Carolina, consistent with the forum-selection clauses appearing in the franchise agreements. [Rec. Doc. 11]. They assert that the plaintiffs violated the mandatory North Carolina forum selection clauses in the franchise agreements by filing suit in this court. In response, the plaintiffs argue that (1) Mosing's claims are not within the scope of the forum selection clauses, since the plaintiffs do not claim breach of the franchise agreement(s), but assert claims which are non-contractual and beyond the scope of the clause, and (2) enforcement of the forum-selection clause is unreasonable under the circumstances of this case. [Rec. Doc. 23].
APPLICABLE LAW AND ANALYSIS
1. Whether the forum selection clause is mandatory or permissive
Parties to a contract are permitted to select venue via a forum selection clause. In order to find whether a forum selection clause requires the parties to litigate in the named forum, a court must first determine whether the forum selection clause is mandatory or permissive. Where a forum selection clause is ambiguous and subject to more than one reasonable interpretation, the clause is properly construed as permissive. Mandatory forum selection clauses have "express language limiting the action to the courts of a specific locale which is clear, unequivocal and mandatory." "On the other hand, a ...