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360 International Inc v. Gomex Energy Services Ltd

United States District Court, W.D. Louisiana, Lafayette Division

July 1, 2019

360 INTERNATIONAL, INC.
v.
GOMEX OFFSHORE, LTD.

          JUNEAU JUDGE.

          MEMORANDUM RULING

          PATRICK J. HANNA UNITED STATES MAGISTRATE JUDGE.

         Currently pending is the motion to transfer venue (Rec. Doc. 14) that was filed by the defendant, GoMex Energy Offshore, Ltd. The plaintiff, 360 International, Inc., opposed the motion. Oral argument was heard on July 11, 2019. Considering the evidence, the law, and the arguments of the parties, and for the reasons fully explained below, the motion is GRANTED and this matter is transferred to the United States District Court for the Southern District of Texas, Houston Division.

         Background

         The plaintiff, 360 International, and the defendant, GoMex, entered into a Master Service Agreement (“MSA”) in August 2014. Between August 2018 and January 2019, 360 International performed work for GoMex pursuant to the MSA. In the complaint, 360 International alleged that it “furnished labor, services, equipment, materials or supplies, including but not limited to compressor rebuild, re-engineering, repair and maintenance. . . in connection with the drilling, completion, reworking or operation of” certain oil or gas wells located on offshore leases on the outer continental shelf. (Rec. Doc. 1 at 3-4). In its briefing, 360 International described the work it performed as “refurbishing compressors and repairing pumps and tanks necessary to ensure GoMex's ongoing production activities” including the installation and testing of the refurbished and repaired equipment on fixed offshore platforms. (Rec. Doc. 20 at 8).

         360 International alleged that GoMex failed to pay the full amount invoiced for the work it performed and further alleged that GoMex now owes 360 International over two million dollars. 360 International contended in its complaint that a statutory lien and privilege exists under La. R.S. 9:4861, et seq., and 43 U.S.C. § 1333(a)(2)(A) for the payment of the amount owed. By filing this lawsuit, 360 International seeks to have that lien and privilege recognized and enforced by obtaining a writ of sequestration or a money judgment.

         The plaintiff's complaint was filed in this venue. However, the MSA contains a mandatory forum-selection clause, which reads as follows: “Notwithstanding anything to the contrary, the state and federal courts located in Harris County, Texas shall be the sole venue for the resolution of any disputes arising hereunder.” (Rec. Doc. 14-2 at 8). Citing this provision of the MSA, GoMex responded to the complaint by filing the instant motion, seeking to have this lawsuit transferred to the federal district court in Houston, Harris County, Texas.

         Law and Analysis

         A. Is the Forum-Selection Clause Mandatory?

         A contract's forum-selection clause is mandatory if it requires that litigation arising from the contract be carried out in a given forum.[1] There is a strong presumption in favor of enforcing mandatory forum-selection clauses.[2] “For cases where all parties signed a forum selection contract, the analysis is easy: except in a truly exceptional case, the contract controls.”[3] In this case, there is no dispute that the forum-selection clause in the parties' MSA is mandatory. Both parties signed the MSA containing the forum-selection clause, and the forum-selection clause states that the sole venue for the resolution of any disputes arising under the MSA is the state or federal courts in Harris County, Texas. Furthermore, in their briefing, both parties acknowledged that the clause is mandatory. (Rec. Doc. 14-1 at 1; Rec. Doc. 20 at 5).

         B. Is the Forum-Selection Clause Reasonable?

         The presumption favoring the enforcement of mandatory forum-selection clauses may be overcome by a showing that the clause is unreasonable.[4] A forum-selection clause may be unreasonable if

(1) the incorporation of the forum selection clause into the agreement was the product of fraud or overreaching; (2) the party seeking to escape enforcement will for all practical purposes be deprived of his day in court because of the grave inconvenience or unfairness of the selected forum; (3) the fundamental unfairness of the chosen law will deprive the plaintiff of a remedy; or (4) enforcement of the forum selection clause would contravene a strong public policy of the forum state.[5]

         In this case, GoMex urged the court to enforce the forum-selection clause while 360 International argued that enforcement of the forum-selection clause would be unreasonable. More particularly, 360 International argued that enforcement of the clause would be unreasonable because it would deny 360 International its day in court, would deprive it of a remedy, and would contravene a strong public policy of the State of Louisiana. 360 International also argued that the dispute underlying this lawsuit does not fall within the scope of the MSA's forum-selection clause.

         Denial of Day in Court.

         The plaintiff alleged that the court has subject-matter jurisdiction either (a) under 28 U.S.C. § 1331 because the dispute arises under the Outer Continental Shelf Lands Act, 43 U.S.C. § 1349(b)(1); or (b) under 28 U.S.C. § 1332 because the parties are diverse in citizenship and the amount in controversy exceeds the statutory minimum. The plaintiff further alleged that if subject-matter jurisdiction is based on diversity, the substantive law of the forum state would be applied[6] - Louisiana law if the case remains in this forum but Texas law if the case were transferred.[7] The plaintiff then argued in opposition to the transfer motion that the application of Texas law would deprive the plaintiff of its day in court and deprive it of remedies available under Louisiana law.

         360 International argued that it would be deprived of its day in court and deprived of certain remedies if the case were transferred to Texas because the relevant Texas lien or privilege statute does not extend to production of hydrocarbons and requires the posting of security (which 360 International alleged it is not in a position to post) while the relevant Louisiana statute extends to the production of hydrocarbons but does not require security to be posted. While having to post security might be a financial burden that 360 International might prefer not to incur and might make litigation in Texas more onerous than litigation in Louisiana, the statutory requirement for security under Texas law is not an all-out bar to litigation that would deprive 360 International of its day in court. Therefore, transferring this case to Texas would not result in 360 International being denied its day in court.

         Denial of a Remedy.

         360 International argued that it would be deprived of remedies available under the Louisiana Oil Well Lien Act if the forum-selection clause were enforced and the matter transferred to Texas. But the unavailability of some particular remedy in the transferee court does not require the forum-selection clause to be enforced. It is only when transferring the case to a forum that would effectively afford no remedy whatsoever that this factor should control. “[T]he fact that certain types of remedies are unavailable in the foreign forum does not change the calculus if there exists a basically fair court system in that forum that would allow the plaintiff to seek some relief.”[8] Therefore, transferring this case to Texas would not result in 360 International having no remedies at all.

         Louisiana's Strong Public Policy.

         360 International argued that the MSA's forum-selection clause is unreasonable and therefore should not be enforced because it is contrary to a strong public policy of the State of Louisiana, established in La. R.S. 9:2779. That statute reads as follows:

The legislature finds that, with respect to construction contracts, subcontracts, and purchase orders for public and private works projects, when one of the parties is domiciled in Louisiana, and the work to be done and the equipment and materials to be supplied involve construction projects in this state, provisions in such agreements requiring disputes arising thereunder to be resolved in a forum outside of this state or requiring their interpretation to be governed by the laws of another jurisdiction are inequitable and against the public policy of this state.

         360 International argued that the MSA is a construction contract and, therefore, the forum-selection clause is contrary to public policy. However, Article 2779 does not define the term “construction contract.” Therefore, 360 International compared the work done under the MSA to the type of work that has been characterized as arising under a construction contract. Notably, however, the parties did not direct this Court to any case in which an MSA was held to be a construction contract for purposes of Article 2779 or to any case in which this same argument was previously made with regard to an MSA. MSAs are very common in the oil and gas industry, and Texas companies frequently use MSAs to contract with Louisiana companies. Therefore, this Court finds it curious that, if such contracts are construction contracts under Article 2779, no court has previously been confronted with this issue.

         Another Louisiana statute does define the term “construction contract.” La. R.S. 9:2780.1, which is found in the same chapter of the Louisiana revised statutes as Article 2779, ...


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