United States District Court, D. Maryland
July 26, 2013
AMERICAN INSURANCE MARKETING CORPORATION, et al.
5 STAR LIFE INSURANCE COMPANY
For American Insurance Marketing Corporation, Brent J. Spyksma, Plaintiffs: Thomas J Schetelich, LEAD ATTORNEY, Ferguson Schetelich and Ballew PA, Baltimore, MD.
For 5 Star Life Insurance Company, Defendant: Scott Michael Trager, LEAD ATTORNEY, Semmes Bowen and Semmes PC, Baltimore, MD.
DEBORAH K. CHASANOW, United States District Judge.
Presently pending and ready for review in this breach of contract case is the motion to dismiss for improper venue filed by Defendant 5 Star Life Insurance Company (" 5 Star" ). (ECF No. 10). The issues have been fully briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, the motion to dismiss will be denied.
This breach of contract case arises out of a series of relationships and events involving the sale of life insurance policies to Native Americans who belong to the First Nations Tribe. According to the complaint (ECF No. 2), Plaintiff American Insurance Marketing Corporation (" AIM" ) is an insurance brokerage company organized under Maryland law with its principal place of business in Maryland. Plaintiff Brent J. Spyksma is a general insurance agent and a resident of Iowa. 5 Star is a life insurance company that maintains its principal place of business in Virginia.
The complaint alleges that, in February 2008, Spyksma and 5 Star entered into a Sales Representative Agreement (" the 2008 SR Agreement" ).  Pursuant to the 2008 SR Agreement, Spyksma agreed to procure insurance applications on behalf of 5 Star. In exchange, 5 Star agreed to pay Spyksma commissions, calculated based on a percentage of premiums paid for policies that Spyksma procured. At some unspecified point in time, the ZWG Trust - an irrevocable trust that holds assets for the benefit of the First Nations Tribe - purportedly engaged the services of Spyksma and AIM to procure life insurance policies for Tribe members. AIM and Spyksma then approached 5 Star about underwriting and issuing the life insurance policies.
The complaint alleges that, " by letters dated May 10, 2012, and May 17, 2012," 5 Star agreed to underwrite applications for up to 5,000 members of the First Nations Tribe. Based on this agreement, the ZWG Trust, Spyksma, and AIM began soliciting and accepting life insurance applications from First Nations Tribe members. The complaint also asserts that " 5 Star issued a Case Information Worksheet for the Trust confirming that AIM was to receive 85% of the commissions payable associated with the policies issued to the Trust and Spyksma was to receive 15%." ( Id. ¶ 11). 5 Star ultimately issued 1,097 policies to members of the First Nations Tribe, which were delivered on July 31 and August 22, 2012. Then, on September 26, 2012, 5 Star allegedly rescinded all 1,097 of the policies, without justification, and returned the premium payments. Plaintiffs allege that 5 Star has never paid them any commissions for the rescinded policies.
On December 10, 2012, AIM and Spyksma filed a complaint against 5 Star in the Circuit Court for Calvert County, Maryland, asserting three breach of contract claims. (ECF No. 2). On February 20, 2013, 5 Star removed the action to this court. (ECF No. 1). The notice of removal asserts that there is federal diversity jurisdiction over Plaintiffs' claims pursuant to 28 U.S.C. § 1332(a).  The notice also states that venue is proper pursuant to 28 U.S.C. § 1441(a) because the Southern Division of the United States District Court for the District of Maryland is the federal judicial district embracing the Circuit Court for Calvert County, Maryland ( i.e. , where Plaintiffs originally filed suit). ( Id. ¶ ¶ 3-4).
One week later, 5 Star filed a motion to dismiss for improper venue pursuant to Fed.R.Civ.P. 12(b)(3). (ECF No. 10). 5 Star argues that this action must be dismissed because of a mandatory forum selection clause contained in a contract entered into between 5 Star and AIM on July 30, 2012 (" the 2012 Producer Contract" ). The clause in question provides as follows:
18. CONSTRUCTION, MODIFICATION, AND VENUE This contract shall be governed by and construed in accordance with the laws of the state of Virginia . . . Any suit arising out of this contract shall be instituted in Fairfax County, Virginia and tried under Virginia law.
(ECF No. 10-3, at 3). 5 Star acknowledges that the complaint does not mention the 2012 Producer Contract, but nonetheless contends that it is the operative agreement and, indeed, the only agreement that could possibly entitle AIM to commissions from 5 Star. (ECF No. 10-1, at 3-4, 9). 5 Star also asserts that, although Spyksma is not a signatory to the 2012 Producer Contract, he is still subject to its forum selection clause because " he was very closely related to AIM" in placing the policies with 5 Star. ( Id. at 8). Finally, 5 Star argues that it did not waive its right to rely on the forum selection clause by removing this action to federal court. ( Id. at 10).
In their opposition, Plaintiffs do not question the validity or enforceability of the forum selection clause contained in the 2012 Producer Contract. (ECF No. 12-1). Rather, Plaintiffs contest the applicability of the clause, arguing that the 2012 Producer Contract is not the contract at issue here. Plaintiffs offer a number of unauthenticated exhibits purporting to show that all 1,097 life insurance policies purchased by members of the First Nations Tribe (1) " were . . . issued under [the 2008
SR Agreement]" ; (2) " listed [Mr. Spyksma] as the insurance agent" ; and (3) had an effective date of July 1, 2012 - i.e. , before the 2012 Producer Contract even existed. ( See ECF Nos. 12-4 through 12-7). Thus, according to Plaintiffs, the 2008 SR Agreement is the applicable contract, and venue is proper because that contract does not contain a forum selection clause.
In its reply, 5 Star questions Plaintiffs' position that all 1,097 policies were issued under the 2008 SR Agreement and through Spyksma, individually. (ECF No. 14). 5 Star submits its own collection of unauthenticated exhibits purporting to establish AIM's extensive role in procuring the policies. ( See ECF Nos. 14-1 through 14-20). 5 Star insists that, when all of the events at issue are viewed together, this action " falls within the ambit" of the 2012 Producer Contract and is subject to its mandatory forum selection clause.
II. Standard of Review
A motion to dismiss based on a contractual forum selection clause is properly analyzed as a motion to dismiss for improper venue pursuant to Fed.R.Civ.P. 12(b)(3). Sucampo Pharms., Inc. v. Astellas Pharma, Inc. , 471 F.3d 544, 550 (4th Cir. 2006) (deciding that - as between Rule 12(b)(1), Rule 12(b)(3), and Rule 12(b)(6) - Rule 12(b)(3) is the best procedural mechanism for analyzing forum selection clauses). Unlike a Rule 12(b)(6) motion, evidence outside the pleadings may be " freely consider[ed]" in ruling on a Rule 12(b)(3) motion. Id. All reasonable inferences must still be drawn in the light most favorable to the plaintiff. CoStar Realty Info., Inc. v. Field , 612 F.Supp.2d 660, 672 (D.Md. 2009). Moreover, where no evidentiary hearing is held, a plaintiff need only make " a prima facie showing of proper venue in order to survive a motion to dismiss." Aggarao v. MOL Ship Mgmt. Co., Ltd. , 675 F.3d 355, 366 (4th Cir. 2012) (citing Mitrano v. Hawes , 377 F.3d 402, 405 (4th Cir. 2004)).
Although the parties devote the bulk of their briefs to discussing the events that led to this lawsuit, 5 Star's motion ultimately turns on an issue mentioned only in passing - namely, that a defendant who has properly removed an action from state to federal court pursuant to 28 U.S.C. § 1441(a) cannot seek dismissal for improper venue pursuant to Rule 12(b)(3) based on a contractual forum selection clause.
Ordinarily, proper venue for actions filed in federal district courts is governed by 28 U.S.C. § 1391.  When venue is improper under § 1391, the district court must dismiss the action or, " if it be in the interest of justice," transfer the action " to any district or division in which it could have been brought." 28 U.S.C. § 1406(a); see also Benton v. England ,
222 F.Supp.2d 728, 731 (D.Md. 2002) (explaining that where a plaintiff lays venue incorrectly, " it is within the discretion of this court, pursuant to 28 U.S.C. § 1406(a), either to dismiss the claims or to transfer them if it would be in the interest of justice to do so" ). 
When an action is removed from state court to federal court, however, venue is governed exclusively by the federal removal statute, 28 U.S.C. § 1441(a). As explained by the United States Supreme Court, " Section 1441(a) expressly provides that the proper venue of a removed action is 'the district court of the United States for the district and division embracing the place where such action is pending.'" Polizzi v. Cowles Magazines, Inc. , 345 U.S. 663, 666, 73 S.Ct. 900, 97 L.Ed. 1331 (1953) (quoting 28 U.S.C. § 1441(a)); see also Hollis v. Fla. State Univ. , 259 F.3d 1295, 1299 (11th Cir. 2001) (" by requiring removal to the district court for the district in which the state action is pending," Section 1441(a) " properly fixes the federal venue in that district" ). Thus, 28 U.S.C. § 1391 " has no application" to actions that are removed; rather, the only question that must be answered to determine the propriety of venue is whether removal was effectuated to the district court " for the district and division embracing the place" where the suit was filed originally. Polizzi , 345 U.S. at 665-66 (because the action was filed in the Circuit Court for Dade County, Florida, and was removed to the United States District Court for the Southern District of Florida - i.e. , the district " embracing" Dade County - venue was proper pursuant to § 1441(a) and there was no need to address where the corporate defendant " resided" for purposes of § 1391); see also Lynch v. Vanderhoef Builders , 228 F.Supp.2d 644, 645 (D.Md. 2002) (because " [t]here is no question that this Court embraces the Circuit Court of Cecil County, Maryland, . . . venue is proper pursuant to 28 U.S.C. § 1441(a)" ); Hollis , 259 F.3d at 1300 (observing that § 1441(a) establishes federal venue in the district where the state action was pending " as a matter of law," even if venue would be " improper under state law when the action was originally filed" ).
Because, under Polizzi , federal venue is proper when a case has been removed to federal court in accordance with § 1441(a), a defendant's post-removal Rule 12(b)(3) motion to dismiss for improper venue must be denied, including where the motion is premised on a contractual forum selection clause. See MTB Servs., Inc. v. Tuckman-Barbee Constr. Co. , No. RDB-12-2109, 2013 WL 1224484, at *4 & n.7 (D.Md. Mar. 26, 2013) (denying a Rule 12(b)(3) motion based on a forum selection clause following the defendant's voluntary and proper removal); Three M. Enters., Inc. v. Tex. D.A.R. Enters., Inc. , 368 F.Supp.2d 450, 456 (D.Md. 2005) (denying the defendant's post-removal Rule 12(b)(3) motion based on a forum selection clause because the Northern Division of the District of Maryland " plainly embraces" the Circuit Court for Baltimore County, Maryland, and thus " venue is proper in this Court as a matter of law" ) (internal quotation marks omitted); Dan Dill, Inc. v. Ashley Furniture Indus., Inc. , No. 07-cv-111, 2008 WL 3287255, at *1-2 (W.D.N.C. Aug. 7, 2008) (denying the defendant's post-removal Rule 12(b)(3) motion premised on a forum selection clause " [b]ecause § 1441(a) only allows one possible venue for removal" ). 
Some courts question whether Polizzi applies where a defendant, after removal, seeks dismissal pursuant to a contractual forum selection clause. Most notably, the First Circuit has observed that " a different issue is presented" when a defendant challenges venue based on a contractual provision as opposed to the requirements of § 1391, because " a valid forum selection clause operates to render the venue improper, not only under § 1391, but also under § 1441(a)." Lambert v. Kysar , 983 F.2d 1110, 1113 n.2 (1st Cir. 1993) (emphasis added); see also, e.g., Cross Roads R.V. Ctr., Inc. v. Textron Fin. Corp. , 609 F.Supp.2d 151, 152-53 (D.Mass. 2009) (relying on Lambert to hold that, despite removing the action pursuant to § 1441, the defendant could still seek dismissal based on a forum selection clause); Assetworks, Inc. v. City of Cincinnati , No. 02-0351-FB, 2003 WL 25463096, at *5-*8 (W.D.Tex. Mar. 31, 2003) (holding that, although venue was " arguably proper" pursuant to § 1441(a) and Polizzi , it was appropriate under the circumstances of the case to consider the defendant's post-removal Rule 12(b)(3) motion to dismiss based on a forum selection clause " that did not provide for any federal court forum" ); Tokio Marine & Fire Ins. Co., Ltd. v. Nippon Express U.S.A. (Ill.), Inc. , 118 F.Supp.2d 997, 999 (C.D.Cal. 2000) (distinguishing Polizzi and its progeny as not involving forum selection clauses and observing that " defendants often challenge
venue based on forum selection clauses even after removal" ) (citing Spradlin v. Lear Siegler Mgmt. Servs. Co., Inc. , 926 F.2d 865, 868-69 (9th Cir. 1991)). 
The United States Court of Appeals for the Fourth Circuit has not squarely addressed this split of authority. See Tuckman-Barbee , 2013 WL 1224484, at *4 & n.7. The Fourth Circuit has, however, held that a defendant's attempt to enforce a forum selection clause is properly treated as an improper venue defense under Rule 12(b)(3) rather than as an issue affecting the court's subject matter jurisdiction under Rule 12(b)(1) or the merits of a plaintiff's claim under Rule 12(b)(6). See Sucampo , 471 F.3d at 548-50. In light of the Fourth Circuit's view of forum selection clauses, and in the absence of controlling precedent to the contrary,  the approach adopted by Judge Bennett in Three M. Enterprises and Tuckman-Barbee will be used here.
As 5 Star acknowledges ( see ECF No. 1 ¶ 4), the Southern Division of the District of Maryland " embraces" the Circuit Court for Calvert County, Maryland, meaning that venue is proper as a matter of law pursuant to Section 1441(a) and Polizzi. Accordingly, 5 Star's Rule 12(b)(3) motion to dismiss for improper venue based on the forum selection clause in the 2012 Producer Contract must be denied. 
For the foregoing reasons, the motion to dismiss for improper venue filed by Defendant 5 Star Life Insurance Company will be denied. A separate Order will follow.
For the reasons stated in the foregoing Memorandum Opinion, it is this 26th day of July, 2013, by the United States District Court for the District of Maryland, ORDERED that:
1. The motion to dismiss for improper venue filed by Defendant 5 Star Life Insurance Company (ECF No. 10) BE, and the same hereby IS, DENIED; and
2. The clerk will transmit copies of the Memorandum Opinion and this Order to counsel for the parties.