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Servicemaster of Fairfax, Inc. v. Servicemaster Residential/ Commercial Services, L.P.

United States District Court, D. Maryland

July 17, 2017




         Pending in this contractual dispute is a motion to transfer filed by the Defendants ServiceMaster Residential/Commercial Services, LP, d/b/a ServiceMaster; SM Clean L.L.C.; and David Carpenter (ECF No. 6). The issues are fully briefed and the Court now rules pursuant to Local Rule 105.6 because no hearing is necessary. For the reasons stated below, the Defendants' motion is granted.

         I. BACKGROUND

         On August 24, 2013, Stephen Simmons (“Simmons”), through his company, Plaintiff ServiceMaster of Fairfax, Inc. (“Plaintiff”), entered into four separate franchise agreements with ServiceMaster Residential/Commercial Services, L.P. (“ServiceMaster”), a company specializing in cleaning and disaster restoration services. See Complaint, ECF No. 2 at 6. The franchise agreements granted Plaintiff a license to operate the ServiceMaster businesses in territories covering the District of Columbia, Virginia, and Maryland. Id. at 7. Each franchise agreement includes an identical forum-selection clause mandating that all litigation must be venued exclusively in Memphis, Tennessee-the location of ServiceMaster's principal place of business. See 1998 Franchise Agreement, ECF No. 6-3 at 20; 1977 Franchise Agreement, ECF No. 6-4 at 19; 1963 Franchise Agreement, ECF No. 6-5 at 19; 1957 Franchise Agreement, ECF No. 6-6 at 19 (collectively, the “Franchise Agreements”).[1] The 1963 Franchise Agreement also includes an addendum amending the Franchise Agreement's “Applicable Law” section to read: “The Maryland Franchise Registration and Disclosure Law allows a franchisee to bring a lawsuit in Maryland for claims arising under this Law.” ECF No. 6-5 at 26 (the “Maryland Addendum”).

         On July 1, 2016, Plaintiff filed its Complaint in the Circuit Court for Montgomery County, Maryland against ServiceMaster, ServiceMaster's general partner “SM Clean LLC”, and David Carpenter who supports ServiceMaster franchises in the northeast region (collectively, the “Defendants”). See ECF No. 2. The seven-count complaint in part alleges violations of the Maryland Franchise Registration and Disclosure Law, Md. Code Ann., Bus. Reg. § 14-201 et seq. (“Maryland Franchise Law”). See Id. at 20. Plaintiff specifically avers that beginning in 2013, Simmons sought to sell certain portions of his franchise territories because business was declining. After Simmons found suitable buyers for some of his franchise territories, he informed the Defendants. Defendants, in turn, approached the same buyers and offered to sell the franchises at a reduced cost, thereby undercutting Plaintiff. See Id. at 7. When Simmons contested the Defendants' ability to sell franchises directly to the prospective buyers, ServiceMaster retaliated by sending Simmons four default letters, one for each his franchises. Plaintiff also complains that the Defendants failed to meet certain other obligations included in the Franchise Agreements.

         On July 15, 2016, the Defendants removed the case from the Montgomery County Circuit Court to this Court, asserting diversity of citizenship pursuant to 28 U.S.C. § 1332. See ECF No. 1. Defendants then filed a motion to transfer this to the United States District Court for the Western District of Tennessee pursuant to the Franchise Agreements' forum-selection clauses under 28 U.S.C. § 1404(a). See ECF No. 6.

         II. ANALYSIS

         The federal transfer statute, 28 U.S.C. § 1404(a), provides that “[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.”[2] Section 1404 is procedural rather than substantive and so federal law governs the analysis. See Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 32 (1988); Jones v. Weibrecht, 901 F.2d 17, 19 (2d Cir. 1990); Bank v. Advanced Sys. Servs., Corp., No. 1:09CV23 (GBL), 2009 WL 855730, at *4 (E.D. Va. Mar. 30, 2009) (“[S]ince forum clauses involve procedural issues and choice of law clauses are substantive, federal law, not choice of law provisions, should determine whether a forum clause is mandatory or permissive.”).

         Under § 1404(a), the court evaluates the propriety of transfer by considering such factors as the convenience of the parties and the relevant public interests. Atl. Marine Constr. Co. v. U.S. Dist. Ct. for W. Dist. Tex., 134 S.Ct. 568, 581 (2013). “The calculus changes, however, when the parties' contract contains a valid forum-selection clause, which ‘represents the parties' agreement as to the most proper forum.'” Id. (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 31 (1988)). Because forum-selection clauses are “bargained for by the parties, ” “a valid forum-selection clause [should be] given controlling weight in all but the most exceptional cases.” Id. (alteration in original) (quoting Stewart, 487 U.S. at 33) (internal quotation marks omitted).

         In Atlantic Marine, the United States Supreme Court explained that a valid forum-selection clause changes the § 1404 analysis in three ways. First, “the plaintiff's choice of forum merits no weight. Rather, as the party defying the forum-selection clause, the plaintiff bears the burden of establishing that transfer to the forum for which the parties bargained is unwarranted.” Id. This is because, by executing a contract with a specified forum, the plaintiff has effectively chosen her forum before the dispute arises. Id. at 581-82.

         Second, arguments about the parties' interests are irrelevant. “When parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the litigation. A court accordingly must deem the private-interest factors to weigh entirely in favor of the preselected forum.” Id. at 582. This means that a district court may only consider arguments about the public-interest factors.

         “Third, when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue's choice-of-law rules.” Id. The Court's analysis should militate against enforcing the forum-selection clause only in the most “extraordinary circumstances”. Id. at 581.

         This Court recognizes that Atlantic Marine involved a mandatory forum selection clause and was silent on whether the same analysis applies to permissive forum selection clauses. A mandatory forum selection clause is “‘one containing clear language showing that jurisdiction is appropriate only in the designated forum.'” Davis Media Grp., Inc. v. Best W. Int'l, Inc., 302 F.Supp.2d 464, 467 (D. Md. 2004) (quoting Koch v. Am. Online, Inc., 139 F.Supp.2d 690, 693 (D. Md. 2000)). A permissive forum selection clause, on the other hand, “merely permits jurisdiction in the selected forum without precluding it elsewhere.” Id. (internal citation and quotation marks omitted). The Fourth Circuit has not yet addressed whether Atlantic Marine applies to a permissive forum-selection clause; however, this Court notes that the majority of post-Atlantic Marine courts have declined to extend Atlantic Marine's holding to permissive forum-selection clauses. See UEK Corp. v. Univ. of Manitoba, No. GLR-13-3832, 2015 WL 11027769, at *2 (D. Md. Mar. 26, 2015) (citing Networld Commc'ns, Corp. v. Croatia Airlines, D.D., No. 13-4770 SDW, 2014 WL 4724625, at *2 (D.N.J. Sept. 23, 2014) (citing cases)). The distinction stems from the language employed by the Atlantic Marine Court. Its discussion of forum-selection clauses describes those where “a plaintiff agrees by contract to bring suit only in a specified forum, ” suggesting that the Supreme Court contemplated only mandatory forum-selection clauses when assessing their ...

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