[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 09-14695 FEBRUARY 11, 2011
________________________ JOHN LEY
CLERK
D. C. Docket No. 09-00432-CV-RBP-2
JOHN RUCKER,
CAROLYN WILLIAMS,
WANDA ANDERSON,
MELANIE HOUSE,
THOMAS R. PRINCE, JR.,
on behalf of themselves and
others similarly situated,
Plaintiffs-Appellees,
versus
OASIS LEGAL FINANCE, L.L.C.,
Defendant-Appellant,
GLOBAL FINANCIAL CREDIT, L.L.C., et al.,
Defendants.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(February 11, 2011)
Before BLACK, MARTIN and COX, Circuit Judges.
MARTIN, Circuit Judge:
This case presents the issue of the enforceability of a forum selection clause.
The plaintiffs, on behalf of themselves and a purported class of others similarly
situated, filed a declaratory judgment action outside of the contractually chosen
forum, and the defendant moved to dismiss based on improper venue. The District
Court denied the defendant’s motion, concluding that giving effect to the forum
selection clause would be unreasonable under the circumstances. After thorough
review, we reverse and remand with instructions to enforce the clause and dismiss
this action without prejudice on the basis of improper venue.
I.
The defendant, Oasis Legal Finance, L.L.C., provides “non-recourse
funding” to plaintiffs involved in pending litigation. The plaintiffs are Alabama
residents who entered into “purchase agreements” with Oasis. Under the terms of
the purchase agreements, the plaintiffs sold an interest in the proceeds of their
pending legal claims to Oasis in exchange for a fixed sum. The purchase
agreements provided that if the plaintiffs recover nothing on their legal claims,
they have no obligation to repay Oasis.
The purchase agreements also included choice of law and forum selection
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clauses. The choice of law clause states that: “all lawsuits, disputes, claims, or
proceedings arising out of or relating to this Purchase Agreement . . . shall be
governed, construed and enforced in accordance with the laws of the State of
Alabama.” The forum selection clause requires all disputes between the parties to
be litigated in the Circuit Court of Cook County, Illinois. Specifically, the forum
selection clause provides that:
The Parties hereby irrevocably and unconditionally consent to submit
to the exclusive jurisdiction of the Circuit Court of Cook County,
Illinois for any disputes, claims or other proceedings arising out of or
relating to this Purchase Agreement, or the relationships that result
from this Purchase Agreement, and agree not to commence any such
lawsuit, dispute, claim, or other proceeding except in the Circuit Court
of Cook County, Illinois. The parties hereby irrevocably and
unconditionally waive any objection to the laying of venue of any
lawsuit, dispute, claim or other proceeding arising out of or relating to
this Purchase Agreement, or the relationships that result from this
Purchase Agreement, in the Circuit Court of Cook County, Illinois,
and hereby further irrevocably and unconditionally waive and agree
not to plead or claim in the Circuit Court of Cook County, Illinois that
any such lawsuit, dispute, claim or other proceeding brought in the
Circuit Court of Cook County, Illinois has been brought in an
inconvenient forum.
(emphasis added).
In March 2009 the plaintiffs filed this purported class action in the Northern
District of Alabama seeking a declaratory judgment that the purchase agreements
they entered into with Oasis were void under Alabama law as illegal gambling
contracts. Oasis moved to dismiss the action for improper venue on the basis of
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the forum selection clause in the purchase agreements. See Fed. R. Civ. P.
12(b)(3); Lipcon v. Underwriters at Lloyd’s, London, 148 F.3d 1285, 1290 (11th
Cir. 1998). The District Court denied Oasis’s motion, concluding that enforcement
of the forum selection clause would be unreasonable because it would require the
parties to litigate a pure question of Alabama law in Illinois. This is the
interlocutory appeal of the District Court’s order. See 28 U.S.C. § 1292(b).
II.
We must first determine the proper standard of review to apply when
reviewing the District Court’s decision regarding this forum selection clause. This
Court has previously reviewed the enforceability of a forum selection clause in an
international agreement de novo. See Lipcon, 148 F.3d at 1290–91. Plaintiffs
argue that the District Court’s decision not to enforce the forum selection clause in
their contract, however, should be reviewed only for an abuse of discretion because
the clause was included in a domestic, rather than international, agreement.
It is true that we generally review the dismissal of a lawsuit for improper
venue under an abuse of discretion standard. Home Ins. Co. v. Thomas Indus.,
Inc., 896 F.2d 1352, 1355 (11th Cir. 1990). However, when considering the
dismissal of a lawsuit for improper venue based on a forum selection clause in an
international agreement, we concluded that there is “good reason” to review a
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district court’s decision regarding the enforceability of a forum selection clause de
novo. Lipcon, 148 F.3d at 1290. We explained that such an inquiry requires us to
interpret a provision of a contract—a question of law subject to de novo review.
Id. We also noted that in the context of international agreements, there may be
questions of “fundamental fairness and public policy,” determinations which we
explained were “quintessentially legal.” Id. at 1290–91.
Despite the distinction that plaintiffs attempt to make, the enforceability of a
forum selection clause in a domestic contract is just as much a question of law as
the enforceability of a forum selection clause in an international contract. We
review questions of law de novo, and we have concluded, like many of our sister
circuits, that the wiser course of action is to apply that standard here. See Ginter ex
rel. Ballard v. Belcher, Prendergast & Laporte, 536 F.3d 439, 441 (5th Cir. 2008);
Pee Dee Health Care, P.A. v. Sanford, 509 F.3d 204, 209 (4th Cir. 2007); Preferred
Capital, Inc. v. Assocs. in Urology, 453 F.3d 718, 721 (6th Cir. 2006); Silva v.
Encyclopedia Britannica, Inc., 239 F.3d 385, 387 (1st Cir. 2001); see also 14D
Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and
Procedure § 3803.1 (3d ed. 2009) (“Some courts of appeal have held that the
enforceability of a forum selection clause is reviewed for abuse of discretion. But
many recent cases have held—correctly it seems—that the meaning, scope, and
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applicability questions relating to the clause are questions of law so that the district
court’s decision is reviewable de novo.” (footnotes omitted)).
III.
We decide whether state versus federal law governs a particular issue, such
as the enforceability of a forum selection clause, in federal diversity cases by
applying the Erie doctrine. See Gasperini v. Ctr. for Humanities, Inc., 518 U.S.
415, 427, 116 S. Ct. 2211, 2219 (1996). Under the Erie doctrine, we conduct a
multi-step analysis. Esfeld v. Costa Crociere, S.P.A., 289 F.3d 1300, 1306–07
(11th Cir. 2002). The first step is “to determine whether state and federal law
conflict with respect to the disputed issue before the district court. If no conflict
exists, then the analysis need proceed no further, for the court can apply state and
federal law harmoniously to the issue at hand.” Id.
In this case, there is no conflict between Alabama and federal law regarding
the validity of forum selection clauses. Under federal law, the analysis in M/S
Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S. Ct. 1907 (1972), is instructive
in deciding this issue. Where, as here, the forum selection clause requires filing in
state court and a party seeks to enforce the clause by moving to dismiss, other
circuits have evaluated the forum selection clause under Bremen. See Doe 1 v.
AOL LLC, 552 F.3d 1077, 1082–84 (9th Cir. 2009); Ginter ex rel. Ballard, 536
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F.3d at 441; Int’l Software Sys., Inc. v. Amplicon, Inc., 77 F.3d 112, 115 (5th Cir.
1996); Jones v. Weibrecht, 901 F.2d 17, 19 (2d Cir. 1990); see also 14D Charles
Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and
Procedure § 3803.1 (3d ed. 2009) (recognizing that a majority of the courts of
appeal have analyzed the enforceability of a forum selection clause under the
Bremen framework when the clause selects a state court forum). The analysis is
the same under Alabama law. See Prof’l Ins. Corp. v. Sutherland, 700 So. 2d 347,
350 (Ala. 1997) (holding that forum selection clauses are not void per se as against
the public policy of Alabama and finding “the Supreme Court’s reasoning in M/S
Bremen on [the issue of enforceability of forum selection clauses] to be
persuasive”). Consequently, we can apply both federal and Alabama law
harmoniously in deciding the validity of the forum selection clause in this case.
IV.
In conducting the Bremen analysis, we have said that “[f]orum selection
clauses are presumptively valid and enforceable unless the plaintiff makes a
‘strong showing’ that enforcement would be unfair or unreasonable under the
circumstances.” Krenkel v Kerzner Int’l Hotel Ltd., 579 F.3d 1279, 1281 (11th
Cir. 2009). The Bremen factors provide that a forum selection clause is
unenforceable when: “(1) its formation was induced by fraud or overreaching; (2)
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the plaintiff would be deprived of its day in court because of inconvenience or
unfairness; (3) the chosen law would deprive the plaintiff of a remedy; or (4)
enforcement of the clause would contravene public policy.” Krenkel, 579 F.3d at
1281.
Within this framework, we consider the parties’ arguments. Oasis argues
that the plaintiffs did not make the required “strong showing” that enforcement of
the forum selection clause would be unfair or unreasonable under the
circumstances. Specifically, Oasis asserts that the plaintiffs failed to establish that
any of the factors warranting non-enforcement of the clause applied in this case.
We analyze each factor in turn.
In order for a forum selection clause to be invalidated on the basis of the first
factor, fraud or overreaching, a plaintiff must specifically allege that the clause was
included in the contract at issue because of fraud. See Lipcon, 148 F.3d at 1296
(“By requiring the plaintiff to specifically allege that the [forum selection] clause
itself was included in the contract due to fraud . . . courts may ensure that more
general claims of fraud will be litigated in the chosen forum, in accordance with
the contractual expectations of the parties.” (emphasis omitted)). The plaintiffs
have never made this allegation here. For that reason, the first factor does not
support non-enforcement of the forum selection clause.
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As for the second factor, the plaintiffs maintain that it would be inconvenient
or unfair to require this action to be brought in Illinois because they are Alabama
residents. The fact that the plaintiffs reside in Alabama suggests that litigating this
action in Illinois may be more difficult or costly. We have explained, however,
that “[t]he financial difficulty that a party might have in litigating in the selected
forum is not a sufficient ground by itself for refusal to enforce a valid forum
selection clause.” P&S Bus. Machs., Inc. v. Canon USA, Inc., 331 F.3d 804, 807
(11th Cir. 2003). Moreover, any inconvenience the plaintiffs would suffer by
being forced to litigate in Illinois was foreseeable at the time of contracting. In that
circumstance, a plaintiff must show that litigating “in the contractual forum will be
so gravely difficult and inconvenient that he will for all practical purposes be
deprived of his day in court.” M/S Bremen, 407 U.S. at 17–18, 92 S. Ct. at 1917
(emphasis added); see also Phillips v. Audio Active Ltd., 494 F.3d 378, 393 (2d
Cir. 2007) (enforcing clause requiring a U.S. citizen to litigate in England even
though none of the plaintiff’s witnesses, documents, or the parties to the action
were located in England and noting that the added expense and difficulty was
foreseeable). Because the plaintiffs have not made this showing, we conclude that
the second factor does not render the forum selection clause unenforceable.
Under the third factor, a forum selection clause will not be enforced if “the
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chosen law would deprive the plaintiff of a remedy.” Krenkel, 579 F.3d at 1281.
The purchase agreements included a choice of law clause stating that all disputes
arising out of the agreements would be governed by Alabama law, and neither side
contests that Alabama law governs this action. Regardless of whether this action is
litigated in a courthouse in Illinois or Alabama, the court will apply Alabama law
to determine the enforceability of the purchase agreements. In other words, the
remedy will be determined under the same set of rules no matter where this case is
heard. For that reason, the third factor also does not warrant non-enforcement of
the forum selection clause.
Finally, a forum selection clause is unenforceable under the fourth factor if
“enforcement of the clause would contravene public policy.” Id. at 1281. The
plaintiffs argue that enforcing the forum selection clause would violate Alabama’s
public policy against enforcing contracts based on a gambling consideration.
Indeed, plaintiffs point to precedent in which the Alabama Court of Civil Appeals
invalidated a contract by which a litigant agreed to repay a loan by signing away a
percentage of any proceeds she might later receive from a pending wrongful death
action. Wilson v. Harris, 688 So. 2d 265, 269–70 (Ala. Civ. App. 1996). The
Alabama Court of Civil Appeals found the contract in Wilson to be “closely akin to
champerty,” and held it void as a matter of public policy. Id. at 270. However,
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plaintiffs argument again ignores the fact that the Illinois court hearing this case
will apply Alabama law, and must therefore give proper deference to the Alabama
precedent plaintiffs provide. Cf. Lipcon, 148 F.3d at 1298 (considering whether
requiring the plaintiffs to litigate in England under English remedies would
undermine the public policies expressed in the United States securities laws).
Thus, enforcement of the forum selection clause has no impact on whether the
purchase agreements themselves are unenforceable under Alabama law as illegal
gambling contracts.
Finally, plaintiffs assert that the forum selection clause cannot be given
effect because it is included within a contract that is void as a matter of law.
Specifically, the plaintiffs maintain that the purchase agreements are void as illegal
gambling contracts under Alabama law and because the forum selection clause is
included within those agreements, it also is void. We do not agree. A forum
selection clause is viewed as a separate contract that is severable from the
agreement in which it is contained. Cf. Scherk v. Alberto-Culver Co., 417 U.S.
506, 519 n.14, 94 S. Ct. 2449, 2457 n.14 (1974) (explaining that a forum selection
clause within a contract alleged to be the product of fraud is enforceable as long as
the forum selection clause, itself, was not included in the contract because of
fraud); see Muzumdar v. Wellness Intern. Network, Ltd., 438 F.3d 759, 762 (7th
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Cir. 2006) (rejecting argument that a forum selection clause was void because it
was included within a contract that was void and unenforceable as against public
policy); Marra v. Papandreou, 216 F.3d 1119, 1123 (D.C. Cir. 2000) (“A forum-
selection clause is understood not merely as a contract provision, but as a distinct
contract . . .—that is, an agreement between the parties to settle disputes in a
particular forum—that is separate from the obligations the parties owe to each
other under the remainder of the contract.”).
In sum, the plaintiffs have not made the required “strong showing” that
enforcing the forum selection clause in the purchase agreements would be unfair or
unreasonable under the circumstances. See Krenkel, 579 F.3d at 1281. For that
reason, we conclude that the District Court erred in failing to give effect to the
clause and grant Oasis’s motion to dismiss for improper venue. We reverse and
remand with instructions to dismiss this action without prejudice based on
improper venue.
REVERSED AND REMANDED.
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