PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 09-4676
____________
STATE OF NEW JERSEY,
DEPARTMENT OF TREASURY,
DIVISION OF INVESTMENT,
o/b/o COMMON PENSION FUND A
v.
MERRILL LYNCH & CO., INC.;
BANK OF AMERICA CORPORATION,
Appellants
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Appeal From the United States District Court
For the District of New Jersey
(D.C. Civ. No. 2-09-cv-04526)
District Judge: Honorable Stanley R. Chesler
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Argued February 9, 2011
Before: JORDAN, GREENAWAY, JR.,
and WEIS, Circuit Judges.
(Filed: May 18, 2011)
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Scott D. Musoff, Esquire (ARGUED)
Jay B. Kasner, Esquire
Andrew Muscato, Esquire
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
Four Times Square
New York, New York 10036
Attorneys for Appellants Merrill Lynch & Co., Inc., and Bank
of America Corporation
Lester L. Levy, Esquire (ARGUED)
WOLF POPPER LLP
845 Third Avenue, 12th Floor
New York, New York 10022
Jeffrey W. Herrmann, Esquire
Peter S. Pearlman, Esquire
COHN LIFLAND PEARLMAN HERRMANN & KNOPF
LLP
Park 80 West-Plaza One
250 Pehle Avenue, Suite 401
Saddle Brook, New Jersey 07663
Attorneys for Appellee State of New Jersey, Department of
Treasury, Division of Investment, on behalf of Common
Pension Fund A
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OPINION
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2
WEIS, Circuit Judge.
The dispute in this appeal is a narrow one, centering on
the interpretation of a forum selection clause that provides:
“exclusive jurisdiction . . . shall lie in the appropriate courts of
the State [of] New Jersey.” Plaintiff argues that this language
constitutes a waiver of the right to remove the pending litigation
to the federal district courts in New Jersey. Defendant responds
that the clause contemplates jurisdiction in either the state or the
federal courts located in New Jersey. The District Court agreed
with plaintiff and remanded the matter to the Superior Court of
New Jersey. We will affirm.
Plaintiff, a division within New Jersey’s Department of
Treasury, 1 purchased $300 million in preferred stock issued by
defendant Merrill Lynch 2 in January 2008. Some months later,
Merrill Lynch asked New Jersey to convert its preferred shares
to common stock. New Jersey agreed, so long as the terms of
the conversion were as favorable as the terms governing the
exchange of other stockholders’ preferred shares. Merrill
Lynch acceded to that demand, which was memorialized in the
parties’ Share Exchange Agreement (“Agreement”), in July
2008.
Approximately one year later, the State commenced this
action in the Superior Court of New Jersey, alleging that Merrill
1
For simplicity’s sake, we refer to plaintiff as “New Jersey” or
“the State.”
2
Defendant Bank of America Corp. merged with Merrill Lynch
in January 2009 and is bound to the terms of the agreements at
issue. Accordingly, we refer to defendants as “Merrill Lynch.”
3
Lynch breached the Agreement by converting another
shareholder’s preferred stock in terms more favorable than
those granted to the State. New Jersey also alleged that
financial disclosures produced by Merrill Lynch prior to the
conversion had been incomplete or misleading.
Merrill Lynch removed the action to the United States
District Court for the District of New Jersey, citing the “strong
federal interest” in the case and asserting that issues under the
Securities Exchange Act were embedded in the complaint.
New Jersey moved to remand, arguing, inter alia, that the
Agreement’s forum selection clause mandated that all disputes
be resolved in New Jersey’s state courts.
Merrill Lynch responded that the forum selection clause
required only that the matter proceed in a court located in the
State of New Jersey. The District Court disagreed, noting that
every Court of Appeals confronted with a similar forum
selection clause “ha[d] ruled that the reference to courts of the
state . . . limits jurisdiction to state rather than federal
tribunals.” 3 It reasoned that such interpretation was consistent
with the plain and ordinary meaning of the contractual language.
3
Citing Grable & Sons Metal Products, Inc. v. Darue
Engineering & Manufacturing, 545 U.S. 308 (2005), Merrill
Lynch also argued that federal jurisdiction was proper because
the complaint’s implication of federal securities statutes would
require the court to interpret federal law to resolve the matter.
The District Court found this argument “extremely dubious” but
ultimately did not reach the issue.
Merrill Lynch made, at most, a vague reference to this
contention in a footnote in its principal brief on appeal, though it
devoted several pages to the argument in its reply. Failure to set
4
Accordingly, the District Court remanded the case to the
New Jersey Superior Court.
Generally, this Court has no jurisdiction over appeals
from orders remanding a matter to state court. 28 U.S.C.
§ 1447(d). We have, however, recognized an exception where
the remand is based on reasons not specified in 28 U.S.C.
§ 1447(c). See Foster v. Chesapeake Ins. Co., Ltd., 933 F.2d
1207, 1211 (3d Cir. 1991) (Ҥ 1447(d) does not bar review of
the order of the district court remanding this case [based upon
forum selection clause] . . . and that order is considered ‘final’
so as to vest this court with jurisdiction to hear this appeal”). 4
Because the issue at hand is one of contractual
construction, our standard of review is plenary. See id. at 1216
(citing cases).
“[A] defendant can contractually waive his right to
remove . . . an action brought . . . in a state court.” 14B Charles
Alan Wright, Arthur R. Miller, Edward H. Cooper & Joan E.
Steinman, Federal Practice & Procedure § 3721, at 97 (4th ed.
2009). Such waivers are usually upheld if they are reasonable
forth an issue on appeal and present arguments in support of
that issue in one’s opening brief generally amounts to
“abandon[ment] and waive[r of] that issue . . . and it need not
be addressed by the court of appeals.” Kost v. Kozakiewicz, 1
F.3d 176, 182 (3d Cir. 1993).
4
Other Courts of Appeals have held similarly. See, e.g., Regis
Assocs. v. Rank Hotels (Mgmt.) Ltd., 894 F.2d 193, 194-95
(6th Cir. 1990); Karl Koch Erecting Co. v. New York
Convention Ctr. Dev. Corp., 838 F.2d 656, 658-59 (2d Cir.
1988).
5
and voluntary and if their enforcement is not inconsistent with
public policy. See id. at 97-98; Foster, 933 F.2d at 1219 (forum
selection clause unreasonable where party makes “strong
showing” that inconvenience of designated forum will effectively
deprive him of day in court or that clause resulted from fraud or
duress).
The parties in this case, sophisticated organizations both,
were represented by counsel during the negotiation and
adoption of the forum selection clause at issue. 5 Merrill
Lynch’s draft agreement proposed that the contract be
construed under New York law and “that any suit, action or
proceeding . . . arising out of . . . this Agreement . . . may only
be brought in the United States District Court for the Southern
District of New York or any New York State court sitting in . . .
Manhattan.”
With certain exceptions not relevant here, the State
agreed that New York law would govern the agreement. On the
other hand, it objected to Merrill Lynch’s choice of forum and
suggested the following provision instead: “In connection with
any dispute, controversy or claim arising out of . . . [this
Agreement], each of the parties hereto agrees . . . that exclusive
jurisdiction and venue shall lie in the appropriate courts of the
State [of] New Jersey.” Merrill Lynch incorporated the State’s
5
This negotiation took place prior to New Jersey’s January
2008 purchase of Merrill Lynch preferred stock, and the
resulting forum selection clause was memorialized in the
agreement governing that purchase. The forum selection
provision in the Share Exchange Agreement, from which the
current dispute arose, is identical to the clause agreed on by the
parties in January 2008.
6
proposed forum selection language verbatim into the final
Agreement.
In determining whether parties have contractually waived
the right to remove to federal court, a court should “simply . . .
us[e] the same benchmarks of construction and, if applicable,
interpretation as it employs in resolving all preliminary
contractual questions.” Foster, 933 F.2d at 1217 n.15.
Although some courts have required that waivers of removal
rights be “clear and unequivocal,” they have done so in the
context of non-contractual, litigation-based waivers or have
relied upon such cases. See id. (citing cases). We recognized
in Foster a distinction between those cases and the one then
before us and concluded that a “clear and unequivocal”
standard “serv[ed] no meritorious policy of litigation” and was
“so stringent as to be contrary to the right of parties to contract
in advance regarding where they will litigate.” Id. Accordingly,
we look to the “plain and ordinary meaning” of the forum
selection clause to determine whether it amounted to a waiver of
the right to remove. See Buono Sales, Inc. v. Chrysler Motors
Corp., 449 F.2d 715, 721 (3d Cir. 1971) (“the wording of a
contract is to be given its plain and ordinary meaning”).
As it did in the District Court, Merrill Lynch argues that
the plain and ordinary meaning of the phrase “appropriate
courts of the State [of] New Jersey” includes both state and
federal courts in New Jersey, for two reasons. First, the
reference to “courts” in the plural sense, in light of New
Jersey’s unified Superior Court, must include the federal courts
located in that state. Second, the word “of” denotes the
geographic location of the “appropriate courts,” rather than the
governmental entity from which they derive their authority.
7
We do not agree. As the District Court noted, the New
Jersey Superior Court may be a unified “court,” but it boasts
fifteen vicinages throughout the twenty-one counties at the trial
level. The use of the plural “courts” is best read as a vestigial
reference to the many tribunals comprising the Superior Court
of New Jersey, not the federal district courts in the state.
This is particularly true when the small but significant
word following “courts” in the forum selection clause -- “of” --
is taken into account. “Of” “indicat[es] a possessive
relationship” or “such relationships as ruler and subject, [or]
owner and property.” Webster’s Third New Int’l Dictionary of
the English Language 1565 (Unabr. ed. 1968). “Of” also means
“from as the place of birth, production, or distribution: having as
its base of operation, point of initiation, or source of issuance or
derivation.” Id.
After examining the contrast between the meanings of
“in” and “of” in forum selection clauses, the Court of Appeals
for the Fourth Circuit adopted “the widely-accepted rule that . .
. ‘in [a state]’ express[es] the parties’ intent as a matter of
geography, permitting jurisdiction in both the state and federal
courts of the named state.” FindWhere Holdings, Inc. v. Sys.
Env’t Optimization, LLC, 626 F.3d 752, 755 (4th Cir. 2010)
(emphasis added). On the other hand, “‘of [a state]’ connote[s]
sovereignty, limiting jurisdiction . . . to the state courts of the
named state.” Id. (emphasis added). The Fifth Circuit put it
more pithily: “Federal district courts may be in [a state], but
they are not of [that state].” Dixon v. TSE Int’l Inc., 330 F.3d
396, 398 (5th Cir. 2003) (per curiam).
Notwithstanding the plain and ordinary meaning of the
contractual language, Merrill Lynch relies heavily on Jumara v.
State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995). There, we
8
held that a forum selection clause that referred to a “court of
record in the county” included either the state court or the
federal court in the judicial district encompassing that county.
55 F.3d at 881-82.
The forum selection clause in Jumara was part of an
automobile insurance agreement requiring arbitration of
disputes. That clause incorporated, and its interpretation was
driven by, Pennsylvania’s Uniform Arbitration Act, which, we
had previously held, was not intended to provide exclusive
jurisdiction to the Pennsylvania state courts. See id. at 881;
Allstate Ins. Co. v. Gammon, 838 F.2d 73, 76-77 (3d Cir. 1988).
Indeed, we had recognized that interpreting the statute in a way
that denied parties access to federal courts “might well run afoul
of the Supremacy Clause.” Gammon, 838 F.2d at 77 n.7.
There is no such concern in this case. The forum
selection clause here does not rely upon the interpretation of
any statute, state or federal; rather, it is the bargained-for result
of the parties’ counseled negotiation. Jumara is not at odds with
the District Court’s ruling.
We further note, as did the District Court, that the vast
majority of our sister circuits have held that forum selection
clauses like the one at issue here required remand to the state
court. See, e.g., FindWhere Holdings, 626 F.3d at 754
(“‘[j]urisdiction and venue of any dispute . . . shall lie
exclusively in, or be transferred to, the courts of the State [sic]
of Virginia, USA’”); Am. Soda, LLP v. U.S. Filter Wastewater
Grp., Inc., 428 F.3d 921, 924 (10th Cir. 2005) (“‘the Courts of
the State of Colorado shall be the exclusive forum . . .’”);
Dixon, 330 F.3d at 397 (“‘[t]he Courts of Texas, U.S.A. shall
have jurisdiction . . .’”); LFC Lessors, Inc. v. Pac. Sewer Maint.
Corp., 739 F.2d 4, 6 (1st Cir. 1984) (“‘the rights . . . of the
9
parties hereto [shall be] determined . . . in the courts[ ] of the
Commonwealth of Massachusetts’”). 6
The other cases on which Merrill Lynch relies are not
binding on us and are unpersuasive in their reasoning. In Regis
Associates v. Rank Hotels (Management) Ltd., 894 F.2d 193
(6th Cir. 1990), for example, the Court applied a “clear and
unequivocal” standard in determining whether defendant had
waived its right to removal. 894 F.2d at 195. We have
expressly rejected that stringent standard. 7 Foster, 933 F.2d at
1217 n.15.
Merrill Lynch also contends that, since the State drafted
the forum selection clause, that provision’s ambiguous language
must be construed against the State. We do not agree that the
6
Cf. Doe 1 v. AOL LLC, 552 F.3d 1077, 1080 (9th Cir. 2009)
(per curiam) (holding that “‘exclusive jurisdiction for any claim .
. . resides in the courts of Virginia’” limited jurisdiction to state
courts, but declining to enforce clause, as to California residents
only, for public policy reasons).
7
Also distinguishable are Global Satellite Communication Co. v.
Starmill U.K. Ltd., 378 F.3d 1269 (11th Cir. 2004), and
Northwest Airlines, Inc. v. Astraea Aviation Services, Inc., 111
F.3d 1386 (8th Cir. 1997). The forum selection language in
Global Satellite differed significantly from the clause we are now
confronted with. 378 F.3d at 1271 (parties had “‘agree[d] . . .
to submit to the jurisdiction of Broward County, Florida’” not
“courts of” that state or county). And, while the clause in
Northwest Airlines mirrored the one at issue here, the Court did
not address whether remand was required, apparently because
neither party raised the question. 111 F.3d at 1390-95.
10
clause is ambiguous for the reasons already stated. Further,
while contra proferentem may be the general rule,
“[a]pplication of the rule may be . . . limited by the degree of
sophistication of the contracting parties or the degree to which
the contract was negotiated.” 11 Williston on Contracts §
32:12, at 480-81 (4th ed. 1999). See also Cummins, Inc. v. Atl.
Mut. Ins. Co., 867 N.Y.S. 2d 81, 83 (N.Y. App. Div. 2008)
(doctrine of contra proferentem inapplicable where parties, both
sophisticated entities, had equal bargaining power in drafting
agreement).
In sum, we find that the forum selection clause
memorializes the parties’ intention to litigate all contractual
disputes in the state courts of New Jersey and thus was a waiver
of the right to removal.
Accordingly, the remand order will be affirmed.
11