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Canterbury Affordable Housing, LLC v. UBS Group AG

United States District Court, N.D. Mississippi, Greenville Division

November 13, 2018

CANTERBURY AFFORDABLE HOUSING, LLC PLAINTIFF
v.
UBS GROUP AG, et al. DEFENDANTS

          ORDER

          DEBRA M. BROW, UNITED STATES DISTRICT JUDGE

         Before the Court is the “Motion for Transfer of Venue, or in the Alternative, for Dismissal” filed by UBS Group AG, UBS AG, and UBS Securities LLC. Doc. #4.

         I. Background and Procedural History

         On August 1, 2018, Canterbury Affordable Housing, LLC, filed a complaint in the Circuit Court of Coahoma County, Mississippi, against UBS Group AG, UBS AG, UBS Securities, LLC, “John Doe Corporations 1-10, ” and “John Does 1-5.” Doc. #2. The complaint asserts claims arising from the defendants' conduct as lenders with respect to Canterbury's efforts to refinance a loan on the Canterbury Apartments in Tupelo, Mississippi. Specifically, Canterbury alleges that the defendants breached a term sheet agreement and then employed economic duress to coerce it into executing a less favorable agreement. Of relevance here, the term sheet agreement, which is attached to the complaint, includes the following forum selection clause:

This Term Sheet may not be assigned by [Canterbury] without the prior written consent of Lender. This Term Sheet shall be governed by and construed and interpreted in accordance with the internal laws of the State of New York, without regard to principles of conflicts of laws. To the fullest extent permitted under applicable law, [Canterbury] (i) submits to the exclusive jurisdiction of any state and federal court sitting in New York City for the resolution of any dispute in connection with this Term Sheet or the transactions contemplated hereby; (ii) agrees that any legal proceeding relating to this Term Sheet or the transactions contemplated hereby shall be maintained in a state or federal court of competent jurisdiction sitting in the city, state and county of New York as Lender shall elect; (iii) agrees that any legal proceeding related to this term sheet or the transactions contemplated hereby shall be maintained in a state or federal court of competent jurisdiction sitting in the City, State and County of New York as Lender shall elect and waives the defense of any inconvenient forum; and (iv) agrees that a final judgment in any such legal proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each of [Canterbury] and Lender waives any right to a jury trial.

Id. at Ex. 2 at 9.

         On August 29, 2018, the defendants removed the state court action to this Court on the basis of diversity jurisdiction. Doc. #1. Two days later, the defendants, relying on the forum selection clause in the term sheet agreement, filed a motion under 28 U.S.C. § 1404(a) to transfer this case to the Southern District of New York or, in the alternative, to dismiss. Doc. #4. Canterbury responded in opposition to the motion on September 14, 2018. Doc. #14. In support of its response, Canterbury submitted an affidavit of F.G. Jack Bobo, Canterbury's managing member, setting forth Bobo's observations and opinions regarding the course of dealing between Canterbury and the defendants. Doc. #14-1.

         On September 21, 2018, the defendants replied in support of their motion to transfer, Doc. #18, and filed a motion to strike portions of Bobo's affidavit. Doc. #19. Canterbury responded in opposition to the motion to strike on October 5, 2018. Doc. #27.

         II Standard of Review

         A motion to transfer under 28 U.S.C. § 1404(a) is “the appropriate provision to enforce [a] forum-selection clause ….” Atl. Marine Const. Co. Inc. v. U.S. Dist. Ct. for the W. Dist. of Tex., 571 U.S. 49, 62 (2013). When considering such a motion, a mandatory and enforceable forum selection clause “control[s] except in unusual cases.” Weber v. PACT XPP Techs., AG, 811 F.3d 758, 767 (5th Cir. 2016). “Where the agreement contains clear language showing that jurisdiction is appropriate only in a designated forum, the clause is mandatory.” Valero Mktg. & Supply Co. v. Gen. Energy Corp., 702 F.Supp.2d 706, 712 (S.D. Tex. 2010) (collecting cases).

         Here, there is no dispute that the forum selection clause, which places exclusive jurisdiction in the courts of New York City, is mandatory or that, as drafted, it covers the claims at issue. There is also no dispute that no “unusual circumstances” exist which would justify overriding the clause, should it be enforceable. Rather, the sole issue is whether the clause is enforceable.

         “[I]n diversity cases, federal law governs the ‘enforceability' of forum-selection clauses ….”[1] Barnett v. DynCorp Int'l, L.L.C., 831 F.3d 296, 301 (5th Cir. 2016). Under federal law, there exists a “strong presumption in favor of enforcing mandatory forum-selection clauses.” Al Copeland Invs., L.L.C. v. First Specialty Ins. Corp., 884 F.3d 540, 543 (5th Cir. 2018) (internal quotation marks omitted). However:

This presumption may be overcome by a clear showing that a forum-selection clause is “unreasonable” under one of the following circumstances:
(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 ...

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