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Bright LLC v. Best Western International, Inc.

United States District Court, D. Kansas

February 10, 2017

BRIGHT LLC, Plaintiff,
v.
BEST WESTERN INTERNATIONAL, INC., Defendant.

          MEMORANDUM & ORDER

          JULIE A. ROBINSON, UNITED STATES DISTRICT JUDGE

         Plaintiff Bright LLC (“Bright”) filed this action alleging breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, and declaratory judgment arising from Defendant Best Western International, Inc.'s (“Best Western”) actions relating to the development of a Best Western Plus Hotel in Lenexa, Kansas. This matter is before the Court on Defendant's Motion to Dismiss the Complaint or, in the Alternative, to Transfer Venue to the District of Arizona (Doc. 11). The motion is fully briefed, and the Court is prepared to rule. For the reasoning articulated below, the Court grants Defendant's motion.

         I. Background

         The following facts are taken from the evidence attached to the parties' briefing and the Complaint. On March 12, 2013, Plaintiff applied for a Best Western membership for a proposed Best Western Plus Extended Stay that would have been called the Best Western Plus Lenexa Hotel. The Best Western Plus Lenexa Hotel was going to be converted from a hotel Plaintiff owned called the Suburban Extended Stay Hotel. Plaintiff submitted a Membership Application[1]that was “conditionally approved” on May 28, 2013. Defendant instructed that by June 12, 2013, Plaintiff must sign and return originals of the Membership Agreement[2] and the Terms of Approval[3] to continue with the process toward membership. On June 20, 2013, Plaintiff executed the Terms of Approval and the Membership Agreement. Pursuant to the Terms of Approval, Plaintiff had twelve months, up to June 12, 2014, to open and operate the hotel under Defendant's brand. The Terms of Approval provided that if more than twelve months were needed, then extensions could be granted if requested. After several extensions, on December 15, 2015, Defendant denied Plaintiff's request for an extension, and as a result, Plaintiff's Membership Application was considered withdrawn and conditional approval terminated. Plaintiff brought this action in this Court on July 12, 2016 alleging Defendant should not have terminated the conditional approval.

         The Terms of Approval set forth the conditions for conversion of the hotel to a Best Western brand hotel, which included purchasing a specific reservation system, purchasing certain furniture, fixtures, and equipment, and completing significant structural changes. The Terms of Approval stated that “any failure to comply with these Terms of Approval may result in cancellation of the application and the Membership Agreement.”[4] Further, it stated that “[e]ach is responsible, jointly and severally, for all obligations to Best Western arising under the Membership Application, the Membership Agreement, these Terms of Approval, and/or relating to the affiliation of the above-referenced property with Best Western.”[5]

         The Membership Agreement became effective on the day of its execution, but membership rights provided through the Membership Agreement did not exist until activation on the Best Western reservation system. The Membership Agreement states that it and the Terms of Approval are to “embody the entire agreement between the parties.” The Membership Agreement contains a paragraph named “Application of Law and Choice of Form, ” which states:

This Agreement shall be governed and construed according to the laws of the State of Arizona, unless any obligation under this Agreement shall be invalid or unenforceable under such laws, in which event the laws of the jurisdiction whose law can apply to and validate the obligations under this Agreement shall apply. This Agreement shall be deemed executed in Phoenix, Arizona. Member acknowledges that Best Western is headquarter in Phoenix, Arizona, that the majority of Best Western's records and employees are in Phoenix, Arizona, and that Phoenix, Arizona is the most convenient forum for actions between Best Western and Member.
UNLESS WAIVED BY BEST WESTERN IN WHOLE OR IN PART, THE COURT LOCATED IN THE STATE OF ARIZONA, STATE OR FEDERAL, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ALL CLAIMS, DISPUTES AND ACTIONS ARISING FROM OR RELATED TO THE APPLICATION PROCESS, THIS AGREEMENT, TERMINATION OF THIS AGREEMENT OR TO ANY RELATIONSHIP BETWEEN THE PARTIES HERETO. VENUE SHALL BE IN THE COURTS LOCATED IN MARICOPA COUNTY, ARIZONA. APPLICANT EXPRESSLY CONSENTS TO AND SUBMITS TO THE JURISDICTION OF SAID COURTS AND TO VENUE BEING IN MARICOPA COUNTY, ARIZONA.[6]

         II. Discussion

         Defendant argues that the mandatory forum selection clause providing for exclusive jurisdiction in the state of Arizona must be enforced. In its brief, Defendant cites 28 U.S.C. § 1404(a), the doctrine of forum non conveniens, and Fed.R.Civ.P. 12(b)(3) as grounds for its motion for dismissal or in the alternative, transfer. The Supreme Court has made clear, however, that a mandatory forum selection clause is properly enforced by a motion to transfer pursuant to 28 U.S.C. § 1404(a)[7] or, in the case of a clause pointing to a state or foreign forum, by a motion to dismiss based on the doctrine of forum non conveniens.[8] Here, the forum selection clause provides that the forum is “the court located in the state of Arizona, state or federal.” Therefore, because the forum selection clause allows for a federal forum, the proper mechanism is 28 U.S.C. § 1404(a), not forum non conveniens.

         While Defendant argues that dismissal, not transfer is proper, 28 U.S.C. § 1404(a) states that a district court may “transfer, ” not dismiss, any action to any other district. Defendant has not cited case law under 28 U.S.C. § 1404(a), not forum non conveniens, where the court dismissed instead of transferred.[9] Forum non conveniens is different than 28 U.S.C. § 1404(a) because forum non conveniens is used in the case of a state or foreign forum, not within the federal system. In 28 U.S.C. § 1404(a), Congress replaced the traditional remedy of outright dismissal with transfer.[10] Thus, the Court further finds that under 28 U.S.C. § 1404(a), this case should not be dismissed, but should be transferred to the United States District Court for the District of Arizona.

         As a threshold matter, Plaintiff does not contest that this was a valid forum-selection clause.[11] Applying the § 1404(a) doctrine to the allegations in this case, the Court must remember that “when the parties have agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the forum specified in that clause. Only under extraordinary circumstances unrelated to the convenience of the parties should a § 1404(a) motion be denied.”[12] Plaintiff, as the party opposing the forum selection clause, bears the burden of establishing that the clause should be ignored.[13] Plaintiff's arguments against transfer should not be about the parties' private interest, but instead should address the public-interest factors.[14]Plaintiff's burden is to show that the “public-interest factors overwhelmingly disfavor a transfer.”[15]

         Plaintiff makes two arguments for not enforcing the forum selection clause: (1) the only contract at issue (the Terms of Approval) does not contain a forum selection clause; (2) even if the forum selection clause is applicable to the Terms of Approval, the Court must consider the factors determining whether to transfer and Defendant has not met its burden. For the reasons discussed more fully below, the Court rejects both arguments.

         The Court finds that although the forum selection clause is in the Membership Agreement, it is applicable to disputes involving the Terms of Approval. The Terms of Approval and the Membership Agreement are meant to be viewed as the complete agreement. This is evidenced by the fact that the Terms of Approval and the Membership Agreement only became effective when both were executed; Plaintiff executed both on the same day;[16] the Membership Agreement cancelled if Plaintiff did not comply with the Terms of Approval; and the Membership Agreement contains a provision stating that it and the Terms of Approval “embody the entire agreement between the parties.” The Court rejects Plaintiffs argument that because the Terms of Approval do not contain a forum selection clause, Defendant intended for the forum selection clause in the Membership Agreement to not apply to the Terms of Approval.[17] As Defendant correctly cites, courts have enforced forum selection clauses in contracts not directly at issue but interrelated to the contract in the complaint.[18] These two agreements are interrelated and refer to the other throughout, so the Court concludes that these agreements must be read together including the forum selection clause.

         The plain language of the forum selection clause in the Membership Agreement also is broad enough to encompass disputes relating to the Terms of Approval. The language states that it applies to“all claims, disputes and actions arising from or related to the application process, this agreement, termination of this agreement or to any relationship between the parties hereto.” In this case, Plaintiff's Complaint alleges breach of the Terms of Approval, which is part of the application process. This would surely fall within the language assigning the forum selection clause to disputes arising from the application process. Further, it would fall within the language in the forum selection clause stating that it covers “any relationship between the parties hereto.” It is clear to the Court that the forum selection clause was intended to apply to both applicants and members. Thus, even assuming that the Terms of Approval is the only contract at issue in this case, the Court finds that the forum selection clause in the Membership Agreement governs disputes about the Terms of the Approval.

         Additionally, the Court finds that the Membership Agreement and the Terms of Approval are both at issue in the claims alleged in the Complaint. Plaintiff makes the argument that the Membership Agreement is not applicable to this dispute because it never reached the membership stage. However, a plain reading of the Membership Agreement shows that this is not correct. The Membership Agreement clearly states that it is effective as of the date of execution, which in this case was June 20, 2013.[19] The Membership Agreement and the Terms of Approval only became effective when the originals of both it and the Terms of Approval were received. In fact, the forum-selection clause itself states that “applicant expressly consents to and submits to the jurisdiction of said courts and to venue being in Maricopa County, Arizona, ”[20]which indicates that the clause was intended to apply to members and applicants. While the Membership Agreement is not identified in the Complaint, termination of the Membership Agreement and withdrawal of the Membership Application are clearly at issue. In fact, Count VI of the Complaint seeking declaratory judgment requests that the Court declare that Plaintiff is entitled ...


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