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Service Team of Professionals, Inc. v. Folks

United States District Court, W.D. Missouri, Western Division

May 2, 2018

SERVICE TEAM OF PROFESSIONALS, INC., Plaintiff,
v.
WILLIAM C. FOLKS, et al., Defendants.

          ORDER AND OPINION (1) CONCLUDING THAT THE COURT LACKS PERSONAL JURIDICTION OVER DEFENDANTS AND (2) DIRECTING PLAINTIFF TO INDICATE WHETHER IT DESIRES FOR THE CASE TO BE TRANSFERRED

          BETH PHILLIPS, JUDGE

         Plaintiff filed this suit, alleging Defendants breached a contract. Defendants have filed a Motion to Dismiss, contending that they are not subject to personal jurisdiction in Missouri. Alternatively, Defendants ask that the case be transferred to the Middle District of Louisiana for the convenience of the parties pursuant to 28 U.S.C. § 1404(a). The Court concludes that it does not have personal jurisdiction over Defendants, so the Court cannot consider transferring the case based on § 1404(a). The Court will defer taking any further action, however, to allow Plaintiff an opportunity to indicate whether it would like the case transferred to the Middle District of Louisiana pursuant to 28 U.S.C. § 1406(a).

         I. BACKGROUND

         Plaintiff is in the business of granting franchises to businesses engaged in providing cleaning and restoration services. (Doc. 1, ¶ 7.) Defendants entered into a Franchise Agreement with Plaintiff for the operation of a franchise in Baton Rouge, Louisiana. (Doc. 1, ¶¶ 10-11.) Section 26 of the Franchise Agreement contained a forum selection clause stating that “[p]roper venue for any action shall be in Kansas City, Missouri.” (Doc. 1, ¶ 6; Doc. 8, p. 2.)[1] The Franchise Agreement was due to expire on July 31, 2016. (Doc. 8-1, p. 2.)[2]

         A dispute arose between the parties, and in April 2016 they entered into a Mutual Settlement and General Release Agreement, (“the Settlement Agreement”). (Doc. 1, ¶ 14; Doc. 1-1; Doc. 14-4, pp. 39-43.) The Settlement Agreement provides that the Franchise Agreement was deemed to have been terminated as of January 1, 2016, and that “none of the Settling Parties shall have any remaining obligations or rights thereunder, except for those post termination obligations and rights described within Section 13a through Section 13d and Section 13f through Section 13h of the Franchise Agreement.” (Doc. 1-1, p. 1 (emphasis supplied).) Generally, these specified sections (hereafter “Section 13”) describe the franchisee's obligation to stop using Plaintiff's service marks, refrain from divulging trade secrets, return certain materials to Plaintiff, and cancel or abandon all fictitious names, service marks, advertising, and business listings incorporating or related to Plaintiff's name or mark. (Doc. 1, ¶ 16.) However, with the exception of Section 13, the Settlement Agreement specifies that “the Settling Parties are relieved from all of the terms and conditions” of the Franchise Agreement. (Doc. 1-1, p. 1.)

         Another dispute arose between the parties, this time over whether Defendant had breached the Settlement Agreement. Plaintiff filed suit in the District of Nevada, contending that Defendants had breached the Settlement Agreement by continuing to use Plaintiff's promotional videos, service marks, and other materials. (Doc. 8-4, ¶¶ 17-19, 23.) Defendants moved to dismiss the suit, arguing that they were not subject to personal jurisdiction in Nevada. (Doc. 14-4.) The District of Nevada agreed that Defendants lacked minimum contacts with that state, and granted Defendants' Motion to Dismiss in January 2018. (Doc. 8-5.) Plaintiff then filed this suit, which is essentially the same as the one it filed in Nevada.

         Defendants contend that the case must be dismissed because (1) the forum selection clause did not survive the Franchise Agreement's termination, and (2) they do not have the minimum contacts with Missouri necessary to satisfy the Due Process Clause. Alternatively, they ask that the case be transferred to the Middle District of Louisiana for the convenience of the parties pursuant to 28 U.S.C. § 1404(a). Plaintiff opposes Defendants' Motion. As discussed more fully below, the Court concludes that Defendants are not subject to personal jurisdiction in this forum, but the Court defers further action so that Plaintiff can indicate whether it wants the case transferred to a proper forum.

         II. DISCUSSION

         A. The Forum Selection Clause

         “Due process is satisfied when a defendant consents to personal jurisdiction by entering into a contract that contains a valid forum selection clause.” Dominium Austin Partners, LLC v. Emerson, 248 F.3d 720, 726 (8th Cir. 2001) (citing Burger King v. Rudzewicz, 471 U.S. 462, 472 n.14 (1985) and M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972)); see also St. Paul Fire & Marine Ins. Co. v. Courtney Enterprises, Inc., 270 F.3d 621, 624 (8th Cir. 2001). Plaintiff contends that the Franchise Agreement's forum selection clause was valid and that it survived the Franchise Agreement's termination. Defendants do not dispute that the forum selection clause was valid; they only contend that it is no longer in effect because in the Settlement Agreement the parties agreed to no longer be bound by that provision. The Court agrees with Defendants.

         Normally, the parties' obligations expire when a contract terminates, but provisions related to the manner in which disputes are resolved generally survive the contract's termination. Such provisions govern disputes that (1) accrued before the agreement's termination or (2) relate to post-termination obligations specified in the contract. E.g, Silverpop Sys., Inc. v. Leading Market Tech., Inc., 641 Fed. App'x 849, 857 (11th Cir. 2016); 13 Corbin on Contracts § 67.2 (2003). Courts have applied this general principle to forum selection clauses and concluded that such clauses generally survive the termination of the agreement and apply to pre-termination disputes and to post-termination obligations specified in the agreement. E.g., United States Smoke & Fire Curtain, LLC v. Bradley Lomas Electrolok, Ltd., 612 Fed. App'x 671, 672-73 (4th Cir. 2015); Tristate HVAC Equipment, LLP v. Big Belly Solar, Inc., 752 F.Supp.2d 517, 534-35 (E.D. Pa. 2010); AGR Fin., LLC v. Ready Staffing, Inc., 99 F.Supp.2d 399, 401 (S.D.N.Y. 2000); Allied Sound, Inc. v. Dukane Corp., 934 F.Supp. 272, 275 (M.D. Tenn. 1996); Baker v. Economic Research Servs., Inc., 2018 WL 1415501, *2 (Fla. Dist. Ct. App. 2018). However, the common law rule assumes that the contract containing the contract has expired by its terms or that the parties have merely agreed to terminate the contract. The parties are free to negotiate a different outcome.

         The question before the Court is whether the Settlement Agreement terminated the parties' agreement to litigate disputes in Kansas City, Missouri. When interpreting the Settlement Agreement, the Court's objective is to ascertain and give effect to the parties' intent. E.g., Armbruster v. Mercy Med. Grp., 465 S.W.3d 67, 71 (Mo.Ct.App. 2015).[3] The parties' intent is to be gleaned solely from the contract if the contract's terms are unambiguous, e.g, . id., and in conducting this inquiry “the terms of a contract should be read as a whole.” State ex rel. Vincent v. Schneider, 194 S.W.3d 853, 858 (Mo. 2006) (en banc).

         The Settlement Agreement does not contain a forum selection clause or choice of law provision. The parties discussed the issue during negotiations but were unable to agree. (Doc. 8-2, ¶¶ 4-5.) However, they were able to agree that, with the exception of certain obligations in Section 13, “the Settling Parties are relieved from all of the terms and conditions” of the Franchise Agreement. (Doc. 1-1, p. 1 (emphasis supplied).) This language is unambiguous, and the only possible interpretation is that the parties agreed that all of the Franchise Agreement's provisions ended effective January 1, 2016, except for the specified provisions in Section 13. This means that the parties were relieved of obligations contained in Section 26, including the obligation to resolve disputes in Kansas City, Missouri.

         Plaintiff opposes this conclusion by relying on the common law principles referenced earlier. It suggests that the common law principles apply and a forum selection clause remains applicable whenever and regardless of how a contract ends. However, there can be no doubt that the parties retain the ability to agree to terminate a forum selection clause; the question in a given case is whether they did so. For the reasons set forth in ...


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