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Aurora Casket Company, LLC v. Caribbean Funeral Supply, Corp.

United States District Court, S.D. Indiana

November 22, 2017




         Aurora Casket Company, LLC (“Aurora”) sued Caribbean Funeral Supply, Corp. (“Caribbean”), JR Quality, Inc. (“JR”) and Rosa E. González-López (“González”) for damages for breach of contract by Caribbean, JR, and González, and for declaratory judgments that Caribbean is not protected by the Puerto Rico Dealer's Act, 10 P.R. Laws Ann. §§ 278 et seq. (“Law 75”). Docket No. 20. Based on a forum-selection clause in the Product Supply Agreement (PSA) signed by both Caribbean and Aurora, Caribbean now moves to either dismiss Aurora's complaint for improper venue under Federal Rule of Civil Procedure 12(b)(3) or to transfer venue under 28 USC § 1404(a). Docket Nos. 26, 31. Aurora opposes. Docket No. 27. Pursuant to Local Rule 72(b)(1), Caribbean's motion was referred to me for disposition. Docket No. 29.


         The following facts are limited to those relevant to the matter before the court. Aurora is a company based in Indiana that manufactures caskets, cremation urns, keepsakes, and other products for funeral homes and families. Docket No. 20 at 2. Caribbean is a Puerto Rico-based company as is JQ. Id. González is a citizen of Puerto Rico. Id. at 2-3. In 2015, Caribbean and Aurora entered into the PSA, agreeing that Aurora would deliver its products to Caribbean who would then purchase and distribute them in Puerto Rico as well as surrounding Caribbean islands. Id. at 5-6. The PSA included a forum-selection clause stating that the parties agreed that “[a]ny litigation” between them would be brought “exclusively in an appropriate court of competent jurisdiction (state or federal) located in Dearborn County, Indiana.” Docket No. 20-1 at 9. Aurora now alleges that although it has delivered all the products that Caribbean has ordered, Caribbean has failed to perform its obligations under the PSA, including failing to pay Aurora for its products. Docket No. 20 at 9-10.

         In 2014, JQ and Aurora allegedly entered into a contract that Aurora would provide JQ with a particular machine and in exchange JQ would buy certain products from Aurora. Id. at 7. JQ also agreed to pay Aurora in annual installments for the machine. Id. Aurora alleges that JQ has breached their contract by both failing to purchase products from Aurora and for failing to pay the installments due for the machine. Id. at 8.

         In 2015, González allegedly agreed to pay Aurora $350, 000 for inventory that she had received from Aurora. Id. The alleged promissory note is secured by a mortgage deed over real estate property in Puerto Rico. Id.

         After Aurora brought suit against Caribbean in this court, Caribbean filed this motion to dismiss or transfer based on the forum-selection clause in the PSA. Docket Nos. 20; 26.


         Typically, when a case is based on diversity jurisdiction, federal courts must apply state substantive law and federal procedural law. See MARPOR Corp. v. DFO, LLC, No. CV. 10-1312, 2010 WL 4922693, at *5 n.3 (D.P.R. Dec. 2, 2010) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938)). Therefore, the question is whether the enforceability of a forum-selection clause is procedural or substantive. However, because “there is no conflict between federal common law and Puerto Rico law regarding the enforceability of forum selection clauses, ” the First Circuit “has declined to perform an Erie analysis when dealing with such clauses.” MARPOR Corp. v. DFO, LLC, No. CV. 10-1312, 2010 WL 4922693, at *5 (D.P.R. Dec. 2, 2010) (citing D.I.P.R. Mfg., Inc. v. Perry Ellis Int'l, Inc., 472 F.Supp.2d 151, 155 (D.P.R. 2007)); see Lambert v. Kysar, 983 F.2d 1110, 1116-17 (1st Cir. 1993) (“In cases where federal law and state law coincide on the issue in question, it is unnecessary for the court to make a full Erie analysis.”). Instead, given the similarity between federal and Puerto Rico law, “the First Circuit has applied federal common law when interpreting [forum-selection clauses] in a diversity context. D.I.P.R. Mfg., Inc., 472 F.Supp.2d at 154 (citing Silva v. Encyclopedia Britannica Inc., 239 F.3d 385 (1st Cir. 2001)).

         In the First Circuit, a motion to dismiss based on a forum-selection clause is treated “as a motion alleging the failure to state a claim for which relief can be granted under Rule 12(b)(6).” Claudio-De Leon v. Sistema Universitario Ana G. Mendez, 775 F.3d 41, 46 (1st Cir. 2014) (quoting Rivera v. Centro Médico de Turabo, Inc., 575 F.3d 10, 15 (1st Cir. 2009)). Caribbean filed such a motion here, albeit under 12(b)(3), but alternatively requested a transfer under § 1404(a). Although the Supreme Court “explicitly declined to express a view as to whether a Rule 12(b)(6) motion is a proper alternative” to enforce a forum-selection clause, its holding in Atlantic Marine Co., Inc. v. U.S. District Court, 134 S.Ct. 568 (2013) is “emphatic that a motion to transfer under Section 1404(a) was the appropriate mechanism” when the chosen forum is within the federal system. Caribbean Rests., LLC v. Burger King Corp., 23 F.Supp.3d 70, 75 (D.P.R. 2014). Accordingly, “the court will now treat . . . [Caribbean]'s motion as a motion to transfer under Section 1404(a) and analyze its request under the standard set forth in Atlantic Marine.” Id.; see also Antilles Cement Corp. v. Aalborg Portland A/S, 526 F.Supp.2d 205, 207 (D.P.R. 2007) (“[W]here transfer to another federal jurisdiction is viable, the proper remedy is not dismissal of the complaint but rather a determination of whether transfer is proper by focusing instead on the requirements established in § 1404(a).” (citing Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22 (1988))); Diaz Morales v. Royal Caribbean Cruises, Ltd., 419 F.Supp.2d 97, 101 (D.P.R. 2006) (defendant's motion to dismiss denied and case transferred to a district court in Florida, the appropriate venue).[1]

         As a motion to transfer is a non-dispositive matter, it is appropriate for me to resolve the motion through an order as opposed to a report and recommendation to the presiding district judge. See 28 U.S.C. § 636(b)(1)(A); Caguas Lumber Yard Inc. v. Ace Hardware Corp., 827 F.Supp.2d 76, 78 (D.P.R. 2011), aff'd, No. CIV. 11-1684 GAG, 2011 WL 5837808 (D.P.R. Nov. 21, 2011) (change of venue or transfer to another district is a non-dispositive matter); BMJ Foods Puerto Rico, Inc. v. Metromedia Steakhouses Co., L.P., 562 F.Supp.2d 229, 231 (D.P.R. 2008) (motion to transfer is non-dispositive). Severance of claims is also a non-dispositive matter and as such is appropriate for decision by a magistrate judge. See U.S. v. Schneider, 2007 WL 2407060, *1 (E.D.Wis. Aug. 20, 2007) (“A magistrate judge has authority to decide nondispositive motions such as motions to sever.”); Wat Bey v. City of New York, No. CV 99-3873, 2007 WL 2012421, at *1 (S.D.N.Y. July 11, 2007); Cruzan Terraces, Inc. v. Antilles Ins., Inc., 138 F.R.D. 64, 65 (D.V.I. 1991) (“Granting severance . . . is not dispositive of any of the claims).


         Section § 1404(a) provides that “[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.” 28 U.S.C. § 1404(a). This transfer statute “is merely a codification of the doctrine of forum non conveniens for the subset of cases in which the transferee forum is within the federal court system; in such cases, Congress has replaced the traditional remedy of outright dismissal with transfer.” Atlantic Marine, 134 S.Ct. at 580. “The decision to transfer should be made on a case-by-case basis. In its analysis, a court must balance the convenience of the parties, the convenience of the witnesses, and public interest factors which are generally subsumed under the category ‘the interest of justice.'” Outek Caribbean Distributors, Inc. v. Echo, Inc., 206 F.Supp.2d 263, 266 (D.P.R. 2002) (quoting Stewart, 487 U.S. at 29-31). Public-interest factors include “familiarity with the governing law, the local interest in deciding local controversies at home, and the relative congestion of the courts.” Johnson v. VCG Holding Corp., 767 F.Supp.2d 208, 217 (D. Me. 2011).

         However, this framework is different when there is a valid forum-selection clause representing the parties' prior agreement of forum. In such cases, “the Supreme Court held . . . that clause should be given controlling weight in all but the most exceptional cases, and a district court should ordinarily transfer the case to the forum specified in that clause.” Caribbean Rests., LLC, 23 F.Supp.3d at 75. Specifically, when the court is considering enforcing a forum-selection clause, “the plaintiff's choice of forum merits no weight. Rather, as the party defying the forum-selection clause, the plaintiff bears the burden of establishing that transfer to the forum for which the parties bargained is unwarranted. . . . Second, a court evaluating a defendant's § 1404(a) motion to transfer based on a forum-selection clause should not consider arguments about the parties' private interests.” Caribbean Rests., 23 F.Supp.3d at 76 (quoting Atlantic Marine, 134 S.Ct. at 582). In addition, “a district court should transfer the case unless extraordinary circumstances unrelated to the convenience of the parties clearly disfavor a transfer.” Atlantic Marine, 134 S.Ct. at 575. Consequently, “the party acting in violation of the forum-selection clause . . . must bear the burden of showing that public-interest factors ...

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