Bartels Ex Rel. Bartels v. Saber Healthcare Group, LLC ( 2018 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 16-2247
JEANNE T. BARTELS, by and through William H. Bartels, Attorney-in-Fact;
JOSEPH J. PFOHL, Executor of the Estate of Bernice C. Pfohl; CLAIRE M.
MURPHY, by and through Michele Mullen, Attorney-in-Fact,
Plaintiffs – Appellees,
v.
SABER HEALTHCARE GROUP, LLC; SABER HEALTHCARE HOLDINGS,
LLC; FRANKLIN OPERATIONS, LLC, d/b/a Franklin Manor Assisted Living
Center; SMITHFIELD EAST HEALTH HOLDINGS, LLC, d/b/a Gabriel Manor
Assisted Living Center; QUEEN CITY AL HOLDINGS, LLC, d/b/a The
Crossings at Steele Creek,
Defendants – Appellants.
No. 16-2416
JEANNE T. BARTELS, by and through William H. Bartels, Attorney-in-Fact; JOSEPH
J. PFOHL, Executor of the Estate of Bernice C. Pfohl; CLAIRE M. MURPHY, by and
through Michele Mullen, Attorney-in-Fact,
Plaintiffs – Appellees,
v.
SABER HEALTHCARE GROUP, LLC; SABER HEALTHCARE HOLDINGS, LLC;
FRANKLIN OPERATIONS, LLC, d/b/a Franklin Manor Assisted Living Center;
SMITHFIELD EAST HEALTH HOLDINGS, LLC, d/b/a Gabriel Manor Assisted Living
Center; QUEEN CITY AL HOLDINGS, LLC, d/b/a The Crossings at Steele Creek,
Defendants – Appellants.
Appeal from the United States District Court for the Eastern District of North Carolina, at
Raleigh. Terrence W. Boyle, District Judge. (5:16-cv-00283-BO)
Argued: September 13, 2017 Decided: January 23, 2018
Before TRAXLER, DIAZ, and FLOYD, Circuit Judges.
Vacated and remanded by published opinion. Judge Traxler wrote the majority opinion
in which Judge Diaz joined. Judge Floyd wrote an opinion concurring in part and
concurring in the judgment.
ARGUED: Mary Beth Hickcox-Howard, WILLIAMS & CONNOLLY LLP,
Washington, D.C., for Appellants. Stephen Jay Gugenheim, GUGENHEIM LAW
OFFICES, P.C., Raleigh, North Carolina, for Appellees. ON BRIEF: Steven B. Epstein,
POYNER SPRUILL LLP, Raleigh, North Carolina; Edward J. Bennett, WILLIAMS &
CONNOLLY LLP, Washington, D.C., for Appellants. Daniel K. Bryson, Matthew E.
Lee, Jeremy R. Williams, WHITFIELD BRYSON & MASON LLP, Raleigh, North
Carolina; Andrew D. Hathaway, GUGENHEIM LAW OFFICES, P.C., Raleigh, North
Carolina, for Appellees.
2
TRAXLER, Circuit Judge:
Saber Healthcare Holdings, LLC, sits at the top of a family of wholly owned
limited-liability companies that own and operate dozens of assisted-living facilities and
nursing homes in several states, including North Carolina. Current and former residents
of one of Saber’s North Carolina assisted-living facilities brought a putative class action
in North Carolina state court against Saber Healthcare Holdings and certain of its
subsidiaries, alleging that the defendants failed to deliver the contractually promised care
and failed to comply with certain state law requirements. After the defendants removed
the case to federal court, the district court granted the plaintiffs’ motion to remand the
case to state court, concluding that a forum-selection clause in the residents’ contracts
required the case to proceed in state court. The defendants appeal, arguing that the case
was properly removed under the Class Action Fairness Act of 2005 (“CAFA”), Pub. L.
No. 109–2, 119 Stat. 4 (codified in scattered sections of Title 28, United States Code),
and that, in any event, the forum-selection clause does not prohibit removal. As we will
explain, we vacate and remand for further proceedings and factual development on the
question of whether all of the defendants are bound by the forum-selection clause
contained in the contracts executed by the plaintiffs.
I.
The defendants in this case are Saber Healthcare Holdings, LLC (“Saber”); Saber
Healthcare Group, LLC; Franklin Operations, LLC; Smithfield East Health Holdings,
LLC; and Queen City AL Holdings, LLC. Saber is the sole member of each of the other
defendant LLCs.
3
As is relevant to this case, Saber and its related companies operate three assisted-
living facilities in North Carolina: Franklin Manor Assisted Living Center, which is
operated by Franklin Operations, LLC, and located in Franklin County; Gabriel Manor
Assisted Living Center, which is operated by Smithfield East Health Holdings, LLC, and
located in Johnston County; and The Crossings at Steele Creek, which is operated by
Queen City AL Holdings, LLC, and located in Mecklenburg County. Each facility
requires its residents to sign an “Assisted Living Residency Agreement,” which includes
a forum-selection clause providing that “the county in which the Facility is located shall
be the sole and exclusive venue for any dispute between the parties, including, but not
limited to, litigation, special proceeding, or other proceeding between the parties that may
be brought, arise out of or in connection with or by reason of this Agreement.” J.A. 160.
The plaintiffs are the representatives of three then-current and former residents of
Saber facilities -- Jeanne Bartels, Bernice Pfohl, and Claire Murphy. Bartels was a
resident of Franklin Manor for a few weeks in October and November 2015, and Pfohl
was a resident of Franklin Manor from February 2014 through August 2015. Murphy
was a resident of Franklin Manor from April 2015 through January 1, 2016. After
spending a month in a rehabilitation hospital, Murphy was a resident of Gabriel Manor
from February 4 through April 21, 2016. On April 21, 2016, Murphy returned to
Franklin Manor, where she resided until sometime after this action was filed. 1
1
Murphy voluntarily dismissed her claims on October 25, 2016, and is no
longer a party to this action.
4
The plaintiffs filed this action on May 9, 2016, in Franklin County, North
Carolina. The plaintiffs alleged that the defendants are all alter egos of each other and
that they failed to provide the level of staffing necessary to satisfy North Carolina
statutory requirements or to meet the basic needs of its residents. According to the
plaintiffs, the defendants deliberately chose to understaff the facilities in order to
“increase profits at the expense of its residents with Alzheimer’s and dementia.” J.A. 38.
The plaintiffs sought a preliminary injunction, and the hearing on that motion took
place on May 16 and 19, 2016, in courthouses located in Granville County and Wake
County. At the conclusion of the hearing, the state court indicated that it would grant the
injunction and appoint a monitor to ensure compliance with state law, but the court made
it clear that the injunction would be effective on entry of a written order. See D. Ct.
docket entry #34, exh. 2, pp. 5-6 (“[C]ome up with an order that memorializes that and
I’m looking at it and either sign it or modify it as I think is appropriate and I’ll make it
effective when the order is signed.” (emphasis added)). On May 24, the Saber defendants
removed the case to federal court. A few days after removal, the state court entered a
written order granting the injunction. The order stated that the injunction “was entered in
open court on May 19, 2016 and is signed . . . on this, the 27th day of May 2016.” J.A.
234. Recognizing that the case had been removed, the state court stayed the injunction
“unless and until the case is remanded to this court for further proceedings.” J.A. 235.
The plaintiffs subsequently moved to remand, arguing that the forum-selection
clauses in the contracts required the action to be prosecuted in Franklin County. Because
there is no federal courthouse in Franklin County, the plaintiffs contended that the
5
defendants were contractually precluded from removing the action. The defendants
argued that the absence of a federal courthouse in Franklin County did not preclude
removal and that, in any event, the only defendant bound by the forum-selection clause
was Franklin Operations, LLC. Because CAFA authorizes removal by a single defendant
and does not require the consent of other defendants, any of the other defendants were
free to remove the case.
The district court granted the motion to remand. The court concluded that the
forum-selection clause required the action to proceed in Franklin County and that the
absence of a federal courthouse in Franklin County precluded removal. The court
rejected the defendants’ argument that only Franklin Operations, LLC, was bound by the
forum-selection clause, noting that the plaintiffs alleged that the entities were alter egos
and that Saber was the sole member in each entity. This appeal followed.
II.
Before proceeding to the merits, we pause to address our jurisdiction over this
appeal. Subject to certain exceptions, appellate review of orders remanding removed
cases to state court is prohibited. See 28 U.S.C. § 1447(d). The defendants therefore
proceeded under the Class Action Fairness Act and timely sought permission from this
court to appeal the remand order. See 28 U.S.C. § 1453(c) (“[A] court of appeals may
accept an appeal from an order of a district court granting or denying a motion to remand
a class action to the State court from which it was removed if application is made to the
court of appeals not more than 10 days after entry of the order.”).
6
The general statutory prohibition against appeals of remand orders, however,
applies only where the remand was based on lack of subject-matter jurisdiction or on a
timely raised defect in the removal procedure. See Things Remembered, Inc. v. Petrarca,
516 U.S. 124, 127-28 (1995); Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192,
196 (4th Cir. 2008). In this case, the district court did not remand because it lacked
subject-matter jurisdiction or because of any defect in the removal procedure. 2 Instead,
the court remanded because it concluded that the forum-selection clause effected a waiver
of the defendants’ right to remove the case to federal court. Consistent with the approach
taken in other circuits, this court has concluded that a remand based on enforcement of a
forum-selection clause “does not fall within the general prohibition of appellate review
2
There is no real question that the district court had subject-matter
jurisdiction over this case. CAFA confers jurisdiction over class actions in which the
amount in controversy exceeds $5 million and in which “any member of a class of
plaintiffs is a citizen of a State different from any defendant.” 28 U.S.C. § 1332(d)(2)(A)
(emphasis added). Under CAFA, unincorporated associations – including limited
liability companies – are citizens of the state under whose laws they are organized and of
the state where their principal place of business is located. See 28 U.S.C. § 1332(d)(10);
Ferrell v. Express Check Advance of SC LLC, 591 F.3d 698, 705 (4th Cir. 2010).
Because the plaintiffs are North Carolina citizens, and Saber Healthcare Group, LLC, is a
citizen only of Ohio, CAFA’s minimal diversity requirements are met. As to the amount
in controversy, the plaintiffs seek to recover the difference between the value of the
services the defendants promised and the value of the services actually received, which
they contend should be trebled under North Carolina’s unfair trade practices act, see N.C.
Gen. Stat. § 75-16. The defendants alleged in their notice of removal that over the time
period addressed in the complaint, the three North Carolina facilities received more than
$14 million in payments from residents. Because the plaintiffs do not challenge the
defendants’ calculations, the defendants adequately established that the amount in
controversy exceeds $5 million. See Dart Cherokee Basin Op. Co. v. Owens, 135 S. Ct.
547, 554 (2014) (“A defendant’s notice of removal need include only a plausible
allegation that the amount in controversy exceeds the jurisdictional threshold.”).
7
for remand orders pursuant to 28 U.S.C. § 1447(d)” and thus is “reviewable on appeal.”
FindWhere Holdings, Inc. v. Sys. Env’t Optimization, LLC, 626 F.3d 752, 755 (4th Cir.
2010) (collecting cases). The order at issue in this case, therefore, is subject to appellate
review under ordinary principles. 3
III.
We turn now to the merits of this appeal. There is no question that under CAFA, a
single defendant can remove a case without the consent of the other defendants. See 28
U.S.C. § 1453(b) (“A class action . . . may be removed by any defendant without the
consent of all defendants.” (emphasis added)); Lowery v. Ala. Power Co., 483 F.3d 1184,
1221 (11th Cir. 2007) (“[A]ny one defendant authorized under CAFA to remove the
plaintiffs’ claims against that defendant . . . may remove the action as a whole, regardless
of whether other defendants in the action would be authorized to remove their claims.”).
Removal was therefore proper under CAFA if any one of the defendants was authorized
to remove the case. Accordingly, the questions we must answer are whether the forum-
selection clause prohibited removal, and, if so, whether all defendants are bound by the
clause.
A.
As noted, the forum-selection clause contained in the residency agreements states
that “the county in which the Facility is located shall be the sole and exclusive venue for
3
In light of this conclusion, we hereby deny as moot the defendants’ §
1453(c) petition requesting permission to appeal the remand order.
8
any dispute between the parties, including, but not limited to, litigation, special
proceeding, or other proceeding between the parties that may be brought, arise out of or
in connection with or by reason of this Agreement.” J.A. 160.
The plaintiffs contend that under the plain language of this clause, all litigation
springing from the contractual relationship must be pursued in the county where the
facility is located. Thus, if there is a federal courthouse in that county, then removal
would be consistent with the contract, because the litigation would still be proceeding in
the required county. But if there is no federal courthouse in the designated county, then
removal would be inconsistent with the contract, because the litigation would of necessity
be proceeding in a different county. The defendants, however, argue that the clause does
not preclude removal because the contract does not limit venue to the courts of North
Carolina – language that is generally understood to require the case to proceed in state
court. See FindWhere, 626 F.3d at 755. According to the defendants, the forum-
selection clause should be understood as permitting removal to the federal court with
jurisdiction over the specified county, regardless of whether there happens to be a federal
courthouse physically located in that county.
In our view, the plain language of the forum-selection clause compels the
conclusion urged by the plaintiffs. The clause states that the county where the facility is
located “shall be the sole and exclusive venue” for resolution of disputes between the
parties, which unambiguously requires the case to be resolved in Franklin County, North
Carolina. Because there is no federal courthouse in the designated county, removal of the
case to federal court would mean that the dispute would be resolved in a county other
9
than the one designated by the contract. To accept the defendants’ argument would
require us to re-write the clause to provide that “the sole and exclusive venue for any
dispute between the parties shall be the county in which the Facility is located, or the
county in which a federal courthouse is located that has jurisdiction over the county in
which the Facility is located.” This court, of course, may not re-write the contract; our
role is limited to enforcing the contract as written.
Although the defendants’ argument is supported by a few district court opinions,
every circuit court to have addressed this issue has agreed with the plaintiffs. For
example, in Yakin v. Tyler Hill Corp., 566 F.3d 72 (2d Cir. 2009), the forum-selection
clause provided that “the venue and place of trial of any dispute that may arise out of this
Agreement . . . shall be in Nassau County, New York.” Id. at 74. The defendant
removed the state-court action to federal court, even though there was no federal
courthouse in Nassau County. The Second Circuit affirmed the district court’s decision
to remand the case:
We perceive no ambiguity in the forum selection clause. A
reasonable person reviewing the statement “It is agreed that the venue and
place of trial of any dispute that may arise out of this Agreement . . . shall
be in Nassau County, New York,” would necessarily conclude that the
parties intended that litigation take place in an appropriate venue in Nassau
County and that this commitment was not conditioned on the existence of a
federal courthouse in that county.
....
Given that the forum selection clause contains only obligatory venue
language, we will effectuate the parties’ commitment to trial in Nassau
County. Had there been a federal court located in Nassau County at the
time of this litigation, remand would have been improper. But there was
none. In addition, contrary to Tyler Hill’s contention, no reasonable
10
reading of the clause permits the interpretation that the parties had agreed to
trial in Suffolk County or Brooklyn because those courthouses were within
the Eastern District of New York, which spans an area including Nassau
County. Had the parties intended to provide for that result, they could, of
course, have drafted a different forum selection clause that communicated
that intent. We are free only to interpret and enforce the clause as written.
Id. at 76-77 (emphasis added); accord Simonoff v. Expedia, Inc., 643 F.3d 1202, 1207
(9th Cir. 2011) (“[W]e hold that a forum selection clause that vests ‘exclusive jurisdiction
and venue’ in the courts ‘in’ a county provides venue in the state and federal courts
located in that county.” (emphasis added)); Alliance Health Grp., LLC v. Bridging Health
Options, LLC, 553 F.3d 397, 400 (5th Cir. 2008) (“[T]he clause at hand, providing for
venue in a specific county, permits venue in either federal or state court, because a
federal courthouse is located in that county.” (emphasis added)); Global Satellite
Commc’n Co. v. Starmill U.K., Ltd., 378 F.3d 1269, 1272 (11th Cir. 2004) (“The contract
provision, ‘Venue shall be in Broward County,’ . . . is most reasonably interpreted to
mandate venue in Broward County, and Broward County alone. The provision, however,
does not designate any particular forum, such that a suit either in the Seventeenth Judicial
District of Florida, or in the Fort Lauderdale Division of the Southern District of Florida,
both of which are located in Broward County, would satisfy the venue requirement.”
(emphasis added)). Although the language of the clause in this case does not precisely
mirror that in the cases cited above, we do not believe the difference in the contractual
language requires a different interpretation.
In support of their argument, the defendants rely on our decision in FindWhere. In
that case, the parties were subject to a contractual forum-selection clause that required
11
litigation to proceed “exclusively in . . . the courts of the State of Virginia.” FindWhere,
626 F.3d at 754. After removal, the district court remanded the case to state court,
agreeing with the plaintiffs that the forum-selection clause precluded removal. Affirming
the district court’s order, the FindWhere court explained the differences between forum-
selection clauses that impose a geographical venue limitation and those that impose a
sovereignty limitation:
[F]orum selection clauses that use the term “in a state” express the parties’
intent as a matter of geography, permitting jurisdiction in both the state and
federal courts of the named state, whereas forum selection clauses that use
the term “of a state” connote sovereignty, limiting jurisdiction over the
parties’ dispute to the state courts of the named state.
Id. at 755 (internal alterations omitted). Because the forum-selection clause at issue
required the litigation to proceed in the courts “of the State of Virginia,” we held that
removal was improper, as “federal courts are not courts ‘of’ the State of Virginia.” Id.The defendants seem to read FindWhere as holding that where a geographically
limited forum-selection clause is at issue, venue is always proper in either state or federal
court. See Brief of Appellants at 24-25. We disagree. The court in FindWhere did not
hold venue was proper in state or federal courts in all cases involving geographically
focused forum-selection clauses; the court held that where a forum-selection clause limits
litigation to courts in a state, then the case can proceed in any court located in that state.
See id. The holding in FindWhere is thus consistent with the holdings of the out-of-
circuit cases cited above -- forum-selection clauses using geographical limitations permit
the case to be filed with any court, whether state or federal, that is located within the
contractually described geographical boundary. In this case, the forum-selection clause
12
is one focused on geography, not sovereignty. Accordingly, under the rule set out in
FindWhere, this case is properly filed with and resolved by any court that is located in
Franklin County. Because there is no federal court in Franklin County, the plain
language of the forum-selection clause precludes removal.
The defendants, however, insist that this reading of the clause does not “square[]
with how North Carolina courts operate.” Brief of Appellants at 27. They note that the
state judicial district encompassing Franklin County includes other counties and that pre-
trial proceedings on a case filed in Franklin County might sometimes be conducted in one
of the other counties in the district. (Indeed, that happened in this case -- hearings on the
plaintiffs’ request for a preliminary injunction were conducted in two other counties.)
Thus, because there is no guarantee under North Carolina practice that all proceedings in
a case filed in Franklin County will actually occur in Franklin County, the defendants
contend that the clause cannot be understood as limiting venue to the courts of Franklin
County. We disagree.
The parties to the residency agreement must be presumed to have been familiar
with the operation of the state court system when they agreed to the forum-selection
clause. See, e.g., Fraternal Order of Police Lodge No. 89 v. Prince George’s Cty., 608
F.3d 183, 191 (4th Cir. 2010) (“[P]arties are presumed to contract against the backdrop of
relevant law. . . .”). Accordingly, the parties to the Franklin Manor contracts agreed that
disputes must be resolved in Franklin County, while at the same time recognizing that
pretrial proceedings might take place in another county. Under these circumstances, it is
clear that the purpose of the forum-selection clause was to dictate which county court
13
would have jurisdiction over the case as a whole, without regard to which county
courthouse might play host to a given hearing. That is, Franklin County may be the “sole
and exclusive venue” for resolution of the dispute as a whole, as required by the contract,
notwithstanding the fact that a few preliminary hearings might be held elsewhere.
Indeed, the record here shows just that – the case retained its Franklin County flavor even
when the hearing was held outside Franklin County. See J.A. 209 (“I’ve gotten
commissioned by the chief justice to hold this hearing in Wake County even though it’s a
Franklin County case.”). The operation of the North Carolina court system thus provides
no basis for ignoring the plain language of the forum selection clause.
B.
The defendants argue that even if the forum-selection clause is properly read as
requiring the litigation to proceed in state court, the plaintiffs are, for various reasons, not
entitled to enforce it.
(1)
The defendants first contend that the plaintiffs waived the forum-selection clause
by including claims against the Gabriel Manor and Crossings defendants, whose contracts
require residents to sue in the counties where those facilities are located. The defendants
contend that since the plaintiffs claim that all defendants must be bound by the Franklin
Manor contract, then all defendants and plaintiffs would also be bound by the Gabriel
Manor and Crossings contracts. The defendants therefore argue that the plaintiffs’
decision to proceed in Franklin County violates the conflicting forum-selection clauses of
the Gabriel Manor and Crossings contracts. In the defendants’ view, the plaintiffs have
14
not shown “why they should be entitled to insist upon enforcement of the Franklin Manor
clause in particular, in derogation of the other Defendant facilities’ clauses.” Brief of
Appellants at 36.
The plaintiffs are entitled to insist upon enforcement of the forum-selection clause
of the Franklin Manor contracts because those are the contracts signed by the plaintiffs.
The named plaintiffs do not sue the Gabriel Manor and Crossings defendants for
breaching contracts the plaintiffs did not execute; instead, the plaintiffs sue these
defendants as alter egos of the defendants who breached the contracts the plaintiffs did
execute -- the Franklin Manor contracts. At the time this action was filed, all of the
plaintiffs were residents of Franklin Manor and had signed contracts requiring litigation
to be pursued in Franklin County. Because none of the plaintiffs had an active contract
with Gabriel Manor or Crossings, they could not be bound by forum-selection clauses in
unexecuted form contracts. 4 The plaintiffs therefore did not breach an operative forum-
selection clause, and the defendants’ argument on this point fails.
(2)
4
Plaintiff Claire Murphy was party to a contract with Gabriel Manor during
her two-month stay there in early 2016. Although each facility requires each resident to
sign a contract, see J.A. 155, the record does not include the contract signed by Murphy
when she returned to Franklin Manor in April 2016. Nonetheless, the complaint alleges
that each plaintiff signed a Franklin Manor residency agreement, see J.A. 44, and we
must accept that allegation as true for purposes of this appeal. Since each agreement
terminates upon the execution of a new one, J.A. 159, we must assume that Murphy’s
contract with Gabriel Manor terminated upon her execution of the Franklin Manor
contract.
15
The defendants also contend that the plaintiffs waived the forum-selection clause
by including non-contract claims in their complaint. The plaintiffs asserted a claim for
injunctive relief based on violations of N.C. Gen. Stat. § 131D-21, which sets out a
declaration of rights for residents of “adult care homes.” The Saber defendants argue that
the statutory claim does not fall within the scope of the forum-selection clause and that
the plaintiffs therefore waived their rights under the forum-selection clause.
This argument is without merit. The Franklin Manor forum-selection clause
applies to claims that “arise out of or in connection with or by reason of this Agreement.”
J.A. 160 (emphasis added). The “in connection with” language broadens the scope of the
clause beyond pure contract claims and extends it to “every dispute between the parties
having a significant relationship to the contract regardless of the label attached to the
dispute.” J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A., 863 F.2d 315, 321 (4th
Cir. 1988) (emphasis added); see Long v. Silver, 248 F.3d 309, 316 (4th Cir. 2001)
(clause requiring arbitration of disputes “arising out of or in connection with” the contract
between the parties had broad scope). The statutory declaration of rights imposes
standards that an assisted-living facility must meet when providing services to its
residents, and it is the contract with the resident that obligates the facility to provide those
services in the first instance. The claims that the Saber defendants violated the statute
thus bear a significant relationship to the residency agreements and fall within the scope
of the forum-selection clause. See Long, 248 F.3d at 318 (concluding that breach of
fiduciary duty claim fell within scope of clause requiring arbitration of disputes
connected with 1972 Agreement because “Long’s breach of fiduciary duty claim arises
16
only by virtue of Long’s status as a shareholder, and the 1972 Agreement creates Long’s
status as a shareholder”).
(3)
Finally, the defendants argue that the plaintiffs waived their right to enforce the
forum-selection clause by requesting and attending hearings that were held outside
Franklin County. Again, we disagree.
A party may expressly waive a contractual right, or it may waive the right
impliedly, through “acts or conduct that naturally lead the other party to believe that the
right has been intentionally given up.” Patterson v. Patterson, 529 S.E.2d 484, 492 (N.C.
Ct. App. 2000) (internal quotation marks omitted). The intent to waive must be clear, as
conduct with ambiguous meaning will not support a waiver defense. See Hassett v. Dixie
Furn. Co., 425 S.E.2d 683, 687 (N.C. 1993). 5 In this case, the plaintiffs requested that
the first preliminary-injunction hearing be held outside Franklin County (but within the
same judicial district), and they consented to the hearing continuing in another county
outside the district. In the view of the defendants, that conduct amounts to a waiver of
the Franklin Manor forum-selection clause. As discussed above, however, the parties
agreed to the forum-selection clause with the knowledge that, under North Carolina
practice, preliminary hearings might be held outside Franklin County. Because the
5
Because the parties do not contend that there is any meaningful difference
between state and federal law on the kind of conduct necessary to establish a waiver of a
contractual right, we do not decide whether a claim of waiver of a forum-selection clause
is governed by state or federal law.
17
plaintiffs’ request for and consent to two out-of-county hearings in order to expedite their
request for a preliminary injunction is in no way inconsistent with the forum-selection
clause, the plaintiffs did not waive their right to enforce the clause.
IV.
Having concluded that the operative forum-selection clause precludes removal to
federal court and that the plaintiffs did not waive their right to enforce the clause, we turn
now to the question of which defendants are bound by the clause. As previously noted,
unanimity is not required for removal under CAFA; a single defendant may remove a
case. Accordingly, unless all of the Saber defendants are bound by the forum-selection
clause contained in the Franklin Manor residency agreements, removal was proper.
The plaintiffs alleged in their amended complaint that all defendants are liable
because each individual defendant is an alter ego of the other, and the complaint includes
a list of factors relevant to the alter-ego analysis. See Glenn v. Wagner, 329 S.E.2d 326,
330-31 (N.C. 1985) (listing factors relevant to alter-ego question). In granting the motion
to remand, the district court did not address the unilateral-removal issue, nor did it
explicitly conclude, as a factual matter, that the various entities were alter egos of each
other. Nonetheless, the court did find the plaintiffs’ alter-ego allegations sufficient to
reject the defendants’ argument that the plaintiffs made the case removable by suing
Saber entities who were not signatories to the residency agreements.
On appeal, the defendants contend that the district court erred in its approach to
the issue. Relying primarily on Hugel v. Corporation of Lloyd’s, 999 F.2d 206 (7th Cir.
1993), the defendants contend that the non-signatory defendants can be bound by the
18
Franklin Manor clause only if their “conduct is sufficiently related to the contract dispute
that the [non-signatory] third party could foresee that it would be bound by the contract.”
Brief of Appellants at 19; see Hugel, 999 F.2d at 209 (“In order to bind a non-party to a
forum selection clause, the party must be closely related to the dispute such that it
becomes foreseeable that it will be bound.” (internal quotation marks omitted)).
According to the defendants, the conduct of the Gabriel Manor and Crossings entities is
entirely unrelated to any dispute about the provision of services under the Franklin Manor
residency agreements, thus making it unforeseeable that the Gabriel Manor and Crossings
entities would be bound by the Franklin Manor contracts.
As a preliminary matter, we believe the defendants take too narrow a view of the
circumstances under which a non-signatory may be bound by the terms of contract
executed by a third party. As we have explained in the arbitration context, 6 if “the
charges against a parent company and its subsidiary are based on the same facts and are
inherently inseparable, a court may refer claims against the parent to arbitration even
though the parent is not formally a party to the arbitration agreement.” J.J. Ryan, 863
F.2d at 320–21. We have likewise explained that “[w]ell-established common law
principles,” including estoppel and alter-ego theories, may bind a non-signatory to a
contractual clause executed by a third party. Int’l Paper Co. v. Schwabedissen
Maschinen & Anlagen GMBH, 206 F.3d 411, 416-17 (4th Cir. 2000); see Arthur
6
Since arbitration is, “in effect, a specialized kind of forum-selection
clause,” Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974), these principles are
equally applicable to this case.
19
Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009) (“[T]raditional principles of state
law allow a contract to be enforced by or against nonparties to the contract through
assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party
beneficiary theories, waiver and estoppel.” (internal quotation marks omitted)); Adams v.
Raintree Vacation Exch., LLC, 702 F.3d 436, 441 (7th Cir. 2012) (“Piercing the veil
remains a possible ground for enforcing a forum selection clause against a party’s
affiliate, if for example the corporation that signed the contract containing the clause was
a mere shell . . . .” (citation omitted)). Accordingly, there are several paths through
which all defendants could be bound by the forum-selection clause included in the
Franklin Manor residency agreements.
The defendants contend that the plaintiffs bear the burden of proving that all
defendants were bound by the Franklin Manor forum-selection clause and that the
contract therefore precluded removal. Because the plaintiffs presented no evidence
supporting their alter-ego claim, the defendants argue that the plaintiffs failed to carry
their burden and that the district court therefore erred by granting the motion for remand.
It is well established that the party removing a case to federal court bears the
burden of establishing the court’s subject-matter jurisdiction over the case:
[F]ederal courts, unlike most state courts, are courts of limited jurisdiction,
created by Congress with specified jurisdictional requirements and
limitations. Accordingly, a party seeking to adjudicate a matter in federal
court must allege and, when challenged, must demonstrate the federal
court’s jurisdiction over the matter. If a plaintiff files suit in state court and
the defendant seeks to adjudicate the matter in federal court through
removal, it is the defendant who carries the burden of alleging in his notice
of removal and, if challenged, demonstrating the court’s jurisdiction over
the matter. While a defendant filing a notice of removal under 28 U.S.C. §
201446(a) need only allege federal jurisdiction with a short plain statement—
just as federal jurisdiction is pleaded in a complaint—when removal is
challenged, the removing party bears the burden of demonstrating that
removal jurisdiction is proper.
Strawn v. AT&T Mobility LLC, 530 F.3d 293, 296-97 (4th Cir. 2008) (citations omitted).
Accordingly, the defendants, as the parties invoking the jurisdiction of the federal courts,
were obligated to demonstrate the existence of subject-matter jurisdiction.
As previously noted, supra note 2, the defendants sufficiently established the
existence of subject-matter jurisdiction under CAFA. By relying on the plaintiffs’ alter-
ego allegations, the district court implicitly concluded that the defendants’ obligation to
establish the propriety of removal also required them to show that they were not alter
egos bound by the Franklin Manor residency agreements. We agree with the defendants
that the district court erred by placing that burden on them.
While the removing party must demonstrate that jurisdiction exists, a forum-
selection clause has nothing to do with subject-matter jurisdiction. An enforceable clause
prevents a court from exercising jurisdiction over a case that it would otherwise be
authorized to hear, but the existence of the clause does not somehow negate the factual
and legal bases establishing the court’s jurisdiction. See Lipcon v. Underwriters at
Lloyd’s, London, 148 F.3d 1285, 1289 (11th Cir. 1998) (“[T]he basis upon which the
defendants seek dismissal -- namely, that the agreement of the parties prohibits the
plaintiff from bringing suit in the particular forum -- is unrelated to the actual basis of
federal subject matter jurisdiction -- namely, federal question jurisdiction or diversity of
citizenship.”). Thus, in the removal context, an enforceable forum-selection clause
21
essentially operates as an affirmative defense to removal -- subject-matter jurisdiction
exists, but the forum-selection clause effects a waiver of the defendant’s right to ask the
court to exercise that jurisdiction. The party asserting an affirmative defense bears the
burden of proving it, see, e.g., Stonehenge Eng’g Corp. v. Emp’rs Ins. of Wausau, 201
F.3d 296, 302 (4th Cir. 2000), and we see little justification for a different procedure
here.
In analogous situations, courts have concluded that where jurisdiction has been
shown to exist, the burden rests on the plaintiff to provide a reason for a court to decline
to exercise that jurisdiction. For example, in Breuer v. Jim’s Concrete of Brevard, Inc.,
538 U.S. 691 (2003), the Supreme Court considered 28 U.S.C. § 1441(a), the general
removal statute, which authorizes removal of cases within the original jurisdiction of the
district courts unless another statute expressly prohibits removal. The Court held that if
“the subject matter of an action qualifies it for removal, the burden is on a plaintiff to find
an express exception.” 538 U.S. at 698.
Similarly, CAFA itself establishes certain exceptions to the exercise of jurisdiction
under the statute, spelling out the circumstances under which the district court may or
must decline to exercise jurisdiction. See 28 U.S.C. § 1332(d)(3)-(5). Every circuit that
has considered the issue has concluded that while the removing defendant bears the
burden of showing that CAFA’s general jurisdictional requirements are satisfied, the
plaintiff has the burden of showing the applicability of one of the exceptions. See Evans
v. Walter Indus., Inc., 449 F.3d 1159, 1164 (11th Cir. 2006) (“CAFA does not change the
traditional rule that the party seeking to remove the case to federal court bears the burden
22
of establishing federal jurisdiction. . . . However, when a party seeks to avail itself of an
express statutory exception to federal jurisdiction granted under CAFA, . . . the party
seeking remand bears the burden of proof with regard to that exception.”); accord
Brinkley v. Monterey Fin. Servs., Inc., 873 F.3d 1118, 1121 (9th Cir. 2017); Mason v.
Lockwood, Andrews & Newnam, P.C., 842 F.3d 383, 389 (6th Cir. 2016); Woods v.
Standard Ins. Co., 771 F.3d 1257, 1262 (10th Cir. 2014); Westerfeld v. Indep.
Processing, LLC, 621 F.3d 819, 822 (8th Cir. 2010); In re Hannaford Bros. Co.
Customer Data Sec. Breach Litig., 564 F.3d 75, 78 (1st Cir. 2009); Kaufman v. Allstate
N.J. Ins. Co., 561 F.3d 144, 153 (3d Cir. 2009); Hart v. FedEx Ground Package Sys.,
Inc., 457 F.3d 675, 676 (7th Cir. 2006); Frazier v. Pioneer Americas LLC, 455 F.3d 542,
546 (5th Cir. 2006).
Accordingly, given the manner in which a forum-selection clause operates in the
removal context, we believe that the plaintiff must bear the burden of demonstrating that
the defendant waived its right to remove an otherwise removable case by agreeing to a
forum-selection clause. In this case, although the plain language of the Franklin Manor
forum-selection clause precludes removal, the question remains whether all of the Saber
defendants are alter egos or otherwise bound by the clause. These questions are
inherently factual, see DeWitt Truck Brokers, Inc. v. W. Ray Fleming Fruit Co., 540 F.2d
681, 684 (4th Cir. 1976), but the district court made no findings of fact and instead
simply accepted the plaintiffs’ allegations as true, implicitly placing the burden on the
defendants to rebut the allegations. Because the district court placed the burden on the
defendants rather than the plaintiffs, the proper course is to vacate the court’s order and
23
remand to allow the district court to reconsider the issue under the correct standard.
Scott v. Cricket Commc’ns, LLC, 865 F.3d 189, 194 (4th Cir. 2017) (“When a district
court fails to make findings of fact because of an erroneous view of the law, the usual
rule is that there should be a remand for further proceedings to permit the trial court to
make the missing findings” (internal quotation marks omitted)). Given the nature of the
alter-ego question, some amount of discovery will likely be required to permit the
plaintiffs to gather the evidence necessary to support their claim. 7
V.
For the foregoing reasons, we hereby vacate the district court’s order and remand
for reconsideration of the question of whether all of the Saber defendants are bound by
the Franklin Manor forum-selection clause.
VACATED AND REMANDED
7
The plaintiffs contend that the state court during the preliminary injunction
proceedings found that the defendants were alter egos and that these findings of fact
should be given binding effect by this court. We disagree. Although the state court’s
preliminary injunction order seems to treat the defendants as alter egos, see J.A. 224-25,
231, we note that findings of fact made when granting a preliminary injunction are not
binding at trial, see University of Texas v. Camenish, 451 U.S. 390, 395 (1981). In any
event, the order was issued after the case was removed, which means that the order is
void for our purposes. See Ackerman v. ExxonMobil Corp., 734 F.3d 237, 249 (4th Cir.
2013) (“[T]he [removal] statute deprives the state court of further jurisdiction over the
removed case and . . . any post-removal actions taken by the state court in the removed
case action are void ab initio.”).
24
FLOYD, Circuit Judge, concurring in part and concurring in the judgment:
I fully join all except Part III.A of Judge Traxler’s well-reasoned opinion.
Although I agree with my colleagues’ conclusion that the forum-selection clause at issue
forecloses removal to federal court in this case, I do not agree that removal would have
been proper if a federal court had been physically located in the county, and I would not
have reached that question in this case. Therefore, I concur in part and concur in the
judgment, but respectfully write separately as to Part III.A.
I.
Saber Healthcare Holdings, LLC, and its subsidiaries own and operate dozens of
assisted living facilities and nursing homes. Three current and former residents of the
Franklin Manor Assisted Living Center (“Franklin Manor”) filed this putative class
action, alleging breach of contract and unfair trade practices arising from defendants’
alleged failure to comply with their contractual and statutory obligations to provide
services meeting the needs of the residents at Franklin Manor and two other facilities.
Each facility enters into a residency agreement with their respective residents,
including the named plaintiffs in this case. Each agreement contains the same language.
The forum-selection clause, in pertinent part, reads as follows:
This Agreement shall be construed in accordance with the laws of the State
of North Carolina, and the county in which the Facility is located shall be
the sole and exclusive venue for any dispute between the parties, including,
but not limited to, litigation, special proceeding, or other proceeding
between the parties that may be brought, arise out of or in connection with
or by reason of this Agreement.
25
J.A. 160. The plaintiffs filed this action in Franklin County Superior Court pursuant to
the Franklin Manor agreement―Franklin Manor is located in Franklin County, North
Carolina. The defendants then filed a notice of removal with the Eastern District of
North Carolina. Plaintiffs then filed a motion to remand the case to Franklin County
Superior Court, contending that the forum-selection clause in Franklin Manor’s residency
agreement barred removal. The district court granted the motion to remand, holding, as
relevant here, that defendants waived their right to removal because the forum-selection
clause “limits jurisdiction to the state courts in Franklin County, North Carolina.” J.A.
278. Defendants now appeal that determination.
II.
The venue selection clause at issue in this case states that “the county in which the
Facility is located shall be the sole and exclusive venue for any dispute between the
parties . . . .” J.A. 160. The majority opinion holds that this language creates a
geographic limitation such that removal to federal court would be permissible if a federal
courthouse were physically located within the county. I respectfully disagree.
I first note that it was unnecessary for my colleagues to reach this question, and I
would not have done so. As the majority notes, there is no federal courthouse physically
located in Franklin County. It is sufficient under these facts to narrowly hold that the
plain language of the forum-selection clause at issue clearly limits venue to the county
and not to courts that have jurisdiction over the county, as Saber requests. It is
unnecessary to define whether this limitation to “county” is one of geography or
26
sovereignty because either way, removal is precluded here, resolving the issue squarely
before the court.
Having reached the question, however, I respectfully disagree with the majority’s
conclusion that removal would be permitted if a federal court were physically located in
Franklin County. In my view, the majority opinion fails to consider the nuanced
differences between this contract’s language and that of those to which it analogizes.
As the majority opinion explains, this Court’s decision in FindWhere describes
how different clauses discussing venue in terms of a state are commonly interpreted as
creating either a geographic or sovereignty limitation on venue.
[F]orum selection clauses that use the term ‘in [a state]’ express the parties’
intent as a matter of geography, permitting jurisdiction in both the state and
federal courts of the named state, whereas forum selection clauses that use
the term ‘of [a state]’ connote sovereignty, limiting jurisdiction over the
parties’ dispute to the state courts of the named state.
FindWhere Holdings, Inc. v. Sys. Env’t Optimization, LLC, 626 F.3d 752, 755 (4th Cir.
2010) (second and third alteration in original) (quoting Doe 1 v. AOL, LLC, 552 F.3d
1077, 1082 (9th Cir. 2009)); see also Dixon v. TSE Int’l Inc., 330 F.3d 396, 398 (5th Cir.
2003) (per curiam) (holding that the contract language “[t]he Courts of Texas, U.S.A.,
shall have jurisdiction” precluded federal jurisdiction by explaining that “[f]ederal district
courts may be in Texas, but they are not of Texas” (emphasis in original)).
Several of our sister circuits have applied the same reasoning to conclude that a
forum-selection clause that sets venue “in” a county creates a geographic limitation such
that venue is permitted in any state or federal court located within that county. See, e.g.,
Simonoff v. Expedia, Inc., 643 F.3d 1202, 1207 (9th Cir. 2011) (“[W]e hold that a forum
27
selection clause that vests ‘exclusive jurisdiction and venue’ in the courts ‘in’ a county
provides venue in the state and federal courts located in that county.” (emphasis added));
Yakin v. Tyler Hill Corp., 566 F.3d 72, 76 (2d Cir. 2009) (interpreting the clause
“venue . . . shall be in Nassau County, New York,” as permitting venue in state or federal
court within the county (emphasis added)); All. Health Grp., LLC v. Bridging Health
Options, LLC, 553 F.3d 397, 398, 400 (5th Cir. 2008) (interpreting “venue . . . shall occur
in Harrison County, Mississippi,” and stating that “the clause at hand, providing for
venue in a specific county, permits venue in either federal or state court, because a
federal courthouse is located in that county” (emphasis in original omitted) (emphasis
added)); Glob. Satellite Commc’n Co. v. Starmill U.K., Ltd., 378 F.3d 1269, 1272, 1274
(11th Cir. 2004) (construing the contract provision “Venue shall be in Broward County”
as permitting venue in the state or federal court within the county because the provision
“does not designate any particular forum” (emphasis added)). But see Excell, Inc. v.
Sterling Boiler & Mech., Inc., 106 F.3d 318, 321 (10th Cir. 1997) (interpreting the clause
“venue shall lie in the County of El Paso, Colorado,” as creating a sovereignty limitation
on venue to state courts (emphasis added)).
The majority’s opinion relies on these interpretations of forum-selection clauses
that set venue “in” a county to conclude that this clause creates a geographic limitation
that would permit venue in a federal court within the county, if such court existed.
However, the forum-selection clause at issue here―stating that “the county . . . shall be
the sole and exclusive venue”―is missing the operative word “in” that triggers a
geographic limitation. J.A. 160. Thus, the majority opinion implicitly concludes that the
28
phrase “venue shall be in the county” is materially the same as the phrase “the county
shall be the venue.”
I hesitate to disregard the omission of this operative word. See Maersk Line, Ltd.
v. United States, 513 F.3d 418, 423 (4th Cir. 2008) (citations omitted) (“[I]n contractual
disputes, every word is important.”). The Fifth Circuit seems to share this hesitation. In
Alliance Health Group, the Fifth Circuit held that the clause “venue . . . shall occur in
Harrison County, Mississippi,” created a geographic limitation such that the clause
permitted venue in any federal or state court located within that county. All. Health Grp.,
553 F.3d at 401 (emphasis in original). In doing so, however, the court expressly
acknowledged that a clause’s inclusion of the phrase “shall be” and omission of the
operative “in” may create a sovereignty limitation rather than merely a geographic one.
Id. The court stated that “[t]he clause at issue does not state that venue shall be some
county, which might have suggested an intent to limit venue to a single tribunal. On the
contrary it merely says that venue shall exclusively occur in Harrison County, a markedly
less specific construction.” Id. (emphasis in original). Consequently, I disagree with the
majority’s presumption that the clause at issue here is materially the same as those that
set venue “in” a particular county.
In my view, the better approach is to look at the plain meaning of the language in
this clause, and interpret the parties’ intentions in stating that the county shall be the sole
and exclusive venue for litigating disputes. In doing so, I am persuaded that this clause
limits venue to state courts located in Franklin County. First, I believe using “county” to
describe the venue more likely indicates an intent for the parties to litigate in state courts.
29
In Excell, the Tenth Circuit reasoned that the plain meaning of stating venue in terms of a
county implied the exclusive use of county courts, i.e., state courts, and thus created a
sovereignty limitation because “[f]or federal court purposes, venue is not stated in terms
of ‘counties.’  Rather, it is stated in terms of ‘judicial districts.’ ” Excell, 106 F.3d at 321
(citing 28 U.S.C. § 1391). The North Carolina state court system—unlike the federal
court system—is discussed in terms of counties, lending further support to the position
that the use of “county” implies venue in the state’s county courts alone. See, e.g., N.C.
Gen. Stat. § 1-82 (setting venue “[i]n all other cases . . . in the county in which the
plaintiffs or the defendants, or any of them, reside at its commencement”); J.A. 209 (state
court judge explaining that he had “gotten commissioned by the chief justice to hold this
hearing in Wake County even though it’s a Franklin County case”). Although the
majority concludes that “[t]he operation of the North Carolina court system thus provides
no basis for ignoring the plain language of the forum selection clause,” I submit that it
informs our interpretation of the plain language of this clause as limiting venue to state
courts.
Additionally, we construe ambiguous provisions in contracts against the drafters.
See Maersk Line, 513 F.3d at 423 (“The basic contract law principle contra proferentem
counsels that we construe any ambiguities in the contract against its draftsman.” (citation
omitted)); Glob. Satellite Commc’n Co. v. Starmill U.K., Ltd., 378 F.3d 1269, 1271–72,
1274 (11th Cir. 2004) (“[W]hen ordinary contract principles fail to elucidate a single
reasonable interpretation for an ambiguous provision, and instead the provision is subject
to opposing, yet reasonable interpretation,” “rather than strain to find that one should
30
prevail over another, we must simply construe it against . . . the drafter.”) (internal
quotation marks & citations omitted). Here, Saber drafted the contract, and the plaintiffs
assert that removal is improper because venue in federal court was waived under the
forum-selection clause. To the extent that this clause is ambiguous as to whether it
creates a geographic or sovereignty limitation on venue, we are compelled to construe the
words against Saber and hold that the clause precludes removal. See id.With these considerations in mind, I believe this forum-selection clause should be
interpreted to set venue in the state court system, and would hold as much.
III.
For the reasons discussed above, therefore, I would hold that this clause precludes
removal in this case based on the use of the phrase “the county.” If I reached the broader
question of whether this clause permits removal when a federal courthouse is physically
located in the county―which I believe can be avoided under the facts of this case―I
would hold that the clause limits venue to state courts.
31