(PS) Wescott v. Yee ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 CARL A. WESCOTT, No. 2:22–cv–00179–JAM–KJN PS 12 Plaintiff, 13 v. ORDER TO SHOW CAUSE 14 SUSIE YEE, 15 Defendant. 16 17 This case comes before the court on plaintiff’s motion to proceed in forma pauperis 18 (“IFP”) with a complaint filed January 27, 2022.1 (ECF Nos. 1-2.) See 28 U.S.C. § 1915 19 (authorizing the commencement of an action “without prepayment of fees or security” by a 20 person that is unable to pay such fees). The undersigned declines to rule at this time on the IFP 21 motion, however, because an initial review of this action indicates that this case would more 22 efficiently be adjudicated in another district where related litigation is ongoing. Therefore, the 23 court orders plaintiff to show cause why this action should not be transferred to the U.S. District 24 Court for the Northern District of California, under 28 U.S.C. § 1404(a). 25 Plaintiff brings this 10-count complaint for breach of contract against a single defendant, 26 Susie Yee, who he alleges was part of a group of 22 individual investors who entered a 27 1 Because plaintiff is self-represented, this action proceeds before the undersigned magistrate 28 judge pursuant to Local Rule 302(c)(21) and 28 U.S.C. § 636(b)(1). 1 Nicaraguan real estate purchase “Funding Contract” with him in August 2018. (ECF No. 1 ¶¶ 11, 2 20-24; id. at 46-51 (Ex. D).) Plaintiff’s complaint references his original suit filed against all 22 3 investors in Arizona state court in May 2020 based on this Funding Contract. (Id. ¶ 24.) See 4 Wescott v. Crowe, et al., No. CV2020-006232 (Az. Super. Ct., Maricopa Cty., complaint filed 5 May 27, 2020). Both the original complaint and the “Corrected” Complaint filed in the state 6 court on June 12, 2020, named Ms. Yee as one of the defendants. On July 13, 2020, a subset of 7 the investor defendants—not including Ms. Yee—removed the case to the federal district court 8 for the District of Arizona (based on diversity jurisdiction).2 Wescott v. Crowe, No. CV-20- 9 01383-PHX-SPL, 2020 WL 5535760, at *1 (D. Ariz. Sept. 15, 2020). The removing defendants 10 then moved to dismiss the action because the Funding Contract contains a forum selection clause 11 naming San Francisco, California as the proper venue for any suits arising from it. Id. at *2. 12 Rather than dismiss the action, the district court for the District of Arizona opted to 13 enforce the forum selection clause by transferring the action to the Northern District of California. 14 Id. (“In the interest of justice and upholding the agreed-upon forum selection clause, the Court 15 finds the Northern District of California is the proper venue.”). That litigation is currently 16 ongoing in the Northern District of California, under its new case number, Wescott v. Crowe, et 17 al., No. 3:20-cv-06456-JD (N.D. Cal.). The day before plaintiff filed the present action against 18 Ms. Yee in this court, the Northern District dismissed many claims from plaintiff’s Second 19 Amended Complaint, with leave to further amend—largely on the grounds that only two of the 20 defendants were named parties to the Funding Contract. (N.D. Cal. No. 3:20-cv-06456-JD, ECF 21 No. 104.) On March 18, 2022, plaintiff filed a Third Amended Complaint, alleging that the other 22 defendants were party to the Funding Contract under agency principles. (Id., ECF No. 106.) 23 Defendants again moved to dismiss, and a hearing on the motion is coming up on April 28, 2022. 24 (Id., ECF No. 109.) 25 2 It is unclear why the case was removed by only a subset of the state court defendants. The 26 removal statute requires that “all defendants who have been properly joined and served must join 27 in or consent to the removal of the action.” 28 U.S.C. § 1446(b)(2)(A). Only ten of the state court defendants joined or consented to removal, without indicating the status of the others. 28 Nevertheless, plaintiff did not move to remand, and the case went forward in the district court. 1 Although no motion to dismiss or transfer is before the undersigned in this case (given 2 that defendant Yee is not yet a party to the instant action), the same venue concern observed by 3 the District of Arizona in the original suit also exists in this case. Plaintiff’s complaint is 4 factually identical to the Corrected Complaint that was removed to the District of Arizona, except 5 that it names only Ms. Yee instead of all the investors. Plaintiff attaches and asserts the identical 6 August 11, 2018 Funding Contract as the basis of his claims. (Compare ECF No. 1 at 46-51 with 7 N.D. Cal. No. 3:20-cv-06456-JD, ECF No. 1.4 at 16-21.) As noted by the district court for the 8 District of Arizona, the Funding Contract contains the following clause: 9 3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of San Francisco, California 10 in the United States of America, and thus that shall be the jurisdiction and venue for this contract. 11 12 (ECF No. 1 at 49.) 13 Plaintiff asserts the Funding Contract as the basis for his various claims, all of which 14 relate to Ms. Yee’s alleged breach of contract. Plaintiff’s attempt to enforce the contract indicates 15 that he does not challenge the validity of its provisions. Plaintiff does not mention the forum 16 selection clause in his complaint, which simply asserts that venue is proper in this district because 17 defendant Yee is a resident of Vallejo, California, which lies in the Eastern District of California. 18 (Id. ¶ 2.) Assuming defendant Yee is “domiciled” in Vallejo, this district is indeed a proper 19 venue. See 28 U.S.C. § 1391(b)(1), (c)(1). 20 However, even assuming venue is proper in this district, the court may, on its own motion, 21 “transfer this case to another district under 28 U.S.C. § 1404(a), so long as the parties are first 22 given the opportunity to present their views on the issue.” Singh v. Cissna, No. 1:18-cv-0782- 23 SKO, 2018 WL 4182602 (E.D. Cal. Aug. 30, 2018); see Costlow v. Weeks, 790 F.2d 1486, 1488 24 (9th Cir. 1986) (describing “long-approved practice of permitting a court to transfer a case sua 25 sponte under the doctrine of forum non conveniens, as codified at 28 U.S.C. § 1404(a), so long as 26 the parties are first given the opportunity to present their views on the issue”). 27 A forum selection clause is properly enforced through Section 1404(a), which codifies the 28 doctrine of forum non conveniens for cases in which the transferee forum is a federal court (as 1 opposed to a state court or foreign tribunal).3 Atl. Marine Constr. Co. v. U.S. Dist. Ct. for W. 2 Dist. of Tex., 571 U.S. 49, 60 (2013); see 28 U.S.C. § 1404(a). Typically, a forum selection 3 clause is enforced through a motion to transfer. “However, a court may, under Section 1404(a), 4 sua sponte transfer a case to a contractually chosen federal forum.” Powell v. United Rentals (N. 5 Am.), Inc., No. C17-1573JLR, 2019 WL 1489149, at *6 (W.D. Wash. Apr. 3, 2019) (citing 6 Lexington Ins. Co. v. Centex Homes, 795 F. Supp. 2d 1084, 1090 (D. Haw. 2011)); U.S. ex rel. 7 QSR Steel Corp., LLC v. Safeco Ins. Co. of Am., No. 3:14-cv-1017 (VAB), 2015 WL 4393576, 8 at *5 (D. Conn. July 16, 2015) (“While forum selection clauses are typically enforced upon a 9 party’s motion, the Court may sua sponte transfer cases to enforce forum selection clauses under 10 section 1404(a).”). 11 Section 1404(a) provides that “[f]or the convenience of parties and witnesses, in the 12 interest of justice, a district court may transfer any civil action . . . to any district or division to 13 which all parties have consented.” Under this provision, the district court “[o]rdinarily . . . would 14 weigh the relevant [forum non conveniens] factors and decide whether, on balance, a transfer 15 would serve ‘the convenience of parties and witnesses’ and otherwise promote ‘the interest of 16 justice.’” Atl. Marine, 571 U.S. at 62-63 (quoting § 1404(a)). When parties have agreed to a valid 17 forum selection clause, however, “the calculus changes” because the clause “represents the 18 parties’ agreement as to the most proper forum.” Id. at 63. “For that reason, and because the 19 overarching consideration under § 1404(a) is whether a transfer would promote ‘the interest of 20 justice,’ ‘a valid forum-selection clause should be given controlling weight in all but the most 21 exceptional cases.’” Id. (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988)). 22 The undersigned agrees with the Arizona district court’s view that the above-quoted 23 clause of the Funding Contract functions as a forum selection clause—and a mandatory forum 24 selection clause, at that. The provision states that San Francisco, California “shall be the 25 3 “The principle of forum non conveniens is simply that a court may resist imposition upon its 26 jurisdiction even when jurisdiction is authorized by the letter of a general venue statute.” Carijano 27 v. Occidental Petroleum Corp., 643 F.3d 1216, 1224 (9th Cir. 2011) (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507 (1947)). 28 1 jurisdiction and venue for this contract” (ECF No. 1 at 49), making the Northern District of 2 California—which encompasses San Francisco—the exclusive forum contemplated by the parties 3 to the contract. See Tech. Credit Corp. v. N.J. Christian Acad., 307 F. Supp. 3d 993, 1007 (N.D. 4 Cal. 2018) (a mandatory forum selection clause “clearly requires exclusive jurisdiction” (cleaned 5 up)). 6 When a forum selection clause exists, “[t]he plaintiff’s subsequent choice of forum merits 7 no weight.” Yei A. Sun v. Advanced China Healthcare, Inc., 901 F.3d 1081, 1087 (9th Cir. 2018) 8 (citing Atl. Marine, 571 U.S. at 63-64). All factors relating to the private interests of the parties 9 must be deemed “as weighing ‘entirely in favor of the preselected forum,’” in this case the 10 Northern District of California. Id. at 1087-88 (quoting Atl. Marine, 571 U.S. at 64). Although 11 factors relating to the public interest (such as administrative difficulties from court congestion, 12 judicial efficiency, and any local interest in having localized controversies decided at home) may 13 be considered, those factors will “rarely” outweigh the interest in transfer. Id. at 1088. This is 14 because “[i]n all but the most unusual cases, . . . the interest of justice is served by holding parties 15 to their bargain.” Atl. Marine, 571 U.S. at 66. “[T]he practical result is that forum-selection 16 clauses should control except in unusual cases.” Id. at 64. 17 The enforceability of forum selection clauses is governed by federal law. Petersen v. 18 Boeing Co., 715 F.3d 276, 280 (9th Cir. 2013). Under governing federal law, a forum selection 19 clause is controlling unless the plaintiff makes a “strong showing that: (1) the clause is invalid 20 due to ‘fraud or overreaching,’ (2) ‘enforcement would contravene a strong public policy of the 21 forum in which suit is brought, . . .’ or (3) ‘trial in the contractual forum will be so gravely 22 difficult and inconvenient that the litigant will for all practical purposes be deprived of his day in 23 court.’” Yei A. Sun, 901 F.3d at 1088 (quoting M/S Bremen v. Zapata Off-Shore Co., 407 24 U.S. 1, 15, 18 (1972)); see Doe 1 v. AOL LLC, 552 F.3d 1077, 1083 (9th Cir. 2009) (“A forum 25 selection clause is presumptively valid; the party seeking to avoid a forum selection clause bears a 26 ‘heavy burden’ to establish a ground upon which we will conclude the clause is unenforceable.” 27 (quoting M/S Bremen, 407 U.S. at 17)). 28 /// 1 Plaintiff is invited to address these three exceptions in response to this order to show 2 cause, if he wishes to avoid transfer. The court currently sees no indication of fraud in the 3 inducement of the Funding Contract. As to the second exception, the court sees no local interest 4 in the Eastern District of California retaining jurisdiction over this contract which involves the 5 funding of a contract to purchase land in Nicaragua. Finally, the third exception appears difficult 6 to satisfy given that plaintiff is currently actively litigating the same claims against several 7 similarly situated investor defendants in the Northern District of California.4 8 The court notes that defendant Yee, like all but two of the other investors, is not a named 9 party to the Funding Contract. The contract, by its terms, is between plaintiff and one David 10 Crowe and Mike Lyonette (both of whom are among the defendants in the Northern District 11 litigation). (ECF No. 1 at 46-51.) Still, plaintiff alleges—and the contract could conceivably 12 support the theory—that Crowe entered the contract on behalf of all 22 investors, including 13 Ms. Yee. (Id. ¶¶ 28-31.) This allegation is sufficient for purposes of enforcing the forum 14 selection clause that defendant Yee is alleged to have agreed to through Mr. Crowe. However, 15 even if defendant Yee is not a party to the Funding Contract, herself, the Ninth Circuit holds that 16 “a range of transaction participants, parties and non-parties, should benefit from and be subject to 17 forum selection clauses.” Manetti–Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 514 n.5 (9th 18 Cir. 1988) (emphasis added). A court may enforce a forum selection clause against someone who 19 was not a party to the contract where “the alleged conduct of the non-parties is . . . closely related 20 to the contractual relationship.” Id.; Meras Eng’g, Inc. v. CH2O, Inc., No. C-11-0389 EMC, 2013 21 WL 146341, at *10 (N.D. Cal. Jan. 14, 2013) (enforcing forum selection clause against non-party 22 to contract). All of plaintiff’s claims against defendant Yee depend upon her being bound by the 23 Funding Contract. This makes it proper to enforce the forum selection clause whether or not 24 defendant Yee is a party to the contract. 25 4 The court acknowledges that defendant Yee has not yet appeared in this action. However, the 26 court cannot see how the transfer of this action to the San Francisco division of the Northern 27 District of California would inconvenience Ms. Yee, who lives in Vallejo. Although Vallejo lies within the Eastern District of California, it is geographically closer to San Francisco than to 28 Sacramento. ] In addition, although the complaint contains tort claims alongside the breach of contract 2 || claims, transfer appears warranted for all claims because each cause of action has some logical or 3 || causal connection to plaintiff's alleged Funding Contract with defendant Yee. See Yei, 901 F.3d 4 | at 1086 (“[FJorum-selection clauses covering disputes ‘relating to’ a particular agreement apply 5 || to any disputes that reference the agreement or have some ‘logical or causal connection’ to the 6 || agreement.” (citation omitted)); Petersen, 715 F.3d at 283 n.7 (when resolution of non-contract 7 || claims relates to interpretation of the contract, a contractual forum selection clause may also 8 | apply to related non-contract claims). 9 Finally, the court notes that one of the forum non conveniens public interest factors weighs 10 || particularly heavily in favor of transfer to the Northern District of California: the consideration of 11 | judicial efficiency. It would require unnecessary duplication of judicial effort to maintain this 12 | parallel action against one defendant who, as far as the court can tell, is identically situated to the 13 || other non-signatory defendants in the current litigation over the same Funding Contract in another 14 | district court. Transferring this action to the Northern District of California would allow that 15 || court to recognize the relatedness of the actions, and even potentially consolidate the cases if 16 || warranted. See Desire, LLC v. Manna Textiles, Inc., 986 F.3d 1253, 1272 (9th Cir. 2021) (noting 17 || that courts can consolidate multiple actions brought in the same district, and if claims are brought 18 || in different districts, a defendant could seek transfer under § 1404(a)). 19 Plaintiff is therefore ORDERED TO SHOW CAUSE why this action should not be 20 | transferred to the San Francisco Division of the U.S. District Court for the Northern District of 21 | California. Within fourteen (14) days of the date of entry of this order, plaintiff shall file a 22 || response. In the response, plaintiff should indicate whether he opposes such transfer, and if so, 23 || explain to the court why the case should remain here, in the Eastern District of California. 24 || Dated: April 12, 2022 Foci) Aharon 2% KENDALL J. NE wese.179 UNITED STATES MAGISTRATE JUDGE 27 28