Daniel O'Bryant, d/b/a O'Bryant Transport, LLC v. Alan P. Adams, Luan Adams, d/b/a A.L.A. Trucking, Inc. , 123 N.E.3d 689 ( 2019 )

FILED
Jun 04 2019, 2:42 pm
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
IN THE
Indiana Supreme Court
Supreme Court Case No. 18S-PL-584
Daniel O’Bryant, d/b/a
O’Bryant Transport, LLC,
Appellant,
–v–
Alan P. Adams, Luan Adams, d/b/a
A.L.A. Trucking, Inc.,
Appellees.
Argued: January 10, 2019 | Decided: June 4, 2019
Appeal from the Madison Circuit Court, No. 48C01-1703-PL-19
The Honorable Angela Warner Sims, Judge
On Petition to Transfer from the Indiana Court of Appeals
No. 48A02-1711-PL-2709
Opinion by Justice Slaughter
Chief Justice Rush and Justices Massa and Goff concur.
Justice David concurs in result.
Slaughter, Justice.
We hold that a valid forum-selection clause, in which the parties agree
by contract to litigate their disputes in a specific forum, does not deprive a
trial court of personal jurisdiction over parties that would otherwise be
subject to the court’s jurisdiction. Thus, the trial court erred in dismissing
the plaintiff’s claims against the Indiana-resident defendants under Trial
Rule 12(B)(2). But we nevertheless affirm the court’s without-prejudice
dismissal on this record for two reasons. First, the disputed forum-
selection clause is mandatory and unambiguous in requiring that suit be
brought in Texas not Indiana. And, second, the plaintiff has not satisfied
its burden of showing that the clause is invalid. Thus, the trial court was
correct to dismiss the amended Indiana complaint without prejudice,
though for a reason other than lack of personal jurisdiction.
Factual and Procedural History
The parties are in the transportation business. O’Bryant Transport, LLC,
and A.L.A. Trucking, Inc., entered into an independent-contractor
agreement. Under the agreement, A.L.A. Trucking was seeking truck-
driving services, and O’Bryant Transport agreed to provide them. Their
agreement contains a forum-selection clause providing that the agreement
was prepared under Texas law; that the laws of “this state” shall apply;
and, relevant here, that suit must be brought in “this state”.
This Agreement shall be deemed to have been drawn in
accordance with the statutes and laws of the State of Texas and
in the event of any disagreement or litigation, the laws of this
state shall apply and suit must be brought in this state, except
that CARRIER [A.L.A. Trucking] may bring suit against
INDEPENDENT CONTRACTOR [O’Bryant Transport] in any
state where INDEPENDENT CONTRACTOR resides or is
located.
More than a year later, the plaintiff, Daniel O’Bryant, alleged breach of
contract and sued in the Circuit Court of Madison County, Indiana. He
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claimed that A.L.A. Trucking breached the agreement by treating him,
apparently a principal of O’Bryant Transport, as an A.L.A. employee
rather than an independent contractor and did not pay him salary or
benefits for most of the prior year. We say “apparently” because the
agreement lists the contracting party as the LLC, a limited-liability
company, and shows Daniel as signing on its behalf. Yet the amended
complaint, the operative pleading here, recites Daniel as the aggrieved
party and lists the LLC as merely a “dba” and not a separate legal entity.
The lower courts did not address Daniel’s standing to sue for breach of an
agreement to which he is not a party. And neither shall we.
O’Bryant also sued for fraudulent inducement, alleging he was induced
to sign the agreement by A.L.A.’s “material misrepresentations”
concerning the work he was to do. The suit named as defendants Alan P.
Adams and Luan Adams, as “owners”—presumably meaning
shareholders—of A.L.A. Trucking, Inc. The Adamses are residents of
Indiana, and A.L.A. Trucking is an Indiana for-profit corporation doing
business in Indiana. According to O’Bryant, the Adamses are alter egos of
A.L.A. Trucking, and he seeks to pierce the corporate veil and hold them
personally liable for any obligations of the corporation. In the lawsuit’s
caption, O’Bryant lists the counterparty, A.L.A. Trucking, as a “dba”
rather than the separate legal entity his own complaint alleges it to be.
Again, the lower courts ignore this issue, and so shall we.
The defendants moved to dismiss the amended complaint on two
separate grounds. The first, under Rule 12(B)(2), is that the Indiana trial
court lacked personal jurisdiction over these defendants because the
parties agreed to litigate their dispute in Texas. The second ground, under
Rule 12(B)(6), seeks partial dismissal of the veil-piercing claims against the
Adamses because the allegations are insufficient to subject them to
liability for obligations of the corporation. The other 12(B)(6) request is to
dismiss count 2, the fraud claim, because the plaintiff failed to plead fraud
with the specificity required by Rule 9(B).
O’Bryant objected to dismissal under Rule 12(B)(2), arguing that the
phrase “this state” within the forum-selection clause refers not to Texas
but Indiana; that the clause is ambiguous and permissive; and that
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requiring Indiana parties to litigate their dispute in Texas is unreasonable
and unjust. The trial court disagreed. It held that the forum-selection
clause is unambiguous and mandatory; that “this state” refers to Texas;
and that the clause is enforceable. The court dismissed O’Bryant’s
amended complaint without prejudice.
O’Bryant then filed a motion to correct error. He argued, among other
things, that newly discovered evidence, consisting of an affidavit from his
counsel describing communications with an unidentified Texas lawyer,
establishes that a Texas court would not enforce the forum-selection
clause. The trial court denied the motion, and O’Bryant appealed. But his
notice of appeal identified only the trial court’s original entry as the order
being appealed and not its later denial of his motion to correct error. The
court of appeals affirmed the 12(B)(2) dismissal in a precedential opinion.
O’Bryant v. Adams, 108 N.E.3d 933 (Ind. Ct. App. 2018), trans. granted.
Standard of Review
We review de novo the trial court’s dismissal of O’Bryant’s amended
complaint for lack of personal jurisdiction. LinkAmerica Corp. v. Cox, 857
N.E.2d 961, 965 (Ind. 2006).
Discussion and Decision
A. The forum-selection clause is mandatory and
unambiguous.
Parties to a contract are generally free to bargain for the terms that will
govern their relationship. They can decide, among other things, what law
will govern; whether disputes arising between them will be resolved
publicly (in a court of law) or privately (in arbitration); and where any
disputes will be resolved. At issue here is the last category—where
O’Bryant Transport must assert its claims against A.L.A. Trucking.
The parties’ agreement contains a forum-selection clause, which
provides in pertinent part: “This Agreement shall be deemed to have been
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drawn in accordance with the statutes and laws of the State of Texas and
in the event of any disagreement or litigation, the laws of this state shall
apply and suit must be brought in this state[.]” This case turns on the
meaning of “suit must be brought in this state”. The phrase “must be
brought” is mandatory. It requires O’Bryant to bring suit, if at all, in the
specified forum.
The forum specified in the agreement—“this state”—refers
unambiguously to Texas. Texas is the only state mentioned within that
sentence and, indeed, within the entire paragraph. There is no other
plausible reading of this term. We are not swayed by O’Bryant’s contrary
argument that “this state” must mean Indiana because that is where the
parties executed the agreement. If the parties had intended Indiana to be a
forum where O’Bryant Transport could file suit, they could have recited
that intention expressly. Indeed, the identification of “Indiana” in the final
paragraph shows the parties know how to refer to Indiana when they
want to. They did so specifically in the closing paragraph but not in the
paragraph containing the forum-selection clause. The clear take-away is
that the parties intended to identify Indiana as the state where they were
executing their agreement but not the state where they agreed O’Bryant
must sue to enforce it.
We thus agree with the court of appeals’ resolution of this issue, though
for a different reason. The court held that “this state” means Texas
because the interpretive canon ejusdem generis—“of the same kind”—
compels that result. 108 N.E.3d at 939. There are two issues worth
mentioning with the court’s approach. First, courts need not resort to
interpretive canons at all when a word or phrase is unambiguous. In such
circumstances, we simply apply the text’s plain meaning. Once the court
of appeals concluded (correctly) that “this state” unambiguously means
Texas, it was unnecessary to invoke this or any other interpretative canon.
Second, the ejusdem generis canon does not apply here for another
reason. The canon applies only when a list of more than one item within
an enumeration is followed by a catch-all phrase at the end. The meaning
of the catch-all phrase turns on the nature of the items within the
enumerated list. Scalia and Garner explain the canon this way: “Where
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general words follow an enumeration of two or more things, they apply
only to persons or things of the same general kind or class specifically
mentioned[.]” Antonin Scalia and Bryan A. Garner, Reading Law: The
Interpretation of Legal Texts 199 (2012).
Suppose, for example, an invitation to a party says the menu will
consist of “hamburgers, hot dogs, and other like food.” Under common
usage, we expect “other like food” to be defined with reference to the
foods listed. Hamburgers and hot dogs are casual foods, inexpensive, and
easy to prepare. Because they “all belong to an obvious and readily
identifiable genus”, we expect that “the speaker or writer has that
category in mind for the entire passage.” Id. Given the invitation’s list of
specified foods, it would come as little surprise if the host also served
baked beans and potato salad. But no one would expect the menu to
include lobster thermidor or pheasant under glass.
Here, the disputed contract contains no antecedent list of other items to
which the reader can refer to interpret the meaning of “this state”. Just as
it takes two points to determine a line in geometry, it takes at least two
items within a list to establish a pattern from which a generic catch-all
phrase at the end of the list can be interpreted under the ejusdem generis
canon. Stated differently, the canon applies only to the following format—
“A, B, [C, etc.] and other like items”—which is not present here.
B. The forum-selection clause is valid and enforceable.
Indiana puts a premium on parties’ freedom of contract, and we
presume that contracts represent the parties’ freely bargained agreements.
Haegert v. Univ. of Evansville, 977 N.E.2d 924, 937 (Ind. 2012). Especially
where the contracting parties are commercial entities, the party resisting a
forum-selection clause bears an especially onerous burden of showing it
was neither “freely negotiated” nor “reasonable and just”, which is what
Indiana law requires for such clauses to be enforced. Carmeuse Lime &
Stone v. Illini State Trucking, Inc., 986 N.E.2d 271, 276, 277 (Ind. Ct. App.
2013).
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O’Bryant’s transfer petition argues that the forum-selection clause
deprives him of a meaningful forum for vindicating his claims. “Plaintiff
simply has no legal remedy in the State of Texas and that is shown by the
affidavit submitted by plaintiff’s counsel”—which avers that an
unidentified Texas lawyer told O’Bryant that Texas courts would not
afford him a remedy because neither party “maintained an operational
business in that state and therefore, the State of Texas would not accept
personal jurisdiction over the parties to any law suit.”
This argument fails for several reasons. First, it is waived. O’Bryant
raised this argument in a motion to correct error filed after the trial court
had dismissed his amended complaint, and he failed to establish this
argument was unavailable during the original proceedings. Moreover,
once the trial court denied his motion to correct error, O’Bryant did not
appeal that order. His notice of appeal recites that he was appealing only
the initial entry dismissing his amended complaint under Rule 12(B)(2)
but not the subsequent order denying his motion to correct error. His
failure to appeal the latter order also waives this issue on appeal.
Apart from waiver, the argument is meritless. It would have been
reversible error had the trial court afforded O’Bryant relief from the
forum-selection clause based on the thin content of his lawyer’s
affidavit—not just the hearsay statement of the unnamed Texas lawyer
but the dubious legal conclusion that Texas would “not accept personal
jurisdiction over the[se] parties” because they did not “maintain[] an
operational business” there. O’Bryant cites no Texas authority supporting
that proposition. And we have identified none. To the contrary, the law of
Texas (and of most states) permits parties to consent to personal
jurisdiction by contractually agreeing to litigate their disputes there. See
Abacan Tech. Servs. Ltd. v. Glob. Marine Int'l Servs. Corp., 994 S.W.2d 839,
845 (Tex. Ct. App. 1999) (cited favorably by In re AIU Ins. Co., 148 S.W.3d
109, 112 n.5 (Tex. 2004)).
On this record, O’Bryant did not satisfy his burden of establishing that
the forum-selection clause was invalid.
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C. The validity of the forum-selection clause does not
divest the Indiana trial court of personal jurisdiction
over these Indiana parties.
Given our conclusion that the forum-selection clause is valid,
unambiguous, and mandatory in requiring that O’Bryant file suit in Texas,
we turn next to consider the appropriate remedy for his having sued in
Indiana. A.L.A. Transport and the trial court understandably relied on
settled, controlling precedent from our court of appeals in seeking and
granting, respectively, the dismissal of O’Bryant’s amended complaint
under Trial Rule 12(B)(2). See, e.g., Dexter Axle Co. v. Baan USA, Inc., 833
N.E.2d 43, 48 (Ind. Ct. App. 2005); Grott v. Jim Barna Log Sys.-Midwest, Inc.,
794 N.E.2d 1098, 1101-02 (Ind. Ct. App. 2003), trans. denied. But neither
Dexter Axle, Grott, nor the appellate opinion below analyzed an Indiana
court’s personal jurisdiction over parties that agreed to sue elsewhere.
Instead, these decisions assessed whether the disputed forum-selection
clauses were enforceable and concluded they were.
We hold that a valid forum-selection clause does not divest a trial court
of personal jurisdiction over parties otherwise subject to the court’s
jurisdiction. Parties are free to consent to having their disputes litigated in
a forum in which they would not otherwise be amenable to suit. And
when they elect to do so, as here, they submit to the personal jurisdiction
of the distant forum. But by consenting to personal jurisdiction in a
different forum, they do not thereby deprive other jurisdictions—such as
those where they live and do business—of personal jurisdiction, too.
Personal jurisdiction is not a zero-sum game in which agreeing to personal
jurisdiction elsewhere divests jurisdiction at home. Thus, the parties’
consent to suit in Texas did not deprive the court below of personal
jurisdiction. The parties, all residents of Indiana or companies doing
business here, remain subject to the jurisdiction of an Indiana tribunal.
The trial court thus erred in dismissing O’Bryant’s amended complaint
under Rule 12(B)(2). We specifically disapprove of Dexter Axle and Grott to
the extent they authorize a 12(B)(2) dismissal whenever parties have
agreed to litigate their disputes in a different forum.
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As an aside, we note that a dismissal for lack of personal jurisdiction
does not adjudicate the merits but merely requires that the merits be
litigated elsewhere—in a forum in which the parties are amenable to suit.
Here, the defendants sought dismissal of the amended complaint “with
prejudice”—a proposed merits disposition that can have preclusive effect
in other litigation. Given the posture of this case and the trial court’s
dismissal without prejudice, we do not decide whether a defendant
waives an objection to personal jurisdiction by seeking a dismissal with
prejudice. We leave that issue for another day.
D. We recognize an alternative motion for enforcing a
forum-selection clause.
Finally, having concluded that 12(B)(2) is not the correct vehicle for
enforcing a forum-selection clause, we recognize an alternative for
obtaining that relief.
One option is for the defendant to file a stand-alone motion to enforce a
forum-selection clause, arguing the parties’ written agreement requires
their dispute to be litigated elsewhere. See generally Bradley Scott
Shannon, Enforcing Forum-Selection Clauses, 66 Hastings L.J. 777 (2015). The
motion should recite the clause within the motion’s four corners or attach
it as a separate document if it is not part of the complaint. Unless the
plaintiff contests the clause’s enforceability, the court can interpret the
clause and dismiss the complaint without prejudice if the plaintiff sued in
an unauthorized forum. If the plaintiff contests the clause’s validity—
alleging it to be, say, unfair or the product of unequal bargaining power—
the court may need to hold a mini-trial to resolve factual disputes on the
threshold question of the clause’s enforceability. Such a limited trial is
necessarily antecedent to deciding what the clause means and whether
dismissal is required to effectuate its meaning. Courts must occasionally
resolve factual disputes before deciding threshold questions of subject-
matter or personal jurisdiction. The same is true of facts underlying the
validity of a forum-selection clause. And, as a belt-and-suspenders
measure, a defendant wanting to protect itself from costly collateral
litigation over the validity of a presumptively valid forum-selection clause
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can include in its contract a requirement that the breaching party pay the
costs and attorney’s fees the aggrieved party incurs to enforce the clause.
By recognizing this procedural vehicle, we do not foreclose other
possible options for enforcing a forum-selection clause against a litigant
that sued in an unapproved forum. Once our opinion is certified, we will
ask our rules committee to consider various options for amending our
rules of trial procedure to formalize a process for enforcing forum-
selection clauses.
Conclusion
For these reasons, we affirm the trial court’s dismissal of the amended
complaint without prejudice. Although the court erred in basing its
dismissal on lack of personal jurisdiction, dismissal was nevertheless
warranted on this record. The disputed forum-selection clause is
mandatory and unambiguous in requiring that suit be brought in Texas.
And the plaintiff did not satisfy its burden of showing that the clause is
invalid and thus unenforceable.
Rush, C.J., and Massa and Goff, JJ., concur.
David, J., concurs in result.
ATTORNEY FOR APPELLANT
Scott A. Norrick
Scott A. Norrick, P.C.
Anderson, Indiana
ATTORNEY FOR APPELLEES
Andrew F. Marquis
Scopelitis Garvin Light Hanson & Feary, P.C.
Indianapolis, Indiana
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