Kansas City Grill Cleaners v. BBQ Cleaner ( 2019 )

No. 118,687
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
KANSAS CITY GRILL CLEANERS, LLC,
Appellant,
v.
THE BBQ CLEANER, LLC, and
JEFFREY KRENTZMAN,
Appellees.
SYLLABUS BY THE COURT
1.
The interpretation and legal effect of written instruments are matters of law, and
an appellate court exercises unlimited review. Regardless of the construction given a
written contract by the trial court, an appellate court may construe a written contract and
determine its legal effect.
2.
Kansas appellate courts exercise unlimited review over the interpretation and legal
effect of a forum-selection clause.
3.
A forum-selection clause is generally valid and enforceable. However, the clause
is unenforceable if the party resisting it shows that enforcement would be unreasonable
under the circumstances.
4.
A forum-selection clause is unreasonable if: (1) it was induced by fraud or duress;
(2) there is no reasonable relationship between the selected forum and the complained of
1
transaction; (3) the contractually selected forum is so unfair and inconvenient that it, for
all practical purposes, deprives the plaintiff of a remedy or of its day in court; or (4)
enforcement would contravene a strong public policy of the state where the action has
otherwise been properly filed.
5.
The Kansas Consumer Protection Act's venue statute, K.S.A. 50-638(b), provides:
"Venue. Every action pursuant to this act shall be brought in the district court of any
county in which there occurred an act or practice declared to be a violation of this act, or
in which the defendant resides or the defendant's principal place of business is located. If
the defendant is a nonresident and has no principal place of business within this state,
then the nonresident defendant can be sued either in the district court of Shawnee county
or in the district court of any county in which there occurred an act or practice declared to
be a violation of this act."
6.
The Kansas Consumer Protection Act's waiver or forbearance statute, K.S.A. 50-
625(a), provides: "Except as otherwise provided in this act, a consumer may not waive or
agree to forego rights or benefits under this act." This provision applies unless a
settlement is reached that is not unconscionable. K.S.A. 50-625(c).
7.
To the extent that a contractual provision waives a consumer's right or benefit
provided by the Kansas Consumer Protection Act, K.S.A. 50-625(a) prevents the
operation of that contractual provision.
2
8.
Under K.S.A. 50-623(b), the Kansas Consumer Protection Act shall be construed
liberally to promote the policy of protecting consumers from suppliers who commit
deceptive and unconscionable practices.
9.
Under the facts of this case, the forum-selection clause of the purchase agreement
is unenforceable because it contravenes the strong public policy of our state "to protect
consumers from suppliers who commit deceptive and unconscionable practices," K.S.A.
50-623(b). In particular, the forum-selection clause runs counter to the Kansas Consumer
Protection Act venue statute as set forth in K.S.A. 50-638(b) and the nonwaiver or
agreement "to forego rights or benefits" provision as set forth in K.S.A. 50-625(a).
Appeal from Johnson District Court; DANIEL W. VOKINS, magistrate judge. Opinion filed
December 13, 2019. Reversed and remanded with directions.
Steven H. Mustoe and Oliver P. Maguire, of Evans & Dixon, LLC, of Overland Park, for
appellant.
John B. Gariglietti and James F.B. Daniels, of McDowell, Rice, Smith & Buchanan, of Kansas
City, Missouri, for appellees.
Before BUSER, P.J., ATCHESON, J., and WALKER, S.J.
BUSER, J.: Kansas City Grill Cleaners, LLC (KC Grill) entered into a contract
with The BBQ Cleaner, LLC (BBQ Cleaner) for the purchase of outdoor grill cleaning
equipment and supplies. The contract included a forum-selection clause and choice-of-
law provision, which provided that the venue for any litigation arising from the contract
was only proper in Bergen County, New Jersey, and that the contract shall be construed
and enforced in accordance with the laws of New Jersey.
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After a dispute over the contract, KC Grill filed a petition in Johnson County
District Court, alleging BBQ Cleaner and its agent, Jeffrey Krentzman (collectively BBQ
Cleaner), violated the Kansas Consumer Protection Act (KCPA) by engaging in a
deceptive trade practice. BBQ Cleaner filed a motion to dismiss based on the forum-
selection clause. The district court dismissed the case. KC Grill appeals the district court's
dismissal of its petition against BBQ Cleaner.
Upon our review, we agree with KC Grill and hold that, under the facts and
circumstances of this case, the forum-selection clause is unenforceable. This contractual
provision contravenes the strong public policy of our state "to protect consumers from
suppliers who commit deceptive and unconscionable practices" as generally provided in
K.S.A. 50-623(b). In particular, the forum-selection clause runs counter to the KCPA
venue statute as set forth in K.S.A. 50-638(b) and the nonwaiver or agreement "to forego
rights or benefits" provision as set forth in K.S.A. 50-625(a). Accordingly, we reverse the
district court and remand the case with directions to reinstate KC Grill's petition and for
further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
BBQ Cleaner is a New Jersey company that sells barbeque equipment and
cleaning instructions for use in cleaning outdoor barbeque grills. In December 2015, KC
Grill, a Kansas business, purchased more than $25,000 in outdoor grill cleaning
equipment and supplies from BBQ Cleaner. The purchase agreement was subject to
choice-of-law and forum-selection provisions which provided:
"This Agreement shall be construed and enforced in accordance with the laws of the State
of New Jersey. Venue for any litigation arising out of this agreement shall be proper only
in Bergen County, New Jersey. The parties hereby irrevocably consent to the personal
jurisdiction of the state and federal courts situated in Bergen County, New Jersey."
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On August 19, 2016, KC Grill filed a petition against BBQ Cleaner asserting a
deceptive trade practice claim under the KCPA. The petition alleged that BBQ Cleaner
induced KC Grill to enter into the purchase agreement by misrepresenting or omitting
material facts regarding its negotiations to sell similar outdoor grill cleaning equipment
and supplies to KC Grill's competitors in Johnson County. KC Grill requested $25,000 in
damages and any applicable fees and costs. Relying on the forum-selection clause in the
contract, BBQ Cleaner filed a motion to dismiss the lawsuit.
The district court granted BBQ Cleaner's motion and dismissed KC Grill's petition
with prejudice. The district court ruled that based on the forum-selection clause in the
contract, any litigation arising out of the parties' agreement must be filed in Bergen
County, New Jersey. KC Grill appeals.
ANALYSIS
KC Grill contends the district court erred by dismissing its petition that asserted
the KCPA claim against BBQ Cleaner. It argues that the forum-selection clause is
unenforceable with regard to the KCPA claim and that K.S.A. 50-638(b) provides that the
Johnson County District Court is the proper venue. KC Grill also asserts that K.S.A. 50-
625(a) prevents a party from waiving or agreeing to forego the rights or benefits of the
KCPA venue statute. We consider only the narrow issue the parties have presented—the
legal efficacy of the forum-selection clause in the contract.
We begin with a summary of our standards of review.
"The interpretation and legal effect of written instruments are matters of law, and
an appellate court exercises unlimited review. Regardless of the construction given a
written contract by the trial court, an appellate court may construe a written contract and
determine its legal effect." Aylward v. Dar Ran Furniture Industries, Inc., 32 Kan. App.
2d 697, Syl. ¶ 1, 87 P.3d 341 (2004).
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While venue decisions are ordinarily reviewed for an abuse of discretion, we
exercise unlimited review over the interpretation and legal effect of a forum-selection
clause. AkesoGenX Corp. v. Zavala, 55 Kan. App. 2d 22, 31, 407 P.3d 246 (2017), rev.
denied 308 Kan. 1593 (2018). Similarly, this issue involves statutory interpretation which
is a question of law subject to our unlimited review. Nauheim v. City of Topeka, 309 Kan.
145, 149, 432 P.3d 647 (2019).
A forum-selection clause is generally valid and enforceable. However, the clause
is unenforceable if the party resisting it shows that enforcement would be unreasonable
under the circumstances. AkesoGenX Corp., 55 Kan. App. 2d at 31 (citing The Bremen v.
Zapata Off-Shore Co., 407 U.S. 1, 9, 92 S. Ct. 1907, 32 L. Ed. 2d 513 [1972]). A forum-
selection clause is unreasonable if: (1) it was induced by fraud or duress; (2) there is no
reasonable relationship between the selected forum and the complained of transaction; (3)
the contractually selected forum is so unfair and inconvenient that it, for all practical
purposes, deprives the plaintiff of a remedy or of its day in court; or (4) enforcement
would contravene a strong public policy of the state where the action has otherwise been
properly filed. See Brenner v. Oppenheimer & Co., 273 Kan. 525, 540-41, 44 P.3d 364
(2002); AkesoGenX Corp., 55 Kan. App. 2d at 32; Dix v. ICT Group, Inc., 160 Wash. 2d
826, 834, 161 P.3d 1016 (2007).
As the district court ruled, the forum-selection clause here is mandatory and it
required that all litigation arising out of the purchase agreement be filed in Bergen
County, New Jersey. See AkesoGenX Corp., 55 Kan. App. 2d at 32 (noting that "[i]f there
is language stating that a certain forum is the exclusive forum, then the clause is a
mandatory forum selection clause"). As a result, KC Grill must show that enforcement of
the mandatory clause is unreasonable under the circumstances of this case. See
AkesoGenX Corp., 55 Kan. App. 2d at 31-32.
6
The KCPA contains a venue statute, K.S.A. 50-638(b), and a nonwaiver or
agreement to forego rights or benefits statute, K.S.A. 50-625. These statutes individually
and jointly provide a consumer with certain prerogatives in prosecuting a consumer
protection action in Kansas.
On appeal, KC Grill contends K.S.A. 50-638(b) prevents the enforcement of the
forum-selection clause. The venue statute provides:
"Venue. Every action pursuant to this act shall be brought in the district court of
any county in which there occurred an act or practice declared to be a violation of this
act, or in which the defendant resides or the defendant's principal place of business is
located. If the defendant is a nonresident and has no principal place of business within
this state, then the nonresident defendant can be sued either in the district court of
Shawnee county or in the district court of any county in which there occurred an act or
practice declared to be a violation of this act." K.S.A. 50-638(b).
The most fundamental rule of statutory construction is that the intent of the
Legislature governs if that intent can be ascertained. State ex rel. Schmidt v. City of
Wichita, 303 Kan. 650, 659, 367 P.3d 282 (2016). We attempt to ascertain legislative
intent through the statutory language enacted, giving common words their ordinary
meanings. Nauheim, 309 Kan. at 149. A plain reading of this statute makes clear that the
Legislature has afforded plaintiffs in KCPA actions with the rights and benefits of filing
lawsuits in the district courts of Kansas. Of particular relevance to this case, the
Legislature specifically provided KCPA plaintiffs with Kansas forums to sue nonresident
defendants, such as BBQ Cleaner.
It is true that as a general rule, parties are free to waive venue because it is a
procedural matter that relates to a litigant's convenience, rather than a jurisdictional issue.
AkesoGenX Corp., 55 Kan. App. 2d at 37. The KCPA's nonwaiver statute, K.S.A. 50-
625(a), however, provides that, other than based on a settlement, "a consumer may not
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waive or agree to forego rights or benefits" under the KCPA. As our Supreme Court has
explained, to the extent that a contractual provision waives a consumer's right or benefit
provided by the KCPA, K.S.A. 50-625(a) prevents the operation of that contractual
provision. Stechschulte v. Jennings, 297 Kan. 2, 28, 298 P.3d 1083 (2013).
The question presented in this appeal is whether the venue provision of K.S.A. 50-
638(b), when considered together with the nonwaiver provision of K.S.A. 50-625,
renders the forum-selection clause in the contract unenforceable. This is a question of
first impression for Kansas appellate courts.
By adopting the KCPA, the Legislature clearly intended to increase and advance
the interests of consumers. Ray v. Ponca/Universal Holdings, Inc., 22 Kan. App. 2d 47,
50, 913 P.2d 209 (1995). Towards this end, the Legislature has stated that the KCPA
"shall be construed liberally" to promote the policy of protecting consumers from
suppliers who commit deceptive and unconscionable practices. K.S.A. 50-623(b).
One means by which the Legislature advanced the interests of Kansas consumers
was by providing them a Kansas forum to litigate KCPA claims against nonresident
suppliers. K.S.A. 50-638(b). Indeed, Kansas consumers have a right to rely upon this
statutory venue provision. See Wheatland Contracting v. Jaco General Contractor, Inc.,
57 Kan. App. 2d 236, 240, 450 P.3d 374, 377 (2019).
Another means to effectuate the purposes of the KCPA is found in K.S.A. 50-
625(a). This statute provides that "[e]xcept as otherwise provided in this act, a consumer
may not waive or agree to forego rights or benefits under this act." K.S.A. 50-625(a).
This provision applies unless a settlement is reached that is not unconscionable. K.S.A.
50-625(c). Since no settlement is at issue in this appeal, the nonwaiver provision applies
to this contract. Once again, a common sense, plain reading of the statute yields the
obvious conclusion that whether the venue statute is characterized as a right or benefit,
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the Legislature intended that it may not be waived or foregone by agreement. K.S.A. 50-
625(a). In summary, because the forum-selection clause purports to waive or forego KC
Grill's right or benefit to litigate its KCPA claim in Kansas, enforcement of the clause
violates K.S.A. 50-625(a).
In analyzing this issue, we derive helpful guidance from an analogous case our
court decided in Wheatland, 57 Kan. App. 2d 236, 450 P.3d 374. In Wheatland, our court
held that the parties' forum-selection clause was unenforceable under the Kansas Fairness
in Private Construction Contract Act (KFPCCA) because the venue provision of the Act
could not be waived by contract. 57 Kan. App. 2d at 240, 450 P.3d at 377.
In reaching this determination, the Wheatland court relied on two statutory
provisions in the KFPCCA—a venue statute and a nonwaiver statute. The venue statute
provided that the venue of a KFPCCA action "'shall be in the county where the real
property is located'" and the nonwaiver statute provided that the "'rights and duties
prescribed by this act shall not be waivable or varied under the terms of a contract.'" 57
Kan. App. 2d at 239-40, 450 P.3d at 377 (quoting K.S.A. 16-1806 and K.S.A. 16-1801).
Our court held that venue was a right granted under the KFPCCA and, therefore, the
parties could not waive that right through a forum-selection clause. 57 Kan. App. 2d at
240, 450 P.3d at 377.
Similarly, the Colorado Court of Appeals in Morris v. Towers Financial Corp.,
916 P.2d 678, 679 (Colo. App. 1996), refused to enforce the parties' forum-selection
clause, finding that enforcement of the clause would contravene a strong public policy
embodied in the Colorado Wage Claim Act (CWCA).
The Morris court examined two statutes in the CWCA. One statute provided that
any employee aggrieved under that act may file a civil action in "'any court having
jurisdiction over the parties,'" and the other provided that "'[a]ny agreement, written or
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oral, by any employee purporting to waive or modify [such employee's] rights in
violation of this article shall be void.'" 916 P.2d at 679. The Colorado Court of Appeals
determined that the CWCA voided the forum-selection clause because the clause
modified the employee's right to file an action in any court having jurisdiction of the
parties. 916 P.2d at 679.
As stated earlier, a forum-selection clause is unreasonable if enforcement would
contravene a strong public policy of the state where the action is filed. See Brenner, 273
Kan. at 540-41. For example, in Brenner, our Supreme Court considered whether a
choice-of-law provision in an investor's agreement with a clearing broker was
enforceable in an action under the Kansas Securities Act. The Supreme Court held that
because Kansas public policy strongly favored regulating securities transactions to
protect Kansas investors, the choice-of-law provision was invalid on public policy
grounds. 273 Kan. at 548-49.
Similar to the Kansas Securities Act examined in Brenner, the KCPA advances
strong public policies by protecting "consumers from suppliers who commit deceptive
and unconscionable practices." K.S.A. 50-623(b). In particular, the KCPA affords Kansas
consumers, who may be entitled to minimal damages, the right to a Kansas venue against
nonresident defendants. This is important. The right of a plaintiff to prosecute a consumer
claim in Kansas against a nonresident defendant provides the Kansas consumer the right
to a convenient forum to recover damages which could be the determining factor in
whether there is an economically feasible recourse against a supplier. Allowing a forum-
selection clause in a contract to eliminate this right contravenes Kansas public policy. See
Dix, 160 Wash. 2d at 837 (noting that a forum-selection clause which seriously impairs a
plaintiff's ability to enforce consumer protection laws violates state public policy).
For all of the reasons discussed, we hold that enforcing an unlawful waiver or
forbearance of a Kansas consumer's right or benefit to a Kansas venue would violate
10
Kansas public policy. Accordingly, we find the district court erred when it ruled that the
forum-selection clause in the purchase agreement was enforceable.
There is an additional reason for our holding in this particular case. In addition to
the forum-selection clause, the purchasing agreement included a choice-of-law provision
that required application of New Jersey law with regard to the contract. That clause
provided: "This Agreement shall be construed and enforced in accordance with the laws
of the State of New Jersey."
When analyzing the Kansas Securities Act, the Brenner court noted that other state
courts interpreting their securities laws have found that public policy and nonwaiver
provisions of the law rendered certain contractual provisions unenforceable. 273 Kan. at
543. The court favorably cited the California case Hall v. Superior Court, 150 Cal. App.
3d 411, 197 Cal. Rptr. 757 (1983), and quoted the following language from Hall:
"'California's policy to protect securities investors, without more, would probably
justify denial of enforcement of the choice of forum provision, although a failure to do so
might not constitute an abuse of discretion; but section 25701, which renders void any
provision purporting to waive or evade the Corporate Securities Law, removes that
discretion and compels denial of enforcement.
....
"'Similarly, we believe the right of a buyer of securities in California to have
California law and its concomitant nuances apply to any future dispute arising out of the
transaction is a "provision" within the meaning of section 25701 which cannot be waived
or evaded by stipulation of the parties to a securities transaction. Consequently, we hold
the choice of Nevada law provision in this agreement violates section 25701 and the
public policy of this state and for that reason deny enforcement of the forum selection
clause as unreasonable.' [Citations omitted.]" 273 Kan. at 546.
California courts have applied the reasoning in Hall to its consumer protection
laws and determined that forum-selection clauses accompanied by choice-of-law
11
provisions are unenforceable for claims brought under the California Consumers Legal
Remedies Act (CLRA). See America Online, Inc. v. Superior Court, 90 Cal. App. 4th 1,
108 Cal. Rptr. 2d 699 (2001).
In America Online, the court noted that Hall denied enforcement of a forum-
selection clause because enforcement would inevitably eliminate the protections of
California's Corporate Securities Law—a result prohibited by a nonwaiver provision of
the law. The court found that the CLRA paralleled the protections of securities law
because it protected California consumers and furthered a strong public policy of the
state. 90 Cal. App. 4th at 14-15. The court then held:
"Certainly, the CLRA provides remedial protections at least as important as
those under the Corporate Securities Law of 1968. Therefore, by parity of reasoning,
enforcement of AOL's forum selection clause, which is also accompanied by a choice of
law provision favoring Virginia, would necessitate a waiver of the statutory remedies of
the CLRA, in violation of that law's antiwaiver provision and California public policy.
For this reason alone, we affirm the trial court's ruling. [Citation omitted.]" 90 Cal. App.
4th at 15.
Returning to the case on appeal, we have no reason to doubt that the New Jersey
courts would appropriately construe and apply the KCPA, but one of the protections
afforded Kansas consumers is the right to avoid the inevitable and often considerable
expense of litigating in a distant forum. That protection would be lost if the forum
selection provision of the contract were enforced. Moreover, the New Jersey court would
have to decline to enforce the choice-of-law provision. While that's certainly conceivable,
it is not inevitable. See Stone Street Services, Inc. v. Daniels, No. CIV.A. 00-1904, 2000
WL 1909373, at *4-5 (E.D. Pa. 2000) (unpublished opinion) (applying the KCPA in lieu
of a choice-of-law provision which favored Pennsylvania law).
12
The potential likelihood that an agreed-to forum would apply an accompanying
choice-of-law provision favoring its law and disfavoring the protections in the KCPA
bolsters our conclusion that the forum-selection clause is unenforceable in this case. Cf.
Axis Oilfield v. Mining, Rock, Excavation & Const., 166 F. Supp. 3d 684, 694 (E.D. La.
2016) (while a state's interest in protecting its consumers is important, a court may find
such interest to be outweighed by the other state's interest in procommerce policies).
Finally, for the sake of completeness, we acknowledge that our decision runs
counter to two unpublished cases from the United States District Court for the District of
Kansas which upheld forum-selection clauses and required the plaintiffs to bring their
KCPA claims in out-of-state forums.
Although Kansas state courts are not bound by a federal court's interpretation of
Kansas law, Community First Nat'l Bank v. Nichols, 56 Kan. App. 2d 1057, 1066, 443
P.3d 322 (2019), or bound to follow the precedent of the Tenth Circuit Court of Appeals,
"the authority may be considered persuasive." State v. Thompson, 284 Kan. 763, 801, 166
P.3d 1015 (2007).
In Billings, M.D. v. Clinitec Intern., Inc., No. 00-1236-JTM, 2000 WL 1072167, at
*3 (D. Kan. 2000) (unpublished opinion), the court dismissed Billings' KCPA claim,
holding that the parties' mandatory forum-selection clause required the action to be
brought in Pennsylvania. In enforcing the clause, the court noted the KCPA's nonwaiver
provision but asserted that Billings did not waive any rights or benefits under the KCPA
when he signed the contract that included the forum-selection clause. 2000 WL 1072167,
at *3. The court also explained there was no reason why Billings could not bring his
KCPA claim in Pennsylvania. 2000 WL 1072167, at *3.
While similar to the case on appeal, Billings presents one key difference from this
case. In Billings, the forum-selection clause did not address what state law governed the
13
litigation, and the court found no reason why Billings could not bring his KCPA claim in
Pennsylvania. In contrast, here the forum-selection clause is accompanied by a choice-of-
law provision requiring application of New Jersey law. As a result, unlike Billings, there
is a potential likelihood that KC Grill may not be able to prosecute its KCPA claim in
New Jersey.
In Streit v. Snap-On Equipment, Inc., No. 10-4086-KHV-DJW, 2010 WL 5058540
(D. Kan. 2010) (unpublished opinion), the plaintiff claimed his KCPA claims were not
governed by the parties' forum-selection clause because they were statutory-based claims
and not contract-based claims. The court held that the forum-selection clause applied to
Streit's KCPA claims because the clause governed any action related to the parties'
contractual agreement. Relying on Billings, the court explained that enforcing the forum-
selection clause "does not necessarily foreclose plaintiff's KCPA claims; it simply means
that plaintiff will have to litigate the choice of law question in the proper forum—a
Wisconsin court." 2010 WL 5058540, at *4.
Streit is distinguishable because KC Grill raises an entirely different argument
than the plaintiff made in Streit. Unlike Streit, where the plaintiff argued that the forum-
selection clause did not apply to statutory claims, KC Grill argues that enforcement of the
forum-selection clause would unlawfully waive its statutory right to a Kansas venue.
Importantly, the federal courts in Billings and Streit did not analyze K.S.A. 50-
638(b) or consider whether a Kansas venue was a right or benefit provided by the KCPA
which could not be waived. Having considered this issue, we find that a Kansas
consumer's right to pursue a KCPA action in a Kansas venue is a right that may not be
waived. And allowing the parties' forum-selection clause to eliminate this right in
violation of K.S.A. 50-625(a) would contravene Kansas public policy. Accordingly, the
forum-selection clause is unenforceable and the district court erred when it enforced the
clause and dismissed KC Grill's petition.
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Reversed and remanded with directions to reinstate KC Grill's petition and for
further proceedings.
15