Wilder v. Absorption Corp.

OPINION

WINTERSHEIMER, Justice.

This appeal is from an order of the Court of Appeals granting a writ of mandamus which directs the Boone circuit judge to vacate his May 29, 2001 order which had allowed the claim by Wilder and Kelley against Absorption Corporation to be submitted'to binding arbitration in this Commonwealth.

The questions presented are whether the arbitration/choice of forum clause in this contract is unreasonable; whether mandamus is the proper means to review factual determinations made by the circuit judge; whether the circuit judge correctly found that enforcement of the arbitration/choice of forum clause would result in manifest injustice; and whether arbitration held in the Commonwealth of Kentucky pursuant to a court order may be enforced by the courts of Kentucky.

A long procedural history has brought this case to this point. It includes two separate appeals and two opinions from the Court of Appeals.

Absorption Corporation is a Nevada corporation with its principal place of business located in Washington state. It operates throughout the nation selling several lines of consumer products among which are a line of speciality pet care products, including several types of cat litter. In July 1993, Absorption entered into a written sales representative agreement with Roger Wilder, d/b/a R. Wilder Sales. Under the terms of the agreement, Wilder was to sell Absorption’s products to pet supply stores in Michigan, Indiana, Ohio and Kentucky. Wilder’s brother-in-law, Dennis Kelley, joined him and became a sales representative for Absorption. Together, Wilder and Kelley formed a business entity called R & D Midwest Pet Supplies. Both men worked out of their homes in Boone County. After the sales territory was established, Absorption terminated the contract with Wilder and Kelley in 1995 and began selling directly from its Washington state location into the territory previously served by the two sales representatives.

In 1995, Wilder and Kelley filed suit against Absorption in circuit court claiming breach of oral contracts, breach of the written agreement, fraud and misrepresentation and unfair trade practices. Absorption Corporation moved to dismiss the claim based on an arbitration/choice of forum clause which allegedly required all disputes to be submitted to arbitration in the state of Washington. The circuit judge denied the motion. Several years into the litigation, Absorption Corporation filed a renewed motion to compel arbitration. On April 30, 1998, the circuit judge denied that motion as well, holding that the arbitration/choice of forum clause in the contract was unreasonable and unenforceable and ordered the parties to proceed in circuit court.

In the first appeal by Absorption Corporation, a panel of the Court of Appeals reversed the April 30, 1998 order of the circuit judge and remanded for an application of the test set forth in Prudential Resources Corp. v. Plunkett, Ky.App., 583 S.W.2d 97 (1979). See Absorption Corp. v. Wilder, 1998-CA-1358-MR. Neither party sought discretionary review from this Court.

On remand, the circuit judge referred the matter to a Master Commissioner who conducted an evidentiary hearing as directed by the Court of Appeals and considered the four factors in Plunkett, supra, concerning the enforcement of a forum selection clause. Those factors are: 1) whether the clause was freely negotiated; 2) whether the specific forum is a seriously inconvenient place for trial; 3) whether enforcement would contravene a strong public policy of the forum in which the suit is brought; and 4) whether Kentucky has more than a minimal interest in the lawsuit.

The Master also considered, as directed by the Court of Appeals, that it was necessary to evaluate the convenience of the parties and witnesses. In doing so, he carefully reviewed the choice of forum by Wilder and Kelley; the situs of the material events; the relative ease of access to sources of proof; the convenience of the witnesses; and the convenience of the parties litigating in the respective forums.

The Master found that Absorption is a publicly held corporation organized under the laws of the state of Nevada, with its principal place of business located in Bell-ingham, Washington; that Wilder and Kelley were sales representatives for a pet bedding product produced by Absorption; that a lengthy negotiation ensued from 1990 until 1993 between the parties; that the final product of the negotiations was a contract dated April 1, 1993, with the contract ultimately completed by July 28, 1993; that the contract was signed by Wilder only after Absorption advised him that if he faded to sign that Absorption would get someone else as their representative; and that the final contract contained a choice of forum clause and arbitration provision which is the subject of this action.

Following the requirements of Plunkett, the Master determined that the choice of forum clause was freely negotiated and that the enforcement of it does not contravene the public policy of Kentucky; that Kentucky had more than a minimal interest in the action insofar as it involved two of its citizens and that a majority of the customers, who are key witnesses, are residents; and that Kentucky had the most significant relationship to the transactions in this case. He reported to the circuit judge that litigation in the state of Washington would be the “death knoll” of the plaintiffs action.

On May 29, 2001, the circuit judge confirmed the report of the Master Commissioner that enforcement of a choice of forum clause in this case would result in manifest injustice to Wilder and Kelley and this consideration outweighs the agreement of the parties to accept arbitration in the state of Washington. He ordered that the claim by Wilder and Kelley be submitted to binding arbitration within the Commonwealth of Kentucky.

In the second appeal by Absorption Corporation, a different panel of the Court of Appeals granted the requested writ of mandamus. It determined that Absorption Corporation had demonstrated its entitlement to a review on the merits because no appeal could adequately redress the loss of its contractually bargained for right to arbitrate all disputes concerning the contract in the state of Washington. The Court of Appeals found that the parties were bound by the clear and legitimate provisions of the arbitration/choice of forum clause in their agreement. Accordingly, it directed the circuit judge to vacate his order entered on May 29, 2001. This appeal followed.

Wilder and Kelley argue that the arbitration clause in the contract is unreasonable and enforcement would result in manifest injustice. They ask this Court to reverse and set aside the decision of the Court of Appeals and allow the underlying action to proceed to arbitration as ordered by the circuit court. In the alternative, they request the arbitration clause be invalidated in total and that we remand this case to the circuit court so that it may proceed under the Kentucky Rules of Civil Procedure. Wilder and Kelley contend that mandamus is not proper for the review of a circuit court’s factual determination. They also claim that the circuit court correctly found that it would be a manifest injustice for them to travel to the state of Washington to litigate or arbitrate. Finally, Wilder and Kelley ask this Court to review the question of whether an arbitration held in the state of Kentucky pursuant to a court order may be enforced by the courts of Kentucky.

Absorption Corporation responds that a decision refusing to enforce a forum selection clause is reviewable by original action because effective review cannot be obtained by appeal from a final judgment. It asserts that arbitration in the state of Washington is not inconvenient unless it would effectively deny the plaintiffs their day in court. Absorption maintains that the alleged inconveniences to the plaintiffs and the witnesses are not sufficient reasons to invalidate the contractual choice of forum or arbitration clauses. It contends that the choice of forum and arbitration provisions were not the result of overreaching or boilerplate terms. Absorption argues that the plaintiffs claim of fraud is no excuse to enforceability of a forum selection clause.

After considering the arguments of both parties, we must conclude that the Court of Appeals erred in granting the writ of mandamus sought by Absorption Corporation. For purposes of this opinion we treat writs of mandamus and writs of prohibition in the same manner. A writ of mandamus is an extraordinary remedy, one which should not be issued lightly. University of Louisville v. Shake, Ky., 5 S.W.3d 107 (1999). Such a remedy will be granted only upon a showing that: 1) the lower court is proceeding or is about to proceed outside its jurisdiction and there is no adequate remedy by appeal, or 2) the lower court is about to act incorrectly, although within its jurisdiction, and there exists no adequate remedy by appeal or otherwise and great injustice and irreparable injury would result. Kentucky Labor Cabinet v. Graham, Ky., 43 S.W.3d 247 (2001).

The requirement of showing that there is no adequate remedy by appeal emphasizes that a writ is an extraordinary remedy used to shield a party from injustice, against which there is no other adequate remedy and to preserve the ordinary administration of the laws. Ohio River Contract Co. v. Gordon, 170 Ky. 412, 186 S.W. 178 (1916), aff'd, 244 U.S. 68, 37 S.Ct. 599, 61 L.Ed. 997 (1917). It has not at any time been held that mandamus will issue in every instance and on every occasion merely because the court is allegedly proceeding out of its jurisdiction. Ordinarily when a court is proceeding out of its jurisdiction, there exists an ample and adequate remedy by appeal. In such cases the writ has been denied.

We disagree with the conclusion reached by the Court of Appeals that Absorption Corporation does not have an adequate remedy by appeal. Even if the circuit court is operating outside of its jurisdiction, the moving party is still not entitled to the remedy of a writ absent a showing that it has no adequate remedy by appeal from an unfavorable ruling. Graham, supra. Here, no such showing has been made and the reason stated by the Court of Appeals is insufficient.

The decision of the circuit judge in upholding the report of the Master Commissioner was correct insofar as it held that enforcement of the arbitration clause would produce a manifest injustice and would result in an inconvenience of forum so serious as to deprive Wilder and Kelley of their opportunity for a day in court. The choice of forum clause presented an impossible situation.

The evidentiary hearing held by the Master involved live testimony from witnesses and although Absorption was not present at the hearing, they were ably represented by local counsel. The Court appointed Master Commissioner is an experienced and competent attorney. Further trial of this matter would only be redundant. The Court of Appeals was incorrect in disturbing the findings of fact as presented to the circuit judge and endorsed by him.

The inconvenience and unreasonableness of the choice of forum clause results in a manifest injustice, and this consideration is greater than the contractual agreement to accept arbitration in the state of Washington.

The decision of the Court of Appeals is reversed and the order of the trial judge is reinstated. The litigation shall be submitted to binding arbitration within the Commonwealth of Kentucky.

Graves, Johnstone and Stumbo, J.J. concur. Lambert, C.J., dissents without opinion. Cooper, J., dissents by separate opinion. Keller, J., dissents and would affirm the Court of Appeals in accordance with the legal analysis contained in Justice Cooper’s dissenting opinion, but does not join that opinion because he disagrees with dicta contained therein that ascribes improper motivations to those who have reached different legal conclusions.