S&J Rentals, Inc. v. Hilti, Inc.
S&J Rentals, Inc. v. Hilti, Inc.
Opinion of the Court
S & J Rentals, Inc., ("S & J") seeks redress on behalf of both itself and a putative class from Hilti, Inc. ("Hilti") for alleged illegal business practices. S & J's First Amended Complaint ("FAC") sets forth a single cause of action alleging that Defendant violated California's Unfair Competition Law ("UCL"), California Business and Professions Code §§ 17200 - 17204. ECF No. 4, at 9-10. Currently before the Court is Hilti's Renewed Motion to Dismiss S & J's case under the doctrine of forum non conveniens or, in the alternative, to strike S & J's request for a jury trial.
BACKGROUND
S & J is a California corporation that rents construction equipment to the public.
In 2008 and 2010, S & J contracted with Hilti to open a line of credit to facilitate the purchase of new power tools and other related equipment. Two agreements in that regard were executed. For both, S & J signed and submitted to Hilti credit applications (Credit Applications), the signature lines of which stated the following:
IN CONSIDERATION OF HILTI'S GRANTING OF CREDIT, APPLICANT AND PERSONAL GUARANTOR ("CUSTOMER"), HEREBY AGREE THAT ALL TRANSACTIONS MADE PURSUANT HERETO SHALL BE GOVERNED BY HILTI'S STANDARD TERMS AND CONDITIONS
*982OF SALE PRINTED ON THE REVERSE SIDE HEREOF.
Def.'s Mot. Dism., ECF No. 49-1, 4:13-16. In addition, the "CONSENT TO JURISDICTION" section of the Credit Applications' Terms and Conditions provided:
All transactions made pursuant hereto shall be deemed to have been made and entered into in Tulsa, Oklahoma. Any and all disputes arising directly or indirectly from such transactions shall be resolved in the courts of the County of Tulsa, State of Oklahoma, to the exclusion of another court, and any resulting judgment may be enforced by any court having jurisdiction of such an action. All transactions shall be governed by and construed in accordance with the laws of the State of Oklahoma.
Id. at 4:23-27.
S & J subsequently made several tool purchases using the line of credit, one of which was for a TE 3000-AVR breaker chiseling tool in 2012. S & J alleges that it did not know when it purchased products from Hilti that the products were equipped with a "pre-programmed 'automatic shut off' function that causes [them] to shut down after a specified number of operational hours." Pl.'s Opp. Mot. Dism., ECF No. 57, 2:11-12. According to S & J, to reactivate the tools, Hilti's customers must send them back to Hilti and pay a servicing fee, which S & J alleges is required regardless of whether the tools actually need any maintenance, repair, or servicing. S & J alleges that Hilti failed to adequately disclose this process to its consumers, and that such failure constitutes an unfair business practice under the UCL.
S & J filed its FAC on May 9, 2016. On June 21, 2016, Hilti filed a motion in which it sought to enforce the parties' forum section clause and have the case transferred to the District Court for the Northern District of Oklahoma. Hilti also moved to dismiss the action or, in the alternative, to strike S & J's jury demand. The parties briefed the issues raised in Hilti's motion, focusing primarily on whether the case should be transferred. Although S & J did contend in a footnote that the forum selection clause referred to Oklahoma state courts, it did not argue the motion to transfer should be denied on that basis. Instead, S & J argued that the forum selection clause was unenforceable because it would contravene a strong public policy of California. According to S & J, enforcing the forum selection clause would contravene California's public policy of ensuring its citizens have access to class action suits because: (1) Oklahoma's consumer protection statute had no extraterritorial effect; and (2) S & J would not be able to attain class status under Oklahoma's class action statute. Hilti, on the other hand, argued that the forum selection clause did not limit S & J to Oklahoma state court, and claimed that since S & J could bring its suit in a federal court in Oklahoma under Federal Rule of Civil Procedure 23, enforcing the forum selection clause did not contravene California's public policy in favor of class actions.
Ultimately, this Court agreed with Hilti and granted the motion to transfer to the Northern District of Oklahoma. The district judge assigned to the case, however, subsequently issued an Order to Show Cause questioning the propriety of transfer to that district.
The Northern District correctly noted that the unavailability of a federal forum in Oklahoma changes the degree to which California's interests are implicated, and, consequently, this Court's analysis of whether enforcing the forum selection and choice of law clause contravenes a public policy of California. Following transfer of the case back to this Court, Hilti refiled its motion to dismiss, and that motion is currently before the Court for adjudication. Hilti argues that enforcing the contract still does not contravene a public policy of California and seeks dismissal on forum non conveniens grounds. Alternatively, Hilti moves to strike S & J's jury request pursuant to Federal Rule of Civil Procedure 12(f). S & J, on the other hand, argues that Oklahoma consumer protection and class action statutes preclude it from bringing its suit in Oklahoma state court, thereby contravening California's public policy in favor of ensuring that its citizens have effective class action remedies.
STANDARD
A. Federal Rule of Civil Procedure 12(b)(3)
Rule 12(b)(3) and
B. Forum Non Conveniens
Under
In evaluating a motion for forum non conveniens, a court must first determine whether the relevant forum selection clause is valid under federal law. Doe 1 v. AOL, LLC,
"The Supreme Court has construed this exception narrowly," with unreasonableness being shown only if: (1) the clause was the result of fraud, undue influence, or overweening bargaining power; (2) the transferee forum "is so gravely difficult and inconvenient" that plaintiff would essentially be denied its day in court; or (3) "enforcement of the clause would contravene a strong public policy of California."
If none of the "unreasonableness" exceptions apply, the forum selection clause is deemed prima facie valid. District courts must then analyze the clause(s) at issue under § 1404(a) to determine whether public-interest factors weigh against dismissing the case. These public interest factors include "[ (1) ] the administrative difficulties flowing from court congestion; [ (2) ] the local interest in having localized controversies decided at home; [and (3) ] the interest in having the trial of a diversity case in a forum that is at home with the law." Atl. Marine,
ANALYSIS
A. Hilti Did Not Waive Its Right to Enforce the Forum Selection and Choice of Law Clauses When It Previously Argued for Transfer to the Northern District of Oklahoma
S & J argues that Hilti waived its right to assert that the case should be refiled in Oklahoma state court pursuant to the forum selection clause because it sought transfer to the Northern District of Oklahoma. While it is true that a forum selection clause is waived where the party invoking it has taken actions inconsistent with it, or delayed its enforcement, and enforcement would prejudice other parties, Wachovia Bank Nat. Ass'n v. EnCap Golf Holdings, LLC,
B. Hilti Is Not Judicially Estopped from Asserting the Forum Selection and Choice of Law Clauses As Grounds for Dismissal under Forum Non Conveniens
S & J also argues that Hilti is judicially estopped from asserting that the *985suit must be brought in state court after previously asserting that the proper forum was federal court. The doctrine of judicial estoppel prevents a party from taking a position that is inconsistent with or contradictory to a prior position such that it would be an affront to the court. Am. Booksellers Ass'n v. Barnes & Noble, Inc.,
S & J's argument fails the first requirement under Martin Marietta. It is true that Hilti argued previously that the case could be brought in either federal or state court and that it is now arguing the case must be brought in Oklahoma state court. The difference between these two positions, however, is not the kind of inconsistency or contradiction the doctrine of judicial estoppel is meant to prevent. Although the two positions may appear facially inconsistent, they are nonetheless generally consistent in that both positions are efforts to enforce the forum selection clause. Moreover, the reason for Hilti's shift in position was the Northern District of Oklahoma's ruling. That Hilti's first attempt to enforce the clause was predicated on a flawed interpretation thereof does not preclude another attempt that is predicated on the correct interpretation. In light of the Northern District of Oklahoma's ruling that the forum selection clause refers only to Oklahoma state court, Hilti is not judicially estopped from advocating for the enforcement of the forum selection clause as interpreted by that court.
C. It Is Not Unreasonable to Enforce the Forum Selection and Choice of Law Clauses Contracted for Because Doing So Does Not Contravene a Strong Public Policy of California
Hilti moves to dismiss this case, or, in the alternative, strike S & J's request for a jury trial, because of the forum selection and choice of law clauses agreed to by the parties. S & J contends that enforcing the forum selection and choice of law clauses in this context contravenes a strong public policy of California. The state of California does indeed have a strong public policy in favor of "[a]ffording its citizens effective consumer class-action remedies." Van Slyke v. Capital One Bank,
Hilti contends that where a valid choice of law provision mandates application of the law of another state, a plaintiff's claim under the UCL must be dismissed. For this proposition, Hilti cites Medimatch, Inc. v. Lucent Tech., Inc.,
Plaintiffs argue that enforcing the contracted-for forum selection and choice of law clauses would contravene California's public policy of affording its citizens effective class action remedies because: (1) the Oklahoma Consumer Protection Act ("OCPA") has no extraterritorial effect; and (2) that under 12 Okla. Ann. Stat. § 2023(D)(3), judges may limit class membership to (a) residents of Oklahoma or (b) nonresidents who "have a significant portion of the non-resident's cause of action arising from conduct occurring" in Oklahoma.
As to the first ground, S & J cites Steinbeck v. Dollar Thrifty Auto. Grp., Inc., No. 08-CV00378-CVE-PJC,
As to S & J's second rationale against enforcing the forum selection clause, Hilti presents a number of arguments that this Court finds persuasive. First, § 2023(D)(3) is permissive. Judges "may" limit the class to the two categories of people enumerated, but they are not required to. That the statute is permissive proves that enforcing the forum selection and choice of law clauses would not necessarily preclude Plaintiff from bringing its claim in Oklahoma state court. It cannot, therefore, be said that enforcing the forum selection and choice of law clauses would clearly contravene California's public policy in favor of class action remedies. Second, even if a judge were to limit the class pursuant to § 2023(D)(3), there is a good argument that Plaintiff would still qualify under the statute. As stated above, the Credit Applications explicitly state that all transactions made pursuant to the contract are deemed to have been made in Tulsa, Oklahoma. Such an agreement arguably means that Plaintiff "ha[s] a significant portion of [its] cause of action arising from conduct occurring" in Oklahoma.
Plaintiff argues that the district court for the Northern District of Oklahoma explicitly held the opposite and that Plaintiff would be unable to pursue a class action in Oklahoma. Pl.'s Opp. to Mot. to Dism., *987ECF No. 57, 12:26-28. They quote the following language from the court's order:
The analysis of whether the forum selection clause contravenes a strong public policy of California changes if the case were in Oklahoma state court versus federal court in Oklahoma, because Oklahoma limits class membership to residents of Oklahoma and nonresidents who either own property in Oklahoma or have a significant portion of their cause of action arise from conduct occurring within Oklahoma ... plaintiff would be unable to bring a class action in Oklahoma state court ... California has a public policy that strongly favors class actions, AOL,552 F.3d at 1083 , and therefore, the degree to which California's interests are implicated in this case changes depending on whether a federal forum is available.
Pl.'s Opp. to Mot. to Dism., ECF No. 57, 12:26-13:7 (quoting Northern District's Order, ECF No. 44, 7-8) (emphasis in the original). But Plaintiffs conveniently omitted the premises on which the Northern District of Oklahoma based the statement "plaintiff would be unable to bring a class action in Oklahoma state court." The order actually provides: "As a California resident with no property in Oklahoma asserting a claim based on conduct that occurred entirely in California, plaintiff would be unable to bring a class action in Oklahoma state court." Order, ECF No. 44, 7-8 (emphasis added). On those premises, the Northern District of Oklahoma is correct. As stated above, however, it remains unclear whether the facts here present a situation where the conduct forming the basis for the cause of action occurred entirely in California because the Credit Applications explicitly state that the transactions are deemed to have been made in Tulsa, Oklahoma. Moreover, the Northern District of Oklahoma went on to note that it "offer[ed] no opinion on whether this distinction would be dispositive...."
It is true that there is some possibility that an Oklahoma state court judge could decide to limit the class to residents, or, in the event the judge limited the class to non-residents whose causes of action arose from conduct occurring in Oklahoma, decide that the statement in the Credit Agreements was insufficient to put S & J within that category. The fact that such a decision merely could occur, however, does not necessarily mean holding S & J to the contract they bargained for contravenes California public policy. On the contrary, that it is merely possible suggests to this Court that S & J has not met its heavy burden of proving that enforcement is clearly unreasonable.
Relying on Harvell v. Goodyear Tire and Rubber Co.,
S & J also argues that because a federal forum is not available, its case now aligns with Doe 1 v. AOL LLC,
Additionally, although S & J is correct to point out that Van Slyke holds that affording its citizens effective class action remedies is a strong public policy of California, there are factual differences between Van Slyke and the present case sufficient to warrant a different outcome. Van Slyke involved oppressive adhesion contracts between a large bank and individual credit card consumers. Hilti, attempting to distinguish Van Slyke, argues that S & J is not a consumer. S & J contests this position, arguing that its status as a small business does not preclude it from being a consumer. Although the Court agrees with S & J that a small business can still technically be a consumer in that it can function as a patron or customer of another business, it is clear that S & J is not the same kind of consumer meant to be protected by the policy enumerated in Van Slyke. S & J is not an individual person dealing with a take-it-or-leave-it contract with a large bank. On the contrary, S & J is a corporation, albeit a small one, that deals with both the public and other businesses. In the same way that S & J's status as a small business does not preclude it from being a consumer neither does such status preclude it from being a sophisticated commercial party. Indeed, S & J deals with complex tools and equipment used in a variety of industrial contexts. Therefore, S & J is relatively sophisticated compared to the individual consumers in Van Slyke, and that difference undercuts the consumer protection rationale articulated in Van Slyke enough to compel a different conclusion.
In sum, the plain language of § 2023(D)(3) is sufficient to preclude this Court from concluding that enforcing the agreed upon forum selection and choice of law clauses, which require them to bring the case in Oklahoma state court under Oklahoma law, contravenes a strong public policy of California. As stated above, S & J bears a "heavy burden of proof" and must "clearly show that enforcement would be unreasonable." M/S Bremen,
D. The Public-Interest Factors Favor Dismissal
Having concluded that it is not unreasonable to enforce the forum selection and choice of law clauses, the Court must now consider whether public interest factors weigh against dismissal. As stated above, the public-interest factors include "[ (1) ] the administrative difficulties flowing from court congestion; [ (2) ] the local interest in having localized controversies decided at home; [and (3) ] the interest in having the trial of a diversity case in a forum that is at home with the law." Atl. Marine,
The first factor favors Defendant and dismissal because the Eastern District of California is one of the busiest courts in the nation. The second factor, on the other hand, seems to favor Plaintiff because the actual sale of the tools at issue allegedly took place in California. Nonetheless, the extent to which this factor favors Plaintiff is, presumably, limited by the extent to which the class will eventually be comprised of members across the nation. Finally, the third factor favors Defendant and dismissal because, pursuant to the choice of law clause in the Credit Applications, determining which state's substantive law applies to this matter depends on the application of Oklahoma's choice of law rules.
The single factor favoring Plaintiff's position is simply insufficient to constitute the "extraordinary circumstance" necessary to refrain from enforcing the forum selection and choice of law clauses the parties contracted for. Here, the presumption that forum selection and choice of law clauses should control prevails.
E. Freedom of Contract
Although the Court is satisfied that its analysis within the framework outlined above is sufficient in itself to justify this decision, there is another principle implicated by facts like those here that is worth noting: freedom of contract. Even if it was perfectly clear, contrary to the Court's findings above, that there was no chance that Plaintiff would be able to bring a case in Oklahoma, this Court would still be inclined to find that enforcing the forum selection and choice of law clauses does not necessarily contravene California's public policy of affording its citizens effective class action remedies. First, as stated above, the consumer protection rationale enumerated in Van Slyke, in which the plaintiffs were individual credit card customers who signed oppressive adhesion contracts, is undercut in this context because *990S & J is a relatively sophisticated entity. In addition, refraining from enforcing the forum selection and choice of law clauses undercuts the fundamental principle of freedom of contract. Specifically, such a holding would undermine contractual relationships between California businesses and businesses in other states. Affording California citizens effective class action remedies is important, and Van Slyke does provide a basis for concluding that that policy is contravened where big banks take advantage of unsophisticated individual consumers with oppressive adhesion contracts and consequently refusing to enforce a given forum selection or choice of law clause. But where a relatively sophisticated entity, even if it is a small one, is involved in arms-length contractual negotiations, it is not the job of the courts, or the government for that matter, to rescue the entity when the terms it contracted for later turn out to be unfavorable.
CONCLUSION
For all the foregoing reasons, Hilti's Motion to Dismiss (ECF No. 49) is GRANTED, and the instant lawsuit is dismissed, without prejudice. The matter having now been concluded in this Court, the Clerk is directed to close the file.
IT IS SO ORDERED.
The Court notes that Hilti's Notice of Motion refers mistakenly to the Motion to Transfer already adjudicated. The Court will construe the Notice as consistent with the relief sought in Hilti's supporting Points and Authorities.
Because oral argument would not be of material assistance, the Court ordered this matter submitted on the briefs. E.D. Cal. Local Rule 230(g).
Unless otherwise noted, the facts are taken from the parties' pleadings.
The Court notes that Hilti filed a Request for Judicial Notice as to the Order to Show Cause and other documents already docketed in this matter. Although judicial notice is not necessary as to the contents of the Court's own file, the Request for Judicial Notice was unopposed and is therefore GRANTED.
Because enforcing the forum selection and choice of law clauses does not contravene a strong California public policy, the Court need not address which state has a materially greater interest in the litigation. Similarly, having decided in Hilti's favor under forum non conveniens, the Court need not address Hilti's alternate request to strike S & J's demand for jury trial and declines to do so.
Reference
- Full Case Name
- S & J RENTALS, INC. d/b/a Twin Cities Equipment Rentals, a California corporation, individually and on behalf of all others similarly situated v. HILTI, INC., an Oklahoma corporation
- Cited By
- 7 cases
- Status
- Published