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Amberger v. Legacy Capital Corp.

United States District Court, S.D. New York

January 20, 2017

CHRISTOPHER AMBERGER, Plaintiff,
v.
LEGACY CAPITAL CORPORATION, et al., Defendants.

          ORDER GRANTING MOTION TO TRANSFER RE: DKT. NO. 10

          JACQUELINE SCOTT CORLEY United States Magistrate Judge

         In 1998, Plaintiff Christopher Amberger entered into an investment contract with Defendant Legacy Capital Corporation. The contract contains a forum selection clause which states that “[t]his agreement shall be governed by the laws of the State of New York and any litigation related hereto shall be brought in the State of New York.” Notwithstanding the forum selection clause, in 2016 Plaintiff sued Defendants in the Northern District of California regarding the investment. Defendants now move to enforce that clause and seek an order transferring this action to the Southern District of New York under 28 U.S.C. § 1404(a).[1] (Dkt. No. 10.) After carefully considering the parties' briefing and having had the benefit of oral argument on January 19, 2017, the Court GRANTS Defendants' motion and TRANSFERS this action to the Southern District of New York. Plaintiff could have filed this action originally in the Southern District of New York and Plaintiff has not met his heavy burden of showing that the forum selection clause should not be enforced.

         BACKGROUND

         Plaintiff Christopher Amberger, a California resident, entered into an investment contract with Legacy Capital Corporation, a New York corporation, through its agent Josh Brackett, in November of 1998. (First Amended Complaint (“FAC”) at ¶¶ 9-10.) Pursuant to the contract, Plaintiff provided Legacy Capital Corporation with $20, 000 for investment in two viatical settlement contracts. (Id.) A viatical settlement is a transaction in which a terminally ill insured sells the benefits of his life insurance policy to a third party in return for a lump-sum cash payment equal to a percentage of the policy's face value. (Id. at ¶ 3.) Legacy Capital Corporation acquires these life insurance policies and “solicit[s] investors to pool together to purchase fractional shares in the policies.” (Id. at ¶ 4.) Both viators (holders of the life insurance policies) for the settlement contracts Plaintiff invested in are still alive and Plaintiff has yet to receive a return on his investment. (Id. at ¶¶ 25-29.) In October 2015 his interest in the two polices was cancelled. (Id. at ¶ 30.)

         A year later, Plaintiff filed this action against Legacy Capital Corporation and its alter egos Legacy Benefits Corporation, and Legacy Benefits, LLC (collectively “Legacy”), as well as Mills, Potoczak & Company, the successor to Wesley, Mills & Company who was the escrow agent under the investment contract. (Dkt. No. 1.) Plaintiff alleges violations of (1) California's Consumer Legal Remedies Act (“CLRA”); (2) fraud; (3) breach of fiduciary duty; (4) violation of the California Securities Act[2]; and (5) declaratory relief. Defendants thereafter moved to transfer venue to the Southern District of New York under Section 1404(a) based on the forum selection clause in the parties' investment contract. (Dkt. No. 14 at 27.[3]) Plaintiff failed to timely file an opposition to the motion to transfer, and instead, nearly two weeks after the opposition was due, filed an opposition and an amended complaint.[4] (Dkt. Nos. 14 & 15.) Defendants thereafter filed a reply. (Dtk. No. 16.)

         DISCUSSION

         “For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.” 28 U.S.C. § 1404(a). When a case concerns an enforcement of a forum selection clause, section 1404(a) provides a mechanism for its enforcement and “a proper application of § 1404(a) requires that a forum-selection clause be given controlling weight in all but the most exceptional cases.” Atlantic Marine Const. Co., Inc. v. U.S. Dist. Court for W. Dist. Of Tex., 134 S.Ct. 568, 579 (2013) (internal quotation omitted). This weight is due because the “enforcement of valid forum-selection clauses, bargained for by the parties, protects their legitimate expectations and furthers vital interests of the justice system.” Id. at 581. In particular, the court should give no weight to “the plaintiff's choice of forum” or “the parties' private interests.” (Id. at 581-82.) Instead, the court “may consider arguments about public-interest factors only.[] Because those factors will rarely defeat a transfer motion, the practical result is that forum-selection clauses should control except in unusual cases.” Id. at 582.

         A. The Forum-Selection Clause

         Plaintiff does not dispute that the parties' contract contains a forum selection clause which states: “Section 12. This agreement shall be governed by the laws of the State of New York and any litigation related hereto shall be brought in the State of New York.” (Dkt. No. 14 at 27.) Instead, Plaintiff argues that transfer is improper because (1) the action could not have been brought in the transferee court in the first instance, and (2) enforcement of the forum selection clause is unreasonable. Neither argument is availing.

         1. Transfer Does Not Destroy Diversity Jurisdiction

         Section 1404(a) provides that a court may transfer a case to a district “where it might have been brought.” 28 U.S.C. § 1404(a). Plaintiff argues that his case could not have been brought in the Southern District of New York because there would not be diversity jurisdiction. Plaintiff misunderstands diversity jurisdiction. A district court has diversity jurisdiction “where the matter in controversy exceeds the sum or value of $75, 000, ... and is between citizens of different states, or citizens of a State and citizens or subjects of a foreign state....” Id. § 1332(a)(1)-(2); see also Diaz v. Davis (In re Digimarc Corp. Derivative Litig.), 549 F.3d 1223, 1234 (9th Cir. 2008) (“diversity jurisdiction requires complete diversity between the parties-each defendant must be a citizen of a different state from each plaintiff.”) The parties are diverse-Plaintiff is a California resident and Defendants are residents of New York, Delaware, and Ohio- and Plaintiff has alleged that the amount in controversy requirement is satisfied. (FAC at ¶ 33.) Whether the action is venued in New York or this District, the district court has diversity jurisdiction.

         Plaintiff's reliance on the “forum defendant rule” for removal jurisdiction in 28 U.S.C. section 1441(b)(2) is misplaced. The forum defendant rule “imposes a limitation on actions removed pursuant to diversity jurisdiction: ‘such action[s] shall be removable only if none of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.'” Spencer v. U.S. Dist. Court for N. Dist. of Ca., 393 F.3d 867, 870 (9th Cir. 2004) (quoting 28 U.S.C. § 1441(b)) (emphasis added). The removal rules do not apply here. Section 1404(a) states that an action can be transferred to a district where it “might have been brought, ” not to a district where it might have been removed from state court. Since the Southern District of New York would have diversity jurisdiction and venue of this action, it might have been brought there and thus transfer to New York is an available remedy.

         2. The Reasonableness of the Forum Selection Clause

         Forum-selection clauses are “prima facie valid and should be enforced unless enforcement is shown by the resisting party to be ‘unreasonable' under the circumstances.” M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). This exception is construed narrowly. Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 325 (9th Cir. 1996). “A forum selection clause is unreasonable if (1) its incorporation into the contract was the result of fraud, undue influence, or overweening bargaining power; (2) the selected forum is so gravely difficult and inconvenient that the complaining party will for all practical purposes be deprived of its day in court; or (3) enforcement of the clause would contravene a strong public policy of the forum in which the suit is brought.” Id. (internal citations and quotation marks omitted). “[T]he party seeking to avoid a forum selection clause bears a ‘heavy burden' to establish a ground upon which ...


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