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MTR Capital, LLC v. Lavida Massage Franchise Development, Inc.

United States District Court, E.D. Michigan, Southern Division

April 16, 2018

MTR CAPITAL, LLC, Plaintiff,
v.
LAVIDA MASSAGE FRANCHISE DEVELOPMENT, INC., PEGGY DAVIS, and DUANE GOODWIN, Defendants.

          ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS

          John Corbett O'Meara, United States District Judge.

         This case arises out of a franchise agreement entered into by the parties. Plaintiff MTR Capital, LLC (“MTR”) alleges in its complaint that Defendants, LaVida Massage Franchise Development, Inc. (“LaVida”), Peggy Davis, and Duane Goodwin, induced MTR to open a franchised spa through the use of affirmative misrepresentations and fraudulent omissions. In addition, MTR alleges that franchisor LaVida breached the Franchise Agreement by failing to provide support, services and guidance as required. In lieu of answering the complaint, Defendants filed motions to dismiss[1] asserting that jurisdiction and venue are improper in the United States District Court for the Eastern District of Michigan pursuant to the Franchise Agreement's forum selection clause. Alternatively, Defendants argue that that the matter should be dismissed pursuant to the doctrine of forum non conveniens.

         STANDARD OF REVIEW

         In addressing a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction that attacks the plaintiff's complaint on its face, a court is required to consider the allegations of the complaint as true. RMI Titanium Co. v. Westinghouse Electric Corp., 78 F.3d 1125, 1134 (6th Cir. 1996).

         Whether jurisdiction is properly conferred upon the court through a forum selection clause is a matter of contract distinct from the issue of whether venue is proper. Kerobo v. Southwestern Clan Fuels, Corp., 285 F.3d 531, 535 (6th Cir. 2002).

         A defendant invoking forum non conveniens bears a heavy burden in opposing the plaintiff's chosen forum. Sinochem Intern. Co. Ltd. v. Malaysia Intern. Shipping Corp., 549 U.S. 422, 430 (2007). When the parties have contractually agreed in advance as to the proper forum for adjudicating any dispute, that forum selection clause represents their agreement as to the most proper location for adjudication of the dispute and “should be ‘given controlling weight in all but the most exceptional cases.'” Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S.Ct. 568, 574 (2013) (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 23 (1988)).

         ANALYSIS

         MTR is a Florida limited liability company with its principal place of business in Miami-Dade County, Florida. LaVida is a Michigan corporation with its principal place of business in Livingston County, Michigan. Mr. Goodwin is a Master Area Developer responsible for new franchisees in the southeastern region of the United States, and is an agent of LaVida who resides in Georgia. Ms. Davis is the President and CEO for LaVida and resides in Michigan. The parties are completely diverse and the amount in controversy is alleged to exceed $75, 000. Therefore, this court has subject-matter jurisdiction over the dispute.

         Venue is also proper in this court pursuant to 28 U.S.C. § 1391 because one or more defendants reside in this judicial district and a substantial part of the events or omissions giving rise to the claim occurred in this judicial district. Defendants do not disagree that subject-matter jurisdiction and venue are proper, rather they argue that the parties contractually agreed to litigate any disputes arising out of the Franchise Agreement in Livingston County.

         In this case, the Franchise Agreement entered into by the parties, which was attached to the complaint, contains a clause that discusses exclusive jurisdiction and forum selection. Therefore, in order to determine whether this action was properly brought in the United States District Court for the Eastern District of Michigan, the court refers to the parties' agreement. Section XXI provides:

E. Exclusive Venue. Franchisor and Franchisee (and their respective owners and guarantors, if applicable) each agree to submit to the exclusive jurisdiction of the state and federal courts of Michigan with respect to any litigation pertaining to this Agreement or to any aspect of the business relationship between the parties, even if additional persons are named as parties to such litigation (unless the courts of Michigan would have no jurisdiction over such additional parties). No action or proceeding involving this Agreement or any aspect of the relationship between the parties or their agents or affiliates shall be commenced by any party except in Livingston County, Michigan, nor shall any such action be transferred to any other venue. Notwithstanding the foregoing, if we are permitted to seek injunctive relief under this Agreement, we may, at our option, bring such action in the county in which any of the Centers is located.

         In Michigan, the interpretation of a contract is a matter of law. Davis v. LaFontaine Motors, Inc., 271 Mich.App. 68, 73 (2006). A contract is to be construed based on is plain and ordinary meaning. Wilie v. Auto-Owners Ins. Co., 469 Mich. 41, 47 (2003). If a contract is unambiguous, it reflects the parties' intent as a matter of law and must be enforced as written. Holland v. Trinity Health Care Corp., 287 Mich.App. 524 (2010). Courts must avoid an interpretation that would render any part of a contract surplusage or nugatory. Lapp v. United Ins. Group Agency, Inc., 468 Mich. 459 (2003).

         The first sentence of the forum selection clause addresses jurisdiction: the parties “agree to submit to the exclusive jurisdiction of the state and federal courts of Michigan.” The agreement does not merely allow the parties to submit their case to a court of Michigan, but rather requires the parties to do so. Furthermore, the use of the conjunction “and” preceding “federal courts of Michigan” denotes “in addition to” rather than “as an alternative to.” That is, the parties agreed that any litigation pertaining to the Franchise Agreement would have jurisdiction in the state and federal courts of Michigan. The second sentence of Section XXI(E) addresses venue and provides that “[n]o action or proceeding involving this Agreement or any aspect of the relationship between the parties . . . shall be commenced by any party except in Livingston County, Michigan, nor shall any such action be transferred to any other venue.” Defendants argue that the plain and ordinary language of the word “commence” is to begin, and in the case of litigation it means to file a complaint. Therefore, defendant contends that the sentence means that plaintiff's complaint had to be filed in Livingston County rather than in Wayne County, where this federal court sits.

         This sentence does not state where the court must be physically located, only that the action be commenced in Livingston County. Plaintiff argues the sentence should be construed as setting forth a geographic region of all available courts whose territorial limitations include Livingston County. Indeed, if one were to commence an action in state court in Livingston County, one would do so in the Livingston County Circuit Court. Similarly, if one were to commence an action in federal court in Livingston County, one would do so in the United ...


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