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Craig v. Worldwide Mixed Martial Arts Sports Incorporated

United States District Court, D. Arizona

July 8, 2014

Wayne Craig, Plaintiff,
v.
Worldwide Mixed Martial Arts Sports Incorporated, et al., Defendants.

ORDER

DAVID G. CAMPBELL, District Judge.

Defendants have moved to dismiss Plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(b)(2)-(5) and on the ground of forum non conveniens. Doc. 6. Defendants have also moved to transfer the case to the District of New Jersey pursuant to 28 U.S.C. § 1404(a). Id.; Doc. 3. The motion is fully briefed. The Court will grant in part and deny in part Defendants' motion.[1]

I. Background.

Defendants Worldwide Mixed Martial Arts Sports ("WMMA"), Worldwide MMA USA, Inc. ("WUSA"), WMMA Holdings, Inc. ("WMMAH"), and various corporate officers are in the business of organizing and operating mixed martial arts events, fights, and promotions. Doc. 1-1, ¶ 15. Plaintiff's complaint alleges that he invested $250, 000 with Defendants after learning about their business from a document entitled Confidential Private Placement Memorandum ("CPPM"). The parties' relationship is memorialized in a Regional Promoter Agreement ("RPA"). Id., ¶¶ 16-17. The CPPM and RPA allegedly contain material representations of fact that are not true. Doc. 1-1, ¶ 20. Instead of actually organizing a network of promoters that would stage mixed martial arts competitions, Defendants allegedly used investment proceeds acquired from Plaintiff to pay pre-existing liabilities. Id., ¶ 23.

The RPA contains a forum-selection clause that provides: "Disputes, between the Parties that cannot be settled after a 30-day Cure Period will be resolved in a non-jury trial in the federal district court in the state where WUSA's current headquarters resides." Doc. 6-1 at 14, ¶ 20. Plaintiff filed a complaint in Maricopa County Superior Court on August 30, 2013, asserting a claim for fraud in connection with the offer and sale of securities in violation of A.R.S. § 44-1991 and a claim for rescission. Doc. 1-1 at 2, 12, 14. The case was removed to federal court on January 30, 2014. Doc. 1. Defendants filed their motion to dismiss on February 26, 2014. Doc. 6. Defendants assert lack of personal jurisdiction, improper venue, insufficient process, and insufficient service of process. Id. at 2. They also assert that the case should be transferred pursuant to the forum-selection clause. Doc. 3. Because the Court finds that the forum-selection clause should be enforced, it will not address Defendants' other arguments.

II. Legal Standard.

A. Enforcement of Forum-Selection Clauses.

Federal law governs the enforceability and interpretation of forum-selection clauses. See Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 513 (9th Cir. 1988). Such clauses are presumptively valid, see Doe 1 v. AOL LLC, 552 F.3d 1077, 1083 (9th Cir. 2009) (citation omitted), and should not be set aside unless the party challenging enforcement of the provision can show that enforcement would be unreasonable, see Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 325 (9th Cir. 1996). There are three circumstances where enforcement may be unreasonable: "(1) if the inclusion of the clause in the agreement was the product of fraud or overreaching; (2) if the party wishing to repudiate the clause would effectively be deprived of his day in court were the clause enforced; and (3) if enforcement would contravene a strong public policy of the forum in which suit is brought." Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1140 (9th Cir. 2004) (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-13, 15, 18 (1972)). The party challenging the clause has a heavy burden of proof. Id.

B. Motion to Transfer Pursuant to 28 U.S.C. § 1404(a).

A forum-selection clause may be enforced by a motion to transfer under 28 U.S.C. § 1404(a). Atlantic Marine Constr. Corp. v. U.S. Dist. Court for W. Dist. of Tex., 134 S.Ct. 568, 575 (2013). If a defendant files such a motion, "a district court should transfer the case unless extraordinary circumstances unrelated to the convenience of the parties clearly disfavor a transfer." Id.

District courts may decide motions to transfer according to individualized, case-by-case considerations of convenience and fairness. Van Dusen v. Barrack, 376 U.S. 612, 622 (1964); Ventress v. Japan Airlines, 486 F.3d 1111, 1118 (9th Cir. 2007) (noting that the decision to change venue is left to the discretion of the district court). In the typical case not involving a forum-selection clause, "a district court considering a § 1404(a) motion must evaluate both the convenience of the parties and various public interest considerations." Atlantic Marine, 134 S.Ct. at 581. In such circumstances, "the district court would weigh the relevant factors and decide whether, on balance, a transfer would serve the convenience of the parties and witnesses' and otherwise promote the interest of justice.'" See id. (citing § 1404(a)).

"The calculus changes, however, when the parties' contract contains a valid forum-selection clause, which represents the parties' agreement as to the most proper forum." Id. (internal quotation marks and citation omitted). The presence of a valid forum-selection clause requires the district court to adjust its usual § 1404(a) analysis in three ways. First, the plaintiff's choice of forum merits no weight and the party defying the forum-selection clause bears the burden of establishing that transfer to the forum for which the parties bargained is unwarranted. Id. Second, a court evaluating a defendant's § 1404(a) motion to transfer based on a forum-selection clause should not consider arguments about the parties' private interests. "When parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the litigation." Id. at 582. A court must deem the private-interest factors to weigh entirely in favor of the preselected forum and may consider arguments about public interest factors only. Id. "[T]hose factors will rarely defeat a transfer motion, " and a "forum-selection clause[] should control except in unusual cases." Id. Third, a § 1404(a) transfer will not carry with it the original venue's choice-of-law rules. Id.

III. Analysis.

Defendants' principal argument is that the forum-selection clause should be enforced as to all claims and all parties and that the case should be dismissed pursuant to Rule 12(b)(2) and 12(b)(3). Doc. 6 at 9. But a forum-selection clause cannot be enforced by moving to dismiss under Rule 12(b); it must be enforced by moving to transfer under § 1404(a). Atlantic Marine, 134 S.Ct. at 575. Elsewhere in their briefing, Defendants urge the Court to enforce the forum-selection clause by transferring the ...


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