United States District Court, D. Arizona
ORDER
Dominic W. Lanza United States District Judge
Pending
before the Court is Defendant Spring Excellence Surgical
Hospital, LLC's (“SESH”) Renewed Motion to
Transfer Venue to the Southern District of Texas. (Doc. 149.)
The motion is fully briefed and neither party has requested
oral argument. For the reasons that follow, the motion will
be denied.
BACKGROUND
Plaintiff
Advanced Reimbursement Solutions, LLC (“ARS”) is
a third-party medical billing service located in Phoenix,
Arizona that contracts with medical providers to process and
bill out-of-network health insurance claims. (Doc. 136
¶¶ 1, 12.) ARS alleges that it entered into a
contract, the Executive Billing Agreement (the “Billing
Agreement”), with SESH, a hospital located in Texas,
and that SESH did not fully perform under the Billing
Agreement. (Id. ¶¶ 3, 39-65, 83-99.)
Joanna Davis (“Davis”), representing herself to
be SESH's CEO, executed the Billing Agreement on behalf
of SESH. (Id. ¶ 49.) Initially, SESH and Davis
were both named as defendants, but ARS recently dismissed
Davis as a party. (Doc. 175.)
SESH
previously requested to transfer venue to the Southern
District of Texas. (Doc. 22.) The Court ruled that venue was
proper in this District and declined to “address
whether the Southern District of Texas is a more convenient
forum” because SESH had “fail[ed] . . . to
develop this argument.” (Doc. 40 at 7 & n.1.)
SESH
now renews its motion to transfer under 28 U.S.C. §
1404(a) and § 1412. SESH contends this case has many
ties to the Southern District of Texas, including that: (1)
SESH's business operations are located in the Southern
District of Texas; (2) the three initial managers and the
individuals with ownership interests in the sole initial
member, Excellence Medical Group, LLC (“EMG”), of
SESH and the current controlling member of the entity with a
controlling interest in SESH are residents of the Southern
District of Texas; (3) SESH and related entities initiated a
lawsuit against EMG and its principals in the Southern
District of Texas on May 8, 2017; (4) EMG filed a voluntary
petition for Chapter 7 bankruptcy protection in Bankruptcy
Court for the Southern District of Texas on October 30, 2017;
(5) Devorshia Russell, one of SESH's initial managers,
filed a voluntary petition for Chapter 11 bankruptcy in
Bankruptcy Court for the Southern District of Texas on April
28, 2018; and (6) Davis filed a voluntary petition for
Chapter 7 bankruptcy in Bankruptcy Court for the Southern
District of Texas on July 18, 2018. (Doc. 149 at 3-4; Doc.
149-1 [Exs. 1-3].) SESH further asserts that it intends to
assert cross-claims against Davis and (possibly) third-party
claims against Russell and that, under the forum-selection
clause in SESH's initial operating agreement, such claims
would need to be litigated in the Southern District of Texas.
(Doc. 149 at 10-11.)
In its
response, ARS points out that SESH failed to acknowledge, let
alone seek to distinguish, a different forum-selection
clause. (Doc. 182 at 2.) Specifically, the Billing
Agreement-the very contract at issue in this case-contains a
forum-selection clause that provides, in relevant part:
[E]ach party irrevocably submits to the exclusive
jurisdiction of the federal and state courts located in
Phoenix, Arizona for the purposes of any action or proceeding
arising out of or relating to this Agreement. Each party
hereby consents to such jurisdiction and agrees that venue
shall lie in the state or federal courts within Phoenix,
Arizona with respect to any claim or cause of action arising
under or relating to this Agreement. Each party hereby waives
any objection based on forum non conveniens and
waives any objection to venue of any action instituted
hereunder.
(Doc. 182-1 at 9.) Even in its reply, SESH for the most part
ignores ARS's forum-selection clause argument, but does
at least imply that it shouldn't be bound by the
forum-selection clause because Davis lacked authority to
execute the Billing Agreement on its behalf. (See
Doc. 185 at 8 [“ARS . . . argues that SESH waived any
argument against litigating in Arizona because SESH is
allegedly bound by a contract, which Davis signed without
proper authority, to litigate in Arizona, which is only
convenient for ARS.”].) SESH's statement relates to
what appears to be one of its defenses to the entire
action-that Davis did not have authority to bind SESH.
ANALYSIS
“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).[1] Ordinarily, under § 1404(a), a
district court conducts a two-step analysis, determining
first “whether the case could have been brought in the
forum to which the moving party seeks to transfer the
case” and second “whether the proposed transferee
district is a more suitable choice of venue based upon the
convenience of the parties and witnesses and the interests of
justice.” R. Prasad Indus. v. Flat Irons Envtl.
Sols. Corp., 2017 WL 4409463, *2-3 (D. Ariz. 2017)
(quoting Park v. Dole Fresh Vegetables, Inc., 964
F.Supp.2d 1088, 1093 (N.D. Cal. 2013)). When making the
second determination, the court will consider a variety of
factors, including those enumerated by the Ninth Circuit in
Jones v. GNC Franchising, Inc., 211 F.3d 495, 498-99
(9th Cir. 2000).
“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.'” Atl. Marine Const. Co. v. U.S.
Dist. Court for W. Dist. of Tex., 571 U.S. 49, 63 (2013)
(quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S.
22, 31 (1988)). Because “enforcement of valid
forum-selection clauses, bargained for by the parties,
protects their legitimate expectations and furthers vital
interests of the justice system, ” “a valid
forum-selection clause [should be] given controlling weight
in all but the most exceptional cases.” Atl.
Marine, 571 U.S. at 63 (citation omitted).
“The
presence of a valid forum-selection clause requires district
courts to adjust their usual § 1404(a) analysis in three
ways.” Atl. Marine, 571 U.S. at
63.[2]
One adjustment is that courts “should not consider
arguments about the parties' private interests” and
instead “may consider arguments about public-interest
factors only.” Id. at 64.[3] This is so
because, “[w]hen 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.
With
this backdrop in mind, the Court begins by considering the
validity of the forum-selection clause in the Billing
Agreement. “Forum selection clauses are prima
facie valid, and are enforceable absent a strong showing
by the party opposing the clause ‘that enforcement
would be unreasonable or unjust, or that the clause [is]
invalid for such reasons as fraud or
overreaching.'” Manetti-Farrow, Inc. v. Gucci
...