Court: District Court, D. Minnesota; September 28, 2016; Federal District Court
Valspar Corporation filed a motion to remand its case against former employee John Sherman and his new employer, TCI, Inc., back to Hennepin County District Court, citing a forum selection clause in Sherman's employment agreement that restricts disputes to that court. Valspar alleged Sherman violated non-compete and non-solicitation terms after leaving for TCI and that TCI tortiously interfered with the agreement. TCI removed the case to federal court, claiming Sherman consented to the removal, although formal notification was delayed. Valspar argued that the forum selection clause rendered Sherman's consent ineffective under 28 U.S.C. 1446. TCI countered by asserting that the clause did not provide a "clear and unequivocal" waiver of the right to remove, and that even if Sherman had waived this right, TCI, as a non-party, could still remove the case. The court ultimately granted Valspar's motion to remand the case back to state court.
28 U.S.C. § 1441 grants defendants in state civil cases the right to remove such cases to federal district court if they could have originally been filed there. Plaintiffs can seek remand if there is a lack of subject matter jurisdiction or if removal is otherwise improper, as outlined in 28 U.S.C. § 1447(c). Courts, including the Eighth Circuit, have determined that removal is improper when a valid forum selection clause mandates that disputes be litigated in state court. The validity and enforceability of these clauses have been reaffirmed by the Supreme Court, emphasizing the importance of honoring parties' pre-agreed litigation forums.
In instances where there are no claims of fraud regarding the forum selection clause, the primary consideration is whether the clause waives the right to remove to federal court. The Eighth Circuit mandates that any waiver of the right to remove must be "clear and unequivocal." It has provided limited guidance on this standard, indicating that a general agreement for state venue does not imply a removal waiver if it does not explicitly address that right. However, a more explicit clause, as seen in iNet Directories, LLC v. Developershed, Inc., where the parties waived objections to venue in Missouri courts, was interpreted as a waiver of the right to remove to federal court.
Several district courts have determined that a simple agreement indicating proper venue does not constitute a "clear and unequivocal" waiver of the right to remove a case, while an explicit waiver of the right to object to venue does. This interpretation lacks comprehensive guidelines for analyzing forum selection clauses, prompting courts in the circuit to reference decisions from other circuits that apply a "clear and unequivocal" standard. The Fifth Circuit outlines that a forum selection clause meets this requirement if it (1) explicitly waives the right to remove, (2) allows the other party to select the venue, or (3) establishes an exclusive venue. In the current case, the forum selection clause specifies disputes will be resolved exclusively in Hennepin County, Minnesota, demonstrating the parties' intention to restrict venue to that jurisdiction. The exclusive nature of this clause indicates that submission to one court excludes all others.
Despite this, TCI argues that this interpretation inadequately protects parties like Sherman and misinterprets Eighth Circuit law, particularly referencing Weltman and iNet Directories. TCI claims that a forum selection clause must explicitly address removal to meet the "clear and unequivocal" standard, implying that without the terms "waive" and "removal," such clauses would not satisfy the requirements outlined by the Fifth Circuit.
The Court expresses skepticism about the Eighth Circuit adopting a rigid "magic words" standard for contract interpretation and jurisdiction, which would diverge from other circuits' practices. It asserts that a forum selection clause does not need to explicitly mention terms like "waiver of right of removal" but must clearly designate a specific forum as the exclusive venue for dispute resolution. Citing relevant cases, the Court notes that similar clauses in the Eighth Circuit have been deemed clear and unequivocal without needing explicit waiver language. The Court concludes that the mandatory forum selection clause in this case, while lacking explicit waiver language, sufficiently indicates the parties' intent to limit litigation to the Circuit Court of St. Louis County, Missouri. It emphasizes that interpreting the clause in a manner that diminishes its express terms would be unjust and contrary to the parties' clear expectations, rejecting any notion that such language allows for removal to federal court.
TCI contends that even if Sherman waived his right to consent to the removal of the case to federal court, this should not prevent TCI from removing the entire action. However, the "rule of unanimity" mandates that all defendants in a multi-defendant case must consent to removal; failure of any defendant to do so renders the removal defective. The Eighth Circuit has not specifically ruled on this issue, but other courts have consistently held that a valid forum selection clause preventing one defendant from consenting to removal also bars removal by any defendant. The Court finds no reason to deviate from this established principle. The order concludes with granting Plaintiff's Motion to Remand and instructing the Clerk of Court to send a certified copy of the order to Hennepin County District Court. The Court also notes TCI's failure to address the implications of the forum selection clause in iNet Directories regarding removal. Additionally, three exceptions to the rule of unanimity are identified: 1) a co-defendant not served when the removal petition is filed, 2) a co-defendant being merely nominal, and 3) when the removed claim is separate and independent under 28 U.S.C. 1441(c).
