Cowin Equip. Co. v. Terex USA, LLC (Ex parte Terex USA, LLC)

Citation: 260 So. 3d 813Docket: 1161113

Court: Supreme Court of Alabama; March 30, 2018; Alabama; State Supreme Court

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Terex USA, LLC petitions for a writ of mandamus to compel the Jefferson Circuit Court to enforce a forum-selection clause in its distributorship agreement with Cowin Equipment Company, Inc., and to dismiss Cowin's lawsuit for improper venue under Alabama Rule of Civil Procedure 12(b)(3). The Court denies the petition. Prior to August 2015, Cowin, an authorized dealer for Liebherr Group, transitioned to a distributorship agreement with Terex based on assurances of exclusivity in selling Terex equipment in Alabama, Georgia, and Florida. The agreement included a clause stating that any disputes would be exclusively resolved in the United States District Court for the Northern District of Georgia or the State Court in Atlanta, Georgia. After the agreement, Terex re-entered into a deal with Warrior Tractor Equipment Company without notifying Cowin, which Cowin claims violates industry norms. In June 2017, Cowin sued Terex and Warrior, citing violations of the Alabama Heavy Equipment Dealer Act (AHEDA). Terex subsequently moved to dismiss based on the forum-selection clause, which Cowin opposed on the grounds that enforcing it would contravene public policy under the AHEDA. Terex countered that the AHEDA does not prohibit such clauses and that Cowin's cited cases were inapplicable. The trial court denied Terex's motion to dismiss, prompting this petition for mandamus. The standard for issuing such a writ requires a clear legal right, an imperative duty for the respondent, the absence of an adequate remedy, and proper jurisdiction.

An outbound forum-selection clause, which specifies that disputes will be tried outside Alabama, pertains to venue rather than jurisdiction. A motion to dismiss based on such a clause is appropriately filed under Rule 12(b)(3) for improper venue, and parties may introduce evidence to support this motion. The trial court's decision to enforce a forum-selection clause is subject to an abuse of discretion standard. Outbound forum-selection clauses are generally considered valid and enforceable unless the resisting party demonstrates that enforcement would be unreasonable, unfair, or inconvenient, or if the clause was influenced by fraud or overreaching.

To dismiss an action based on an outbound forum-selection clause, the party seeking dismissal must first establish the clause's existence within a contract. The burden then shifts to the opposing party to prove that enforcing the clause would be unreasonable or unjust. The challenging party faces a significant burden, as noted by the Alabama court, and must meet specific criteria to invalidate the clause, including fraud in its formation, deprivation of a fair trial, the chosen law denying a remedy, or contravention of public policy.

Terex asserts that Alabama recognizes the validity of forum-selection clauses and that the legislature has not indicated a desire to undermine this practice. Conversely, Cowin argues that there is a strong public policy favoring heavy-equipment dealers that would render the outbound forum-selection clause unenforceable in this instance.

Outbound forum-selection clauses are not inherently void under Alabama public policy, as established in Sutherland. However, the Alabama legislature has the authority to enact laws that shape the state's fundamental public policy regarding such clauses. Currently, the Alabama Heavy Equipment Distribution Act (AHEDA) does not explicitly prohibit these clauses, necessitating an examination of the AHEDA to discern any legislative intent against them. The principles of statutory construction dictate that courts must seek to understand the legislative intent behind statutes, focusing on their language and purpose. The AHEDA underscores the significance of heavy equipment distribution to the state's economy and public welfare, leading to regulations aimed at preventing fraud and unfair business practices. Specific provisions include prohibitions on suppliers unilaterally terminating distributorship agreements without just cause, requirements for advance notice of amendments or terminations, and limitations on entering agreements with new dealers without informing existing ones. Additionally, suppliers are barred from acting in a manner that is arbitrary, bad faith, or unconscionable towards dealers.

Cowin asserts that the Alabama Heavy Equipment Dealers Act (AHEDA) establishes a public policy opposing the enforcement of forum-selection clauses. He highlights that Section 8-21B-13 of the AHEDA grants heavy-equipment dealers the right to initiate legal action in Alabama, regardless of any conflicting terms in their dealer agreements. Terex argues that this section allows for actions to be brought in Alabama but does not prohibit actions in other jurisdictions, emphasizing the legislature's use of "may" rather than "shall," which they claim preserves contractual freedom regarding dispute resolution.

Cowin counters this by interpreting the phrase "in this state" as indicating a legislative intent for disputes under the AHEDA to be exclusively resolved in Alabama. He argues that the phrase "notwithstanding the terms, provisions, or conditions of any dealer agreement" reinforces this intention, permitting action in Alabama despite any outbound forum-selection clauses. He concludes that the AHEDA's provisions are incorporated into dealer agreements, overriding any inconsistent terms. Section 8-21B-9 further supports this by stating that the AHEDA supersedes any conflicting provisions in dealer agreements.

The outbound forum-selection clause in the distributorship agreement mandates that disputes be exclusively resolved in federal court in the Northern District of Georgia or in state court in Atlanta. Cowin argues this clause conflicts with the dealer's right under Ala. Code 8-21B-13 to initiate actions within the state, asserting that it is thus superseded by the Alabama Dealer's Protection Act (AHEDA) and is unenforceable. Cowin further contends that Ala. Code 8-21B-8(d) prohibits requiring a dealer to waive any protections granted under the AHEDA, including the right to bring actions in Alabama. This section declares any provisions that seek to waive such rights void and unenforceable. Terex counters that 8-21B-8(d) lacks specific language regarding forum selection or venue and does not establish Alabama as the exclusive venue for AHEDA actions. The excerpt cites Wimsatt v. Beverly Hills Weight Loss Clinics International, Inc., which invalidated a similar outbound forum-selection clause under California’s antiwaiver statute, emphasizing that such clauses risk undermining state protections by mandating litigation in forums where state laws may not apply. The ruling highlights the importance of ensuring that franchisees retain the benefits of local laws, suggesting forum-selection clauses can effectively waive rights protected by state statutes if they lead to litigation in jurisdictions with differing legal standards.

Hall v. Superior Court established that enforcing a Nevada forum selection clause in securities litigation was inappropriate due to potential application of Nevada law contradicting California's choice of law. In Wright-Moore Corp. v. Ricoh Corp., the enforcement of a choice-of-law provision in a franchise agreement was deemed contrary to Indiana's public policy, which prohibits waiver of certain statutory protections for franchisees. The Indiana statute aims to prevent franchisors from using their bargaining power to compel franchisees to relinquish legal rights. Cowin argues that enforcing a forum-selection clause would violate Alabama's public policy as outlined in 8-21B-8(d), undermining protections under the Alabama Franchise Dealers Act (AHEDA). Terex asserts that 8-21B-8(d) should be interpreted alongside the Alabama Motor Vehicle Franchise Act (MVFA), which explicitly prohibits provisions that would limit a dealer's rights, including those related to jurisdiction and venue for disputes. The emphasis in the MVFA indicates a legislative intent to invalidate forum-selection clauses in franchise agreements.

Terex argues that the absence of express language prohibiting forum-selection clauses in the AHEDA, unlike the MVFA, indicates that the legislature did not intend to prohibit such clauses. The principle of in pari materia applies, meaning related statutes can be analyzed together to determine legislative intent, even if they do not share identical subject matter. The AHEDA provides protections for heavy-equipment dealers, including the right to pursue claims in Alabama and prohibits any provisions in dealer agreements that would waive supplier liability or limit recovery under the AHEDA, declaring such provisions void and unenforceable. Although the AHEDA does not explicitly address outbound forum-selection clauses, the overall legislative intent is interpreted as opposing any agreement that would deprive dealers of their remedial rights under the AHEDA. The court concludes that Terex has not demonstrated a clear legal right to the relief sought, denying its petition for a writ of mandamus. The decision is supported by a majority, with some justices concurring in the result and one dissenting. The choice-of-law provision in the distributorship agreement, indicating Georgia law, remains unchallenged.