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 seeks a writ of mandamus to compel the Jefferson Circuit Court to enforce a forum-selection clause in a distributorship agreement with Cowin Equipment Company, Inc. and to dismiss Cowin's lawsuit for improper venue under Rule 12(b)(3) of the Alabama Rules of Civil Procedure. The Court denies the petition. 

Prior to August 2015, Cowin had been an authorized dealer for Liebherr Group for around 30 years. Terex recruited Cowin to become its dealer in Alabama, Georgia, and Florida, assuring Cowin exclusivity in the territory, which led Cowin to let its relationship with Liebherr lapse. In August 2015, Cowin entered a distributorship agreement with Terex, which included a forum-selection clause designating the United States District Court for the Northern District of Georgia or the State Court in Atlanta, Georgia, as the exclusive venue for disputes.

After the agreement, Terex entered into a new agreement with Warrior Tractor Equipment Company, Inc. without notifying Cowin, who claims this was against industry norms. Cowin filed a lawsuit against Terex and Warrior on June 2, 2017, citing violations of the Alabama Heavy Equipment Dealer Act (AHEDA). Terex subsequently moved to dismiss the case, asserting that the forum-selection clause made Jefferson County an improper venue. Cowin contended that enforcing the clause would contravene a strong public policy in the AHEDA. Terex countered that Alabama law favors outbound forum-selection clauses and that the legislature did not prohibit such clauses in the AHEDA, unlike the Alabama Motor Vehicle Franchise Act.

On September 1, 2017, the trial court denied Terex's motion to dismiss, leading to the current petition. The standard for issuing a mandamus includes: (1) a clear legal right for the petitioner, (2) an imperative duty for the respondent that is being refused, (3) lack of an adequate alternative remedy, and (4) proper court jurisdiction. A motion to dismiss based on an outbound forum-selection clause is appropriate under Rule 12(b)(3) of the Alabama Rules of Civil Procedure for improper venue. Parties can present evidentiary matters to support such motions, and the trial court’s ruling on enforcing a forum-selection clause is reviewed for abuse of discretion.

An outbound forum-selection clause, which specifies trial outside Alabama, relates to venue rather than jurisdiction. Such clauses are governed by the law of the forum, here Alabama. The U.S. Supreme Court has established that these clauses are generally enforceable unless the resisting party demonstrates that enforcement would be unreasonable. Alabama courts echo this, stating enforcement is valid unless proven unfair due to fraud, undue influence, or serious inconvenience. A party aiming to dismiss based on an outbound clause must first prove its existence in the contract, after which the burden shifts to the opposing party to show that enforcement would be unfair or unreasonable, a challenging task. Four factors can invalidate a forum-selection clause: fraud in its formation, deprivation of the plaintiff's access to court due to inconvenience, chosen law that denies a remedy, or contravention of public policy.

Terex asserts that forum-selection clauses are valid under Alabama law, claiming no expressed intent in the AHEDA to contravene this established practice. Cowin counters that the AHEDA reflects a strong public policy favoring heavy-equipment dealers, rendering the outbound forum-selection clause unenforceable. The Court references its prior ruling in Sutherland, affirming that such clauses are not inherently void against Alabama's public policy, but acknowledges the legislature's authority to define public policy through statutory language. The AHEDA does not explicitly prohibit outbound forum-selection clauses, necessitating an examination of its provisions to ascertain legislative intent. The Court emphasizes the importance of legislative intent in statutory interpretation, asserting that clear and unambiguous language must be given effect without judicial alteration. The AHEDA recognizes the significance of heavy equipment sales to the state’s economy and public welfare, outlining regulations that protect dealers, including prohibitions against unilateral terminations of agreements, requirements for notice prior to amendments, and restrictions against arbitrary actions by suppliers.

Cowin identifies three sections of the Alabama Heavy Equipment Dealer Act (AHEDA) indicating a legislative intent against enforcing the forum-selection clause in this case. Section 8-21B-13 allows heavy-equipment dealers to file actions in Alabama regardless of dealer agreement terms, stating that individuals suffering damages due to violations may pursue civil action in a competent Alabama court. Terex contends that this provision does not imply exclusive venue in Alabama; rather, it simply grants the right to sue in Alabama without preventing actions in other jurisdictions. Terex argues that the use of "may" indicates the legislature did not intend to restrict contractual freedom regarding dispute resolution. Cowin counters that the phrase "in this state" signifies a legislative intent for AHEDA disputes to be resolved in Alabama. Cowin emphasizes the phrase "notwithstanding the terms, provisions, or conditions of any dealer agreement," asserting it allows for legal action in Alabama despite contrary agreement provisions, such as outbound forum-selection clauses. The combined interpretation of these phrases suggests the legislature intended to guarantee an aggrieved dealer's right to sue in Alabama, irrespective of conflicting terms in a dealer agreement.

Cowin asserts that the Alabama Home Equipment Dealer Act (AHEDA) terms are incorporated into all dealer agreements, overriding any conflicting provisions. Under Section 8-21B-9, Ala. Code 1975, the AHEDA is impliedly included in dealer agreements and takes precedence over inconsistent clauses. Cowin highlights a forum-selection clause in the distributorship agreement that mandates disputes be resolved in federal court in Georgia or state court in Atlanta, arguing this conflicts with a dealer's right under Section 8-21B-13 to initiate actions within Alabama. Consequently, Cowin claims the forum-selection clause is unenforceable due to AHEDA's supremacy. Additionally, Cowin references Section 8-21B-8(d), which prohibits dealers from waiving any rights under the AHEDA, including the right to sue in Alabama. Terex counters that Section 8-21B-8(d) does not explicitly address forum selection and does not designate Alabama as the exclusive venue for AHEDA actions. The excerpt also cites Wimsatt v. Beverly Hills Weight Loss Clinics International, Inc., where a court invalidated a forum-selection clause due to a similar antiwaiver provision in California law, emphasizing that such clauses can undermine statutory protections by relegating disputes to forums lacking the application of local laws. This parallels the concerns regarding the reach of statutory protections in the current case.

A forum selection clause that requires in-state franchisees to litigate in an out-of-state forum could effectively bypass California's antiwaiver statute if that forum employs a balancing test to apply its own law instead of California law. In Hall v. Superior Court, the court deemed a forum selection clause unenforceable because the out-of-state forum might apply its own law, despite a California choice of law provision. Similarly, in Wright-Moore Corp. v. Ricoh Corp., the enforcement of a choice-of-law provision in a franchise agreement was found contrary to Indiana's public policy, which prohibits franchise agreements that require waiver of legal liabilities or limit litigation rights. The Indiana statute underscores that franchisors cannot leverage their bargaining power to compel franchisees to waive statutory protections, reinforcing the notion that such contractual choices cannot override state legislated rights.

Cowin argues that enforcing the forum-selection clause would violate public policy outlined in 8-21B-8(d) by undermining protections under the Alabama Heavy Equipment Dealer Act (AHEDA) and absolving Terex of its liabilities. Terex counters that 8-21B-8(d) should be interpreted in conjunction with the Motor Vehicle Franchise Act (MVFA), specifically citing 8-20-4(3)(m), which identifies certain acts by manufacturers and distributors as unfair trade practices, including any waiver or agreement that limits a dealer's ability to pursue claims in Alabama courts or waives the right to a jury trial. Terex contends that the absence of similar prohibitive language regarding forum-selection clauses in the AHEDA indicates that such clauses are not prohibited under that statute. The court notes that statutes covering similar subjects should be construed in pari materia, but finds that the two statutes do not address the same subject matter. While 8-20-4(3)(m) defines unfair trade practices, 8-21B-8(d) protects heavy-equipment dealers by voiding provisions that would release liabilities. Consequently, the court concludes that the legislature did not intend to prohibit forum-selection clauses under the AHEDA, as it recognizes the significance of heavy equipment distribution to the state's economy and public welfare.

The AHEDA was enacted to regulate heavy-equipment suppliers and dealers, granting dealers specific remedial rights and protections while imposing obligations on suppliers. Aggrieved dealers can bring actions under the AHEDA regardless of conflicting dealer agreements, as stated in 8-21B-13. Suppliers are prohibited from requiring dealers to waive any liability or obligations under the AHEDA, with such provisions deemed void and unenforceable under 8-21B-8(d). The AHEDA's terms are incorporated into all dealer agreements, superseding any inconsistent provisions (8-21B-9). Although outbound forum-selection clauses are not specifically mentioned, the legislature's clear intent against provisions undermining dealers' rights suggests that such clauses, particularly those designating Georgia law, are prohibited. Consequently, Terex's petition for a writ of mandamus is denied, with a majority of justices concurring and one dissenting. The choice-of-law provision in the distributorship agreement, which specifies Georgia law, has not been directly challenged.