Opinion

Black v. Arizala

  • 182 Or. App. 16
  • 48 P.3d 843
  • 2002 Ore. App. LEXIS 870
Court
Court of Appeals of Oregon
Filed
Jun 5, 2002
Status
Published
Author
Armstrong
On the bench
Armstrong, Edmonds, Kistler
Cited by
10 cases
Authority
More cited than 11.2%

The opinion

ARMSTRONG, P. J.,

concurring.

I agree with the majority’s decision to reverse the judgment dismissing the case and with its reasoning on the other issues. I disagree with its reasoning for reversing the dismissal and therefore write separately.

The majority makes a ruling of procedure and a ruling of substance in explaining its decision to reverse the dismissal; both are wrong. It first holds, procedurally, that the only way that defendants can obtain a pretrial decision on whether the forum selection clause applies to this case is by a motion for summary judgment. That holding ignores a statute that expressly permits the trial court to adopt a more sensible procedure. It then holds, substantively, that the trial court erred in dismissing the case because there are issues of fact about the meaning of the clause in this case. However, there are no disputed facts in the record, and we should apply normal rules of contract construction and decide the issue as a matter of law. I would hold that the trial court properly treated defendants’ motion as a motion to dismiss but erred in dismissing the case.

The trial court dismissed the case on defendants’ motion, holding that the forum selection clause of the PCS Agreement of Limited Partnership (the Agreement) applied *35 to plaintiffs’ claims. 1 In making its decision by ruling on a pretrial motion to dismiss, the trial court correctly followed every other jurisdiction that has considered the matter. The purpose of a forum selection clause is to require the parties to resolve their disputes in a specific judicial forum. In order for a forum selection clause to have any practical meaning, there must be a way to determine at an early date whether it applies to the case at hand. The longer a case remains pending in a forum other than the chosen one, the longer the defendant is damaged. Even if there are no factual disputes, a motion for summary judgment is seldom as expeditious as a motion under ORCP 21 A. If there are factual issues, a motion for summary judgment will be useless, and the parties will have to wait for trial to determine whether they should be in an Oregon court at all. If the finder of fact ultimately determines that the forum selection provision is both enforceable and applicable, the Oregon trial will become a nullity and the parties must go to the chosen forum for an entirely new trial. That result would waste both Oregon’s judicial resources and the resources of the parties. It would also violate the state’s underlying policy to enforce the parties’ valid choice of a specific judicial forum. The longer the parties remain in a forum that they did not choose, the longer they lose the benefit of their bargain. 2

Courts universally recognize the importance of a speedy resolution of this issue. Every other jurisdiction that has considered the question provides a method for resolving the issue by an early pretrial motion; none relegates that resolution to summary judgment or trial. With a few exceptions, the jurisdictions permit the parties to present evidence outside of the pleadings to support their positions on the motion, and the court resolves any factual disputes. This uniformity of practice occurs despite the lack of applicable procedural rules and without agreement on the appropriate rationale. Some state courts treat it as a question of proper venue, see, *36 e.g., Perkins v. CCH Computax, Inc., 333 NC 140, 423 SE2d 780 (1992); Voicelink Data Services v. Datapulse, 86 Wash App 613, 937 P2d 1158 (1997), while others simply rule on a motion to dismiss without identifying any particular rule. See, e.g., Accelerated Christian Educ. v. Oracle Corp., 925 SW2d 66 (Tex App 1996). Federal courts universally hold that a motion to dismiss is the only proper procedure. Most rely on Federal Rule of Civil Procedure 12(b)(3), which provides for dismissal on the ground of improper venue. A few require a motion under FRCP 12(b)(6), which provides for dismissal for failure to state a claim. See 17 Daniel R. Coquillette et al, eds., Moore’s Federal Practice, §§ 111.04[3][a] to 111.04[3][b] (3d ed 2002). 3 Federal courts also may treat a motion to dismiss based on a forum selection clause as a variation on a motion to dismiss for forum non conveniens. 17 Moore’s, § 111.75. The federal courts do not treat the lack of a rule that expressly provides for a motion to dismiss on the ground of forum non conveniens as having any significance.

The majority refuses to follow those other jurisdictions because no Oregon procedural rule expressly provides for enforcing a forum selection clause by a motion to dismiss. It fails to recognize that the statutes and rules give trial courts the necessary flexibility to adopt an appropriate procedure when the rules do not provide one. In the trial court, defendants separated their motion to dismiss based on the forum selection clause from their motions to dismiss under Oregon Rule of Civil Procedure 21 A. On appeal, however, they suggest that their motion fits under ORCP 21 A(2), which provides for motions to dismiss for lack of personal jurisdiction. 4 The difficulty with their suggestion on appeal is that the trial court had jurisdiction over the case. The motion *37 did not question that jurisdiction but, rather, asked the trial court to decline to exercise its jurisdiction because the parties had chosen another forum. 5

Defendants’ original approach was correct: their motion was a motion to dismiss separate from the motions that the rules provide. The trial court’s authority to entertain the motion comes from ORS 1.160, which is designed for precisely that situation:

“When jurisdiction is, by the Constitution or by statute, conferred on a court or judicial officer, all the means to carry it into effect are also given; and in the exercise of the jurisdiction, if the course of proceeding is not specifically pointed out hy the procedural statutes, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of the procedural statutes.” (Emphasis added.)

Oregon courts have relied on ORS 1.160 and its predecessors, which go back without change to the Deady Code of 1862, a number of times to create appropriate procedures when none other was available. 6 In Butterfield v. State Indus. Acc. Com., 111 Or 149 , 223 P 941 , 226 P 216 (1924), the Supreme Court relied on the predecessor to ORS 1.160 to create a procedure for circuit courts to try appeals from administrative decisions under the Workmen’s Compensation Law. Because of the statute, the absence of a specified mode of procedure did not prevent a fair and orderly trial of the issues. Ill Or at 162. The court reemphasized its action soon afterward in Meany v. State Industrial Acc. Com., 113 Or 371, 384, 227 P 305, 232 P 789 (1925). It had previously relied on the statute as the basis for its authority to issue execution on a judgment for costs in a case where it had original jurisdiction. State v. Hodgin, 76 Or 480, 487-88 , 146 P 86 , 149 P 530 (1915). 7

*38 Other appellate uses of ORS 1.160 include State Highway Com. v. Burk et al., 200 Or 211, 259-60 , 265 P2d 783 (1954) (authorizing trial court in condemnation action to apportion the award among the owners and lessees of the condemned land); State v. Ridder, 185 Or 134, 138-39 , 202 P2d 482 (1949) (prescribing method of appealing from a conviction based on a plea of guilty when the defendant alleges that the sentence is unconstitutionally cruel or unusual); State v. Chase, 106 Or 263, 267-69 , 211 P 920 (1923) (trial court had authority to disqualify male prospective jurors in order to obtain a jury that consisted of equal numbers of men and women, as statute required); and Household Finance v. Bacon, 58 Or App 267, 271 , 648 P2d 421 , rev den 293 Or 653 (1982) (redemption statutes did not provide method for curing faulty notice in circumstances present in the case; court had authority under ORS 1.160 to adopt an appropriate procedure for doing so). The only apparent restriction on the use of the statute is that the court must have jurisdiction of the case. ORS 1.160 does not confer jurisdiction but simply authorizes a court that has jurisdiction to adopt a suitable process or mode of proceeding in order to carry its jurisdiction into effect. State v. Endsley, 214 Or 537, 546-47 , 331 P2d 338 (1958); Hensley v. State Court System Appeals Board, 72 Or App 64, 70 , 695 P2d 65 (1984).

In a closely related area, we have decided issues raised by pretrial motions that the Oregon Rules of Civil Procedure did not expressly authorize. In Novich v. McClean, 172 Or App 241, 244 , 18 P3d 424 , rev den 332 Or 137 (2001), and Fenn and Fenn, 63 Or App 506, 512 , 644 P2d 1143 (1983) , the trial courts decided issues of forum non conveniens based on pretrial motions to dismiss. In Fenn there was a statute authorizing such a motion, but there was no procedural rule implementing the statute. In Novich, there was no basis for the motion in either a statute or a rule. We resolved the issues on appeal without discussing the authority for the motions, but the only possible source was ORS 1.160. The issue in this case, a motion to dismiss because the parties have chosen a different forum, is close in concept to forum non conveniens. 8

*39 We should follow the uniform practice of other jurisdictions, and exercise the authority that the legislature gave us in ORS 1.160 for precisely this purpose, by holding that a trial court has the authority to rule on a motion to dismiss that is based on a forum selection clause. The procedures should be similar to those for motions under ORCP 21 A(l) and (2). Thus, the parties may submit relevant evidence and the court will then decide the motion, resolving whatever factual disputes may exist. That procedure provides a way to resolve the question at an early stage; if the motion is meritorious, it will send the parties to the forum where they agreed to go, at the least expense to them and to this state. That is the procedure that the trial court followed in this case. 9

I turn to the merits of the trial court’s decision, which I review in the same way that we would review a decision on a motion under ORCP 21 A(2) — that is, I accept the trial court’s factual findings if there is evidence to support them and review the legal conclusions that it drew from the facts before it. The obvious point in that regard is that there are no disputed facts. Thus, even if we treat defendants’ motion as one for summary judgment, there is nothing for the trial court to do on remand. The issues before us are purely legal, and we must resolve them. If the forum selection clause applies to this case, we should affirm the trial court’s dismissal; if it does not apply, we should reverse.

Oregon has a well-established method for construing contractual provisions such as the forum selection clause in the Agreement. According to the Supreme Court, the purpose behind that method is to determine and enforce the intent of the contracting parties, as the statutes require. ORS 42.220; ORS 42.240; see Yogman v. Parrott, 325 Or 358 , 937 P2d 1019 (1997). To find that intent, a court first looks at the words in *40 question in the context of the contract of which they are a part. If the meaning of the words is clear in that context, the court goes no further. Yogman, 325 Or at 361 . If, however, the contract is ambiguous, the court then considers extrinsic evidence of the parties’ intent in order to resolve the ambiguity. Whether the terms are clear or ambiguous is a matter of law for the court to decide. Contractual terms are ambiguous when, in context, they can reasonably be given more than one meaning. Id. at 363-64 . Finally, if the evidence is insufficient to resolve the ambiguity, the court resolves it by applying appropriate maxims of construction. Id. at 364-65 . I do not find any ambiguity in this clause; it is clearly inapplicable to plaintiffs’ claims. Even if it were ambiguous, applying the appropriate maxim of construction leads to the same result.

The Agreement establishes venue “for any legal action arising from this Agreement” in San Juan, Puerto Rico. (Emphasis added.) The question is whether that provision applies to the claims that plaintiffs make in their complaint. None of those claims relates to the terms of the Agreement or to any actions taken under it. Rather, as defendants recognize, every claim that plaintiffs make involves things that defendants allegedly did before plaintiffs were parties to the Agreement. The damages that plaintiffs seek are for actions that allegedly induced them to enter into the Agreement, not for anything related to the terms or conditions that it contains or the things that happened after plaintiffs became bound by.it. The forum selection clause applies to plaintiffs’ claims, and the trial court correctly dismissed them, only if claims based on actions that induced plaintiffs to enter into the agreement are claims “arising from this Agreement.”

In construing contracts, the Supreme Court relies heavily on the dictionary meanings of the words that the parties used. See Yogman, 325 Or at 362-63 . The relevant dictionary definitions of “arise” include “to originate from a specific source,” “to come into being,” and “to become operative.” Webster’s Third New Int’l Dictionary, 117 (unabridged ed 1993). According to the same dictionary, “from” is “used as a function word to indicate the source or original or moving force of something as * * * (4) the place of origin, source, or derivation of a material or immaterial thing.” Id. at 913. Unlike forum selection clauses discussed in other cases, that *41 clause does not extend to disputes that “relate to” or are “connected with” the Agreement. Under the words that the parties used, the Agreement itself, not the relationship of which the Agreement is a part, and not the things that led the parties to enter into the Agreement, must be the source of the dispute. It must be “the place of origin, source, or derivation” of the legal action.

Plaintiffs were not parties to the Agreement at the time that defendants allegedly made the representations about which plaintiffs complain, so it is difficult to see how the Agreement could be the point of origin of this legal action. In addition, the Agreement does not contain representations or other inducements that might lead a person to invest in the partnership. Rather, the Agreement describes the structure of the partnership, relationships between the limited partners and the general partner, management of the business, capital contributions, responsibility for expenses, distribution of profits, and other similar matters that one would expect such an agreement to cover. Defendants do not assert that any aspect of the Agreement, other than the forum selection clause, is relevant to any party’s claim or defense. Thus, the context of the Agreement as a whole does not provide any broader scope to the forum selection clause than do the words themselves.

I do not see how the Agreement can be the source or origin of plaintiffs’ claims. The purpose of the representations about which they complain was to induce them to invest in the overall enterprise; the Agreement is simply part of the package that came with the decision to invest. It was the end point of the representations, not their source. The Agreement was the goal to which defendants sought to guide plaintiffs by their representations, not their origin. Plaintiffs do not allege that any of the representations related to the terms or conditions of the Agreement. It may well be that the Agreement is “related to” or “connected with” plaintiffs’ claims, but those claims do not arise from it. I would hold that the forum selection clause is unambiguous and does not apply to plaintiffs’ claims.

The parties discuss a number of federal cases in support of their positions. For two reasons, with the exception of *42 several Ninth Circuit cases, I do not find them very helpful. First, many of the provisions at issue are broader than the one in the Agreement and clearly cover the parties’ entire relationship, not simply a specific document. Secondly, most of the cases involve arbitration rather than forum selection clauses. There is a special presumption in favor of arbitrability under both federal and state law. Most of the federal cases on which defendants rely involve broad constructions of arbitration clauses that often pay little attention to the words that the parties used. In Snow Mountain Pine, Ltd. v. Tecton Laminates Corp., 126 Or App 523 , 869 P2d 369 , rev den 319 Or 36 (1994), we stated that the presumption requires us to order arbitration “unless we can say with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute!.]” Id. at 529. If there is any ambiguity, we leave the question of arbitrability for the arbitrator to decide. Id. The reason for that approach to an arbitration clause is that, when parties agree to arbitrate, they choose a nonjudicial forum for their disputes. In doing so, they agree that that nonjudicial forum will decide whether the dispute in issue is subject to the arbitration provision.

The extremely broad construction that we give an arbitration clause does not apply to a forum selection clause. When parties agree to a forum selection clause, they simply choose one judicial forum instead of another. There is no policy reason to construe such clauses differently from how we construe the rest of the contract, nor is there any reason to require that the chosen judicial forum be the one to decide whether the clause applies. Thus, there is no policy reason that would require us to strain to find a forum selection clause applicable to this case in the way that we might with an arbitration clause. 10 I would hold that the forum selection clause is unambiguous and does not apply to plaintiffs’ *43 claims. Even if I were to conclude that the clause is ambiguous, it would still be our job to resolve the ambiguity before deciding that the clause requires us to send the case to a different forum.

The majority holds that the clause is ambiguous and remands the case for a factual determination. However, as Yogman makes clear, the only relevant facts would be extrinsic evidence of the intent of the parties in agreeing to the forum selection clause. Although the parties had both the opportunity and every incentive to place such evidence in the record, there is none. There is no reason to believe that they could produce any on remand. The clause was one of many provisions in an agreement that was part of a larger investment package. There is no evidence that plaintiffs paid the slightest attention to the terms of the clause in deciding to invest or that defendants told them anything about their understanding of the clause. Thus, if the majority is correct that the clause is ambiguous, we must resolve the ambiguity as a matter of law by using the appropriate maxim of construction. In that context the appropriate maxim is to construe the ambiguous phrase against the drafter. See Quality Contractors, Inc. v. Jacobsen, 139 Or App 366, 371 , 911 P2d 1268 , rev den 323 Or 691 (1996). Because defendants drafted the Agreement, the majority’s own analysis requires us to construe the clause against them, which would lead us to hold that the forum selection clause does not apply to plaintiffs’ claims.

That clause provides that “[v]enue for any legal action arising from this Agreement, including enforcement of any arbitration award, shall be in San Juan, Puerto Rico.”

A trial court could order a separate trial on the meaning of the forum selection clause, ORCP 53 B, but that approach would still be less expeditious and efficient than it would be to resolve the issue on a motion to dismiss.

The minority position is flawed because it allows the motion to be made at any time up to trial and because the facts to support the motion are limited to those in the pleadings, which prevents the parties from presenting evidence on such issues as whether enforcing the clause would be unreasonable under the circumstances. See 17 Moore’s, § 111.04[3][b][ii].

Such a motion permits the parties to present evidence outside of the pleadings, with the court resolving any factual disputes. We would then accept the trial court’s factual conclusions if the evidence was sufficient to support them and would review its legal conclusions as a matter of law. See Industrial Leasing Corp. v. Miami Ice Machine Co., 126 Or App 80, 83-84 , 867 P2d 548 (1994).

All of the cases that discuss the issue agree that a forum selection clause does not deprive the court of subject matter jurisdiction but, instead, provides an opportunity for the court to decline to exercise jurisdiction in light of the parties’ agreement. See, e.g., Vanderbeek v. Vernon Corp., 25 P3d 1242, 1248 (Colo App 2000); Perkins, 423 SE2d at 782 .

The procedural rules anticipate the use of ORS 1.160 in this fashion. ORCP 14 A sets forth the general requirements for a motion without limiting the motions to which it applies to those that the rules specifically describe.

In Evans v. OSP, 87 Or App 514, 533 , 743 P2d 168 (1987), we relied on ORS 1.160 in holding that our authority to make an order carried with it the authority to enforce it, including the authority to invoke our contempt power.

As our forum non conveniens cases show, we have the authority to create an adequate procedure when the only available statutory procedure would be *39 insufficient to give the parties the benefit of their agreement. (The availability of summary judgment did not prevent us from deciding the issue on a non-ORCP motion to dismiss.) Thus the majority’s suggestion that ORS 1.160 does not apply to this case is incorrect.

In Reeves v. Chem Industrial Co., 262 Or 95 , 495 P2d 729 (1972), the first Oregon case to approve the validity of a forum selection clause, the defendant raised the issue by a motion to dismiss, although there was no pre-ORCP express statutory provision for a motion to dismiss. Only ORS 1.160 could justify the procedure that the trial court and the Supreme Court followed.

Several Ninth Circuit cases construe arbitration or forum selection clauses similarly to the approach that the Supreme Court established in Yogman. See Tracer Research v. Nat. Environ. Services Co., 42 F3d 1292 (9th Cir 1994); Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F2d 509 (9th Cir 1988); Mediterranean Enterprises, Inc. v. Ssangyong, 708 F2d 1458 (9th Cir 1983). The analyses in those cases support my conclusion that the forum selection clause in the Agreement does not apply to plaintiffs’ claims.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.

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