E-Alert Case Updates
Fourth Circuit Affirms South Carolina District Court Order Denying Motion to Dismiss Breach of Contract Claim on Bases of Forum-Selection Clause in Related Contract
Thavian Ford v. Big Daddy Drayage LLC
In Thavian Ford v. Big Daddy Drayage LLC, Big Daddy Drayage LLC, (“BDD”) appealed to the United States Court of Appeals for the Fourth Circuit from the South Carolina district court’s order denying its motion to dismiss Thavian Ford’s breach of contract complaint on the basis of a forum-selection clause in another contract, which required litigation in New Jersey. BDD argued that the two (2) contracts were related. In a per curiam opinion, the Fourth Circuit affirmed the district court’s decision.
Thavian Ford was an independent contractor for BDD, pursuant to the terms of a written Independent Contractor Agreement (“ICA”) that Ford and BDD entered into in September 2008 and renewed in 2011. The ICA expressly established Newark, New Jersey, as the exclusive forum for resolving any disputes “arising from or related to this agreement,” but made no mention of the lease or sale of a vehicle. Additionally, the ICA provided that the “Agreement contains the entire understanding between the parties relating to the transaction contemplated by this Agreement. All prior contemporaneous agreements . . . are merged in this Agreement and shall be of no further force or effect.”
In September 2008, Ford and BDD also entered into a Lease to Purchase Agreement, (“LPA”) whereby Ford paid monthly installments toward the ownership of a tractor supplied by BDD. In a paragraph entitled “Contractor Status,” the LPA provides that “[a]t all times during the term of this Agreement, Lessee agrees to be under contract to [BDD] . . . under the terms of an Independent Contract Agreement. If, at any time during the term of this Agreement, Lessee is not under contract with [BDD], this Agreement shall terminate immediately.” The LPA did not contain a forum-selection clause. In January 2013, Ford filed a class action complaint against BDD in the District of South Carolina, averring that he and other drivers had fully paid for their vehicles, but BDD refused to transfer title or refund payments. Ford stated that BDD sold automobiles in South Carolina, but the complaint did not include allegations regarding the employment practices of BDD, nor did it mention the ICA.
BDD filed a motion to dismiss and/or to transfer venue to New Jersey, based upon the forum-selection clause in the ICA. The South Carolina district court denied the motion to dismiss, finding that the forum-selection clause in the 2011 ICA did not apply to Ford’s claims arising out of the 2008 LPA. The court ruled that, “at best,” the language was unclear and that any ambiguity should be construed against the drafter, i.e., BDD. The district court certified the matter for an interlocutory appeal, pursuant to 28 U.S.C. 1292(b), noting that there was a “substantial ground for difference of opinion.” BDD then applied for permission to appeal in the Fourth Circuit, which was granted.
First, the appellate court articulated that a motion to dismiss based on a forum-selection clause should be treated as a Rule 12(b)(3) motion to dismiss based on improper venue. Sucampo Pharm., Inc. v. Astellas Pharma, Inc., 471 F.3d 544, 550 (4th Cir. 2006). The rules of contract construction are designed to determine the intent of the parties; under South Carolina law, where a contract is clear and unambiguous, a court should rely on the plain language of the contract, “interpret[ing] its lawful meaning and the intent of the parties as found within the agreement.” Smith-Cooper v. Cooper, 543 S.E.2d 271, 274 (S.C. Ct. App. 2001). Where a contract is found to be ambiguous, a court may look outside the four corners of the document to determine the intent of the parties, and ambiguities should be construed against the drafter. See Wheeler v. Dynamic Eng’g, Inc., 62 F.3d 634, 638 (4th Cir. 1995).
Second, the Fourth Circuit examined the case law. Citing to Sucampo, the appellate court concluded that the district court correctly found that the LPA was not governed by the forum-selection clause in the ICA. Specifically, unlike the instant case, the contract with the forum-selection clause in Sucampo was signed before the agreement at issue—i.e., an agreement specifically executed “under” the first. See Sucampo, 471 F.3d at 546–47. Here, however, BDD would only lease tractors to its own independent contractors, and Ford’s ICA and LPA were entirely separate. Further, the LPA did not reference a specific independent contractor agreement, nor did it state that the LPA was governed by any such agreement. Rather, the appellate court determined that the LPA merely (and somewhat ambiguously) stated that Ford had to be working under contract with BDD in order for the LPA to be in effect. Ford’s ICA, which was the contract with the forum-selection clause, did not require—or even mention—a lease-to-purchase agreement, and the LPA was not explicitly executed pursuant to the ICA.
Finally, the appellate court concluded that BDD, the drafter of both contracts, did not attempt to incorporate the LPA into the ICA or exempt the LPA from the operation of the ICA’s merger clause. Given that the merger clause applied to the entirety of the “transaction contemplated by this Agreement,” the court opined that the LPA must have been neither contemplated by, nor related to, the Agreement. If it were, the merger clause’s failure to except the LPA would have voided the LPA, and neither party argued that the LPA was void. Thus, in agreement with the district court found, the Fourth Circuit stated that the language referencing a “contract agreement” in the LPA is ambiguous. Given the material differences between the instant case and Sucampo, as well as the fact that BDD drafted the agreements in question, the Fourth Circuit upheld the district court’s ruling that the ICA’s forum-selection clause was not applicable to the current conflict arising out of the LPA.
|©2008 Maryland Defense Counsel, Inc. All Rights Reserved.|