Adams v. Raintree Vacation Exchange, LLC
2012 U.S. App. LEXIS 26000
| 7th Cir. | 2012Background
- 250 timeshare purchasers bought villas at Club Regina/Residence Club at Grand Regina in San José del Cabo, Mexico.
- Seller was Desarrollos Turísticos Regina, S. de R.L. de C.V. (DTR); DTR later merged into CR Resorts Holding, S. de R.L. de C.V. and ceased to exist.
- Each sale contract contained a forum selection and law clause directing disputes to the courts of Mexico City, Federal District, Mexico.
- The dispute was filed in Illinois state court and removed to federal court in Chicago under the Class Action Fairness Act as a mass action.
- District court dismissed for improper venue based on the forum clause; plaintiffs appealed challenging enforcement by nonparties Raintree and Starwood.
- The court analyzed whether nonparties could enforce or be bound by the forum clause via affiliation or mutuality, and addressed policy concerns about forum selection clauses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May nonparties enforce a forum selection clause? | Raintree/Starwood should be barred due to nonparty status. | Affiliates may enforce under affiliation or mutuality doctrines when closely related to the contract. | Yes; affiliates may enforce under affiliation or mutuality doctrines. |
| Application of affiliation doctrine to Raintree | No withholding of enforcement since Raintree is not a party to the contract. | Raintree, as parent of DTR’s successor, is sufficiently related to enforce the clause. | Raintree can enforce the clause via affiliation. |
| Application of mutuality doctrine to Starwood | Starwood cannot enforce the clause because it is not a party. | Starwood can enforce due to conspiracy allegations linking Starwood with Raintree and DTR, making it a mutual party to the clause. | Starwood can enforce the clause under mutuality. |
| Fraud in contracting affects enforceability of forum clause? | Fraud in the contracts undermines the forum clause. | Fraud in contracts does not automatically void the forum clause; the clause itself must be scrutinized fora enforcement. | Fraud in contracts does not automatically nullify the forum clause; clause remains enforceable. |
Key Cases Cited
- Abbott Laboratories v. Takeda Pharmaceutical Co. Ltd., 476 F.3d 421 (7th Cir. 2007) (addressed law governing forum selection and choice of law)
- Phillips v. Audio Active Ltd., 494 F.3d 378 (2d Cir. 2007) (analyzed governing law for interpretation of forum clauses)
- Yavuz v. 61 MM, Ltd., 465 F.3d 418 (10th Cir. 2006) (remand to apply foreign law when foreign law designated)
- American Patriot Ins. Agency, Inc. v. Mutual Risk Management, Ltd., 364 F.3d 884 (7th Cir. 2003) (affiliation-based enforcement and rejection of trivial defeats of forum clauses)
- Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991) (promoted certainty in forum selection agreements for international transactions)