Aurora Casket Company, LLC v. Caribbean Funeral Supply Corp.
3:16-cv-02937
D.P.R.Nov 22, 2017Background
- Aurora Casket (Indiana) contracted with Caribbean Funeral Supply (Puerto Rico) under a Product Supply Agreement (PSA) with a clause requiring litigation exclusively in Dearborn County, Indiana.
- Aurora sues Caribbean, JR Quality, Inc. (JQ), and Rosa González in Puerto Rico for breach of separate contracts and seeks declaratory relief that Law 75 (Puerto Rico Dealer’s Act) does not protect Caribbean.
- Caribbean moved to dismiss or, alternatively, to transfer under 28 U.S.C. § 1404(a) based on the forum-selection clause; the court treated the motion as one to transfer under Atlantic Marine.
- Aurora argued the forum-selection clause is invalid under Law 75, which prohibits contractual clauses forcing dealers to litigate outside Puerto Rico; court assumed arguendo that Caribbean is a dealer.
- The magistrate judge found the forum-selection clause valid, concluded private-interest factors are governed by the clause, and held Aurora failed to show public-interest factors overwhelmingly disfavor transfer.
- Because JR and González are not parties to the clause and are Puerto Rico residents, the court applied the Howmedica/Rolls-Royce framework and severed Aurora’s claims against Caribbean for transfer to Indiana while keeping claims against JR and González in Puerto Rico.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of forum-selection clause given Law 75 | Law 75 invalidates forum-selection clauses that require litigation outside Puerto Rico; clause should be void | PSA clause is a valid forum-selection agreement and should be enforced | Clause is contractually valid; Law 75 does not automatically bar enforcement here |
| Proper remedy: dismissal vs transfer under forum-selection clause | Plaintiff implied transfer location unspecified; urged retaining case in Puerto Rico | Enforce clause by dismissal or transfer to Indiana federal court | Under Atlantic Marine, transfer under §1404(a) is appropriate; court granted transfer (not dismissal) |
| Treatment of claims against non-signatory Puerto Rico defendants (JR, González) | Claims against local defendants should remain in Puerto Rico; severance prejudicial | Enforce clause against Caribbean; consider severance per efficiency and Howmedica framework | Applied Howmedica steps; severed and transferred claims against Caribbean to Indiana; kept claims against JR and González in Puerto Rico |
Key Cases Cited
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (U.S. 1938) (establishes Erie doctrine governing federal courts’ application of state substantive law)
- Atlantic Marine Constr. Co. v. U.S. Dist. Court, 134 S. Ct. 568 (U.S. 2013) (forum-selection clauses are given controlling weight; transfer under §1404(a) is the proper remedy)
- Silva v. Encyclopedia Britannica Inc., 239 F.3d 385 (1st Cir. 2001) (federal common law governs enforceability of forum-selection clauses in diversity cases)
- Claudio-De Leon v. Sistema Universitario Ana G. Mendez, 775 F.3d 41 (1st Cir. 2014) (forum-selection clause defenses treated under Rule 12(b)(6) standard in First Circuit)
- In re Rolls-Royce Corp., 775 F.3d 671 (5th Cir. 2014) (framework for handling transfers when not all parties bound by forum-selection clause)
- In re Howmedica Osteonics Corp., 867 F.3d 390 (3d Cir. 2017) (adopted a multi-step approach for enforcing forum-selection clauses when some defendants are not parties to the clause)