Lead Opinion
Vacated and remanded by published opinion. Judge Traxler wrote the majority opinion in which Judge Diaz joined. Judge Floyd wrote an opinion concurring in part and concurring in the judgment.
Saber Healthcare Holdings, LLC, sits at the top of a family of wholly owned limited-liability companies that own and operate dozens of assisted-living facilities and nursing homes in several states, including North Carolina. Current and former residents of one of Saber’s North Carolina assisted-living facilities brought a putative class action in North Carolina state court against Saber Healthcare Holdings and certain of its subsidiaries, alleging that the defendants failed to deliver the contractually promised care and failed to comply with certain state law requirements. After the defendánts removed the case to federal court, the district court granted the plaintiffs motion to remand the cáse to state court, concluding that a forum-selection clause in the residents’ contracts required the case to proceed in state court. The defendants appeal, arguing that the case was properly removed under, the Class Action Fairness Act of 2005 (“CAFA”), Pub. L. No. 109-2,
⅜—i
The defendants in this case are Saber Healthcare Holdings, LLC (“Saber”); Saber Healthcare Group, LLC; Franklin Operations, LLC; Smithfield East Health Holdings, LLC; and Queen City AL Holdings, LLC. Saber, is the sole member of each of the other defendant. LLCs.
As is relevant to this case, Saber and its related companies operate three assisted-living facilities in North Carolina: Franklin Manor Assisted Living Center, which is operated by Ffanklin Operations, LLC, and located in Franklin County; Gabriel Manor Assisted Living Center, which is operated by Smithfield East Health Holdings, LLC, and located in Johnston County; and The Crossings at Steele Creek, Which is operated by Queen City AL Holdings, LLC, 'and located in "Mecklenburg County, Each facility requires its residents to sign an “Assisted Living Residency Agreement,” which includes a forum-selection clause providing that “the county in which the Facility is located shall be the sole and exclusive venue for any dispute between the parties, including, but not lim
The plaintiffs are the representatives of three then-current and former residents of Saber facilities—Jeanne Bartels, Bernice Pfohl, and Claire Murphy. Bartels was a resident of • Franklin Manor for a few weeks in October and November 2015, and Pfohl was a resident of Franklin Manor from February 2014 through August 2015. Murphy was a resident of Franklin Manor from April 2015 through January 1, 2016. After spending a month in a rehabilitation hospital, Murphy was a resident of Gabriel Manor from February 4 through April 21, 2016. On April 21, 2016, Murphy returned to Franklin Manor, where she resided until sometime after this action was filed.
The plaintiffs filed this action' on May 9, 2016, in Franklin County, North Carolina. The plaintiffs alleged that the defendants are all alter egos of each other and that they failed to provide the level of staffing necessary to satisfy North Carolina statutory requirements or to meet the basic needs of its residents. According to the plaintiffs, the defendants deliberately chose to understaff the facilities in order to “increase profits at the expense of its residents with Alzheimer’s and dementia.” J.A. 38.
The plaintiffs sought a preliminary injunction, and the hearing on that motion took place on May 16 and 19, 2016, in courthouses located in Granville County and Wake County. At the conclusion of the hearing, the state court indicated that it would grant the injunction and appoint a monitor to ensure compliance with state law, but the court made it clear that the injunction would be effective on entry of a written order. See D. Ct. docket entry #34, exh. 2, pp. 5-6 (“[C]ome up with an order that memorializes that and I’m looking at it. and either sign it or modify it as I think is appropriate and I’ll make it effective when the order is signed.” (emphasis added)). On May 24, the Saber defendants removed the case to federal court. A few days after removal, the state court entered a written order granting , the injunction. The order stated that the injunction “was entered in open court on May 19, 2016 and is signed ... on this, the 27th day of May 2016.” J.A. 234. Recognizing that the case had been removed, the state court stayed the injunction “unless and until the case is remanded to this court for further proceedings.” J.A. 235.
The plaintiffs subsequently moved to remand, arguing that the forum-selection clauses in the contracts required the action to be prosecuted in Franklin County. Because there is no federal courthouse in Franklin County, the . plaintiffs contended that the defendants were contractually precluded from removing the action. The defendants argued that the absence of a federal courthouse in Franklin County did not preclude removal and that, in any event, the only defendant bound by the forum-selectión clause was Franklin Operations, LLC. Because- CAFA authorizes removal by a single defendant and does not require the consent of other defendants, any of the other defendants were free to remove the case.
The district court granted the motion to remand. The court concluded that the forum-selection clause required the action to proceed in Franklin County and that the absence of a federal courthouse in Frank
II.
Before proceeding to the merits, we pause to address our jurisdiction over this appeal. Subject to certain exceptions, appellate review of orders remanding removed cases to state court is prohibited. See
The general statutory prohibition against appeals of remand orders, however, applies only where the remand was based on lack of subject-matter jurisdiction or on a timely raised defect in. the removal procedure. See Things Remembered, Inc. v. Petrarca,
We turn now to the merits of this appeal.- There is no question that under CAFA, a'single defendant can remove a case without the consent of the other defendants. See
.A.
As noted, the forum-selection clause contained in the residency agreements states that “the county in which the Facility is located shall be the sole and exclusive venue "for any dispute between the parties, including, but not limited to, litigation, special proceeding, or other proceeding between the parties that may be brought, arise out of or in connection with or by reason of this Agreement,” J.A. 160.
The plaintiffs contend- that under the plain language of this clause, all litigation springing from the contractual relationship must be pursued in the county where the facility is located. Thus, if there is a federal courthouse in that county, then removal would be consistent with the contract, because the litigation would still be proceeding in the required county. But if there is no federal courthouse in the designated county, then removal would be inconsistent with the contract, because the litigation would of necessity be proceeding in a different county. The defendants, however, argue that the clause does not preclude removal because the contract does not limit venue to the courts of North Carolina— language that is generally understood to require the case to proceed in state court. See FindWhere,
In our view, the plain language- of the forum-selection clause compels the conclusion urged by the plaintiffs. The clause states that the county where the facility is located “shall be the sole and exclusive venue” for resolution of disputes between the parties, which unambiguously requires the case to be resolved in Franklin County, North Carolina. Because there is no federal courthouse in the designated county, removal ■ of the case to federal court would mean that the dispute would be resoived in a county other than the one designated by the contract. To accept the defendants’ argument would require us to re-write the. clause to provide that “the sole and .exclusive venue for any dispute between the parties shall be the county in which the Facility is located, or the county in which a federal courthouse is located that has jurisdiction over the county in which the Facility is located.” This court, of course, may not re-write the contract; our role is limited to enforcing the contract as written.
We perceive no ambiguity in the forum selection clause. A reasonable person reviewing the statement “It is agreed that the venue and place of trial of any dispute that may arise out of this Agreement ... shall be in Nassau County, New York,” would necessarily conclude that the parties intended that litigation take place in an appropriate venue in Nassau County and that this commitment was not conditioned on the existence of a federal courthouse in that county.
Given that the forum selection clause contains only obligatory venue language, we will effectuate the parties? commitment to trial in Nassau County. Had there been a federal court located in Nassau County at the time of this_ litigation, remand would have been improper. Bat there, was none. In addition, contrary to Tyler Hill’s contention, no reasonable reading of the clause permits the interpretation that the parties had agreed to trial in Suffolk County or Brooklyn because those courthouses were within the Eastern District of New York, which spans an area including Nassau County. Had the parties intended to provide for that result, they could, of course, have drafted a different forum selection clause that communicated that intent. We are free only to interpret and enforce the clause as written.
In support .of their argument, the defendants rely on our decision in FindWhere. In that case, the. parties were subject to a contractual forum-selection clause that required litigation to proceed “exclusively in ... the courts of the State of Virginia.” FindWhere,
[Fjorum selection clauses that use the term “in a state” express the parties’ intent as a matter of geography, permitting jurisdiction .in both the state' and federal, courts of the named state, whereas forum selection clauses that use the term “of a state” connote sovereignty, limiting jurisdiction over the parties’ dispute to the state courts of the named state.
The defendants seém to read Find-Where as holding that where a geographically limited forum-selection clause is at issue, venue is always proper in either state or federal court. See Brief of Appellants at 24-25. We disagree. The court in FindWhere did' not hold venue was proper in state or federal courts in all cases involving geographically focused forum-selection clauses; the court held that where a forum-selection clause limits litigation to courts in a state, then the case can proceed in any court located in that state. See
The defendants, however, insist that this reading of the clause does not “square[] with how North Carolina courts operate.” Brief of Appellants at 27. They note that the state judicial district encompassing Franklin County includes other counties and that pretrial proceedings on a case filed in Franklin County might sometimes be conducted in one of the other counties in the district. (Indeed, that happened in this case—hearings on the plaintiffs’ request for a preliminary injunction were conducted in two other counties.) Thus, because there is no guarantee under North Carolina practice that all proceedings in a case filed in Franklin County will actually occur in Franklin County, the defendants contend that the clause cannot be understood as limiting venue to the courts of Franklin County. We disagree.
The parties to the residency agreement must be presumed to have been familiar with the operation of the state court system when they agreed to the forum-selection clause. See, e.g., Fraternal Order of Police Lodge No. 89 v. Prince George’s Cty.,
B.
The defendants argue that even if the forum-selection clause is properly read as requiring the litigation to proceed in state court, the plaintiffs are, for various reasons, not entitled to enforce it,
(1)
The defendants first contend that the plaintiffs waived the forum-selection clause by including claims against the Gabriel Manor and Crossings defendants, whose contracts require residents to sue in the counties where those facilities are located. The defendants contend that since the plaintiffs claim that all defendants must be bound by the Franklin Manor contract, then all defendants and plaintiffs would also be bound by the Gabriel Manor and Crossings contracts. The defendants therefore argue that the plaintiffs’ decision to proceed in Franklin County violates the conflicting forum-selection clauses of the Gabriel Manor and Crossings contracts. In the defendants’ view, the plaintiffs have not shown “why they should be entitled to insist upon enforcement of the Franklin Manor clause in particular, in derogation of the other Defendant facilities’ clauses.” Brief of Appellants at 36.
The plaintiffs are entitled to insist upon enforcement of the forum-selection clause of the Franklin Manor contracts because those are the contracts signed by the plaintiffs. The named plaintiffs do not sue the Gabriel Manor and Crossings defendants for breaching contracts the' plaintiffs did not execute; instead, the plaintiffs sue these defendants as alter egos of the defendants who breached the contracts the plaintiffs did execute—the Franklin Man- or contracts. At the time this action was filed, all of the plaintiffs were residents of Franklin Manor and had signed contracts requiring litigation to be pursued in Franklin County. Because none of the plaintiffs had an active contract with Gabriel Manor or Crossings, they could not be bound by forum-selection clauses in unexecuted form contracts.
(2)
The defendants also contend that the plaintiffs waived the forum-selection clause by including non-contract claims in their complaint. The plaintiffs asserted a claim
This argument is without merit. The Franklin Manor forum-selection clause applies to claims that “arise out of or in connection with or by reason of this Agreement.” J.A. 160 (emphasis added). The “in connection with” language broadens the scope of the clause beyond pure contract claims and extends it to “every dispute between the parties having a significant relationship to the contract regardless .of the label attached to the dispute.” J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, S.A.,
(3)
Finally, the defendants argue that the plaintiffs waiyed their right to enforce the forum-selection clause by. requesting and attending hearings that were held outside Franklin County, Again, we disagree.
A party may expressly waive a contractual right, or it may waive the right impliedly, through “acts- or conduct that naturally lead the other party to believe that the right has been intentionally given up.” Patterson v. Patterson,
IV..
Having concluded that the operative forum-selection clause precludes removal to federal court and that the plaintiffs did not waive their right to enforce the elaüse, we turn now to the question of which defendants are bound by the clause. As previously noted, unanimity is not required for removal under CAFA; a single defendant may remove a case. Accordingly, unless all of the Saber defendants are bound by the forum-selection clause contained in the Franklin Manor residency agreements, removal was proper.
The plaintiffs alleged in their amended complaint that all defendants are liable because each individual defendant is an alter ego of the other, and the complaint includes a list of factors relevant to the alter-ego analysis. See Glenn v. Wagner,
On appeal, the defendants contend that thé district court erred in its approach to the issue. Relying primarily on Hugel v. Corporation of Lloyd’s,
As a preliminary matter, we believe the defendants take'too, narrow a view of the circumstances under which a non-signatory may be. bound by the terms of contract executed by a third party. .As we have explained in the arbitration';context,
The defendants contend that the plaintiffs bear the burden of proving that all defendants were bound by the Franklin Manor forum-selection clause and that the contract therefore precluded removal. Because the plaintiffs presented no evidence supporting their alter-ego claim, the defendants argue that the plaintiffs failed to carry their burden and that the district court therefore erred by granting the motion for remand.
It is well established that the party removing a case to federal court bears the burden of establishing the court’s subject-matter jurisdiction over the case:
[Fjederal courts, unlike most state courts, are courts of limited jurisdiction, created by Congress with specified jurisdictional requirements and limitations. Accordingly, a party seeking to adjudicate a matter in federal court must allege and, when challenged, must demonstrate the federal court’s jurisdiction over the matter. If a plaintiff files suit in state court and the defendant. seeks to adjudicate the matter in federal court through removal, it is the defendant who carries the burden of alleging in his notice of removal and, if challenged, demonstrating the court’s jurisdiction over the matter. While a defendant filing a notice of removal under28 U.S.C. § 1446 (a) need only allege federal jurisdiction with a short plain statement— just as federal jurisdiction is pleaded in a complaint—when removal is challenged, the removing party bears the burden of demonstrating that removal jurisdiction is proper.
Strawn v. AT&T Mobility LLC,
As previously noted, supra note 2, the defendants sufficiently established the existence of subject-matter jurisdiction under CAFA. By relying on the plaintiffs’ alter-ego allegations, the district court implicitly concluded that the defendants’ obligation to establish the propriety of removal also required them to show that they were not alter egos bound by the Franklin Manor residency agreements. We agree with the defendants that the district court erred by placing that burden on them.
"While the removing party must demonstrate that jurisdiction exists, a forum-selection clause has nothing to do with subject-matter jurisdiction. An enforceable clause prevents a court from exercising jurisdiction over a case that it would otherwise be authorized to hear, but the existence of the clause does not somehow negate the factual and legal bases establishing the court’s jurisdiction. See Lipcon v. Underwriters at Lloyd’s, London,
In analogous situations, courts have concluded that where jurisdiction has been shown to exist, the burden rests on the plaintiff to provide a reason for a court to decline to exercise that jurisdiction. For example, in Breuer v. Jim’s Concrete of Brevard, Inc.,
Similarly, CAFA itself establishes certain exceptions to the exercise of jurisdiction under the statute, spelling out the circumstances under which the district court may or must decline to exercise jurisdiction. See
Accordingly, given the manner in which a forup-selection clause operates in the removal context, we believe that the plaintiff must bear the burden of demonstrating that the defendant waived its right to remove an otherwise removable case by agreeing to a forum-selection clause. In this case, although the plain language of the Franklin Manor forum-selection clause precludes removal, the question remains whether all of the Saber defendants are alter egos or otherwise bound by the clause. These questions are inherently factual, see DeWitt Truck Brokers, Inc. v. W. Ray Flemming Fruit Co.,
V.
For the foregoing reasons, we hereby vacate the district court’s order and remand for reconsideration of the question of whether all of the Saber defendants are bound by the Franklin Manor forum-selection clause.
VACATED, AND REMANDED
. Murphy voluntarily dismissed her claims on October 25, 2016, and is no longer a party to this action.
. There is no real question that the district court had subject-matter jurisdiction over this case, CAFA confers jurisdiction over class actions in which the amount in controversy exceeds $5 million and in which "any member of a class of plaintiffs is a citizen of a State different from any defendant.”
. In light of this conclusion, we hereby deny as moot the defendants’ § 1453(c) petition
. Plaintiff Claire Murphy was party to a contract with Gabriel Manor during her two-month stay there in early 2016. Although each facility requires each resident to sign a contract, see J.A. 155, the record does not include the contract signed by Murphy when she returned to Franklin Manor in April 2016. Nonetheless, the complaint alleges that each plaintiff signed a Franklin Manor residency agreement, see J.A. 44, and we must accept that allegation as true for purposes of this appeal. Since each agreement terminates upon the execution of a new one, J.A. 159, we must assume that Murphy's contract with Gabriel Manor terminated upon her execution of the Franklin Manor contract.
. Because the parties do not contend that there is any meaningful difference between state and federal law on the kind of conduct necessary to establish a waiver of a contractual right, we do not decide whether a claim of waiver of a forum-selection clause is governed by state or federal law.
. Since arbitration is, "in effect, a specialized kind of forum-selection clause,” Scherk v. Alberto-Culver Co.,
. The plaintiffs contend that the state,court during the preliminary injunction proceedings found that the defendants were alter egos and that these findings of fact should be given binding effect by this court. We, disagree. Although the state court’s preliminary injunction older seems to treat the defendants as • alter egos, see J.A. 224-25, 231, we note that findings of fact made when granting a preliminary injunction are not binding at trial, see University of Texas v. Camenisch,
Concurrence Opinion
concurring in part and concurring in the judgment:
I fully join all except Part III. A of Judge Trader’s well-reasoned opinion. Although I agree with my colleagues’ conclusion that the forum-selection clause at issue forecloses removal to federal court in this case, I do. not agree that removal would have been proper if a federal court had been physically located in the county, and I would not have reached that question in this case. Therefore, I concur in part and concur in the judgment, but respectfully write separately. as to Part III.A.
I.
Saber Healthcare Holdings, LLG, and its subsidiaries own and operate dozens óf assisted living facilities and nursing homes. Three current and former residents of the Franklin Manor Assisted Living Center (“Franklin Manor”) filed this putative class action, alleging breach of contract and unfair trade practices arising from defendants’ alleged failure to comply with their contractual and statutory obligations to provide services meeting the needs of the residents at Franklin Manor and .two other facilities.
Each facility enters into a residency agreement with their respective residents, including the named plaintiffs in this case. Each agreement contains the same language. The forum-selection clause, in pertinent part, reads as follows:
This Agreement shall be construed in accordance with the laws of the State of North Carolina, and the county in which the Facility' is located shall be the sole and exclusive venue for any dispute between the parties, including, but not limited to, litigation, special proceeding, or*683 other proceeding between the parties that may be brought, arise out of:or in connection with or by reason of .this Agreement.
J.A. 160, The plaintiffs 'filed this action in Franklin County Superior Court pursuant to the Franklin Manor agreement—Franklin Manor is located in Franklin, County, North Carolina. The defendants then filed a notice of removal with the Eastern .District of North Carolina. Plaintiffs then filed a motion to. remand the case to Franklin County Superior Court, contending that the forum-selection clause in Franklin Manor’s residency agreement barred removal. The district court granted the motion to remand, holding, as relevant here, that defendants waived their right to removal because the. forum-selection clause “limits jurisdiction to the state courts in Franklin County, North Carolina.” J.A. 278. Defendants now appeal that determination. . ,
n.
The venue selection clause at issue , in this case states that “the county in which the Facility is located shall be the sole and exclusive venue for any dispute between the parties .... ” J.A, 160. The majority opinion holds that this language creates a geographic limitation such, that removal to federal court would be permissible if a federal courthouse were physically located within the county. I respectfully disagree.
I first note that it was unnecessary for my colleagues to reach this question, and I would not have done so. As the majority notes, there is no federal courthouse physically located in Franklin. County. It is sufficient under these facts to narrowly hold •that the plain language of the forum-selection clause at issue clearly limits venue to the county and not to courts that have jurisdiction over the county, as Saber requests. It is. unnecessary to define whether this limitation to “county” is one of geography or sovereignty because either way, removal is precluded here, resolving the issue squarely before the court.
Having reached-the question, however, I respectfully disagree with the majority’s conclusion that removal would be permitted if a- federal court were physically located in Franklin County. In my view, the majority opinion fails to consider the nuanced differences between this nontract’s language and that of those to which it analogizes.
As the majo'rity opinion explains, this Court’s decision in FindWhere describes how different clauses discussing venue in terms' of ’a state are commonly interpreted as creating either a'geographic or sovereignty limitation on venue.
[Fjorum selection clauses that use the term ‘in [a state]’ express the parties’ intent as a.matter of geography, permitting jurisdiction in both, the state-and federal courts, of the named state, whereas forum selection clauses that use the term ‘of [a state]’ connote sovereignty, limiting jurisdiction over the parties’ dispute to the state courts of the named state..
FindWhere Holdings, Inc. v. Sys.. Env’t Optimization, LLC,
Several of. our sister circuits have applied the same reasoning to conclude that a forum-selection clause that sets venue “in” a county creates a.geographic limita
The majority’s opinion relies on these interpretations of forum-selection clauses that set venue “in” a county to conclude that this clause creates a geographic limitation that would permit venue in a federal court within the county, if such court existed. However, the forum-selection clause at issue here—stating that “the county ... shall be the sole and exclusive venue”—is missing the operative word “in” that triggers a geographic limitation. J.A. 160. Thus, the majority opinion implicitly concludes that the phrase “venue shall be in the county” is materially the same as the phrase “the county shall be the venue.”
■ I hesitate to disregard the omission of this operative word. See Maersk Line, Ltd. v. United States,
In my view, the better approach is to look at the plain meaning of the language in this clause, and interpret the parties’ intentions in stating that the county shall be the sole and exclusive venue for litigating disputes. In doing so, I am persuaded that this clause limits venue to state courts located in Franklin County. First, I believe using “county” to describe the venue more likely indicates an intent for the parties to
Additionally, we construe ambiguous provisions in contracts against the drafters. See Maersk Line,
With these considerations in mind, I believe this forum-selection clause should be interpreted to set venue in the state court system, and would hold as much.
III.
For the reasons discussed above, therefore, I would hold that this clause precludes removal in this case based on the use of the phrase “the county.” If I reached the broader question of whether this clause permits removal when a federal courthouse is physically located in the county—which I believe can be avoided under the facts of this case—I would hold that the clause limits venue to state courts.