R5 PARTNERS, INC., Plaintiff, v. RENATUS ADVISORS, LLC AND ERIC SWIDER, Defendants.
CIVIL NO. 24-1440 (RAM)
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
March 11, 2025
RAÚL M. ARIAS-MARXUACH, United States District Judge
This matter comes before the Court on Plaintiff R5 Partners, Inc.‘s (“Plaintiff” or “R5 Partners“) Motion in Compliance with Order to Show Cause at Docket No. 33. For the reasons outlined below, the Court finds that there is a valid mandatory forum selection clause requiring DISMISSAL WITHOUT PREJUDICE of Plaintiff’s claims against co-defendant Renatus Advisors, LLC (“Renatus“).
I. PROCEDURAL AND FACTUAL BACKGROUND
On September 19, 2024, Plaintiff filed its Complaint against Renatus and Eric Swider (“Mr. Swider“), collectively “Defendants,” for failure to comply with the terms of a Promissory Note Agreement and an Unlimited Personal Guaranty Agreement. (Docket No. 1). Plaintiff asserts that on June 1, 2021, Renatus, represented by its managing partner Mr. Swider, and Brian C. Shevland (Mr.
Pursuant to the terms of the Promissory Note, the entity designated by Mr. Shevland (the Lender, i.e. R5 Partners), agreed to loan Renatus (the Borrower) fifty thousand dollars ($50,000.00). (Docket No. 1-1 at 1). In return, Renatus agreed to (1) pay interest on the Promissory Note equal to one percent (1%) annum; and (2) share fifty percent (50%) of all net revenue received by Renatus and Mr. Swider. Id. at 1-2. However, any sums of interest that were not paid on the maturity date, would bear interest at the highest lawful rate or, in the alternative, at a rate of thirteen percent (13%) a month). Id. Importantly, the Note also contained the following forum selection clause:
This Promissory Note shall be governed by, and construed in accordance with, the laws of the Commonwealth of Puerto Rico, without regard to the conflict of law principles thereof. All actions or proceedings arising in connection with this Promissory Note may be tried and litigated in, and the Borrower and the Lender hereby submit to the exclusive jurisdiction of the courts of the Commonwealth of Puerto Rico located in the Municipality of San Juan, Puerto Rico, and appellate courts from any thereof.
Id. at 3.
On June 3, 2021, Mr. Swider and the entity designated by Mr. Shevland (the Company, i.e., R5 Partners), entered into an
With respect to any claim or action arising hereunder, the Guarantor . . . irrevocably submits, at the sole option of the Company, to the nonexclusive jurisdiction of the Federal Court or local courts of the Commonwealth of Puerto Rico located in the Municipality of San Juan, Puerto Rico, and appellate courts from any thereof.
Id. at 5. Although the Guarantee Agreement recognizes that Renatus is the borrower that executed the Promissory Note, Renatus is not a party to the Guarantee Agreement. Id. at 1, 9.
On September 19, 2024, Plaintiff filed a Complaint for breach of contract, alleging that Renatus and Mr. Swider failed to honor the terms of the Promissory Note and/or the Guarantee Agreement. (Docket No. 1). Accordingly, R5 Partners seeks specific performance of the contract, injunctive relief, monetary damages, and penalties. Id. at 6-8.
Renatus and Mr. Swider filed separate motions requesting dismissal under
On February 7, 2025, the Court issued an order instructing Plaintiff to file a memorandum of law showing cause as to why the Complaint should not be dismissed without prejudice in light of the forum selection clause contained in the Promissory Note. (Docket No. 29).
Plaintiff filed the pending Memorandum of Law in Response to Judge‘s Order to Show Cause (the “Memorandum“), presenting two arguments for why the forum selection clause in the Promissory Note does not require dismissal. (Docket No. 33). First, Plaintiff asserts that the forum selection clause is permissive, allowing for litigation in either the local or federal court located in the Municipality of San Juan in Commonwealth of Puerto Rico. Id. at 2. Second, Plaintiff claims that the forum selection clause of the Guarantee Agreement supersedes that of the Promissory Note. Id. at 2-3.
II. DISCUSSION
A. The forum selection clause is enforceable
Under federal law, determining the “enforceability of forum-selection clauses ordinarily entails several steps.” Rivera v. Kress Stores of Puerto Rico, Inc., 30 F.4th 98, 103 (1st Cir. 2022) (citing Claudio-De Leon v. Sistema Universitario Ana G. Mendez, 775 F.3d 41, 46-47 (1st Cir. 2014)). First, the Court must
1. The Forum Selection Clause is Mandatory
The Court must first determine the threshold issue of whether the forum selection clause is mandatory or permissive. “Permissive forum selection clauses, often described as ‘consent to jurisdiction’ clauses, authorize jurisdiction and venue in a designated forum, but do not prohibit litigation elsewhere . . . In contrast, mandatory forum selection clauses contain clear language indicating that jurisdiction and venue are appropriate exclusively in the designated forum.” Centro Medico de Turabo, Inc., 575 F.3d at 17 (quoting 14D Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3803.1 (3d ed.1998)). Courts are tasked with examining the “specific language of the contract at issue.” Silva v. Encyclopedia Britannica Inc., 239 F.3d 385, 388 (1st Cir. 2001)).
All actions or proceedings arising in connection with this Promissory Note may be tried and litigated in, and the Borrower and the Lender hereby submit to the exclusive jurisdiction of the courts of the Commonwealth of Puerto Rico located in the Municipality of San Juan, Puerto Rico, and appellate courts from any thereof.
(Docket No. 1-1 at 3). Although this clause uses the phrase “may be tried and litigated,” upon revision of the entirety of the language, the forum selection clause must be “deemed mandatory because it dictates the exclusive forum for litigation.” Kress Stores, 30 F.4th at 103 (internal quotations omitted). The word “exclusive” means “single” or “sole.” See Exclusive, Merriam Webster, https://www.merriam-webster.com/dictionary/exclusive (last visited Mar. 11, 2025) (listing “exclusive jurisdiction” as an example of usage). Thus, the plain language of the clause designates the courts of the Commonwealth of Puerto Rico located in San Juan, Puerto Rico as the only forum for disputes arising from the Promissory Note.
The “language of the forum selection clause itself that determines which claims fall within its scope.” Centro Medico de Turabo, Inc., 575 F.3d at 19. Here, the forum selection clause in the Promissory Note applies to “[a]ll actions or proceedings arising in connection with this Promissory Note[.]” (Docket No. 1-1 at 3). The First Circuit has held that a clause applicable to “any action arising out of or in connection with the Agreement” is “unambiguously broad.” Carter‘s of New Bedford, Inc. v. Nike, Inc., 790 F.3d 289, 293 (1st Cir. 2015). See also Huffington v. T.C. Grp., LLC, 637 F.3d 18, 22 (1st Cir. 2011) (noting that Courts have found the phrase “in connection with” “to be broader than the concept of a causal connection, and to mean simply ‘connected by reason of an established or discoverable relation.‘“) (quotations omitted).
Here, Plaintiff claims that Defendants have not complied with the terms of the Promissory Note and seeks specific compliance. Thus, the present dispute undoubtedly “aris[es] in connection” with the Promissory Note.
3. The presumption of enforceability should apply
“A forum selection clause is ‘prima facie valid’ and, absent a ‘strong showing’ by the resisting party that the clause is ‘unreasonable’ under the circumstances,’ it should not be set aside.” Claudio-De Leon, 775 F.3d at 48 (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972)). The First Circuit has recognized four grounds for finding that a forum selection clause is unreasonable, and thus unenforceable:
(1) the clause was the product of “fraud or overreaching“;
(2) “enforcement would be unreasonable and unjust“;
(3) proceedings “in the contractual forum will be so gravely difficult and inconvenient that [the party challenging the clause] will for all practical purposes be deprived of his day in court“; or
(4) “enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision.”
Id. (quoting Rafael Rodriguez Barril, Inc. v. Conbraco Indus., Inc., 619 F.3d 90, 93 (1st Cir. 2010)). Plaintiff did not address the reasonableness of the forum selection clause in their Memorandum. Rather, as will be discussed below, they claim that the forum selection clause in the Promissory Note was superseded by the Guarantee Agreement. Thus, the Court need not analyze each of the above-stated factors and finds that the presumption of enforceability applies.
B. The forum selection clause in the Guarantee Agreement is not binding as to Renatus
Plaintiff contends that the Guarantee Agreement supersedes the forum selection clause in the Promissory Note because it contains an integration clause establishing that: “[a]ll understandings, representations, and agreements heretofore had
“In Puerto Rico, contracts are generally only valid between the parties who execute them, and actions arising out of a contract can be prosecuted only by one contracting party against the other.” Calderon v. Patel, No. 22-1540, 2025 WL 71809, at *3 (D.P.R. Jan. 10, 2025) (quoting Dantlzer, Inc. v. Lamas-Besos, 2010 WL 2572618, at *3 (D.P.R. 2010)). See also
III. CONCLUSION
For the foregoing reasons, the Court NOTES Plaintiff’s Motion in Compliance with Order to Show Cause at Docket No. 33.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 11th day of March 2024.
s/Raúl M. Arias-Marxuach
UNITED STATES DISTRICT JUDGE