-GSA Big Sandy Rancheria of Western Mono Indians, et al. v. Brownstone, LLC, No. 1:2011cv00198 - Document 12 (E.D. Cal. 2011)

Court Description: MEMORANDUM DECISION Regarding 7 Motion to Dismiss signed by Judge Oliver W. Wanger on 4/21/2011. CASE TRANSFERRED to Central District of California, Los Angeles Division. (Sant Agata, S)
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1 2 3 4 UNITED STATES DISTRICT COURT 5 EASTERN DISTRICT OF CALIFORNIA 6 7 8 9 1:11-cv-00198-OWW-GSA BIG SANDY RANCHERIA OF WESTERN MONO INDIANS, et al., Plaintiffs, 10 11 12 MEMORANDUM DECISION REGARDING MOTION TO DISMISS (Doc. 7) v. BROWNSTONE, LLC, 13 Defendant. 14 I. INTRODUCTION. 15 16 Big Sandy Rancheria of Western Mono Indians and Big Sandy 17 Rancheria Entertainment Authority ( Plaintiffs ) proceed with an 18 action 19 ( Defendant ). for declaratory relief against Brownstone, LLC 20 Defendant filed a motion to dismiss Plaintiffs complaint on 21 March 2, 2011 under Federal Rule of Civil Procedure 12(b)(3) for 22 improper 23 interpretation of a forum selection clause. 24 first amended complaint ( FAC ) on March 23, 2011. 25 Plaintiffs filed opposition to the motion to dismiss on April 4, 26 2011. venue. 7). The motion centers on proper Plaintiffs filed a (Doc. 8). (Doc. 9). II. FACTUAL BACKGROUND. 27 28 (Doc. Plaintiff Big Sandy Rancheria 1 of Western Mono Indians 1 ( Tribe ) is a federally recognized Indian Tribe. Plaintiff Big 2 Sandy wholly 3 instrumentality of the Tribe organized under Tribal Law as an 4 authorized government agency. 5 Rancheria Entertainment Authority is a owned On September 10, 1999, the Tribe and the State of California 6 executed and 7 ( Compact ) pursuant to the Indian Gaming Regulatory Act (25 U.S.C. 8 ยง 2701 et seq.) ( IGRA ). 9 Interior approved the Compact on May 5, 2000. sets entered forth into a Tribal-State Gaming Compact The United States Secretary of the specific and Inter alia, the 10 Compact comprehensive licensing 11 requirements pursuant to which entities designated as Gaming 12 Resource Suppliers or Financial Sources must become licensed by 13 the Tribe s Gaming Agency before providing any services to the 14 Tribe. In order to become licensed, an entity must submit a formal 15 application from the Tribal Gaming Agency and must also submit to 16 a State Certification process with the California Gambling Control 17 Commission. 18 On May 21, 2002, the Tribe enacted the Big Sandy Rancheria 19 Tribal Gaming Ordinance ( Gaming Ordinance ) and adopted the Big 20 Sandy Rancheria Tribal Gaming Regulations ( Gaming Regulations ); 21 both were approved by the National Indian Gaming Commission on 22 November 7, 2002. 23 Rancheria Gaming Commission ( Gaming Commission ). 24 Commission is responsible for carrying out the Tribe s regulatory 25 responsibilities. The Gaming Ordinance established the Big Sandy The Gaming 26 On January 16, 2007, the Tribe and Defendant executed a 27 Memorandum of Understanding ( MOU ) which memorialized their 28 attempt to enter into a formal development, financing agreement, 2 1 and consulting agreement for a new casino, hospitality, and 2 recreational project for the Tribe. Pursuant to the MOU, the Tribe 3 was to forego discussion with any entity other than Defendant with 4 respect to contracts or agreements related to the development, 5 construction, opening, financing, or on-going operation of the 6 Tribe s proposed project. 7 advance $40,000.00 to the Tribe pursuant to a Credit Agreement the 8 parties intended to enter into at a later date. The MOU provided that Defendant would 9 On or about March 25, 2007, the Tribe and Defendant executed 10 two agreements as contemplated by the MOU: (1) a Development 11 Agreement; and (2) a Credit Agreement. 12 stated that Defendant would provide an array of services to the 13 Tribe in connection with its gaming activities. 14 be paid a development fee equal to six percent of the total cost of 15 the project. 16 purports to relieve Defendant from any licensing requirements 17 imposed under the IGRA, the Compact, the Gaming Regulations, or the 18 Gaming 19 exemption provision. The Development Agreement Defendant was to The Development Agreement includes a provision that Ordinance. The Credit Agreement includes a similar 20 The Compact, Gaming Ordinance, and Gaming Regulations require 21 Defendant s licensure in light of the terms and provisions of the 22 Development Agreement and the Credit Agreement. 23 never applied for or been granted any Tribal Gaming License, nor 24 has Defendant ever submitted to a Suitability Determination by the 25 California Gambling Control Commission. 26 Defendant has On or about December 10, 2009, the Gaming Commission notified 27 Defendant 28 Commission that it was requested required that to be Defendant 3 licensed. submit all The Gaming necessary 1 applications within ten days. 2 Defendant responded to the Gaming Commission and asserted that it 3 was not subject to licensing requirements pursuant to the exemption 4 provisions entailed 5 Agreement. Defendant also asserted that it did not need to obtain 6 any licensing because Defendant did not deem any of its services to 7 the tribe to be Gaming Resources. in the Approximately thirty days later, Development Agreement and Credit 8 The Gaming Commission reiterated its position in a letter to 9 Defendant on February 9, 2010, noting that the contract language 10 Defendant sought to rely on conflicted with the express terms of 11 the Compact, the Gaming Ordinance, and the Gaming Regulations. The 12 Gaming Commission notified Defendant that until it received the 13 necessary licenses, Defendant was to refrain from further contact 14 with the Tribal Council or the Entertainment Authority. 15 On or about July 13, 2010, the Gaming Commission notified the 16 Tribe of its Findings of Regulatory Review of Brownstone, LLC and 17 Associated Documents with resulting Business Relationships with the 18 Big Sandy Entertainment Authority and the Big Sandy Rancheria Band 19 of 20 Findings provided that the Gaming Commission determined that the 21 Development Agreement and Credit Agreement were null and void for 22 failure to comply with the Compact, Gaming Ordinance, and Gaming 23 Regulations. Western Mono Indians ( the Findings ). Inter alia, the 24 On or about July 16, 2010, the Tribe notified Defendant that 25 the Development Agreement, Credit Agreement, and the MOU were each 26 null and void. 27 that the agreements remained in effect and binding. 28 responded on September 7, 2010 and reiterated its position, but Defendant responded on July 22, 2010 and asserted 4 The Tribe 1 also indicated a willingness to entertain further proposals once 2 Defendant complied with applicable licensing provisions. Defendant 3 refuses to submit to any licensing requirements and continues to 4 demand that the Tribe withdraw its licensing requirements. III. LEGAL STANDARD. 5 6 Defendant moves to dismiss the complaint on the basis of forum 7 selection clauses contained in the parties agreements. 8 Enforcement of a forum selection clause is an appropriate basis for 9 a motion to dismiss pursuant to Rule 12(b)(3). Fed. R. Civ. P. 10 12(b)(3); Doe 1 v. AOL LLC, 552 F.3d 1077, 1081 (9th Cir. 2009). In 11 adjudicating a motion to dismiss for improper venue under Rule 12 12(b)(3), pleadings need not be accepted as true, and facts outside 13 the pleadings may be considered. 14 interpretation of a forum selection clause under Rule 12(b)(3). Id. 15 Forum selection clauses are prima facie valid and should not 16 be set aside unless the party challenging enforcement of such a 17 provision can show it is "'unreasonable' under the circumstances." 18 E.g., Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 325 (9th Cir. 19 1996). 20 incorporation into the contract was the result of fraud, undue 21 influence, or overweening bargaining power; (2) the selected forum 22 is so "gravely difficult and inconvenient" that the complaining 23 party will "for all practical purposes be deprived of its day in 24 court;" or (3) enforcement of the clause would contravene a strong 25 public policy of the forum in which the suit is brought. Id. 26 (citations omitted). 27 /// 28 /// A forum selection clause 5 Id. is Federal law applies to unreasonable if (1) its IV. DISCUSSION. 1 2 3 The parties agreements each contain sections entitled Forum Selection which provide as follows: 4 Each party hereto irrevocably and unconditionally submits, for itself and its property subject to the provision in this SECTION 8, to the exclusive jurisdiction for any claim arising hereunder of (i) the United States District Court for the Central District of California (of [sic] if such court determines it is unwilling or unable to hear any dispute, any other federal court of competent jurisdiction in the State of California) (and any court having appellate jurisdiction thereof) and (ii) if, and only if the federal courts identified in Section 6.02(I) [sic] determine that they lack jurisdiction over any claim arising hereunder, the Superior Court in and for Los Angeles County, California (of [sic] if such court determines it is unwilling or unable to hear the dispute, any other state court of [sic] in the State of California (and any court having appellate jurisdiction thereof) (collectively, the Applicable Courts ) 5 6 7 8 9 10 11 12 13 14 (FAC, Ex. K, Development Agreement at 13; Ex. L, Credit Agreement 15 at 14).1 16 for dismissal under Rule 12(b)(3). 17 A. Scope of the Forum Selection Clauses 18 Defendant invokes the forum selection clauses as a basis Plaintiffs contend that their claims for declaratory relief 19 are outside the scope of the forum selection clauses. Plaintiffs 20 cite Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 21 1464 (9th Cir. 1983) and Cedars-Sinai Med. Ctr. v. Global Excel 22 23 24 25 26 27 28 1 Defendant s motion misquotes the forum selection provisions by substituting the word or in place of the word of in two separate clauses. (Doc. 7, Motion to Dismiss at 3). Although the syntax and apparent purpose of the forum selection provisions indicate that use of the word of instead of or was likely a typographical error (Plaintiffs do not contend otherwise), attorneys do not have license to substitute words they believe should have been included in a contract for the words that are actually set forth in the agreement when quoting contract provisions to a court. At a minimum, typographical errors should be flagged by including the correct words in brackets, or by use of the term [sic]. Presenting an edited contract provision as a direct quote in a pleading is inappropriate, particularly when an attorney s edits have a material impact on the force and effect of the provision. See Fed. R. Civ. P. 11. 6 1 Mgmt., Inc., 2010 U.S. Dist. LEXIS 139848 *14, 2010 WL 5572079 *5 2 (C.D. Cal. 2010) for the proposition that the phrase any claims 3 arising hereunder only encompasses claims requiring the court to 4 interpret the agreements in the context of...performance under 5 them. 6 agreements, nor [does it] cover claims having their origin in the 7 agreements. 8 Plaintiffs supports this reading of the forum selection clauses 9 contained in the Development Agreement and the Credit Agreement. [It] does not cover claims that merely (Doc. 9, Opposition at 3). Neither case cited by 11 context 12 hereunder. 13 synonymous with the phrase arising under the Agreement. 708 F.2d 14 at 1464. 16 17 18 19 20 21 an arbitration Ninth the In of the to 10 15 Mediterranean, relate Circuit agreement, interpreted, the phrase in the arising The Ninth Circuit interpreted arising hereunder as The Court then examined the scope of that phrase: The phrase "arising under" has been called "relatively narrow as arbitration clauses go." Sinva, Inc. v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 253 F. Supp. 359, 364 (S.D.N.Y. 1966). In In re Kinoshita & Co., 287 F.2d 951, 953 (2d Cir. 1961), Judge Medina concluded that when an arbitration clause "refers to disputes or controversies 'under' or 'arising out of' the contract," arbitration is restricted to "disputes and controversies relating to the interpretation of the contract and matters of performance." Judge Medina reasoned that the phrase "arising under" is narrower in scope than the phrase "arising out of or relating to," the standard language recommended by the American Arbitration Association. Id. 22 23 Id. (emphasis added). As Defendant points out, Mediterranean 24 establishes that the phrase arising hereunder encompasses claims 25 relating to the interpretation...of the contract. Id. 26 Cedars-Sinai is of no help to Plaintiffs, as it says nothing 27 about the meaning of the phrase arising hereunder. Cedars-Sinai 28 discusses generally the three categories 7 of forum selection 1 clauses: 2 First, the most limited forum selection clauses cover claims "arising under" the relevant agreement. 3 Second, an intermediate category is occupied by forum selection clauses that govern disputes "arising out of or relating to" the contract. These clauses cover claims that have a significant relationship to the contract or have "their origin or genesis" in the contract. 4 5 6 Third, at the most extreme end of the spectrum, some forum selection clauses purport to govern "all claims" without qualification. 7 8 Cedars-Sinai, 2010 U.S. Dist. LEXIS 139848 *14 (citations omitted). 9 In discussing the scope of the first and most limited type of forum 10 selection clause, Cedars-Sinai cites In re Kinoshita. Id. As noted 11 in Mediterranean, Kinoshita holds that the phrase arising under 12 encompasses disputes and controversies relating to the 13 interpretation of the contract. Mediterranean, 708 F.2d at 1464 14 (citing Kinoshita, 287 F.2d at 953). 15 The FAC asserts two causes of action, each of which arise under 16 the contract as alleged by the FAC s express terms. The FAC s first 17 cause of action alleges there is an actual and justiciable 18 controversy relating to the legal rights and duties of Plaintiffs 19 and Defendant under the Development Agreement. (FAC at 22). 20 Similarly, the second cause of action alleges there is an actual 21 and justiciable controversy relating to the legal rights and duties 22 of Plaintiffs and Defendant under the Credit Agreement. (FAC at 23 22). Inter alia, the FAC seeks a declaration from the court that 24 the two agreements...impermissibly encumber Indian lands. (FAC 25 at 2). It cannot be denied that the FAC calls on the court to 26 interpret the parties agreements respecting the need for a license. 27 Absent interpretation of the parties respective rights and duties 28 8 1 under the contract, Plaintiffs claims cannot be adjudicated. 2 Plaintiffs claims for relief fall within the ambit of the forum 3 selection clauses. See, e.g., Mediterranean, 708 F.2d at 1464 4 (holding that phrase arising hereunder covers disputes and 5 controversies relating to the interpretation of the contract ) 6 (citing Kinoshita, 287 F.2d at 953). 7 B. Exclusivity Entailed by the Forum Selection Clauses 8 Plaintiffs contend that the 9 permissive, rather than mandatory. forum selection (Opposition at 6). clauses are Plaintiffs 10 argue that the language of the forum selection clauses does not 11 establish exclusive jurisdiction in the United States District Court 12 for the Central District of California, because the forum selection 13 clauses contemplate jurisdiction in other California courts. 14 Plaintiffs argument misses the mark. That the forum selection 15 clause does not establish the Central District as the only possible 16 venue for litigation does not provide for alternative fora. A forum 17 selection clause, like any other contractual agreement, must be 18 construed and enforced according to the plain meaning of its terms. 19 E.g., Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77 20 (9 th Cir. 1987) (noting that plain meaning must be afforded to 21 words contained in a forum selection provision). Here, the forum 22 selection clauses specifically state that the forum of first resort 23 for claims arising under the parties agreements is the United State 24 District Court for the Central District of California. Plaintiffs 25 do not contend otherwise. 26 Plaintiffs citations to Northern Cal. Dist. Council of 27 Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1037 (9th 28 Cir. 1995) and Krish v. Balasubramaniam, 2006 U.S. Dist. LEXIS 76194 9 1 * 14-16 (E.D. Cal. 2007) are of no avail, as neither case involved 2 forum selection clauses similar to the parties agreements. The 3 forum selection clause in Pittsburg-Des Moines Steel Co. mandate[d] 4 nothing more than that the Orange County courts have jurisdiction. 5 69 F.3d at 1037. In Krish, the court acknowledged that, in order 6 to justify dismissal under Rule 12(b)(3), [a] forum selection 7 clause needs to contain additional language mandating that venue be 8 in a particular place. 2006 U.S. Dist. LEXIS 76194 * 14. The 9 subject forum selection agreements contain language mandating that 10 suit must first be brought in the Central District; only if that 11 court determines it is unwilling or unable to hear any dispute is 12 suit in another district appropriate. (FAC, Ex. K, Development 13 Agreement at 13; Ex. L, Credit Agreement at 14). 14 C. Remedy Plaintiffs request that this case be transferred rather than 15 16 dismissed, and Defendant does not oppose transfer of this case to 17 the Central District. (Reply at 4). The court finds that a 18 transfer, as opposed to a dismissal, is in the interest of justice. ORDER 19 For the reasons stated, this case is TRANSFERRED to the United 20 21 States District Court for the Central District of California, Los 22 Angeles Division. 23 IT IS SO ORDERED. 24 Dated: hkh80h 25 April 21, 2011 /s/ Oliver W. Wanger UNITED STATES DISTRICT JUDGE 26 27 28 10