AFC Franchising, LLC v. Purugganan

43 F.4th 1285

AFC FRANCHISING, LLC, Plaintiff-Appellant,

v.Danilo PURUGGANAN, Defendant-Appellee.

No. 20-13849

United States Court of Appeals, Eleventh Circuit.

Filed: August 11, 2022

Michael J. Douglas, Joe L. Leak, Leak Douglas & Morano, PC, Birmingham, AL, Robert Gerald Boliek, Jr., Robert G. Boliek, Jr., Attorney At Law, Birmingham, AL, for Plaintiff-Appellant.

Robert E. Battle, Adam Patterson Plant, Harlan F. Winn, III, Attorney, Battle & Winn, LLP, Birmingham, AL, Laura Marie Carbo, Kahane & Associates, PA, Plantation, FL, Allan Samuels, McLeod Brock, PLLC, Boca Raton, FL, for Defendant-Appellee.

Before Newsom, Tjoflat, and Ed Carnes, Circuit Judges.

Newsom, Circuit Judge, delivered the opinion of the Court.

Tjoflat, Circuit Judge, filed a concurring opinion.

Newsom, Circuit Judge:

In this case, we must decide whether Danilo Purugganan consented to personal jurisdiction and venue in the Northern District of Alabama by agreeing to a "floating" forum-selection clause. We hold that, in the circumstances presented, the clause is applicable and enforceable. Accordingly, we reverse the district court's contrary decision and remand for further proceedings.

I

AFC Franchising is an Alabama LLC with its principal place of business in Shelby County, Alabama. Purugganan is a resident of New York. In 2009, Purugganan signed a "Master Developer Agreement" with another company, Doctors Express Franchising, to develop urgent-care centers in New York and Connecticut. Doctors Express was an LLC with its principal place of business in Maryland, and the parties agreed that the contract would be governed by Maryland law.

After a series of acquisitions, AFC was assigned Doctors Express's end of the bargain in 2013, and Purugganan was notified of the assignment. It is undisputed that this assignment was permissible. Indeed, the Master Developer Agreement expressly authorized Doctors Express to "change [its] ownership or form and/or assign th[e] Agreement and any other agreement to a third party without restriction." Doc. 1-2 at 17.

As particularly relevant here, the Master Developer Agreement—which Doctors Express drafted—contains the following forum-selection provision:

You and your owners agree that all actions arising under this Agreement or otherwise as a result of the relationship between you and us must be commenced in a state or federal court of competent jurisdiction within such state or judicial district in which we have our principal place of business at the time the action is commenced , and you (and each owner) irrevocably submit to the jurisdiction of those courts and waive any objection you (or the owner) might have to either the jurisdiction of or venue in those courts.

Id. at 26 (emphasis added). This is known as a "floating" forum-selection clause because it ties the chosen forum to a mutable fact—here, the franchisor's principal place of business. See Dale Joseph Gilsinger, Annotation Enforceability of Floating Forum Selection Clauses , 39 A.L.R.6th 629 § 2 (2008) ("A ‘floating’ forum selection clause is defined as a clause which, rather than designating a forum by immutable geographical place name, designates the exclusive forum for all litigation regarding the agreement ... by reference to mutable facts ....").

When the parties’ relationship soured, Purugganan threatened to sue AFC in either Connecticut or New York. AFC believed that the floating forum-selection clause required Purugganan to sue in Alabama, where AFC had its principal place of business. It thus sought a declaratory judgment in Alabama state court (1) that the parties had to litigate their dispute in Alabama and (2) that AFC hadn't breached the Master Developer Agreement.

Purugganan removed the action to the United States District Court for the Northern District of Alabama, and the parties agreed to have the case decided by a magistrate judge. See 28 U.S.C. § 636(c). Purugganan then moved to dismiss for lack of personal jurisdiction and improper venue. In the alternative, Purugganan asked the magistrate judge—who, given the parties’ consent, acted on behalf of the district court—to transfer this case to Connecticut, where he has since sued AFC.

The district court sided with Purugganan on the personal-jurisdiction issue. First, it concluded that Purugganan lacked "minimum contacts" with Alabama. Second, and more importantly for present purposes, the court held that Purugganan hadn't contractually waived his personal-jurisdiction defense by agreeing to the forum-selection provision. Even though AFC took over as Doctors Express's assignee and had its principal place of business in Alabama, the court reasoned, there was "no reference to assignees in the Master Develop[er] Agreement's forum selection clause." Accordingly, the district court granted Purugganan's motion to dismiss. AFC timely appealed.¹

II

We begin our analysis from a place of relative agreement between the parties—what law to apply. We then turn to the merits of the personal-jurisdiction dispute.

A

It is well settled that state law governs issues of contract interpretation that arise in a diversity action. See, e.g. , Fernandez v. Bankers Nat'l Life Ins. , 906 F.2d 559, 564 (11th Cir. 1990). Here, the Master Developer Agreement provides that the contract and all claims arising from it are "governed by the laws of the State of Maryland." Doc. 1-2 at 26. Neither party disputes the applicability of that choice-of-law clause. So we will apply Maryland law in our interpretation of the agreement.

The next question is whether state or federal law governs the enforceability of the forum-selection clause. See Erie R.R. Co. v. Tompkins , 304 U.S. 64, 71, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). "When deciding to apply federal or state law to a forum selection clause, the context in which the clause is asserted can be determinative." Preferred Cap., Inc. v. Sarasota Kennel Club, Inc. , 489 F.3d 303, 306 (6th Cir. 2007). For instance, in a diversity action involving a transfer motion, "[c]onsideration of whether to enforce a forum selection clause ... is governed by federal law, under 28 U.S.C. § 1404(a)." P & S Bus. Machs., Inc. v. Canon USA, Inc. , 331 F.3d 804, 807 (11th Cir. 2003) (per curiam). But at least in some cases in which a defendant moves to dismiss for lack of personal jurisdiction, this Court has held that "we must apply state law." Alexander Proudfoot Co. World Headquarters L.P. v. Thayer , 877 F.2d 912, 918–19 (11th Cir. 1989).

We needn't wade into these Erie waters today, as the parties agree that Maryland law should apply, and Maryland has "adopt[ed] the federal standard for analyzing the enforceability of forum-selection clauses." Peterson v. Evapco, Inc. , 238 Md.App. 1, 188 A.3d 210, 228 (Md. Ct. Spec. App. 2018) (citing Gilman v. Wheat, First Sec., Inc. , 345 Md. 361, 692 A.2d 454, 462–63 (1997) ).² Thus, we "can apply state and federal law harmoniously" to the enforceability issue at hand. Esfeld v. Costa Crociere, S.P.A. , 289 F.3d 1300, 1307 (11th Cir. 2002).

B

That brings us to the heart of the parties’ dispute—whether the exercise of personal jurisdiction over Purugganan would violate due process.³ "Normally," the Due Process Clause requires us to "consider whether the defendant purposefully established ‘minimum contacts’ with the forum state." Alexander Proudfoot , 877 F.2d at 921 (quoting Int'l Shoe Co. v. Washington , 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) ). But "because the personal jurisdiction requirement is a waivable right," Burger King Corp. v. Rudzewicz , 471 U.S. 462, 472 n.14, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985), the normal "due process analysis is unnecessary where a nonresident defendant has consented to suit in a forum," Alexander Proudfoot , 877 F.2d at 921. In that case, so long as a forum-selection clause is applicable and "not ‘unreasonable and unjust,’ [its] enforcement does not offend due process." Burger King , 471 U.S. at 472 n.14, 105 S.Ct. 2174 (citation omitted) (quoting The Bremen v. Zapata Off-Shore Co. , 407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) ); see also Carnival Cruise Lines, Inc. v. Shute , 499 U.S. 585, 593, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991).

We start, then, by analyzing whether the floating forum-selection clause applies to this dispute. Again, that provision provides as follows:

You and your owners agree that all actions arising under this Agreement or otherwise as a result of the relationship between you and us must be commenced in a state or federal court of competent jurisdiction within such state or judicial district in which we have our principal place of business at the time the action is commenced , and you (and each owner) irrevocably submit to the jurisdiction of those courts and waive any objection you (or the owner) might have to either the jurisdiction of or venue in those courts .

Doc. 1-2 at 26 (emphases added). Clearly, Purugganan waived objections to personal jurisdiction in the "state or judicial district," to use the contract's language, "in which we have our principal place of business at the time the action is commenced." Who, though, is the "we" and "our" in that phrase? That is the pivotal question.

Purugganan says that phrase refers to the principal place of business of Doctors Express—and only Doctors Express—as the original party to the Master Developer Agreement. AFC contends, by contrast, that the phrase now refers to its principal place of business because—as a valid assignee—it succeeded to all of Doctors Express's rights and obligations under the contract.

We agree with AFC. The Master Developer Agreement explicitly authorizes Doctors Express to "assign th[e] Agreement ... to a third party without restriction." Id. at 17. And under Maryland law, when a contract "is transferred by assignment, the assignee steps into the [assignor]’s shoes and acquires all the [assignor]’s rights" under the contract. Italian Fisherman, Inc. v. Middlemas , 313 Md. 156, 545 A.2d 1, 4 (1988) (emphasis...