Barber v. Bradford Aquatic Grp., LLC

414 Mont. 170

539 P.3d 648

Kevin BARBER, Plaintiff and Appellant,

v.BRADFORD AQUATIC GROUP, LLC, Defendant and Appellee.

DA 23-0218

Supreme Court of Montana.

Submitted on Briefs: September 6, 2023

Decided: December 5, 2023

For Appellant: Nicholas LeTang, Passamani & LeTang, PLLC, Helena, Montana

For Appellee: Natasha P. Jones, Elliott D. McGill, Boone Karlberg, P. C., Missoula, Montana

Justice Beth Baker delivered the Opinion of the Court.

¶1 Kevin Barber (Barber) sued Bradford Aquatic Group, LLC (Bradford) for claims arising from the termination of his employment. The Eleventh Judicial District Court, Flathead County, dismissed Barber's claims without prejudice for improper venue, applying the choice-of-law and forum selection clauses contained in Barber's employment agreement. Barber appeals, arguing that Montana law should apply notwithstanding the agreement's contrary provision. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Bradford, a North Carolina limited liability corporation with its principal place of business in Brunswick County, North Carolina, engages in the sale of pools and hot tubs. Sometime in 2018, Bradford contacted Barber about the possibility of employment. In 2019, Bradford hired Barber as a Regional Business Development Manager for its Rocky Mountain region, which included Montana, Idaho, and Wyoming.

¶3 Bradford and Barber engaged in substantial negotiations leading up to Barber's employment with the company. In July 2019, the parties executed an employment agreement (the Agreement).¹ Section 8(f) of the Agreement contains a choice-of-law and forum selection clause. It provides:

(f) Governing Law and Venue. Notwithstanding the principles of conflicts of laws or specific laws to the contrary, North Carolina law shall govern and control the validity, interpretation, performance, and enforcement of this Agreement and its Addendum. Any action, claim, dispute, or proceeding arising from or relating to this Agreement shall exclusively be instituted and prosecuted only in the courts located in the County of Brunswick, State of North Carolina, or the federal courts of the Eastern District of North Carolina, and each party submits to the jurisdiction and venue of such courts and waives any defense relating to such personal jurisdiction and venue.

During his employment, Barber resided and paid income taxes in Montana. Bradford paid payroll taxes for Barber's employment in Montana.

¶4 In January 2022, Bradford terminated Barber's employment. Barber sued Bradford alleging, among other things, that Bradford violated the Montana Wrongful Discharge from Employment Act (WDEA). Citing the Agreement, Bradford moved under M. R. Civ. P. 12(b)(3) to dismiss the suit for lack of proper venue. The District Court granted Bradford's motion. Barber appeals.

STANDARDS OF REVIEW

¶5 When a contract contains both choice-of-law and forum selection provisions, we first determine whether the choice of law clause is valid. Polzin v. Appleway Equip. Leasing, Inc. , 2008 MT 300, ¶ 13, 345 Mont. 508, 191 P.3d 476. We review a district court's determination of applicable law de novo. Harrington v. Energy West Inc. , 2015 MT 233, ¶ 7, 380 Mont. 298, 356 P.3d 441.

Whether a Montana district court is the proper venue is a question of law requiring application of facts to the applicable law. See Deichl v. Savage , 2009 MT 293, ¶ 6, 352 Mont. 282, 216 P.3d 749. This Court's review of a determination of proper venue is plenary. Deist v. Thornton , 2009 MT 21, ¶ 7, 349 Mont. 94, 201 P.3d 800.

DISCUSSION

¶6 1. Is the choice-of-law provision in Barber's employment agreement valid?

¶7 This Court determines choice-of-law questions through the approach described in the Restatement (Second) of Conflict of Laws. Phillips v. GMC , 2000 MT 55, ¶¶ 5, 23, 298 Mont. 438, 995 P.2d 1002. The flexible approach of the Restatement calls for application of its principles on an issue-by-issue basis. See Buckles v. BH Flowtest, Inc. , 2020 MT 291, ¶ 11, 402 Mont. 145, 476 P.3d 422. Barber's claims raise only questions sounding in contract. We therefore apply the Restatement rules applicable to contract disputes.²

¶8 We rely on the Restatement §§ 6, 187, and 188 for determining the validity of choice of law clauses. Polzin , ¶ 14. When a contract includes a choice-of-law provision, we begin with the Restatement § 187 to determine the provision's validity. Polzin , ¶ 14 (citing Modroo v. Nationwide Mut. Fire Ins. , 2008 MT 275, ¶ 54, 345 Mont. 262, 191 P.3d 389 ). The Restatement § 187 provides:

(1) The laws of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue.

(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either

(a) the chosen state had no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or

(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

(3) In the absence of a contrary indication of intention the reference is to the local law of the state of the chosen law.

¶9 Considering the Restatement § 187(1), parties generally are free to determine the terms of their dealings. See the Restatement (Second) of the Conflict of Laws § 187 cmt. c. In Montana, parties enjoy a broad freedom to contract around the terms of their private dealings so long as their agreements do not conflict with public policy. Winter v. State Farm Mut. Auto Ins. Co. , 2014 MT 168, ¶ 26, 375 Mont. 351, 328 P.3d 665 (citing Arrowhead Sch. Dist. No. 75 v. Klyap , 2003 MT 294, ¶ 20, 318 Mont. 103, 79 P.3d 250 ). Through extensive negotiations, Bradford and Barber explicitly agreed to be governed by North Carolina law. Barber does not claim that he was unable to bargain for terms in the Agreement. It was within the parties’ prerogative to determine that North Carolina law would govern their relationship. The particular issue raised by Barber—whether Montana or North Carolina law should apply—is resolvable by the choice-of-law clause contained in the Agreement. Under the Restatement § 187(1), North Carolina law applies to Barber's claims.

¶10 Even if Barber had a plausible argument that the issue he now raises is not one the parties could have resolved by an explicit provision in the Agreement, we follow Restatement § 187(2) and apply the law of the state chosen by the parties unless "(1) if, but for the choice-of-law provision, Montana law would apply under § 188 of the Restatement; (2) if Montana has a materially greater interest in the particular issue than the state chosen by the parties; and (3) if applying the state law chosen by the parties would contravene a fundamental policy of Montana." Modroo , ¶ 54.

a. Applicability of Montana Law

¶11 The first prong of the Modroo test requires that this Court determine whether Montana law would apply under the Restatement § 188 had the parties made no valid choice-of-law election in their contract. Modroo , ¶ 54. In relevant part, that section provides:

(1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.

The relevant portion of the Restatement § 6 states, "(1) A court, subject to constitutional restrictions, will follow a statutory directive of its own state on choice of law."

¶12 Montana's statutory directive governing contractual choice-of-law is contained in § 28-3-102, MCA. It requires this Court to interpret a contract pursuant to the law of the place where it is to be performed or, if no such place is indicated, pursuant to the law of the place where the contract was made. Harrington , ¶ 18 ; Polzin , ¶ 16. In Polzin , we determined that a contract between a truck seller and buyer did not contain a specified place of performance. Polzin , ¶ 18. There, the seller argued that the place of performance of a sales contract was the place of payment, while the buyer argued that because the underlying dispute regarded a warranty of a truck in Montana, Montana was the place of performance. Polzin , ¶¶ 17-18. Barber argues that our analysis should center on whether Montana was an anticipated place of performance under the Agreement. Barber alleges that Montana is the state with the most significant relationship to the transactions because (1) Montana was one of three states listed as Barber's territory in the Agreement, (2) Bradford was aware of Barber's activity in Montana, and (3) Bradford remitted payroll taxes to Montana and mailed paystubs to Barber's Polson address. See the Restatement (Second) of the Conflict of Laws § 188(1). Therefore, Barber maintains, Montana law would apply to the contract, but for the choice-of-law provision. See Modroo, ¶ 57. Bradford responds that, while Barber did work and reside in Montana, the Agreement did not contemplate Montana as the only place of performance. At a minimum, the Agreement contemplated performance in Montana, Idaho, and Wyoming, and it provided the possibility for performance in any county of any state. Bradford also argues that Barber's reliance on Modroo is misplaced because even in that case, where we found Montana was the place of performance of an automobile insurance policy covering accidents in multiple states, we chose not to apply Montana...