Barshaw v. Allegheny Performance Plastics, LLC

334 Mich.App. 741

965 N.W.2d 729

Steven BARSHAW, Plaintiff-Appellant,

v.ALLEGHENY PERFORMANCE PLASTICS, LLC, Defendant-Appellee.

No. 350279

Court of Appeals of Michigan.

Submitted November 5, 2020, at Detroit.

Decided November 24, 2020, 9:05 a.m.

Law Office of Daniel J. Bernard, Bingham Farms (by Daniel J. Bernard ) for Steven Barshaw.

Starr, Butler, Alexopoulos & Stoner, PLLC (by William R. Thomas, Southfield, and Joseph A. Starr, Bloomfield Hills) for Allegheny Performance Plastics, LLC.

Before: Boonstra, P.J., and Cavanagh and Borrello, JJ.

Borrello, J.

In this matter, the trial court was asked to interpret an employment agreement that contained a choice-of-law clause and a forum-selection clause.

The trial court concluded that because Pennsylvania law controlled the issue of whether the forum-selection clause was permissive or mandatory, the parties’ contract evidenced the parties’ agreement to litigate claims arising under the employment agreement in Pennsylvania rather than Michigan. On the basis of this conclusion, the trial court dismissed plaintiff's action. Plaintiff appeals by leave granted.¹ For the reasons set forth in this opinion, we reverse and remand to the trial court for further proceedings consistent with this opinion.

I. BACKGROUND

The parties do not dispute that defendant is a Pennsylvania company, that plaintiff lives in Michigan, and that plaintiff was defendant's employee. In 2018, plaintiff's employment was terminated. As part of the termination process, the parties entered into a separation agreement that contained the following provision:

Governing Law; Jurisdiction. This Agreement shall be governed by and shall be interpreted in accordance with the laws of the State of Pennsylvania, and the parties hereby confer jurisdiction upon the courts of any jurisdiction within the State of Pennsylvania to determine any dispute arising out of or related to this Agreement, or the breach hereof.

Plaintiff filed the instant lawsuit in Macomb County, Michigan, alleging in relevant part² that defendant had breached the separation agreement.³ In his complaint, plaintiff also alleged that he had performed his duties as defendant's employee within Michigan and that defendant did business in Michigan.

Defendant argued in its motion for summary disposition that plaintiff's breach-of-contract claim should be dismissed because the contract's forum-selection clause required plaintiff to pursue this claim in a Pennsylvania forum. Plaintiff argued in response that Michigan was a proper forum because the forum-selection clause did not state that Pennsylvania was the only proper forum or otherwise indicate that jurisdiction was limited exclusively to Pennsylvania.

The trial court dismissed plaintiff's breach-of-contract claim on the basis of the forum-selection clause. The trial court concluded that under Michigan law, the forum-selection clause was unambiguously permissive in nature, rather than mandatory, and that Michigan law therefore did not require dismissal of the claim. However, the trial court concluded that the result would be different under Pennsylvania law and that the conflict should be resolved by following Pennsylvania law because of the choice-of-law provision that was also contained in the parties’ separation agreement. The trial court determined that the forum-selection clause was enforceable under Pennsylvania law, and the court granted defendant's summary disposition motion with respect to plaintiff's breach-of-contract claim.

II. STANDARD OF REVIEW

"This Court reviews de novo a trial court's decision on a motion for summary disposition." Allen v. Bloomfield Hills Sch. Dist. , 281 Mich. App. 49, 52, 760 N.W.2d 811 (2008). In this case, the trial court did not explicitly state which subrule of MCR 2.116 it relied on in dismissing plaintiff's breach-of-contract claim. However, dismissal is appropriate under MCR 2.116(C)(7) when there is "an agreement to arbitrate or to litigate in a different forum." This Court has also stated that dismissal "on the basis of the existence of a valid forum-selection clause falls under MCR 2.116(C)(8), because pursuant to MCL 600.745(3),^{[4 ]} [the] plaintiff's complaint fails to state a claim upon which the courts of this state are permitted to grant relief." Robert A. Hansen Family Trust v. FGH Indus., LLC , 279 Mich. App. 468, 477 n. 6, 760 N.W.2d 526 (2008).

Furthermore, "a trial court's dismissal of an action pursuant to a contractual forum-selection clause is properly reviewed on appeal under a de novo standard." Turcheck v. Amerifund Fin., Inc. , 272 Mich. App. 341, 345, 725 N.W.2d 684 (2006). To the extent our analysis requires the interpretation of contractual and statutory language, our review is also de novo. Id. ("The legal effect of a contractual clause is a question of law that we review de novo."); Allen , 281 Mich. App. at 52, 760 N.W.2d 811 ("The proper interpretation of statutes is also a question of law reviewed de novo on appeal.").

III. ANALYSIS

"[A] dismissal based on a forum-selection clause necessarily requires interpretation and application of contractual language." Turcheck , 272 Mich. App. at 345, 725 N.W.2d 684. Therefore, we begin our analysis by examining the core principles of contract interpretation:

In interpreting a contract, our obligation is to determine the intent of the contracting parties. If the language of the contract is unambiguous, we construe and enforce the contract as written. Thus, an unambiguous contractual provision is reflective of the parties’ intent as a matter of law. Once discerned, the intent of the parties will be enforced unless it is contrary to public policy. [ Id. , quoting Quality Prod. & Concepts Co. v. Nagel Precision, Inc. , 469 Mich. 362, 375, 666 N.W.2d 251 (2003) (quotation marks omitted).]

We have previously instructed that when presented with a contractual forum-selection clause, a court's first step is to "determine the threshold issue whether a party is bound by a contract, and, accordingly, any forum selection and choice-of-law provision in the contract."⁵ Turcheck , 272 Mich. App. at 346 n. 2, 725 N.W.2d 684 (quotation marks and citation omitted). When the action has been filed in Michigan, "Michigan courts have the initial jurisdiction" to make this determination. Id. "A contractual forum selection clause, though otherwise valid, may not be enforced against one not bound by the contract." Offerdahl v. Silverstein , 224 Mich. App. 417, 420, 569 N.W.2d 834 (1997).

In general, Michigan courts enforce forum-selection clauses, Turcheck , 272 Mich. App. at 348, 725 N.W.2d 684, and "Michigan's public policy favors the enforcement of contractual forum-selection clauses and choice-of-law provisions," id. at 345, 725 N.W.2d 684. The approach to enforcing contractual forum-selection clauses similar to the clause at issue here is grounded in MCL 600.745(3), which provides:

(3) If the parties agreed in writing that an action on a controversy shall be brought only in another state and it is brought in a court of this state, the court shall dismiss or stay the action, as appropriate, unless any of the following occur:

(a) The court is required by statute to entertain the action.

(b) The plaintiff cannot secure effective relief in the other state for reasons other than delay in bringing the action.

(c) The other state would be a substantially less convenient place for the trial of the action than this state.

(d) The agreement as to the place of the action is obtained by misrepresentation, duress, the abuse of economic power, or other unconscionable means.

(e) It would for some other reason be unfair or unreasonable to enforce the agreement.

If none of the exceptions listed in Subdivisions (a) through (e) applies, then Michigan courts will enforce the parties’ contractual forum-selection clause as written pursuant to MCL 600.745(3). Turcheck , 272 Mich. App. at 345-346, 348, 725 N.W.2d 684.

However, the analysis becomes "more complicated" when, as here, "a single agreement contains both a forum-selection clause and a choice-of-law provision." Id. at 346, 725 N.W.2d 684. We explained in Turcheck :

When a party to such an agreement sues in a state that is not designated by either the forum-selection clause or the choice-of-law provision, it becomes necessary to determine which state's law will govern the enforceability of the forum-selection clause itself. In other words, the trial court where the action is filed must decide whether to determine the enforceability of the forum-selection clause by applying its own law, or by applying the law designated in the choice-of-law provision. [ Id. ]

In Turcheck , we also noted that "Michigan courts have never squarely addressed whether the enforceability of a contractual forum-selection clause should be governed by the law of the state where the action was filed or, in the alternative, the law selected by the parties in the choice-of-law provision." Id. at 347 n. 3, 725 N.W.2d 684. We further observed that there were examples of jurisdictions following each approach, and we explained the rationale for each view.

Id. at 347, 725 N.W.2d 684. Regarding the first approach, we stated:

[C]ertain jurisdictions follow the rule that a contract's forum-selection clause is to be read independently of the choice-of-law provision, and that the validity of the forum-selection clause will always be determined according to the law of the jurisdiction where the action was filed. This rule is based on the notion that because choice-of-law provisions only require application of the chosen state's substantive law, the state where the action was filed remains free to apply its own law on matters of procedure , including the question whether the forum-selection clause is valid in the first place. [ Id. ]

With respect to the second approach, we stated:

Many jurisdictions follow the rule that, provided the choice-of-law provision is enforceable under the law of the state where the action was filed, the

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