Championship Tournaments, LLC v. U.S. Youth Soccer Ass'n, Inc.

CHAMPIONSHIP TOURNAMENTS, LLC Plaintiff v. UNITED STATES YOUTH SOCCER ASSOCIATION, INC., et al. Defendants

Civil Case No. ELH-18-2580

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

February 8, 2019

MEMORANDUM OPINION

Championship Tournaments, LLC, d/b/a Elite Tournaments ("Elite"), filed suit in the Circuit Court for Howard County against United States Youth Soccer Association, Inc. ("USYSA"); United States Youth Soccer Association, Inc. d/b/a US Youth Soccer; United States Youth Soccer Association, Inc. d/b/a/ US Youth Soccer Region I; United States Youth Soccer Association, Inc. d/b/a Eastern Regional League; and United States Youth Soccer Association, Inc. d/b/a US Youth Soccer Region I - Eastern Regional League. ECF 1-3 (the "Complaint"). Plaintiff alleges "Breach of Contract" (Count I); "Anticipatory Breach of Contract" (Count II); and "Declaratory Judgment" (Count III). Id. at 11-16.

On the basis of diversity jurisdiction, USYSA removed the case to this Court, pursuant to 28 U.S.C. §§ 1332. ECF 1, ¶ 5. Now pending is plaintiff's Motion for Remand. ECF 12. The motion is supported by a memorandum of law (ECF 12-1) (collectively, the "Motion"), along with exhibits. See ECF 12-2 to ECF 12-4.¹

Plaintiff alleges that the removal violates a forum selection clause contained in the "Memorandum of Understanding" at issue in this case. See ECF 12-2 (the "Contract"). Further, Elite claims the Notice of Removal was not timely filed within the 30-day period established under 28 U.S.C. § 1446. USYSA opposes the Motion (ECF 15, the "Opposition") and submitted an exhibit. ECF 15-1. Plaintiff has replied. ECF 21 ("Reply").

No hearing is necessary to resolve the Motion. See Local Rule 105.6. For the reasons that follow, I shall deny the Motion.

I. Factual Background

On October 7, 2016, Elite, a sports management firm specializing in youth sporting events, entered into a contract with "Eastern Regional League U.S. Youth Soccer Region I" ("ERL"). ECF 1-3, ¶¶ 22-27; see also ECF 12-2. The parties agreed that ERL would incorporate some of Elite's soccer events and tournaments into its youth soccer regional league. ECF 1-3 at ¶¶ 1, 30. The contract has a three-year term and terminates after the end of the 2019 Eastern Regional League season. Id. at ¶¶ 2, 31.

The Complaint alleges that USYSA unilaterally announced that it would be eliminating its regional league system in favor of national conferences. Further, it allegedly announced that it had selected a different company, instead of Elite, to manage its tournaments. Id. at ¶¶ 3, 47-55. According to Elite, the defendant told Elite in no uncertain terms that USYSA and its member clubs would not participate in Elite's events in 2019. Id. ¶ 5. As a consequence, Elite claims the defendant is in breach of contract.

The parties currently dispute the meaning of their Contract's forum selection clause. The clause states, ECF 12-2 at 6 (emphasis added):

15. DisputesIf a dispute arises, the parties will try in good faith to settle it through mediation conducted by an independent mediator to be mutually selected. The parties will share the costs of the mediator equally. Each party will cooperate fully and fairly with the mediator and will attempt to reach a mutually satisfactory compromise to the dispute. If the dispute is not resolved within 30 days after it is referred to the mediator, either party may file a lawsuit in Howard County in the State of Maryland.

II. Legal Standard

Federal courts are courts of limited jurisdiction and "may not exercise jurisdiction absent a statutory basis." Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552 (2005). Further, a federal court must presume that a case lies outside its limited jurisdiction unless and until jurisdiction has been shown to be proper. United States v. Poole, 531 F.3d 263, 274 (4th Cir. 2008) (citing Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994)).

A civil action filed in state court may be removed to federal court if it is one over which the district court has original jurisdiction. 28 U.S.C. § 1441(a). The burden of demonstrating jurisdiction and the propriety of removal rests with the removing party. See McBurney v. Cuccinelli, 616 F.3d 393, 408 (4th Cir. 2010); Robb Evans & Assocs., LLC v. Holibaugh, 609 F.3d 359, 362 (4th Cir. 2010); Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004). Therefore, "[i]f a plaintiff files suit in state court and the defendant seeks to adjudicate the matter in federal court through removal, it is the defendant who carries the burden of alleging in his notice of removal and, if challenged, demonstrating the court's jurisdiction over the matter." Strawn v. AT & T Mobility LLC, 530 F.3d 293, 296 (4th Cir. 2008).

Courts are required to construe removal statutes narrowly. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941). This is because "the removal of cases from state to federal court raises significant federalism concerns." Barbour v. Int'l Union, 640 F.3d 599, 605 (4th Cir. 2011), abrogated in part on other grounds by the Federal Courts Jurisdiction and Venue Clarification Act of 2011, Pub. L. No. 112-63, 125 Stat. 758 (2011); see also Mulcahey v.Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994) ("Because removal jurisdiction raises significant federalism concerns, [courts] must strictly construe removal jurisdiction.") (citing Shamrock, 313 U.S. at 108-09). Indeed, a federal court "should construe removal statutes narrowly, [with] any doubts . . . resolved in favor of state court jurisdiction." Barbour, 640 F.3d at 617; see also Cohn v. Charles, 857 F.Supp.2d 544, 547 (D. Md. 2012) ("Doubts about the propriety of removal are to be resolved in favor of remanding the case to state court.").

Courts in this circuit have held that a motion to remand from federal to state court on the basis of a forum selection clause is, in effect, a challenge to subject matter jurisdiction under Rule 12(b)(1). See Nahigian v. Juno-Loudoun, LLC, 661 F. Supp. 2d 563, 565-66 (E.D. Va. 2009) (reviewing the plaintiff's motion to remand from federal to state court under Rule 12(b)(1)); Garner v. Supervalu, Inc., DKC 2008-0895, 2008 WL 11416969, at *1 (D. Md. June 4, 2008) (explaining that "[t]he motion to remand challenges Defendant's assertion of diversity jurisdiction and is akin to a motion to dismiss for lack of subject matter jurisdiction governed by [Rule] 12(b)(1)").

A challenge to subject matter jurisdiction under Rule 12(b)(1) may proceed "in one of two ways": either a facial challenge, asserting that the allegations pleaded in the complaint are insufficient to establish subject matter jurisdiction, or a factual challenge, asserting "'that the jurisdictional allegations of the complaint [are] not true.'" Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009) (citation omitted); see also Buchanan v. Consol. Stores Corp., 125 F. Supp. 2d 730, 736 (D. Md. 2001).

In a facial challenge, "the facts alleged in the complaint are taken as true, and the motion must be denied if the complaint alleges sufficient facts to invoke subject matter jurisdiction." Kerns, 585 F.3d at 192. On the other hand, in a factual challenge, "the district courtis entitled to decide disputed issues of fact with respect to subject matter jurisdiction." Id. In that circumstance, the court "may regard the pleadings as mere evidence on the issue and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Velasco v. Gov't of Indonesia, 370 F.3d 392, 398 (4th Cir. 2004); see also United States ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 347-48 (4th Cir. 2009); Evans v. B.F. Perkins Co., a Div. of Standex Int'l Corp., 166 F.3d 642, 647 (4th Cir. 1999).

The jurisdictional facts are essentially uncontested. Although the Motion is a facial challenge, I may consider the Contract because it is incorporated into the complaint by reference. Indeed, it is central to the suit. Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 166 (4th Cir. 2016) (citation omitted).

III. Discussion

A. Principles of Contract Construction

In regard to state law claims under diversity jurisdiction, federal courts apply federal procedural law and the substantive law of the state in which the proceeding is brought. See, e.g., Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938); Leichling v. Honeywell Intern., Inc., 842 F.3d 848, 851 (4th Cir. 2016); see also Kerr v. Marshall Univ. Bd. of Governors, 824 F.3d 62, 74 (4th Cir. 2016); Colgan Air, Inc. v. Raytheon Aircraft Co., 507 F.3d 270, 275 (4th Cir. 2007); 19 WRIGHT & MILLER, FED. PRACTICE & PROCEDURE § 4501 (3d ed.). And, federal courts apply the choice of law rules of the state in which the court sits. See, e.g., Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496-97 (1941); Albemarle Corp. v. AstraZeneca UK Ltd., 628 F.3d 643, 652-53 (4th Cir. 2010); see also Prof'l Massage Training Cent., Inc. v. Accreditation All. of Career Schs. & Colls., 781 F.3d 161, 180 (4th Cir. 2015); Demetres v. E. W. Const. Inc., 776 F.3d 271, 273 (4th Cir. 2015).

In a contract suit, Maryland courts follow the rule of lex loci contractus, applying the substantive law of the state where the contract was formed, unless there is a choice-of-law provision in the contract. Am. Motorists Ins. Co. v. ARTRA Group, Inc., 338 Md. 560, 573, 659 A.2d 1295, 1301 (1995). Here, the Contract contains a choice of law clause, stating: "This agreement will be governed by and construed in accordance with the laws of the State of Maryland." ECF 12-2 at 7. Accordingly, I will apply Maryland law in addressing the Motion. See Ground Zero Museum Workshop v. Wilson, 813 F. Supp. 2d 678, 696 (D. Md. 2011) ("When choosing the applicable state substantive law while exercising diversity or supplemental jurisdiction, a federal district court applies the choice of law rules of the forum state.") (citing ITCO Corp. v. Michelin Tire Corp., Commercial Div., 722...