Czewski v. KVH Indus., Inc.

SCOTT CZEWSKI, Plaintiff-Appellant, v. KVH INDUSTRIES, INC., Defendant-Appellee.

No. 14-1957

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

April 14, 2015

NOT RECOMMENDED FOR PUBLICATION

File Name: 15a0272n.06

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MICHIGAN

OPINION

BEFORE: BATCHELDER and WHITE, Circuit Judges; and COX, District Judge.^*

SEAN F. COX, District Judge. Plaintiff-Appellant Scott Czewski filed this breach of contract action against Defendant-Appellee KVH Industries, Inc. in state court, and KVH Industries removed the action to federal court based upon diversity jurisdiction. The district court granted a Motion to Dismiss filed by KVH Industries, ruling that Michigan's six-year statute of limitations applied and that Czewski's complaint was untimely. Czewski now appeals that ruling, arguing that Rhode Island's ten-year statute of limitations applies to this action. Czewski also argues, in the alternative, that if we agree with the district court's statute-of-limitations ruling, we should nevertheless vacate the district court's order and either directly transfer this action to the United States District Court for Rhode Island or remand the action to the district court so that Czewski can file a motion asking the district court to transfer the case. For the reasons below, we AFFIRM the district court's statute-of-limitations rulingand, although we have the authority to grant the alternative relief Czewski requests, we conclude that there are no unusual circumstances here that warrant such relief.

I.

Czewski filed this breach of contract action against KVH Industries in state court on March 14, 2014. Czewski's complaint asserted a single count, "Breach of Contract." The contract at issue, a manufacturer representative agreement, was attached to Czewski's Complaint as Exhibit 1. The contract provides, in pertinent part, that the "validity, interpretation, and performance of this Agreement shall be controlled by and construed under the laws of the State of Rhode Island." (R. 2 at PID 23) (holding and underlining in original). Czewski alleges that he began working as a commissioned representative in 2002 and that he worked in that capacity until March 15, 2004, at which time he took a position with KVH Industries as an account manager. Czewski alleges that in August of 2004 he realized that KVH Industries had not paid him all the commissions that should have been paid to him. (R. 2 at PID 14).

After removing the case to federal court, KVH Industries filed a Motion to Dismiss, pursuant to Fed. R. Civ. P. 12(b)(6), asserting that Michigan's six-year statute of limitations applies and that Czewski's complaint was filed outside of that limitations period.

In response to that motion, Czewski took the position that statutes of limitation are substantive in nature, that Rhode Island's ten-year statute of limitations applies, and that his Complaint was therefore timely filed.

Czewski did not file a motion asking the district court to transfer the action to Rhode Island. Czewski's response brief did not argue, in the alternative, that the district court should transfer the action to Rhode Island if the court were to agree with KVH Industries that Michigan's statute of limitations applies.

On June 26, 2014, the district court issued an Opinion granting KVH Industries' Motion to Dismiss. In its Opinion, the district court explained that "Michigan's six-year statute of limitations, rather than Rhode Island's longer statute of limitations, is applicable to Plaintiffs claim. Because Plaintiff did not file his complaint within six years of the time his claim accrued, it is time-barred in Michigan." (R. 10 at PID 128). In a footnote to the Opinion, the district court stated "[although Plaintiff has not indicated an intention to file an action in Rhode Island, the Court will dismiss the action without prejudice to allow Plaintiff to re-file in Rhode Island if he chooses to do so." (R. 10 at PID 128 n.1). The district court then issued an order dismissing Czewski's complaint without prejudice. Czewski now appeals.

II.

As both parties recognize, the Panel reviews de novo the district court's dismissal of a case pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Bright v. Gallia Cnty., Ohio, 753 F.3d 639, 648 (6th Cir. 2014). A district court's choice-of-law determination is also reviewed de novo. Performance Contracting, Inc. v. DynaSteel Corp., 750 F.3d 608, 611 (6th Cir. 2014).

III.

It is undisputed that Michigan has a six-year statute of limitations for breach of contract actions (see Mich. Comp. Laws § 600.5807(8)) and Rhode Island has a ten-year statute of limitations that applies to breach of contract actions (see R.I. Gen. Laws § 9-1-13(a)). Czewski does not dispute that his action was untimely filed if Michigan's statute of limitations applies. Rather, Czewski contends that the district court erred in applying Michigan's statute of limitations, rather than Rhode Island's longer statute of limitations.

Czewski filed this breach of contract action in the forum state of Michigan. The contract at issue in this case, however, has a choice-of-law provision that provides that the "validity, interpretation, andperformance of the contract "shall be controlled by and construed under" Rhode Island law. (R. 2 at PID 23).

The district court exercised jurisdiction over this case based upon diversity jurisdiction under 28 U.S.C. § 1332. "A federal court sitting in diversity must apply the substantive law, including choice of law rules, of the state in which it sits." Phelps v. McClellan, 30 F.3d 658, 661 (6th Cir. 1994).

"Under Michigan's common law choice of law rule, statutes of limitation are considered procedural and are governed by the law of the forum." Johnson v. Ventra Group, Inc., 191 F.3d 732, 746 (6th Cir. 1999) (citing Isley v. Capuchin Province, 878 F.Supp. 1021, 1025 (E.D. Mich. 1995)). Moreover, as Czewski acknowledges, the Sixth Circuit has held that "contractual choice-of-law clauses incorporate only substantive law, not procedural provisions such as statutes of limitations." Cole v. MiletU 133 F.3d 433, 437 (6th Cir. 1998).¹ "Absent an express statement that the parties intended another state's limitations statute to apply, the procedural law of the forum governs time restrictions on an action for breach, while the law chosen by the parties governs the terms of their contract." Id.

In the case at bar, the parties agreed that the "validity, interpretation, and performance of the contract "shall be controlled by and construed under" Rhode Island law. (R. 2 at PID 23). The contract did not, however, expressly provide that Rhode Island's statute of limitations would apply to an action toenforce the contract. Given the absence of such an express provision, the parties' choice-of-law provision incorporated only the substantive law of Rhode Island - not that state's procedural law, including its statute of limitations. Phelps, supra; Frisch, supra.

Although Michigan courts have long held that statutes of limitation are procedural in nature, Czewski asserts that the Michigan Supreme Court dramatically changed the landscape in Gladych v. New Family Homes, Inc., 468 Mich. 594, 664 N.W.2d 705 (2003). Czewski contends that, in Gladych, the Michigan Supreme Court ruled that statutes of limitations are substantive for all purposes, including choice-of-law determinations.

We conclude that the district court properly rejected Czewski's position. The district court properly found that ""Gladych's holding was limited to conflict between court rules and statutes, and does not extend to choice-of-law determinations," followed "Michigan's traditional rule that statutes of limitations are procedural in nature,"² and applied Michigan's statute of limitations where "Rhode Island's statute of limitations was not incorporated into the choice-of-law clause at issue in this case." (R. 10 at PID 126-128).

IV.

Although it is not included in his "Statement Of The Issue" presented for review (see Appellant's Br. at 1),³ the body of Czewski's brief seeks to raise a second issue. If the Panel agrees with the district court's statute-of-limitations ruling, then Czewski asks the Panel to nevertheless "vacatethe district court's Order and either transfer the case to the District of Rhode Island or remand to the district court to allow [him] to move to transfer to the District of Rhode Island." (Appellant's Br. at 16).

In support of this request, Czewski asserts that the Panel "has the authority pursuant to 28 U.S.C. § 1404(a) and the All Writs Act to transfer this matter to the District of Rhode Island." (Appellant's Br. at 14). Czewski relies on Koehring Co. v. Hyde Const. Co., 382 U.S. 362 (1966) and Hunt v. Bankers Trust Co., 799 F.2d 1060, 1070 (5th Cir. 1986). He also asserts that the Panel has the authority to remand with instructions for the district court to consider a motion to transfer, relying on Ross v. Mebane, 536 F.2d 1199 (7th Cir. 1976).

The change-of-venue statute provides, in pertinent part, that "a district court" may transfer a civil action to another district "where it might have been brought." 28 U.S.C. § 1404(a) (emphasis added). Thus, as the Supreme Court observed in Koehring, "a federal appellate panel does not ordinarily itself transfer a case to another district." Koehring, 382 U.S. at 364. Nevertheless, the Court concluded that the statute does not preclude "an appellate court, where unusual circumstances indicate the necessity thereof, from effecting a transfer by direct order." Id at 365 (emphasis added). The Court concluded that the "extraordinary circumstances" presented there warranted such action. Those extraordinary circumstances "included the fact that the Federal District Court in Mississippi had granted a motion to dismiss despite instructions from the Fifth Circuit to transfer the cause to Oklahoma, and the further fact that trial of a duplicative action in...