Horizon Rental, LLC v. Am. W. Worldwide Express, Inc.

397 Wis.2d 245

959 N.W.2d 95 (Table)

2021 WI App 27

HORIZON RENTAL, LLC and MDS Enterprises, Inc., Plaintiffs-Appellants, v. AMERICAN WEST WORLDWIDE EXPRESS, INC., Defendant-Respondent.

Appeal No. 2020AP1195

Court of Appeals of Wisconsin.

March 25, 2021

PER CURIAM.

¶1 Horizon Rental, LLC (Horizon) and MDS Enterprises, Inc. (MDS) (collectively, plaintiffs) appeal the circuit court's order granting American West Worldwide Express, Inc.’s (American West's) motion to dismiss the plaintiffs’ breach of contract and unjust enrichment claims against it. The court determined that the plaintiffs are prohibited from bringing this action in Wisconsin pursuant to a contractual forum selection clause.

¶2 Based on the plain meaning of the language in the pertinent agreements among the parties, we conclude that: (1) the forum selection clause at issue does not apply to the breach of contract and unjust enrichment claims for unpaid truck rental payments to Horizon and, therefore, does not bar those claims from being brought in Wisconsin; and (2) the forum selection clause at issue does apply to the breach of contract claim for unpaid royalty payments to MDS and requires that that claim be raised only in California state courts. Accordingly, we reverse the circuit court's dismissal of the breach of contract and unjust enrichment claims for unpaid truck rental payments to Horizon, affirm the circuit court's dismissal of the breach of contract claim for unpaid royalties to MDS, and remand for further proceedings.

BACKGROUND

¶3 The following undisputed facts are taken from the pleadings and affidavits submitted by the parties and considered by the circuit court. ¹

¶4 American West is a California corporation engaged in the trucking and warehousing business, and Josh Brown is its CEO. Horizon and MDS are Wisconsin companies, and Thomas J. Alfuth is the president of both and also the owner of Horizon. At the time the agreements at issue were executed, MDS operated a trucking business that serviced customers using trucks and warehouses leased from Horizon.

¶5 After months of negotiation, Brown and Alfuth reached an agreement in December 2017 for the sale of MDS's assets to American West. The parties continued to negotiate throughout January 2018, and those negotiations resulted in two lease agreements between Horizon and American West. The individuals involved in the negotiations were Brown, Alfuth, and Danny Ray Hunt, who was then a consultant to MDS.

¶6 On February 1, 2018, Alfuth met with Brown at the Horizon facility in Jefferson, Wisconsin, to execute three agreements: an Agreement for Purchase and Sale of Assets (Asset Sale Agreement or Agreement), a Truck Lease Agreement (or Truck Lease), and a Building Lease Agreement. This action concerns the Asset Sale Agreement and the Truck Lease Agreement.

¶7 The Asset Sale Agreement identifies MDS as the "seller" and American West as the "buyer" and provides for the sale of assets by MDS to American West. The Agreement provides for American West to pay MDS royalties on a monthly basis for five years as "consideration for the Purchased Assets." The "Purchased Assets" are defined as (a) MDS's customer relationships and accounts, along with information about the customers; and (b) certain equipment belonging to MDS. The Asset Sale Agreement contains a choice of law and forum selection clause providing that any proceedings relating to the Asset Sale Agreement shall be brought in California state courts and governed by California law. The Asset Sale Agreement does not reference leases of trucks or buildings.

¶8 The Truck Lease Agreement identifies Horizon as the "Lessor" and American West as the "Lessee." It provides for American West to make monthly rental payments to Horizon for two years to lease fifteen trucks. The Truck Lease Agreement does not reference the Asset Sale Agreement or the sale of MDS's business to American West. The Truck Lease Agreement contains a choice of law clause providing that Wisconsin law shall govern the interpretation of the Truck Lease Agreement. It does not contain a forum selection clause.

¶9 In March 2020, Horizon and MDS brought this action alleging that American West failed to pay royalties to MDS as provided in the Asset Sale Agreement and failed to pay rent to Horizon as provided in the Truck Lease Agreement even as American West continued to use the trucks. The plaintiffs asserted one breach of contract claim based on American West's alleged failure to pay royalties and both a breach of contract claim and an unjust enrichment claim based on American West's allegedly uncompensated use of Horizon's trucks.

¶10 Shortly thereafter, American West moved to dismiss this action based on the forum selection clause in the Asset Sale Agreement, arguing that the action was required to be filed in California. American West filed an affidavit by Hunt, who at that time was president of American West, in support of its motion, and the plaintiffs filed an affidavit by Alfuth in opposition to the motion.

¶11 The circuit court issued an oral ruling granting American West's motion to dismiss based on the parties’ filings.

¶12 MDS and Horizon appeal.

¶13 We provide additional undisputed background as pertinent throughout the discussion that follows.

DISCUSSION

¶14 We first explain the standard governing our review of this case. We next interpret and apply the language in the Asset Sale Agreement. We conclude that the forum selection clause in the Asset Sale Agreement does not entitle American West to summary judgment dismissing the claims based on American West's alleged nonpayment of rent to Horizon for the use of Horizon's trucks because those claims do not arise under or relate to the Asset Sale Agreement. We further conclude that the forum selection clause in the Asset Sale Agreement does entitle American West to summary judgment dismissing the breach of contract claim based on American West's alleged nonpayment of royalties to MDS because that claim does arise under or relate to the Asset Sale Agreement. After each conclusion, we address the parties’ arguments to the contrary and explain why they lack merit.

I. Standard of Review

¶15 We review an order granting summary judgment de novo. Palisades Collection LLC v. Kalal , 2010 WI App 38, ¶9, 324 Wis. 2d 180, 781 N.W.2d 503. A party is entitled to summary judgment if there is no genuine issue of material fact and that party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2)²

¶16 "Interpretation of a contract is a question of law which this court reviews de novo." Beilfuss v. Huffy Corp. , 2004 WI App 118, ¶6, 274 Wis. 2d 500, 685 N.W.2d 373. Whether forum selection and choice of law clauses in an agreement are valid is also a question of law that we review de novo. See id. (interpretation of contract is question of law subject to de novo review); Drinkwater v. American Fam. Mut. Ins. Co. , 2006 WI 56, ¶14, 290 Wis. 2d 642, 714 N.W.2d 568 (choice-of-law determination question of law subject to independent review).

¶17 When interpreting a written agreement, "our goal ‘is to ascertain the true intentions of the parties as expressed by the contractual language.’ " Town Bank v. City Real Estate Dev., LLC , 2010 WI 134, ¶33, 330 Wis. 2d 340, 793 N.W.2d 476 (quoted source omitted). "[T]he best indication of the parties’ intent is the language of the contract itself." Id. We presume the parties’ intentions are expressed in the language of the contract, Estate of Kriefall v. Sizzler USA Franchise, Inc. , 2012 WI 70, ¶21, 342 Wis. 2d 29, 816 N.W.2d 853, for that is the language the parties "saw fit to use," State ex rel. Journal/Sentinel, Inc. v. Pleva , 155 Wis. 2d 704, 711, 456 N.W.2d 359. "Contract language is construed according to its plain or ordinary meaning." Tufail v. Midwest Hospitality, LLC , 2013 WI 62, ¶28, 348 Wis. 2d 631, 833 N.W.2d 586. If a contract provision is unambiguous, we construe it according to its literal terms. Id. , ¶26.

II. Interpretation and Application of Asset Sale Agreement

¶18 The following provisions provide context for the analysis that follows.

Preamble

¶19 The Agreement begins by stating in the first paragraph ("preamble"):

THIS AGREEMENT FOR PURCHASE AND SALE OF ASSETS is made and entered into on 12-27-17 (" Effective Date") by and among AMERICAN WEST WORLDWIDE EXPRESS, INC., a California corporation (Buyer) and MDS ENTERPRISES, INC., a Wisconsin corporation (Seller) collectively referred to herein as the " Parties" and each are referred to as a " Party".

¶20 The Agreement defines "buyer," "seller," and "parties" as those as having the meaning set forth in the preamble.

"Contemplated Transactions"

¶21 Immediately following the preamble is a paragraph titled "Background," which states:

Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, certain of Seller's assets related to (i) Seller's business of truckload and less-than-truckload transportation services related to LTL freight forwarding, (ii) Seller's business of warehousing freight at its facilities located at 761N. Parkway, Jefferson, Wisconsin. All of the terms hereafter provided (collectively, the "Contemplated Transactions")[.]

¶22 "Contemplated Transactions" are defined as having "the meaning set forth in the Background." As set forth in the "Background" quoted above, the transactions contemplated by the Asset Sale Agreement are the selling and buying of certain assets related to MDS's trucking and warehousing business.

"Purchased Assets"

¶23 "Purchased Assets" are defined as having "the meaning set forth in Section 2.1," which describes the purchased assets as "(a) Seller's customer relationships and accounts that make up the Purchased Business; and (b) Certain equipment presently used by Seller to service the Purchased Business and listed in Exhibit A hereto (the "Purchased Equipment"). " The equipment listed in Exhibit A is: "Forklift $3,000.00[,] Computer Server $2,500.00[,] All other Office...