Farmer Bean & Seed, LLC v. Pacific Grain & Food, LLC

• Court: District Court, E.D. Washington
• Decided: October 15, 2020
• Docket: 2:20-cv-00273
• Status: Unknown

Opinion

1 2

3 4 5 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON 6

7 FARMER BEAN & SEED, LLC, a Washington limited liability NO. 2:20-CV-0273-TOR 8 company, ORDER GRANTING PLAINTIFF’S 9 Plaintiff, MOTION TO REMAND AND DENYING DEFENDANT’S MOTION 10 v. TO DISMISS

11 PACIFIC GRAIN & FOODS, LLC, a California limited liability company, 12 Defendant. 13

14 BEFORE THE COURT is Plaintiff’s Motion to Remand (ECF No. 13) and 15 Defendant’s Motion to Dismiss for Lack of Personal Jurisdiction (ECF No. 2). 16 These matters were submitted for consideration with oral argument on October 15, 17 2020. Zachary W. Acres and Christopher F. Ries appeared on behalf of Plaintiff. 18 Jeremiah R. Newhall appeared on behalf of Defendant. The Court has reviewed 19 the record and files herein, and is fully informed. For the reasons discussed below, 20 1 Plaintiff’s Motion to Remand (ECF No. 13) is GRANTED and Defendant’s 2 Motion to Dismiss for Lack of Personal Jurisdiction (ECF No. 2) is DENIED.

3 BACKGROUND 4 This case arises out of an alleged breach of contract over the sale of dark red 5 kidney beans. ECF No. 1. On May 20, 2020, Plaintiff filed suit in state court in

6 Grant County, Washington. On August 6, 2020, Defendant removed the case to 7 this Court. ECF No. 1. On August 13, 2020, Defendant filed the instant Motion to 8 Dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil 9 Procedure 12(b)(2). ECF No. 2. On September 8, 2020, Plaintiff filed the instant

10 Motion to Remand with a request for attorney’s fees and costs. ECF No. 13. The 11 following facts are not in dispute, except where noted. 12 Plaintiff Farmer Bean & Seed, LLC is a Washington limited liability

13 company based out of Quincy, Washington. ECF No. 2 at 3; ECF No. 11 at 2. 14 Plaintiff produces and sells beans and seeds to domestic and international entities. 15 ECF No. 11 at 2. 16 Defendant Pacific Grain & Foods, LLC is a California limited liability

17 company. ECF No. 2 at 3. Defendant contracts with food suppliers such as 18 Plaintiff to purchase products such as dry beans, rice, grains, soups, spice, and 19 nuts/snack products. ECF No. 2 at 4; ECF No. 11 at 2. Defendant uses third-party

20 1 food brokers or contracts directly with suppliers for the repackaging and sale of 2 such dried goods. ECF No. 2 at 4; ECF No. 11 at 2.

3 Approximately eight years ago, the parties directly contracted for the 4 purchase and sale of beans. ECF No. 11 at 2. Plaintiff ceased doing business with 5 Defendant as a result of Defendant’s problems accepting shipments and making

6 timely payments. ECF No. 11 at 2. Approximately five years ago, unbeknownst 7 to Plaintiff, the parties resumed business indirectly through a third-party broker in 8 Colorado. ECF No. 2 at 4; ECF No. 11 at 2. As performance issues arose again, 9 the parties agreed to meet and confer. ECF No. 11 at 2.

10 Between July 20-23, 2019, the United States Dry Bean Convention was held 11 in Snowmass, Colorado. ECF No. 2 at 4; ECF No. 11 at 3. There, Plaintiff’s 12 owner Mr. Russell A. Kehl and Defendant’s managing member, Mr. Lee Perkins,

13 met for the first time. ECF No. 2 at 4; ECF No. 11 at 2. Mr. Perkins attended this 14 convention, in part, to meet and contract with suppliers in order to remove any 15 third-party food broker. ECF No. 2 at 4-5. 16 On or about July 21, 2019,1 Mr. Perkins and Mr. Kehl discussed the business

17 relationship between Plaintiff and Defendant. ECF No. 11 at 3. During this 18 conversation, the two agreed that Defendant would purchase goods directly from 19

20 1 Defendant claims this meeting occurred on July 22, 2019. ECF No. 2 at 5. 1 Plaintiff, removing the need for the third-party Colorado food broker. ECF No. 2 2 at 5; ECF No. 11 at 3. The parties negotiated two agreements for the purchase and

3 sale of dark red kidney beans and small red beans. ECF No. 11 at 3-4.2 4 The next day, the parties met again to sign a “sales confirmation.” ECF No. 5 2 at 5; ECF No. 11 at 3. Defendant agreed to purchase 1,654,000 pounds of dark

6 red kidney beans for $1,095,840, to be delivered from Washington to California 7 between July and November 2019. ECF No. 2 at 5; ECF No. 11 at 3. Above the 8 signature line, the document read: “THIS CONTRACT, which includes the further 9 provisions printed on the back hereof….” ECF No. 3-1 at 2. On the back, the

10 clause stated that “[a]t the option of [Plaintiff], venue of any action shall lie in 11 Grant County, Washington.” ECF No. 3-1 at 3. Mr. Perkins added handwritten 12 notes before signing, including “37” next to the quantity which indicated the

13 number of loads it would take to ship the entire order to Defendant. ECF No. 11 at 14 3. Mr. Perkins then signed the agreement. ECF No. 11 at 3. Mr. Perkins did not 15 object to any terms of the agreement at that time but claims that he did not read, 16

18 2 The small red beans contract is not at issue. ECF No. 11 at 4. Defendant 19 did not accept any shipments under this contract, but Plaintiff was able to resell the 20 beans for the full contract price which mitigated any damages. Id. 1 discuss, nor consent to the clause regarding venue in Grant County on the back of 2 the agreement. ECF No. 2 at 5-6; ECF No. 11 at 4.

3 In the first ten weeks of the shipment term, Plaintiff shipped 3 loads of the 4 dark red kidney beans totaling 132,000 pounds to Defendant in California, who 5 remitted payment in the amount of $95,040. ECF No. 2 at 6; ECF No. 11 at 4-5.

6 On October 4, 2019, with less than two months remaining, Plaintiff demanded 7 adequate assurances from Defendant that it would accept the remaining 35 1/2 8 loads over the next thirty days. ECF No. 11 at 4-5. Defendant did not respond to 9 this demand, and Plaintiff declared Defendant in default. ECF No. 11 at 5.

10 Plaintiff subsequently sold the remaining 1,522,000 pounds of beans for $944,815, 11 instead of the $1,095,840 value under the contract with Defendant. ECF No. 11 at 12 5.

13 On May 20, 2020, Plaintiff filed suit in state court in Grant County – where 14 no federal courthouse sits – for the difference in the resale price of $151,025. ECF 15 No. 2 at 6; ECF No. 11 at 6; ECF No. 12 at 5. After Defendant’s removal, the 16 instant motions followed.

17 DISCUSSION 18 A. Motion to Remand 19 A case may be removed from state to federal court only if the federal court

20 has subject matter jurisdiction over the case. 28 U.S.C. § 1441(a). “In civil cases, 1 subject matter jurisdiction is generally conferred upon federal district courts either 2 through diversity jurisdiction, 28 U.S.C. § 1332, or federal question jurisdiction, 28

3 U.S.C. § 1331.” Peralta v. Hispanic Bus., Inc., 419 F.3d 1064, 1068 (9th Cir. 4 2005). However, even if a court has subject matter jurisdiction, a case may 5 nonetheless be remanded based on a forum selection clause. See Kamm v. ITEX

6 Corp., 568 F.3d 752, 756 (9th Cir. 2009). 7 Under 28 U.S.C. § 1447(c), “[a] motion to remand the case on the basis of 8 any defect other than lack of subject matter jurisdiction must be made within 30 9 days after the filing of the notice of removal under section 1446(a).” A motion to

10 remand based on a forum selection clause is not subject to the 30-day time limit. 11 Kamm, 568 F.3d at 757. 12 Here, the parties do not dispute that diversity of citizenship exists for subject

13 matter jurisdiction under 28 U.S.C. § 1332. ECF No. 15 at 9. However, the 14 motion to remand is based on the forum selection clause contained in the sales 15 agreement, which is not subject to the 30-day time limit. ECF No. 13 at 1. 16 Defendant argues that it did not agree to the forum selection clause because it was

17 an additional term to an oral contract, or in the alternative, that the Court retain 18 19

20 1 jurisdiction by special session. ECF No. 15 at 5-8.3 Plaintiff argues that the sales 2 agreement was the contract and by signing the agreement, Defendant agreed to

3 venue in Grant County, Washington. Id. at 6-11. The fundamental issue here is 4 whether the sale agreement constitutes a contract or confirmatory memorandum. 5 1. The Sales Agreement

6 State law governs contract formation. Lowden v. T-Mobile USA, Inc., 512 7 F.3d 1213, 1217 (9th Cir. 2008). 4 Article 2 of the UCC applies to contracts 8 between merchants for the sale of goods. See RCW 62A.2-102; RCW 62A.2-104. 9 “A contract for the sale of goods may be made in any manner sufficient to show

10 agreement.” RCW 62A.2-204(1). For “a contract for the sale of goods for the 11 price of five hundred dollars or more” to be enforceable, there must be “some 12 writing sufficient to indicate that a contract for sale has been made between the

3 Finding the forum selection clause valid, the Court rejects Defendant’s 14 argument that it should retain jurisdiction by special session under 28 U.S.C. 15 § 141(a)(1). 16 4 The parties do not identify a conflict of laws issue as the Uniform 17 Commercial Code has been adopted in Colorado and Washington. As the parties 18 rely on Washington law, the Court will do the same. See ECF No. 13 at 6; ECF 19 No. 15 at 5. 20 1 parties and signed by the party against whom enforcement is sought.” RCW 2 62A.2-201(1). Alternatively, a contract is enforceable “[b]etween merchants if

3 within a reasonable time a writing in confirmation of the contract and sufficient 4 against the sender is received and the party receiving it has reason to know its 5 contents … unless written notice of objection to its contents is given within ten

6 days after it is received.” RCW 62A.2-201(2). 7 Section 2-207 of the UCC applies to situations where a written confirmation 8 or acceptance of an oral agreement includes additional terms that were not 9 originally discussed. RCW 62A.2-207, UCC cmt. 1. However, “[i]f [the

10 additional terms] are such as materially to alter the original bargain, they will not 11 be included unless expressly agreed to by the other party.” RCW 62A.2-207, UCC 12 cmt. 3 (emphasis added).

13 Here, the Court finds that this case is not controlled by Section 2-207 as the 14 sales agreement is a contract under RCW 62A.2-201(1) rather than a confirmatory 15 memorandum under RCW 62A.2-201(2). The parties negotiated terms orally and 16 then set out the final expression of their agreement in the sales confirmation. ECF

17 No. 2 at 5; ECF No. 11 at 3. Defendant reviewed and signed the agreement in 18 person. ECF No. 11 at 3. Even if the forum selection clause constitutes an 19 additional term to the agreement, Mr. Perkins expressly agreed to the clause by

20 reviewing and signing the agreement. See Carnival Cruise Lines, Inc. v. Shute, 1 499 U.S. 585, 595 (1991) (Party “conceded that they were given notice of the 2 forum provision and, therefore, presumably retained the option of rejecting the

3 contract with impunity.”). Therefore, the sales agreement constitutes a valid and 4 binding contract. 5 2. The Forum Selection Clause

6 Federal law governs the enforcement of forum selection clauses in diversity 7 cases. Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 513 (9th Cir. 8 1988). In a valid contract, a forum selection clause is presumptively valid and 9 “should be honored ‘absent some compelling and countervailing reason.’” Murphy

10 v. Schneider Nat’l, Inc., 362 F.3d 1133, 1140 (9th Cir. 2004) (citing M/S Bremen v. 11 Zapata Off-Shore Co., 407 U.S. 1, 12 (1972)). Countervailing reasons not to 12 enforce a forum selection clause include: “(1) if the inclusion of the clause in the

13 agreement was the product of fraud or overreaching; (2) if the party wishing to 14 repudiate the clause would effectively be deprived of his day in court were the 15 clause enforced; and (3) if enforcement would contravene a strong public policy of 16 the forum in which suit is brought.” Id. (citing Richards v. Lloyd’s of London, 135

17 F.3d 1289, 1294 (9th Cir. 1998) (internal quotation marks omitted)). 18 Here, as described above, the sales agreement constitutes a valid contract. 19 Defendant’s claim that it did not agree to a clause in a contract its managing

20 member reviewed, annotated, and signed is not a compelling and countervailing 1 reason that renders the forum selection clause unenforceable. As such, the forum 2 selection of Grant County, Washington is enforceable, a forum where no federal

3 courthouse is located. ECF No. 12 at 5. See City of Albany v. CH2M Hill, Inc., 4 924 F.3d 1306 (9th Cir. 2019). Therefore, remand is appropriate to the Superior 5 Court of Washington in Grant County.

6 B. Attorney’s Fees and Costs 7 Plaintiff seeks attorney’s fees and costs in connection to the motion to 8 remand, arguing that “given the unambiguous language of the Forum Selection 9 Clause, [Defendant] had no objectionably [sic] reasonable basis for removal.”

10 ECF No. 13 at 11-12. Defendant argues that there was an objectively reasonable 11 basis for removal based on subject matter jurisdiction. ECF No. 15 at 8-11. 12 Under 28 U.S.C. § 1447(c), “[a]n order remanding the case may require

13 payment of just costs and any actual expenses, including attorney fees, incurred as 14 a result of removal.” However, “absent unusual circumstances, attorney’s fees 15 should not be awarded when the removing party has an objectively reasonable 16 basis for removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 136 (2005).

17 Plaintiff prevailed on the instant motion to remand based on contract principles; 18 this does not make Defendant’s basis for removal based on diversity of citizenship 19 objectively unreasonable. Therefore, the Court declines to award Plaintiff

20 attorney’s fees and costs. C. Motion to Dismiss 2 Defendant moves to dismiss the case based on lack of personal jurisdiction. 3|| ECF No. 2. A forum selection clause in a valid contract constitutes a waiver of 4|| objection to personal jurisdiction. See Chan v. Society Expeditions, Inc., 39 F.3d 1398, 1406-07 (9th Cir. 1994). Finding the clause binding and enforceable, 6|| Defendant submitted to personal jurisdiction in Grant County, Washington. 7\| Therefore, Defendant’s Motion to Dismiss is denied. 8|| ACCORDINGLY, IT IS HEREBY ORDERED: 9 1. Plaintiff's Motion to Remand (ECF No. 13) is GRANTED. Plaintiff's 10 request for attorney’s fees and costs is DENIED. 11 2. Defendant’s Motion to Dismiss for Lack of Personal Jurisdiction (ECF 12 No. 2) is DENIED. 13 3. This matter is REMANDED to the Superior Court of Washington for 14 Grant County (former Grant County Superior Court No. 20-2-00445-13). 15 The District Court Executive is directed to enter this Order, furnish copies to counsel, mail a certified copy to the Clerk of the Grant County Superior Court, and 17|| CLOSE this case. 18 DATED October 15, 2020 19 a yy Ug PA. A) fiw. C.Kiee 20 on Ue THOMAS O. RICE <> United States District Judge

ORDER GRANTING PLAINTIFF’S MOTION TO REMAND AND