#29573-r-SRJ 2022 S.D. 32
IN THE SUPREME COURT OF THE STATE OF SOUTH DAKOTA
****
NORTHLAND CAPITAL FINANCIAL SERVICES, LLC, Plaintiff and Appellee,
v.
ROBERT STEPHEN ROBINSON, Defendant and Appellant.
APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT SPINK COUNTY, SOUTH DAKOTA
THE HONORABLE RICHARD A. SOMMERS Judge
PAUL J. GILLETTE of Gillette Law Office, P.C. Redfield, South Dakota Attorneys for defendant and appellant.
PAUL H. LINDE of Schaffer Law Office, Prof. LLC Sioux Falls, South Dakota Attorneys for plaintiff and appellee.
CONSIDERED ON BRIEFS OCTOBER 4, 2021 OPINION FILED 06/08/22 #29573
JENSEN, Chief Justice
[¶1.] Northland Capital Financial Services, LLC (Northland) and Robert
Robinson entered into a lease financing agreement for Robinson’s purchase of grain
bin monitoring equipment. The lease agreement included a forum selection clause
requiring any suit filed by either party to be filed in Stearns County, Minnesota.
After Robinson stopped making lease payments, Northland filed suit against
Robinson in Spink County, South Dakota, where he resided. Northland filed a
motion for summary judgment. In granting Northland’s motion, the circuit court
treated Robinson’s objection to the suit filed in Spink County as a question of venue
and determined that Robinson failed to make a timely objection in Spink County.
Robinson appeals, arguing that the forum selection clause required Northland to
file the action in Stearns County, Minnesota, and that the circuit court erred in
finding he had waived objection to enforcement of the forum selection clause. We
reverse and remand with directions for the circuit court to dismiss the action in
Spink County.
Facts and Procedural History
[¶2.] Robinson purchased grain bin monitoring equipment for his farm in
Spink County from American Edge Grain, Inc. on May 8, 2017. The purchase was
financed through an Equipment Master Lease Agreement (Lease) between
Northland and Robinson. Northland’s place of business is located in Stearns
County, Minnesota.
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[¶3.] Paragraph 21 of the Lease contained a forum selection clause that
provided:
Consent to Minnesota Law, Jurisdiction and Venue: It is agreed between the parties that this Lease has been negotiated within Stearns County, Minnesota, and finally executed within Stearns County, Minnesota, and accordingly, the Lease and all related documentation shall be governed by, and construed in accordance with, the laws of the State of Minnesota (without regard to principles of conflicts of laws) and any suit by either of the parties pursuant to this Lease shall be maintained in and the venue for any such litigation shall be in Stearns County District Court, Stearns County, Minnesota.
[¶4.] Following the purchase, Robinson reported problems with the
equipment. He claimed the problems were not addressed and stopped making
Lease payments to Northland. Northland filed suit against Robinson in Spink
County to collect the balance due under the Lease. Northland served a summons
and complaint on Robinson on March 12, 2020. On April 10, 2020, Robinson, acting
pro se, mailed a letter to Northland’s counsel stating:
According to the lease agreement that I read, paragraph number 21, says the lawsuit should take place in Stearns County, Minnesota. It says all related documents shall be governed by, and construed in accordance with the laws of the State of Minnesota. From what I read the lawsuit shall be cancelled in Spink County, South Dakota and moved to Stearns County, Minnesota.
[¶5.] Northland’s counsel responded to Robinson that the forum selection
clause was included in the Lease for Northland’s benefit and that it was choosing to
waive the clause. Robinson did not serve and file a formal answer or a motion to
dismiss.
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[¶6.] Northland later filed a motion for summary judgment and attached
Robinson’s letter to the filing. Robinson hired counsel and resisted the motion
arguing that he intended to pursue claims against Northland and other parties in
Minnesota for the defective equipment, and that the forum selection clause required
Northland to file the action in Stearns County, Minnesota. Robinson did not file a
counterclaim against Northland or move to file a third-party complaint in Spink
County.
[¶7.] Following a hearing on the motion for summary judgment, the circuit
court issued a letter ruling, denying Northland’s motion for summary judgment.
The circuit court expressed concerns about the forum selection clause and
characterized the issue as whether Spink County was the proper venue for the
action. The court stated its belief that Northland was otherwise entitled to
summary judgment but requested the parties to submit briefing on whether
Robinson had waived the right to enforce the forum selection clause by failing to
timely raise the issue under the venue statute, SDCL 15-5-10.
[¶8.] Thereafter, Robinson filed a motion to dismiss the action based upon
the forum selection clause and both parties submitted briefs addressing the issues
raised by the circuit court. The circuit court did not take any action on the motion
to dismiss and determined that Robinson waived the right to enforce the forum
selection clause by not filing a motion to change venue or a motion to dismiss. The
court entered summary judgment against Robinson for the principal balance due
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under the Lease, plus prejudgment interest and attorney fees incurred by
Northland as permitted by the Lease.
[¶9.] Robinson appeals the circuit court’s entry of summary judgment,
arguing that the circuit court erred by applying the South Dakota venue statutes to
find waiver by Robinson and in failing to enforce the forum selection clause in the
Lease. Northland argues that the circuit court correctly determined that Robinson
failed to timely object to venue. Alternatively, Northland argues that the circuit
court’s summary judgment order should be affirmed because Northland was legally
entitled to waive enforcement of the forum selection clause, which was intended to
unilaterally benefit Northland, and sue Robinson in his county of residence.
Analysis and Decision
[¶10.] An order of summary judgment is reviewed de novo by this Court.
Wyman v. Bruckner, 2018 S.D. 17, ¶ 9, 908 N.W.2d 170, 174. In considering a
motion for summary judgment, “[w]e decide whether genuine issues of material fact
exist and whether the law was correctly applied.” State v. BP plc, 2020 S.D. 47,
¶ 18, 948 N.W.2d 45, 52 (citation omitted).
1. Whether the circuit court erred in determining that Robinson waived his objection to Northland’s filing of the action in Spink County. [¶11.] Robinson initially argues that the circuit court erred in concluding that
he waived enforcement of the forum selection clause. In finding waiver by
Robinson, the circuit court relied upon SDCL 15-5-10, which provides that an action
may be tried in an improper county “unless the defendant, before the time for
answering expires, demands in writing that the trial be had in the proper county[.]”
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See Kolb v. Monroe, 1998 S.D. 64, ¶ 11, 581 N.W.2d 149, 151 (finding a party waived
objection to venue under SDCL 15-5-10 when it did not file a motion to change
venue until after the expiration of the time for filing an answer). Robinson argues
that the contractual forum selection clause, not the venue statutes, controls the
choice of forum for this action. Therefore, in his view, SDCL 15-5-10 does not bar
his right to contest the filing of the suit in Spink County. He relies on OT
Industries, Inc. v. OT-tehdas Oy Santasalo-Sohlberg Ab, 346 N.W.2d 162, 168
(Minn. Ct. App. 1984) to support his position that “[a] contractual forum selection
clause is not governed by the rules relating to venue and jurisdiction, but rather by
the rules of contractual defenses.”
a. Choice of law
[¶12.] Before addressing the merits, we must initially consider the law
applicable to these issues. In addition to the forum selection clause, the Lease
includes a choice of law provision that provides “the Lease and all related
documentation shall be governed by, and construed in accordance with, the laws of
the State of Minnesota (without regard to principles of conflicts of laws)[.]” While
the parties cite both South Dakota and Minnesota law in addressing the issues on
appeal, neither party has specifically addressed which state’s law should be applied
to the questions of waiver and enforceability of the forum selection clause at issue.
[¶13.] In considering contractual choice of law provisions, we have applied
the conflict of law principles from the Restatement and have stated that generally
“[t]he law of the state chosen by the parties to govern their contractual rights and
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duties will be applied.” Dunes Hosp., L.L.C. v. Country Kitchen Int’l, Inc., 2001 S.D.
36, ¶ 11, 623 N.W.2d 484, 488 (alteration in original) (quoting Restatement (Second)
Conflict of Laws § 187 (Am. L. Inst. 1971)). However, the law of the forum is
generally applied when the issues presented involve matters of procedure. For
instance, the Restatement (Second) Conflict of Laws, § 122 (Am. L. Inst. 1971)
provides that “[a] court usually applies its own local law rules prescribing how
litigation shall be conducted even when it applies the local law rules of another
state to resolve other issues in the case.” Minnesota also recognizes that “general
choice of law provisions, as expressed in contracts, incorporate only substantive law,
and do not displace the procedural law of the forum state.” Fredin v. Sharp, 176
F.R.D. 304, 308 (D. Minn. 1997). As the Minnesota Supreme Court has explained,
“[t]his court has for many years followed the almost universal rule that matters of
procedure and remedies were governed by the law of the forum state.” Davis v.
Furlong, 328 N.W.2d 150, 153 (Minn. 1983).
[¶14.] The question of whether waiver and enforceability of a forum selection
clause are matters of procedural or substantive law has not been addressed by this
Court. However, in O’Neill Farms, Inc. v. Reinert, this Court, without discussion,
applied the forum state’s law (South Dakota) to questions of enforceability of a
forum selection clause in a lease, despite a determination that “Texas law controls
the interpretation of the contract” under a conflicts of law analysis. 2010 S.D. 25,
¶ 12, 780 N.W.2d 55, 59. Nevertheless, courts have not necessarily been uniform in
addressing the question of which state’s law should be applied to a forum selection
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clause. See Symeon C. Symeonides, What Law Governs Forum Selection Clauses, 78
La. L. Rev. 1119, 1121–22 (2018) (detailing the lack of uniformity in the several
different approaches that courts take in determining which jurisdiction’s laws
govern a forum selection clause).
[¶15.] Some federal courts that have addressed the question have
distinguished “between the interpretation of a forum selection clause and the
enforceability of the clause.” Martinez v. Bloomberg LP, 740 F.3d 211, 217 (2d Cir.
2014). Federal courts have generally treated the question of the interpretation of a
forum selection clause as a substantive question controlled by the law chosen by the
parties, while the enforceability of such a clause is treated as procedural in nature
subject to federal common law without resorting to a choice-of-law analysis. See
Barnett v. DynCorp Int’l, L.L.C., 831 F.3d 296, 301 (5th Cir. 2016) (explaining that
“[w]hen the ‘interpretation’ of a forum-selection clause is at issue in a diversity case
. . . [the court] appl[ies] the forum state’s choice-of-law rules to determine what
substantive law governs” (citation omitted)). “Every circuit court decision that we
have located involving a forum selection clause designating a foreign forum . . . has
applied federal law . . . to decide the clause’s enforceability.” Martinez, 740 F.3d at
222. Making the distinction between the interpretation and the enforceability of
the forum selection clause ‘‘ensure[s] that . . . courts account for both the important
interests served by forum selection clauses and the strong public policies that might
require . . . courts to override such clauses[,]” and also “accords with the traditional
divide between procedural and substantive rules developed under Erie.” Collins ex.
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rel. herself v. Mary Kay, Inc., 874 F.3d 176, 181–82 (3d Cir. 2017) (first alteration in
original) (quoting Martinez, 740 F.3d at 220–21).
[¶16.] Neither Northland, nor Robinson, have directly challenged the
enforceability of the forum selection clause in the Lease. 1 Rather, the first issue
requires this Court to consider whether Robinson’s action or inaction in the
litigation waived his right to enforce the forum selection clause. We conclude this
issue presents a matter of procedure and South Dakota law should be applied.
However, Northland’s alternative argument requires us to interpret the language of
the Lease to determine whether the forum selection clause permits Northland to
waive the clause because it was included solely for Northland’s benefit. For this
substantive contractual issue, we apply Minnesota law consistent with the choice of
law provision in the Lease.
b. Northland’s claim of waiver by Robinson
[¶17.] SDCL 15-5-1 through SDCL 15-5-8 address the proper venue for civil
actions filed in the State of South Dakota. However, none of these statutes address
a contractual choice of forum or venue provision agreed to by the parties and do not
contain any language suggesting that the venue statutes were intended to override
a valid and enforceable contractual choice of forum provision between two parties.
1. We have recognized that a forum selection clause is presumptively enforceable, and “should be enforced unless ‘the clause was invalid for such reasons as fraud or overreaching[,]’ or ‘if enforcement would contravene a strong public policy of the forum in which it is brought.’” O’Neill Farms, Inc., 2010 S.D. 25, ¶ 9, 780 N.W.2d at 58 (alteration in original) (citation omitted). Neither party has claimed that enforcement of the forum selection clause would contravene public policy of either South Dakota or Minnesota.
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Therefore, the statutory venue provisions have no application to the question of the
enforceability of the contractual forum selection clause. Our conclusion is also
consistent with Minnesota law that “[a] contractual forum selection clause is not
governed by the rules relating to venue and jurisdiction, but rather by the rules of
contractual defenses.” OT Indus., Inc., 346 N.W.2d at 168; see also Hauenstein &
Bermeister, Inc. v. Met-Fab Indus., Inc., 320 N.W.2d 886, 892 (Minn. 1982) (finding
that the rules for waiver of a contractual defense, not the rules of venue and
jurisdiction, govern a case involving a forum selection clause). Further, Northland
has failed to cite any authority to the contrary. Thus, the circuit court erred in
applying SDCL 15-5-10 to conclude that Robinson had waived enforcement of the
forum selection clause by failing to present a timely motion to dismiss.
[¶18.] Additionally, the record does not support a determination that
Robinson procedurally waived his right to enforce the forum selection clause.
Robinson sent a letter within thirty days after the service of the complaint objecting
to the suit filed in Spink County arguing that the forum selection clause required
Northland to file the lawsuit in Stearns County, Minnesota. Although Robinson did
not technically comply with the proof of service requirements by serving an “answer
within thirty days after the service of the complaint upon defendant,” see SDCL 15-
6-12(a), he nevertheless timely asserted his rights under the forum selection clause.
Robinson’s first formal pleading filed with the court again raised the forum
selection clause issue and asked the court to determine that Stearns County,
Minnesota was the proper forum for resolution of the parties’ disputes. Robinson
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also informed the court that he had a counterclaim against Northland and cross-
claims against third parties that he intended to assert in Minnesota, and he did not
attempt to assert any claims in Spink County. See March v. Thursby, 2011 S.D. 73,
¶ 13, 806 N.W.2d 239, 243 (“A person may waive [jurisdictional issues] by
submitting to the jurisdiction of the court and pleading on the merits.” (citation
omitted)); see also SDCL 15-6-12(h). Robinson’s actions in responding to the suit do
not support a waiver determination under the Rules of Civil Procedure.
[¶19.] Finally, Northland has not cited any other basis to support a waiver by
Robinson. The doctrine of contractual waiver applies if the party in possession of
any right “does or forebears the doing of something inconsistent with the exercise of
the right. To support the defense of waiver, there must be a showing of a clear,
unequivocal and decisive act or acts showing an intention to relinquish the existing
right.” Norwest Bank S.D., N.A. v. Venners, 440 N.W.2d 774, 775 (S.D. 1989)
(quoting Subsurfco, Inc. v. B–Y Water Dist., 337 N.W.2d 448, 456 (S.D. 1983)). 2
Robinson’s letter put Northland on notice that he objected to the lawsuit being filed
in Spink County and requested the action be moved to Stearns County. The record
does not demonstrate an intentional relinquishment by Robinson of his right to
enforce the forum selection clause.
2. Minnesota law also requires “an intentional relinquishment of a known right, and it must ‘clearly be made to appear from the facts disclosed.’” Hauenstein, 320 N.W.2d at 892 (citation omitted).
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2. Whether Northland was entitled to waive the forum selection clause.
[¶20.] Northland contends that even if Robinson did not waive his forum
selection clause defense, Northland could unilaterally waive the clause by filing the
action in Robinson’s home county because the Lease provision providing that any
suit must be filed in Stearns County, Minnesota was included for Northland’s sole
benefit. Northland cites the general rule in Minnesota that “a party may waive a
condition precedent . . . when such condition precedent exists for his sole benefit and
protection[.]” Dolder v. Griffin, 323 N.W.2d 773, 778 (Minn. 1982) (citation omitted)
(emphasis added); see also Hanson v. Moeller, 376 N.W.2d 220, 224–25 (Minn. Ct.
App. 1985). Although Northland raised this issue before the circuit court, the court
did not address the question in concluding that Northland could maintain its action
in Spink County. 3 Nonetheless, if Northland is legally entitled to waive the forum
selection clause, the court’s entry of summary judgment should be affirmed. 4 “We
will affirm a circuit court’s decision so long as there is a legal basis to support its
decision.” Wyman, 2018 S.D. 17, ¶ 9, 908 N.W.2d at 174 (citation omitted).
3. The circuit court found that Northland’s decision to file the action in Spink County benefitted Robinson, but the court did not address whether Northland was entitled to waive the forum selection clause in the Lease. Our review of this issue is hampered by Robinson’s failure to file a reply brief and respond to Northland’s argument that it is entitled to waive the forum selection clause.
4. Robinson does not otherwise challenge the circuit court’s entry of summary judgment on the merits of Northland’s claim under the Lease.
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[¶21.] Our determination of whether the parties intended the forum selection
clause to solely benefit Northland must start with the language of the contract.
“The primary goal of contract interpretation is to determine and enforce the intent
of the parties.” Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271
(Minn. 2004). “Where there is a written instrument, the intent of the parties is
determined from the plain language of the instrument itself.” Id. Moreover, a court
must give effect to the language of an unambiguous contract. Halla Nursery, Inc. v.
City of Chanhassen, 781 N.W.2d 880, 884 (Minn. 2010). A contract is unambiguous
if “it has only one reasonable interpretation.” Id. “[W]hen a contractual provision is
clear and unambiguous, courts should not rewrite, modify, or limit its effect by a
strained construction.” Travertine Corp., 683 N.W.2d at 271.
[¶22.] The forum selection clause in the Lease unambiguously provides that
“any suit by either of the parties pursuant to this Lease . . . shall be in Stearns
County District Court, Stearns County, Minnesota.” (Emphasis added.) The
mandatory language for filing suit in Stearns County, Minnesota, applies to both
parties. Further, the Lease contains no language suggesting that the forum
selection clause was intended to solely benefit Northland, or that the mandatory
language requiring “any suit by either of the parties” could be unilaterally waived
by Northland.
[¶23.] The Colorado Court of Appeals faced a similar issue in Avicanna Inc. v.
Mewhinney, 487 P.3d 1110 (Colo. App. 2019). The defendants, like Robinson, were
sued in their home county by the out-of-state plaintiff. Avicanna, 487 P.3d at 1112.
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The plaintiff in Avicanna asserted that the forum selection cause was included for
its own benefit and it could therefore waive the contractual provision. Id. at 1113.
The Colorado court noted that while “[i]t is well-settled that a party may waive a
provision that was included in a contract for that party’s sole benefit[,] . . . it is
equally true that ‘a waiver of contract requirements and conditions may not be
made unilaterally when it would deprive the nonwaiving party of a benefit under
the provision in question.’” Id. at 1113–14 (quoting 13 Williston on Contracts
§ 39:24, Westlaw (4th ed. database updated May 2022)).
[¶24.] The Colorado court examined the language of the parties’ contract,
noting that the forum selection clause provided that “[e]ach Party irrevocably
attorns and submits to the exclusive jurisdiction of the courts of Ontario[.]” Id. at
1112. The court found that the inclusion of the language “each party” demonstrated
that the forum selection clause applied to both parties and did not exclusively
benefit either party. Id. at 1114. The court further rejected the plaintiff’s argument
that its status as the only Canadian resident, standing alone, showed that the
forum selection clause was intended to solely benefit the plaintiff. Id. The court
concluded that the plaintiff could not unilaterally waive the forum selection clause
by suing the defendants in their home county because under the plain language of
the contract, “[the] language of mutuality signals an intent to apply the forum
selection clause to every signatory to the contract.” Id.
[¶25.] A Maryland District Court also held that a party could not unilaterally
waive a forum selection clause when the clause contained language stating that
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“[e]ach party . . . stipulates that the State and Federal courts located in the County
of New York, State of New York shall have in personam jurisdiction and venue over
each of them[.]” Imperium Ins. Co. v. Allied Ins. Brokers, Inc., 2012 WL 4103889, at
*1, *2 (D. Md. Sept. 17, 2012). In Imperium Insurance, the plaintiff attempted to
waive the forum selection clause by suing the defendant in Maryland, arguing that
the forum selection clause was included for its sole benefit. Id. at *3. The court
explained that “[w]hile contracting to litigate in [plaintiff’s] (former) home district
may appear to have been for the sole benefit of [plaintiff],” the forum selection
clause was bilateral and could not be unilaterally waived because the contractual
language provided a mutual benefit for both parties. Id.
[¶26.] Northland relies on decisions from other jurisdictions that have held a
party for whose benefit the forum selection clause was placed in the contract may
unilaterally waive that benefit and commence an action in the defendant’s home
county. See Peoples Bank v. Carter, 132 S.W.3d 302, 307 (Mo. Ct. App. 2004);
Investec Bank PLC v. Opalgem Invs. Corp., No. 652120/10, 2014 WL 6886252, *3
(N.Y. Sup. Ct. Oct. 15, 2014); Open Text Corp. v. Grimes, 262 F. Supp. 3d 278, 286
(D. Md. 2017); JetBlue Airways Corp. v. Stephenson, 931 N.Y.S.2d 284, 289 (N.Y.
App. Div. 2011); Seals v. Callis, 848 S.W.2d 5, 7 (Mo. Ct. App. 1992).
[¶27.] Based upon the plain language of the forum selection clause in this
Lease, we conclude that the cases cited by Northland are either unpersuasive or do
not support Northland’s position. The forum selection clauses interpreted in Open
Text, Investec Bank PLC, and JetBlue Airways Corporation demonstrated a clear
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intention to benefit one party by including language that was unilateral in
application. In each case, the unilateral language of the forum selection clause
permitted the party benefited to waive the obligation to file suit in the selected
forum. See Open Text, 262 F. Supp. 3d at 286; Investec Bank PLC, 2014 WL
6886252, at *1, *3; JetBlue Airways Corp., 931 N.Y.S.2d at 289. Further, in Peoples
Bank and Seals, neither court gave any consideration to the language of the
agreement and whether the language reflected an intent for the forum selection
clause to solely benefit one party.
[¶28.] The forum selection clause in the Lease contains no language
permitting Northland to unilaterally waive the obligation to file the action in
Stearns County, Minnesota, or otherwise suggesting that it was intended to solely
benefit Northland. Rather, the Lease provides that “any suit by either of the parties
pursuant to this Lease shall be maintained in and the venue for any such litigation
shall be in Stearns County District Court, Stearns County, Minnesota.” (Emphasis
added.) The Lease unambiguously binds both parties to the forum selected.
Applying Minnesota law, “[b]ecause of the presumption that the parties intended
the language used to have effect, [this Court] will attempt to avoid an interpretation
of the contract that would render a provision meaningless.” Chergosky v. Crosstown
Bell, Inc., 463 N.W.2d 522, 526 (Minn. 1990). Northland’s asserted interpretation of
the Lease allowing them to unilaterally waive the forum selection clause would
render the language “any suit by either of the parties” meaningless.
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[¶29.] We conclude as a matter of law that the forum selection clause does
not permit Northland to waive the agreed choice of forum and requires an action by
either party arising from the Lease to be commenced in Stearns County, Minnesota.
Brookfield Trade Ctr., Inc. v. Cnty. of Ramsey, 584 N.W.2d 390, 394 (Minn. 1998)
(“The construction and effect of a contract presents a question of law, unless an
ambiguity exists.”). Robinson was entitled to enforce the forum selection clause and
require Northland to file the action in the forum chosen by the parties in the Lease.
Therefore, we reverse and vacate the circuit court’s judgment, and direct the circuit
court to dismiss the case in Spink County without prejudice. 5
[¶30.] KERN, SALTER, DEVANEY, and MYREN, Justices, concur.
5. Northland has also filed an application for appellate attorney fees. Based upon our disposition of this case, we decline to award appellate attorney fees.
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