USCA4 Appeal: 21-1217 Doc: 39 Filed: 07/22/2022 Pg: 1 of 24
PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 21-1217
PAMELA D. WHITAKER,
Plaintiff - Appellee,
v.
MONROE STAFFING SERVICES, LLC; STAFFING 360 SOLUTIONS, INC.,
Defendants - Appellants.
Appeal from the United States District Court for the Middle District of North Carolina, at Greensboro. N. Carlton Tilley, Jr., Senior District Judge. (1:20−cv−00012−NCT−JLW)
Argued: March 9, 2022 Decided: July 22, 2022
Before RICHARDSON and HEYTENS, Circuit Judges, and KEENAN, Senior Circuit Judge.
Vacated and remanded with instructions by published opinion. Senior Judge Keenan wrote the majority opinion, in which Judge Heytens joined. Judge Richardson wrote an opinion concurring in part and concurring in the judgment.
ARGUED: Jonathan D. Pressment, HAYNES & BOONE, LLP, New York, New York, for Appellants. Grover Gray Wilson, NELSON MULLINS RILEY & SCARBOROUGH LLP, Winston-Salem, North Carolina, for Appellee. ON BRIEF: Craig D. Schauer, BROOKS, PIERCE, MCLENDON, HUMPHREY & LEONARD, L.L.P., Greensboro, North Carolina; Abbey Gauger, HAYNES & BOONE, LLP, New York, New York, for Appellants. Stuart H. Russell, NELSON MULLINS RILEY & SCARBOROUGH LLP, USCA4 Appeal: 21-1217 Doc: 39 Filed: 07/22/2022 Pg: 2 of 24
Winston-Salem, North Carolina, for Appellee.
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BARBARA MILANO KEENAN, Senior Circuit Judge:
This appeal raises issues concerning ripeness and the application of a contract’s
forum selection clause. In August 2018, plaintiff Pamela Whitaker entered into a share
purchase agreement with the defendants for the sale of her business, which agreement the
parties later amended (the contract, or the amended agreement). Whitaker filed suit in
December 2019 in North Carolina state court, alleging that the defendants had not made
interest and earnout payments as required under the amended agreement. The defendants
removed the case to federal district court in the Middle District of North Carolina, where
they argued that the state or federal courts in New York were the exclusive forums for
Whitaker’s complaint under the contract’s forum selection clause. The defendants also
argued that Whitaker’s claims were not yet ripe because, at the time the complaint was
filed, all payments that were due under the contract had been made.
The magistrate judge recommended transferring the case to the Southern District of
New York in accordance with the contract’s forum selection clause. The district court
disagreed. The district court concluded that Whitaker’s claims were “relating to” a setoff,
enabling Whitaker to invoke an exception in the forum selection clause and maintain her
suit in North Carolina state court. The district court remanded the case to the North Carolina
state court, and the defendants now appeal.
Upon our review, we initially conclude that Whitaker’s claims are ripe, both as
originally pleaded and under the facts developed prior to the district court’s judgment. We
also agree with the magistrate judge that Whitaker’s claims do not relate to a setoff and
that under the contract’s forum selection clause, the state or federal courts in New York are
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the exclusive forums for Whitaker’s claims. We therefore vacate and remand with
instructions that the district court transfer this case to the Southern District of New York.
I.
Whitaker is the owner of Key Resources, Inc., a North Carolina corporation. In
August 2018, Whitaker entered into a share purchase agreement with defendant Monroe
Staffing Services, LLC. 1 Monroe agreed to make an initial payment of around $8 million
to Whitaker, to be followed by two earnout payments in August 2019 and August 2020,
each in the amount of $2,027,198.
The agreement specified that New York law would apply to all matters relating to
the contract. The contract also included a forum selection clause, stating that:
Any legal suit, action, proceeding, or dispute arising out of or related to this Agreement . . . may be instituted in the federal courts of the United States of America or the courts of the State of New York in each case located in the city and county of New York, and each party irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action, proceeding, or dispute [the forum selection clause].
The forum selection clause further provided the following exception (the North Carolina
exception):
Notwithstanding the foregoing, any legal suit, action, proceeding, or dispute arising out of or relating to a [Monroe] setoff pursuant to Section 7.08 and [Whitaker’s] dispute relating thereto may be instituted in the federal courts of the United States of America located in the Middle District of North Carolina or the courts of the State of North Carolina located in Guilford
1 Defendant Staffing 360 Solutions, Inc. is the parent company of Monroe. For ease of reference, we refer to Staffing 360 and Monroe collectively as “Monroe” or “the defendants.” 4 USCA4 Appeal: 21-1217 Doc: 39 Filed: 07/22/2022 Pg: 5 of 24
County, in either case applying New York law, and such forum selection by [Whitaker] shall be controlling.
(Emphases added.) Thus, under these provisions, New York federal or state courts are the
exclusive forums for disputes arising out of or relating to the contract, unless the dispute is
“arising out of or relating to a [Monroe] setoff pursuant to Section 7.08” of the contract.
Section 7.08 (or the setoff provision) allows Monroe “at its sole election” to
withhold or deduct amounts from the earnout payments that otherwise would be owed to
Whitaker in the event of Whitaker’s breach of the contract or misrepresentation of
information contained in the contract. To exercise this right of setoff, Monroe “shall”
“deliver[] a written notice to [Whitaker] that shall contain the following: (1) the basis for
why [Monroe] believes it is entitled to setoff, (2) the alleged amount owed (the ‘Setoff
Amount’) along with a calculation showing the basis for such Setoff Amount, and (3)
reasonable documentation supporting the Setoff Amount.”
Monroe failed to make the first scheduled earnout payment due in August 2019.
The following month, the parties executed an amendment to the share purchase agreement.
The amended agreement stated that both outstanding earnout payments were “deemed
earned and payable in full.” The amendment also permitted Monroe to delay the first
earnout payment “provided, however, that for each full calendar month that such payment
is delayed, [Monroe] shall pay [Whitaker] interest in the amount of $10,000.” The first
such interest payment was due at the end of September 2019, with successive interest
payments due by “the last business day of each calendar month.” The amendment further
provided that:
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[Monroe] expects that it will pay the First Year Earnout on or around November 29, 2019, but failure to make payment shall not be a breach of the Share Purchase Agreement so long as [Monroe] continues to pay interest . . . and such payment is made in full by February 27, 2020.
(Emphasis added.) The amendment also stated that the final earnout payment would be
“due and payable on February 27, 2020.” The parties dispute whether the interest payments
specified in the amendment were made as required by the amended agreement.
On November 25, 2019, Monroe’s counsel sent Whitaker a letter stating as the
subject, “Notice of Claim And Reservation Of Rights With Respect To Breaches” of the
contract (the reservation of rights letter). In the letter, counsel stated that it was
investigating “numerous” misrepresentations that Whitaker allegedly had made in
connection with the sale of her business. The letter further explained that “in an abundance
of caution,” Monroe was providing Whitaker with notice of its claims with respect to
“suspected breaches” of the contract and “other potentially fraudulent representations
and/or conduct.” The letter listed several sections of the contract that might be the subject
of Monroe’s claims. The letter also stated:
We further provide you with notice, pursuant to [the setoff provision], that [Monroe] reserves all rights to setoff any penalties, liabilities, or damages arising as a result of any fraudulent conduct and/or breaches of the [contract] by you . . . against any Earnout Payments that would otherwise be owed to you. (See [contract], § 7.08.)
However, the letter did not include a setoff amount, supporting calculations, or
corroborating documentation, as required by the setoff provision of Section 7.08.
Ten days later, on December 5, 2019, Whitaker filed the present complaint against
the defendants in North Carolina state court, alleging breach of contract and seeking a
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declaratory judgment to that effect. Whitaker alleged that the defendants “materially
breached the [contract] by failing to make the payments and interest as agreed,” in the
amount of $4,054,396 plus interest. The defendants removed the case to federal district
court in the Middle District of North Carolina and filed a motion to dismiss the complaint
for lack of ripeness, lack of personal jurisdiction, improper venue, and failure to state a
claim, under Federal Rules of Civil Procedure 12(b)(1), (2), (3), and (6). Alternatively,
Monroe sought to transfer the case to the Southern District of New York pursuant to the
forum selection clause and 28 U.S.C. § 1404(a).
In response, Whitaker filed a motion to amend her complaint. The proposed
amended complaint alleged that as of February 28, 2020, the defendants had “repeatedly
failed to timely make the interest payments as required,” had failed to make the earnout
payments, and had purported to terminate the contract. Whitaker also sought to have the
case remanded to state court.
While the case was pending in the district court, Monroe filed a complaint against
Whitaker in the Southern District of New York, alleging claims of breach of contract and
fraudulent inducement. 2 Monroe’s complaint did not allege entitlement to a setoff. The
New York litigation currently is stayed pending resolution of this appeal.
The magistrate judge in North Carolina concluded that the contract’s forum
selection clause mandated exclusive jurisdiction in the state or federal courts in New York
2 Monroe has since filed an amended complaint in the New York proceedings, alleging a single claim that Whitaker breached the warranties and representations in the contract. 7 USCA4 Appeal: 21-1217 Doc: 39 Filed: 07/22/2022 Pg: 8 of 24
and recommended transferring the case accordingly. The district court disagreed, holding
that the clause’s North Carolina exception for disputes “relating to” a setoff applied. The
district court remanded the case to North Carolina state court without addressing Monroe’s
other arguments, and denied as moot Whitaker’s motion to amend her complaint. Monroe
appeals.
II.
Monroe first argues that the district court should have dismissed Whitaker’s
complaint because her claims were not ripe when the complaint was filed. According to
Monroe, because the earnout payments were not due until February 2020 under the terms
of the amended agreement, Whitaker’s complaint was premature when filed in December
2019. Monroe asserts that at the time the complaint was filed, Monroe “had made every
single payment to which [Whitaker] was even arguably entitled.” We disagree with
Monroe’s ripeness argument.
Although we conclude that the district court erred in declining to address Monroe’s
ripeness challenge before proceeding to interpret the forum selection clause, we ultimately
disagree with Monroe’s contention that the district court was required to dismiss the
complaint on ripeness grounds. The doctrine of ripeness arises from the case or
controversy requirement of Article III. Scoggins v. Lee’s Crossing Homeowners Ass’n,
718 F.3d 262, 269 (4th Cir. 2013); South Carolina v. United States, 912 F.3d 720, 730 (4th
Cir. 2019). A case is not ripe for judicial determination “if the plaintiff has not yet suffered
injury and any future impact remains wholly speculative.” Doe v. Va. Dep’t of State Police,
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713 F.3d 745, 758 (4th Cir. 2013) (citation and internal quotation marks omitted). In
contrast, a case is ripe for judicial decision when the “controversy is final and not dependent
on future uncertainties.” Id. (citation omitted). Thus, when a claim is “presented in a clean-
cut and concrete form,” the issue is ripe for adjudication. South Carolina, 912 F.3d at 730
(citation omitted). The plaintiff bears the burden of establishing ripeness. Doe, 713 F.3d
at 758.
Because ripeness is a Constitutional limitation on federal court jurisdiction, ripeness
presents the threshold question whether a claim is justiciable. Scoggins, 718 F.3d at 269;
South Carolina, 912 F.3d at 730. Both the district court and this Court are required to
assure that such jurisdictional requirements are met. Va. Dep’t of Corrs. v. Jordan, 921
F.3d 180, 187 (4th Cir. 2019).
Generally, a court must resolve jurisdictional issues before considering the merits
of a claim, because “[w]ithout jurisdiction the court cannot proceed at all in any cause.”
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94-95 (1998) (citation omitted); see
also Ctr. for Biological Diversity v. U.S. Dep’t of the Interior, 563 F.3d 466, 475 (D.C. Cir.
2009) (courts must address ripeness before considering the merits). The Supreme Court
has recognized exceptions to this general rule for certain threshold issues. 3 See Ruhrgas
This Court also has held that res judicata can qualify as a threshold issue. East 3
Cost Repair & Fabrication, LLC v. United States ex rel. Dep’t of the Navy, 16 F.4th 87, 90 (4th Cir. 2021). In that case, we declined to consider jurisdictional issues surrounding the “Election Doctrine” rule and instead held that the parties’ settlement agreement barred the plaintiff’s claim of payment. Id. at 91. Neither the “Election Doctrine” rule nor the doctrine of res judicata is before us in the present case and, thus, our decision in East Coast is inapplicable here. See Concurring Op. 22-23. 9 USCA4 Appeal: 21-1217 Doc: 39 Filed: 07/22/2022 Pg: 10 of 24
AG v. Marathon Oil Co., 526 U.S. 574, 585 (1999) (listing examples of threshold issues
that can be resolved before subject matter jurisdiction, including declining to exercise
jurisdiction over state-law claims and abstaining under Younger v. Harris, 401 U.S. 37
(1971)).
An instructive case addressing one such threshold issue is the Supreme Court’s
decision in Sinochem International Co. v. Malaysia International Shipping Corp., 549 U.S.
422 (2007), in which the Court held that district courts need not conclusively establish their
jurisdiction before dismissing a case on forum non conveniens grounds. Id. at 425. Forum
non conveniens is the common law doctrine enabling a court to dismiss a case when a
foreign forum is the more appropriate venue based on a range of convenience-related
factors. Id. at 429-30. The Court in Sinochem reasoned that “jurisdiction is vital only if
the court proposes to issue a judgment on the merits,” which occurs when a court assumes
“substantive law-declaring power.” Id. at 431, 433 (citations, internal quotation marks,
and alteration omitted). Because a ruling on forum non conveniens grounds “is a
determination that the merits should be adjudicated elsewhere,” the Court concluded that
the doctrine is a non-merits basis for dismissal. Id. at 432. Noting that jurisdictional
questions can be “burdensome,” the Court concluded that judicial economy sometimes may
justify a court’s decision to dismiss based on forum non conveniens before assuring itself
of jurisdiction. Id. at 435-36.
Notably, however, the Court in Sinochem was not faced with the issue presented
here, namely, whether a disputed forum selection clause in a contract requires transfer of
the case to a different federal forum. To answer this question, we must interpret the
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language of the parties’ contract to determine the nature of their agreement. Like other
contractual provisions, a forum selection clause is a bargained-for term of the contract
which, as evidenced by this appeal, may have material value to one or more of the parties.
See Atl. Marine Constr. Co. v. U.S. Dist. Ct., 571 U.S. 49, 66 (2013) (a forum selection
clause “may have figured centrally in the parties’ negotiations and may have affected how
they set monetary and other contractual terms” or have influenced their decision to “do
business together in the first place”).
In the present case, therefore, application of the forum selection clause is
inextricably intertwined with the merits of the contract action. The parties’ chosen forum
depends on whether the dispute is “arising out of or relating to a [Monroe] setoff pursuant
to Section 7.08.” We cannot interpret the forum selection clause in isolation, but also must
determine whether a setoff right was asserted in accordance with another provision of the
contract. Under these circumstances, our interpretation of the forum selection clause
requires us to assume “substantive law-declaring power” with respect to the merits of the
case. Sinochem, 549 U.S. at 433 (citation and internal quotation marks omitted). Thus,
while there may be instances in which application of a forum selection clause would merely
“den[y] audience to a case on the merits,” akin to a forum non conveniens dismissal, id. at
432 (citation omitted), the forum selection clause before us requires engagement in the
merits of the case. We therefore conclude that the general rule of Steel Co. applies, and
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that the district court should have assured itself of jurisdiction before interpreting and
applying the forum selection clause. 4 523 U.S. at 93-94.
We nevertheless decline to remand for the district court to consider Monroe’s
ripeness challenge in the first instance, because we conclude that Whitaker’s claims were
ripe at the time the district court issued its judgment. In her complaint, filed in December
2019, Whitaker alleged that the defendants materially breached the contract “by failing to
make the payments and interest as agreed.” Under the terms of the amended agreement,
Monroe’s failure to make the first earnout payment, originally due in August 2019,
constituted a breach unless Monroe made the monthly interest payments beginning on
September 30, 2019. By alleging in her complaint that Monroe had failed to pay “interest,”
Whitaker claimed that a breach already had occurred.
Monroe disputes these allegations. While acknowledging that its interest payments
may have been untimely, Monroe asserts without documentary evidence that it paid the
required interest. However, this factual dispute centers on the merits of Whitaker’s breach
of contract claim, namely, whether a breach occurred due to Monroe’s alleged failure to
pay interest as agreed. 5 This merits argument does not implicate the court’s jurisdiction to
4 To the extent that the Seventh Circuit reached a different conclusion in the context of mandamus relief in In re: Limitnone, LLC, 551 F.3d 572, 576-78 (7th Cir. 2008) (per curiam), we respectfully disagree. We note, however, that the Seventh Circuit left open the possibility that, in some circumstances, district courts may not appropriately decide questions of venue before subject matter jurisdiction. Id. at 578. 5 The record contains an affidavit filed by Whitaker on February 4, 2020, in which she attested that she received the December 2019 interest payment late and had not yet received the interest payment due on January 31, 2020. The affidavit does not reference (Continued) 12 USCA4 Appeal: 21-1217 Doc: 39 Filed: 07/22/2022 Pg: 13 of 24
entertain the breach of contract claim as pleaded. See Litecubes, LLC v. N. Light Prods.,
Inc., 523 F.3d 1353, 1361 (Fed. Cir. 2008) (“[A] failure to prove the allegations alleged in
a complaint requires a decision on the merits, not a dismissal for lack of subject matter
jurisdiction.”).
Moreover, because “ripeness is peculiarly a question of timing,” we may look to
factual developments that occurred after the complaint was filed to determine whether
Whitaker’s claims were ripe for review at the time of the district court’s judgment.
Blanchette v. Conn. Gen. Ins. Corps., 419 U.S. 102, 140 (1974); Am. Motorists Ins. Co. v.
United Furnace Co., 876 F.2d 293, 302 n.4 (2d Cir. 1989); see also Church of Our Lord
& Savior Jesus Christ v. City of Markham, 913 F.3d 670, 677 (7th Cir. 2019) (explaining
that courts should determine ripeness based on the facts at the time of the court’s decision,
not at the time the complaint was filed). There is no dispute that Whitaker’s claims were
ripe by the time that the district court issued its decision in February 2021. Regardless
whether interest payments were made before the complaint was filed, Monroe failed to pay
the earnout amounts by the final February 2020 due date. This failure to make the earnout
payments rendered Whitaker’s claim for breach of contact ripe at least one year before the
district court’s judgment issued. By then, Whitaker allegedly had suffered at least one
injury, namely, non-payment of the earnout amounts. Her injury was not “wholly
the interest payments due in September, October, and November 2019, which Whitaker generally alleged in her complaint had not been made. At oral argument, Monroe appeared to concede that these fall 2019 interest payments were rendered in an untimely fashion. As noted above, the record contains no corroboration of Monroe’s contention that the interest payments were made at all, nor documentation showing the date that any payment was received. 13 USCA4 Appeal: 21-1217 Doc: 39 Filed: 07/22/2022 Pg: 14 of 24
speculative” or “dependent on future uncertainties.” Doe, 713 F.3d at 758 (citations
omitted). Under these circumstances, there was no risk that the court would become
“entangled in abstract disagreements.” Scoggins, 718 F.3d at 270 (citation and internal
quotation marks omitted). We therefore conclude that Whitaker’s claims were ripe for
adjudication in the district court.
III.
We turn to consider Monroe’s contention that the district court erred in failing to
transfer the case to the Southern District of New York. Monroe argues that the forum
selection clause in the parties’ contract established exclusive jurisdiction over Whitaker’s
claims in the federal or state courts in New York. According to Monroe, the clause’s North
Carolina exception for disputes “arising out of or relating to” a setoff does not apply here,
because Monroe never sought to exercise its right to a setoff pursuant to Section 7.08.
In response, Whitaker urges us to affirm the district court’s order remanding the
case to North Carolina state court. In Whitaker’s view, the North Carolina exception has
broad application to any dispute “relating to” a setoff, even if such a setoff never was
asserted by the defendants. Whitaker contends that the reservation of rights letter, various
telephone conversations between the parties, and the lawsuit Monroe eventually filed in
the Southern District of New York all show that her complaint is “relating to” a setoff. We
disagree with Whitaker’s arguments.
We review the district court’s interpretation of the contract de novo. Foodbuy, LLC
v. Gregory Packaging, Inc., 987 F.3d 102, 118 (4th Cir. 2021). We also review de novo
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the court’s decision to remand the case to state court. 6 Quicken Loans Inc. v. Alig, 737
F.3d 960, 964 (4th Cir. 2013).
A forum selection clause in a contract “represents the parties’ agreement as to the
most proper forum.” Atl. Marine Constr. Co., 571 U.S. at 63 (citation omitted). The
“enforcement of valid forum-selection clauses, bargained for by the parties, protects their
legitimate expectations and furthers vital interests of the justice system.” Id. (citation
omitted). Accordingly, courts will enforce such clauses “in all but the most exceptional
cases.” Id. (citation omitted). When a forum selection clause designates another federal
forum, we will transfer the case to that forum pursuant to 28 U.S.C. § 1404(a) (“For the
convenience of parties and witnesses, in the interest of justice, a district court may transfer
any civil action to any other district or division where it might have been brought or to any
district or division to which all parties have consented.”). 7 Id. at 59.
6 Following the Supreme Court’s decision in Atlantic Marine Construction Co., 571 U.S. 49, we have left open the question whether the more deferential abuse of discretion standard of review should apply to questions of venue when a contract contains a forum selection clause. See BAE Sys. Tech. Sol. & Servs., Inc. v. Republic of Korea’s Def. Acquisition Program Admin., 884 F.3d 463, 470 & n.4 (4th Cir. 2018). However, we need not resolve this issue here because under either standard of review, we would vacate the district court’s judgment based on the court’s erroneous interpretation of the contract. See id. at 470. 7 As an initial matter, we disagree with Whitaker’s assertion that the forum selection clause merely allows, but does not mandate, jurisdiction in New York for non-setoff- related claims. In support of this argument, Whitaker points to the permissive phrase “may be instituted.” See BAE Sys. Tech. Sol. & Servs., 884 F.3d at 470-72 (discussing difference between permissive and mandatory forum selection clauses). The clause later states that the parties “irrevocably submit[] to the exclusive jurisdiction” of New York state and federal courts. This “specific language of exclusion” confers mandatory jurisdiction in New York to the exclusion of any other forum for claims not subject to the limited North (Continued) 15 USCA4 Appeal: 21-1217 Doc: 39 Filed: 07/22/2022 Pg: 16 of 24
When interpreting a contract under New York law, we “give effect to the expressed
intentions of the parties.” Law Debenture Tr. Co. of N.Y. v. Maverick Tube Corp., 595
F.3d 458, 467 (2d Cir. 2010) (citation omitted). We give terms their plain meaning and
read the contract as a whole to avoid placing “undue emphasis” on “particular words and
phrases.” Id. at 468. We thus will not “add or excise terms” or adopt an interpretation of
the contract that would render any provision superfluous. Id. at 468.
As discussed above, the forum selection clause in the present case establishes that
the state or federal courts in New York are the default forums for all disputes arising out
of or relating to the contract, subject to a limited exception for setoff-related disputes. The
clause’s North Carolina exception applies to “any legal suit, action, proceeding, or dispute
arising out of or relating to a [Monroe] setoff pursuant to Section 7.08” of the contract.
The North Carolina exception undoubtedly contains some broad language, including the
phrase “relating to” that broadens the applicability of the exception beyond claims that
arise directly from a setoff. See Coregis Ins. Co. v. Am. Health Found., Inc., 241 F.3d 123,
129 (2d Cir. 2001) (applying Ohio and Connecticut law, and observing that the plain
meaning of the term “relating to” is “broader in scope” than the term “arising out of”);
Phillips v. Audio Active Ltd., 494 F.3d 378, 389 (2d Cir. 2007) (distinguishing between the
terms “arise out of” and “relate to”). The term “relating to” is akin to the phrases “in
Carolina setoff exception. Id. at 472. Were we to read the selection of New York courts as permissive, the North Carolina exception to jurisdiction in New York would be rendered superfluous. 16 USCA4 Appeal: 21-1217 Doc: 39 Filed: 07/22/2022 Pg: 17 of 24
connection with,” “associated with,” “with respect to,” and “with reference to.” Coregis
Ins. Co., 241 F.3d at 129.
Our analysis, however, does not end with consideration of this broad language. The
North Carolina exception applies only to disputes arising out of or relating to a setoff
“pursuant to Section 7.08” of the contract. Section 7.08 establishes three prerequisites for
Monroe to exercise its contractual right to a setoff, namely, written notice to Whitaker that
includes the basis for Monroe’s claim to a setoff, a calculation of the setoff amount, and
supporting documentation. None of these requirements were satisfied by the reservation
of rights letter, which did not calculate the amount of a claimed setoff or provide supporting
documentation. Thus, to the extent that Monroe’s general reservation of rights indicated a
“dispute” regarding a potential setoff, that dispute was not formalized “pursuant to Section
7.08,” as required by the plain language of the contract. Nor did any later communications
between the parties or Monroe’s complaint filed in the Southern District of New York
satisfy the requirements of Section 7.08. Indeed, Whitaker’s allegations neither refer to
Section 7.08 nor assert that its terms have been met. Instead, she alleges that her claims
relate to a “potential” setoff.
Whitaker thus argues that the North Carolina exception applies because Monroe
could assert a “possible” setoff claim or defense. Under this view, however, any claim
against Monroe for nonpayment would “relate to” a “possible” setoff dispute, irrespective
whether a setoff right had been asserted pursuant to Section 7.08 of the contract. Such an
interpretation would read the phrase “pursuant to Section 7.08” out of the contractual
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language, contrary to fundamental principles of New York contract law. Law Debenture
Tr. Co. of N.Y., 595 F.3d at 468.
Moreover, were we to adopt the broad position advanced by Whitaker, the North
Carolina exception would swallow the default rule that “[a]ny legal suit, action,
proceeding, or dispute arising out of or related to” the contract must be brought in state or
federal court in New York. This outcome would “disrupt the parties’ settled expectations”
that New York would serve as the default forum for all claims, subject to a limited
exception for disputes relating to setoffs. Atl. Marine Constr. Co., 571 U.S. at 66. For
these reasons, we conclude that Whitaker’s lawsuit is not “arising out of or relating to a
[Monroe] setoff pursuant to Section 7.08,” and that the North Carolina exception in the
contract’s forum selection clause is not applicable.
Whitaker also has not offered any “exceptional” reasons that the public interest
would be served better by refusing to enforce the parties’ agreement to litigate this case in
New York. Id. at 62, 64. We therefore will enforce the forum selection clause by directing
the district court to transfer this case to the Southern District of New York pursuant to 28
U.S.C. § 1404(a). 8
IV.
8 In light of our holding, we decline to consider Monroe’s other arguments in favor of dismissal, or Whitaker’s request to amend her complaint. We leave these issues for consideration by the Southern District of New York should the parties choose to pursue them. 18 USCA4 Appeal: 21-1217 Doc: 39 Filed: 07/22/2022 Pg: 19 of 24
For these reasons, we conclude that Whitaker’s claims are ripe for adjudication.
Based on the contract’s forum selection clause, we vacate the district court’s judgment and
remand with instructions that the court transfer this case to the Southern District of New
York.
VACATED AND REMANDED WITH INSTRUCTIONS
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RICHARDSON, Circuit Judge, concurring in part and concurring in the judgment:
I agree with most of the majority’s fine opinion: the claims were ripe in the district
court and should have been transferred. I write separately only because I find a different
path to reach the issue of ripeness.
First, I disagree with the majority’s conclusion that Steel Co. v. Citizens for a Better
Environment, 523 U.S. 83, 94–95 (1998), requires us to first question ripeness before
deciding to transfer under 28 U.S.C. §1404(a). Steel Co. requires that we place subject-
matter jurisdiction before the merits in our decisional ordering. But non-merits, threshold
issues may still be addressed before subject-matter jurisdiction. A § 1404(a) transfer is
such a threshold issue.
In Sinochem International Co. v. Malaysia International Shipping Corp., 549 U.S.
422, 432–35 (2007), the Supreme Court held that subject-matter jurisdiction need not be
considered before a forum non conveniens dismissal. And Sinochem recognized that
§ 1404(a) codified the common-law doctrine of forum non conveniens, though with some
modifications. Id. at 430; see Piper Aircraft Co. v. Reyno, 454 U.S. 235, 253 (1981). Then
in a later case, the Court held that a forum-selection clause “may be enforced through a
motion to transfer under § 1404(a)” and also recognized that “the appropriate way to
enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine
of forum non conveniens.” Atl. Marine Constr. Co. v. U.S. Dist. Ct., 571 U.S. 49, 59–60
(2013). Reading Sinochem and Atlantic Marine Construction together suggests that Steel
Co.’s judicial ordering permits addressing a § 1404(a) transfer motion under a forum-
selection clause before resolving jurisdiction, just like a forum non conveniens dismissal.
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See Atl. Marine, 571 U.S. at 61 (“[B]ecause both § 1404(a) and the forum non conveniens
doctrine from which it derives entail the same balancing-of-interests standard, courts
should evaluate a forum-selection clause pointing to a nonfederal forum in the same way
that they evaluate a forum-selection clause pointing to a federal forum.”).
Even so, the majority concludes that this particular § 1404(a) transfer motion cannot
be treated as a threshold issue because it is “inextricably intertwined with the merits.” But
this conflicts with the Supreme Court’s approach to evaluating when a court may rely on a
“threshold ground[] for denying audience to a case on the merits” prior to considering its
subject-matter jurisdiction. Sinochem, 549 U.S. at 431 (quoting Ruhrgas AG v. Marathon
Oil Co., 526 U.S. 574, 585 (1999)). Rather than perform a fact intensive, case-by-case
analysis of which issues are “inextricably intertwined with the merits,” the Supreme Court
categorically analyzes which non-merits threshold issues may be addressed before looking
to subject-matter jurisdiction. See id. at 431 (recognizing that dismissals based on Younger
abstention, personal jurisdiction, and Totten, among others, can be considered before
subject-matter jurisdiction as a categorical matter); Ruhrgas AG, 526 U.S. at 584–85
(holding, without qualification, that personal jurisdiction can be considered before subject-
matter jurisdiction).
In contrast, the majority’s approach leaves courts to separate threshold issues that
involve a “brush with ‘factual and legal issues of the underlying dispute,’” Sinochem, 549
U.S. at 433 (quoting Van Cauwenberghe v. Biard, 486 U.S. 517, 529 (1988)), from those
that are inextricably intertwined with the merits. District courts will now face a difficult
task in applying the majority’s inextricably intertwined standard given its contradiction
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with the Supreme Court’s, and our own, routine blessing of threshold dismissals that
require resolving factual or legal questions central to the plaintiff’s claim.
For instance, in Ruhrgas, the plaintiff brought a fraud claim, among others, but the
district court dismissed the case for lack of personal jurisdiction without considering its
subject-matter jurisdiction. 526 U.S. at 579–80, 581 n.4. The Court upheld the personal-
jurisdiction dismissal as a threshold non-merits dismissal, even though the Court
recognized that the district court’s holding hinged on the factual finding “that Marathon
had not shown that Ruhrgas pursued the alleged pattern of fraud and misrepresentation
during the Houston meetings.” Id. at 581 n.4, 584–85. So Ruhrgas blessed a threshold
dismissal that required resolving a factual question that went to the core of the plaintiff’s
claims. See id.; see also Sinochem, 549 U.S. at 433 (“[I]n ruling on the non-merits
threshold question of personal jurisdiction, a court may be called upon to determine
whether a defendant’s contacts with the forum relate to the claim advanced by the
plaintiff.”); id. (“[A] court may need to identify the claims presented and the evidence
relevant to adjudicating those issues to intelligently rule on a forum non conveniens
motion.”).
This Court has likewise blessed threshold dismissals that require considering factual
and legal questions relevant to the plaintiff’s claim—and has done so in circumstances
nearly identical to those here. In East Coast Repair & Fabrication, LLC v. United States
ex rel. Department of the Navy, 16 F.4th 87, 90 (4th Cir. 2021), this Court held that it could
dismiss a case based on res judicata, without considering its subject-matter jurisdiction,
even though its res judicata holding required it to interpret a settlement agreement and
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associated contract setoff provision relevant to the merits. Id. at 91 (“The $473,600 setoff
clearly ‘relates’ to the Tempest contract because the Navy withheld that amount as
liquidated damages on the Tempest contract.”). No discernible standard separates
circumstances when the merits are “inextricably intertwined” from those that the Supreme
Court, and this Court, have long blessed as appropriately disentangled.
While I disagree with the majority’s path to addressing ripeness, I agree that we
must do so before transferring this case under §1404(a). That is because the text of
§ 1404(a) demands that we transfer only to a court that would have subject-matter
jurisdiction. And that statutory command requires us to consider whether the claims are
ripe. So in the end I agree with the majority that we must consider ripeness; I just find that
obligation in § 1404(a)’s statutory limitations.
The statute provides that without the parties’ consent to a transfer, a district court
may only “transfer any civil action to any other district or division where it might have
been brought.” § 1404(a) (emphasis added). And because claims cannot be brought
without subject-matter jurisdiction, a transferee court must have subject-matter jurisdiction
over the claim. Hoffman v. Blaski, 363 U.S. 335, 341–43 (1960); see Wright & Miller,
Federal Practice & Procedure § 3845 (noting that § 1404(a) requires the transferee court to
have subject-matter jurisdiction). Thus, we cannot instruct the district court to transfer this
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case to the Southern District of New York without first considering whether the case is ripe
for the Southern District of New York to hear. ∗
Steel Co. and its progeny have spun a web of confusion around the issues a court
can decide and when. But we need not add to its complexity. Straightforward application
of § 1404(a) already requires us to consider ripeness here. Once there, I agree with the
majority that the claims are ripe and should be transferred.
∗ Although some have argued that transfer under § 1404(a) also requires the transferor court to first ensure its own subject-matter jurisdiction, we need not reach that question here. See Wright & Miller, supra, at n.19 and accompanying text. When the jurisdictional challenge relates to justiciability, there is no difference between the transferor and transferee’s subject-matter jurisdiction because the jurisdiction of both courts arises from Article III. 24