Header graphic for print
CAFA Law Blog Information, cases and insights regarding the Class Action Fairness Act of 2005

A Forum Selection Clause Must Clearly and Unequivocally Waive the Right To Remove the Action to Federal Court To Remand the Action

Posted in Case Summaries

Zehentbauer Family Land LP v Chesapeake Exploration, LLC, 2016 WL 3903391 (N.D. Ohio July 19, 2016).

A district court in Ohio found that if the forum selection clause does not clearly and unequivocally waive the right to removal, it cannot find that the defendants waived their right to remove the action.

The plaintiffs filed a putative class action in the Columbiana County, Ohio Court of Common Pleas, seeking compensation for damages they and the class members sustained when the defendants allegedly underpaid royalties due under certain oil and gas leases. The plaintiffs alleged that the defendants breached the terms of their oil and gas leases by deducting production and post-production costs from the royalties due to the plaintiffs and by selling their oil products to affiliates at sub-market prices.  The defendants removed the case to the federal court under CAFA.

The plaintiffs moved to remand arguing that the parties agreed to a dispositive forum selection clause in their leases which requires resolution in their agreed-upon court. The defendant Total E&P USA, Inc. (“TEPUSA”) argued that the forum selection clause contained in the agreements did not clearly and unequivocally waive their right to removal and that the matter should remain before the federal court because of CAFA’s preference for federal jurisdiction.  The remaining defendants joined TEPUSA in opposing the motion to remand.

The plaintiffs argued that the defendants waived their right to removal by signing leases that contained a forum selection clause. Specifically, the plaintiffs argued that the defendants expressly agreed to be bound by the state court when they signed leases which provided that any and all disputes must be resolved in a common pleas court located solely in the State of Ohio.

The plaintiffs relied on Atlantic Marine Construction Co. v. U.S. Dist. Court of Western Dist. Of Texas, 134 S.Ct. 568 (2013) arguing that a forum selection clause can only be overcome with proof of extraordinary circumstances for proceeding in any forum other than the one in the parties contracted for venue provision.  The District Court found that this reliance was misplaced as Atlantic Marine held that when parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witness, or for the pursuit of the litigation.  The District Court observed that this case does not concern the right to transfer, rather, the defendants sought removal because the parties were entirely diverse and there was a statutory preference for class actions to be presented in federal court.

The plaintiffs cited to only one removal case, Power Mktg. Direct Inc. v. Moy, 2008 WL 4849289 (S.D. Ohio Nov. 6, 2008), where the court held that when a forum selection clause specifically states only one court as the contracted for venue, then this should be construed as a waiver of the right to removal.  The District Court, however, found that this decision, predated the mandatory, binding authority Cadle Co. v. Reiner, Reiner, & Benedett, P.C., 307 Fed. Appx. 884 (6th Cir. 2009), where the Sixth Circuit held that forum selection clause must explicitly mention removal or the party seeking removal in order to be a clear waiver of the right to remove.

The District Court found that Cadle’s binding jurisprudence analyzes a forum selection clause nearly identical, at least linguistically, to that now before the District Court.  Because the Sixth Circuit found that this language did not explicitly waive the right to removal, the District Court concluded that the defendants did not waive their right to removal.

Accordingly, the District Court denied the plaintiffs’ motion to remand.

Published by – John T. Rouse