Filed: September 14, 2018
Opinion by: Catherine C. Blake, United States District Judge
Holding:
The United States District Court for the District of Maryland denied Defendant’s motion to dismiss for lack of personal jurisdiction, holding Defendant, Ananda Shipyard & Slipways LTD, subjected itself to the jurisdiction of the state of Maryland when it consented to a valid freely-negotiated forum-selection clause.
Facts:
On January 19, 2012 Ellicott Dredges, LLC (“Ellicott”) and Ananda Shipyard & Slipways LTD (“Ananda”) entered a Joint Venture Agreement to “build and sell dredges, ancillary crafts and accessories to the government of Bangladesh.” In addition, about one year later the parties signed a License Agreement through which Ellicott licensed some of its products to Ananda, complete with mutual non-compete clauses. This License Agreement also stated that all disputes arising under the agreement would be resolved by the federal district court in Baltimore, Maryland:
Notwithstanding what is provided elsewhere in the Contract, disputes regarding the license agreement…will be handled as provided below in this clause 7.6…[Ananda]…hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the (federal) courts of the State of Maryland and of the United States of America (located in the City of Baltimore) for any actions, suits or proceedings arising out of or relating to this clause of this agreement.
The parties’ Joint Venture was successful and, as a result, Ananda entered four different Purchase Orders, governed by the “laws of the State of Maryland.” Further, these Purchase Orders stated Ananda was to secure letters of credit from specific banks. Ellicott alleges that Ananda violated several provisions of these orders, including its obligation to acquire said letters of credit.
As a result of these breaches, in December 2014 the parties entered a Separation Agreement, formally titled, “Amendments to Deed of Agreement dated 19th January, 2012 and License Agreement dated March 15, 2013.” By its own terms, the Separation Agreement was executed “to supplement and/or alter certain provisions of the [Joint Venture Agreement] and License Agreement in order to elucidate the extent and the ambit of relationship between the parties.” Among other things, the Separation Agreement removed the non-compete restrictions on Ellicott’s conduct. The Separation Agreement also stated that the Separation Agreement, “the [Joint Venture Agreement] and the License Agreement and all non-contractual obligations arising from or in connection with the same shall be governed and enforced in accordance with the governing law and enforcement provisions contained in Clause 7.6 of the License Agreement.”
Despite these modifications, Ananda sent Ellicott a demand letter in December 2017 claiming Ellicott violated the non-competition provision of the License Agreement. One month later, Ellicott filed suit seeking a declaratory judgment on the parties’ rights and obligations under the Separation Agreement and claiming Ananda breached its obligations under the Joint Venture Agreement, Purchase orders, and License Agreement, as amended by the Separation Agreement.
Analysis:
The federal court had to determine several interrelated legal issues, including whether it had jurisdiction over the dispute, and whether the forum selection clause in incorporated into the Separation Agreement was constitutionally enforceable. In evaluating the enforceability of this clause, the court had to decide what substantive contract law would apply using Maryland's choice-of-law rules.
(1) Personal Jurisdiction Standard of Review
A court’s assertion of personal jurisdiction over a nonresident defendant must comply with two requirements: (1) the exercise of jurisdiction must be authorized under the state’s long-arm statute; and (2) the exercise of jurisdiction must comport with the due process requirements of the Fourteenth Amendment. Carefirst, 334 F.3d at 396. For purposes of its analysis, the court concluded that Maryland’s long-arm statue is coextensive with the limits of the due process clause. Id.
The due process clause permits parties to waive their challenge to personal jurisdiction by “either implicitly or explicitly” consenting to the court’s jurisdiction. Foster v. Arletty 3 Sarl, 278 F.3d 409, 413 (4th Cir. 2002). Further, a party may consent through a “valid forum selection clause,” which courts have held “is enough to confer personal jurisdiction on a nonresident defendant.” CoStar Realty Information, Inc. v. Field, 612 F. Supp. 2d 660, 668 (D. Md. 2009). Maryland has long enforced freely negotiated forum-selection clauses.
A federal court exercising diversity jurisdiction must apply the substantive law of the state in which it sits, including the state’s choice-of-law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). Under Maryland law, if “the contract contains a choice of law provision,” the court must apply “the law of the specified jurisdiction.” Cunningham, 107 A.3d 1194, 1204 (Md. 2015).
(2) Personal Jurisdiction Standard of Review Applied to Ananda
The relevant contract for this Analysis is the Separation Agreement, which modified the License Agreement, and is therefore the most current expression of the parties’ relationship. The last act required to form the Separation Agreement, the final signature, occurred in Maryland when the agreement was signed by Ellicott’s representative and therefore Maryland law applies. And because the Separation Agreement selected this forum to resolve the parties’ disputes through its incorporation of clause 7.6 of the License Agreement Ananda consented to this court’s jurisdiction.
Ananda has not claimed that the forum selection clause is invalid and unenforceable under Maryland law. Instead, Ananda argues that by its terms the clause only governs “actions…arising out of or relating to” the clause itself. In Ananda’s view, it only consented to the court’s jurisdiction for disputes over the scope of the clause. The court dismisses this argument, explaining, “If the forum selection clause only governs claims arising out of the forum selection clause then the parties agreed to have this court engage in a circular exercise: the court can decide whether it has jurisdiction to decide if it has jurisdiction and so on. That is an absurd reading, unsupported by common sense or the very clause Ananda attempts to interpret.”
The court further highlights that what the parties intended by their forum selection clause is written right above its text: “notwithstanding what is provided elsewhere in the Contract, disputes regarding the license agreement or intellectual property or confidential data will be handled as provided below in this clause 7.6.” And further, Ananda consented to “irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this agreement or the transactions contemplated hereby.”
The full opinion is available in PDF.
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