Diversified Striping Systems, Inc. v. Joe Kraus

¶1 Diversified Striping Stystems, Inc. (Diversified) appeals the

district court's dismissal of its tort claims against Joe Kraus; FLJ,

LLC; and National Striping (collectively, Kraus) on grounds of

forum non conveniens. We reverse and remand for additional

findings.

¶2 On March 2, 2012, Diversified filed a complaint against

Kraus in Utah's Third District Court, alleging fraud, tortious

interference with existing or prospective economic advantage, and

Diversified v. Kraus

defamation. On July 30, 2012, Kraus filed a motion to dismiss based

on lack of personal jurisdiction. On October 25, 2012, National

Striping filed a complaint against Diversified in Nevada, alleging

conversion and seeking declaratory relief. National Striping's

claims arose from the same events as Diversified's claims in the

Utah case. Diversified moved to dismiss the Nevada case, and the

Nevada court stayed the case "pending the outcome of the Utah

case.”

¶3 The Utah Third District Court held a hearing on Kraus's

motion to dismiss on March 25, 2013. At the hearing, Kraus orally

moved to dismiss the case on forum non conveniens grounds as an

alternative to dismissing it on personal jurisdiction grounds. The

court indicated that it would not entertain the motion at that time

but that Kraus could brief it later.

¶4 Although neither party took any further action, on April 24,

2013, the district court issued a memorandum decision and order

determining that Utah had jurisdiction to hear the case1 but

declining jurisdiction on forum non conveniens grounds. It also

acknowledged the existence of a forum selection clause in a written

agreement between the parties but determined that the clause did

not apply to Diversified's tort claims. Diversified appeals that

decision.

¶5 Diversified first argues that the district court erred in

determining that the forum selection clause in the parties' agree-

1. In addition to the other arguments addressed in this decision,

Diversified argues that the court erred by dismissing the case

because Kraus submitted to personal jurisdiction in Utah.

However, because the district court determined that Utah has

personal jurisdiction over Kraus under Utah's long-arm statute,

this argument is moot. See generally Ellis v. Swensen, 2000 UT 101,

¶ 25, 16 P.3d 1233 ("A case is deemed moot when the requested

judicial relief cannot affect the rights of the litigants.” (citation and

internal quotation marks omitted)).

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Diversified v. Kraus

ment did not apply to Diversified's tort claims. "The trial court's

interpretation of the forum selection clause is a question of law that

we review for correctness.” Energy Claims Ltd. v. Catalyst Inv. Group

Ltd. (Energy Claims I), 2012 UT App 32, ¶ 22, 275 P.3d 257, rev'd on

other grounds, 2014 UT 13, 325 P.3d 70.

¶6 Diversified asserts that, consistent with Energy Claims Ltd. v.

Catalyst Investment Group Ltd. (Energy Claims II), 2014 UT 13, 325

P.3d 70, we should interpret the forum selection clause broadly.

However, the forum selection clause in Energy Claims II governed

"any dispute, controversy or claim that is related to the parties'

contract.” Id. ¶ 45 (internal quotation marks omitted). It was

therefore much broader than the one in this case, which applied

only to "action[s] or proceeding[s] seeking to interpret or enforce

the provisions” of the parties' agreement. The tort claims brought

by Diversified do not seek to interpret or enforce the provisions of

the parties' agreement. Thus, the forum selection clause does not

apply to Diversified's tort claims.

¶7 Diversified next asserts that the district court employed the

wrong legal standard in dismissing its case on forum non

conveniens grounds. "We review a dismissal on forum non

conveniens grounds for an abuse of discretion.” Id. ¶ 27. "While

this standard is highly deferential, it requires us to reverse when a

lower court fails to follow the governing legal standards.” Id.

(citation and internal quotation marks omitted).

¶8 Evaluating a motion to dismiss on the grounds of forum non

conveniens involves several analytical steps. The first step requires

the court to "determine whether the plaintiff's choice of forum is

entitled to deference.”2 Id. ¶ 26. The second step requires the court

2. Generally, "a plaintiff's choice of forum is entitled to deference

when the plaintiff has brought suit in its home jurisdiction.” Energy

Claims II, 2014 UT 13, ¶ 30, 325 P.3d 70. Nevertheless, the crux of

(continued...)

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Diversified v. Kraus

to "determine whether an adequate alternative forum exists.” Id.

(citation and internal quotation marks omitted). If there is an

adequate alterative forum, then the court must analyze and weigh

the factors set forth in Summa Corp. v. Lancer Industries, Inc., 559

P.2d 544 (Utah 1977). Energy Claims II, 2014 UT 13, ¶ 35. These

factors include (1) "'the location of the primary parties'”; (2) the

place "'where the fact situation creating the controversy arose'”; (3)

"'the ease of access to proof, including the availability and costs of

obtaining witnesses'”; (4) "'the enforceability of any judgment that

may be obtained'”; (5) "'the burdens that may be imposed upon the

court in question in litigating matters which may not be of local

concern'” ; (6) "the practical 3 burden plaintiffs will face in filing a

new action after dismissal for forum non conveniens”; and (7) any

other "relevant considerations.” Id. ¶¶ 36–37 (quoting Summa, 559

P.2d at 546).

¶9 Rather than undertaking this multi-step inquiry, the district

court appears to have merged its forum non conveniens analysis

with its personal jurisdiction analysis, considering the relevant

forum non conveniens factors only generally. Although many of

the court's findings were relevant to the forum non conveniens

analysis—such as that the events precipitating the lawsuit occurred

in Nevada and California, that the issues implicated Nevada law,

and that Diversified would have no trouble pursuing its claims in

Nevada because a suit had already been initiated there—the court's

analysis of the forum non conveniens issue was incomplete. Most

2. (...continued)

the analysis is whether the plaintiff's forum choice "was motivated

by legitimate reasons” as opposed to "tactical advantage.” Iragorri

v. United Tech. Corp., 274 F.3d 65, 73 (2d Cir. 2001) (en banc), cited

with approval in Energy Claims II, 2014 UT 13, ¶¶ 31–33.

3. Although the burden imposed on the court remains a relevant

consideration, it "carries little weight” where it has been

determined that the plaintiff's choice of forum was made "for

legally legitimate reasons.” Energy Claims II, 2014 UT 13, ¶ 40.

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notably, the court did not determine the degree to which Diversified's

choice of forum was entitled to deference. Instead, the court

recognized "a presumption for the plaintiff,” but suggested that

such a presumption exists "primarily because dismissal forces the

plaintiff to initiate the suit anew in another state” and concluded

that because a suit had already been initiated in Nevada, that

concern was alleviated.

¶10 Our supreme court recently addressed the issue of deference

in Energy Claims II. The court explained that the degree of deference

a plaintiff should be afforded in its choice of forum depends

on whether the plaintiff is "motivated by legitimate reasons” in

selecting the forum. Id. ¶¶ 32–33. Because the district court

declined to grant deference to Diversified's choice of forum based

on its determination that Diversified could pursue its claims in an

alternative forum rather than on a determination that Diversified's

motives were illegitimate, the court employed the wrong legal

standard. We therefore find it necessary to reverse the district

court's ruling and remand the case for the district court to consider

the degree of deference that should be afforded to Diversified's

choice of forum.

¶11 On remand, the district court should also fully analyze the

other factors relevant to the forum non conveniens analysis.

Because the district court ruled on the forum non conveniens issue

without permitting the parties to fully brief and argue it, see supra

¶ __, the court does not appear to have had the opportunity to

consider all facts relevant to the forum non conveniens issue, and

its order, addressing only some, but not all, of the Summa factors,

reflects that. Therefore, on remand, the parties should be given the

opportunity to brief the issue and present the relevant facts at a

hearing, and the district court should conduct the complete threestep

analysis outlined above before ruling on Kraus’s motion to

dismiss the Utah case.