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Dumont v. Pepsico, Inc.

United States District Court, D. Maine

June 29, 2016

FREDERICK J. DUMONT, Plaintiff,
v.
PEPSICO, INCORPORATED and PEPSICO ADMINISTRATION COMMITTEE, Defendants.

          ORDER ON DEFENDANTS’ MOTION TO DISMISS OR TRANSFER VENUE

          Nancy Torresen United States Chief District Judge

         Before the Court is the Defendants’ motion to dismiss the Plaintiff’s Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), or alternatively, to transfer the action to the United States District Court for the Southern District of New York pursuant to 28 U.S.C. § 1404(a) (ECF No. 6). For the reasons stated below, the motion is DENIED.

         BACKGROUND[1]

         The Plaintiff in this action is Frederick Dumont, a retiree living in Fairfield, Maine. Compl. ¶¶ 1, 15 (ECF No. 1). The Defendants are PepsiCo, Inc. (“PepsiCo”), a North Carolina corporation authorized to do business in Maine, and the PepsiCo Administrative Committee, which administers the PepsiCo Hourly Employees Retirement Plan (“Hourly Plan”) and the PepsiCo Salaried Employees Retirement Plan (“Salaried Plan”) (together, the “Plans”). Compl. ¶¶ 2-3. This action arises from a dispute regarding the amount of benefits Dumont is owed under the Plans.

         Dumont began working for Seltzer & Rydholm, Inc. in 1979. Compl. ¶ 11. Pepsi Bottling Group, Inc. purchased Seltzer & Rydholm, Inc. in 2004, and, in 2010, PepsiCo acquired Pepsi Bottling Group, Inc. Compl. ¶¶ 12, 14. For the first twenty-seven years and seven months of his employment Dumont worked as a salaried employee, and for approximately the final six years of his employment he worked as an hourly employee. Compl. ¶¶ 11-15. Dumont participated in both the Hourly and Salaried Plans. Compl. ¶ 7. Although the Plans are not in the record, documents attached to the Complaint repeatedly refer to the vested status of his benefits. E.g., Pension Benefit Modeling Statement 4 (ECF No. 1-5) (“Vesting Percentage: 100%”); Apr. 4, 2013 Employer Benefits Statement 1 (ECF No. 1-8) (“Full Vesting Date 12/01/1984”).

         In 2010, PepsiCo made changes to the Plans. One of these changes was the addition of a forum selection clause. Oct. 1, 2015 Ryan Aff. ¶¶ 3, 5 (“Ryan Aff.”) (ECF No. 6-1). The new forum selection clause in each of the Plans reads as follows:

Any claim or action filed in court or any other tribunal in connection with the Plan by or on behalf of a Petitioner[2] . . . shall only be brought or filed in the United State District Court for the Southern District of New York, effective for claims and actions filed on or after January 1, 2011 . . . .

         Ryan Aff ¶ 3. PepsiCo distributed notice of this change to participants in December of 2010. Ryan Aff. ¶ 5. Plaintiff retired from PepsiCo after May 31, 2013. Compl. ¶ 27. He now disputes the calculation of his retirement benefits under the Plans.

         LEGAL STANDARD

         In Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas, the Supreme Court clarified the appropriate procedural vehicle and standard for enforcement of a “valid” forum selection clause. 134 S.Ct. 568, 581-83 (2013). Where the plaintiff has brought a case in a venue that is considered proper under the general venue statute (28 U.S.C. § 1391) or a more specific statutory venue provision such as that found in the Employee Retirement Income Security Act (“ERISA”) (29 U.S.C. § 1132(e)(2)), “ ‘federal law, specifically 28 U.S.C. § 1404(a), governs the District Court’s decision whether to give effect to the parties’ forum-selection clause.’ ” Atl. Marine, 134 S.Ct. at 579 (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 32 (1988)).

         Under 28 U.S.C. § 1404(a), “[f]or 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.” A motion to transfer venue under § 1404(a) “calls on the district court to weigh in the balance a number of case-specific factors.”[3]Stewart Org., 487 U.S. at 29. “When the parties have agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the forum specified in that clause.” Atl. Marine, 134 S.Ct. at 581. “[W]hen a plaintiff agrees by contract to bring suit only in a specified forum-presumably in exchange for other binding promises by the defendant-the plaintiff has effectively exercised its ‘venue privilege’ before a dispute arises.” Id. at 582. “When parties agree to a forum selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves . . . .” Id.

         DISCUSSION

         The issue raised by the Defendants’ motion is whether the Plans’ forum selection clauses are enforceable against Dumont. Neither the United States Supreme Court nor the First Circuit has yet addressed whether forum selection clauses that channel participants challenging their ERISA benefit determinations to a single, plan-chosen forum are permissible.[4] One appellate court (through a divided panel) has held that forum selection clauses are enforceable in ERISA-governed plans. Smith v. Aegon Cos. Pension Plan, 769 F.3d 922, 932-33 (6th Cir. 2014). The majority of district courts to address the issue have likewise held that forum selection clauses are permissible in the ERISA plan context. See, e.g., Malagoli v. AXA Equitable Life Ins. Co., No. 14-cv-7180, 2016 WL 1181708, at *2 (S.D.N.Y. Mar. 24, 2016); Turner v. Sedgwick Claims Mgmt. Servs., Inc., No. 7:14-cv-1244, 2015 WL 225495, at *21 (N.D. Ala. Jan. 16, 2015); Vega v. Carondelet Health Network, No. cv- 12-617, 2013 WL 784365, at *3 (D. Ariz. Feb. 5, 2013); Conte v. Ascension Health, No. 11-12074, 2011 WL 4506623, at *4 (E.D. Mich. Sept. 28, 2011); Rodriguez v. PepsiCo Long Term Disability Plan, 716 F.Supp.2d 855, 862 (N.D. Cal. 2010); Sneed v. Wellmark Blue Cross & Blue Shield of Iowa, No. 1:07-cv-292, 2008 WL 1929985, at *3 (E.D. Tenn. Apr. 30, 2008); Klotz v. Xerox Corp., 519 F.Supp.2d 430, 437-38 (S.D.N.Y. 2007); Schoemann ex rel Schoemann v. Excellus Health Plan, Inc., 447 F.Supp.2d 1000, 1007 (D. Minn. 2006); Bernikow v. Xerox Corp. Long-Term Disability Income Plan, No. cv-06-2612, 2006 WL 2536590, at *2 (C.D. Cal. Aug. 29, 2006). Two district courts have held that forum selection clauses are not enforceable against ERISA plan participants. See Coleman v. Supervalu, Inc. Short Term Disability Program, 920 F.Supp.2d 901, 909 (N.D. Ill. 2013); Nicolas v. MCI Health & Welfare Plan No. 501, 453 F.Supp.2d 972, 974 (E.D. Tex. 2006).

         I. The Evolution of Forum Selection Clause Jurisprudence

         Courts have long recognized that plaintiffs hold a “ ‘venue privilege.’ ” E.g., Atl. Marine, 134 S.Ct. at 581 (quoting Van Dusen v. Barrack, 376 U.S. 612, 635 (1964)). This is the unremarkable proposition that a plaintiff gets to choose-consistent with jurisdictional and venue limitations-where to bring suit.

But when a plaintiff agrees by contract to bring suit only in a specified forum-presumably in exchange for other binding promises by the defendant-the plaintiff has effectively exercised its “venue privilege” before a dispute arises. Only that initial choice deserves deference, and the plaintiff must bear the burden of showing why the court should not transfer the case to the forum to which the parties agreed.

Id. at 582.

         Historically, courts have disfavored forum selection clauses. However, M/S Bremen v. Zapata Off-Shore Co. marked a sea change in how courts treat them. 407 U.S. 1 (1972). In Bremen, the Supreme Court held that a freely-negotiated forum selection clause between two sophisticated international corporations was enforceable. The Court wrote:

There is strong evidence that the forum clause was a vital part of the agreement, and it would be unrealistic to think that the parties did not conduct their negotiations, including fixing the monetary terms, with the consequences of the forum clause figuring prominently in their calculations.

Id. at 14 (footnote omitted). The presumption of enforceability of forum selection clauses “freely entered into between two competent parties” took hold. Id. (citation and internal quotations omitted). Under Bremen, unless the resisting party could show that the forum selection clause was invalid for such reasons as fraud or overreaching, or that enforcement would be unreasonable, unjust or would contravene a strong public policy, the clause would be enforced. Id. at 15.

         In Carnival Cruise Lines, Inc. v. Shute, the Supreme Court “refine[d] the analysis of The Bremen to account for the realities of form passage contracts.” 499 U.S. 585, 593 (1991). At issue in Shute was a forum selection clause printed on the back of a cruise ship ticket. The Court held that the forum selection clause was enforceable, even though the customer had unequal bargaining power and did not negotiate the terms of the contract. Scrutinizing the clause for “fundamental fairness, ” the Court noted that the customers “conceded that they were given notice of the forum provision and, therefore, presumably retained the option of rejecting the contract with impunity.” Id. at 595.

         Following Shute and Bremen, the First Circuit upheld the enforcement of a forum selection clause “embedded” in a series of consent forms signed by a patient before a medical procedure. Rivera v. Centro Médico de Turabo, Inc., 575 F.3d 10, 12-13 (1st Cir. 2009). While the forum selection clause was a non-negotiated boilerplate provision between parties of unequal bargaining power, the First Circuit reasoned that the patient signed the form days before his procedure and “had the option of going to another hospital.” Id. at 22.

         The Court’s most recent discussion of forum selection clauses is found in Atlantic Marine, where the Court addressed a “valid” forum selection clause and resolved a procedural issue. When a “plaintiff agrees” to a forum selection clause, the Court explained, it has effectively exercised its “venue privilege” and waived its right to challenge the pre-selected forum as inconvenient under 28 U.S.C. § 1404(a). Atl. Marine, 134 S.Ct. at 582.

         An important distinction between the controlling forum selection clause cases and this case is that Mr. Dumont never agreed to the forum selection clauses contained in the Plans. As pled, Mr. Dumont did not play a part in the negotiation of the Plans, he did not sign off on the Plans, and he did not agree to the addition of the forum selection clauses in 2010.[5] Although he was sent notice of modifications to the Plans, including the forum selection clauses, he was not notified about the modifications at a time when he could do anything about it. He was 31 years into his career at the time the forum selection clauses were added, and his retirement benefits had already vested. He could not have simply chosen to work for another employer, the way the plaintiffs in the cases above could have chosen another cruise line, a different hospital, or a new corporate business partner.

         Bremen, Shute, and Atlantic Marine, all of which focus on an agreement between the parties, do not fit the situation before me. The Defendants lean heavily on cases from outside of this District and Circuit that have held that forum selection clauses in ERISA plans can be enforced against plan participants. Turning to those authorities, a few patterns appear.

         First, some of the decisions cited by the Defendants simply applied the Bremen/Shute/Atlantic Marine presumption of validity without really analyzing whether or why a party that has not agreed to the forum selection clause should lose the plaintiff’s venue privilege. E.g., Smith, 769 F.3d at 930; Haughton v. Plan Adm’r of Xerox Corp. Ret. Income Guarantee Plan, 2 F.Supp. 3d 928, 933 (W.D. La. 2014); Price v. PBG Hourly Pension Plan, 921 F.Supp.2d 764, 770 (E.D. Mich. 2013); Vega, 2013 WL 784365, at *3; Scaglione v. Pepsi-Cola Metro. Bottling Co. Inc., 884 F.Supp.2d 642, 643 (N.D. Ohio 2012); Rodriguez, 716 F.Supp.2d at 857-58; Williams v. CIGNA Corp., No. 5:10-cv-00155, 2010 WL 5147257, at *4 (W.D. Ky. Dec. 13, 2010); Klotz, 519 F.Supp.2d at 433-34; Rogal v. Skilstaf, Inc., 446 F.Supp.2d 334, 338 n.3 (E.D. Pa. 2006).[6]

         Some of the cases cited by the Defendants acknowledged that the plaintiffs before them had not agreed to the forum selection clauses, but found it sufficient that they, as ERISA participants, had knowledge of the term. E.g., Loeffelholtz v. Ascension Health, Inc., 34 F.Supp. 3d 1187, 1191-92 (M.D. Fla. 2014); Smith v. Aegon USA, LLC, 770 F.Supp.2d 809, 811-12 (W.D. Va. 2011); Testa v. Becker, No. cv-10-638, 2010 WL 1644883, at *6-7 (C.D. Cal. Apr. 22, 2010). And a couple of courts held that it was not even essential for the participant to have knowledge of the forum selection clause, as long as the employer that negotiated the plan had notice. See Angel Jet Serv., LLC v. Red Dot Bldg. Sys.’ Emp. Benefit Plan, No. cv-09-2123, 2010 WL 481420, at *2 (D. Ariz. Feb. 8, 2010); Laasko v. Xerox Corp., 566 F.Supp.2d 1018, 1024 (C.D. Cal. 2008). In Schoemann ex rel. Schoemann v. Excellus Health Plan, Inc., 447 F.Supp.2d 1000 (D. Minn. 2006), the court stated:

When a plaintiff sues a defendant, and the defendant seeks to enforce a forum-selection clause that was negotiated between the plaintiff and the defendant, it makes sense to refer to the forum selection clause as reflecting the “preference” of the parties for the venue identified in the clause. But when, as here, the contract was negotiated between a plan administrator and an employer, the forum-selection clause obviously does not reflect any “preference” of the beneficiaries. Indeed, it is likely that a typical beneficiary does not even know that the forum-selection clause exists. Perhaps, then, a forum-selection clause in an ERISA plan should be entitled to less weight than other forum-selection clauses when parties move to transfer under § 1404(a). But the Schoemanns go 14-cv-7180, 2016 WL 1181708, at *2 (S.D.N.Y. Mar. 24, 2016) (alternation in original) (internal quotations and citation omitted) (“Malagoli contracted with AXA in 2003 to allow[ ] [him] to receive retirement benefits while . . . [continuing] to receive commissions, fees . . ., and additional compensation.”); Mroch v. Sedgwick Claims Mgmt. Servs., Inc., No. 14-cv-4087, 2014 WL 7005003, at *2 (N.D. Ill.Dec. 10, 2014) (“The forum selection clause was established within Ascension’s LTD plan contract and was clearly stated and agreed to when Plaintiff began working for Alexian Brothers.”); Bernikow v. Xerox Corp. Long-Term Disability Income Plan, No. cv-06-2612, 2006 WL 2536590, at *2 (C.D. Cal. Aug. 29, ...

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