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SSAB Alabama, Inc. v. Kem-Bonds, Inc.

United States District Court, N.D. Illinois, Southern Division.

December 12, 2017

SSAB ALABAMA, INC., Plaintiff,
v.
KEM-BONDS, INC., et al., Defendants.

          ORDER

          WILLIAM H. STEELE UNITED STATES DISTRICT JUDGE.

         This matter comes before the Court on defendant Thyssenkrupp Materials NA, Inc.'s “Motion to Dismiss for Forum Non Conveniens or, in the Alternative, to Transfer Pursuant to 28 U.S.C.A. § 1404(a)” (doc. 36). The Motion has been briefed and is ripe for disposition.

         I. Background.

         Plaintiff, SSAB Alabama, Inc., brought an Amended Complaint (doc. 24) against defendants, Kem-Bond, Inc. and Thyssenkrupp Materials NA, Inc. In summary, that pleading alleges that SSAB purchased a product called EZ-POR (commonly known as “tap-hole sand”) from defendant Kem-Bonds for use in its steel-making process. According to SSAB, this EZ-POR product “catastrophically failed, ” causing SSAB to suffer “significant property loss damages” and “other damages including significant production delays and disruption resulting in lost profits.” (Doc. 24, ¶ 3.) The Amended Complaint further alleges that Kem-Bonds obtained the defective EZ-POR from defendant Thyssenkrupp, which manufactured and/or distributed the product. (Id., ¶ 2.)

         Based on these allegations, SSAB advances state-law causes of action against defendants for breach of contract (Count One), breach of warranty (Count Two), and the Alabama Extended Manufacturer's Liability Doctrine (Count Three). In Count One, SSAB asserts that Kem-Bonds breached its direct contracts with SSAB as set forth in two enumerated purchase orders. SSAB's contract claim against Thyssenkrupp arises from a contract between Thyssenkrupp and Kem-Bonds, on the theory that “SSAB was … a third-party beneficiary of the contract whereby Kem- Bonds acquired the tap-hole sand from” Thyssenkrupp. (Doc. 24, ¶ 10.) The Amended Complaint alleges that Thyssenkrupp breached its contract with Kem-Bonds by (i) failing to provide industry standard tap-hole sand, (ii) failing to perform chemical analysis and testing of the product prior to its delivery to SSAB, and (iii) failing to notify SSAB that a different supplier was being used for the tap-hole sand. In Count Two, SSAB alleges that (i) Kem-Bonds breached express warranties to SSAB set forth in the purchase orders, as well as implied warranties of merchantability and fitness for a particular purpose; and (ii) Thyssenkrupp breached implied warranties to SSAB, including implied warranties of merchantability and fitness for a particular purpose. And Count Three is a claim of products liability under the AEMLD against both defendants for selling and/or manufacturing EZ-POR that was in a defective condition and unreasonably dangerous to SSAB as the ultimate user or consumer.

         Of critical importance to the pending Motion to Dismiss or Transfer is a forum-selection clause found in the pre-printed form contract between Thyssenkrupp and Kem-Bonds (the “TK Contract”) for the subject EZ-POR product.[1] That provision states, in relevant part, as follows:

“The laws of the State of Illinois, excluding its conflict of laws principles, shall govern the interpretation and construction of any contract and the rights and obligations of the parties hereunder. … Any litigation or claims by you against us arising from any contract must be brought by you exclusively in the state or federal courts located in Cook County, Illinois.

(Doc. 36-2, § IX.1 (emphasis added).) In its Motion to Dismiss or Transfer, Thyssenkrupp seeks to enforce Section IX.1 against SSAB, based on SSAB's unequivocal stance that it is a third-party beneficiary of the TK Contract. SSAB opposes the Motion. For its part, defendant Kem-Bonds has elected not to be heard.

         II. Analysis.

         As noted, Section IX.1 of the TK Contract is a forum-selection clause requiring claims against Thyssenkrupp “arising from” that contract to be brought “exclusively in the state or federal courts located in Cook County, Illinois.” Four years ago, the Supreme Court explained in some detail how such clauses are to be construed and enforced by federal courts. In particular, the Court explained that “Section 1404(a) … provides a mechanism for enforcement of forum-selection clauses that point to a particular federal district.” Atlantic Marine Const. Co. v. U.S. Dist. Court for Western Dist. of Texas, 134 S.Ct. 568, 579, 187 L.Ed.2d 487 (2013). By contrast, “the appropriate way to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of forum non conveniens.” Atlantic Marine, 134 S.Ct. at 580.

         Here, the forum-selection clause sought to be enforced designates the proper forum as being state or federal courts in Cook County, Illinois; therefore, Thyssenkrupp has properly framed its Motion in terms of both § 1404(a) and the doctrine of forum non conveniens. Fortunately, the legal standard and analysis are the same in each scenario. See Atlantic Marine, 134 S.Ct. at 580 (“because 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”). Because “enforcement of valid forum-selection clauses, bargained for by the parties, protects their legitimate expectations and furthers vital interests of the justice system, ” the Atlantic Marine Court explained, “a valid forum-selection clause [should be] given controlling weight in all but the most exceptional cases.” 134 S.Ct. at 581 (citations omitted); see also Stiles v. Bankers Healthcare Group, Inc., 637 Fed.Appx. 556, 562 (11th Cir. Jan. 26, 2016) (“Only under extraordinary circumstances unrelated to the convenience of the parties should a court decline to enforce a forum-selection clause.”) (citations and internal quotation marks omitted). “The party seeking to avoid the forum selection clause bears the burden of showing exceptional circumstances, predicated on public interest considerations to justify disturbing the forum selection clause.” McArthur v. Kerzner Int'l Bahamas Ltd., 607 Fed.Appx. 845, 847 (11th Cir. Mar. 30, 2015). A forum-selection clause entails a waiver of the parties' private rights to challenge the preselected forum; therefore, all private-interest factors weigh entirely in favor of that forum, and “a district court may consider arguments about public-interest factors only” by a litigant resisting enforcement of a contractually valid forum-selection clause. Atlantic Marine, 134 S.Ct. at 582.[2] “Because those factors will rarely defeat a transfer motion, the practical result is that forum-selection clauses should control except in unusual cases.” Id.

         Thyssenkrupp's argument in support of its Motion is straightforward. The TK Contract contains a valid forum-selection clause specifying that any claim against Thyssenkrupp arising from that contract must be brought in Cook County, Illinois. SSAB purports to be a third-party beneficiary of the TK Contract. Third-party beneficiaries have routinely been deemed bound by forum-selection clauses contained in the contracts they are seeking to enforce. See, e.g., Stiles, 637 Fed.Appx. at 562 (“A third party is bound by a forum-selection clause where the party's rights are completely derivative of those of the [signing party] - and thus ‘directly related to, if not predicated upon' the interests of the [signing party].”) (citations omitted).[3] And, Thyssenkrupp argues, there are no public policy reasons why the forum-selection clause should not be enforced in this matter.

         In response, SSAB advances a pair of arguments that the forum-selection clause in the TK Contract does not warrant transfer of its claims to Illinois.[4] First, SSAB maintains that its “claims against TK (except, arguably, SSAB's Third Party Beneficiary claim) are not within the scope of the Forum Selection Clause.” (Doc. 42, at 4.) Again, on its face the forum-selection clause in the TK Contract applies to “[a]ny litigation or claims by [Kem-Bonds] against [Thyssenkrupp] arising from any contract.” As a third-party beneficiary, SSAB would be bound by that provision just as Kem-Bonds would be. Evidently, SSAB's position is that its claims against Thyssenkrupp do not arise from the TK Contract. But the “arising from” language telegraphs a broad interpretation. See, e.g., Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151, 1162 (11th Cir. 2009) (choice-of-law provision covering “all disputes arising out of or in connection with” parties' agreement “is clearly meant to be read broadly, ” and reaches claims of negligent/ defective manufacture that are necessarily connected to the agreement). Indeed, “where the dispute occurs as a fairly direct result of the performance of contractual duties …, then the dispute can fairly be said to arise out of or relate to the contract in question.” International Underwriters AG v. Triple I: International Investments, Inc., 533 F.3d 1342, 1348-49 (11th Cir. 2008) (citation omitted); see also Bahamas Sales Associate, LLC v. Byers, 701 F.3d 1335, 1340-41 (11th Cir. 2012) (similar).[5]

         Contrary to SSAB's conclusory assertion, all of plaintiff's claims against Thyssenkrupp occurred “as a fairly direct result of the performance of contractual duties.” After all, the contractual duties that Thyssenkrupp performed were to supply EZ-POR to Kem-Bonds. All of SSAB's claims against Thyssenkrupp flow directly from that activity. In Count One, SSAB alleges that Thyssenkrupp breached the TK Contract by supplying defective tap-hole sand that it had failed to test before delivery. In Count Two, SSAB alleges that Thyssenkrupp breached certain implied warranties by supplying defective tap-hole sand under the TK Contract. And in Count Three, SSAB alleges Thyssenkrupp sold defective, unreasonable dangerous tap-hole sand under the TK Contract, giving rise to an AEMLD claim. Under any reasonable viewing of these claims, they all occur “as a fairly direct result of the performance of contractual duties, ” such that they fit comfortably ...


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