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Idacorp, Inc., An Idaho Corporation v. American Fiber Systems

September 19, 2012


The opinion of the court was delivered by: Edward J. Lodge District Judge United States District Court



Defendant American Fiber Systems, Inc. filed a Motion to Dismiss for Improper Venue, under Rule 12(b)(3) of the Federal Rules of Civil Procedure, or, in the alternative, for a Change of Venue pursuant to 28 U.S.C. § 1404(a). The motion has been fully briefed and the Court has determined oral argument would not assist the decision-making process. The Court will therefore decide the motion without a hearing. For the reasons explained below, the Court will deny the motion.


In February 2007, plaintiff IDACORP, INC. sold another company, IDACOMM, to defendant American Fiber Systems. IDACOMM is an Idaho telecommunications corporation headquartered in Idaho. In connection with this transaction, American Fiber acquired IDACOMMM's offices and employees in Boise, and the company provides telecommunications services to Idaho customers.

In December 2011, nearly five years after the deal closed, IDACORP sued American Fiber in this Court for breach of contract and breach of the implied covenant of good faith and fair dealing. American Fiber responded with the pending motion to dismiss or transfer.


A. Motion to Dismiss

American Fiber moves to dismiss plaintiff's complaint for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3). Under this rule, the Court need not accept the pleadings as true and may consider facts outside the pleadings. Kukje Hwajae Ins. Co. v. M/V Hyundai Liberty, 408 F.3d 1250, 1254 (9th Cir. 2005).

American Fiber argues that dismissal is proper because the parties' stock purchase agreement contains a forum-selection clause, which requires any litigation to take place in New York. The agreement also contains a choice-of-law clause, indicating that it shall be "governed by and construed in accordance with" New York law.

Preliminarily, federal law governs in determining whether the forum-selection clause is enforceable -- despite the existence of the New York choice-of-law provision. See Jones v. GNC Franchising, 211 F.3d 495, 497 (9th Cir. 2000) (applying federal law to determine enforceability of forum-selection clause, despite Pennsylvania choice-of-law clause) (citing Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 513 (9th Cir.1988)). The Court also observes, however, that New York and federal law regarding the enforceability of forum-selection clauses are substantially the same. See, e.g., In re Betlem, 753 N.Y.S. 2d 632, 633 (App. Div. 2002). So the parties' debate as to which law governs is academic.

At any rate, the federal principles governing the enforceability of forum-selection clauses are enunciated in Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). According to Bremen, a forum-selection clause is prima facie valid and is only set aside if it unreasonable. Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 325 (9th Cir. 1996). "A forum selection clause is unreasonable if (1) its incorporation into the contract was the result of fraud, undue influence, or overweening bargaining power; (2) the selected forum is so 'gravely difficult and inconvenient' that the complaining party will 'for all practical purposes be deprived of its day in court'; or (3) enforcement of the clause would contravene the strong public policy of the forum in which the suit is brought." Id. (internal citations omitted).

Here, the Court finds that the forum-selection clause is unenforceable for the third-listed reason -- enforcement of the clause would contravene Idaho public policy. Idaho has a strong public policy againstenforcement of forum-selection clauses, which is articulated in Idaho Code § 29-110. This statute provides that "every stipulation or condition in a contract, by which any party is restricted from enforcing his rights under the contract by the usual proceedings in the ordinary tribunals . . . is void." Idaho Code § 29-110. The Idaho Supreme Court has recognized the state's policy against enforcing forum-selection clauses many times. See, e.g., Cerami--Kote v. Energywave Corp., 773 P.2d 1143, 1147 (Idaho 1989) (forum-selection clause unenforceable because it "violates the public policy expressed in I.C. § 29-110 . . . ."). Similarly, this Court has repeatedly invoked Idaho Code § 29-110 in striking down forum-selection clauses. See, e.g., Spencer v. Capital One Bank, Case No. CV-07-197-S-BLW, 2007 WL 2700405, at *1 (D. Idaho Sept. 11, 2007); Brandt v. ComTrust, Inc., Case No. CV06-166-S-EJL, 2006 WL 2136145, at *3 (D. Idaho July 28, 2006).

American Fiber says the result should be different here because IDACORP is a sophisticated business -- not an individual -- and thus less likely to need the protections of Idaho Code ยง 29-110. Relatedly, American Fiber points out that IDACORPactually negotiatedthe provisions of this ...

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