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Advanced International Marketing, LLC v. LXR Biotech, LLC

United States District Court, W.D. Arkansas, Fayetteville Division

October 23, 2017

ADVANCED INTERNATIONAL MARKETING, LLC PLAINTIFF
v.
LXR BIOTECH, LLC DEFENDANT

          MEMORANDUM OPINION AND ORDER

          Timothy L. Brooks, Judge

         Currently before the Court is Defendant's Motion to Transfer (Doc. 11) and Brief in Support (Doc. 12), and Plaintiff's Response in Opposition (Doc. 14) and Brief in Support (Doc. 15). On September 25, 2017, the Court conducted a hearing and DENIED the Motion to Transfer from the bench. The purpose of this Opinion and Order is to memorialize the bases for the Court's ruling. To the extent anything in this Order differs from what the Court stated from the bench, this Opinion and Order shall control.

         I. BACKGROUND

         Plaintiff Advanced International Marketing, LLC ("AIM") is an Illinois limited liability company with a principal place of business in Algonquin, Illinois. Defendant LXR Biotech, LLC ("LXR") is a Michigan limited liability company with a principal place of business in Auburn Hills, Michigan. AIM is a sales representative company. LXR is a manufacturing company that produces various products including liquid energy shots that are sold in retail and convenience stores.

         On August 5, 2014, the parties entered into an agreement ("Agreement") where they contracted that AIM would serve as LXR's sales representative for all LXR products within AIM'S market territory.[1] The Agreement states that the parties' initial Term of Agreement is five years and that AIM will be compensated based on a Performance Fee. Specifically, LXR contracted to pay AIM five percent of its net sales. Concerning the Walmart account, LXR agreed to pay AIM on sales made to Walmart only for monthly sales in excess of the lower of "net sales dollars shipped to Walmart during the 30 days immediately prior to the execution of this Agreement or the equivalent sales dollars of 300, 000 2.0 oz. bottles of LXR products." (Doc. 1-1, p. 6). Along with commissions, LXR agreed to send AIM commission statements that displayed commission calculations and a list of invoices covered by the commission statement. Id. at 7.

         AIM alleges that it successfully sold LXR's products to both Walmart and Walgreens. Eventually, AIM asserts, LXR stopped paying AIM its due commissions for the Walmart and Walgreens accounts and failed to provide AIM with any commission statements. In February, 2016, LXR unilaterally terminated the Agreement pertaining to the Walmart account. Following the termination, AIM alleges that it sought to cure the failure in performance and recover its earned commissions for the Walmart account. However, LXR did not pay, provide commission statements, or effectively communicate with AIM.

         On May 17, 2017, AIM filed suit in this Court. Principally, AIM alleges that LXR breached its agreement with AIM, breached the implied covenant of good faith and fair dealing, and violated the Arkansas Sales Representative Commission Act ("ASRCA"). On July 28, 2017, LXR filed its answer to AIM'S Complaint; it denied all of AIM'S allegations and asserted a lack of jurisdiction, improper venue, and various affirmative defenses. Along with its answer, LXR also filed a Motion to Transfer (Doc. 11) the case to the U.S. District Court for the Eastern District of Michigan pursuant to 28 U.S.C. § 1404(a). This Motion centers around the Agreement's forum-selection clause. The clause states:

This Agreement shall be construed and governed in accordance with the laws of the State of Michigan and the federal laws of the United States applicable therein, without regard to principles of conflict of law, and any action arising out of this Agreement shall be bought in the courts of Michigan or Federal Court located in the Eastern District of Michigan.

(Doc. 1-1, p. 8). Additionally, LXR argues that AIM "flouted" the Agreement by ignoring the forum-selection clause and filing suit in Arkansas. (Doc. 12, p. 2).

         On August 11, 2017, AIM filed its response opposing LXR's Motion to Transfer (Doc. 14) while admitting that the Agreement contains a forum-selection clause. AIM contends that the forum-selection clause is void due to the application of the ASRCA, which is an Arkansas statute. See Doc. 15, pp. 3-5.

         II. LEGAL STANDARD

         A. Enforceability of the Forum Selection Clause

         Whether a forum-selection clause is valid is a procedural question that is governed by federal law. Bright Harvest Sweet Potato Co., Inc. v. H.J. Heinz Co., LP., 2013 WL 2458685, at *2 (W.D. Ark. June 6, 2013). "When the parties have agreed to a valid forum-selection clause, " the district court should transfer the case to the pre-negotiated jurisdiction. Atl. Marine Const. Co., Inc. v. U.S. Dist. Ct. for the W.D. of Tex., 134 S.Ct. 568, 581 (2013). Only in narrow, "extraordinary circumstances unrelated to the convenience of the parties should a [motion to transfer pursuant to] § 1404(a) be denied." Id.; see also M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972) (forum-selection clauses are prima facie valid, and "the forum clause should control absent a strong showing that it should be set aside"). The Eighth Circuit has reaffirmed this holding. See M.B. Restaurants, Inc. v. CKE Restaurants, Inc., 183 F.3d 750, 752 (8th Cir. 1999) (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 590-95 (1991)) ("[Forum-selection clauses] are enforceable unless they would actually deprive the opposing party of [its] fair day in court."). The party challenging a forum-selection clause bears a "heavy burden of proof when trying to avoid its enforcement. Servewell Plumbing, LLC v. Fed. Ins. Co., 439 F.3d 786, 789 (8th Cir. 2006) (citing Bremen, 407 U.S. at 17).

         B. Appropriateness of ...


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