UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY
July 14, 2009
MARINA BAY TOWERS URBAN RENEWAL II, L.P., PLAINTIFF,
CITY OF NORTH WILDWOOD, DEFENDANT.
The opinion of the court was delivered by: Hillman, District Judge
Now before the Court are plaintiff's two motions to remand this breach of contract and civil rights matter to state court. For the reasons expressed below, plaintiff's first motion will be denied without prejudice, and plaintiff's second motion will be continued for 30 days pending supplemental briefing.
Plaintiff, Marina Bay Towers Urban Renewal II, L.P. ("Marina Bay II"), filed a complaint against defendant, City of North Wildwood (the "City") in New Jersey state court, claiming that the City breached an agreement concerning the development of low income housing. Specifically, plaintiff, by assignment, had an agreement with the City to develop senior citizen housing pursuant to New Jersey's Long Term Tax Exemption Law, N.J.S.A. 40A:20-1 et seq., whereby in lieu of real property taxes, plaintiff was to pay "an annual service charge for municipal services equal to 7% of the per annum gross revenue actually collected as rents on senior units." Plaintiff claims that the City has breached this agreement by treating the service charge as real property tax despite the agreement's explicit exemption from taxes. Plaintiff also claims that the City's actions concerning the agreement violated its substantive due process and equal protection rights.
After some not-insubstantial proceedings in the state court*fn1 , the City removed plaintiff's case to this Court pursuant to federal question jurisdiction, 28 U.S.C. § 1331, with supplemental jurisdiction pursuant to 28 U.S.C. § 1367 for plaintiff's state law claims. Plaintiff has moved to remand its case to state court, arguing that (1) the City's removal was untimely, and (2) the forum selection clause in the agreement mandates that New Jersey state court is the forum to hear any claims arising out of the agreement.*fn2 The City counters that it timely filed its notice of removal. It also argues that the forum selection clause was not intended to bar its right to have federal civil rights claims heard in federal court.
Removal of a case from state to federal court is governed by 28 U.S.C. § 1441. Section 1441 is to be strictly construed against removal. Samuel-Bassett v. KIA Motors America, Inc., 357 F.3d 392, 396 (3d Cir. 2004) (citing Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990)). This policy "'has always been rigorously enforced by the courts.'" Id. (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938)). Parties may not confer subject matter jurisdiction by consent, Samuel-Bassett, 357 F.3d at 396, and "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded," 28 U.S.C. § 1447(c).
Plaintiff asserts two bases for remand: (1) untimely filing of the notice of removal, and (2) the forum selection clause in the parties' agreement. With regard to the time to file a notice of removal, 28 U.S.C. § 1446(b) provides that a notice of removal "shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading . . . ." Plaintiff contends that the City did not file its notice of removal within the 30-day window because it hand delivered copies of the complaint to the City's counsel on December 9, 2008, thus causing the 30-day time limit to expire on January 8, 2009, and the City did not file its notice of removal until January 27, 2009. The 30-day window does not begin, however, when a defendant's attorney simply receives a courtesy copy. See Murphy Bros., Inc. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 354 (1999) (finding that the 30-day window does not begin until formal service is effected onto defendant, or until there is a waiver of service); Tucci v. Hartford Financial Services Group, Inc., 600 F. Supp. 2d 630, 634-35 (D.N.J. 2009) (discussing Murphy). The City states, and plaintiff does not contest, that when it filed its notice of removal, the complaint had not yet been formally served onto the City.*fn3 Consequently, plaintiff's argument that the 30-day clock for removal began when the City's attorneys received a courtesy copy of the complaint cannot serve as a basis for remand.*fn4
With regard to the forum selection clause, the agreement entered between the parties provides:
19. Jurisdiction and Venue. The parties agree that all disputes arising under this Agreement shall be resolved in the Superior Court of New Jersey, Cape May County.
(Ex. A. to Verified Compl.) Plaintiff argues that the City's removal of its case was improper because the parties contracted to resolve their disputes in the Superior Court of New Jersey, Cape May County. The City contends that the forum selection clause was not intended to encompass federal civil rights claims, which the City also argues do not arise out of the agreement. Plaintiff counters that its civil rights claims do arise out of a dispute with the agreement, and that the City's intent with regard to its interpretation of the scope of the forum selection clause is immaterial.
The Third Circuit has affirmed that a forum selection clause may waive a defendant's right to remove an action to federal court.*fn5 Foster v. Chesapeake Ins. Co., Ltd., 933 F.2d 1207, 1216 (3d Cir. 1991), cert. denied, 502 U.S. 908 (1991). Forum selection clauses are "prima facie valid and should be enforced unless enforcement is shown by the resisting party to be 'unreasonable' under the circumstances." Id. (quoting Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972)). A forum selection clause is "unreasonable" where the defendant can make a "strong showing," either that the forum selected is "so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court," or that the clause was procured through "fraud or overreaching." Id. Further, a "contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision." Bremen, 407 U.S. at 15.
Here, the validity of the forum selection clause does not immediately turn on the City's intent or whether plaintiff's claims arise out of the agreement. Instead, the primary issue is whether the forum selection clause is a contravention of public policy as declared by statute. Although not specifically argued by the City as a basis against remand, in the certification of William J. Kaufman, Esq. in support of the City's opposition, Mr. Kaufman states that the forum selection clause, which was added by him to the agreement in lieu of an arbitration provision, may be invalid because the New Jersey Long Term Tax Exemption Act specifies that agreements under the Act must include an arbitration provision. (Def. Opp. Ex. 4, Cert. of William J. Kaufman, ¶¶ 8-9.) Specifically, the Act provides,
Every approved project shall be evidenced by a financial agreement between the municipality and the urban renewal entity. The agreement shall be prepared by the entity and submitted as a separate part of its application for project approval. . . . The financial agreement shall be in the form of a contract requiring full performance within 30 years from the date of completion of the project, and shall include the following: . . .
f. That in the event of any dispute between the parties matters in controversy shall be resolved by arbitration in the manner provided in the financial agreement.
N.J.S.A. 40A:20-9. Based on this provision, Mr. Kaufman opines that any forum selection clause directing that disputes arising out of the agreement must be heard in a court of law, rather than through arbitration, is invalid pursuant to the Act.
In its reply, plaintiff notes that the City made a "passing allusion" to the validity of the forum selection clause on this basis. Plaintiff argues that this issue does not support a denial of remand, but instead constitutes a challenge to the validity of the agreement, which would cause the dispute to arise under the agreement, and therefore require its adjudication in state court.
Neither the City's off-hand challenge to the forum selection clause based on the Long Term Tax Exemption Act, and plaintiff's argument against that challenge, are sufficient to address what is a dispositive issue to not only plaintiff's motion to remand, but also to its ability to prosecute its case at all. The Court's analysis of this issue, in conjunction with the contemplation of the parties' arguments concerning the forum selection clause, raises two possible outcomes, both of which result in the case not being heard in this forum and neither of which have been fully briefed by the parties.
First, if the Court were to find that the forum selection clause is invalid because the parties are required by N.J.S.A. 40A:20-9(f) to arbitrate all their claims,*fn6 the Court must dismiss plaintiff's case, because neither this Court nor the state court is the appropriate forum.
Second, the Court would be required to remand the action if the Court were to find that the Act's arbitration requirement and the forum selection clause are not mutually exclusive. Even if we assume that federal civil rights claims are not "matters in controversy" over the financial agreement and therefore not subject to arbitration, the forum of the state court to hear those civil rights claims would still be proper. Despite the City's argument that it did not intend to waive its right to have federal civil rights claims heard in federal court, civil rights claims based on federal law can be brought and heard in state court. Tafflin v. Levitt, 493 U.S. 455, 458-459 (1990) ("Under this system of dual sovereignty, we have consistently held that state courts have inherent authority . . . to adjudicate claims arising under the laws of the United States."). Further, state courts are "presumptively competent" to hear such claims. Id. Therefore, even though the City would now prefer to have plaintiff's civil rights claims heard in federal court, its preference is not a "right," and if such disputes "arise under" the agreement, as they appear to do, the parties have contracted to hear those claims in state court.*fn7
In short, at this stage there is very little to suggest that this Court is the proper venue to hear this case and may indeed lack jurisdiction. First, state law, which provides the impetus and foundation for the agreement in the first instance, appears to require arbitration of disputes of this kind. Second, to the extent any remaining claims are justiciable in court, the parties expressed a clear desire to, and in fact did, litigate such matters in state court. Whether or not mutually exclusive, both fora - arbitration and state court - are competent to hear federal civil rights claims.
Consequently, the Court will deny without prejudice plaintiff's first motion to remand based on the timing of the City's notice of removal (and without prejudice to any other motion asserting a different basis for remand), but reserve decision on plaintiff's second motion pending supplemental briefing by the parties on how or whether N.J.S.A. 40A:20-9(f) affects the agreement's forum selection clause. Following this briefing, the Court will determine whether plaintiff's complaint should be dismissed or remanded.
An appropriate Order will be entered.
NOEL L. HILLMAN, U.S.D.J.