The Power Authority of the State of New York, ex rel. Solar Liberty Energy Systems, Inc. v. Advanced Energy Industries, Inc.

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
THE POWER AUTHORITY OF THE
STATE OF NEW YORK, ex rel. SOLAR
LIBERTY ENERGY SYSTEMS, INC.,
Plaintiff,
v.
ADVANCED ENERGY INDUSTRIES,
INC.,
Defendant.
19-CV-1542-LJV-JJM
DECISION & ORDER
INTRODUCTION
On October 23, 2018, the plaintiff, the Power Authority of the State of New York
(“Power Authority”), by and through a qui tam relator, Solar Liberty Energy Systems,
Inc. (“Solar Liberty”), filed an amended complaint under the New York False Claims Act
(“NYFCA”) in New York State Supreme Court, Erie County. Docket Item 1-5. On
November 15, 2019, the defendant, Advanced Energy Industries, Inc. (“Advanced
Energy”), removed the action to this Court. Docket Item 1.
On December 6, 2019, Solar Liberty moved to remand. Docket Item 7. A week
later, Advanced Energy moved to dismiss for failure to state a claim, Docket Item 11,
and on January 3, 2020, Solar Liberty cross-moved to amend its complaint, Docket Item
14-2. On October 9, 2020, this Court denied Solar Liberty’s motion to remand and
Advanced Energy’s motion to dismiss and granted Solar Liberty’s motion to amend.
Docket Item 28.
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After Solar Liberty filed a second amended complaint, see Docket Item 30, this
Court referred the matter to United States Magistrate Judge Jeremiah J. McCarthy for
all proceedings under 28 U.S.C. § 636(b)(1)(A) and (B). Docket Items 36, 47.
On February 19, 2021, Advanced Energy moved to transfer venue under 28 U.S.C.
§ 1404(a), arguing that a forum-selection clause in its contract with Solar Liberty
required that this case be transferred to the United States District Court for the District
of Colorado. Docket Item 48. On March 5, 2021, Solar Liberty responded, Docket Item
49, and on March 12, 2021, Advanced Energy replied, Docket Item 50.
On March 23, 2021, Judge McCarthy issued a Decision and Order (“D&O”)
denying the motion to transfer venue. Docket Item 55. Judge McCarthy found that
Advanced Energy had waived its venue objection by “fil[ing] a 12(b)(6) motion [to]
dismiss[]” and “resort[ing] to the forum[-]selection clause[]” in the contract “[o]nly after
that motion was unsuccessful.” Id. at 4. On April 6, 2021, Advanced Energy objected to
the D&O, Docket Item 56; on April 28, 2021, Solar Liberty responded, Docket Item 59;
and on May 12, 2021, Advanced Energy replied, Docket Item 60.
This Court has carefully and thoroughly reviewed the record in this case; the
D&O; the objection, response, and reply; and the materials submitted to Judge
McCarthy. Based on that review, the Court affirms Judge McCarthy’s D&O denying
Advanced Energy’s motion to transfer venue.1
1 The Court assumes familiarity with the facts alleged in the second amended
complaint, Docket Item 30, and Judge McCarthy’s analysis in the D&O, Docket Item 55,
as well as the procedural history of this case.
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STANDARD OF REVIEW
Under Rule 72(a) of the Federal Rules of Civil Procedure, when a party timely
objects to a magistrate judge’s decision on a non-dispositive matter, “the district judge in
the case must . . . modify or set aside any part of the order that is clearly erroneous or is
contrary to law.” Id.; see also 28 U.S.C. § 636(b)(1)(A). “[A] finding is ‘clearly
erroneous’ when although there is evidence to support it, the reviewing court on the
entire evidence is left with the definite and firm conviction that a mistake has been
committed.” Anderson v. Bessemer City, 470 U.S. 564, 573 (1985) (quoting United
States v. U.S. Gypsum Co., 333 U.S. 364, 395 (1948)). A decision is contrary to law
“when it fails to apply or misapplies relevant statutes, case law[,] or rules of procedure.”
Catskill Dev., L.L.C. v. Park Place Entrn’t Corp., 206 F.R.D. 78, 86 (S.D.N.Y. 2002)
(citation omitted). Unlike de novo review for dispositive matters, which is without
deference, see Zervos v. Verizon New York, Inc., 252 F.3d 163, 168 (2d Cir. 2001), the
standard of review for non-dispositive decisions is “highly deferential”: a district court
“may not reject a magistrate judge’s non-dispositive order ‘merely because the [district]
court would have decided the matter differently.’” Davis v. 2191 Niagara Street, LLC,
351 F. Supp. 3d 394, 410 (W.D.N.Y. 2019) (citing Rubin v. Valicenti Advisory Svcs.,
Inc., 471 F. Supp. 2d 329, 333 (W.D.N.Y. 2007)).
DISCUSSION
28 U.S.C. § 1404(a) provides that “[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
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which all parties have consented.” Generally, “a district court considering a [section]
1404(a) motion . . . must evaluate both the convenience of the parties and various
public-interest considerations . . . and decide whether, on balance, a transfer would
serve ‘the convenience of parties and witnesses’ and otherwise promote ‘the interest of
justice.’” Atl. Marine Constr. Co. v. United States Dist. Ct. for Western Dist. of Tex., 571
U.S. 49, 62-63 (2013) (citing 28 U.S.C. § 1404(a)).
“The calculus changes, however, when the parties’ contract contains a valid
forum-selection clause . . . .” Id. at 63. “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. Only under extraordinary circumstances unrelated to the
convenience of the parties should a [section] 1404(a) motion be denied.” Id. at 62.
To determine whether a forum-selection clause is enforceable, courts in this
circuit consider “(1) ‘whether the clause was reasonably communicated to the party
resisting enforcement’; (2) whether the clause is ‘mandatory or permissive’ . . . ; and (3)
‘whether the claims and parties involved in the suit are subject to the forum selection
clause.’” Martinez v. Bloomberg LP, 740 F.3d 211, 217 (2d Cir. 2014) (quoting Phillips
v. Audio Active Ltd., 494 F.3d 378, 383 (2d Cir. 2007)). “If the forum clause was
communicated to the resisting party, has mandatory force[,] and covers the claims and
parties involved in the dispute, it is presumptively enforceable.” Id. (citing Phillips, 494
F.3d at 383). “A party can overcome this presumption only by . . . ‘making a sufficiently
strong showing that enforcement would be unreasonable or unjust, or that the clause
was invalid for such reasons as fraud or overreaching.’” Id. (citing Phillips, 494 F.3d at
383-84 (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972))).
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There is a “strong public policy” in favor of enforcing forum-selection clauses.
Wachovia Bank Nat’l Ass’n v. EnCap Golf Holdings, LLC, 690 F. Supp. 2d 311, 327
(S.D.N.Y. 2010) (quoting Roby v. Corp. of Lloyd’s, 996 F.2d 1353, 1361 (2d Cir. 1993)).
Nevertheless, a court may find that a party has waived a venue objection “when [the]
party takes actions that are inconsistent with it.” See Ferraro Foods, Inc. v. M/V IZZET
INCEKARA, 2001 WL 940562, at *3 (S.D.N.Y. Aug. 20, 2021) (citing cases). “Courts
have found implied waiver of venue where a party has repeatedly represented that
venue is appropriate[] or actively pursued substantive motions.” Id. at *4 (citing Orb
Factory Ltd. v. Design Science Toys, 6 F. Supp. 2d 203, 206-07 (S.D.N.Y. 1998);
Altman v. Liberty Equities Corp., 322 F. Supp. 377, 378) (S.D.N.Y. 1971)). Conversely,
“no waiver has been found where parties merely participated in pretrial motions[ or]
moved to dismiss after discovery has been completed . . . . ” Id. (internal citation
omitted) (citing Sherman v. Moore, 86 F.R.D. 471, 473-74 (S.D.N.Y.1980) (collecting
cases)).
“Whether a party has impliedly waived objections to venue is a fact-intensive
inquiry,” id., and “[t]here is no clear boundary . . . [indicating] what action a party may
take during the pretrial stage and still invoke its venue objection and what conduct on its
part will constitute waiver of that defense,” Krape v. PDK Labs Inc., 194 F.R.D. 82, 86
(S.D.N.Y. 1999) (alterations in original) (citation omitted). For example, the court in
Kasper Global Collection & Brokers, Inc. v. Global Cabinets & Furniture Mfrs. Inc., 952
F. Supp. 2d 542 (S.D.N.Y. 2013), found that the defendants did not waive enforcement
of a forum-selection clause when they did not “assert[] the forum-selection clause as an
affirmative defense in [their] [a]nswer[s]” but “den[ied the p]laintiff’s allegation that venue
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was proper” and sought “enforcement of the forum-selection clause . . . [in] their first
motion to the [c]ourt.” 952 F. Supp. 2d at 567-88. In American Int’l Group Europe S.A.
(Italy) v. Franco Vago Int’l, Inc., 756 F. Supp. 2d 369 (S.D.N.Y. 2010), on the other
hand, the court found that the defendant waived its venue objection when it failed to
assert the forum-selection clause in its answer, “attempt[ed] to implead third-party
defendants[,] and file[d] several affidavits, affirmations, and memoranda of law . . . all
before [] assert[ing] the forum[-]selection clause in its brief in opposition to [the
plaintiff’s] motion for summary judgment.” 756 F. Supp. 2d at 380; see also id. at 380-
81 (“While courts in this district have held that a defendant that files a cross-claim and
impleads a third-party does not necessarily waive its right to subsequently assert a
forum[-]selection clause, those cases invariably involve defendants who referred to the
clause in their answers, or who filed timely pre-answer motions to dismiss on the
grounds of the forum selection clause.”); Mateco, Inc. v. M/V Elli, 103 F. Supp. 2d 70,
72-73 (D.P.R. 2000) (finding waiver when the defendant did not raise the forum-
selection clause as an affirmative defense, participated in discovery for over a year, filed
a counterclaim, and requested that the plaintiffs provide counter security).
The facts here lie between these examples. Advanced Energy did not move to
dismiss the case for improper venue in state court but instead removed the matter to
this Court. See Docket Item 1. In its answer, Advanced Energy asserted the forum-
selection clause as an affirmative defense. See Docket Item 35 at ¶ 73 (“Plaintiff has
violated the terms of the applicable warranty by failing to bring this matter in a federal
court in Denver, Colorado[,] or in state court in Fort Collins, Colorado. As such,
Defendant intends to preserve its argument that Plaintiff has filed its claims in an
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improper venue.”). But that was a defense of improper venue under Federal Rule of
Civil Procedure 12(b)(3), see id., a defense that clearly was waived when Advanced
Energy moved to dismiss under Rule 12(b)(6), see Docket Item 11, without raising it in
that motion, see Fed. R. Civ. P. 12(h)(1)(a). And in that motion, Advanced Energy did
not ask for dismissal or transfer based on the forum-selection clause at all; instead,
Advanced Energy argued only that Solar Liberty had failed to state a viable claim under
the NYFCA. See generally Docket Item 11-1.
The motion to dismiss mentioned in passing that Advanced Energy believed the
case should be litigated in Colorado. See id. at 17. But it did so only in the context of
arguing that this case was a private contract dispute masquerading as a false claims
case.2 Id. (“Solar Liberty incorrectly brought this case under the NYFCA and
purportedly on behalf of the Power Authority in an obvious effort to avoid the agreed-
upon exclusive jurisdiction of Colorado courts pursuant to its contract with Advanced
Energy.”). Similarly, in its response to the motion to remand, Advanced Energy
mentioned venue only in passing and only to support its argument that Solar Energy
had mischaracterized its claims. See Docket Item 13 at 13.
This Court agrees with Advanced Energy that only removing the case—or only
moving to dismiss for failure to state a claim—would not waive its ability to enforce the
forum-selection clause. See Docket Item 56 at 7-8. But that is not what happened
here. Advanced Energy raised the forum-selection clause in an affirmative defense of
2 This Court rejected this argument in its October 9 decision and order denying
the motion to dismiss and finding that Solar Liberty stated a claim under the NYFCA.
Docket Item 28.
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improper venue, but it also filed several documents—including a substantive motion to
dismiss—that did not ask for dismissal on venue grounds or to transfer venue.
Whether all that constituted a waiver is a much closer question. And precisely
because that question is a close one, this Court cannot say that Judge McCarthy’s
finding waiver—after reviewing the relevant law—was clearly erroneous. See Krape,
194 F.R.D. at 86 (explaining that “[t]here is no clear boundary” between pre-trial
behavior that constitutes waiver and behavior that does not). That is especially so
because a court has “broad discretion” to decide a motion to transfer, Phillips v. Reed
Grp., Ltd., 955 F. Supp. 2d 201, 214 (S.D.N.Y. 2013), discretion that rested with Judge
McCarthy here.
Absent legal error, a clearly erroneous factual determination, or an abuse of
discretion, a district court should not interfere with the discretion of a magistrate judge to
whom a matter has been referred. See, e.g., Carmona v. Wright, 233 F.R.D. 270, 276
(N.D.N.Y. 2006) (“[M]agistrate judges have broad discretion to regulate nondispositive
matters, and reversal is warranted only if that discretion is abused.”). Judge McCarthy
committed no legal error and made no clearly erroneous factual finding; for that reason,
he did not abuse his discretion in denying the motion to transfer venue. And for that
reason, this Court will not disturb his decision.
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CONCLUSION
The D&O, Docket Item 55, is AFFIRMED, and Advanced Energy’s motion to
transfer, Docket Item 48, is DENIED. The case is referred back to Judge McCarthy for
further proceedings consistent with the referral order of February 5, 2021, Docket
Item 47.
SO ORDERED.
Dated: August 23, 2021
Buffalo, New York
/s/ Lawrence J. Vilardo
LAWRENCE J. VILARDO
UNITED STATES DISTRICT JUDGE
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