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Cliffs Natural Resources Inc. v. Seneca Coal Resources, LLC

United States District Court, N.D. Ohio, Eastern Division

May 12, 2017

CLIFFS NATURAL RESOURCES, INC Plaintiff,
v.
SENECA COAL RESOURCES, LLC., et al., Defendant.

          OPINION AND ORDER

          CHRISTOPHER A. BOYKO, J.

         This matter is before the Court on Defendant Seneca Coal Resources, LLC.'s Motion to Transfer Venue Under 28 U.S.C. § 1404(a). (ECF # 42). For the following reasons, the Court grants Defendant's Motion and transfers the case to the United States District Court for the District of Delaware for further adjudication.

         This matter arises out of a purchase agreement between Plaintiff Cliffs Natural Resources, Inc. (“Cliffs”) and Defendant Seneca Coal Resources, LLC (“Seneca”) that was entered into in 2015, involving the sale of certain mining assets owned by Cliffs to Seneca. According to Cliffs' Complaint, Cliffs is an Ohio-based mining and natural resources company that is a major supplier of iron ore pellets to the North American steel industry. Seneca is a Virginia-based company. On December 22, 2015, Cliffs, CLF PinnOak LLC and Seneca entered into a Unit Purchase Agreement (“UPA”) wherein Cliffs sold outstanding equity interests in Cliff North American Coal LLC to Seneca. Under the UPA, Seneca agreed to replace bonds and guarantees and agreed to reimburse Cliffs for certain expenses. Seneca agreed to replace certain bonds and cause the release of Cliffs' bonds within 45 days of the Closing date.

         Because of the sale of the equity interests in Cliffs North American Coal, Seneca was responsible for assuming all liabilities, including the purchase of workers compensation insurance and administering the same. Under the UPA, Seneca agreed to indemnify Cliffs for any losses arising out of or resulting from the breach of the UPA, the bonds or guarantees.

         Seneca failed to replace the bonds within 45 days as required by the UPA and failed to cause the timely release of the guarantees and letters of credit, causing Cliffs to incur losses. Cliffs also incurred additional losses related to capital lease repayments, workers compensation costs, bond premiums and medical costs all of which Seneca was contractually obligated to pay. Seneca has failed to assume administration of workers compensation as required under the UPA. Cliffs now moves for Breach of Contract for Seneca's failure to pay under the UPA over $6, 000, 000. Cliffs further moves for a declaratory judgment that Seneca may not transfer assets to its Defendant owners or affiliates until it pays its obligations to Cliffs under the UPA.

         Seneca has counterclaimed for Breach of the UPA for Cliffs' failure to disclose obligations due and owing at the time of the sale. Seneca also alleges a claim for Breach of Contract for failing to make Union payments and Breach of Contract for failing to pay certain contractual obligations at closing.

         On February 1, 2017, Cliffs filed its First Amended Complaint adding additional parties Cliffs alleges conspired to transfer assets from Seneca to the newly named affiliates of Seneca.

         On March 30, 2017, Defendant Seneca Coal Resources, LLC. moved to transfer the case to Delaware based on a forum selection clause in the UPA. Section 9.10 of the UPA reads in pertinent part:

This Agreement shall be governed by and construed in accordance with the Laws of the State of New York applicable to Contracts to be made and performed entirely therein without giving effect to the principles of conflict of law thereof or of any other jurisdiction. Each of the parties hereto hereby (a) expressly and irrevocably submits to the exclusive personal jurisdiction of the United States District Court for the District of Delaware and to the jurisdiction of any other competent court of the State of Delaware located in New Castle County (collectively, the “Delaware Courts”), preserving, however, all rights of removal to such federal court under 28 U.S.C. 1441 in connection with all disputes arising out of or in connection with this Agreement or the transactions contemplated hereby and (b) agrees not to commence any litigation relating thereto except in such courts. * * * Each party hereto hereby waives the right to any other jurisdiction or venue for any litigation arising out of or in connection with this Agreement or the transactions contemplated hereby to which any of them may be entitled by reason of its present or future domicile.

         Due to the mandatory language of the forum selection clause and pursuant to the United States Supreme Court's relatively recent ruling on the enforceability of forum selection clauses, Defendant contends the case must be transferred to Delaware.

         Cliffs argues Seneca expressly agreed that this Court has jurisdiction over Cliffs' claims in Seneca's Motion to Dismiss for Lack of Jurisdiction. In its Motion at pgs 13-14, Seneca represented “Defendant Seneca recognizes that there exists a justiciable case or controversy with Plaintiff to vest this court with subject matter jurisdiction with respect to Plaintiff's post- transaction breach of contract claims. The BB&T settlement agreement contains a specific retention of jurisdiction by the Court.” Cliffs contends this statement, Seneca's waiting approximately three months after Plaintiff filed its Complaint to raise a venue challenge and Seneca's filing of a Motion to Dismiss and Answer constitute a waiver of its venue challenge. Furthermore, Cliffs contends Seneca expressly consented to this Court's jurisdiction in a 2016 settlement of a related case wherein the parties agreed the Court retained jurisdiction to enforce the terms of the settlement or otherwise. Also, Cliffs argues Defendant improperly moved for transfer of venue under 28 U.S.C. § 1404(a) when they should have moved under 28 U.S.C. § 1406. Lastly, Cliffs argues it did not consent to venue in Delaware as no party is a resident of Delaware and non-of the actions at issue occurred in Delaware.

         Having reviewed the Motion, Opposition, Reply and supporting exhibits the Court grants Defendant's Motion.

         First, Defendant is correct that 28 U.S.C. § 1404(a) is the proper mechanism for enforcing a forum-selection clause. See Atlantic Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas,134 S.Ct. 568, 574, 187 L.Ed.2d 487 (2013) (“ the clause may be enforced through a motion to transfer under § 1404(a), which permits transfer to any other district where ...


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