Summary
stating that a preference for transfer is strengthened when a forum selection clause expressly provides for venue in another district
Summary of this case from Pulse Medical Instr. v. Drug Impairment Detection SVCOpinion
7:00-CV-208-R.
March 12, 2001.
MEMORANDUM OPINION
On November 2, 2000, Plaintiff, Arctic Equipment of Texas, Inc., filed an Amended Complaint in this Court alleging breach of contract by Defendant, IMI Cornelius, Inc. Now before this Court is Defendant's Motion to Dismiss, filed on January 31, 2001. The Motion is brought pursuant to Federal Rule of Civil Procedure 12(b)(3), for improper venue, and in the alternative, Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief can be granted.
For the reasons stated below, the Motion to Dismiss is DENIED and this matter is hereby TRANSFERRED to the Minnesota District Court.
Background
Plaintiff, Arctic Equipment of Texas, Inc. (Arctic), is a Texas corporation with its principal place of business in Wichita Falls, Texas. Plaintiff sells and services equipment to restaurants, schools, and businesses in Texas. Defendant, IMI Cornelius, Inc. (IMI) is a foreign corporation with its principal place of business in Anoka, Minnesota. Defendant is engaged in the manufacture of commercial ice makers and bins, ice dispensers, ice/drink dispensers, beverage dispensers, and accessories and components. In December, 1995, the parties entered into a contract whereby Plaintiff agreed to sell and distribute equipment manufactured by Defendant in two specific zip code areas in Texas. The five-page Distributorship Agreement contains the following forum selection clause:
Unless arbitration is agreed to in accordance with the remainder of this Section H.9 Distributor hereby irrevocably consents to the jurisdiction of the courts of Minnesota with respect to the adjudication of any case or controversy arising under or in connection with this Agreement, and agrees that such courts will be the proper and only forum in which to adjudicate any such case or controversy initiated by or on behalf of Distributor. Distributor hereby irrevocably waives any objection based on any alleged impropriety of venue or personal jurisdiction of such courts and hereby agrees not to institute an action arising under or relating to this Agreement in any other court
Defendant's Motion to Dismiss p. 2.
In October, 2000, Plaintiff filed suit in the Northern District of Texas for breach of the Distributorship Agreement.
Discussion
I Motion to Dismiss vs. Motion to Transfer
The Defendant argues that this Court should dismiss this case pursuant to Federal Rule of Civil Procedure 12(b)(3) because the existence of a forum selection clause in the Distributorship Agreement makes the Northern District of Texas an improper venue. The existence of a forum selection clause designating Minnesota as the venue for disputes under the Agreement does not make the Northern District of Texas an improper venue requiring dismissal under 12(b)(3). Instead, the forum selection clause triggers an inquiry into whether this Court should transfer venue pursuant to 28 U.S.C. § 1404(a). See Stewart Organization, Inc. v. Ricoh Corporation, 487 U.S. 22, n. 8 (1988) (denial of the Defendant's motion to dismiss was deemed proper because the Defendant apparently did business in the forum); Shaw Group, Inc. v. Natkin Company, 907 F. Supp. 201, 203 (M.D. Louisiana 1995) (the parties' forum selection clause designating that disputes shall be heard in a different forum does not render this Court a court of improper venue) (citing, Stewart Organization, Inc., 487 U.S. n. 8).
FRCP 12(h)(3) is merely the procedural mechanism by which a party can request dismissal for improper venue, 11 U.S.C. § 1406 is the federal law that requires dismissal when a case is brought in the wrong venue.
11 U.S.C. § 1404(a) permits the transfer of a case "[f]or the convenience of parties and witnesses, in the interest of justice . . ."
Transfer is also preferable to dismissal in this case because an alternative forum is available. The existence of a valid forum selection clause, something neither party disputes, provides a sufficient basis for a Minnesota federal court to exercise personal jurisdiction over the Plaintiff See Shaw Group, Inc., 907 F. Supp. n. 21 (citing, Kevlin Servs., Inc. v. Lexington State Bank, 46 F.3d 13, 15 (5th Cir. 1995);Burger King Corp v. Rudzewicz, 471 U.S. 462, n. 14 (1985) (citation omitted)). Therefore, this motion will he decided as a Motion to Transfer Venue under 11 U.S.C. § 1404(a).
As the discussion below will reveal, the Plaintiff admits that the forum selection clause is valid, but argues that this Court should nevertheless accept jurisdiction over this case.
II Application of § 1404(a) In Light of the Forum Selection Clause
Defendant correctly sets forth the law regarding the presumption of validity of forum selection clauses. The seminal case regarding the presumption is Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). Bremen held that 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 at 10 (citations omitted). Bremen also explained that the existence of a forum selection clause places a "heavy burden" on the party seeking to avoid its application. Id. at 17. The Filth Circuit has recognized the rule set forth in Bremen. See Mitsui Co. Inc. v. Mira M/V, 111 F.3d 33, 35 (5th Cir. 1977) ("The Supreme Court has consistently held forum selection clauses presumptively valid . . . the burden of proving unreasonableness is a heavy one."). Therefore, Plaintiff bears the "heavy burden" of demonstrating why this case should not be transferred to the forum in which it contractually agreed to litigate.
Despite this heavy burden, the presumption does not create an absolute rule. Under § 1404(a) courts have the discretion to accept jurisdiction over a case despite the fact that a forum selection clause calls for jurisdiction in a different forum.See Stewart Organization. Inc., 487 U.S. at 29 (citing, Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)). A court must consider factors such as the convenience of the witnesses, the convenience of the parties, the interests of justice, and the fairness of transfer in light of the forum-selection clause and the parties' relative bargaining power. See Shaw Group Inc., 907 F. Supp at 205 (citing, Stewart Organization. Inc., 487 U.S. at 29). Thus, the Supreme Court has held that "[i]t is conceivable in a particular case, for example, that because of these factors a district court acting under § 1404(a) would refuse to transfer a case notwithstanding the counterweight of a forum-selection clause. . . ." Stewart Organization, Inc., 487 U.S. at 30-31.
On the other hand, in the same decision, the Supreme Court stated that the forum selection clause is a "significant factor that figures centrally in the district court's calculus." Id. at 29. For example, in a case cited by the Plaintiff, a district court found that "but for the forum selection clause, the Court would likely deny the motion to transfer" because the very existence of the clause places upon the court a duty to enforce the parties' contractual obligations under the "interests of justice" consideration set forth by the Supreme Court and § 1404(a). Shaw Group, Inc., 907 F. Supp at 205. In the present case, this Court need not rely as heavily as the Shaw court did on the existence of the forum selection clause because the Plaintiff has provided so few countervailing considerations for this Court to weigh in exercising its discretion. For example, the Plaintiff claims that the forum selection clause was never bargained for because it was a part of the Defendant's form contract. Not only did the Plaintiff fail to provide any evidence in support of this claim, but the evidence before this Court demonstrates that the Plaintiff had the ability and the opportunity to bargain for this forum selection clause. The Plaintiff is a corporation that sells and distributes equipment. Unless it is provided with evidence to the contrary, this Court will assume that the Plaintiff is familiar with the terms of a distributorship agreement. Moreover, this particular agreement was only five pages in length — there can be no argument that the clause was hidden among pages and pages of fine print. The Plaintiff's argument is even less compelling when considered in light of the Supreme Court's holding in Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991). In Carnival Cruise Lines the Court enforced a forum selection clause that appeared on the last pages of a cruise line ticket that was sent to an "unsophisticated cruise line passenger, notwithstanding the disparity in the parties' bargaining power and the fact that the contract had not been subject to negotiation." Haynsworth v. The Corporation, 121 F.3d 956, 965 (5th Cir. 1997).
The Plaintiff also argues that this Court should retain jurisdiction because the events that gave rise to this lawsuit took place in the Northern District of Texas. This claim is also not supported by any further explanation or evidence, and it appears from this Court's review of the Amended Complaint that the allegedly wrongful actions of the Defendant may very well have taken place at the Defendant's headquarters in Minnesota. Finally, the Plaintiff argues that all of the witnesses necessary to establish and prove Plaintiff's cause of action reside in the Northern District of Texas. Once again, the Plaintiff fails to elaborate on this conclusory assertion. Moreover, this Court's review of the Amended Complaint reveals that most of the witnesses will likely be other corporations and businesses and thus the burden of their participation in litigation in Minnesota is not great enough to outweigh the need to enforce an agreement that was freely and fairly negotiated between two experienced corporations.
Conclusion
Exercising the discretion vested in it by 28 U.S.C. § 1404(a), in light of the precedent which overwhelmingly favors enforcement, this Court holds that the forum selection clause in this Distributorship Agreement is controlling and this case is hereby TRANSFERRED to the Minnesota District Court.