Summary
applying Superior Court Rule 12(b) to a motion to dismiss based on a forum selection clause
Summary of this case from Degregorio v. Marriott Int'l, Inc.Opinion
C.A. No. 97C-08-076.
Submitted: March 16, 2000.
Decided: June 1, 2000.
Upon Defendants' Motion to Dismiss
Janet Z. Charlton, Esquire, Young, Conaway, Stargatt Taylor, Wilmington, Delaware, Attorney for Plaintiffs.
John P. Daniello, Esquire, Maron, Marvel Wilks, P.A., Wilmington, Delaware, Attorney for Defendants.
MEMORANDUM OPINION
The plaintiffs David L. Zicherman ("Zicherman") and Double Z Enterprises, Inc. ("Double Z") have filed suit against four parties. Two of the parties, International Toy Corporation ("ITC") and Dennis Ellicker, were severed to permit an arbitration. They have not been served. Thus, before the Court are the two remaining parties, General Marketing Corporation ("GMC") and Robert W. Krause ("Krause"). They now seek to have the action dismissed. GMC is the corporation with which plaintiffs contracted, and Krause is an agent of GMC. As to GMC, there is no contention that Delaware lacks jurisdiction over the corporation. The issue is whether the forum selection clause in the contract, designating Clark County, Nevada as the venue for resolving disputes, should be enforced. As to Krause, the issue is whether this Court has personal jurisdiction over him in his individual capacity.
For the reasons that follow, I find that the forum selection clause is enforceable, there being no allegation or evidence of fraud in the procurement of the specific provision. The claims, although not all sounding in contract, all arise from the contractual relationship between the plaintiffs and the defendants. Thus the action against GMC must be dismissed. I further find that the action against Krause, a non-resident of Delaware, must be dismissed. Insofar as Krause has been sued as an agent of GMC, his availability for suit can be no greater than that of the corporation he serves, so dismissal of GMC must also result in dismissal of Krause under the forum selection provision. And, insofar as Krause has been sued in his individual capacity for conduct outside the scope of his agency, and assuming the conduct comes within the scope of the long arm statute, due process requirements have not been met.
Factual Background
Plaintiffs Zicherman and Double Z brought claims of fraud, misrepresentation, mistake, breach of contract, deceptive trade practices, conspiracy, unjust enrichment, and negligent hiring and supervision against defendants GMC and Krause, and also against ITC and Ellicker. Zicherman responded to an ad in The News Journal placed by ITC and ultimately decided to purchase from it official licensed Disney products for distribution in Wilmington. Zicherman subsequently formed Double Z, under which his distributorship would be operated.
Plaintiff Zicherman has sued in both his individual and corporate capacities. However, that the contract between Double Z and GMC was signed by Zicherman only in his capacity as President of Double Z.
Krause is sued in both his individual and corporate capacitates.
ITC recommended GMC as an independent locating company to find locations for Zicherman's display carousels. "Zicherman then called GMC [in Las Vegas, Nevada] and spoke with Defendant Robert Krause, [GMC's President and Director of Marketing], who described how GMC conducted its business." During the conversation, Krause informed Zicherman that "a GMC representative would travel to Wilmington, Delaware; screen local retail locations and select appropriate ones for Mr. Zicherman's business in the Wilmington area; would then introduce Mr. Zicherman to the owners/managers of the selected retail locations; and present Zicherman and Double Z with contracts signed. by the owners/managers of each selected location." Shortly thereafter, "Zicherman received an overnight letter from Defendant Krause containing a letter, brochure, contract, and other documents. These materials provided additional information about the services, terms and conditions of the work to be performed by GMC."
Plaintiffs subsequently learned that GMC and ITC were not independent of each other.
Complaint at 9, ¶ 16. (Dkt. No. 1) (Emphasis added).
Id.
Id. (Emphasis added).
GMC and Double Z entered into a contract on August 30, 1996 whereby GMC was to find locations for Double Z to sell its Disney merchandise in Wilmington within two weeks. A portion of the contract between GMC and Double Z states:
In the event of any dispute or litigations [sic], the parties to this agreement and/or their agents or assignee's agree that the jurisdiction and venue of any action shall be in Clark County Nevada and this agreement shall be construed and governed in accordance with the laws of the state of Nevada only.
After a two month delay, during which time plaintiffs allegedly were induced several times by GMC not to terminate the contract, a locator from GMC came to Wilmington to find locations for plaintiffs to sell the merchandise. That locator informed Double Z that the market in Wilmington was saturated and the closest locations to sell the merchandise would be past Lancaster, PA, below Dover. DE, and/or below Elkton, MD. On November 14, 1996, Double Z fired GMC for nonperformance. GMC returned Double Z's $500.00 deposit.
Improper venue
GMC seeks dismissal for improper venue pursuant to Superior Court Civil Rule 12(b)(3) because the contract signed by Double Z and GMC contains a forum selection provision which states that the parties agree to litigate disputes in Clark County, Nevada.
In response, plaintiffs make several arguments. First, plaintiffs argue that plaintiff Zicherman is not a party to the contract and therefore Zicherman's claim against GMC is not governed by the forum selection clause. Second, plaintiffs argue that the use of fraud to induce agreement to a contract is grounds to override a contract's forum selection clause.
Lack of personal jurisdiction
Defendant Krause seeks dismissal of the claim against him in his individual capacity for lack of personal jurisdiction pursuant to Superior Court Civil Rule 12(b)(2). Krause is a resident of Nevada. He asserts that Delaware does not have personal jurisdiction over him in his individual capacity because at all relevant times he was acting as an agent of GMC in Nevada. Defendant argues that under Delaware's long arm statute, business transacted solely as an officer or agent of a corporation does not confer jurisdiction over the individual.
In response, plaintiffs contend that Krause is subject to long arm jurisdiction in this state pursuant to 10 Del. C. § 3104. Plaintiffs argue that transactional jurisdiction exists over GMC, a Nevada corporation, and there is personal jurisdiction over Krause because both the corporation and the officers can be sued for fraud when the officer is an active participant.
Standard of Review
In a motion to dismiss the record must be viewed in a light most favorable to the nonmoving party and all reasonable inferences are considered most strongly in favor of plaintiff. All well-pled allegations are taken as true.
Greenly v. Davis, Del. Supr., 486 A.2d 669, 670 (1984).
Spence v. Funk, Del. Supr., 396 A.2d 967 (1978).
Discussion Venue
Forum selection clauses are prima facie valid and should be enforced unless the party seeking to invalidate the clause demonstrates that enforcement is unreasonable under the circumstances. Where the action is filed in a proper venue but the contract contains a forum selection clause, the Court should decline to proceed where the parties agreed that litigation should be conducted in another forum. A forum selection clause should be specifically enforced "unless [the party seeking to invalidate the clause] could clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching."Whether allegations of fraud invalidate an otherwise valid forum selection clause is an issue of first impression in this state. To invalidate a forum selection clause on the grounds of fraud, the party seeking to invalidate the clause must demonstrate that the clause itself was procured by fraud. Unless there is a showing that the alleged fraud or misrepresentation induced the party opposing the forum selection clause to agree to inclusion of that clause in the contract, a general claim of fraud or misrepresentation as to the entire contract does not affect the validity of the forum selection clause.
American Life Ins. Co. v. Parra, D. Del., 2SF. Supp.2d 467, 478 (1998) (citing Moses v. Business Card Express, 6th Cir., 929 F.2d 1131, 1138 (1991) ("there must be a well founded claim of fraud in the inducement of the clause itself standing apart from the whole agreement" to challenge the enforcement of the forum selection clause), cert. denied 502 U.S. 821 (1991); Nemo Assoc., Inc, v. Homeowners Marketing Servs. Int'l, Inc., E.D. Pa., 942 F. Supp. 1025, 1028 (1996) ("[T]o invalidate a forum selection clause on the grounds of fraudulent inducement, the party challenging the clause must show that the clause itself was procured by fraud.")).
Moses, 929 F.2d at 1138.
There are no allegations or evidence to suggest that there was fraud in the procurement of the specific clause. Indeed, the defendants claim that the contract was negotiated, with the plaintiff making some changes. Those claims were not denied by plaintiffs in the answering brief. There being no allegations of fraud in the procurement of the specific provision, the forum selection clause must be enforced. The proper forum for this action is Clark County Nevada. Defendants' motion to dismiss for improper venue is GRANTED.
Personal Jurisdiction
Determining the existence of personal jurisdiction over a non-resident defendant requires a two step analysis. First, the Court must ascertain if Delaware's long arm statute, 10 Del. C. § 3104, grants jurisdiction; second, the Court must determine whether the exercise of long arm jurisdiction would violate the Due Process Clause of the Fourteenth Amendment. 10 Del. C. § 3104 states in pertinent part:
LaNuova D B, S.p.A. v. Bowe Company, Inc., Del. Supr., 513 A.2d 764, 768 (1986).
Id. (citing Waters v. Deutz Corp., Del. Supr., 497 A.2d 273 (1984)).
(c) As to a cause of action brought by any person arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident, or a personal representative, who in person or through an agent:
(1) Transacts any business or performs any character of work or service in the State;
(2) Contracts to supply services or things in this State;. . . .
"Person" includes a natural person or a corporation. To sub an individual to personal jurisdiction pursuant to § 3104, that person must act in his individual capacity.
Gebelein v. Perma-Dry Waterproofing Co., Del. Ch., C.A. No. 6210,
Brown, V.C. (Jan. 12, 1982) (Mem. Op.).
This Court does not have personal jurisdiction over Krause in his individual capacity for two reasons. First, Krause did not act in his individual capacity. Plaintiffs have only alleged dealing with Krause by phone and mail in his capacity as an agent of GMC. Second, assuming arguendo that Krause acted individually, due process requirements have not been met. In order to meet the requirements of due process, the defendant must have minimum contacts with the forum state. Krause did not conduct business in Delaware. One telephone call and one mailing are not sufficient minimum contacts to satisfy due process requirements. Because this Court does not have personal jurisdiction over Krause in his individual capacity, defendants' motion to dismiss Krause individually is GRANTED.
International Shoe Co. v. State of Washington, 326 U.S. 310 (1945).
See Bank of America Nat'l Trust and Savings Ass'n v. GAC Properties credit, Inc., Del. Ch., 389 A.2d 1304, 1310 (1978) (citing several cases for the proposition that "mail and telecommunications were not sufficient minimum contact[s] to give in personam jurisdiction over non-residents.").
IT IS SO ORDERED.