Opinion
1:01CV706
August 23, 2002
MEMORANDUM OPINION
This case comes before the Court on three Motions brought by Defendant Can Due Partners ("Can Due"). The Motions include a Motion to Dismiss Due to Deficiencies in Process and Service of Process [Document #5], a Motion to Dismiss for Forum Non Conveniens or, in the Alternative, to Transfer Venue [Document #6] (hereinafter "Motion to Dismiss for Forum Non Conveniens or to Transfer"), and a Motion to Stay Proceedings [Document #7]. For the following reasons, Can Due's Motions are hereby DENIED.
Although the Motions are filed by Can Due, Can Due's Brief clarifies that it brings these motions on behalf of itself and the remaining two Defendants, Philip Coleman ("Coleman") and Interlease 757 Aircraft Investors, L.L.C ("Interlease") (together, "Defendants").
I. FACTUAL BACKGROUND
This case involves Plaintiff Firstar Bank, N.A.'s ("Firstar") rights to certain aircraft and aircraft engines as collateral for a fixed rate revolving draw note ("Note") that was issued to Interlease, an Illinois limited liability company that is engaged in the business of leasing and operating aircraft and aircraft engines within North Carolina. On or about January 30, 1998, Interlease executed the Note and delivered it to Firstar's predecessor, the Mercantile Bank of Eastern Iowa ("the Bank"). As security for the Note, Coleman, a citizen of Illinois, executed and delivered to the Mercantile Bank of Eastern Iowa a Guaranty for the Note on January 30, 1998. As further security, Interlease entered into two security agreements ("Security Agreements") that granted the Bank a security interest in a 1976 Lockheed Aircraft, serial number 193A-1141, and five Rolls-Royce Engines with the serial numbers 10676, 10101, 10629, 10074, and 10437. The Security Agreements specified that the aircraft and aircraft engines would be stored at Piedmont Triad International Airport in Greensboro, North Carolina. The aircraft was subsequently leased to Tradewinds Airlines, Inc.
At some point prior to 2000, Interlease and Coleman defaulted under the provisions of the Note, Guaranty, and Security Agreements. Interlease and Coleman also lapsed in the payment for certain storage and maintenance fees related to the aircraft and aircraft engines. As a result of these storage and maintenance debts, Gearbuck Aviation Services ("Gearbuck") informed Firstar, the successor in interest of the Mercantile Bank of Eastern Iowa, that the aircraft and one aircraft engine were now subject to a $13,955.25 storage lien and that Gearbuck intended to sell the property to satisfy the lien. To prevent the sale of the aircraft and the engine, Firstar paid the storage lien and assumed possession of the aircraft and engine.
In late 2000, Firstar learned that Defendant Can Due, a limited liability company organized and operated under Iowa law, also claimed an ownership interest in one of the Rolls Royce engines, serial no. 10629 ("Engine No. 10629"). With respect to this disputed ownership interest, Firstar received a November 30, 2000 letter from Coleman requesting that Firstar release its lien on this engine. Firstar refused to release its lien. Firstar complains, however, that Can Due continues to claim an ownership interest in Engine No. 10629 free and clear of Firstar's security interest. Firstar disputes Can Due's claim of the priority of its lien over Firstar's interest in Engine No. 10629.
Despite Can Due's claims and Coleman's requests that Firstar release its lien, Firstar declared that the Note and Guaranty were breached, making the entire unpaid balance of the Note due and payable, and requested immediate payment of the unpaid balance from Coleman and Interlease. Because neither party complied with Firstar's request for payment, Firstar then conducted a sale of the aircraft and several of the engines, including Engine No. 10629, on May 24, 2001 in Greensboro, North Carolina. During the sale, Firstar alleges that Coleman informed various potential buyers that Engine No. 10629 was not encumbered by a lien in favor of Plaintiff. Despite Coleman's alleged statements regarding Engine No. 10629, Firstar sold Engine No. 10629 for $51,000.00 and an additional engine, serial number 10437, for $5,100.00.
On June 6, 2001, Firstar filed suit in the Superior Court of Guilford County, North Carolina against Interlease, Coleman, and Can Due. In its Complaint, Firstar alleges one count of breach of contract and one count for specific performance against Interlease and Coleman. Firstar also alleges one count of slander of title against Coleman and requests a declaratory judgment stating that its rights to Engine No. 10629 are superior to any rights Can Due alleges it has in the same property. Defendants removed the North Carolina action to the United States District Court for the Middle District of North Carolina on July 19, 2001 based on diversity jurisdiction. Subsequently, Defendants filed three Motions on August 30, 2001. In the first of these Motions, a Motion to Dismiss Due to Deficiencies in Process and Service of Process, Can Due requests that the Court dismiss Firstar's action pursuant to Rule 12(b)(3-5) of the Federal Rules of Civil Procedure ("Rules"). As its basis for its Motion to Dismiss for Forum Non Conveniens or to Transfer, Can Due moves that the Court either dismiss the instant lawsuit under the common law doctrine of forum non conveniens or transfer the lawsuit to the United States District Court for the Northern District of Iowa. In addition to these two Motions to Dismiss, Can Due also requests that the Court stay all further proceedings until it issues its decision on the two pending Motions to Dismiss. The Court will now address Can Due's Motions in turn, beginning with the Motion to Dismiss due to Deficiencies in Process and Service of Process.
II. DISCUSSION
A. Can Due's Motion to Dismiss Due to Deficiencies in Process and Service of Process
Can Due first requests that the Court dismiss the instant action because Firstar failed to properly serve Defendants when it initiated the state court proceedings. More specifically, Can Due alleges that Firstar failed to have a civil summons issued for each Defendant within the necessary time period, and that this defect terminated Firstar's lawsuit.
Can Due's argument relies on Rule 4(a) of the North Carolina Rules of Civil Procedure ("North Carolina Rules"), N.C. Gen. Stat. § 1A-1, Rule 4, which states that "[u]pon the filing of the complaint, [a] summons shall be issued forthwith, and in any event within five days." N.C. Gen. Stat. § 1A-1, Rule 4. A summons is not issued until "after being filled out and dated, it is signed by the officer having authority to do so." Id. If a summons is not properly issued within five days, "the action is deemed never to have commenced." Wayne County ex rel. Williams v. Whitley, 72 N.C. App. 155, 158, 323 S.E.2d 458, 462 (1984) (citingEverhart v. Sowers, 63 N.C. App. 747, 750, 306 S.E.2d 472, 475 (1983),overruled on other grounds, Hazelwood v. Bailey, 339 N.C. 578, 453 S.E.2d 522 (1995)).
In this instance, Can Due asserts that no summonses were issued to effect service upon the Defendants, and that therefore the state action should be deemed to never have commenced. However, Can Due's argument relies on the premise that no summonses were issued as to the state case, a premise that Plaintiff Firstar strongly disputes. Firstar asserts that the Guilford County Clerk of Court did, in fact, issue a summons for each Defendant in the North Carolina state court action on June 6, 2001, the same day that Firstar filed the state action. As proof, Firstar presents the affidavit of its attorney, William Walt Pettit ("Pettit", who obtained the summonses from the Guilford County Clerk of Court. Attached to Pettit's affidavit are copies of civil summonses for each of the three Defendants. Each summons is dated June 6, 2001 and signed by Sharon D. Bell, the Deputy Clerk of the Superior Court. After reviewing the summonses, the Court finds that the summonses were properly issued within the necessary time frame, as required by North Carolina Rule 4(a). As the summonses for all three Defendants were issued timely and properly, Can Due's Motion to Dismiss due to Deficiencies in Process and Service of Process is DENIED.
B. Can Due's Motion to Dismiss for Forum Non Conveniens or, in the Alternative, to Transfer Pursuant to 28 U.S.C. § 1404
In addition to its Motion to Dismiss Due to Deficiencies in Process and Service of Process, Can Due has also filed a Motion to Dismiss for Forum Non Conveniens or, in the Alternative, to Transfer the matter to the Northern District of Iowa. First, Can Due maintains that Iowa would be a more convenient and efficient forum for this litigation, and therefore requests that, pursuant to the federal forum selection statute, 28 U.S.C. § 1404, the Court transfer the instant case to the United States District Court for the Northern District of Iowa. Alternatively, Can Due asserts that it would be more appropriate for the instant action to be heard in the Iowa state courts because there currently exists an Iowa state court action involving the same facts as this litigation, and for that reason Can Due requests that the Court dismiss this federal action based on the common-law doctrine of forum non conveniens. The Court shall address these two arguments in turn.
1. Can Due's Request for Transfer Pursuant to 28 U.S.C. § 1404
In this Motion, Can Due argues that the Northern District of Iowa is a more suitable and convenient location for this litigation and urges the Court to exercise the discretion provided to it through 28 U.S.C. § 1404. Pursuant to 28 U.S.C. § 1404, a court may transfer a civil action to any other district in which original venue would be proper "[f]or the convenience of parties and witnesses [and] in the interest of justice." 28 U.S.C. § 1404 (a); Kontoulas v. A.H. Robins Co., Inc., 745 F.2d 312, 315 (4th Cir. 1984). The purpose of § 1404 is to "adjudicate motions for transfer according to an `individualized, case-by-case consideration of convenience and fairness.'" Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 2244, 101 L.Ed.2d 22 (1988) (quoting Van Dusen v. Barrack, 376 U.S. 612, 622, 84 S.Ct. 805, 812, 11 L.Ed.2d 945 (1964)).
In making this individualized determination, the Court remains cognizant of the plaintiff's right to choose its forum and notes that, "unless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed." Collins v. Straight, Inc., 748 F.2d 916, 921 (4th Cir. 1984) (quoting Gulf Oil v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1946) (utilizing this standard with respect to a district court's dismissal of a case pursuant to the doctrine of forum non conveniens)). Furthermore, the Court "should refrain from transferring venue if to do so would simply shift the inconvenience from one party to another." Tools USA Equip. Co. v. Champ Frame Straightening Equip., Inc., 841 F. Supp. 719, 721 (M.D.N.C. 1993) (citing Commercial Equip. Co. v. Barclay Furniture Co., 738 F. Supp. 974, 976 (W.D.N.C. 1990)).
With these principles in mind, the Court now considers whether the facts of this case warrant transfer to a different venue. To aid its consideration, this Court considers the following eleven factors:
(1) the plaintiff's initial choice of forum; (2) relative ease of access to sources of proof; (3) availability of compulsory process for attendance of unwilling witnesses, and the cost of obtaining attendance of willing and unwilling witnesses; (4) possibility of a view of the premises, if appropriate; (5) enforceability of a judgment, if one is obtained; (6) relative advantage and obstacles to a fair trial; (7) other practical problems that make a trial easy, expeditious, and inexpensive; (8) administrative difficulties of court congestion; (9) local interest in having localized controversies settled at home; (10) appropriateness in having a trial of a diversity case in a forum that is at home with the state law that must govern the action; and (11) avoidance of unnecessary problems with conflicts of laws.
Republic Mortg. Inc. Co. v. Brightware, Inc., 35 F. Supp.2d 482, 484 (M.D.N.C. 1999).
In addition to these factors, Can Due emphasizes that the forum selection clauses of the Note, Guaranty, and Security Agreements should weigh heavily on the Court's decision in favor of transferring the action to Iowa. Although the wording of the forum selection clauses varies slightly among the different agreements, the content of the forum selection clauses roughly mirrors that of the forum selection clause of the Note, which states:
This Note shall be governed by the laws of the state of Iowa. Borrower [Interlease] consents to the jurisdiction and venue of any court located in such state in the event of any legal proceeding pertaining to the negotiation, execution, performance or enforcement of any term or condition contained in this Note or any related loan document and agrees not to commence or seek to remove such legal proceeding in or to a different court.
(Def. Can Due Partners' Brief Supp. Mot. to Dismiss, Exhibit 1 at 2, subsection 9.) Can Due argues that the forum selection clauses clearly designate Iowa as the forum for all controversies, and insists that the Court will impermissibly overrule the forum selection clauses if it allows the action to continue in North Carolina. Disputing Can Due's characterization, Plaintiff argues that the forum selection clauses allow Plaintiff to bring suit in Iowa but do not mandate that Iowa is the only appropriate forum.
The forum selection clauses of the other agreements are as follows:
The Guaranty: "This Guaranty shall be governed by the laws of the state indicated in Lender's [Mercantile Bank of Eastern Iowa's] address. Guarantor [Coleman Aviation Investors, Inc. and Philip Coleman] consents to the jurisdiction and venue of any court located in such state in the event of any legal proceeding under this Guaranty." (Def. Can Due Partners' Brief Supp. Mot. to Dismiss, Exhibit 2 at 2, subsection 21.)
The March 24, 1998 Security Agreement: "This agreement shall be governed by the laws of the state [indicated] in Lender's [Mercantile Bank of Eastern Iowa] address. Owner [Interlease] consents to the jurisdiction and venue of any court located in the state indicated in Lender's address in the event of any legal proceeding pertaining to the negotiation, execution, performance or enforcement of any term or condition contained in this Agreement or any related document and. agrees not to commence or seek to remove such legal proceeding to a different court." Id. Exhibit 3 at 4, subsection 27.
At this point, the Court notes that the weight a forum selection clause carries in determining whether it is appropriate to transfer venue depends on whether the forum selection clause is mandatory or permissive. A mandatory forum selection clause identifies one state or court as having the exclusive jurisdiction over disputes arising from the contract. S D Coffee Inc. v. GEL Autowrappers, 995 F. Supp. 607, 609 (M.D.N.C. 1997). When a contract includes a mandatory forum selection clause, its presence "will be a significant factor that figures centrally" in the determination of whether to transfer venue. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988). In contrast, a permissive forum selection clause, also referred to as a "consent to jurisdiction" clause, "merely specifies a court empowered to hear the litigation. . . Such a clause is `permissive' since it allows the party to air any dispute in that court without requiring them to do so." SD Coffee Inc., 995 F. Supp. at 609 (emphasis added) (quoting Johnston County, N.C. v. R.N. Rouse Co. Inc., 331 N.C. 88, 93, 414 S.E.2d 30, 33 (1992) (quoting Leandra Lederman, Note, Viva Zapata!: Toward a Rational System of Forum-Selection Clause Enforcement in Diversity Cases, 66 N.Y.U.L. Rev. 422, 423 n. 10 (1991) (citations omitted)). Because this type of clause does not require a party to utilize a particular forum for litigation, a permissive forum selection clause does not impact the Court's decision of the appropriate venue.
A review of the forum selection clauses involved in this case convinces the Court that the forum selection clauses are permissive as to Plaintiff. The forum selection clauses clearly identify that Iowa is one potential forum and they do state that Defendants cannot challenge the forum or venue of a lawsuit brought in Iowa. However, none of the forum selection clauses involved here place any limits on where Plaintiff might bring suit. See SD Coffee, Inc., 995 F. Supp. at 610 (finding that a forum selection clause stating that "both parties shall submit to the jurisdiction of the English courts" was permissive and did not foreclose venue in North Carolina); compare with Republic Mortgage Insurance Co. RMIC Corp. v. Brightware, Inc., 35 F. Supp. F.2d 482, 483-84 (M.D.N.C. 1999) (treating the phrase "any actions relating to this Agreement shall be brought forth in San Francisco, California" as a mandatory forum selection clause). Given that the forum selection clauses do not limit Firstar's choice of forum, the Court finds that the forum selection clauses are permissive and do not prevent Plaintiff from bringing suit in any other appropriate forum.
Turning now to the remaining eleven factors, the Court notes that factor (1), which is the plaintiff's choice of forum, weighs in favor of keeping the action in North Carolina, where Firstar originally brought this action. Several of the other factors, including factor (2) — the relative ease of access to the sources of proof, factor (3) — the availability of compulsory process and the costs related to witnesses, factor (6) — the relative advantages and obstacles to a fair trial, and factor (9) — the local interest in having localized controversies settled at home, do not strongly recommend either forum. As the events forming the basis of this lawsuit occurred both in Iowa, where the contract was entered, and North Carolina, where the aircraft and engines, including Engine No. 10629, were housed, seized, and later put up for auction, the witnesses and proof for this action would likely be found in both states. Although Can Due argues that more of the evidence and witnesses will be supplied from Iowa because that was the location of Firstar's predecessor bank and where Can Due is registered as a general partnership, Plaintiff counters that North Carolina is convenient for a majority of its witnesses, including agents of Gearbuck (the company who at one time held a storage lien on the aircraft and one of the aircraft engines), agents of Tradewinds Airlines, and the auctioneer at the North Carolina action. Given that the events forming the basis of this action occur in both states, the Court finds that factors (2), (3), (6), and (9) do not greatly favor one forum over the other.
Turning now to factor (10), which is the familiarity of the forum state with its own laws, this factor does not overwhelmingly weigh in favor of either forum. While the Court notes that the Note, Guaranty, and Security Agreements have specified that Iowa law will apply to any breach of contract, Plaintiff also brings a claim of slander of title, which is a North Carolina cause of action. Consequently, both North Carolina law and Iowa law will be applied in this case. The Court recognizes, however, that the breach of contract issues will likely predominate in this action, and will therefore consider this factor to weigh slightly towards the selection of Iowa as the forum.
With respect to factor (5) — the enforceability of a judgment, factor (7) — the practical problems that make a trial in one forum easier, more expedition and less expensive, factor (8) — the administrative difficulties of court congestion, and factor (11) — the avoidance of conflicts of laws problems, neither party has presented the Court with any information suggesting that one forum offers substantial benefits in any of these areas. The Court shall therefore find that factors (5), (7), (8), and (11) are non-determinative and do not favor either state. Finally, the remaining factor, factor (4) — the need for a view of the premises, will not be necessary to the lawsuit in this instance and thus also does not favor the selection of one forum over the other.
In summary, the Court has considered the eleven factors and has found that only factor (10) supports Can Due's request to transfer this action to Iowa. Given that factor (1), the plaintiff's choice of forum, weighs towards North Carolina and that all of the remaining factors are neutral or inapplicable, Can Due has not met its burden of demonstrating that the interests of convenience and justice strongly support transferring the instant action to the United States District Court for the Northern District of Iowa. The Court therefore holds that transfer of the instant action to the appropriate Iowa federal court is not warranted.
2. Can Due's Request for Dismissal Based on the Doctrine of Forum non Conveniens
As an alternative argument, Can Due asks that the Court dismiss the action currently before it under the common-law doctrine of forum non conveniens. As an initial matter, the Court questions whether the common-law doctrine of forum non conveniens is even applicable in this instance. Because the federal venue transfer statute, 28 U.S.C. § 1404 (a), provides a district court with greater discretion to transfer an action to a more appropriate venue than allowed by the doctrine of forum non conveniens, the Supreme Court has suggested that "the federal [common-law] doctrine of forum non conveniens has continuing application only in cases where the alternative forum is abroad." Am. Dredging Co. v. Miller, 510 U.S. 443, 449, 114 S.Ct. 981, 986, 127 L.Ed.2d 285 (1994); see also Henderson v. Floorgraphics, Inc., 153 F. Supp.2d 133, 137 (D. Conn. 2001) (finding that the common-law doctrine of forum non conveniens was inapplicable when the defendant asserted that the alternative forum was a state court).
To the extent Can Due argues in favor of the use of the common-law doctrine of forum non conveniens based on In re: Rabex Amuru of North Carolina v. Rabex Japan, Ltd., 198 B.R. 898 (1996), the Court observes that Rabex's use of the forum non conveniens doctrine was justified because, in that case, the moving party had argued that the most appropriate forum was in Japan.
Furthermore, even assuming without deciding that the common-law doctrine of forum non conveniens does apply, the Court's decision on this matter would involve many of the same factors as 28 U.S.C. % 1404(a). Indeed, the only new information that would factor into a common-law forum non conveniens decision is the fact that Defendant Can Due has filed a case in Iowa state court involving many of the same issues. It is well-established, however, that, barring any reason for abstention, the mere fact of a pending action in the state court is generally "no bar to proceedings concerning the same matter in the Federal court having, jurisdiction." Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976). Accordingly, the Court finds that, under both 28 U.S.C. § 1404 (a) and the common law doctrine of forum non conveniens, there is no reason to override Plaintiff's selection of North Carolina as the forum for this action. For these reasons, Can Due's Motion to Dismiss for Forum Non Conveniens or to Transfer pursuant to 28 U.S.C. § 1404 (a) is DENIED.
C. Motion to Stay Proceedings
In addition to its two Motions to Dismiss, Can Due has also filed a Motion to Stay Further Proceedings in this action pending the Court's decision on these matters. As the Court has now decided and denied these Motions to Dismiss, there is no longer any reason to stay the progress of this lawsuit. Can Due's Motion to Stay Further Proceedings is therefore also DENIED.
III. CONCLUSION
For the reasons discussed above, Can Due's Motion to Dismiss Due to Deficiencies in Process and Service of Process is hereby DENIED. Can Due's Motion to Dismiss or to Transfer is also DENIED. In light of the Court's resolution of these two Motions, Can Due's Motion to Stay Further Proceedings shall also be DENIED.
An ORDER consistent with this Memorandum Opinion will be entered contemporaneously herewith.