Opinion
CIVIL ACTION No. 03-4104
September 23, 2003
MEMORANDUM AND ORDER
Plaintiff Applied Card Systems, Inc. brought this action against Defendant Winthrop Resources Corporation seeking a declaration that certain pro visions of the Lease Agreement entered into by the parties are unconscionable as a matter of law. Jurisdiction is based on diversity pursuant to 28 U.S.C. § 1332. Currently before this Court is Defendant's Motion to Dismiss the Complaint for improper venue pursuant to Federal Rules of Civil Procedure 12(b)(3), 12(b)(6) and 28 U.S.C. § 1406(a) or, in the alternative, to transfer the case to the United States District Court for the District of Minnesota pursuant to 28 U.S.C. § 1404(a). Defendant also seeks costs and attorney's fees expended in defense of this action.
I. BACKGROUND
This action arises from a contractual dispute over the terms of a Lease Agreement under which Plaintiff Applied Card Systems, Inc. ("Applied Card") leased computer equipment from Defendant Winthrop Resources Corporation ("Winthrop"). On June 5, 2003, Plaintiff Applied Card initially filed this action in the Court of Common Pleas of Chester County, Pennsylvania, and thereafter Defendant Winthrop removed the case to this Court pursuant to 28 U.S.C. § 1441. On July 17, 2003, Winthrop filed a related action in the United States District Court for the District of Minnesota seeking a declaration that Applied Card defaulted on the Lease Agreement, triggering a one-year extension of the lease, and the payment of accrued delinquent lease charges.
Based upon the forum selection clause contained in the Lease Agreement, the Defendant moves to dismiss the complaint for improper venue pursuant to Federal Rules of Civil Procedure 12(b)(3) and 12(b)(6) and 28 U.S.C. § 1406(a) or, in the alternative, to transfer the case to the United States District Court for the District of Minnesota pursuant to 28 U.S.C. § 1404(a).
II. STANDARD OF REVIEW
A federal court sitting in diversity determines the effect to be given a contractual forum selection clause based on federal, not state law. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22 (1988); Jumara v. State Farm Ins. Co., 55 F.3d 873, 877 (3d Cir. 1995). Third Circuit precedent "leaves no doubt that a 12(b)(6) dismissal is a permissible means of enforcing a forum selection clause that allows suit to be filed in another federal forum." Salovaara v. Jackson Nat'I Life Ins. Co, 246 F.3d 289 (3d Cir. 2001) (citing Crescent Int'l Inc. v. Avatar Communities, Inc., 857 F.3d 943 (3d Cir. 1988). The Third Circuit has noted, however, that "as a general matter, it makes better sense, when venue is proper but the parties have agreed upon a not-unreasonable forum selection clause that points to another federal venue, to transfer rather than dismiss." Salovaara, 246 F.3d at 299.
28 U.S.C. § 1404(a) is the appropriate statutory provision for transfer of an action when jurisdiction is proper in both the original and the requested forum. Jumara v. State Farm Ins. Co., 55 F.3d 873, 878 (3d Cir. 1995). Section 1404(a) provides: "For the convenience of the 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." In addition to these considerations, the Third Circuit has enumerated the following additional private and public interests that the court may consider in deciding whether to grant a motion to transfer:
The private interests [include]: plaintiffs forum preference as manifested in the original choice; the defendant's preference; whether the claim arose elsewhere; the convenience of the parties as indicated by their relative physical and financial condition; the convenience of the witnesses-but only to the extent that the witnesses may actually be unavailable for trial in one of the fora; and the location of the books and records (similarly limited to the extent that the files could not be produced in the alternative forum).
The public interests [include]: the enforceability of the judgment; practical considerations that could make the trial easy, expeditious, or inexpensive; the relative administrative difficulty in the two fora resulting from court congestion; the local interest in deciding local controversies at home; and the familiarity of the trial judge with the applicable state law in diversity cases.
Jumara, 55 F.3d at 879-80 (citations and internal quotations omitted).
III. DISCUSSION
Defendant's motion is based upon the terms of a forum selection clause contained in the Lease Agreement between the parties. The forum selection clause at issue in this case states as follows:
Lessee and Lessor consent to jurisdiction of any local, state or federal court located within Minnesota. Venue shall be in Minnesota and Lessee hereby waives local venue and any objection relating to Minnesota being an improper venue to conduct any proceeding relating to this Lease Agreement.
(Pl.'sCompl. Ex. A at 25.)
While section 1404(a) requires a district court to balance a number of case-specific factors, the "presence of a forum-selection clause . . . will be a significant factor that figures centrally in the district court's calculus. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 30 (1988). Although not dispositive, a forum selection clause is to be given "substantial consideration" and overcomes a court's usual deference to the plaintiffs choice of forum. Jumara, 55 F.3d at 880. The significant weight accorded a forum selection clause in a court's section 1404(a) balancing reflects the fact that "a forum selection clause is . . . a manifestation of the parties' preferences as to a convenient forum." Id.
Moreover, where the forum selection clause is valid, the plaintiff "bear[s] the burden of demonstrating why they should not be bound by their contractual choice of forum." Id. A forum selection clause is prima facie valid "and should be enforced unless enforcement is shown by the resisting party to be unreasonable under the circumstances." The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). As the Third Circuit has defined the term, a forum selection clause is "unreasonable" if the resisting party can make a strong showing that the forum selected is "so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court or that the clause was procured through fraud or overreaching." Foster v. Chesapeake Ins. Ltd., 933 F.2d 1207, 1219 (3d Cir. 1991) (citations and internal quotations omitted).
Weighing the section 1404(a) factors described above in light of the forum selection clause, I find that transfer to the District of Minnesota is appropriate in this case. The plain language of the forum selection clause encompasses this action within its scope and suggests that venue in Minnesota is mandatory. Plaintiff does not contend that the forum selection clause was procured through fraud or overreaching. In fact, the Lease Agreement was a freely negotiated contract entered into by two sophisticated business entities and thus expresses a mutual preference for Minnesota venue. The Bremen, 407 U.S. at 12 (emphasizing that choice of forum was made in arms-length negotiation between sophisticated businessmen). Furthermore, Plaintiff has made no attempt to bear its substantial burden of demonstrating that the chosen forum would be "so gravely difficult and inconvenient" as to deprive him of its day in court. Rather, Plaintiff argues that venue is proper because Defendant Winthrop has consented to suit in the Eastern District of Pennsylvania by virtue of doing business and being susceptible to personal jurisdiction here. This argument is contrary to the plain language of the Lease Agreement and is not supported by case law.
In addition, the District of Minnesota would provide a more convenient forum for this action. Most of Winthrop's employees and all of its records are located in Minnesota. (Def.'s Mot. to Dismiss at 8.) Plaintiffs are required to deliver all payments under the Lease Agreement to Minnesota and are directed to return equipment to Minnesota at the end of the lease term. (Id. at 8.) Furthermore, the Lease Agreement provides that Minnesota internal laws and court decisions are controlling. (Pl.'s Compl. Ex. A at 25.) The local courts of Minnesota have a strong interest in resolving this matter, given that Winthrop, a Minnesota corporation with its principal place of business in Minnesota, utilizes the same or similar contracts in many of its business dealings. Finally, given the fact that related litigation is already pending in the District of Minnesota between these parties, it would be a waste of private and judicial resources to allow Applied Card's claims to remain in this Court while Winthrop's claims are litigated in Minnesota. Weighing the factors governing section 1404(a) and the parties' valid forum selection clause, I find that this action should be transferred to the District of Minnesota. I further conclude that transfer to Minnesota would not be so gravely difficult or inconvenient as to deny Plaintiff its day in court. Accordingly, Defendant's motion to transfer will be granted.
IV. ATTORNEY'S FEES
Defendant Winthrop also requests that this Court award costs and attorneys fees in connection with its defense of this action pursuant to the terms of the Lease Agreement. In light of this Court's decision to transfer this case to the United States District Court for the District of Minnesota, I reserve the determination for that court.
V. CONCLUSION
For the foregoing reasons, Defendant's Motion to Dismiss is granted in part and denied in part. An appropriate order follows.
ORDER
AND NOW, this 23rd day of September, 2003, upon consideration of Winthrop Resources Corporation's Motion to Dismiss, Plaintiffs response thereto, and Defendant's reply, and for the foregoing reasons, it is hereby ORDERED that:
Defendant's Motion to Dismiss (Document No. 2) is GRANTED in part and DENIED in part as follows:
a. Defendant's Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(3), 12(b)(6), and 28 U.S.C. § 1406(a) is DENIED.
b. Defendant's Motion to Transfer pursuant to 28 U.S.C. § 1404(a) is GRANTED and this matter is TRANSFERRED to the United States District Court for the District of Minnesota.
c. Defendant's request for costs and attorney's fees is reserved for determination by the transferee court.