Opinion
Cause No. IP99-1296-C-T/G
August 7, 2000
ENTRY ON DEFENDANT'S MOTION TO DISMISS OR, IN THE ALTERNATIVE, TO TRANSFER VENUE
Defendant, Worldwide Entertainment Group, LLC ("Worldwide"), filed a motion to dismiss the Complaint of Plaintiff, Cinram, Inc. ("Cinram"), under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction, and under Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1406(a) for improper venue. In the alternative, Worldwide seeks to transfer venue to the United States District Court for the District of New Jersey, Newark Vicinage, under 28 U.S.C. § 1404(a) and 1406(a). Based upon the applicable law and review of the memorandum submitted by the parties, Worldwide's motions should be DENIED.
I. Background
Cinram is a Delaware corporation with its U.S. headquarters in Richmond, Indiana and manufacturing facilities in Huntsville, Alabama, Anaheim, California, and Richmond. (See Fookes Aff. ¶¶ 2, 3). Cinram also conducts business through its parent corporation which is located in Scarborough, Ontario, Canada. (See Ison Aff. ¶¶ 2, 10; Jumani Aff. ¶¶ 7, 9). Cinram replicates recording media onto formats such as compact discs, videos, and digital versatile discs ("DVDs"). (See Ison Aff. ¶ 3). Worldwide is a New Jersey limited liability company with its principal place of business in Guttenberg, New Jersey. (See Jumani Aff. ¶ 1; Compl. and Answer ¶ 4). Cinram filed suit against Worldwide alleging breach of contract and check deception. Worldwide filed a counterclaim against Cinram alleging breach of contract, breach of warranties, copyright infringement and fraud.
This cause of action arises out of a July, 1998, agreement entered into between Cinram and Worldwide whereby Cinram would manufacture certain DVDs for Worldwide. (See Ison Aff. ¶ 5). As part of the July agreement, Worldwide executed a written Credit Application and Agreement ("Credit Agreement") on July 17, 1998. (See id.) Sometime thereafter, Cinram opened Worldwide's account and conducted business with Worldwide. (See id. ¶ 6).
The Credit Agreement contains a forum selection clause which is at the center of the current dispute. The forum selection clause reads as follows:
GOVERNING LAW. CONSENT TO JURISDICTION. WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INDIANA WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. THE PARTIES AGREE THAT NEITHER SHALL COMMENCE ANY LITIGATION OR ANY OTHER TYPE OF PROCEEDINGS AGAINST THE OTHER PARTY OVER A DISPUTE ARISING OUT OF THIS AGREEMENT OR EITHER PARTY'S RIGHTS AND OBLIGATIONS HEREUNDER, EXCEPT IN A COURT LOCATED IN WAYNE COUNTY, INDIANA OR MARION COUNTY, INDIANA. EACH PARTY CONSENTS TO AND SUBJECTS ITSELF TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR IN ANY MANNER RELATED TO THE PURCHASE AND SALE OF GOODS AND EACH PARTY AGREES THAT SUCH JURISDICTION AND VENUE ARE REASONABLE AND JUST UNDER THE CIRCUMSTANCES. EACH PARTY EXPRESSLY WAIVES THE RIGHT TO A JURY TRIAL AS TO ANY ISSUES ARISING OUT OF ANY SUCH DISPUTE.
(Credit Agreement ¶ 14). In sum, under the terms of the forum selection clause, the parties agree that Indiana law shall apply to disputes arising under the Credit Agreement and waive personal jurisdiction and venue challenges to causes of action brought in a court located in Wayne or Marion County, Indiana.
Worldwide challenges the validity and enforceability of the Credit Agreement, and consequently personal jurisdiction and venue in this court, on the grounds that the Credit Agreement was not ratified and accepted by Cinram because Cinram did not execute the Credit Agreement.
II. Analysis
In order to properly evaluate Worldwide's motions, it must first be determined whether the Credit Agreement is a valid and binding contract. If the Credit Agreement is a valid and binding contract, it must then be determined whether the forum selection clause is valid and enforceable. If either the Credit Agreement or the forum selection clause is not valid, the court must then (1) determine whether Worldwide's conduct falls within Indiana's long-arm statute, Indiana Rule of Trial Procedure 4.4(A), and (2) engage in a minimum contacts analysis under International Shoe Co. v. Washington, 326 U.S. 310 (1945), and its progeny to ensure that constitutional due process requirements are satisfied if personal jurisdiction is exercised over Worldwide. Finally, if Worldwide's motion to dismiss is denied, its motion to transfer the case to New Jersey must be considered.
A. Personal Jurisdiction And Venue
Worldwide argues that this court lacks personal jurisdiction over it and that venue is improper in this district. Worldwide relies on application of the Indiana long-arm statute, minimum contacts analysis under International Shoe and its progeny, and 28 U.S.C. § 1391 (a) and 1406(a). Cinram responds that Worldwide has waived its personal jurisdiction and venue challenges by entering into the Credit Agreement which contains a valid and enforceable forum selection clause. If the Credit Agreement is a binding contract and the forum selection clause is valid and enforceable, Worldwide has waived its personal jurisdiction and venue challenges. Therefore, Cinram's arguments will be addressed first.
1. Credit Agreement
Worldwide argues that the Credit Agreement is not a binding contract because it was not ratified or accepted by Cinram. Worldwide bases this argument on "principles of basic contract law." (Def.'s Mem. Supp. at 10). Cinram responds that the Credit Agreement is a valid and binding contract.
A choice-of-law analysis is necessary to determine what law to apply in analyzing the validity of the Credit Agreement. Because this court sits in Indiana, it must apply Indiana's choice of law principles. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). "Indiana's choice of law rule for contract actions calls for applying the law of the forum with the most intimate contacts to the facts." Employers Ins. of Wausau v. Recticel Foam Corp., 716 N.E.2d 1015, 1024 (Ind.Ct.App. 1999). In the present case, Indiana has the most intimate contacts to the facts, and therefore, Indiana law governs. Cinram's U.S. headquarters are located in Indiana (see Fookes Aff. ¶ 3); until November or December, 1998, Cinram's accounting department was located in Indiana and all accounting functions were performed in Indiana (see id. ¶¶ 4, 8; Ison Aff. ¶¶ 4, 8); Worldwide's Credit Agreement was approved in Indiana (see Ison Aff. ¶ 6, Fookes Aff. ¶ 8); all invoices for shipments from Cinram to Worldwide were mailed from Indiana (see Fookes Aff. ¶¶ 10, 11); and Worldwide made payments to Cinram in Indiana (see id. ¶ 13).
Note that New Jersey employs this same choice of law rule for contract actions. See Bell v. Merchants and Businessmen's Mut. Ins. Co., 575 A.2d 878, 880-81 (N.J.Super.Ct. App. Div. 1990) (holding that New Jersey has adopted the "most significant relationship" standard) (citations omitted).
Neither party argues that a state other than Indiana has the most intimate contacts to the facts.
Under Indiana law, "[t]hree rudimentary elements must be present before an agreement may be considered a contract: offer, acceptance of the offer and consideration." Straub v. B.M.T., 645 N.E.2d 597, 598 (Ind. 1994). "[T]he validity of a contract is not dependent upon the signature of the parties, unless such is made a condition of the agreement." International Creative Management, Inc. v. D R Entertainment Co., Inc., 670 N.E.2d 1305, 1312 (Ind.Ct.App. 1996); see also Pohl v. United Airlines, Inc., — F. Supp.2d-(S.D.Ind. 1999) ("[A]s long as there is evidence to show that a meeting of the minds has occurred, a signed document is not the sine qua non to the creation of a binding contract."), aff'd, 213 F.3d 336 (7th Cir. 2000). However, "some form of assent to the terms of the contract is necessary[.]" Natare Corp. v. Aquatic Renovation Sys., Inc., 987 F. Supp. 695, 699 (S.D.Ind. 1997). "Assent may be expressed by acts which manifest acceptance." International Creative, 670 N.E.2d at 1312.
Which party bears the burden of proof is governed by state law. See Guaranty Trust Co. v. York, 326 U.S. 99, 109 (1945) ("[W]e have held that in diversity cases the federal courts must follow the laws of the State as to burden of proof[.]") (citation omitted); see also McEwen v. Delta Air Lines, Inc., 919 F.2d 58, 59 (7th Cir. 1990) ("State law provides the burden of proof . . . when it supplies the rule of decision.") (citations omitted). Indiana law provides that, "The party urging the validity of the contract bears the onus of proving its existence." Ochoa v. Ford, 641 N.E.2d 1042, 1044 (Ind.Ct.App. 1994) (citation omitted). Thus, Cinram bears the burden of proving the existence of a valid contract.
Cinram's actions subsequent to the execution of the Credit Agreement by Worldwide amount to a manifestation of acceptance of the Credit Agreement. Cinram, after receiving the executed Credit Agreement, opened Worldwide's account. (See Ison Aff. ¶ 6). Additionally, Cinram accepted purchase orders from Worldwide, replicated DVDs for Worldwide and shipped DVDs to Worldwide. (See id. ¶ 8; Fookes Aff. ¶ 9) These actions are in conformance with the contract. Thus, Cinram's actions amounted to acceptance of the Credit Agreement. Therefore, the Credit Agreement is a valid and binding contract.
It is not necessary to address any issues surrounding the copy of the Credit Agreement attached to Mr. Cotto's Affidavit bearing his signature as an agent for Cinram. Whether a copy of the Credit Agreement executed by Cinram exists is irrelevant because Cinram assented to the contract though its actions.
2. Forum Selection Clause
If the forum selection clause is valid and enforceable, Worldwide has waived any personal jurisdiction and venue challenges it may have otherwise had. See RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1280 (7th Cir. 1997) (recognizing that personal jurisdiction is waivable); Heller Financial, Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1292 n. 4 (7th Cir. 1989) ("Obviously, a valid forum-selection clause, even standing alone, can confer personal jurisdiction."); National Hydro Sys. v. Summit Constructors, Inc., 731 F. Supp. 264, 266 (N.D.Ill. 1989) ("When a party presents the court with a forum-selection clause . . . the defendant waives not only his or her right to contest personal jurisdiction, but the right to challenge venue as well.") (citation omitted). The validity and enforceability of the forum selection clause are thus at the very heart of this dispute. Although the forum selection clause states that the Credit Agreement "shall be governed and construed in accordance with the laws of the state of Indiana" (see Credit Agreement ¶ 14), "the parties may determine what law shall control this issue[.]" Polar Mfg. Corp. v. Michael Weinig, Inc., 994 F. Supp. 1012, 1015 (E.D.Wis. 1998). In their briefs, Cinram and Worldwide cite and rely on federal common law in arguing this issue. By relying on federal common law, the parties have apparently waived their right to rely upon Indiana law. See id. at 1014-15 (citing Luce v. Edelstein, 802 F.2d 49, 57 n. 4 (2d Cir. 1986) (court ignored choice of law clause when not raised by the parties); LFC Lessors, Inc. v. Pacific Sewer Maintenance Corp., 739 F.2d 4, 6-7 (1st Cir. 1984) (same)). Therefore, federal common law will control the determination of the validity and enforceability of the forum selection clause. Cf. Northwestern Nat'l Ins. Co. v. Donovan, 916 F.2d 372, 374 (7th Cir. 1990) (opining that the validity of a forum selection clause is "probably" a matter of federal common law).
Note that applying federal common law here is a distinction without difference. If Indiana law was applied, the analysis applied and outcome determined would be the same as that under federal common law. See Horner v. Tilton, 650 N.E.2d 759, (Ind.Ct.App. 1995) (applying the Supreme Court's analysis in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), in finding a forum selection provision to be valid).
In M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972), the Court held that forum selection clauses are presumptively enforceable and "should be enforced unless enforcement is shown by the resisting party to be `unreasonable' under the circumstances." The Bremen Court held that when considering whether to enforce a forum selection clause, a court should consider (1) whether the clause is the result of fraud, undue influence or overweening bargaining power, (2) whether enforcement of the clause would effectively bar the suit because of grave inconvenience, and (3) whether enforcement of the clause would violate a strong public policy. See id. at 12, 15, 17-18; see also Paper Express, Ltd. v. Pfankuch Maschinen, 972 F.2d 753, 757 (7th Cir. 1992) ("Like any contract provision, a forum-selection clause will be enforced unless enforcement would be unreasonable or unjust or the provision was procured by fraud or overreaching.").
Note that although Bremen is a case in admiralty, "`its teachings are not limited to such cases. Lower federal court have consistently applied The Bremen analysis to cases involving only domestic parties and causes of action other than admiralty.'" L.A. Pipeline Constr. Co. v. Texas Eastern Products Pipeline Co., 699 F. Supp. 185, 188 (S.D.Ind. 1988) (quoting Friedman v. World Transp., Inc., 636 F. Supp. 685, 698 (N.D.Ill. 1986)).
There is no evidence of fraud, undue influence, or overweening bargaining power in this case. Even if Ranchor Jumani's Reply Affidavit, filed some two and one-half months after the time for such a filing had expired, were allowed, the information contained therein does not amount to fraud, undue influence, or overweening bargaining power. Worldwide appears to contend that the Credit Agreement, when executed by its agent Mr. Jumani, may have been illegible and, thus, had he attempted to read the forum selection clause he would not have been able to do so. (See Jumani Reply Aff. ¶ 9). This apparent contention is inconsequential. First, there is no evidence that the copy of the agreement executed by Mr. Jumani was illegible. Second, the issue is whether Worldwide "`had a reasonable opportunity to read and understand the term[s.]'" Northwestern, 916 F.2d at 377 (quoting Bastian v. Wausau Homes, Inc., 635 F. Supp. 201, 203-04 (N.D.Ill. 1986)). Although Worldwide contends that the Credit Agreement was executed in "a matter of a few minutes" (Jumani Reply Aff. ¶ 8), there is no evidence that Mr. Jumani did not have an opportunity to read and understand the terms had he wished to do so. Also, Worldwide has not identified any public policy that would be violated by enforcement of the clause. The only issue left to consider is whether Worldwide can "show that trial in the contractual forum will be so gravely difficult and inconvenient that [it] will for all practical purposes be deprived of [its] day in court." Bremen, 407 U.S. at 18.
Although the court recognizes the inconvenience and cost to Worldwide of defending this case in Indiana, that argument is not enough to persuade the court to find the forum selection clause agreed to by the parties to be invalid. Worldwide has failed to satisfy "the heavy burden of proof required to set aside the [forum selection] clause on grounds of inconvenience." Carnival Cruise Lines v. Shute, 499 U.S. 585, 595 (1991). Worldwide has not demonstrated that if forced to litigate in Indiana, it would be denied its day in court. Worldwide has presented no evidence that it will be "gravely" expensive to litigate in Indiana, such as having the need to transport a large number of witnesses for trial. Furthermore, New Jersey is not so far in distance from Indiana that travel between the states is unduly burdensome. Therefore, the forum selection clause is valid and enforceable, and as a result, personal jurisdiction and venue challenges are waived.
Worldwide does state that it will be tremendously costly for it to have to employ both general and local counsel. (See Jumani Aff. ¶ 10). This is apparently no longer an issue as Worldwide's New Jersey counsel has withdrawn from this matter.
Because Worldwide waived personal jurisdiction and venue, application of the Indiana long-arm statute, minimum contacts analysis under International Shoe and its progeny and analysis of 28 U.S.C. § 1391(a) and 1406(a) need not be addressed.
B. Transfer Of Venue
In the alternative, Worldwide urges the court to disregard the forum selection clause and transfer the case to the District of New Jersey. Worldwide bears the burden of establishing that transfer to New Jersey is clearly more convenient. See Coffey v. Van Dorn Iron Works, 796 F.2d 217, 219-20 (7th Cir. 1986) ("The movant . . . has the burden of establishing, by reference to particular circumstances, that the transferee forum is clearly more convenient."). Worldwide argues that because it is a family-owned business, because all of its employees and staff reside in New Jersey, because Cinram maintains an office in Brooklyn, New York, and in the interests of justice this case should be transferred. Worldwide's arguments boil down to one central point: it would be very inconvenient and costly for Worldwide to defend this case in Indiana.
Worldwide relies on Anderson v. Sportmart, Inc., 57 F. Supp.2d 651 (N.D.Ind. 1999), as supporting its argument that venue ought be transferred. In Andersen, the court engaged in a constitutional minimum contacts analysis and determined that "personal jurisdiction over [Defendant] in Indiana offends the notions of due process." Id. at 661. Because of the valid forum selection clause in the case, a minimum contacts analysis was not necessary here. (See discussion above.). Andersen is thus distinguishable from this case.
Federal law, specifically 28 U.S.C. § 1404(a), governs this court's decision whether to transfer venue to the District of New Jersey. See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 32 (1988); L.A. Pipeline Constr. Co. v. Texas Eastern Products Pipeline Co., 699 F. Supp. 185, 186 (S.D.Ind. 1988) ("In Stewart, the Supreme Court held that federal law, specifically 28 United States Code Section 1404(a), governs a district's court's decision of whether to give effect to the parties' forum-selection clause."). Section 1404(a) provides:
In presenting its transfer of venue argument, Worldwide, at least in making its motion, relies in part on 28 U.S.C. § 1406(a). Because venue is proper as determined above, this section is not applicable here. Worldwide also mentions the doctrine of forum non conveniens, but this doctrine is not helpful to Worldwide because "[l]ess of a showing of inconvenience is needed for a § 1404(a) transfer than that for a forum non conveniens dismissal." Coffey, 796 F.2d at 220 (citations omitted). Thus, Worldwide's argument will be considered only under 28 U.S.C. § 1404(a).
For the conveniences 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.28 U.S.C.A. § 1404(a) (West 1993). Under Section 1404(a), the court must weigh the private concerns of the parties, the convenience of the witnesses, "and those public-interest factors of systematic integrity and fairness that . . . come under the heading of `the interests of justice.'" Stewart, 487 U.S. at 30.
Because the forum selection clause is valid, Worldwide has waived its right to move for a transfer of venue on the grounds of costs or inconvenience to itself. See Northwestern, 916 F.2d at 378 ("We held in Heller, and we repeat, that the signing of a valid forum selection clause is a waiver of the right to move for a change of venue on the ground on inconvenience to the moving party."). "If there is inconvenience to some third party . . . or to the judicial system itself, then either party to the suit is free to move for change of venue." Id. Therefore, the only issues to be considered are (1) the convenience of the witnesses and (2) the interests of justice.
The convenience of the witnesses does not dictate a transfer of venue to New Jersey. Cinram has its U.S. headquarters in Indiana where it performs many functions. Cinram's witnesses who must travel to attend a trial may be traveling from any number of places, including Indiana, California, Alabama, New York, and Canada. Cinram's witnesses residing outside the state of Indiana can travel to Indiana just as easily as they can travel to New Jersey, with a possible exception for witnesses traveling from New York. In fact, given Indiana's central location in the United States, it may be more convenient for witnesses who must travel to travel to Indiana rather than to New Jersey.
Worldwide fails to identify why this case should be transferred in the interests of justice. And, the court can find no sufficient reason that, in the interests of justice, the forum selection clause should be disregarded and Cinram refused the benefits of its bargain with Worldwide. For all of the foregoing reasons, venue will remain in this district. In light of the foregoing, Defendant's motion to dismiss for lack of personal jurisdiction and improper venue is DENIED; and Defendant's motion to transfer venue is DENIED.