Summary
finding forum selection clause was permissive where it did not contain exclusive or obligatory language and stated that a dispute "may be resolved" in a certain court
Summary of this case from Dutton v. Wells Fargo Bank, N.A.Opinion
Civil Action No. 99-2555-GTV.
May 17, 2000.
Joseph R. Colantuono and Christopher J. Reedy, Wehrman Colantuono, LLC, Leawood, KS; Robert C Goldberg, Schoenberg, Fisher, Newman Rosenberg, Ltd., Chicago, IL, for FINANCIAL SYSTEMS EQUIPMENT, INC., a corporation, plaintiff/counter-defendant.
Fred J. Logan, Jr., Logan Logan, L.C., Prairie Village, KS, EASY SYSTEMS INC. a corporation, defendant/counter-claimant.
MEMORANDUM AND ORDER
Plaintiff Financial Systems Equipment, Inc. brings this action against defendant Easy Systems, Inc. claiming violation of the Kansas Uniform Trade Secrets Act, K.S.A. § 60-3320 et seq., and interference with business expectancy, and seeking damages, an injunction, and a declaratory judgment. The claims arise from a dispute about a software licensing and distribution arrangement between the parties. The case is before the court on defendant's motion to dismiss or transfer for improper venue (Doc. 7). Defendant requests that the court dismiss the action for improper venue pursuant to Fed.R.Civ.P. 12(b)(3) and 28 U.S.C. § 1406(a). For the reasons set forth below, the motion is denied.
I. Legal Standard
The standard for deciding a motion to dismiss for improper venue is generally the same as for deciding a motion to dismiss for lack of personal jurisdiction. See Snyder Indus., Inc. v. Clawson Container Co., 991 F. Supp. 1279, 1280 (D. Kan. 1998); Electronic Realty Assocs. v. Paramount Pictures Corp., 935 F. Supp. 1172, 1175 (D. Kan. 1996). Plaintiff bears the burden of establishing personal jurisdiction over the defendant. Prior to trial, when a motion to dismiss for lack of jurisdiction is decided on the basis of affidavits and other written materials, plaintiff need only make a prima facie showing. The allegations in the complaint must be taken as true to the extent that they are uncontroverted by defendant's affidavits. If the parties present conflicting affidavits, all factual disputes are resolved in plaintiff's favor, and plaintiff's prima facie showing is sufficient notwithstanding the contrary presentation by the moving party. See Behagen v. Amateur Basketball Ass'n, 744 F.2d 731, 733 (10th Cir. 1984); see also Williams v. Bowman Livestock Equip. Co., 927 F.2d 1128, 1130-31 (10th Cir. 1991).
II. Factual Background
In November 1999, plaintiff was a regional distributor of banking software developed and sold by defendant. The relationship between the parties was governed by a Regional Distributor Software License and Distribution Agreement ("Distribution Agreement") first executed in January 1994. The Distribution Agreement authorizes plaintiff to license and distribute defendant's software products, and requires plaintiff to provide defendant with the names and addresses of all its customers as well as information about prospective customers. The agreement contains a venue selection provision, which reads as follows:
19. VENUE/JURISDICTION
The parties specifically agree any dispute arising under this Agreement at ESI's sole discretion may be resolved in the Superior Court of King County, State of Washington. The parties agree that the courts in King County, Washington have jurisdiction in such matters.
The dispute arose when defendant notified plaintiff in November 1999 that it would not be renewing the Distribution Agreement after its expiration. Plaintiff then demanded that defendant refrain from contacting prospective customers whose names were supplied to defendant by plaintiff. Defendant refused to do so. Plaintiff alleges that its lists of prospective customers, given to defendant under the terms of the Distribution Agreement, constitute trade secrets that defendant has illegally misappropriated, and that defendant has illegally interfered with plaintiff's business expectancies.
On November 16, 1999, plaintiff filed suit in the District Court of Johnson County, Kansas (Case No. 99C15887). On December 16, 1999, defendant removed that action to this court pursuant to 28 U.S.C. § 1446.
III. Analysis
Defendant argues that this action should be dismissed on the basis of improper venue pursuant to Fed.R.Civ.P. 12(b)(3) and 28 U.S.C. § 1406(a). In a diversity action, venue is assessed under 28 U.S.C. § 1391(a), which provides that the action may be brought only in (1) a judicial district where any defendant resides, if all defendants reside in the same state, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.
28 U.S.C. § 1406(a) reads, "The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought."
Plaintiff has the burden of showing that venue is proper. See Etienne v. Wolverine Tube, Inc., 12 F. Supp.2d 1173, 1180 (D. Kan. 1998). In its amended complaint (Doc. 32), plaintiff has put forth allegations which demonstrate that a substantial part of the events or omissions giving rise to the claim occurred in the District of Kansas, and that defendant is subject to personal jurisdiction in the District of Kansas. Defendant does not contest these allegations in its motion to transfer, but argues instead that plaintiff has waived its right to bring a claim here due to the venue selection provision in the Distribution Agreement.
The enforcement of a forum selection clause by a federal court sitting in diversity is determined under federal law rather than state law. See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 28 (1988). Forum selection clauses should be enforced unless unreasonable under the circumstances. See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). The Tenth Circuit has held that this rule "should be applied only to agreements which clearly confine litigation to specific tribunals to the exclusion of all others." SBKC Serv. Corp. v. 1111 Prospect Partners, L.P., 105 F.3d 578, 582 (10th Cir. 1997). In other words, "[p]ermissive venue agreements, which provided [sic] only that venue is `proper' or `may be maintained' in a given venue are not true `forum selection clauses' and need not be given exclusive effect."Double A Home Care, Inc. v. Epsilon Sys., Inc., 15 F. Supp.2d 1114, 1115 (D. Kan. 1998) (citing Excell, Inc. v. Sterling Boiler Mechanical, Inc., 106 F.3d 318 (10th Cir. 1997) and SBKC Serv. Corp., 105 F.3d at 582).
"Cases interpreting clauses relating to the commencement of litigation should be driven by the language the parties employed in agreeing upon the locus of litigation between them." SBKC Serv. Corp., 105 F.3d at 581. The court concludes that, according to the plain meaning of the language in the provision — in particular, the phrase "may be resolved" — the provision does not place any limits on either party's right to bring an action in a court outside King County, Washington. See id. at 580 ("If we parse this clause, we begin with the word `may,' which is a word universally recognized as connoting permissiveness."). Defendant argues that the phrase "at [defendant's] sole discretion" precludes jurisdiction anywhere but King County, Washington. The court disagrees. See Aloha Group, Inc. v. ITT Commercial Fin. Corp., No. 86 Civ. 9890 (RWS), 1987 WL 17421, at *2 (S.D.N.Y. Sept. 16, 1987) (concluding that "sole discretion" language in a venue provision "reflects [defendant's] right to elect to initiate any action in Pennsylvania" and "does not vest [defendant] with control over where [plaintiff] brings its actions"). Because the provision does not "clearly confine" litigation to King County, Washington "to the exclusion of all others," this court retains jurisdiction. SBKC Serv. Corp., 105 F.3d at 582.
IT IS, THEREFORE, BY THE COURT ORDERED that defendant's motion to dismiss or transfer for improper venue (Doc. 7) is denied.
Copies of this order shall be mailed to counsel of record.
IT IS SO ORDERED.
Dated at Kansas City, Kansas, this 17 day of May, 2000.