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Tyden Seal Co. v. RTS Wright Indus.

United States District Court, W.D. Michigan
Apr 1, 2004
Case No. 1:03-CV-893 (W.D. Mich. Apr. 1, 2004)

Opinion

Case No. 1:03-CV-893

April 1, 2004


ORDER


In accordance with the Opinion filed this day,

IT IS HEREBY ORDERED that Defendant's Motion to Dismiss or Transfer Venue (Dkt. No. 9) is GRANTED IN PART AND DENIED IN PART. IT IS FURTHER ORDERED that this case will be TRANSFERRED to the Middle District of Tennessee.

OPINION

This matter is before the Court on Defendant's Motion to Dismiss, in which Defendant moves the Court to dismiss this case for failure to state a claim or for improper venue or, in the alternative, to transfer this case to the Middle District of Tennessee. For the reasons that follow, Defendant's Motion will be granted in part and denied in part.

I. Facts

The following statement of facts is a representation of the factual record interpreted in a light most favorable to Plaintiff, who is the non-moving party in this matter. See Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir. 2000).

Plaintiff Tyden Seal Company, Inc. ("Tyden") is a Michigan corporation that is part of the "Tyden Group," which is based in Grand Rapids, Michigan and consists of three companies: Tyden Seal Company, Brammall, Inc. ("Brammall"), and Telesis Technologies. In 1997, Tyden "joined forces" with Brammall, and the two became sister companies; both companies have used the d/b/a TydenBrammall.

In July 2000, Joe Kromkowski, who was then the Director of Product Development and Engineering for Tyden, contacted RTS Wright Industries, Inc. ("RTS"). On July 24, 2000, Douglas H. Pessoni, Applications Engineer for RTS, sent a proposal and price quotation for the Tyden Seal Fabrication and Assembly Machine ("Tyden Seal System") to Kromkowski. The proposal and price quotation included a page titled "Terms and Conditions of Sale" ("RTS Terms and Conditions"), which contained the following paragraphs:

18. Consent to Jurisdiction: Appointment of Process Agent: Buyer hereby irrevocably submits to the jurisdiction of any Tennessee or federal court sitting in Davidson County, Tennessee over any action or proceeding arising out of or relating to the product(s) and agrees that all claims in respect of such action or proceeding may be heard and determined in any such court. Buyer further agrees that venue for any such action shall lie exclusively with courts sitting in Davidson County, Tennessee, unless RTS Wright agrees to the contrary in writing. Buyer irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. Buyer agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
23. Governing Law: This Agreement shall be governed by and construed and enforced in accordance with the laws of the state of Tennessee without giving effect to the principles of conflicts of law.

(Def.'s Ex. C).

In February 2001, TydenBrammall issued a series of Purchase Orders to RTS that included its own set of Terms and Conditions ("TB Terms and Conditions"). On February 23, Dave Thierauf from RTS sent Kromkowski a list of concerns regarding the TB Terms and Conditions. On February 26, Kromkowski sent Thierauf several proposed modifications to the TB Terms and Conditions. On March 2, Thierauf sent Kromkowski a letter accepting the Purchase Order, subject to the following condition: "RTS Wright accepts these Purchase Orders with the understanding that the Terms and Condtisions stated in your letter dated February 26, 2001 (a copy of which is attached) and RTS Wright's Terms and Conditions will be used to replace TydenBrammall's Terms and Conditions as stated on the back of the Purchase Orders." (Def.'s Ex. C). There was no further correspondence between the parties regarding the content of the contract, and RTS began performance on the contract around this time. RTS did not deliver the Tyden Seal System by the deadline agreed to in the contract and Tyden filed suit against RTS in Barry County Circuit Court in the state of Michigan, alleging breach of contract. RTS removed the case to this Court and then filed the current Motion.

II. Rule 12(b)(6) Motion to Dismiss

Defendant first moves the Court to dismiss this case under Federal Rule of Civil Procedure 12(b)(6) on the basis that Tyden is not a real party in interest.

Under Rule 12(b)(6), a court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations. Conley v. Gibson, 355 U.S. 41,45-46 (1957); Hishon v. King Spalding, 467 U.S. 69, 73 (1984). A defendant bringing a motion under Rule 12(b)(6) has the burden of showing a failure to state a claim. Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991). When deciding a motion under this rule, "[t]he court must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitled him to relief." Cline v. Rogers, 87 F.3d 176, 179 (6th Cir. 1996). The rules generally require only a "short and plain statement of the claim" and not detailed allegations. Leatherman v. Tarrant County Narcotics Intelligence Coordination Unit, 507 U.S. 163, 168 (1993) (quoting Conley, 355 U.S. at 47). The complaint, however, "must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988) (citations omitted) (emphasis in original).

Under Federal Rule of Civil Procedure 17(a), "[e]very action shall be prosecuted in the name of the real party in interest." A real party in interest is one "entitled to enforce the right asserted under the governing substantive law." Certain Interested Underwriters at Lloyd's v. Layne, 26 F.3d 39,42-43 (6th Cir. 1994). A claim that a party is not a real party in interest may be brought under Rule 12(b)(6). 2 JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE ¶ 12.34 (2004).

Tyden is the real party in interest in this case. The contract at issue was made for the benefit of Tyden, which intended to use the equipment at issue. Defendant claims Tyden is not the real party in interest because Defendant contracted with TydenBrammall, not Tyden. Because TydenBrammall is a registered trademark of Brammall, Defendant argues Brammall is the real party in interest. According to Plaintiff, however, Tyden and Brammall are sister companies that both use the d/b/a TydenBrammall. Because the Court must construe the complaint in the light most favorable to Plaintiff and accept their factual allegations as true, the Court finds Tyden contracted with Defendant under the d/b/a TydenBrammall and is therefore the real party in interest. As a result, the Court will not dismiss the complaint for failure to state a claim.

III. 12(b)(3) Motion to Dismiss

Defendant also moves to dismiss under Rule 12(b)(3) for improper venue on the grounds that the contract contained a forum selection clause setting venue in the Middle District of Tennessee. Because the parties dispute whether such a clause was incorporated into the contract, the Court must first decide whether this clause became part of the final agreement between the parties.

A. Choice of Law

As a preliminary matter, the Court must first decide whether to apply Michigan or Tennessee law in interpreting the contract. Defendant claims Clause 23, which established Tennessee as the governing law, was incorporated in the final agreement between Plaintiff and Defendant; Plaintiff counters the clause did not become part of the final agreement.

The Court is sitting in this case in diversity in the state of Michigan. "[A] federal court in a diversity case applies the law of the state in which it sits, including that state's choice of law provisions." Davis v. Sears, Roebuck Co., 873 F.2d 888, 892 (6th Cir. 1989) (citing Erie R. Co. v. Tompkins, 304 U.S. 64, 82 (1938)). When dealing with contract disputes, Michigan courts must "balance the expectations of the parties to a contract with the interests of the states involved to determine which state's law to apply." Equitable Life Assurance Soc'y v. Poe, 143 F.3d 1013, 1016 (6th Cir. 1998) (citing Chrysler Corp. v. Skyline Indus. Servs., Inc., 528 N.W.2d 698, 703 (Midi. 1995)). The first issue, then, is whether the expectations of the parties are reflected in Clause 23, i.e., whether this clause became a valid part of the contract.

As a general rule, Michigan courts will uphold a contractual provision mandating the choice of law to be applied to a dispute, so long as "(1) there is a `reasonable relationship' between the chosen state and the transaction, and (2) its enforcement would not offend public policy considerations." New England Mut. Life Ins. Co. v. Gray, 786 F.2d 406, 411 (6th Cir. 1986); Auto. Logistics Productivity Improvement Sys., Inc. v. Burlington Motor Carriers, Inc., 986 F. Supp. 446,448 (E.D. Mich. 1997). But see Omne Fin., Inc. v. Shacks, Inc., 596N.W.2d 591, 596 (Mich. 1999) (suggesting choice of law agreements would have a negative effect on the judicial system).

Under Michigan Compiled Laws § 440.2207 (2004),

(1) A definite and seasonable acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless . . . they materially alter it . . .

Comment 4 to this statute lists the following as examples of clauses that "would normally `materially alter' the contract and so result in surprise or hardship if incorporated without express awareness by the other party":

a clause negating such standard warranties as that of merchantability or fitness for a particular purpose in circumstances in which either warranty normally attaches; a clause requiring a guaranty of 90% or 100% deliveries in a case such as a contract by cannery, where the usage of the trade allows greater quantity leeways; a clause reserving to the seller the power to cancel upon the buyer's failure to meet any invoice when due; a clause requiring that complaints be made in a time materially shorter than customary or reasonable.

In this case, RTS accepted Tyden's Purchase Orders on March 2, 2001, but included in their letter of acceptance the following condition: "RTS Wright accepts these Purchase Orders with the understanding that the Terms and Condtisions stated in your letter dated February 26, 2001 (a copy of which is attached) and RTS Wright's Terms and Conditions will be used to replace TydenBrammall's Terms and Conditions as stated on the back of the Purchase Orders" (Def.'s Exh. C). The list of provisions that materially alter a contract under Mich. Comp. Laws § 440.2207 does not include choice of law provisions. TydenBrammall began performance of the contract, thereby indicating their acceptance of the additional terms. Therefore, Clause 23 designating Tennessee as the governing law was incorporated into the contract as a reflection of the expectations of the parties.

With respect to the enforceability of the clause, there is a rational relationship between Tennessee and the transaction because Defendant is located in Tennessee and because the Tyden Seal System was manufactured in Tennessee. Furthermore, applying Tennessee law does not violate any Michigan public policy considerations. Because the application of Tennessee law reflects the expectations of the parties and because Tennessee has an interest in this litigation, the Court will use Tennessee law to interpret the remainder of the contract. Having established Tennessee as the governing law, the Court now turns to the issue of whether Clause 18, which establishes the Middle District of Tennessee as the proper forum, was incorporated into the contract.

B. Forum Selection Clause

Clause 18 is part of the same Terms and Conditions that were included in RTS Wright's acceptance of TydenBrammall's Terms and Conditions. Tennessee law recognizes the validity of forum selection clauses "unless the party opposing enforcement demonstrates that it would be unfair and inequitable to do so." Dyersburg Mach. Works, Inc. v. Rentenbach Eng'g Co., 650 S.W.2d 378, 380 (Tenn. 1983). Tennessee Code Annotated § 47-2-207 (2003) contains wording identical to Michigan Compiled Laws § 440.2207, and comment 4 to both statutes lists identical examples of clauses that materially alter a contract. As with choice of law provisions, forum selection clauses are not listed as an example of a clause that materially alters a contract. Because Clause 18 does not materially alter the contract and does not seem to be either unfair or inequitable, it was incorporated into the contract. However, the fact that this clause became part of the contract does not end the Court's inquiry because this case was removed to the Court under diversity; as a result, venue is dictated not by the contract, but by federal statute.

The Court notes that, due to the similarities between Mich. Comp. Laws § 440.2207 and Tenn. Code Ann. § 47-2-207, the result would probably be the same under Michigan law. See Moses v. Bus. Card Express, Inc., 929 F.2d 1131,1138 (6th Cir. 1991) (recognizing validity of forum selection clauses under Michigan law).

C. 28 U.S.C. § 1441

Under 28 U.S.C. § 1441 (a), "[e]xcept as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending . . ." The Sixth Circuit Court of Appeals has held that, when an action is removed from state to federal court, venue is governed by § 1441(a) and not by the parties' contractual designation of a forum. Kerobo v. Southwestern Clean Fuels, Corp., 285 F.3d 531,534-35 (6th Cir. 2002). In such cases, venue does not lie in the district designated by the forum selection clause, unless that district is "the district and division embracing the place where [the state court] action [was] pending." Id. at 535 (brackets in original).

This case was originally filed in the Circuit Court for Barry County, Michigan and was removed by Defendant to this Court on the basis of diversity on December 16, 2003. Because this matter was removed on diversity grounds, it could only be removed to the Western District of Michigan under § 1441(a). Therefore, Defendant's argument that venue is improper in this district fails as a matter of law.

IV. Motion for Transfer

Although this case cannot be dismissed for improper venue, Defendant has also filed a Motion for Transfer of Venue under 28 U.S.C. § 1404(a), which the Court must now take into consideration. In this Motion, Defendant moves the Court to transfer this case from the Western District of Michigan to the Middle District of Tennessee.

Under 28 U.S.C. § 1404(a), a district court may, for the convenience of the parties and witnesses and in the interest of justice, "transfer any civil action to any other district or division where it might have been brought." Even when a case cannot be dismissed under § 1441(a) for improper venue, the court may transfer the case when the convenience of the parties and witnesses and the interests of justice so require. Kerobo, 285 F.3d at 539. In Kerobo, the Sixth Circuit held that § 1404 "[controls] the issue of whether to transfer the case in accordance with the forum-selection clause." Id. at 537.

The party moving for transfer generally bears the burden of proving transfer is warranted by the circumstances. Viron Int'l Corp. v. David Boland, Inc., 237 F. Supp.2d 812, 815 (W.D. Mich. 2002). However, when the parties have agreed to a forum selection clause that sets venue in a different forum, the burden shifts to the party opposing transfer. Id.

When considering a motion to transfer venue, courts should consider the following ten factors: (1) convenience of the parties and the witnesses, (2) accessibility of sources of proof, (3) the costs of securing testimony from witnesses, (4) practical problems associated with trying the case in the least expensive and most expeditious fashion, (5) the interests of justice, (6) the relative congestion in the courts of the two forums, (7) the public's interest in having local controversies adjudicated locally, (8) the relative familiarity of the two courts with the applicable law, (9) the plaintiff's original choice of forum, and (10) whether the parties have agreed to a forum selection clause. Id. at 816. The Court will now look at each of these factors in turn.

1) Convenience of Parties and Witnesses

Although Plaintiff argues it would be inconvenienced by a transfer of venue to the Middle District of Tennessee, "[t]he parties' convenience is already reflected in the mandatory forum selection clause," which places venue in the Middle District of Tennessee. Id. Therefore, the Court will evaluate the convenience of the parties as weighing in favor of a transfer to the Middle District of Tennessee, the forum identified in the forum selection clause. Plaintiff has identified potential witnesses located in Michigan, while Defendant has identified potential witnesses located in Tennessee. Because some witnesses will be inconvenienced in either venue, the location of the witnesses neither favors nor disfavors a transfer.

2) Accessibility of Sources of Proof

Defendant argues the equipment disputed in this lawsuit is located in Tennessee, while Plaintiff notes that some equipment that could be relevant to the case was delivered to its plant in Michigan. Therefore, this factor weighs equally in support of venue in Tennessee or Michigan.

3) Cost of Securing Testimony

As the parties point out in their briefs, witnesses are located in both Michigan and Tennessee. Neither party has identified any witnesses whose testimony would be particularly difficult to secure in a different venue. Therefore, the cost of securing testimony is not a factor in the Court's decision.

4) Practical Problems

Because Plaintiff and Defendant are located in two different states, the Court faces some practical problems in trying this case regardless of whether venue remains in Michigan or is transferred to Tennessee. Neither party has identified any extraordinary problems that would arise if this case took place in either Michigan or Tennessee. Therefore, this factor favors neither state as the forum for litigating this dispute.

5) Interests of Justice

Plaintiff argues that Michigan law generally disfavors the enforcement of forum selection clauses, citing to Omne, 596 N.W.2d at 596. However, Omne dealt, not with forum selection clauses, but rather with choice of law clauses. In fact, Michigan law does recognize the validity of forum selection clauses. New England Mut. Life Ins., 786 F.2d at 411; Auto. Logistics, 986 F. Supp. at 448. Furthermore, Michigan's public policy with respect to forum selection clauses is irrelevant to the Court's analysis because the Motion to Transfer is being brought under federal law rather than state law. See Viron, 237 F. Supp.2d at 818 (finding federal rather than state law should be used to decide a Motion to Transfer brought under § 1404(a)). Therefore, this factor neither favors nor disfavors a transfer.

6) Relative Congestion in Courts

According to Plaintiff, the court docket in the Middle District of Tennessee is more congested than the court docket in the Western District of Michigan. The Middle District of Tennessee has over twice as many civil cases over three years old than the Western District of Michigan, and the median time from filing to trial in civil cases is about three months longer in the Middle District of Tennessee than in the Western District of Michigan. As a result, this factor weighs in favor of retaining venue in the Western District of Michigan.

7) Public Interest

As a general matter, the public does not have an interest in the resolution of a contractual dispute between two private parties. Id. at 819. Therefore, this factor neither favors nor disfavors a transfer.

8) Relative Familiarity with Applicable Law

Defendant argues that, because the Court is required to apply Tennessee law under Clause 18 of the contract, this factor weighs in favor of transfer. However, both Michigan and Tennessee have adopted the Uniform Commercial Code ("UCC"). Therefore, a court sitting in the Western District of Michigan would be "no less competent to rule on the parties' contractual dispute than a federal court sitting in diversity in" the Middle District of Tennessee. See Viron, 237 F. Supp.2d at 819 (finding Michigan equally competent to rule on a contractual matter in diversity as Florida, when both states had adopted the UCC). Because both states have adopted the UCC, this factor neither favors nor disfavors transfer.

9) Plaintiff's Original Choice of Forum

As with the first factor, convenience to the parties, the Court will not give weight to Plaintiff's decision to file suit in Michigan because Plaintiff agreed to a forum selection clause. Id. Because the forum selection clause, which should be read as an indication of the parties' intent, sets venue in the Middle District of Tennessee, this factor weighs in favor of a transfer.

10) Forum Selection Clause

The parties in this case agreed to a forum selection clause placing venue in the Middle District of Tennessee. Therefore, this factor weighs in favor of a transfer to that district.

Of the ten factors named in Viron, only one, relative congestion in the courts, weighs in favor of retaining jurisdiction in the Western District of Michigan. Three factors (convenience of the parties, the plaintiff's original choice of forum, and the presence of a forum selection clause) weigh in favor of transfer to the Middle District of Tennessee. The remaining factors neither favor nor disfavor transfer. Because more factors favor transfer than retention of venue, the Court finds Plaintiff has not met its burden of proof and will transfer this case to the Middle District of Tennessee.

V. Conclusion

Defendant's Motion to Dismiss or, in the Alternative, to Transfer, will be granted in part and denied in part, and this case will be transferred to the Middle District of Tennessee. An Order consistent with this Opinion shall be issued.


Summaries of

Tyden Seal Co. v. RTS Wright Indus.

United States District Court, W.D. Michigan
Apr 1, 2004
Case No. 1:03-CV-893 (W.D. Mich. Apr. 1, 2004)
Case details for

Tyden Seal Co. v. RTS Wright Indus.

Case Details

Full title:TYDEN SEAL COMPANY, INC., Plaintiff, v. RTS WRIGHT INDUSTRIES, LLC…

Court:United States District Court, W.D. Michigan

Date published: Apr 1, 2004

Citations

Case No. 1:03-CV-893 (W.D. Mich. Apr. 1, 2004)