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concluding that "dismissal for improper venue, unaccompanied by a motion to transfer venue, is proper when a forum selection clause provides for venue" in "the federal or state courts located in Ohio," which is home to two federal judicial districts
Summary of this case from High Rev Motorsports, L.L.C. v. Yang Ming Marine Transp. Corp.Opinion
CA No. 3-03-CV-2189-R.
April 21, 2004
MEMORANDUM OPINION AND ORDER
Now before the Court is Defendant National Administrative Solutions Corp.'s motion to dismiss (filed January 16, 2004) the claims of Plaintiffs Marino Enterprises, L.P. and D.B. Inc. for improper venue. For the reasons stated below, Defendant's motion is GRANTED in part and DENIED in part.
I. BACKGROUND
Plaintiffs Marino Enterprises, L.P. ("Axis") and D.B. Incorporated ("D.B.") have brought five causes of action against Defendant National Administrative Solutions Corporation ("NASC"). First, Axis brings claims against NASC for breach of contract and fraudulent inducement. These claims arise from a contract (the "Service Agreement") between Axis and NASC executed July 14, 2003.
Second, D.B. asserts claims against NASC for breach of fiduciary duty and fraudulent inducement. D.B. alleges that its claims arise from an agreement whereby NASC agreed to act as a fiduciary on behalf of D.B. in connection with monies deposited by D.B. into a bank account under the sole direction and control of NASC. This agreement was allegedly executed on July 7, 2003.
Third, Axis brings a breach of contract claim on a separate contract allegedly formed between NASC and co-Defendant Balboa Insurance Company ("Balboa"). Axis, not party to this contract, claims that NASC breached a duty owed to Axis as a third-party beneficiary.
II. ANALYSIS
A. Motion to Dismiss Standard
In considering a motion to dismiss for improper venue, a court accepts the uncontroverted facts in the plaintiff's pleadings as true, and resolves any factual conflicts in the plaintiff's favor. etradeshow.com, Inc. v. Netopia Inc., No. Civ.A.3:03-CV-1380-K, 2004 WL 515552, at *2 (N.D. Tex. Jan 30, 2004). See also James v. Booz-Allen Hamilton, Inc., 227 F. Supp.2d 16, 20 (D.C. Cir. 2002). Once a defendant raises a 12(b)(3) motion, the plaintiff has the burden of establishing venue. etradeshow.com, Inc., 2004 WL 515552, at *2. Absent an evidentiary hearing, a plaintiff may sustain its burden by presenting facts, taken as true, that establish venue. Id.
B. Axis's Claims Against NASC Under the Axis-NASC Contract
1. Forum Selection Clause
Axis brings two claims against NASC arising from the Service Agreement. NASC, however, claims that Axis's claims are precluded by the forum selection clause of the contract, which provides for exclusive venue in the federal or state courts of Ohio.
In M/S Bremen v. Zapata Offshore Co., the Supreme Court held that forum selection clauses "are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be `unreasonable' under the circumstances." M/S Bremen v. Zapata Offshore Co., 407 U.S. 1, 10 (1972). In determining whether a forum selection clause is unreasonable or unjust a court may consider factors such as whether consent to the clause was secured by fraud, undue influence, or overweening bargaining power, or whether the contractual forum is a serious inconvenience for one or both parties. Id. at 12, 16.
Axis does not allege that the forum selection clause was the product of fraud, undue influence, or overweening bargaining power. Because Axis accepted the clause as part of a bargained-for exchange, litigating in Ohio is not "so gravely difficult and inconvenient" that Axis would "be deprived of his day in court." Id. at 18. Accordingly, the Court finds the agreement valid and enforceable.
2. Treatment of Motion to Dismiss
Axis requests that the Court transfer venue under Fed.R.Civ.P. 1404(a) rather than dismiss the claim outright in the event venue is improper. NASC's motion to dismiss for improper venue stands alone. Although this District has previously ordered transfer of venue where venue was held to be improper, it has not done so in response to a motion to dismiss for improper venue unaccompanied by a motion to transfer venue.
See, e.g., Beauticontrol, Inc. v. Burditt, No. CIV.A.3:01CV0744-M, 2001 WL 1149360 (N.D. Tex. Sept. 26, 2001).
In VarTec Telecom, Inc. v. BCE, Inc., the plaintiffs argued that dismissal is appropriate only where the forum selection clause mandates a state forum. VarTec Telecom, Inc. v. BCE, Inc., No. 3:01-CV-2585-M, 2003 WL 22364302, at *6 (N.D. Tex. Oct. 9, 2003). There, a forum selection clause restricted all proceedings to the District of Columbia. Id. at *3. Rejecting this argument as "unconvincing . . . in light of the more general analysis that the Fifth Circuit uses in International Software," the Court dismissed the claims. Id. at *6. Thus, the court concluded that dismissal for improper venue, unaccompanied by a motion to transfer, is proper when a forum selection clause provides for venue in both federal and state court.
See International Software Systems, Inc. v. Amplicon, 77 F.3d 112 (5th Cir. 1996) (holding that a motion to dismiss, unaccompanied by a motion to transfer, need not be treated as a motion to transfer, where a forum selection clause provided for venue in state court).
Because the Service Contract here provides that "[a]ny actions or proceedings relating to dispute [sic] arising out of or related to this agreement shall . . . have their exclusive venue in, the federal or state courts located in Ohio," dismissal is appropriate, and the Court will dismiss the two Axis claims against NASC under the Service Contract for improper venue, leaving § 1404(a) analysis unnecessary.
C.D.B.'s Claims Against NASC
D.B. alleges that NASC agreed to act as a fiduciary in connection with the deposit of certain monies into an account under the sole control of NASC. This agreement allegedly took place on July 7, 2003. According to D.B., this agreement did not provide for a forum selection clause, and it cannot be bound by the forum selection clause of a separate contract. D.B. has not submitted a copy of the alleged agreement or indicated whether the agreement was reduced to writing, but have submitted an affidavit stating that an agreement was executed.
NASC denies agreeing to act as a fiduciary on behalf of D.B. It alleges that the July 7 exchange to which Plaintiffs' allegations refer was actually a "letter of intent." Defendant submits that this July 7 letter of intent was not a separate enforceable contract but instead merely served as a basis for the subsequent Service Agreement executed July 14, 2003, between NASC and Axis. Therefore, NASC alleges that no separate agreement existed between D.B. and NASC. According to NASC, the only contract in effect between it and either of Plaintiffs was the July 14 NASC-Axis Service Contract.
To bind a non-party to a forum selection clause, the party must be closely related to the dispute such that it becomes foreseeable that it will be bound. See, e.g., Hugel v. Corp. of Lloyd's, 999 F.2d 206, 209 (7th Cir. 1993); Baker v. LeBoef, Lamb, Leiby, Macrae, 105 F.3d 1102 (6th Cir. 1997); Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 514 (9th Cir. 1988). The "letter of intent" NASC attaches to its motion fails to unambiguously indicate whether it was dealing with Axis, as NASC suggests, or with D.B. For example, the signature of Sandra Marino, who serves as both the President of D.B. and a partner of Axis, does not specify any representative capacity. This ambiguity leaves open the possibility that this letter was actually an exchange with D.B. rather than Axis. Indeed, the facsimile script at the header of the letter indicates that the document was faxed to "Omniauto," which is the name under which D.B. — not Axis — does business. Moreover, although the fax script indicates a July 7, 2003 transmission, the letter itself is dated July 2, 2003. By contrast, D.B.'s affidavit provides that NASC agreed to act as D.B.'s fiduciary "on or about July 7, 2003." Finally, the text of the document itself fails to elucidate exactly what purpose the letter serves. As such, Defendant has not established that the letter of intent is one and the same as the agreement that D.B. alleges it entered into with NASC concerning fiduciary duty.
Resolving all factual conflicts in favor of D.B., the court must assume, for purposes of the motion to dismiss, that a separate contract existed between D.B. and NASC whereby NASC agreed to act as a fiduciary of D.B. If a separate contract existed between D.B. and NASC, NASC's argument that D.B. is subject to the forum selection clause is unavailing. Accepting D.B.'s factual allegations as true, and resolving factual conflicts in its favor, the D.B.-NASC agreement predated the final Service Agreement between Axis and NASC by approximately seven days. Thus, regardless of how "closely related" D.B. is to the dispute between Axis and NASC, it was not "foreseeable" that D.B. would be bound by a forum selection clause in a contract that had not yet been formed. Accordingly, the motion to dismiss will be denied as to D.B.'s claims against NASC.
D. Axis's Claim Against NASC As Third-Party Beneficiary
Axis brings a third claim against NASC, claiming third-party beneficiary status as to an Administrative Agreement between NASC and Balboa. Contrary to Axis's allegations, NASC denies that the agreement between it and Balboa was ever executed. NASC further notes that the draft of the contemplated agreement provided: "This Agreement shall not be deemed to give any right or remedy to any third party whatsoever unless said right or remedy is specifically granted to such third party by the terms hereof."
In determining whether a third party can enforce a contract, the intention of the contracting parties is controlling. MCI Telecommunications Corp. v. Texas Utilities Elec. Co., 995 S.W.2d 647, 651 (Tex. 1999). A court will not create a third-party beneficiary contract by implication. Id. Unless an intention to contract or confer a direct benefit to a third party is clearly and fully spelled out, enforcement by the third party will be denied. Id.
Even assuming the existence of a valid agreement between NASC and Balboa, the unambiguous text of the alleged contract does not clearly provide any benefit to Axis. To the contrary, the text reflects that the signatories specifically intended to not create any third-party rights or remedies. Nothing in the document supports an inference that Axis was intended to be a creditor beneficiary, a donee beneficiary, or anything more than an incidental beneficiary. See id. at 652. Accordingly, Axis's claim on the NASC-Balboa contract will be dismissed.
III. CONCLUSION
For the foregoing reasons, Defendant NASC's motion to dismiss for improper venue is GRANTED as to the breach of contract and fraudulent inducement claims of Plaintiff Axis under the Service Agreement, and as to the breach of contract claim based on the alleged agreement between NASC and Balboa. With respect to the breach of fiduciary duty and fraudulent inducement claims of Plaintiff D.B., the motion is DENIED.