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In Independent Stationers, Inc. v. Vaughn, 2000 WL 1449854 (S.D.Ind. Jan. 3, 2000), for instance, the court read a forum-selection clause specifying that “any action to enforce this Agreement... may be brought in the courts of Indiana” as merely permissive; it noted, however, that a clause using the same language, but with the phrase “shall be brought” instead, would have been mandatory.
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Cause No. IP99-0127-C-M/S
January 3, 2000.
Michael Rosiello Barnes Thornburg 1313 Merchants Bank Building 11 South Meridian Street Indianapolis, IN 46204
Elliott D Levin Rubin Levin 500 Marrott Center, 342 Massachusetts Ave Indianapolis, IN 46204-2161
ORDER
This matter comes before the court on a motion filed on May 11, 1999, by Defendants, William Vaughn, Saundra Vaughn (the "Vaughns"), and Prestige Office Supply, Inc. ("Prestige"), (collectively the "Defendants"), seeking to transfer venue of this action to the United States Bankruptcy Court for the Eastern District of Oklahoma (the "Bankruptcy Court"). Alternatively, the Vaughns seek to dismiss this action for lack of subject matter jurisdiction, for lack of standing, for lack of personal jurisdiction, and/or for failure to plead fraud with particularity.
The Vaughns have also moved to strike paragraphs four, six and seven of the Campbell Affidavit filed by ISI in support of its response to the various motions. The Court did not use those portions of the Campbell Affidavit in deciding this motion, therefore, the motion is DENIED as moot.
Plaintiff, Independent Stationers, Inc. ("ISI"), commenced this diversity action against the Defendants for breach of contract (Count I), unjust enrichment (Count II), and account stated (Count III). Shortly after ISI filed the complaint, Prestige filed a bankruptcy petition in the Bankruptcy Court. The petition is currently pending and all action against Prestige has been automatically stayed under 11 U.S.C. § 362.
The complaint does not contain a claim for fraud, therefore, the Court need not consider the Defendants' motion to dismiss for failure to plead fraud with particularity pursuant to Federal Rule of Civil Procedure 9(b).
Section 362(a)(1) of the Bankruptcy code provides that filing a petition for bankruptcy shall operate as a stay to "the commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title. . . ." 11 U.S.C. § 362 (a)(1).
Notwithstanding the stay, the motion to transfer venue filed by the Defendants collectively and the alternative motions filed by the Vaughns are ready to be resolved. The pertinent issues have been fully briefed and, for the reasons stated herein, the Court GRANTS the motion to transfer venue. In addition, the motions to dismiss for lack of subject matter jurisdiction, for lack of standing or for lack of personal jurisdiction are DENIED as moot.
I. FACTUAL AND PROCEDURAL BACKGROUND
From July 1985 to January 1995, the Vaughns owned and operated a business under the name of Prestige Office Supply in Muskogee, Oklahoma. Vaughn Aff. ¶ 1. In June of 1993, Prestige Office Supply commenced doing business with ISI. Id. ¶ 2. In December of that same year, ISI contacted the Vaughns and asked them to execute a Membership Agreement. Id. ¶ 16. Prestige Office Supply finally entered into a Membership Agreement (the "Agreement") with ISI on November 17, 1994. Compl. Ex. A. The Agreement authorized the member to purchase office supply products and merchandise from ISI for resale. Id. ¶¶ 1, 2.02.
There appears to be confusion about the form of the business conducted by the Vaughns under the name Prestige Office Supply. The confusion stems from the conflicting information the Vaughns have given about the nature of that business. On the Membership Agreement executed by Saundra and William Vaughn on behalf of Prestige Office Supply in favor of ISI, the Vaughns, with the option to choose between a sole proprietorship, a partnership and a corporation, checked off that the business was a sole proprietorship. See Compl. Ex. A. However, both Saundra and William Vaughn signed their names on the Membership Agreement in the spots designated for partners or corporate officers without designating the capacity in which they were signing. Id. In her affidavit, Saundra Vaughn states that the business operated as a partnership. Vaughn Aff. ¶ 1.
On January 28, 1995, the Vaughns formed an Oklahoma corporation, Prestige Office Plus, Inc., and transferred the assets of Prestige Office Supply to that corporation. Vaughn Aff. ¶ 3. The corporation assumed the debts of Prestige Office Supply. Id. ¶ 14. Prestige Office Plus, Inc. subsequently changed its name to Prestige Office Supply, Inc. ("Prestige") in November of 1998. Id. The Vaughns were the officers of Prestige; Saundra Vaughn was the President and William Vaughn was the Secretary/Treasurer. Id. ¶ 7.
Saundra Vaughn provided written notice of the changed business name to ISI on May 2, 1995, and again on July 26, 1995. Id. ¶ 6; id. Ex. A. Specifically, she requested that ISI "change [their] account over, effective 5-1-95 to Prestige Office Plus, Inc., member #201." Id. Ex. A. When Saundra Vaughn made the first request, she included a corporate check with a new bank account number in order to facilitate electronic funds transfer to ISI from Prestige. See id. ¶ 13; id. Exs. A, F.
Prestige and ISI never entered into a Membership Agreement, although a business relationship ensued between them. Compl. ¶¶ 8, 13, 20, 26; Vaughn Aff. ¶¶ 14, 15. For at least two years, Prestige purchased office supply products and merchandise from ISI, and ISI received payments from the corporate account for the goods. Vaughn Aff. ¶ 14. However, between September 29, 1997, and January 21, 1999, ISI did not receive any payments from Prestige for office supplies and merchandise it supplied. Compl. ¶ 9. The alleged amount due for the products and merchandise ordered and received during that period is $307,663.82. Id. To secure Prestige's indebtedness, on December 21, 1998, ISI requested that Prestige execute a Security Agreement and that the Vaughns execute a Guaranty Agreement. Vaughn Aff. ¶¶ 9, 10; id. Exs. B, C. Neither of those agreements were executed.
To collect the debt, ISI filed a complaint on February 3, 1999, against Prestige and the Vaughns for breach of contract, unjust enrichment, and account stated. On March 4, 1999, Prestige filed a bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Oklahoma. Vaughn Aff. ¶ 8. ISI has filed a claim against Prestige in the Bankruptcy Court. Pl.'s Resp. To Defs.' Motions, at 8. In response to the Complaint, the Defendants filed a motion seeking to transfer venue of this action to the Bankruptcy Court. In the alternative, the Vaughns seek dismissal of the claims against them for lack of subject matter jurisdiction, lack of standing, lack of personal jurisdiction, and/or failure to plead fraud with the particularity required by Federal Rule of Civil Procedure 9(b).
II. STANDARDS
Change of Venue Pursuant to 28 U.S.C. § 1412 Change of venue for proceedings related to a case under title 11 is governed by 28 U.S.C. § 1412. See In re Bruno's Inc., 227 B.R. 311 (Bankr.N.D.Ala. 1998) (applying § 1412 rather than § 1404, because the plain language of the statute states that it is applicable to a "proceeding" under title 11). That section provides: "A district court may transfer a case or proceeding under title 11 to a district court for another district, in the interest of justice or for the convenience of the parties." 28 U.S.C. § 1412. The statute is phrased in the disjunctive, therefore "[e]ach requirement is discrete." In re Toxic Control Tech., Inc., 84 B.R. 140, 143 (Bankr.N.D.Ind. 1988). Thus, transferability pursuant to § 1412 is an either-or test, not a two-fold one. See id.
Section 1412 provides that a district court "may" transfer a case or proceeding. See Kotlicky v. Belford, 64 B.R. 679, 681 (Bankr.N.D.Ill. 1986). Such language is permissive, not mandatory. See id. The decision to transfer is subject to the broad discretion of the district court. See In re Toxic Control Tech., 84 B.R. at 143; In re Butcher, 46 B.R. 109, 112 (Bankr.N.D.Ga. 1985).
In determining whether to grant a motion to transfer a case or proceeding, a court must weigh the following factors:
1) The proximity to the bankruptcy court of assets, creditors, debtors, it principals, evidence, and witnesses.
2) The willingness or abilities of parties, debtor and creditors alike, to participate in the case or in adversary proceedings, vis-a-vis one venue over another.
3) The economical and efficient administration of the estate.
4) The availability of compulsory process for attendance of unwilling witnesses and the cost of obtaining their attendance.
5) The applicability of State law to the case and adversary proceedings.
6) The intertwined relationships of the debtors.
7) The necessity for ancillary administration.
8) A local interest in localized controversy decided at home.
In re Toxic Control Tech., 84 B.R. at 143 (citations omitted). Undeniably, the most important factor is whether the transfer would promote the economic and efficient administration of the estate. See Kotlicky, 64 B.R. at 682; In re Butcher, 46 B.R. at 112. Motions for transfer under § 1412 require a case-by-case consideration of the abovementioned factors. See In re Toxic Control Tech., 84 B.R. at 143. The moving party bears the burden of persuading the court by a preponderance of the evidence that a case or proceeding should be transferred. See id.
III. DISCUSSION
Venue
A district court may not transfer an action pursuant to 28 U.S.C. § 1412 to another district court (or in this case, a bankruptcy court) unless that action can be classified as a "case" or "proceeding" under title 11. Therefore, the Court must conduct a preliminary inquiry into the nature of the action at bar.
Initially, a distinction must be drawn between a "case" in bankruptcy and a "proceeding." A case is commenced by filing a petition with the bankruptcy court. See 11 U.S.C. § 301-03. "A case includes the actual administration of the bankruptcy from the time of its filing until the case is finally closed." Kotlicky, 64 B.R. at 680 n. 2 (citing Stamm v. Rampco Foam, Inc., 21 B.R. 715, 723 (Bankr.W.D.Penn. 1982)). In contrast, a "proceeding" is a litigated matter connected to the bankruptcy case. See id. In essence, a bankruptcy "case" encompasses a "proceeding."
Proceedings in bankruptcy are divided into three categories: 1) civil proceedings arising under title 11; 2) civil proceedings arising in a case under title 11; and 3) civil proceedings related to a case under title 11. See 28 U.S.C. § 157(a), 1334(b). Proceedings that can be said to "arise under" title 11 or "arise in" a case under title 11, "arise during the bankruptcy proceeding and concern the administration of the bankrupt estate, such as whether to discharge a debtor." Zerand-Bernal Group, Inc. v. Cox, 23 F.3d 159, 161 (7th Cir. 1994). The Seventh Circuit has adopted a narrow definition for proceedings "related to" a bankruptcy case, holding that the dispute must directly affect "the amount of property for distribution or the allocation of property among creditors." In re Xonics, Inc., 813 F.2d 127, 131 (7th Cir. 1987). Accord In re Fedpak Sys., Inc., 80 F.3d 207, 214 (7th Cir. 1996); In re Memorial Estates, Inc., 950 F.2d 1364, 1368 (7th Cir. 1991), cert. denied, 504 U.S. 986 (1992); Home Ins. Co. v. Cooper, Ltd., 889 F.2d 746, 749 (7th Cir. 1989). A mere overlap between the bankrupt's affairs and another dispute is insufficient unless that dispute directly affects either the assets of the estate or their distribution to creditors. See Home Ins., 889 F.2d at 749; In re White Trailer Corp. v. HPA Asset, L.L.C., 222 B.R. 322, 325 (Bankr. N.D. Ind. 1998).
Compare the broad interpretation of a "related to" proceeding applied in other circuits, see In re Lemco Gypsum, Inc., 910 F.2d 784, 788 (11th Cir. 1990) (a proceeding is "related to" a case under title 11 if it could have any possible conceivable effect on the debtor's estate); Wood v. Wood, 825 F.2d 90, 93 (5th Cir. 1987); In re Dogpatch U.S.A., Inc., 810 F.2d 782, 786 (8th Cir. 1987); In re Salem Mortgage Co., 783 F.2d 626, 634 (6th Cir. 1986).
The "related to" language is primarily intended to allow proceedings that would ordinarily be stand alone lawsuits, were it not for bankruptcy, to be forced into the bankruptcy court so that all claims by and against the debtor can be decided in the same forum. Zerand-Bernal Group, 23 F.3d at 161. It permits proceedings against the debtor to be aggregated into one suit in order to prevent efforts by individual creditors to affect the amount of property in the debtor's estate "in ways that may be privately beneficial but collectively harmful." National Tax Credit Partners, L.P. v. Havlik, 20 F.3d 705, 708 (7th Cir. 1994).
In the instant case, the Defendants argue that this proceeding is related to the bankruptcy case filed by Prestige in the Bankruptcy Court. First, the Defendants argue that any claims brought against Prestige itself is related to the bankruptcy case because resolution of those claims will have a direct effect on the assets of the Prestige estate or the distribution of assets to creditors. In addition, Prestige owns shares of stock that potentially can help offset any debt owing to ISI, and the corporation also owns accrued rebates that could be used for the same purpose. Disposition of these assets is within the exclusive jurisdiction of the Bankruptcy Court; therefore, transfer of venue for this action to the Bankruptcy Court is appropriate. Further, the Vaughns argue that the claims against them are also related to the bankruptcy case because they are derivative of the liability of Prestige or Prestige's predecessor company, Prestige Office Supply. As such, these are claims that a trustee or a debtor in possession may bring and are property of the estate. Finally, the Defendants argue that judicial efficiency is served by transferring venue because one court can resolve all claims against all defendants.
In contrast, ISI asserts that it is not trying to continue its suit against Prestige, it is only pursuing its claims against the Vaughns as individuals. Further, ISI claims that the Vaughns signed the Agreement in their personal capacities as sole proprietors. Therefore, any products sold to them, "even if such products were used by third-parties," and any account deficiency incurred thereby subjects them to individual liability. Pl.'s Resp. To Defs.' Motions, at 8. ISI also argues that even if the Vaughns assigned the Agreement to Prestige, it does not release them from personal liability on the underlying debt. ISI compares the Vaughns' liability to that of a guarantor of a bankrupt debtor.
ISI's arguments assume that it is obvious the Vaughns are independently liable for the debt incurred from purchases made during the period September 29, 1997 through January 21, 1999. That assumption is not so obvious. The Agreement designated that Prestige Office Supply was the "member," which seems clear enough. Compl. Ex. A, at 1. However, there is an ambiguity on the face of the Agreement about the form of that business, which has a direct affect on the Vaughns' liability. The Vaughns' designated that the business was a sole proprietorship. Compl. Ex. A, at 1. However, both of the Vaughns signed the Agreement without designating the capacities in which they signed, partners or officers. Further, the extrinsic evidence provided by Saundra Vaughn's affidavit states that the business was operated as a partnership. Vaughn Aff. ¶ 1. The face of the Agreement, however, is ambiguous. As a result, the type of business the Vaughns operated before the incorporation in 1995, and their capacities in relation thereto, is an issue of fact. See Sperling v. Marler, 963 P.2d 577, 582 (Okla. 1998) (citing Johnson v. Plastex, 500 P.2d 596, 597 (Okla.Ct.App. 1972)); see also Peoples Bank Trust Co. v. Price, 714 N.E.2d 712, 716 (Ind.Ct.App. 1999) (citing Bicknell Minerals, Inc. v. Tilly, 570 N.E.2d 1307, 1310 (Ind.Ct.App. 1991), trans. denied). This has an impact on liability for the Vaughns because sole proprietors are directly liable for debts of the sole proprietorship, whereas partners are derivatively liable for the debts of a partnership. Compare Bishop v. Wilson Quality Homes, 986 P.2d 512, 514-15 (Okla. 1999) ("The individual who does business as a sole proprietor under one or several names remains one person, personally liable for all his obligations.") with Southard v. Oil Equip. Corp., 296 P.2d 780, 784 (Okla. 1956) ("`[P]artners as such are not directly or personally liable on a debt or liability of the partnership. Their liabilities arise out of their connection with the firm and are traceable only through the firm and must be established by a judgment against the firm.'") (quoting Fowler v. Brooks, 146 P.2d 304, 307 (Okla. 1944)); also with FDIC v. Frates, 44 F. Supp.2d 1176, 1226 (N.D.Okla. 1999) (stating the same). Compare also Mullis v. Brennan, 716 N.E.2d 58, 62-63 (Ind.Ct.App. 1999) (discussing individual liability) with United States v. Wright, 57 F.3d 561, 563 (7th Cir. 1995) ("Indiana . . . apparently requires creditors to exhaust their efforts to collect from the partnership before turning to the partners.") (citing Thompson v. Wayne Smith Constr. Co., 640 N.E.2d 408 (Ind.App. 1994)). Therefore, a determination of the type of business the Vaughns ran is critical to resolution of their liability.
In addition, if it is determined that the Vaughns Prestige Office Supply business was in fact a partnership, a claim against the Vaughns as partners must flow from the partnership. Stated differently, a creditor must pursue claims against a partnership before it may pursue them against the individual partners. See Southard, 296 P.2d at 784; see also Wright, 57 F.3d at 563. However, here, the partnership's assets and liabilities were transferred to Prestige. Vaughn Aff. ¶¶ 3, 14. Therefore, any claims against the partnership have been absorbed by Prestige. Thus, any claims to hold the Vaughns liable as general partners of the Prestige Office Supply would be owned by Prestige and would be property of the estate. See National Tax Credit Partners, 20 F.3d at 707-08. Further, if ISI seeks to hold the Vaughns liable under some equitable estoppel or other argument that makes the incorporation of Prestige Office Supply to Prestige ineffective, that determination directly affects the liability of Prestige. See Mulkey v. Anglin, 25 P.2d 778, 779 (Okla. 1933) (stating that whether a corporation that had been converted from a partnership actually acted as a corporation was a question of fact bearing on the liability of the alleged partners).
Next, ISI's argument that the Vaughns are guarantors fails because the Vaughns never executed a guaranty, nor do their potential positions as partners present them with such liability for debts incurred by the partnership. As discussed above, partners are derivatively liable for the debts of the partnership; they do not act as guarantors. Even if the Vaughns operated a sole proprietorship, the sole proprietor would have individual liability for debt incurred by the sole proprietorship. However, here the Vaughns argue that Prestige Office Supply, in whatever form, ceased to exist in 1995 when the Vaughns transferred the assets of that entity to the corporation Prestige. Thus, the debt ISI seeks to recover from the Vaughns was not incurred until after that business had evolved. Compare Compl. ¶ 9 with Vaughn Aff. ¶ 3. This allegation further ties the potential liability of Prestige for the entire debt to the Vaughns' liability, because the Vaughns will certainly argue that the transfer of Prestige Office Supply's debts upon incorporation of Prestige and payment in full of those debts after incorporation relieves them from personal liability for future purchases by the corporation.
In addition, ISI presents no evidence or alleges that the Vaughns maintained the partnership for the purpose of purchasing merchandise for the corporation as a third party beneficiary. Rather, the claims only allege that the Vaughns and Prestige breached the contract, were unjustly enriched, or owe on account stated. Compl. ¶¶ 15, 21-22, 26-27. The claims themselves belie ISI's attempt to fashion an argument that Prestige was a third-party beneficiary of the Agreement. There is no division of the debt as to each of the defendants, just the statements that the amount owed is based on the amount of product ordered and received by Prestige and the Vaughns for which ISI never received payment. Compl. ¶¶ 9, 13, 20, 26. Further, the complaint states that "Prestige: (a) ratified and adopted the Agreement; (b) purchased products pursuant to the Agreement; and (c) took advantage of the terms of the Agreement." This claim suggests that Prestige's liability for the debt stems directly from the contract rather than from Prestige's position as a third party beneficiary.
Clearly the resolution of this dispute turns on the liability of the Defendants vis-a-vis the timing of the transactions that gave rise to the debt, and the agreements between ISI and Prestige Office Supply, and those, if any, between ISI and Prestige. In other words, the main issue is whether Prestige or the Vaughns owe on the account held by ISI. Stating that the liability of the Defendants is separable does not make it so, for the liability of the Defendants appears inextricably intertwined given the fact that no written contract exists between ISI and Prestige.
Finally, ISI has made a claim in the Bankruptcy Court for the same amount it seeks in this suit. Thus, the claim against Prestige here is clearly "related to" the bankruptcy case. Furthermore, presumably, if ISI recovers the full amount from Prestige in the Bankruptcy Court, it will not need to pursue the claims against the Vaughns. Similarly, if ISI recovers from the Vaughns in their personal capacities, presumably that recovery would reduce the amount of its claim against Prestige in the Bankruptcy Court. See In re Destron, Inc., 38 B.R. 310, 313 (N.D.Ill. 1984) (finding that recovery by a plaintiff/creditor against a non-debtor/defendant would affect the amount of assets available to unsecured creditors of the debtor, therefore, the claim was related to the bankruptcy proceeding). Again, it appears that the liability of Prestige and that of the Vaughns is inextricably intertwined.
The issues involved in resolving this proceeding between ISI and the Vaughns is sufficiently intertwined with Prestige's liability for the debt that it would have an effect on the assets available for distribution to Prestige's creditors. Therefore, the Court finds this suit "related to" Prestige's bankruptcy case as it is interpreted in the Seventh Circuit. See In re Xonics, Inc., 813 F.2d 127, 131 (7th Cir. 1987); see also 28 U.S.C. § 157(a), 1334(b). Having found the proceeding "related to" Prestige's bankruptcy case, the Court will assess whether to transfer venue of this action to the Bankruptcy Court.
The balance of the factors stated above weighs toward granting transfer. First, the Bankruptcy Court certainly has the best proximity to the debtor's principals, the corporation's assets and the corporation's creditors. In addition, the relationship of the debtor, Prestige, and the Vaughns in this proceeding is intertwined such that the determination of liability in this court will affect the availability of assets to creditors in the bankruptcy case. Further, the transfer of this proceeding to the Bankruptcy Court would enhance the economic and efficient administration of the estate by ensuring that all of Prestige's possible defenses, including potential cross claims against the Vaughns, could be raised for the benefit of Prestige's creditors. Certainly judicial efficiency weighs toward having this dispute resolved in a single forum when the Defendants' potential liability is so intertwined.
Other factors appear neutral. Both Oklahoma and Indiana law would likely be involved in resolving this dispute. The Vaughns' businesses were formed in Oklahoma, therefore, any issues related to their liability as owners of a sole proprietorship, partnership or corporation would likely be determined by Oklahoma law. See Secon Serv. Sys., Inc. v. St. Joseph Bank Trust, 855 F.2d 406, 412-13 (7th Cir. 1988) (citing Indiana's choice of law rule factors and their relevance to an issue of liability of shareholders of a corporation and finding that the law of the state of incorporation would prevail, following the majority rule). However, the Agreement contained a choice of law clause that would govern any issues related to that contract and all other agreements and transactions between ISI and the member; that clause chooses Indiana as its forum. See Compl. Ex. A ¶ 13. As a result, that factor is somewhat neutral. Arguably, the factor that favors localized controversies to be decided in the home forum is also neutral because both Oklahoma and Indiana have an interest in the outcome. Further, ISI disputes transferring venue of this action thus showing its preference to litigate in Indiana, however, ISI has already made a claim in the Bankruptcy Court for the amount it is owed. In that way, ISI has shown the ability to participate in proceedings in the transferee forum, if not a "willingness" to participate as delineated in the factors above.
Finally, ISI asserts that the Vaughns' arguments for transferring venue amount to no more than an assertion about their inconvenience in having to litigate in Indiana. The Agreement's forum selection clause, ISI continues, should prohibit the Vaughns from making this argument. Therefore, ISI concludes, the Court should deny the Vaughn's motion to transfer venue. Generally, forum selection clauses are valid. See Heller Financial, Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1290 (7th Cir. 1989); see also Northwestern Nat'l Ins. Co. v. Donovan, 916 F.2d 372, 376-77 (7th Cir. 1990). No federal cases discuss the effect of a forum selection clause on a motion to transfer venue under 28 U.S.C. § 1412 made by a co-defendant of a debtor. However, courts have considered the effect of such a clause on a motion to transfer venue under 28 U.S.C. § 1404(a). The prevailing view is that "[d]espite the existence of a valid forum-selection clause, courts may still transfer a case under § 1404(a)." Heller Financial, 883 F.2d at 1293 (citing Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988); Plum Tree, Inc. v. Stockment, 488 F.2d 754, 757-58 (3d Cir. 1973); Rouse Woodstock, Inc. v. Surety Federal Savings Loan, 630 F. Supp. 1004, 1008 (N.D.Ill. 1986)). The primary reason for this rule is that only one of the factors the court must weigh under § 1404(a), the convenience of the parties, may be waived by the parties. Id. The parties may not waive the other factors, in the interests of justice and the convenience of witnesses. Id. Thus, a party seeking to transfer venue under § 1404(a) may not use the convenience of the parties in its argument for transfer. However, a court may still weigh the other factors.
Section 1404(a) provides: "For the convenience of 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. § 1404(a).
Applying this logic to cases under § 1412 suggests that when a forum selection clause exists the party seeking to transfer venue may not use its own convenience as the reason to transfer venue, rather, the party must satisfy the interests of justice prong to prevail. As noted above, § 1412 only requires that a party show either for the convenience of the parties or for the interests of justice the Court should transfer the case. 28 U.S.C. § 1412; In re Toxic Control Tech., 84 B.R. at 143. Thus, similarly to § 1404(a), the only prong of § 1412 that the parties may waive by agreement is the convenience of parties.
As a result, a valid forum selection clause should only foreclose a litigant from arguing that a proceeding should be transferred under § 1412 for the convenience of the parties.
Assuming the forum selection clause in the Agreement here is valid, using this rule does not change the result here. Some of the relevant factors for determining the interests of justice include "ensuring a speedy trial, trying related litigation together, and having a judge who is familiar with the applicable law try the case." Heller Financial, 883 F.2d at 1293. These factors are similar to those the Court used in the analysis above. In fact, the most important factor in the analysis is whether transfer would promote economic and efficient administration of the estate. The Court has already discussed that transfer would accomplish that result because the liability of Prestige is intertwined with the liability of the Vaughns such that the outcome of a suit against the Vaughns alone would affect the availability of assets to Prestige's creditors. In addition, the liability of the Vaughns may turn more on what type of business they ran and whether conversion of the business to the corporate form was effective-likely issues of Oklahoma law-rather than issues of contract law. Contrary to ISI's argument that the Vaughns seek to transfer this case for their own convenience, the interests of justice provide sufficient basis to transfer venue.
The parties do not discuss the validity of the forum selection clause, however, whether the clause makes Indiana the mandatory forum is questionable. The clause at issue states:
Member agrees that any action to enforce this Agreement or to collect indebtedness from merchandise and services purchased by Member from IS[I] may be brought in the courts of Indiana, and Member expressly consents to and agrees that notice by certified mail of any such action to the address set forth herein shall be sufficient notice to confer jurisdiction of the person in Indiana for such action.
Compl. Ex. A ¶ 14 (emphasis added). The language of the provision is written with the permissive language "may" not the mandatory language of "shall." The Court would interpret this language with the prevailing Seventh Circuit rule that "where venue is specified with mandatory or obligatory language, the clause will be enforced; where only jurisdiction is specified, the clause will generally not be enforced unless there is some further language indicating the parties' intent to make venue exclusive." Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753, 756 (7th Cir. 1992). See also Hull 753 Corp. v. Elbe Flug Zeugwerke GmbH, 58 F. Supp.2d 925, 927 (N.D.Ill. 1999). Thus, the main purpose of this clause appears to be to get the member to consent to personal jurisdiction in Indiana, not to establish Indiana as the exclusive place to litigate disputes about the contract.
III. CONCLUSION
The Defendants, Prestige Office Supply, Inc., Saundra Vaughn and William Vaughn, having shown by a preponderance of the evidence that transfer of this action to the Bankruptcy Court for the Eastern District of Oklahoma would be in the interest of justice, have met their burden. The Defendants' motion to transfer venue is hereby GRANTED. The alternative motions to dismiss are DENIED as moot.