Opinion
4:01CV603
July 10, 2002
MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS OR, IN THE ALTERNATIVE, MOTION TO TRANSFER
The defendant Holland Colors Americas, Inc. (hereinafter Holland) moves to dismiss this action for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1406, or, in the alternative, to transfer the case to Indiana pursuant to 28 U.S.C. § 1404(a). After reviewing the materials submitted by the defendant Holland and the plaintiff Nebraska Plastics, Inc. (hereinafter Nebraska Plastics), I find that Holland's motion will be denied.
Although the motion also refers to Federal Rule of Civil Procedure 12(b)(2) as a basis for dismissal, the defendant Holland does not address this provision in its brief. See Fed.R.Civ.P. 12(b)(2) (outlining defense of "lack of jurisdiction over the person"). I will therefore treat that portion of the motion as abandoned. See NELR 7.1(a)(1) ("In the event the court concludes that the motion raises a substantial issue of law, the failure to submit a brief may be treated as an abandonment of the motion.")
Background
The plaintiff Nebraska Plastics is a Nebraska corporation with its principal place of business in Cozad, Nebraska, where it manufactures plastic products, including vinyl PVC fencing. The defendant Holland is a Delaware corporation with its principal place of business in Richmond, Indiana, where it designs, manufactures, and sells pigment or colorant for a wide variety of polymers including PVC. The defendant OMYA, Inc. (hereinafter OMYA), is a Vermont corporation with its principal place of business in Proctor, Vermont, where it designs, manufactures, and sells calcium carbonate products.
In 1996, Nebraska Plastics began manufacturing colored vinyl fencing using raw products and pigments from the defendant Holland and calcium carbonate from the defendant OMYA. Prior to that time, Nebraska Plastics had manufactured only white vinyl fencing. Between April of 1996 and February of 2001, Nebraska Plastics sold approximately 8.5 million pounds of colored vinyl fencing and other plastic products using the raw materials supplied by the defendants. In November of 1997, Nebraska Plastics' customers began complaining that the company's colored vinyl fencing was fading excessively, contrary to the company's warranty assuring color fastness and weatherability. According to Nebraska Plastics, it has replaced the damaged fencing at fourteen sites, "with more anticipated in the future." Petition ¶ 10 (filing 1 at Attach. 1).
On October 3, 2001, Nebraska Plastics filed suit in the district court of Dawson County, Nebraska, alleging breach of warranty, negligence, and fraud claims. The defendants removed the action to this court. The defendant Holland then moved to dismiss the case or, alternatively, to transfer it to Indiana.
The defendant OMYA moved for an extension of time in which to file and serve a brief in opposition to the defendant Holland's motion, and OMYA's motion was granted. See filing 12, 13. In reviewing the file, however, I have been unable to locate any brief from OMYA on this matter.
Analysis
The defendant Holland's motion focuses primarily on the effect of a forum selection clause that is included in an alleged contract between Holland and the plaintiff Nebraska Plastics. The alleged contract provides, in relevant part, as follows: "Applicant agrees that in the event legal action becomes necessary, jurisdiction and preferred venue shall remain in Richmond, Wayne County, Indiana." Aff. of Tineke Veldhuis at Ex. A (filing 19). This clause, Holland argues, warrants dismissal under Rule 12(b)(3) and 28 U.S.C. § 1406. In the alternative, Holland contends that the case should be transferred pursuant to 28 U.S.C. § 1404(a).As an initial matter, there appears to be some question as to whether Holland's motion under § 1406(a) and Rule 12(b)(3) is the appropriate procedural vehicle to enforce the forum selection clause contained in the alleged contract. Section 1406(a) provides that "[t]he 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." 28 U.S.C. § 1406(a) (emphasis supplied); see also Fed.R.Civ.P. 12(b)(3) (outlining defense of "improper venue"); 2 James Wm. Moore et al., Moore's Federal Practice § 12.32[1] (3d ed. 1997) ("Although . . . Rule [12(b)(3)] provides the vehicle for challenging venue and dismissing the claim if improper, the substantive standard for determining the propriety of venue appears in 28 U.S.C. § 1391."). Thus, in order to dismiss a suit under this statute, venue must be improper in this court. The substantive standard for analyzing the propriety of venue is found in 28 U.S.C. § 1391. Holland does not argue that venue is "wrong" based on this statutory standard. Instead, Holland is apparently arguing that the forum selection clause renders venue in Nebraska improper, and that dismissal is therefore appropriate under § 1406(a).
Because "`[f]ederal law does not presently provide for a motion expressly designed for forum selection clause enforcement, . . . attorneys have had to invoke an assortment of rules and concepts that were not designed with forum selection clauses in mind.'" Steward v. Up North Plastics, Inc., 177 F. Supp.2d 953, 957 (D.Minn. 2001) (quoting McCloud Constr., Inc. v. Home Depot USA, Inc., 149 F. Supp.2d 695, 697 (E.D.Wis. 2001)). Although it appears that the Eighth Circuit has not yet addressed the issue directly, "numerous circuit courts have split on the appropriate vehicle for bringing a motion to enforce a forum selection clause." Id. (citations omitted). There is authority indicating that § 1406(a) is not the appropriate vehicle "when venue in the original forum is otherwise statutorily proper." Id.; see also Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 28 n. 8 (1988) (suggesting that when venue is statutorily proper in the district where suit is filed, a motion to dismiss or transfer under § 1406(a) based on a forum selection clause is properly denied); Steward, 177 F. Supp.2d at 957-58 ("Since Stewart, numerous courts have relied on footnote eight from Stewart and concluded that venue is laid in the `wrong' division or district under § 1406 only when there is no statutory basis for venue[.]" (citations omitted)). However, I see no need to resolve the "enigmatic question" of whether a forum selection clause makes venue improper in any but the contractual forum, as I am inclined to agree with Nebraska Plastics that the clause on which Holland relies is not part of an enforceable contract between the parties. See Haynsworth v. Lloyd's of London, 121 F.3d 956, 961 (5th Cir. 1997) (declining to resolve the "enigmatic question of whether motions to dismiss on the basis of forum selection clauses are properly brought as motions under Fed.R.Civ.P. 12(b)(1), 12(b)(3), or 12(b)(6), or 28 U.S.C. § 1406(a)" (note omitted)).
I also note that although the defendant Holland moves, in the alternative, for a transfer of venue to "the U.S. District Court in Indiana," the forum selection clause indicates that venue is proper only in Indiana state court. See Aff. of Tineke Veldhuis at Ex. A (filing 19) ("Applicant agrees that in the event legal action becomes necessary, jurisdiction and preferred venue shall remain in Richmond, Wayne County, Indiana."); Br. in Supp. of Mot. to Dismiss at 10 ("[I]n the event the court determines that the forum selection clause does not exclusively require the pending litigation to be brought in Indiana state court, Holland has also moved for an order, in the alternative, transferring venue of this case from Nebraska to Indiana pursuant [to] 28 U.S.C. § 1404(a). . . ."); id. at 20 ("If the court overrules defendant's Motion to Dismiss, defendant prays, in the alternative, that its Motion to Transfer pursuant to 28 U.S.C. § 1404(a) be sustained and the case be transferred to the U.S. District Court in Indiana.").
The forum-selection clause appears in an untitled, letter-like form that requests Nebraska Plastics' sales tax exemption number and federal identification number. See Aff. of Tineke Veldhuis at Ex. A (filing 19). The form indicates that if Nebraska Plastics does not supply the requested information, Holland "[would] be required by law to charge sales tax on all orders shipped to [Nebraska Plastics]." Id. The form mentions, in three short paragraphs, Holland's 30-day net payment terms, its product return policy, and the possibility of default collection costs . Id. After the forum selection clause, the form states that "Applicant further agrees that the line of credit desired and approved is not a limitation of liability." Id. The form concludes as follows: "Please complete this form and return the original to us along with your standard credit statement listing business references (with fax number) as soon as possible. Your time and cooperation is [sic] greatly appreciated. If you have any questions please contact the Holland Colors Accounting Department." Id. The address, telephone number, and fax number for the Holland accounting department are printed at the bottom of the form. Id.
The form is signed by "Larry G. Harvill[,] Controller," and is dated November 23, 1999. Id. The evidence indicates that as the controller, Harvill did have the authority to supply the requested taxpayer identification information, but did not have the authority to enter into binding contracts with the company's suppliers. See Aff. of Larry G. Harvill ¶¶ 4, 10 (filing 15 at Ex. 2); Aff. of Rex German ¶¶ 25, 28 (filing 15 at Ex. 1). The evidence also indicates that all substantive matters regarding the terms of Nebraska Plastics' business relationship with Holland were handled by the company's president, Rex German, or vice president of manufacturing, Leo Sims. See Aff. of Rex German ¶ 23 (filing 15 at Ex. 1); Aff. of Larry G. Harvill ¶ 10 (filing 15 at Ex. 2). According to German, neither he nor Sims had been aware of the existence of the form described above until Holland filed its motion to dismiss or transfer venue in this litigation. See Aff. of Rex German ¶ 24 (filing 15 at Ex. 1).
After reviewing the evidence submitted by both parties, I am not persuaded that the document containing the forum selection clause is an enforceable contract, or part of an enforceable contract, under either Indiana or Nebraska law. There does not appear to be evidence of a clear offer and acceptance, or of a meeting of the minds or mutual understanding between the parties. See, e.g., Wallem v. CLS Indus., Inc., 725 N.E.2d 880, 883 (Ind.Ct.App. 2000); Bain v. Board of Trustees, 550 N.E.2d 106, 110 (Ind.Ct.App. 1990); Nebraska Nutrients, Inc. v. Shepherd, 626 N.W.2d 472, 498-99 (Neb. 2001); Hoeft v. Five Points Bank, 539 N.W.2d 637, 644 (Neb. 1995). Nor does there appear to any evidence indicating that Harvill, the only person who signed the document, had actual or apparent authority to bind Nebraska Plastics to the terms of the forum selection clause. Johnson v. Blankenship, 679 N.E.2d 505, 507-08 (Ind.Ct.App. 1997), aff'd, 688 N.E.2d 1250 (Ind. 1997); Bain, 550 N.E.2d at 109; Franksen v. Crossroads Joint Venture, 515 N.W.2d 794, 801 (Neb. 1994). Instead, the evidence supports Nebraska Plastics' position that the document is merely a request for information and not a contract. Thus, given Holland's failure to demonstrate the existence of an enforceable contract, I agree with Nebraska Plastics that (1) the forum selection clause does not render Nebraska an "improper" venue under § 1406(a), and (2) this clause should not factor into a § 1404(a) transfer analysis. See OVRS Acquisition Corp. v. Community Health Servs., Inc., 657 N.E.2d 117, 125 (Ind.Ct.App. 1985) ("`The party urging the validity of a contract bears the onus of proving its existence.'" (quoting Ochoa v. Ford, 641 N.E.2d 1042, 1044 (Ind.Ct.App. 1994)); Hoeft, 539 N.W.2d at 644 ("A party seeking to enforce a contract has the burden of establishing the existence of a valid, legally enforceable contract." (citation omitted)).
Section 1404(a) provides that "[f]or 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). The Eighth Circuit has recognized, however, that a court's inquiry into whether to transfer venue is not limited to these statutory factors. See Terra Int'l, Inc. v. Mississippi Chem. Corp., 119 F.3d 688, 691 (8th Cir. 1997) ("[C]ourts have recognized that such determinations require a case-by-case evaluation of the particular circumstances at hand and a consideration of all relevant factors." (citations omitted)); see also Stewart Org., Inc., 487 U.S. at 29 ("A motion to transfer under § 1414(a) thus calls on the district court to weigh in the balance a number of case-specific factors."). Other factors that may be relevant include the following: (1) the accessibility to records and documents, (2) the location where the conduct complained of occurred, (3) the applicability of each forum state's substantive law, (4) judicial economy, (5) the plaintiff's choice of forum, (6) the comparative costs to the parties of litigating in each forum, (7) each party's ability to enforce a judgment, (8) obstacles to a fair trial, (9) conflict of law issues, and (10) the advantages of having a local court determine questions of local law. Terra, 119 F.3d at 696. Because federal courts generally afford "considerable deference" to a plaintiff's choice of forum, "the party seeking a transfer under section 1404(a) typically bears the burden of proving that a transfer is warranted." Id. at 695 (citations omitted).
In its brief in support of its motion to dismiss or transfer, Holland analyzes the above factors and admits that the majority of them weigh in neither party's favor. See Br. in Supp. of Mot. to Dismiss [hereinafter Defendant's Brief] at 14-19. Holland identifies only three factors that tend to support a transfer: the location where the conduct occurred, conflict of law issues, and the advantages of having a local court determine questions of local law. After reviewing these factors, I am not persuaded that a transfer is warranted.
According to Holland, "[t]he conduct [Nebraska] Plastics complains of is the design and manufacturing of the raw products and pigment as well as various representations regarding the weatherability of pigment." Id. at 15. "This conduct and these representations," Holland argues, "all occurred in Indiana where the pigment was produced." Id. Thus, Holland concludes, the "location" factor weighs in its favor. See id. Nebraska Plastics does not appear to challenge these assertions. I would therefore agree with Holland that the "location" factor tends to weigh in its favor.
In its brief, Nebraska Plastics states the following:
[Holland] argues that it made the representations about the pigment's weatherability from its office in Indiana. However, personnel of [Holland] and commissioned sales representatives of [Holland] came to Nebraska to sell [Holland] products. Nebraska Plastics relied on the representations of [Holland's] people by using [Holland's] pigments in its manufacturing process in Nebraska.
Nebraska Plastics, Inc.s' Br. in Opp. to Def.'s Mot. to Dismiss/Mot. to Transfer at 23. As the above passage illustrates, Nebraska Plastics never directly disputes Holland's allegations regarding where the representations as to weatherability were made.
With respect to the latter two factors, Holland contends that "Nebraska's conflicts of law analysis requires application of Indiana law." Defendant's Brief at 17; see also Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941) (concluding that a federal court sitting in diversity must apply the conflict of law provision adopted by the state in which the federal court sits). The parties agree that Nebraska has adopted the "most significant relationship" test to resolve disputes involving contracts. Under this test, "[t]he rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties. . . ." Restatement (Second) of Conflict of Laws § 188(1) (1971). According to the Restatement (Second) of Conflict of Law, courts should consider the following contacts in determining which state's law applies in a contract dispute:
As Nebraska Plastics notes in its brief, Holland discusses only the contract claims, and not the tort claims, in its discussion of conflict of law issues. See Petition ¶¶ 29-47 (filing 1 at Attach. 1) (alleging negligent design and manufacture, negligent misrepresentation, and fraudulent concealment).
(a) the place of contracting,
(b) the place of negotiation of the contract,
(c) the place of performance,
(d) the location of the subject matter of the contract, and
(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.Id. § 188(2).
Holland contends that these first two contacts are of little significance. See Defendant's Brief at 18; see also Restatement (Second) of Conflict of Laws § 188 cmt. e (1971) ("Standing alone, the place of contracting is a relatively insignificant contact."); id. ("The place of negotiation. . . . This contact is of less importance when there is no single place of negotiation and agreement, as, for example, when the parties do not meet but rather conduct their negotiations from separate states by mail or telephone."). By contrast, Holland continues, the next two contacts are significant and weigh in its favor. See Defendant's Brief at 18. With respect to these contacts, Holland contends that "the issue is the design, manufacturing, and sale of pigment from Holland to [Nebraska] Plastics," and that it "performed the terms of the `contract' in Indiana where it designed and manufactured the pigment." Id. at 19. "Moreover," Holland continues, "the pigment, which is the subject matter of this contract, was manufactured by Holland at its Indiana plant and sold by Holland to [Nebraska] Plastics from that same plant. . . ." Id. (citation omitted). Thus, Holland concludes, "Indiana clearly has the most significant relationship to the issues related to this contract," and "[i]t would . . . be most preferable to have an Indiana court hear the issues in this case when applying Indiana law." Id.
In response, Nebraska Plastics asserts that "`in a contract for the sale of goods, the most significant contact is the place of delivery, unless another state has a more significant relationship.'" Nebraska Plastics, Inc.s' Br. in Opp. to Def.'s Mot. to Dismiss/Mot. to Transfer [hereinafter Plaintiff's Brief] at 21 (citation omitted); see Restatement (Second) of Conflict of Laws § 191 (1971) ("The validity of a contract for the sale of an interest in a chattel and the rights created thereby are determined . . . by the local law of the state where under the terms of the contract the seller is to deliver the chattel unless, with respect to the particular issue, some other state has a more significant relationship . . . to the transaction and the parties. . . ."). In this case, Nebraska Plastics argues, "the place of the performance of the contract is Nebraska-where the raw product and pigment were delivered," as "[t]he contract would not be fully performed until [Holland] delivered the pigment to Nebraska Plastics' Cozad[, Nebraska,] facility." Plaintiff's Brief at 21-22. Furthermore, Nebraska Plastics continues, the location of the pigment, the subject matter of the contract, was its Cozad, Nebraska, factory, "not Indiana where the pigment was manufactured." Id. at 22. Nebraska Plastics therefore concludes that (1) "[b]ecause both the place of performance and the location of the subject matter of the contract are Nebraska, Nebraska law should apply to any dispute involving the contract," and (2) "[b]ecause Nebraska law applies to this contract dispute, this factor weighs in favor of venue in Nebraska rather than in Indiana." Id.
At this stage, I have no reason to disagree with Nebraska Plastics' assertions regarding the contracted place of delivery. In light of this, my preliminary assessment is that Nebraska's conflict of law provision regarding contracts favors the application of Nebraska law. I therefore agree with Nebraska Plastics that the conflict of law analysis weighs against transferring this case to Indiana. Likewise, the advantages of having a local court determine questions of local law also weigh against a transfer.
Based on the analysis above, it seems that only one of those factors outlined by the Eighth Circuit-the location where the conduct complained of occurred-favors a transfer. See Terra, 119 F.3d at 696. This factor, however, does not weigh so heavily in favor of Holland so as to negate the significance of Nebraska Plastics' choice of forum. Thus, in light of the "considerable deference" afforded to this choice, I cannot find that Holland has met its "burden of proving that a transfer is warranted." Id. at 695. Holland's motion to transfer must therefore be denied.
IT IS ORDERED that the defendant Holland Colors Americas, Inc.'s Motion to Dismiss Under Rule 12(b)(2) (3) and 28 U.S.C. § 1406 or, in the alternative, Motion to Transfer Pursuant to 28 U.S.C. § 1404(a), filing 8, is denied.