Summary
noting that while venue may have arguably been improper in the state court in a case in which a plaintiff sued in state court in a different state than that provided by the forum clause, the federal court's venue on removal is unassailable
Summary of this case from Washburn v. GarnerOpinion
Civil Action No. 3:03CV-20-S
February 2, 2003
MEMORANDUM OPINION
This case was originally filed by the plaintiff, Tumbleweed, Inc. ("Tumbleweed"), in the Jefferson County, Kentucky Circuit Court, and was removed to this court upon an invocation of our diversity jurisdiction. 28 U.S.C. § 1332.
The defendant, American Federal, Inc. ("AFI"), now moves to dismiss pursuant to Fed.R.Civ.P. 12. Although not specified in the motion, it is clear that the movant relies upon Fed.R.Civ.P. 12(b)(3) due to alleged improper venue.
In the alternative, AFI moves to transfer this action to the United States District Court for the Eastern District of Missouri at St. Louis pursuant to 28 U.S.C. § 1404(a).
The parties have briefed the motions, and the court is fully advised.
AFI's motions both seek to enforce a forum selection provision contained in the Conditional Commitment Notification ("CCN") referenced in Tumbleweed's complaint and attached to it as Exhibit A. In its complaint, Tumbleweed contends that the CCN is a contract between it and AFI which AFI has breached. In paragraph 31 on page 5 of the CCN, the following language is found:
The enforcement of the terms of this agreement shall fall under Missouri law and be adjudicated in Missouri courts and is hereby acknowledged and agreed to by the borrower.
Earlier in the document, Tumbleweed is referred to as "borrower."
Tumbleweed's response to the motion raises several issues.
First, Tumbleweed contends that pursuant to Kerobo v. Southwestern Clean Fuels Corp., 285 F.3d 531 (6th Cir. 2002), we are not authorized to dismiss under Fed.R.Civ.P. 12(b)(3) for improper venue because venue is, in fact, not improper. We agree. The plaintiff elected to file this action in the Jefferson County, Kentucky Circuit Court. Rather than raising the venue issue there, the defendant removed to this court based on diversity jurisdiction. By virtue of 28 U.S.C. § 1441(a), there is no court to which the action could have been removed except the United States District Court for the Western District of Kentucky. Hence, while venue may have arguably been improper in the state court, our venue on removal is unassailable. The Kerobo court viewed the issue of whether a forum selection clause in a contract should be enforced as a matter of contract, not of venue. Kerobo at 535.
The dissent in Kerobo indicates that the majority panel opinion is contrary to United States Supreme Court and earlier Sixth Circuit authority. It is said that because of this, and the rule that precedent of the court of appeals cannot be overruled by a panel decision, only en banc, the majority opinion is infirm. However, whether Kerobo is contrary to U.S. Supreme Court precedent or the court of appeals' own rules and precedent, or not, are issues we leave to the court of appeals. This court believes it is bound by Kerobo.
Second, Tumbleweed contends that AFI's motion should be denied because Tumbleweed is not seeking to enforce the terms of the CCN, and thus the forum selection clause is inapplicable.
While respecting Tumbleweed's argument, we find it somewhat disingenuous. In Count I of the complaint, Tumbleweed asks for a declaration as to whether the CCN is valid and binding and whether Tumbleweed is obligated to AFI in the amount of $270,000.00. Such an examination would require the court to determine the enforceability of the CCN.
Similarly, in Count II, Tumbleweed alleges that AFI has breached the CCN by failing to perform under it. The evaluation of the respective obligations of the parties under the CCN, as well as the adequacy of their performance, will most certainly involve a consideration of enforcement of the CCN.
Accordingly, we reject the contention that the forum selection clause is inapplicable to the claims made in this litigation.
The only viable motion, therefore, is that to change venue pursuant to 28 U.S.C. § 1404(a). That provision is broad enough to control the issue of whether a forum selection clause should be given effect. Kerobo at 539.
We consider the § 1404(a) motion in light of convenience and fairness. We must also be mindful of public interest factors of systemic integrity, and private concerns which would fall under the heading of "the interest of justice." Kerobo at 537 (citations omitted).
Convenience of the parties and witnesses must be considered, but here it results in a draw. The plaintiff and its witnesses would be inconvenienced by having to litigate in Missouri. The defendant and its witnesses would be inconvenienced by having to litigate in Kentucky.
Certainly we are not faced with the situation as presented in Kerobo, supra, where state law disfavored forum selection clauses. Here, both Kentucky and Missouri find such clauses enforceable.
There has been no showing that the clause is unreasonable, or that it works a particularized hardship on either side. Both the plaintiff and defendant are sophisticated business entities. Missouri and Kentucky are not far apart.
Public interest factors of systemic integrity favor neither side. There is no prejudice shown in either forum, and applicable law has not been demonstrated to be remarkably different. Systemic integrity, and the interest of due process, require only that this court perform the analysis we are now performing.
The interests of justice clearly favor transfer of venue to the Eastern District of Missouri. Absent overriding factors, we believe the parties' agreement as to the situs of the forum for enforcement dispute resolution should be respected. Tumbleweed's choice to file in Kentucky, in contravention of the forum selection clause it agreed to, is entitled to little weight. The plaintiff should not be rewarded for arguing now against what it previously agreed with, simply because its own strategy and convenience is better served by litigating locally.
There being no specific allegation that the inclusion of the forum selection clause was procured by fraud, and Tumbleweed, as the resisting party, having not shown that enforcement of the clause is unreasonable under the circumstances presented here, Moses v. Business Card Express, Inc., 929 F.2d 1131, 1136, 1138 (6th Cir. 1991), we conclude that transfer under 28 U.S.C. § 1404(a) is appropriate, and will be separately ordered in accordance with this opinion.