Opinion
No. C 98-127
April 20, 1999.
ORDER
This matter is before the Court on motion by the Defendant, Telular Corporation ("Telular"), to dismiss for lack of personal jurisdiction and motion to transfer to the United States District Court for the Northern District of Illinois pursuant to 28 U.S.C. § 1404(a). (Doc.'s 4, 5.) Telular, a Delaware corporation located in Illinois, alleges that it does not have sufficient minimum contacts with Iowa to sustain personal jurisdiction in Iowa. Additionally, Telular contends that the convenience of the parties, the convenience of the witnesses, and the interest of justice dictate that this Court should transfer the case to federal court in Illinois.
The Plaintiff, GreatAmerica Leasing Corporation ("GreatAmerica"), contends that Telular consented to personal jurisdiction, and the factors mentioned in § 1404(a) militate against transferring the case to the Northern District of Illinois. For the reasons set forth below, the Court denies the Telular's motion to dismiss for lack of personal jurisdiction and grants the Telular's motion to transfer.
I. Facts
Telular is a Delaware corporation with its principal place of business in Vernon Hills, Illinois. Telular has leased photocopy machines from U.S. Office Equipment, Inc. ("U.S. Office"), an Illinois corporation with its principal place of business in Chicago, Illinois, since August 1995. As it does with more than seventy-five percent of its photocopy machine business, U.S. Office assigned its first lease with Telular to a third party assignee. U.S. Office assigned the August 1995 lease to Sanwa Leasing ("Sanwa"). (Aff. of John Specht, Doc. 14, Ex. 2, at 1.) John Specht, an employee of U.S. Office, stated that Telular knew that U.S. Office assigned the first lease to Sanwa. ( Id.)
On March 6, 1997, Telular signed an additional lease for two more photocopy machines with U.S. Office. (Doc. 6, Ex. 1.) The March 1997 lease was assigned to GreatAmerica. Specht stated that the March 1997 lease included a provision which allowed Telular to trade an older machine for a new machine. ( Id.) In order to receive the new machines, Telular was forced to buyout the balance due on the August 1995 lease with Sanwa. Specht stated that Telular financed the buyout of the old lease and rolled the cost into the new lease. ( Id.)
U.S. Office secured financing for the transaction through assignee GreatAmerica. (Specht Aff. at 2.) A GreatAmerica employee executed the lease agreement, including the buyout agreement, and a Telular representative signed the agreement. ( Id.) Specht stated that "Telular's representative would have known that the lease was being financed by GreatAmerica." ( Id.)
Telular entered into a lease for one additional photocopy machine on June 6, 1997. (Affidavit of Ken Millard, Doc. 6, at 2-3.) Frank Tenbeck, the former Chief Financial Officer at Telular, executed both the March 1997 lease and the June 1997 lease on behalf of Telular. (Doc. 6, Ex. 1, 2.)
Early in 1998, the President and Chief Executive Officer of Telular, Kenneth Millard, discovered that the amount Telular was paying to lease the photocopy machines appeared unreasonably high. (Millard Aff. at 3.) Millard stated that the amount Telular was forced to pay under the lease for the machines was more than 300% higher than the lease payments on comparable machines.
Telular requested an explanation from U.S Office about the perceived high costs. ( Id.) An employee of U.S. Office in Chicago, Mark Niemi, conducted an initial investigation of the matter. Niemi wrote to Telular that he was "not comfortable with the lack of paperwork found in Telular's file." (Doc. 6, Ex. 4.) U.S. Office has since advised Telular that several documents relating to the leases are missing from U.S. Office's files. (Millard Aff. at 3.)
Millard and another Telular employee, Kent Sheppard, have met on at least one occasion in Telular's Vernon Hills, Illinois office with Niemi and another U.S. Office employee, John Specht, to discuss Telular's problems with the leases. Additionally, Millard, Sheppard, Niemi, and Specht communicated on several occasions in meetings in the Chicago area and by phone, but were unable to resolve the dispute.
Millard alleges that U.S. Office failed to offer an explanation for "several irregularities" in the billing statements it has received. (Millard Aff. at 4.) For example, Millard asserts that the charge of $53,436 to "buyout" the 1995 lease is improper because Telular never received a new photocopying machine to replace an older machine. ( Id.) Telular contends that U.S. Office has over-billed Telular for a total of $98,749.72.
Millard stated although the lease assignments from U.S. Office to GreatAmerica are dated March 10, 1997 and June 6, 1997, Telular was unaware that U.S. Office had assigned the leases to GreatAmerica until this lawsuit was originally filed in the summer of 1998. ( Id.) Telular has submitted invoices in support of its motion which reflect that Telular was billed by and was required to make all payments to U.S. Office. Telular alleges that its contract with U.S. Office was not negotiated, but that Telular merely signed a form contract provided by U.S. Office. Telular maintains that all of the people familiar with the relevant leases reside in Illinois, and many are no longer employed by Telular or U.S. Office.
On August 12, 1998, Telular informed both U.S. Office and GreatAmerica that since Telular could not substantiate many of the charges, and because the cost to lease the machines far exceeded the prevailing market rates for similar machines, Telular was immediately terminating further payments. (Doc. 6, Ex. 6,7.) GreatAmerica advised Telular that they could not respond to Telular's concerns about the alleged billing irregularities because they had no information on the leases, the underlying transactions, or the source of the dispute concerning the amounts alleged owing under the leases. (Millard Aff. at 5.)
Shortly after Telular terminated payments to U.S. Office, GreatAmerica filed a lawsuit against Telular for breach of contract (Count 1) and quantum meruit (Count 2) in the Iowa District Court for Linn County. Telular removed the case to this Court pursuant to 28 U.S.C. § 1441 and § 1446. (Doc. 1.) The Court now turns to the merits of the motion to dismiss and the motion to transfer.
II. Analysis A. Motion to Dismiss for Lack of Personal Jurisdiction
Once a defendant has challenged a federal court's in personam jurisdiction over it, the plaintiff bears the burden of proving that such jurisdiction exists. Burlington Indus., Inc. v. Maples Indus., Inc., 97 F.3d 1100, 1102 (8th Cir. 1996). Although the plaintiff bears the ultimate burden at trial to establish personal jurisdiction by a preponderance of the evidence, where the challenge is made in a motion to dismiss, the plaintiff need only make a prima facie showing of personal jurisdiction over the defendant. Digi-Tel Holdings, Inc. v. Proteq Telecommunications (PTE), Ltd., 89 F.3d 519, 521 (8th Cir. 1996). Where as here, personal jurisdiction is challenged at a pretrial stage, all evidence must be viewed in a light most favorable to the plaintiff, and all factual disputes must be resolved in the plaintiff's favor. Id.
GreatAmerica maintains that a forum selection clause in the leasing agreement between U.S. Office and Telular is dispositive on the issue of personal jurisdiction. The forum selection clause states in full:
GOVERNING LAW, CONSENT TO JURISDICTION, AND VENUE OF LITIGATION. This Lease and each schedule shall be governed by the internal laws for the state in which Lessor's or Lessor's assignee's principal corporate offices are located. YOU CONSENT TO THE JURISDICTION AND VENUE OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN LESSOR'S OR LESSOR'S ASSIGNEE'S STATE, AND WAIVE ANY OBJECTION RELATING TO IMPROPER VENUE. YOU UNDERSTAND THAT THIS LEASE AND EACH SCHEDULE MAY BE ASSIGNED, AS SET FORTH IN PARAGRAPH 16 HEREOF.
(Lease Agreement, Doc. 6, Ex. 1, at 1) (emphasis in original) The clause is located on the first page of both the March 6, 1997 leasing agreement and the June 6, 1997 leasing agreement.
The Supreme Court has enforced reasonable forum selection clauses in form contracts. Carnival Cruise Lines, Inc. v. Schute, 499 U.S. 585, 593 (1991). The Seventh Circuit recently stated a plaintiff arguing a lack of personal jurisdiction in the face of an "express forum selection clause, printed in large bold-face type" did not have a "leg to stand on" with regard to personal jurisdiction. LINC Finance Corp. v. Onwuteaka, 129 F.3d 917, 921 (7th Cir. 1997); see also North American Fin. Corp. v. Amgrar Gesellschaft Fur Farmlagen, 702 F. Supp. 1435, 1438 (D. Minn. 1989) (Murphy, J.). Even if a district court lacks the "minimum contacts" necessary to exercise personal jurisdiction, it is possible for a party to waive the personal jurisdiction requirements. RAR, Inc. v. Turner Diesel, Ltd., 107 F.3d 1272, 1280 (7th Cir. 1997) (personal jurisdiction is waivable through, inter alia, forum selection clauses); J.V. Edeskuty Assoc. v. Jacksonville Kraft Paper, 702 F. Supp. 741, 745 (D. Minn. 1988) ("Personal jurisdiction involves an individual right which, like other individual rights, can be waived.").
Telular signed the leasing agreements containing the unequivocal consent to jurisdiction in Illinois courts or the courts in the assignee's home state. Since the forum selection clause also draws attention to the assignability of the leasing agreement, it is reasonable to infer that Telular could have also anticipated litigating in Iowa or a number of other states. Accordingly, the unequivocal language of the leasing agreement supports the exercise of personal jurisdiction in this Court over Telular. Thus, Telular's motion to dismiss for lack of personal jurisdiction is denied.
Telular asserts that the forum selection clause does not apply to its quantum meruit claim because the consent clause only addresses contractual claims. (Doc. 5, at 6.) While the Court questions the merits of this position, it need not be determined for the purposes of this Order. The Court will exercise supplemental jurisdiction under 28 U.S.C. § 1367(a) (1999). McGoldrick v. Datatrack Int'l, Inc., 1999 WL 144617, *3 (D. Minn., Feb. 26, 1999) (exercising supplemental jurisdiction over quantum meruit claims pursuant to § 1367(a)).
B. Motion to Transfer Venue
Section 1404(a) authorizes the district courts of the United States, "for the convenience of the parties and witnesses, and in the interests of justice, to transfer any civil action to any other district where it might have been brought." 28 U.S.C. § 1404(a). The party seeking transfer bears the burden of proof to show that the balance of factors "strongly" favors the movant. Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947). Transfer should also be denied if the factors are evenly balanced or weigh only slightly in favor of transfer. Graff v. Qwest Comm. Corp., 33 F. Supp.2d 1117, 1120 (D. Minn. 1999).
In addition to the three enumerated factors in § 1404(a), the Court must conduct a case-by-case evaluation of the particular circumstances at hand and consider all the relevant factors. Terra Intern., Inc. v. Mississippi Chem. Corp., 119 F.3d 688, 691 (8th Cir.), cert. denied, 118 S.Ct. 629 (1997). The analysis is flexible and discretionary. 17 James Wm. Moore et al., Moore's Federal Practice § 111.13[1][a] (3d ed. 1999).
There is a "normal presumption in favor of a plaintiff's choice of forums." Qwest, 33 F. Supp.2d at 1121. However, when the operative events of a case occurred elsewhere, the plaintiff's choice of venue is given less weight, and transfer is often appropriate. Smart v. Goord, 21 F. Supp.2d 309, 315-16 (S.D.N.Y. 1998); Dicken v. U.S., 862 F. Supp. 91, 94 (D. Md. 1994). Transfer may be warranted because, quite frequently, a majority of the significant witnesses and the physical evidence are located where the operative events occurred. Anadigics, Inc. v. Raytheon Co., 903 F. Supp. 615, 617 (S.D.N.Y. 1995).
In the instant case, the substantial majority of events giving rise to Telular's claims occurred in the Northern District of Illinois. The original parties to the leasing agreements, Telular and U.S. Office, are located in the Northern District of Illinois. All of the prospective material witnesses are located in Illinois, including Millard, Sheppard, Tenbeck, Specht, and Niemi. Testimony from these witnesses is essential in resolving the question of (1) whether the buyout provision was valid and (2) whether the lease prices exceeded market rates and U.S. Office was guilty of overreaching. For its part, GreatAmerica has failed to name any relevant witnesses that reside in Iowa.
In addition, the leasing agreements were negotiated, signed, and performed in Illinois. The subject of the leasing agreements, the photocopying machines, were used in Telular's Illinois offices. After Millard discovered the alleged billing improprieties, Telular attempted to remedy the problem in Illinois with U.S. Office officials. Finally, a substantial majority of the relevant records in this case are housed in Illinois. Discovery of the documentary evidence will prove significantly more convenient in Illinois. This is especially true if a substantial portion of the relevant documents are missing from U.S. Office's facilities. The only significant connection that this case has with Iowa is that the lessor's assignee's offices are located in Iowa and the lessor assignee provided the financing for the second lease. In all other relevant respects, this is an Illinois case. Since this case is so closely connected to the Northern District of Illinois, the convenience of the parties and the witnesses will best be served by transferring the case to Illinois.
This Court must also consider the interests of justice. Neither party has offered evidence that either district carries an overcrowded docket that would hamper the speedy resolution of this case. Accordingly, the interests of justice weigh in favor of transfer to the district where this dispute originated and where the case is centered.
GreatAmerica essentially offers two arguments against transfer. First, GreatAmerica contends that the factors which favor transfer are roughly equal to the factors which weigh against transfer. GreatAmerica asserts that because of the equal split, the Court should not disturb its choice of forum. However, the plaintiff's choice of forum is only one relevant factor for the Court to consider. Stewart Org. Inc. v. Ricoh Corp., 487 U.S. 22, 31 (1988).
While the Court has considered the fact that the assignee plaintiff, GreatAmerica, has its principal place of business in Iowa, that is the only connection this case has to the Northern District of Iowa. Thus, the fact that GreatAmerica initiated the suit in Iowa does not defeat Telular's motion to transfer. An assignee plaintiff is not automatically allowed its choice of forum if the factors in § 1404(a) weigh in favor of transfer. See J.F. Pritchard Co. v. Dow Chemical of Canada, Ltd., 462 F.2d 998, 1002 (8th Cir 1974) (transferring assignee plaintiff's case from assignee plaintiff's district to district where operative events giving rise to lawsuit occurred) (Clark, Associate Justice (Ret.)); J.V.B. Indus., Inc. v. Federated Dept. Stores, Inc., 684 F. Supp. 22, 24 (S.D.N.Y. 1988) ("[T]he action's only connection with New York is that it is the home of the plaintiff, connected solely with this case as an assignee of an Ohio corporation. Thus, upon consideration of these factors, it is evidence that the 'interests of justice' would be better served by transfer . . .").
Second, GreatAmerica contends that the forum selection clause in each of the leasing agreements discussed supra requires the Court to deny the motion to transfer to the Northern District of Illinois. The pertinent part of the clause states: "YOU CONSENT TO THE JURISDICTION AND VENUE OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN LESSOR'S OR LESSOR'S ASSIGNEE'S STATE, AND WAIVE ANY OBJECTION RELATING TO IMPROPER VENUE." Telular asserts that the forum selection clause authorizes suit in the courts of Iowa over the courts of Illinois, and expresses no preference for either venue. (Doc. 17, at 6.) Telular insists that since the clause authorizes suit in either Illinois or Iowa, the clause is permissive and not mandatory.
Whether a forum selection clause is mandatory or permissive is a matter of contract interpretation reviewed de novo. Terra Intern., Inc. v. Mississippi Chemical Corp., 922 F. Supp. 1334, 1371 (N.D. Iowa 1996) (Bennett, J.), affirmed, 119 F.3d 688 (8th Cir. 1997), cert. denied, 118 S.Ct. 629. Where a clause is ambiguous as to whether or not it is mandatory, it should be construed against the drafter. Id.
The clause in this case, located in a form contract, was drafted by U.S. Office, GreatAmerica's assignor. Telular was merely offered the form contract and did not negotiate the terms contained in the contract. Since the clause was drafted by U.S. Office and it is not clear whether the clause is mandatory or permissive, the Court will construe any ambiguity in the contract against U.S. Office and GreatAmerica.
The clause does not mandate a particular jurisdiction in which a dispute between the parties must be resolved. The clause does not provide for "exclusive" jurisdiction. Instead, the clause in this case "falls short of designating an exclusive forum," and states that the parties "consent" to jurisdiction and venue in the lessor's state or the lessor's assignee's state. See Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77 (9th Cir. 1987) (forum selection clause that says nothing about exclusive jurisdiction is permissive rather than mandatory). In light of the language of the clause, the Court must reject GreatAmerica's contention that the clause is mandatory. The Court finds that the clause is strikingly similar to the clause in Hunt Wesson Foods, 817 F.2d at 77: "[The parties] agree that the laws of the State of California shall govern . . . and the Courts of California shall have jurisdiction"). The Ninth Circuit held that the forum selection clause was permissive. Similarly, this Court finds that the language of the forum selection clause in the leasing agreements is permissive. The effect of the permissive language in the clause is merely that the parties consent to the jurisdiction of the courts in both the lessor's state and the lessor's assignee's state. The case is still subject to transfer if the plaintiff makes a substantial showing of inconvenience to the parties and the witnesses and transfer is in the interests of justice. Orix Credit Alliance, 816 F. Supp. 230, 233 (S.D.N Y 1993) (§ 1404(a) transfer granted although forum selection clause stated that parties "agreed" to venue and jurisdiction in original court); Kachal, Inc. v. Menzie, 738 F. Supp. 371, 375 (S.D.N Y 1990) (§ 1404(a) transfer granted although parties "consented" to jurisdiction and venue).
Moreover, even if the forum selection clause was mandatory, the Court would transfer the case to Illinois. Forum selection clauses do not have a per se dispositive effect on venue. Red Bull Associates v. Best Western Intern., Inc., 862 F.2d 963, 967 (2d Cir. 1988). The existence of a forum selection clause cannot preclude the district court's inquiry into the public policy ramifications of transfer decisions. Id. As the Court has noted in this opinion, those factors weigh in favor of transfer.
In summary, the Court finds that the convenience of the parties and the witnesses, and the interests of justice strongly weigh in favor of transfer to the Northern District of Illinois. The forum selection clause is only one factor that weighs against transfer. All other factors in this case weigh in favor of transfer because the nucleus of this case is in Illinois. Accordingly, the defense motion to transfer this case is granted.
ORDER
IT IS ORDERED that the defendant's motion to dismiss under Rule 12(b)(2) is DENIED.
The defendant's motion to transfer under 28 U.S.C. § 1404(a) to the Northern District of Illinois is GRANTED.