Opinion
Civil No. 04-1434 (DWF/JSM).
August 4, 2004
Andrew M. Luger, Esq., Nancy E. Brasel, Esq. and Stacy L. Bettison, Esq., Greene Espel, Minneapolis, MN, counsel for Plaintiffs.
Mark J. Briol, Esq. and Joseph M. Musilek, Esq., Briol Associates, Minneapolis, MN, counsel for Defendant.
MEMORANDUM OPINION AND ORDER
Introduction
The above-entitled matter came on for hearing before the undersigned United States District Judge on July 23, 2004, pursuant to Defendant Liberty Alliances, LLC's ("Liberty") Motion to Dismiss or Transfer. For the reasons set forth below, the Court grants Defendant's Motion to Transfer.
Background
Plaintiffs Robert L. Sheets and Mary A. West ("Plaintiffs"), who are Minnesota residents, sued Liberty in Minnesota, alleging Liberty breached the terms of a Consulting Agreement entered into by the parties. ( See Compl. ¶¶ 1, 9.) Liberty is a Delaware limited liability company having its principal place of business in New Jersey. ( See Compl. ¶ 2.)
In 1998, Plaintiffs (on their own behalf and through their ownership of a Minnesota corporation named Skyline Group, Inc. ("Skyline")) entered into an agreement (the "Tribal Agreement") with the Prairie Band of Potawatami Indians of Kansas (the "Tribe"). ( See Solomon Aff. ¶ 16.) Under the Tribal Agreement, Plaintiffs were to pursue a claim of land in Illinois on behalf of the Tribe in exchange for certain rights should the claim ultimately be successful. ( See Solomon Aff. ¶¶ 16, 17.)
By late 1999, Skyline was experiencing financial difficulties, and Plaintiffs had their New Jersey counsel contact Mr. Robert H. Book, now a member and managing director of Liberty along with Mr. Robert I. Solomon, regarding his potential interest in purchasing Skyline's rights under the Tribal Agreement. ( See Solomon Aff. ¶¶ 4,18,19.) Mr. Book and Mr. Solomon began negotiating with Plaintiffs to acquire Skyline's and Plaintiffs' rights under the Tribal Agreement. ( See Solomon Aff. ¶ 19.) These negotiations led to the formation of Liberty and the execution of an Acquisition Agreement and two ancillary agreements, including the Consulting Agreement at issue. ( See id.) The Consulting Agreement was attached as an exhibit to the Acquisition Agreement and both were signed contemporaneously by the parties. ( See Solomon Aff., Ex. 1; Compl., Ex. A.)
Under the Acquisition Agreement, Liberty paid Plaintiffs and Skyline $75,000 and issued Plaintiffs a ten-percent interest in Liberty in exchange for their rights, title and interest in, to and under the Tribal Agreement. ( See Solomon Aff., Ex. 1 at Art. I § 1.1). The Acquisition Agreement provides, in relevant part:
Section 10.10. Governing Law and Jurisdiction:
This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed wholly within such State. The parties hereby agree (i) that any dispute, claim or controversy arising out of or relating to this Agreement or any of the Ancillary Agreements, including without limitation the breach thereof, shall be subject to the exclusive jurisdiction of the courts of the State of New York located in New York County and the federal courts located in the Southern District of New York, and (ii) that each of them hereby submits to the jurisdiction of such courts.
( See Solomon Aff., Ex. 1 at Art. X § 10.10.)
Section 10.8. Entire Agreement:
This Agreement and the Exhibits and Schedules annexed hereto represent the entire agreement among the parties hereto and supercedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof.
( See Solomon Aff., Ex. 1 at Art. X § 10.8.) In addition, the Acquisition Agreement specifically explains that the Consulting Agreement was "annexed hereto" as an exhibit in a separate section titled "Consulting Agreement" and also defines the term "Ancillary Agreements" to include the Consulting Agreement. ( See id., Ex. 1 at Art. VIII, § 8.3; Art. IV. § 4.1.)
Under the Consulting Agreement, Liberty agreed to pay consulting fees to Plaintiffs when certain conditions were met. ( See Compl., Ex. A.) The Consulting Agreement does not include a separate forum selection clause. It does, however, include a "Governing Law" clause which provides:
This Agreement constitutes the entire agreement between the parties and shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed solely within such State.
( See Compl., Ex. A. at ¶ 8.)
In March of this year, Plaintiffs sued Liberty in this district, alleging claims for breach of contract; quantum meruit; and unjust enrichment. At issue in this lawsuit is whether or not Liberty has met its obligations under the Consulting Agreement. In essence, Plaintiffs claim that Liberty owes them money for services rendered under the Consulting Agreement. Liberty contends that its obligations under the Consulting Agreement have not yet been triggered.
Defendants now bring the current motion, arguing that this case should be dismissed or, in the alternative, transferred to the Southern District of New York. In support of its motion, Liberty argues that the Acquisition Agreement incorporates the Consulting Agreement by reference, and therefore the forum selection clause set forth in the Acquisition Agreement binds the parties to litigate the current dispute exclusively in New York. Plaintiffs, on the other hand, argue that the Consulting Agreement is a stand-alone agreement with a separate merger clause and, therefore, the Acquisition Agreement's forum selection clause does not apply to this dispute. In addition to the issue of whether the Acquisition Agreement's forum selection clause applies here, the parties also dispute the relative convenience of litigating in Minnesota as opposed to New York. Because the parties agree that transferring this case would be more efficient than dismissing it, should the Court find that New York is the proper venue for this action, the Court will only consider Liberty's motion for transfer.
Discussion
I. Motion for Transfer
Liberty moves to transfer this action pursuant to 28 U.S.C. § 1404(a). That section provides: "For the convenience of the 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." In considering a motion to transfer pursuant to section 1404(a), the Court must consider "a number of case-specific factors," such as the presence or absence of a forum selection clause, convenience of the parties and witnesses, access to sources of proof, and the "interest of justice." Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988). The burden is on the moving party seeking the transfer. See Graff v. Qwest Communications Corp., 33 F. Supp. 2d 1117, 1121 (D. Minn. 1999). Application of these standards to the facts of this case favor transfer.
A. Forum-selection clause
The Court first turns to the presence or absence of a forum selection clause in the parties' written agreement. While the presence of a forum selection clause is not dispositive, it is "a significant factor that figures centrally in the District Court's calculus." Stewart v. Ricoh, 487 U.S. at 29. Here, Liberty's motion to transfer is based primarily on the existence of the forum selection clause in Section 10.10 of the Acquisition Agreement.
Neither party challenges the validity of the forum selection clause in the Acquisition Agreement. Instead, the parties dispute, as a threshold matter, whether it applies to this dispute brought under the terms of the Consulting Agreement. Here, the parties have agreed that both the Acquisition Agreement and the Consulting Agreement "shall be governed by and construed in accordance with" New York law. Federal courts sitting in diversity look to state law to determine whether choice of law clauses are valid. See Minnesota Mining and Mfg. Co. v. Kirkevold, 87 F.R.D. 324, 331 (D. Minn. 1980); Schoenrock v. Morrell Co., Inc., 2003 WL 21639161 at *3 (D. Minn. July 2, 2003). Minnesota traditionally enforces parties' contractual choice of law provisions. See Hagstrom v. American Circuit Breaker Corp., 518 N.W.2d 46, 48 (Minn.Ct.App. 1994); Schoenrock, 2003 WL at *3. Here, neither party argues that the choice of law provision should not be enforced. Therefore, the Court believes that it is proper to apply New York law in making the specific determination of whether, as a contractual matter, the Acquisition Agreement's forum selection clause applies to this dispute.
As a practical matter, however, the potential conflict between using Minnesota or New York law in making this limited determination is immaterial because the same result would be reached under both bodies of contract law.
Under New York law, it is the function of the Court to "discern the intent of the parties to the extent their intent is evidenced by their written agreement." Commander Oil Corp. v. Advance Food Serv. Equip., 991 F.2d 49, 51 (2d Cir. 1993) (quotation omitted). The language of the contract is the primary source for determining the intention of the parties. See id. at 52; RJE Corp. v. Northville Indus. Corp., 198 F. Supp. 2d 249, 262-63 (E.D.N.Y. 2002) ( quoting Kinek v. Paramount Communications, Inc., 22 F.3d 503, 509 (2d Cir. 1994)). Moreover, all writings that are part of the same transaction must be read together. See RJE Corp., 198 F. Supp. 2d at 263 (citations omitted).
The Acquisition Agreement and the Consulting Agreement (which was attached as an exhibit to the Acquisition Agreement) were executed concurrently on February 11, 2000, and are interdependent on each other in several ways. For example, the Consulting Agreement references and incorporates key terms that are defined only in the Acquisition Agreement, and the Acquisition Agreement contains a number of provisions directly applicable to the Consulting Agreement. Moreover, the Acquisition Agreement specifically incorporates the Consulting Agreement by reference by defining the Consulting Agreement as an "Ancillary Agreement" and providing that, "[t]his Agreement and the Exhibits and Schedules annexed hereto represent the entire agreement among the parties herewith." ( See Solomon Aff., Ex. 1 at Art. VIII § 8.3; Art. IV § 4.1.)
Plaintiffs argue that the existence of a separate choice-of-law provision and the accompanying "entire agreement" language found in Paragraph 8 of the Consulting Agreement demonstrates that the parties did not intend to include the forum selection clause in the Consulting Agreement. The Court disagrees. Based on an examination of the Acquisition Agreement and its Ancillary Agreements as a whole, the Court finds that the parties intended those documents, which were entered into at the same time and relate to the same subject matter, to be read together as a single contract. See Commander Oil Corp., 991 F.2d at 53 ("Generally, separate writings are construed as one agreement if they relate to the same subject matter and are executed simultaneously.") (citations omitted). The Acquisition Agreement provides specifically "that any dispute, claim or controversy arising out of or relating to this Agreement or any of the Ancillary Agreements . . . shall be subject to the exclusive jurisdiction of . . . New York." ( See Solomon Aff., Ex. 1 at Art. X § 10.10.) Accordingly, construing the agreement as a whole, the Court finds that the parties clearly intended to have the forum selection clause apply to the entire transaction, including the Consulting Agreement.
Alternatively, the Court finds that the forum selection clause in the Acquisition Agreement is broad enough to cover the current dispute even if it is not explicitly incorporated by reference into the Consulting Agreement. The forum selection clause, by its express terms, applies to "any dispute, claim or controversy arising out of or relating to the Agreement or any of the Ancillary Agreements." ( See Solomon Aff., Ex.1 at Art. X, § 10.10 (emphasis added).) Because the Plaintiffs' complaint relies at least indirectly on the terms of the Acquisition Agreement and certainly is arising out of the Consulting Agreement, the subject matter of the dispute is clearly within the scope of Section 10.10.
Having found that the forum selection clause contained in the Acquisition Agreement applies to the current dispute, the Court must then determine the effect of the forum selection clause. The Court will look to federal law in making this determination. See Rainforest Café, Inv. v. EklecCo, L.L.C., 340 F.3d 544, 546 (8th Cir. 2003); Florida State Bd. of Admin. v. Law Eng'g and Envtl. Servs., Inc., 262 F. Supp. 2d 1004, 1008 n. 1 (D. Minn. 2003). Here, the forum selection clause sets forth proper venue in New York using mandatory language, namely that a dispute such as this one "shall" be subject to the exclusive jurisdiction of New York courts. Therefore, the clause at issue is given greater weight than a permissive clause. See Best Buy Co., Inc. v. Onkyo U.S.A. Corp., 1991 WL 156571 (D. Minn.) ("If venue is set forth using the mandatory `shall,' the clause is enforced as written and venue is found to be exclusive in the designated forum."); see generally Florida State Bd., 262 F. Supp. 2d at 1009-10 (explaining that courts distinguish between mandatory and permissive clauses).
In addition, forum selection clauses are prima facie valid and are enforced unless they are unjust, unreasonable, or invalid for reasons such as fraud or overreaching. See M.B. Rests., Inc. v. CKE Rests., Inc., 183 F.3d 750, 752 (8th Cir. 1999). Here, Plaintiffs have not claimed that venue in New York is unreasonable or that the forum-selection is a result of fraud. Moreover, the numerous cases cited by Plaintiff for the proposition that courts can exercise discretion and decline to give a forum selection clause decisive weight if the balance of factors weighs against giving the clause effect are all factually distinguishable and, therefore, are not persuasive. Therefore, this Court finds that the existence of the mandatory forum selection clause weighs heavily in favor of transfer.
B. Convenience of Parties
In this case, it is more convenient for Plaintiffs to litigate in Minnesota. On the other hand, it is more convenient for Liberty to litigate in New York. Plaintiffs chose this forum and ordinarily the Court must give some deference to that choice. See, e.g., Christensen Hatch Farms, Inc. v. Peavey Co., 505 F. Supp. 903, 911 (D. Minn. 1981). In addition, Plaintiffs claim to be suffering financial hardship. However, a plaintiff's choice of forum and claims of inconvenience are given less weight when that plaintiff has freely entered into an agreement containing a forum selection clause. See Steward, 487 U.S. at 29; Kline v. Kawai Am. Corp., 498 F. Supp. 868, 872 (D. Minn. 1980). Indeed, the Eighth Circuit Court of Appeals rejected an argument made by a plaintiff that "he could not afford to litigate" in a venue agreed upon in a forum selection clause, explaining it "is an insufficient basis to defeat an otherwise enforceable forum selection clause." M.B. Rests. Inc., 183 F.3d at 753; see also United Mortgage Corp. v. Plaza Mortgage Corp., 853 F. Supp. 311, 315 (D. Minn. 1994) (enforcing forum selection clause and explaining that court has "little sympathy" for claim of inconvenience in light of express consent to the forum selection clause). Here, the parties to the contract engaged in arms-length negotiations, are sophisticated individuals or entities of generally equal bargaining power, were represented by counsel, and freely entered into the agreement. Clearly, Plaintiffs' contemplated the possibility of litigating in New York when they negotiated this deal with Liberty. Therefore, the Court gives the existence of the forum selection clause significant weight and finds that the Plaintiffs' claims of inconvenience are not persuasive. Therefore, this factor weighs in favor of transfer.
C. Convenience of Witnesses
The convenience of witnesses is an important factor for the Court and the parties since it determines the "relative ease of access to proof." Nelson v. Master Lease Corp., 759 F. Supp. 1397, 1402 (D. Minn. 1991) (quotation omitted). In considering the issue of convenience to witnesses, courts have focused on a number of factors including the number of non-party witnesses, the location of all witnesses, and the preference of courts for live testimony as opposed to depositions. See Graff, 33 F. Supp. 2d at 1121 (citing Van Dusen v. Barrack, 376 U.S. 612, 646 (1964)).
Plaintiffs claim that almost all witnesses are in Minnesota, Kansas, or Illinois. On the other hand, Liberty claims that the witnesses are located in Boston, Washington, D.C., and the New York metropolitan area. Mere numbers of witnesses are not determinative when considering the convenience of witnesses factor. See, e.g., id. Because neither party has demonstrated that the quantity, location, and accessability of witnesses or documents makes one forum more convenient that the other, this factor does not weigh in favor of or against transfer.
D. Interests of Justice
The Court must also evaluate what venue will best promote the interests of justice. See Graff, 33 F. Supp. 2d at 1122. A number of relevant considerations include relative familiarity with the law to be applied, the relative ability of the parties to bear the expenses of litigating in a distant forum, judicial economy, and the plaintiff's choice of forum. See id.
The interest of justice considerations weigh in favor of transfer. First, the parties have already agreed that the Consulting Agreement at issue shall be governed by and construed in accordance with New York law. Although this Court is able to make an accurate determination of New York law, it goes without saying that a New York court will be more familiar with the law of its state. Second, with respect to the relative ability of the parties to bear the expenses, and while recognizing the Plaintiffs' claim of hardship, the Court is not persuaded that any disparity between the resources of the parties is significant enough to warrant a refusal to enforce the forum selection clause. On the evidence before the Court, Liberty is a limited liability company formed solely to take over Plaintiffs' interest in the Tribal Agreement. Liberty is not a large corporation seeking to enforce a "boilerplate" forum selection clause against an unsophisticated plaintiff. Third, as explained above, the interest in protecting plaintiff's choice of forum is mitigated by Plaintiffs' arms-length, bargained-for agreement with Liberty to litigate in New York. Finally, under these facts, the Court should be reluctant to allow Plaintiffs, who agreed to litigate this purely private dispute in New York, to now evade this contract term based on claims of convenience, especially in the absence of other factors such as unequal bargaining power or fraud. Here, it serves the interests of justice to enforce the parties' prior agreement to litigate in New York. To hold otherwise would promote uncertainty in business relationships.
The Court finds that the forum selection clause in Section 10.10 of the Acquisition Agreement is valid and binding and that it applies to this dispute. The Court also finds that the other section 1404 factors either tip in favor of transfer or are neutral. Further, no additional factor justifies overturning the parties' privately negotiated agreement to litigate this dispute in New York. As such, the Court finds that New York is the proper venue for this case and orders it transferred to the Southern District of New York.
CONCLUSION
Accordingly, based on the files, records, and proceedings herein, and for the reasons set forth above, IT IS ORDERED that:1. Defendant's Motion to Transfer (Doc. No. 2) this action to the Southern District of New York is GRANTED.