Opinion
CA 3:01-CV-171-R
March 26, 2003
MEMORANDUM OPINION AND ORDER
Now before this Court is Defendant's MOTION TO DISMISS FOR LACK OF IN PERSONAM JURISDICTION OR, IN THE ALTERNATIVE, TO TRANSFER TO THE WESTERN DISTRICT OF PENNSYLVANIA PURSUANT TO 28 U.S.C. § 1404 (a) (filed April 8, 2002). After careful consideration of the applicable law, and for the following reasons, Defendant's Motion is hereby DENIED.
I. FACTUAL BACKGROUND
Plaintiff, Automotive Consultants Division, Progressive Marketing Group, Inc., ("AC"), is a Texas Corporation with its principal place of business in Dallas, Texas. AC is engaged in the business of providing consulting services regarding marketing and sales to automobile dealers throughout the United States.Defendant, John R. Farls ("Farls"), is a citizen of Pennsylvania and General Manager and Vice President of Northwest Auto, Inc., a Pennsylvania automobile dealership whose principal place of business is in Ambridge, Pennsylvania. Farls is also responsible for the daily operation of Northwest Chevrolet (the "Dealership"), an automobile dealership in Ambridge, Pennsylvania, which is registered in Pennsylvania as a fictitious name for Northwest Auto, Inc.
In the summer of 2001, AC sent a brochure to the Dealership which illustrated AC's "time proven" system of guaranteeing an increase in sales, gross profits, and insurance. In addition, AC pledged that one of its employees would remain onsite at the Dealership for nine weeks (in the position of Director of Sales and Training) to provide intensive sales training to the Dealership's employees.
See Defendant's Original Counterclaim at 2.
After a period of negotiations, on August 2, 2001, Farls signed a contract (the "Client Agreement") with AC. Shortly thereafter, Tom Johnson was sent to the Dealership to serve as its Director of Sales and Training. Essentially, AC was to implement the sales program and its compensation would be derived from fees paid to it for the services rendered. But according to the Dealership, AC never achieved its sales guarantees. The Dealership argues that after some time it became aware that AC was unable to create an increase in the Dealership's sales. Believing that AC's services were worthless, the Dealership thereby informed Tom Johnson that his services were no longer necessary, and effectively canceled the Client Agreement.
Subsequently, AC filed this lawsuit in the County Court at Law of Dallas, Texas, against Farls, arguing that Farls breached the Client Agreement. The suit was timely removed to this Court. Upon removal, Farls asserted that he did not sign the Client Agreement in his individual capacity, but rather on behalf Northwest Auto, Inc. d/b/a the Dealership. As such, Farls claims that his contacts with Texas are insufficient to satisfy an assertion of personal jurisdiction. Farls argues that AC's action should be dismissed, or in the alternative, transferred to the Western District of Pennsylvania, pursuant to 28 U.S.C. § 1404 (a).
II. ANALYSIS
A. Personal Jurisdiction
A federal district court sitting in diversity may exercise personal jurisdiction over a nonresident if: (1) the long-arm statute of the forum state creates personal jurisdiction over the nonresident; and (2) the exercise of personal jurisdiction is consistent with the due process guarantees of the United States Constitution. See Allred v. Moore Peterson, 117 F.3d 278, 281 (5th Cir. 1997) (citations omitted). When a non-resident presents a motion to dismiss for lack of personal jurisdiction, the plaintiff has the burden of establishing jurisdiction, but need only make a prima facie showing to that effect. See Bullion v. Gillespie, 895 F.2d 213, 216-17 (5th Cir 1990). When a court rules on a motion to dismiss without holding an evidentiary hearing, the court accepts all uncontroverted facts in the complaint as true and must resolve all factual conflicts in favor of the plaintiff. See Felch v. Transportation Lar-Mex SA DE CV, 92 F.3d 320, 327 (5th Cir. 1996).
The Due Process Clause of the Fourteenth Amendment permits a court to exercise personal jurisdiction over a non-resident if two conditions are satisfied. First, the non-resident must have intentionally availed himself of the benefits and protections of the forum state by establishing "minimum contacts." See International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). The minimum contacts must be substantial enough so that the non-resident should reasonably anticipate being brought into court in the forum state. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 296 (1980). Second, an assertion of personal jurisdiction over the non-resident must not offend "traditional notions of fair play and substantial justice." See Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 113 (1987). Sufficient minimum contacts may give rise to specific jurisdiction or general jurisdiction. See Gundle Lining Construction v. Adams County Asphalt, Inc., 85 F.3d 201, 205 (5th Cir. 1994). Specific jurisdiction permits a court to exercise personal jurisdiction over a non-resident when the non-resident's contacts with the forum state either arise from or are directly related to the cause of action. See Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 U.S. 408, 414 (1984). General jurisdiction exists when a non-resident's contacts with the forum state are unrelated to the cause of action, but are nonetheless "systematic and continuous."
A Texas court may exercise jurisdiction over a non-resident if the Texas long-arm statute so provides, and the exercise of jurisdiction is consistent with the federal constitutional guarantees of due process. See Guardian Royal Exch. v. English China, 815 S.W.2d 223, 226 (Tex. 1991). Under the Texas long-arm statute, a nonresident may be subject to personal jurisdiction if the nonresident commits "acts constituting business" within the state. See TEX. Civ. PRAC. REM. CODE §§ 17.041-45 (Vernon 2000).
The pivotal issue for Farls' Motion to Dismiss is the significance to be accorded to the forum selection clause contained within the Client Agreement.
B. The Forum Selection Clause
The Client Agreement contains a forum selection clause, which states:
GOVERNING LAW The agreement shall be governed and controlled under the laws of the State of Texas, and adjudicated in the State of Texas. This agreement shall be deemed to have been entered into in the State of Texas.
See Plaintiff's Original Petition, Exhibit A at ¶ 12.
AC submits that this forum selection clause, as agreed to by both parties, is sufficient to permit an assertion of personal jurisdiction over Farls. Conversely, Farls contends that he did not sign the Client agreement in his individual capacity, but rather he signed the agreement as a Vice President of Northwest Auto, Inc., d/b/a/ Northwest Chevrolet, which would mean that this Court cannot exercise personal jurisdiction over him. Before delving into the merits of the forum selection clause, the Court pauses briefly to address the scope of Farls' signature on the Client Agreement.
1. Fans' Individual Liability as a Signatory on the Client Agreement
As stated above, Farls contends that he did not sign the Client Agreement in his individual capacity but rather in his capacity as a Vice President of Northwest Auto, Inc., d/b/a Northwest Chevrolet. Under Texas law, it is well settled that an agent has no personal liability on contracts made on behalf of a disclosed principal in the absence of an express agreement. See Nagle v. Duncan, 570 S.W.2d 116, 117 (Tex.Civ.App.-Houston [1st Dist.] 1978, writ dism'd). But, the agent of a disclosed principal may nonetheless be personally bound by a contract if "the agent has substituted his own responsibility for that of his principal, or has pledged his own responsibility in addition to that of his principal." See McLeaish Law Office v. Britton, 2001 Tex. App. Lexis 5977 (Tex.App.-Dallas [5th Dist.] 2001). In this instance, this Court notes that Farls' signature indeed appears on the Client Agreement; but more dispositively, directly below Farls' signature the word "owner" is handwritten. The placing of Farls' signature above the word "owner," if one makes a brief perusal of the page upon which it appears, seems to indicate the capacity in which Farls entered into the contract. or to state matters bluntly, with respect to the manner in which Farls endorsed his signature, "it is, what it is." Accordingly, it takes no great analytical effort to conclude that Farls either substituted his own responsibility for that of Northwest Auto Inc., or pledged his own responsibility in addition to that of Northwest Auto Inc (or further still, it may very well be that Farls is in fact the actual "owner," although at the current stage of this litigation, facts have not been plead to support such a conclusion). Whichever the case, Farls is personally bound by the Client Agreement.
See Plaintiff's Original Petition, Exhibit A at ¶ 12.
2. The Mandatory or Permissive Nature of the Forum Selection Clause
The Court now returns to examine whether the forum selection clause is enforceable. At the outset, the Court must first engage whether the forum selection clause is mandatory or permissive. In Caldas Sons, Inc. v. Willingham, 17 F.3d 123 (5th Cir. 1994), the Fifth Circuit examined whether a forum selection clause presented before the Court was mandatory or permissive. The forum selection clause at issue in Caldas consisted of only one-sentence, stating that "the laws and courts of Zurich shall be applicable." Id. at 127. Reiterating its position in Keaty v. Freeport Indonesia, Inc., 503 F.2d 955 (5th Cir. 1974), the Fifth Circuit held that "[e]ven though the clause now before us uses "shall," which is generally mandatory, this clause need not necessarily be classified as mandatory." Caldas, 17 F.3d. at 127. Rather, the Court went on to determine that the forum selection clause was permissive, holding that:
The only thing certain about the clause . . . is that the parties consented to the personal jurisdiction of the Zurich courts. Beyond that, however, the language does not clearly indicate that the parties intended to declare Zurich to be the exclusive forum for the adjudication of disputes arising out of the contract. As we stated in Keaty, "this is not a situation where the contract, on its face, clearly limits actions thereunder to the courts of a specified locale." . . . [L]anguage similar to that presented to the Supreme Court in M/S Breman is the kind required for a court to find an unambiguous, mandatory forum selection clause.Id. at 128. (citation omitted).
The Fifth Circuit noted that "[t]he forum selection clause before the Supreme Court in M/S Bremen specified that 'any dispute arising must be treated before the London Court of Justice'" Caldas, 17 F.3d at 128, citing, M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 2 (1972).
Thus, the Fifth Circuit made clear that a forum selection clause's language must clearly and unequivocally bind the parties to an exclusive forum (such as the language of the forum selection clause at issue in Bremen ), if it is to be considered mandatory.
The Fifth Circuit's analysis applies to the language of the forum selection clause presently before this Court.
Looking at the plain language of the clause, this Court notes that the word "shall" is used: "[t]he agreement shall be governed . . . under the laws of the State of Texas . . ." and, "[t]his agreement shall be deemed to have been entered into in the State of Texas." But again, the Fifth Circuit has cautioned that use of the word "shall" need not be considered mandatory. Caldas, 17 F.3d at 127; Keaty, 503 F.2d at 957. Therefore, the Court must further examine the clause in order to identify, if at all, any language which unequivocally indicates the parties' intention to be bound to an exclusive forum. Reading further, the Court finds just that. The words "controlled under" and "adjudicated in" are employed to indicate exactly where claims are to be litigated. Use of the words "controlled under" and "adjudicated in" offers no ambiguity. When read again in its entirety, the forum selection clause's mandatory nature becomes clear:
See Plaintiff's Original Petition, Exhibit A at ¶ 12 (emphasis added).
The agreement shall be governed and controlled under the laws of the State of Texas, and adjudicated in the State of Texas. This agreement shall be deemed to have been entered into the State of Texas.
Id.
This Court holds that the language of the forum selection clause is indeed mandatory, and unequivocally requires the parties to litigate within the State of Texas.
3. The Enforcebility of the Forum Selection Clause
With the forum selection clause held to be mandatory, the Court now focuses its attention on whether or not it is enforceable.
It is well settled that forum selection clauses are deemed prima facie valid. Bremen, 407 U.S. at 10. However, forum selection clauses are unenforceable if the resisting party can clearly demonstrate that "enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching . . ." Id. at 15. A determination of fraud is based upon whether the agreement was freely bargained for. Hoffman v. Burroughs Corp., 571 F. Supp. 545, 548 (N.D. Tex. 1982). or further still, "[I]f forcing the resisting party to proceed in the chosen forum would be so difficult for that party that it would effectively deprive it of its day in court." Seattle-First Nat'l Bank v. Manges, 900 F.2d 795, 799 (5th Cir. 1990) (relying on Bremen, 407 U.S. at 15).
Examining the forum selection clause before it, this Court finds nothing unreasonable and unjust about requiring Farls to litigate within the State of Texas. This choice of forum is clearly established within the mutually-entered contract between the two parties. Moreover, Farls offers no substantive evidence of fraud on the part of AC concerning the Client Agreement.
This Court recognizes, however, that Farls will be somewhat inconvenienced by having to litigate in Texas. As Farls rightfully points out, most, if not all of the evidence and material witnesses are located in Pennsylvania. "However, the Federal Rules of Civil Procedure have provisions whereby [Farls] can secure the testimony of these witnesses and/or parties." Marklyn Controls Supply v. Pall Trinity Micro Corp., 862 F. Supp. 140, 141 (W.D. Tex. 1994) (referring to Fed.R.Civ.P. 27 45(b)(2)). Requiring Farls to litigate in Texas will not pose such a difficulty as to effectively deprive him of his day in court.
C. Transferral Pursuant to 28 U.S.C. § 1404 (a)
As a final order of business, the Court must address Farls' claim that this case should be transferred in accordance with 28 U.S.C. § 1404 (a). Specifically, Farls asserts that a transferal of this case to the Western District of Pennsylvania would be proper, since this case could have been brought there under diversity jurisdiction, 28 U.S.C. § 1332. According to section 1404(a), when a case is filed in the proper venue, the district court is permitted to transfer venue to another court out of convenience to the parties. Considering the Court's foregoing reasons, transfer of this matter would be unwarranted in this instance.
28 U.S.C. § 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.
III. CONCLUSION
For the reasons stated herein, Defendant's Motion to Dismiss is hereby DENIED.
It is so ORDERED.