2215 Fifth Street Associates v. U Haul Intern.

• Decision Date: 09 July 2001
• Docket Number: CIV.A. No. 1:00CV02872 (ESH).
• Citation: 148 F.Supp.2d 50
• Parties: 2215 FIFTH STREET ASSOCIATES, LP, Plaintiff, v. U-HAUL INTERNATIONAL, INC., Defendant.
• Court: U.S. District Court — District of Columbia

148 F.Supp.2d 50

2215 FIFTH STREET ASSOCIATES, LP, Plaintiff, v. U-HAUL INTERNATIONAL, INC., Defendant.

CIV.A. No. 1:00CV02872 (ESH).

United States District Court, District of Columbia.

July 9, 2001.

COPYRIGHT MATERIAL OMITTED

Stephen R. Smith, Powell, Goldstein, Frazer & Murphy, Washington, DC, for Plaintiff.

Linda Beth Popejoy, Kevin B. Bedell, Kathryn Louise Clune, Dorsey & Whitney, L.L.P., Washingon, DC, for Defendant.

MEMORANDUM OPINION

HUVELLE, District Judge.

Plaintiff 2215 Fifth Street Associates, LP ("2215 Associates") has filed suit seeking a declaratory judgment that an Option Agreement entered into between 2215 Associates and defendant U-Haul International, Inc. ("U-Haul International") is "null, void and unenforceable." (Compl. § 2.) In response, defendant has moved to dismiss the complaint pursuant to Fed. R.Civ.P. 12(b)(3) and 28 U.S.C. § 1406(a), arguing that venue is improper in this District. In the alternative, defendant moves to transfer the action to the United States District Court for the District of Arizona. Upon review of the pleadings and the record herein, the Court denies defendant's motion to dismiss, but will grant defendant's motion to transfer this action to the United States District Court for the District of Arizona. Given this resolution of defendant's motion to transfer, the Court need not address plaintiff's Motion for Leave to File a First Amended Complaint.

BACKGROUND

This action concerns the ownership of real property (the "Property") consisting of an "off-site" storage facility located in the District of Columbia. (Compl. ¶ 1.) Plaintiff 2215 Associates is a limited partnership organized under the laws of the District of Columbia (the "District") with its principal place of business in the District. (Compl. ¶ 5.) Defendant U-Haul International is a corporation organized under the laws of the State of Nevada with its principal place of business in Phoenix, Arizona. (Id. ¶ 6.)

In 1993, defendant purchased a loan previously made to plaintiff and secured by a deed of trust on the Property and personally guaranteed by plaintiff's four general partners. (Id. ¶ 8; Def. Mem. of Law in Support of Mot. to Dismiss ("Def.Mem.Law.") at 2.) At the time of the purchase, the loan was in default. (Compl.¶ 8.) Subsequently, defendant proposed restructuring plaintiff's debt, and thereafter the terms of the restructuring were agreed upon, although plaintiff alleges that it "had no choice in the terms of the restructuring." (Pl. Opp. to Motion to Dismiss ("Pl.Opp.") at 2-4.) Pursuant to those terms, on August 1, 1993, plaintiff issued two promissory notes to defendant for $2,139,049 and $540,000. (Compl. ¶ 9.)

Additionally, an Option Agreement was executed whereby defendant obtained an option to purchase the Property for a price determined by a formula set forth in the Option Agreement, with the closing of the sale to take place between June 1, 2000 and December 1, 2000. (Compl. ¶ 10; Compl. at Ex. 3.) The Option Agreement granted defendant the right to exercise the option to purchase the Property by providing written notice to plaintiff between August 1, 1999 and March 1, 2000. (Id.) In accordance with those terms, defendant exercised the option in a written notice dated November 22, 1999. (Compl. ¶ 10; Compl. at Ex. 4.) Plaintiff contends that it resisted defendant's exercise of the option immediately upon receiving defendant's notice. (Compl. ¶ 13.)

Plaintiff filed suit on November 30, 2000, seeking a declaratory judgment that the Option Agreement is "null, void and unenforceable."¹ (Compl.¶ 2.) In its answer, defendant claimed that venue was improper in this District because of a forum selection clause contained in the Option Agreement, which requires any litigation to be brought in federal court in Arizona or, if the federal courts do not have jurisdiction, in Arizona state court. (Defendant's Answer to Compl. ("Def.Answer") at 4.) Defendant now moves pursuant to Fed. R.Civ.P. 12(b)(3) and 28 U.S.C. § 1406(a) for an order dismissing this action for improper venue.² In the alternative, defendant moves pursuant to 28 U.S.C. § 1406(a) to transfer this case to the United States District Court for the District of Arizona.

LEGAL ANALYSIS

I. Standard of Review

Pursuant to Fed.R.Civ.P. 12, a claim should not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Canady v. Nat'l Hosp. for Orthopaedics and Rehab., 1995 WL 322449, at *1 (D.D.C. May 18, 1995) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). In deciding a motion to dismiss, a court "must accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiffs." Fitts v. Fed. Nat'l Mortgage Ass'n, 44 F.Supp.2d 317, 321 (D.D.C.1999). However, a court need not accept plaintiffs' legal conclusions as true. See Artis v. Greenspan, 158 F.3d 1301, 1306 (D.C.Cir. 1998). On a motion to dismiss for improper venue under Fed.R.Civ.P. 12(b)(3), facts must be presented that will defeat plaintiff's assertion of venue. 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 2d § 1352 (2d ed.1990); see, e.g., Totalplan Corp. of America v. Lure Camera, Ltd., 613 F.Supp. 451, 459 (D.C.N.Y.1985).

II. Forum Selection Clause

Forum selection clauses are to be considered "prima facie valid and should be enforced unless enforcement is shown by the resisting party to be `unreasonable' under the circumstances." The M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (footnote omitted). Thus, there is a strong presumption in favor of upholding such clauses "absent some compelling and countervailing reason." Id. at 15, 92 S.Ct. 1907. In particular, a forum selection clause should be enforced unless the resisting party can show "that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching ... [or that] enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision." Id. Moreover, "in light of present-day commercial realities and expanding international trade," the party seeking to avoid the forum selection clause bears the burden of demonstrating that "trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court." Overseas Partners, Inc., v. PROGEN Musavirlik ve Yonetim Hizmetleri, Ltd., 15 F.Supp.2d 47, 54 (D.D.C.1998) (quoting The M/S Bremen, 407 U.S. at 18, 92 S.Ct. 1907); see also Commerce Consultants Int'l, Inc. v. Vetrerie Riunite S.p.A., 867 F.2d 697, 699 (D.C.Cir.1989) (concluding that a forum selection clause should be upheld even in light of serious doubts about the fairness of trial under Italian rules of discovery).

Defendant argues that venue is improper in the District because the forum selection clause contained in the Option Agreement requires plaintiff to litigate this matter in the United States District Court for the District of Arizona. The clause at issue provides:

This Agreement shall be construed in accordance with the laws of the State of Arizona. Each party agrees that any legal proceedings commenced by such party in respect to the terms and provisions of this Agreement or any collateral agreements between the parties of even date herewith shall be commenced in the federal courts in the State of Arizona or, if the federal courts do not have jurisdiction, in the state courts of the State of Arizona.

(Compl., Ex. 3 ¶ 10.12.) For the reasons expressed herein, the Court agrees with defendant that this forum selection clause should be enforced.

As a preliminary matter, the Court finds that the language of the clause is clear and unambiguously establishes Arizona as the chosen forum for any dispute arising under the Option Agreement. In evaluating the enforceability of forum selection clauses similar to the one at issue in this case, such clauses are to be enforced unless it is shown that "(1) formation of the clause was tainted by fraud or overreaching; (2) enforcement would effectively deprive the complaining party of his day in court or deprive him of any remedy; or (3) enforcement would contravene a strong public policy of the forum state." Marra v. Papandreou, 59 F.Supp.2d 65, 70 (D.D.C.1999), aff'd, 216 F.3d 1119, 1123 (D.C.Cir.2000). The Court finds that none of these exceptions applies in this case.

Plaintiff does not argue that the forum selection clause is the product of any fraud on the part of defendant, but rather claims that the forum selection clause is unenforceable because it is the fruit of defendant's "overwhelming, and virtually unfettered, bargaining power." (Pl. Opp. at 20.) Plaintiff bears the burden of establishing duress or coercion, and "[f]raud and overreaching must be specific to a forum selection in order to invalidate it." Haynsworth v. The Corporation, 121 F.3d 956, 963 (5th Cir.1997), cert. denied, 523 U.S. 1072, 118 S.Ct. 1513, 140 L.Ed.2d 666 (1998); see Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 n. 14, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974) (asserting that a forum selection clause is not enforceable if its inclusion in the contract was the product of fraud or coercion). Accordingly, a forum selection clause would be invalid if it had been concealed by one party or if an overbearing party had forced a relatively unsophisticated party to include it within the contract. See Hartash Constr., Inc. v. Drury Inns, Inc., 2000 WL 1140498, at *2 (E.D.La. Aug.11, 2000) (finding that the forum selection clause was not so one-sided in favor of defendant that it was the product of overreaching).

Plaintiff argues that defendant threatened it, as well as its partners, with "financial ruin" if it did not accept the terms of the loan...