Moretti & Perlow Law Offices v. Aleet Associates

• Decision Date: 04 September 1987
• Docket Number: Civ. A. No. 87-0174 L.
• Parties: MORETTI & PERLOW LAW OFFICES, Plaintiff, v. ALEET ASSOCIATES, Aleet Industries, Inc., Defendant.
• Court: U.S. District Court — District of Rhode Island

668 F. Supp. 103

MORETTI & PERLOW LAW OFFICES, Plaintiff, v. ALEET ASSOCIATES, Aleet Industries, Inc., Defendant.

Civ. A. No. 87-0174 L.

United States District Court, D. Rhode Island, First Division.

September 4, 1987.

William M. Walsh, Moretti & Perlow Law Offices, Cranston, R.I., for plaintiff.

Richard M. Kraver, Kraver and Parker, New York City, for defendant.

MEMORANDUM AND ORDER

LAGUEUX, District Judge.

This matter concerns the enforceability of a forum selection clause contained in a motor vehicle lease. This saga began on October 20, 1983, when the Moretti & Perlow Law Offices (Moretti & Perlow), a Rhode Island firm, entered into a motor vehicle lease with Inskip Leasing Ltd., a Rhode Island car dealership. This lease can best be described as a one page standard form document containing various terms and conditions on both its front and back sides. According to the lease Moretti & Perlow leased a 1984 Mercedes Benz 380 SLCR from Inskip in consideration of payments totalling approximately $40,000 over 46 months.

In addition to the substantive provisions, the front portion of the lease contained the following execution clause:

IN WITNESS WHEREOF, the parties have executed this lease the day and year set forth above.

Just beneath this clause spaces exist for both the lessor and lessee to execute the lease. In the space designated "LESSOR," the words "A-LEET LEASING CORP." are printed in bold face type. These words, however, have been x-ed out and are followed on the same line by the substituted designation, "Inskip Leasing, Ltd." Clearly this was a form supplied by Aleet.

The space entitled "LESSEE" is occupied by the designation "Moretti & Perlow Law Office." Appropriate representatives on behalf of the lessor and lessee executed the lease in spaces below those already mentioned. In the case of Moretti & Perlow Law Office, the signatory was David C. Moretti.

The back side of the lease contains two clauses that are pertinent to the issues to be decided. They are in part as follows:

14. LEGAL MATTERS: THIS LEASE SHALL BE INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND REGARDLESS OF THE ORDERS IN WHICH THE SIGNATURES OF THE PARTIES ARE AFFIXED, IT SHALL BE DEEMED EXECUTED AT LESSOR'S PLACE OF BUSINESS DESIGNATED HEREIN AND IN THE COUNTY THEREOF, IN THE STATE OF NEW YORK; LESSEE AND ANY GUARANTOR HEREOF CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK AND AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING, DIRECTLY OR INDIRECTLY, FROM THIS LEASE SHALL BE LITIGATED ONLY IN COURTS HAVING SUCH STATUS.

17. LESSOR'S ASSIGNMENT: LESSEE ACKNOWLEDGES LESSOR'S RIGHT TO ASSIGN THIS LEASE OR ANY OF ITS INTERESTS HEREIN, AND CONSENTS TO ANY SUCH ASSIGNMENTS.

On the same day that the parties executed the lease, Inskip exercised its rights under clause 17 and assigned its obligations under the lease to defendant Aleet Industries, Inc. (Aleet), a Delaware Corporation with its principal place of business in New York. Rentals and other sums payable by Moretti & Perlow were similarly assigned to a corporation located in the State of New York called Tilden Commercial Alliance, Inc. (Tilden). Notice of this assignment, dated October 29, 1983, was subsequently sent to Moretti & Perlow requesting the lessee to acknowledge receipt of the notice "by signing the enclosed copy of this letter and returning it to Tilden."

All appeared to go well with this arrangement until January of 1987. At that point in time, David C. Moretti (Moretti), a partner in the firm of Moretti & Perlow "became aware of the fact that the leased vehicle was not properly registered in the State of Rhode Island." As a result, Moretti filed a complaint in the Providence County Superior Court. In his complaint, Moretti alleged that Aleet had a duty under the lease to ensure that the vehicle was properly registered; Aleet had breached this duty; and that as a result, Moretti had lost the use of the vehicle and suffered other damages including having to purchase a new car.

In April of 1987, defendant removed plaintiff's action to this Court under 28 U.S.C. § 1441 and 28 U.S.C. § 1332(a), the latter statute giving this Court original jurisdiction where the matter in controversy exceeds $10,000 and is between citizens of different states. At approximately the same time, defendant also filed motions to dismiss this complaint under Fed.R.Civ.P. 12(b)(2), 12(b)(3), 12(b)(6), 17, and 56, or in the alternative to transfer this action to the United States District Court for the Southern District of New York pursuant to 28 U.S.C. § 1406(a).

Defendant's motions were heard on May 29, 1987. At that hearing, defendant only pressed its motion to transfer the case pursuant to § 1406(a). Given the unique factual circumstances surrounding this motion, the parties were given three additional weeks to submit supplementary memoranda. As to Aleet's other contentions, they were waived as a result of its failure to assert them.

While the matter was under advisement, plaintiff moved to file an amended complaint. The only purpose of this motion was to substitute Moretti & Perlow Law Offices as plaintiff in lieu of David C. Moretti. Plaintiff's motion to amend was, therefore, granted.

By the end of June, both parties had submitted their supplementary memoranda. After carefully considering these materials, along with the parties' original submissions and oral arguments, the Court is prepared to render a decision on the matter.

Two issues have been presented by the parties for decision in this case. First, whether state or federal common law governs the decision of this matter? Secondly, under the appropriate choice of law, whether the forum selection clause in question is enforceable?

The first of these issues has already been decided by Judge Bruce Selya of this Court. In D'Antuono v. CCH Computer Systems, Inc., 570 F.Supp. 708, 711 (D.R.I. 1983), plaintiff filed an action for breach of contract in the state superior court. Subsequently, defendant removed the action to this Court pursuant to 28 U.S.C. § 1441(a); jurisdiction was premised upon diversity of citizenship and the appropriate amount in controversy. Id. at 709. After the action was removed, the defendant moved to transfer venue to the United States District Court for the Southern District of California. This motion was premised upon a forum selection clause which provided that any action arising from the contract would be instituted in the Courts of San Diego County, California. Id. at 710. Prior to discussing whether such a clause was enforceable, the Court had to determine which rule (state or federal) was applicable in determining the enforceability of forum selection clauses. The Court held as follows:

Nor can it be doubted but that federal— rather than state—law must in the first instance be applied to venue selection.

This Court reaffirms the result reached in D'Antuono.

Plaintiff, however, contends that the doctrine of Erie RR v. Tomkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) requires this Court to apply the law of the State of Rhode Island to the issue in dispute. In that case the Supreme Court indicated:

except in matters governed by the Federal Constitution or Acts of Congress, the law to be applied by any case is the law of the state ... There is no federal general common law ... Id. at 78, 58 S.Ct. at 822 (emphasis supplied)

The thrust of plaintiff's argument is that the issue to be decided is substantive in nature, and that, therefore, a federal district court sitting in diversity jurisdiction is bound, absent federal Constitutional or statutory mandates, to apply state law.

Plaintiff's reasoning is flawed for two reasons. First, it is now recognized that in certain narrowly defined but extremely important circumstances the federal courts may fashion "specialized federal common law"—substantive rules of decision not expressly authorized by the Constitution or any Acts of Congress—that supplant state law. C. Wright, A. Miller & E. Cooper, 19 FEDERAL PRACTICE AND PROCEDURE § 4514 (1982). This is the case where federal courts are called upon to fill in the interstices of a pervasively federal framework. Id. As the Court previously held in D'Antuono, 570 F.Supp. at 711, 28 U.S.C. § 1406(a) is the federal statute implicated in determining whether federal courts will give effect to forum selection clauses. On its face § 1406(a) does not state whether such clauses are enforceable. Nonetheless, § 1406(a) embraces such a rule because forum selection clauses impinge upon the power of federal courts to transfer cases from one district to another. In LFC Lessors, Inc. v. Pacific Sewer Maintenance Corp., 739 F.2d 4, 6 (1st Cir. 1984) (quoting Central Contracting Co. v. Maryland Casualty Co., 367 F.2d 341, 345 (3d Cir.1966)), the First Circuit stated such clauses, while not ousting the jurisdiction of the court, do constitute stipulations in which the parties join, asking the court to give effect to their agreement by declining to exercise its jurisdiction. Forum selection clauses, then, are merely privately bargained procedural rules adjunct to the operation of § 1406(a). As such, they are subject to a governing federal common law rule filling in the "interstices" of that statute.

Creation of a federal common law rule not only follows from the existence of § 1406(a) itself, but also from the need of a uniform rule in the area of venue selection. D'Antuono, 570 F.Supp. at 711. Were this Court to apply state law to the question in dispute, the result would be to "balkanize" the federal venue rules. Taylor v. Titan Midwest Const. Corp., 474 F.Supp. 145 (N.D.Tex.1979). Cases containing identical forum selection clauses would be given different effect in the same district because choice of law principles would require federal courts to determine which states' law were applicable to the clause in question. Id. at 147-148 n. 2. This...