Moses v. Business Card Exp., Inc.

• Decision Date: 08 April 1991
• Docket Number: No. 90-1496,90-1496
• Citation: 929 F.2d 1131
• Parties: Johnny W. MOSES and Frances G. MOSES, Plaintiffs-Appellants, v. BUSINESS CARD EXPRESS, INC., a Michigan Corporation; Gregory S. Derry, individually and as an agent of the BCE; Dennis Phillips, individually and as an agent of the BCE; American Speedy Printing Centers, Inc., a Michigan corporation; Andrew Petress, Individually and as an agent of both American Speedy Printing Centers and Business Card Express, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1131

929 F.2d 1131

59 USLW 2622

Johnny W. MOSES and Frances G. MOSES, Plaintiffs-Appellants, v. BUSINESS CARD EXPRESS, INC., a Michigan Corporation;

Gregory S. Derry, individually and as an agent of the BCE;

Dennis Phillips, individually and as an agent of the BCE;

American Speedy Printing Centers, Inc., a Michigan

corporation; Andrew Petress, Individually and as an agent

of both American Speedy Printing Centers and Business Card

Express, Defendants-Appellees.

No. 90-1496.

United States Court of Appeals,

Sixth Circuit.

Argued Jan. 24, 1991.

Decided April 8, 1991.

Carlos A. Williams (argued), Selma, Ala., for plaintiffs-appellants.

David A. Ettinger, Howard B. Iwrey (argued), Honigman, Miller, Schwartz & Cohn, Detroit, Mich., for defendants-appellees.

Before GUY and BOGGS, Circuit Judges, and LIVELY, Senior Circuit Judge.

LIVELY, Senior Circuit Judge.

This appeal concerns the reviewability and validity of forum selection and choice of law clauses in a franchise agreement. More specifically, the plaintiffs-appellants contend that a district court erroneously transferred the case to another district designated in the contractual forum selection clause. The clause was contained in a contract which the plaintiffs-appellants allege they signed in reliance on the defendants-appellees' fraud, misrepresentation and deceit. In addition, they argue that the transferee court erred in granting summary judgment to the defendants-appellees on the basis of the choice of law clause.

I.

A.

The plaintiffs, Johnny and Frances Moses, husband and wife, are residents of Alabama. Following some preliminary negotiations, the plaintiffs entered into a franchise agreement with the defendant, Business Card Express, Inc. (BCE), a Michigan corporation. The agreement granted the plaintiffs an exclusive 20-year franchise to use BCE's trademarks and "know how" in the operation of an enterprise printing and selling business cards in Alabama. The 24-page agreement detailed the rights and obligations of the parties, and contained the following provisions concerning choice of law and forum:

This Franchise and License Agreement and the construction thereof shall be governed by the laws of the State of Michigan except that the law of the state where the Franchise Owner is located shall control as to terms of the non-competition provision and, if there is a statute so regulating, of termination and renewal procedures. Both parties acknowledge all litigation must be commenced in the federal district court for the Eastern District of Michigan or the Michigan Circuit Court for the County of Oakland.

There appear to have been disagreements between the plaintiffs and various BCE representatives almost from the beginning of their relationship. Eventually, the plaintiffs notified BCE that they intended to rescind the agreement and demanded compensation for claimed losses. When no satisfactory response was forthcoming the plaintiffs filed this diversity action in the United States District Court for the Northern District of Alabama.

The defendants, in addition to BCE, are identified in the amended complaint as individuals After describing the dealings between the plaintiffs and the defendants, the complaint sets forth counts containing claims for compensatory and punitive damages. Four of the counts allege violations of Alabama statutes establishing causes of action for misrepresentation, deceit and violation of the Alabama Deceptive Trade Practices Act. The remaining count charges a conspiracy to defraud.

who are agents of BCE and as a corporation (American Speedy Printing Company) that either owns or has a controlling interest in BCE. According to the complaint, both BCE and American Speedy are Michigan corporations, and the individual defendants, except Gregory S. Derry, are citizens and residents of Michigan. The complaint avers, "upon information and belief," that Derry is a citizen and resident of Canada.

An attorney accepted service of a summons, in Michigan, on behalf of all defendants. All defendants then filed a motion to dismiss the action for improper venue under 28 U.S.C. Sec. 1406(a) or, in the alternative, to transfer the case to the United States District Court for the Eastern District of Michigan pursuant either to 28 U.S.C. Sec. 1404(a) or 28 U.S.C. Sec. 1406(a). They filed a copy of the franchise agreement as an exhibit to their motion. The plaintiffs and defendants made a number of submissions, including affidavits, in opposition to and in support of the motion to dismiss or transfer.

B.

The district court, Judge William M. Acker, Jr., entered an order staying the motion until the United States Court of Appeals for the Eleventh Circuit ruled on a pending petition for mandamus directed to Judge Acker in an unrelated case in which he had denied a request to transfer that case to another jurisdiction.

After the court of appeals granted the petition for a writ of mandamus in the unrelated case, In re Ricoh Corp., 870 F.2d 570 (11th Cir.1989), the district court entered an order on July 10, 1989, directing the clerk to transfer the present case to the United States District Court for the Eastern District of Michigan. Judge Acker filed a memorandum opinion in which he stated that, in light of the decision of the court of appeals in Ricoh, he had no choice but to grant the motion to transfer the present case to Michigan. This conclusion was based upon the court of appeals' treatment of a forum selection clause in the franchise agreement involved in Ricoh.

Ricoh was also an action by a franchisee against a franchisor that was filed in Judge Acker's court. Although the franchise agreement contained a provision that any action over a dispute arising out of the contract could be brought only in a court located in the New York borough of Manhattan, Judge Acker denied the defendant's motion to transfer the case to a court at that location. In an en banc decision, the court of appeals reversed denial of the motion for transfer. Stewart Organization, Inc. v. Ricoh Corp., 810 F.2d 1066 (11th Cir.1987). Employing somewhat different reasoning, the Supreme Court affirmed the court of appeals and remanded the case "so that the District Court may determine in the first instance the appropriate effect under federal law of the parties' forum-selection clause on respondent's Sec. 1404(a) motion." Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 32, 108 S.Ct. 2239, 2245, 101 L.Ed.2d 22 (1988). Upon remand the district court again denied the motion to transfer, resulting in the mandamus decision previously referred to, 870 F.2d 570.

In his memorandum opinion granting the motion to transfer the present case, Judge Acker stated that he felt the court of appeals in Ricoh had misread the Supreme Court and had treated the forum selection clause as placing an "insurmountable burden of proof" on the plaintiffs in this case. Moses v. Business Card Express, Inc., (consolidated with Stewart v. Dean-Michaels Corp.) 716 F.Supp. 1400 (N.D.Ala.1989). Nevertheless, he was bound by the court of appeals' view of the law. The plaintiff filed a motion for reconsideration the next day, July 11, 1989, arguing that Ricoh was distinguishable because the The district court denied the motion for reconsideration in an order entered the following day, July 12th. Judge Acker concluded that "[o]nce a transfer has occurred, the transferring court no longer has jurisdiction and cannot rule on a post-transfer motion which, if granted, would purport to wrest jurisdiction from the transferee court." The plaintiff did not file a petition for a writ of mandamus but did request the court to certify the issues for an interlocutory appeal pursuant to 28 U.S.C. Sec. 1292(b). The district court did not respond to that request. The clerk of the district court in Alabama forwarded the plaintiffs' motion for reconsideration with supporting papers to the district court in Michigan.

plaintiff in that case did not show fraud, duress or misrepresentation, the very grounds upon which the plaintiffs in this case sought relief.

II.

A.

The district court in Michigan, Judge George La Plata, first addressed the motion for reconsideration and a motion to retransfer the case to Alabama filed by the plaintiffs in the Michigan court. The court stated that once the files are physically transferred to the transferee court, the transferor court loses jurisdiction over the case. Judge La Plata stated further that neither he nor this court can rescind the transfer order. Thus, Judge La Plata denied the motion for reconsideration. The judge determined that he had the power to consider the motion to retransfer, but "where it is no more than an indirect review of whether the decision to transfer the case was an abuse of discretion, the law-of-the-case doctrine should prevent the transferee court from redeciding the issue."

After reviewing applicable cases, Judge La Plata concluded that Judge Acker's decision to grant the motion to transfer the present case was "not a clearly erroneous application of Ricoh." Giving deference to Judge Acker's decision as the law of the case, Judge La Plata declined to review the decision to transfer for abuse of discretion. Nevertheless, Judge La Plata considered the issues raised in the plaintiffs' motion for reconsideration in view of the fact that Judge Acker's opinion did not deal with them. ¹ The court did not agree that the issues raised in the plaintiffs' motion required a retransfer of the case. Pertinent to our review, the court found that the forum selection clause in the franchise agreement was not rendered "a nullity" by the deceit, fraud and misrepresentation alleged to have been practiced by BCE. Judge La Plata concluded that even if the plaintiffs were induced to enter into the agreement by fraud, deceit and misrepresentation, this would not affect the validity of the forum selection clause. The plaintiffs did not claim that the inclusion of...