Barbuto v. Medicine Shoppe Intern., Inc.
| Decision Date | 04 October 2001 |
| Docket Number | No. 00-2531.,00-2531. |
| Citation | 166 F.Supp.2d 341 |
| Parties | Antoniette BARBUTO and George Geregach, Plaintiffs, v. MEDICINE SHOPPE INTERNATIONAL, INC., Defendant. |
| Court | U.S. District Court — Western District of Pennsylvania |
Joseph F. McDonough, Robert D. Finkel, Manion, McDonough & Lucas, Pittsburgh, PA, for plaintiffs.
Stephen H. Rovak, Philip J. Christofferson, Sonnenschein, Nath & Rosenthal, St. Louis, MO, for defendant.
Before the Court is the Motion to Dismiss Pursuant to Rules 12(b)(3) and 12(b)(6) and 28 U.S.C. § 1406(a) or, in the Alternative, Motion to Transfer Pursuant to 28 U.S.C. § 1406(a) or 28 U.S.C. § 1404(a) (Doc. 6), filed by defendant Medicine Shoppe International, Inc. ("MSI"). Plaintiffs have filed a brief in opposition (Doc. 9), to which MSI has filed a reply (Doc. 10) and plaintiffs a surreply which raised, inter alia, the question of whether we have subject matter jurisdiction over this matter (Doc. 11). Plaintiffs have also filed a Stipulation Regarding Relief Sought (Doc. 14). We permitted the defendants to file a supplementary brief on the jurisdictional issue (Doc. 13).
Having fully considered the parties' submissions, we find that we have subject matter jurisdiction; for the reasons set forth below, we will deny defendant's motion insofar as it seeks to dismiss this action, but will grant its motion to transfer, and will order that the case be transferred to the United States District Court for the Eastern District of Missouri.
Plaintiffs Antoniette Barbuto and George Geregach are licensed pharmacists. Compl. at ¶ 11. In 1989, they entered into a licensing agreement ("the Agreement") with defendant MSI to operate a pharmacy in Aliquippa, Beaver County, Pennsylvania as a Medicine Shoppe Pharmacy ("the Pharmacy"). Compl. at ¶ 16.
The Agreement provides that the plaintiffs may operate a pharmacy, under the Medicine Shoppe name, in a territory which is defined as all of Center Township and Hopewell Township, Beaver County, and a portion of the Borough of Aliquippa ("the Territory"). Compl. at ¶ 18. Under the Agreement, plaintiffs pay MSI a continuing license fee equal to a set percentage of the gross revenues collected during the preceding month at the Pharmacy. Compl. at ¶ 19.
The parties may terminate the Agreement for cause or without cause. Compl. at ¶ 23. They allege that "[a]s a result of dramatic changes in the reimbursement strategy for health care, including prescription drugs, the parties cannot continue to operate under the structure contained in the License Agreement." Compl. at ¶ 22. Plaintiffs have informed MSI that they intend to terminate the Agreement for cause, and operate the Pharmacy as an independent pharmacy. Compl. at ¶ 23.
The Agreement includes a covenant not to compete. Plaintiffs assert that the non-competition provision is unenforceable, whether they terminate for cause or without cause. Compl. at ¶¶ 26, 29.
Plaintiffs filed this action in the Court of Common Pleas of Beaver County, Pennsylvania, at Case No. 12094-2000, on December 5, 2000. Count I of the complaint seeks a declaratory judgment as to the parties' rights and duties under the Agreement. Count II asks the Court to enjoin enforcement of the non-competition provision of the Agreement.
Defendant promptly filed a notice of removal to the United States District Court for the Western District of Pennsylvania under 28 U.S.C. §§ 1332, 1441, and 1446. It now seeks to have this action dismissed for improper venue or transferred to the Eastern District of Missouri under the Agreement's forum selection clause.
Plaintiffs have questioned our subject matter jurisdiction over this case. Defendant asserts that original jurisdiction lies in this Court under 28 U.S.C. 1332(a), the federal diversity statute, which provides for original jurisdiction in the district courts of all actions where there is complete diversity of citizenship between the parties and where the matter in controversy exceeds the sum of $75,000. The diversity of citizenship requirement is clearly met. Plaintiffs are citizens of Pennsylvania. Compl. at ¶¶ 8, 9. Defendant MSI is a corporation organized and existing under the laws of the State of Delaware, with its principal place of business in Missouri. Compl. at ¶ 10.
Plaintiffs contend, however, that MSI has not sufficiently established that the amount in controversy in this matter exceeds $75,000. Plaintiffs' argument is that since MSI's position regarding the amount is premised only upon plaintiffs' request that the Agreement between the parties be terminated for cause, and that issue has been put before an arbitrator, the only relief sought by the plaintiffs is: (1) a declaration that a non-competition provision contained in an Agreement entered into between plaintiffs and MSI is invalid and unenforceable; (2) an injunction against MSI from attempting to enforce the clause and to declare that they are entitled to operate a pharmacy within a defined territory; and (3) a declaration that plaintiffs are entitled to operate a pharmacy within a defined territory. These remaining grounds for relief, plaintiffs argue, do not support the requisite amount in controversy.
We reject the plaintiffs' argument. The law is clear that a court considering the amount in controversy for purposes of diversity jurisdiction is limited to a review of the allegations contained in the plaintiff's complaint, regardless of whether the plaintiff's demands change after removal such that the amount in controversy no longer exceeds $75,000. Angus v. Shiley, Inc., 989 F.2d 142, 145 (3d Cir.1993). "Where diversity exists at the time the case is filed, it is not affected by the dismissal of one of the claims, even though the amount recoverable on the remaining claim is less than [$75,000]." Lindsey v. M.A. Zeccola & Sons, Inc., 26 F.3d 1236, 1244 n. 10 (3d Cir.1994). Plaintiffs' complaint seeks, inter alia, a declaration that the Agreement entered into by the parties has been terminated for cause, a declaration that would allow plaintiffs to cease paying MSI licensing fees in excess of $75,000 for the next eight years. Even if this question has been referred to arbitration and may ultimately drop from the case before the Court, the amount in controversy would be satisfied by the allegations in the complaint as filed.
Furthermore, "[i]n injunctive actions, it is settled that the amount in controversy is measured by the value of the right sought to be protected by the equitable relief." In re Corestates Trust Fee Litigation, 39 F.3d 61, 65 (3d Cir.1994). The Court of Appeals for the Third Circuit has explained that "it is the value to the plaintiff to conduct his business or personal affairs free from the activity sought to be enjoined that is the yardstick for measuring the amount in controversy." Id. at 65. Barbuto and Geregach here seek an injunction prohibiting MSI from enforcing the non-compete provision, which would permit plaintiffs to convert their Medicine Shoppe pharmacy to an independently operated establishment and to profit thereby. Accordingly, we find that the requisite amount in controversy has been sufficiently pled in plaintiffs' complaint to satisfy the amount in controversy requirement of 28 U.S.C. § 1332, and that we have subject matter jurisdiction over this action.
Federal Rule of Civil Procedure 12(b)(3) authorizes a district court to dismiss an action for improper venue. Under 28 U.S.C. § 1406(a), "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." Pursuant to 28 U.S.C. § 1404(a), "[f]or 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."
Defendant moves to dismiss for improper venue pursuant to Fed.R.Civ.P. 12(b)(3) and 28 U.S.C. § 1406(a). The basis for MSI's motion is that the Agreement contains a forum selection clause that requires any dispute about the non-competition clause contained in the Agreement to be litigated in the state or federal court systems of St. Louis, Missouri. Therefore, it is MSI's position that this Court is not a proper venue, and the action should be heard in the United States District Court for the Eastern District of Missouri.
MSI also urges dismissal under Fed. R.Civ.P. 12(b)(6), arguing that plaintiffs fail to state a claim upon which relief can be granted because of the parties' contractual agreement to litigate in Missouri.
In the alternative, defendant's motion asks that we transfer this action to the United States District Court for the Eastern District of Missouri under 28 U.S.C. § 1406(a) or 28 U.S.C. § 1404(a), for consolidation with Medicine Shoppe International, Inc. v. Barbuto and Geregach, Case No. 4:00CV002043. MSI contends that transfer is appropriate because the parties agreed to litigate all disputes in the courts of Missouri.
In response, plaintiffs assert that the forum selection clause contained in the Agreement is unfair and unreasonable, and thus it is not enforceable and this Court is the proper venue for this action.
Since our determination of whether to dismiss or to transfer this action depends upon whether the forum selection clause in the Agreement is enforceable, we turn first to that question.
Section 14(I) of the Agreement provides as follows:
FORUM AND VENUE. We, you and your owners hereby agree that any action for a preliminary injunction, to compel arbitration, or to enforce an arbitrator's award shall be brought only in the Federal District Court of the Eastern District of Missouri, unless such court shall lack jurisdiction, in which case, such action...
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