Barrett v. Picker Internatl., Inc.

• Decision Date: 22 October 1990
• Docket Number: No. 57461,57461
• Citation: 589 N.E.2d 1372,68 Ohio App.3d 820
• Parties: BARRETT et al., Appellants, v. PICKER INTERNATIONAL, INC., et al., Appellees. *
• Court: Ohio Court of Appeals

Page 820

68 Ohio App.3d 820

589 N.E.2d 1372

BARRETT et al., Appellants, v. PICKER INTERNATIONAL, INC., et al., Appellees. ^*

No. 57461.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Decided Oct. 22, 1990.

McCarthy, Lebit, Crystal & Haiman Co., L.P.A., Mark B. Cohn and Richard A. Wise, Cleveland, for appellants.

Calfee, Halter & Griswold, Bruce J.L. Lowe and Anthony J. LaCerva, Cleveland, for appellees.

KRUPANSKY, Presiding Judge.

Plaintiffs David Barrett, Donald Thorburn and Gunter Wilkens filed a complaint April 5, 1988 in Cuyahoga County Common Pleas Court, case No. 147463, demanding their respective accrued retirement benefits under the terms of the 1968 Picker Corporation Profit Sharing Trust Plan ("Trust Plan") from defendant Manufacturers Hanover Trust Company as trustee for defendant Picker International, Inc. ("Picker"), plaintiffs' ex-employer.

The complaint alleged plaintiffs, now of retirement age, who had been provided for in the employer-funded, noncontributory Trust Plan ¹ during their employment had accumulated the following vested benefits, viz.:

(1) David Barrett $25,057

(2) Donald Thorburn 18,000

(3) Gunter Wilkins 15,000.

The plaintiffs admitted all three of them went to work for competitors of Picker within two years of leaving Picker's employment. In so doing, they violated Article VII, Section 8.12 of the Trust Plan, which provided an employee forfeited any accrued benefits.

On August 1, 1988, defendants filed with the trial court a joint motion to dismiss pursuant to Civ.R. 12 stating the grounds for dismissal as follows: (1) improper venue pursuant to Civ.R. 12(B)(3) since the profit sharing Trust Plan contained a forum selection clause obligating plaintiffs to bring the action in the state of New York; and (2) lack of personal jurisdiction pursuant to Civ.R. 12(B)(2) over Manufacturers Hanover Trust Company, a New York corporation.

In the memorandum in support of defendants' joint motion to dismiss, defendants argue Ohio is not a proper forum, since Article XI, Section 11.09, of the profit sharing Trust Plan attached to defendants' memorandum provides plaintiffs were required to bring the action in New York state. Defendants contend Section 11.09 provides the "Trust Plan" must be "construed according to the laws of the state of New York, where it is made and where it shall be enforced." Defendants additionally argue that Ohio lacks personal jurisdiction over Manufacturers Hanover Trust Company, which is a New York corporation with no minimum contacts in Ohio.

Plaintiffs filed a memorandum opposing defendants' joint motion to dismiss. On February 27, 1989, the trial court granted defendants' motion to "Enforce Forum Selection Clause and Motion to Dismiss Without Prejudice." Plaintiffs filed a timely notice of appeal.

Plaintiffs' first assignment of error follows:

"I. The trial court committed prejudicial error by enforcing the forum selection clause in Picker's retirement plan."

Plaintiffs' first assignment of error lacks merit.

Plaintiffs argue the trial court erred by (1) enforcing the forum selection clause in Picker's Trust Plan, and (2) dismissing the present action. Plaintiffs' argument is unpersuasive.

The Trust Plan was entered into by Picker and Manufacturers Hanover Trust, trustee. Plaintiffs are, therefore, third-party beneficiaries pursuant to the Trust Plan.

Article XI, Section 11.09, of the plan states in its entirety as follows:

"This Trust Plan shall be construed according to the laws of the State of New York, where it is made and where it shall be enforced."

Historically, a forum selection clause in a contract was held per se invalid on the ground it attempted to "oust one court of its jurisdiction." See Clinton v. Janger (N.D.Ill.1984), 583 F.Supp. 284, 288, citing Nute v. Hamilton Mut. Ins. Co. (1856), 72 Mass. (6 Gray) 174.

However, since the landmark decision of the United States Supreme Court in The Bremen v. Zapata Off Shore Co. (1972), 407 U.S. 1, 9-12, 92 S.Ct. 1907, 1912-1914, 32 L.Ed.2d 513, 519-521 a forum selection clause is generally valid unless construed to be unreasonable. The court held in Bremen as follows:

" * * * [A] forum selection clause that is fairly bargained for and not the result of fraud will be enforced so long as to do so is reasonable at the time of litigation and does not deprive a litigant of his day in court." See United Std. Mgt. Corp. v. Mahoning Valley Solar Resources, Inc. (1984), 16 Ohio App.3d 476, 477-478, 16 OBR 559, 559-560, 476 N.E.2d 724, 725-726.

The burden of so showing falls upon the party challenging the validity of the clause; in the case sub judice, this showing is the plaintiffs' burden. Id.; Bremen, supra.

Bremen announced a general rule that a forum selection clause is presumptively valid and will be enforced by the forum unless the party who challenges it establishes their heavy burden of proof, viz.: (1) that the contract was the result of fraud or overreaching; (2) that enforcement would violate the strong public policy of the forum state, i.e., in this case, Ohio; and (3) that enforcement under the particular circumstances of the case would result in litigation in a jurisdiction so unreasonable, difficult and inconvenient that plaintiff would for all "practical purposes be deprived of his day in court." Bremen, supra.

To fairly analyze whether the forum selection clause included in the Trust Plan that the employees were to benefit from was enforceable under the test in Bremen, it is incumbent upon this court to apply the test to the facts of the case sub judice.

Since plaintiffs do not claim the Trust Plan was the result of fraud or overreaching it is unnecessary to consider the first prong of the test.

The second prong of the test in Bremen necessarily requires an analysis inquiring whether the enforcement of said clause would violate any strong public policy of the state of Ohio. This prong must fail for the reason that Ohio has virtually no interest in the contract or parties in question. In the case sub judice, the contract was negotiated between two New York corporations. The choice of laws provision included in the contract provided New York law was to apply. Undeniably, the state of Ohio has an interest in providing a local forum for its residents, however, none of the plaintiffs resides in Ohio. Rini Wine Co. v. Guild Wineries & Distilleries (N.D.Ohio 1985), 604 F.Supp. 1055, 1057. Assume, arguendo, Ohio had an interest in providing their residents with a friendly forum, the plaintiffs must prove Ohio's interest was so substantial as to defeat a valid contractual clause. Rini Wine, supra; Bill Swad Leasing Co. v. General Elec. Credit Corp. (Oct. 3, 1985), Franklin App. No. 85 AP-208, unreported, 1985 WL 10452. Since plaintiffs are nonresidents, this proof would be difficult if not impossible to prove.

The third prong of the test in Bremen mandates an inquiry into reasonability in the specific factual situation of applying the forum selection clause to these particular plaintiffs. To decide the reasonability issue we are persuaded by the factors set forth in Clinton, supra, as guidelines which follow: (1) which law controls the contractual dispute; (2) what residency do the parties maintain; (3) where will the contract be executed; (4) where are the witnesses and parties to the litigation located; and (5) whether the forum's designated location is inconvenient to the parties. Clinton, supra, citing Furbee v. Vantage Press, Inc. (C.A.D.C.1972), 464 F.2d 835, 837.

The first factor analyzed reveals New York law controls the Trust Plan pursuant to a choice of laws clause. These choices of laws clauses have been held valid by the Ohio Supreme Court if reasonable and fair. See Jarvis v. Ashland Oil, Inc. (1985), 17 Ohio St.3d 189, 17 OBR 427, 478 N.E.2d 786; Schulke v. Radio Productions, Ltd. v. Midwestern Broadcasting Co. (1983), 6 Ohio St.3d 436, 6 OBR 480, 453 N.E.2d 683.

The second and fourth relevant factors, which inquire into the residency and location of the parties and witnesses, find all three plaintiffs now reside outside Ohio and have done so since 1969. ² Plaintiffs, as their complaint indicates, all reside outside Ohio as of the filing date, 1988; Barrett resided in Wisconsin, Thorburn in Florida and Wilkins in West Germany. The witnesses to be called besides plaintiffs necessarily would be either Picker or Manufacturers Hanover representatives. Since both corporations are incorporated in New York, the choice of this jurisdiction seems to offer an advantage to the parties.

Pursuant to the third relevant factor, the contract or Trust Plan was executed in the state of New York and the Trust Plan would be administered and all obligations performed in New York with trust funds dispersed to recipients from the New York offices of the trustee, Manufacturers Hanover.

Lastly, the most striking factor to be applied is the fifth prong of the test which assesses the convenience or inconvenience for the plaintiffs of litigating in the New York forum. Considering the diverse location of plaintiffs' residences, all outside Ohio and one even in a foreign country, it seems the New York state forum is certainly reasonable and not fraught with any measure of disadvantage for plaintiffs in the case sub judice.

Therefore, applying the above criteria, the forum selection clause in the Trust Plan was reasonable under all five prongs of the test and did not violate either substantial Ohio public policy concerns or deprive plaintiffs of their day in court. The trial court properly held enforcement of the forum selection clause was valid and, hence, New York is the proper forum. ³

Plaintiffs argue that since they did not "fairly bargain for" the terms of the Trust Plan, they should not be bound by the forum selection clause. See Bremen, supra. Plaintiffs, as third-party beneficiaries, do however seek to benefit from all the other trust terms.

It is axiomatic that...