Bell Inc. v. Ifs Indus. Inc.
| Decision Date | 16 June 2010 |
| Docket Number | No. CIV 09–4187–RAL.,CIV 09–4187–RAL. |
| Parties | BELL, INC., Plaintiff,v.IFS INDUSTRIES, INC., Defendant. |
| Court | U.S. District Court — District of South Dakota |
OPINION TEXT STARTS HERE
Kent R. Cutler, Cutler & Donahoe, LLP, Sioux Falls, SD, for Plaintiff.William P. Fuller, Hilary L. Williamson, Fuller & Sabers, LLP, Sioux Falls, SD, for Defendant.
ORDER GRANTING MOTION TO CHANGE VENUE
Plaintiff Bell, Inc. (“Bell”) started this action in South Dakota in November of 2009, against Defendant IFS Industries, Inc. (“IFS”). Bell manufactures express courier paperboard. IFS supplied Bell with hot melt adhesive for use on the closure flap of several types of such envelopes. The Complaint stated claims for breach of express warranty, breach of implied warranty of fitness for a particular purpose, and breach of implied warranty of merchantability, all for alleged defects in a particular hot melt adhesive—M781 adhesive—supplied by IFS.
IFS filed a Notice of Removal (Doc. 1) with this Court on December 18, 2009. On February 9, 2010, IFS filed a Motion to Change Venue (Doc. 13) under 28 U.S.C. § 1404(a). This Court grants the Motion to Change Venue for the reasons explained below.
II. FACTS
As the basis for its motion, IFS requests that the Court enforce choice-of-law and forum-selection clauses within the Terms and Conditions of Sale (“Terms and Conditions”) that IFS contends was attached to every invoice it sent to Bell. The Terms and Conditions state:
This Agreement shall be governed by, and construed in accordance with, the laws of the Commonwealth of Pennsylvania, without regard to its conflicts of laws. Any and all disputes arising under this Agreement shall be resolved in a state or federal court of competent jurisdiction within the Commonwealth of Pennsylvania, and Buyer hereby irrevocably submits to the jurisdiction of any such court for the resolution of any and all disputes arising hereunder.
(Doc. 14, at 1); (Doc. 15–1, at 3).
The Terms and Conditions further provided:
If for any reason Buyer fails to accept this Agreement in writing, any conduct that demonstrates the existence of a contract, including, without limitation, the delivery of items in accordance with this Agreement prior to written acceptance hereof and acceptance of such items by Buyer, shall constitute an agreement to all of the terms and conditions stated herein.
IFS submitted affidavits by employees Jean Defrees (Doc. 23), a customer service representative, and Doris Davis (Doc. 24), a billing specialist. Defrees stated that “IFS Industries has a system in place whereby every invoice that is sent out to its customers contains” the Terms and Conditions, the system was in place when IFS submitted the applicable invoices to Bell, and the Terms and Conditions included the forum selection clause. Davis averred that “every mailing from the billing department at IFS” since December 2006 contained the Terms and Conditions on a separate two-sided document, and that Davis personally placed the Terms and Conditions document within all mailings to customers. According to Davis, prior to December 2006, IFS included the Terms and Conditions within its printed invoice documents.
In opposition, Bell argues that the parties never agreed, negotiated, or even discussed forum selection or choice of law, and that the parties have no written, oral, or implied contract containing a forum-selection clause. Bell filed an affidavit by its Director of Finance, Samantha Parsons, attesting that “[t]he retained invoices Bell received from IFS with respect to the M781 adhesive supplied in late 2008 which is at issue in this case do not include a copy of the Terms and Conditions of Sale” filed as Doc. 15–1, and that “discussions with IFS were limited to product, price, quality, payment terms, and shipment.” (Doc. 17, at 1–2). Parsons acknowledged that “a small number of [invoices] include a copy of the Terms and Conditions, all of which were for transactions in 2006 or 2007.” Id. at 2.
Bell also contends that, assuming arguendo that the parties agreed to a forum- selection clause, the clause is not enforceable because it is unreasonable and unjust due to Bell's selection of its home state as forum, the large majority of witnesses in South Dakota, and the presence in South Dakota of the defective goods forming the basis of the lawsuit.
III. DISCUSSIONA. Formation of Forum–Selection Clause
Federal courts sitting in diversity apply the choice-of-law rules of the forum state. Cicle v. Chase Bank USA, 583 F.3d 549, 553 (8th Cir.2009) (citing Prudential Ins. Co. of America v. Kamrath, 475 F.3d 920, 924 (8th Cir.2007)). Under South Dakota law, “a contract is to be interpreted according to the law and usage of the place where it is to be performed or, if it does not indicate a place of performance, according to the law and usage of the place where it is made.” SDCL 53–1–4; O'Neill Farms, Inc. v. Reinert, 2010 SD 25, ¶ 12, 780 N.W.2d 55. “The test of the place of a contract is the place where the last act is done by either of the parties which is necessary to complete the contract and give it validity.” Id. (quoting Briggs v. United Services Life Ins. Co., 80 S.D. 26, 30, 117 N.W.2d 804, 807 (1962)). The Supreme Court of South Dakota has “generally recognized that parties may agree to be bound by the law of a particular state.” Butler Machinery Co. v. Morris Const. Co., 2004 SD 81, ¶ 6, 682 N.W.2d 773, 776 (quoting Dunes Hospitality, L.L.C. v. Country Kitchen Int'l., Inc., 2001 SD 36, ¶ 10, 623 N.W.2d 484, 488). However, South Dakota courts will “not give effect to laws of other jurisdictions if they are contrary to the public policy of South Dakota.” Id.
It is unclear whether the last act necessary to complete and validate the contracts for the purchase and sale of hot melt adhesives occurred in South Dakota, the location where Bell accepted the goods and invoices from IFS, or in Pennsylvania, where IFS received payment and presumably purchase orders from Bell for the transactions. Regardless, the substantive law of both South Dakota and Pennsylvania command the same result under the circumstances in this case.
In South Dakota, the elements necessary for formation of a contract are the following:
(1) Parties capable of contracting;
(2) Their consent;
(3) A lawful object; and
(4) Sufficient cause or consideration.
S.D. Codified Laws (“SDCL”) § 53–1–2 (2009).
“To form a contract, there must be a meeting of the minds or mutual assent on all essential terms.” American Prairie Const. Co. v. Hoich, 594 F.3d 1015, 1023 (8th Cir.2010) (quoting Jacobson v. Gulbransen, 623 N.W.2d 84, 90 (S.D.2001)). “Consent of the parties to a contract must be: (1) [f]ree; (2) mutual; and (3) [c]ommunicated by each to the other.” Id. (citing SDCL 53–3–1). The party asserting the existence of a contract bears the burden of establishing its enforceability. See Rusch v. Kauker, 479 N.W.2d 496, 505 (S.D.1991).
Similarly, in Pennsylvania, the elements necessary for formation of a contract are the following: “an offer, acceptance, and consideration.” Star Spa Servs., Inc. v. Robert G. Turano Ins. Agency, Inc., 595 F.Supp.2d 519, 530 (M.D.Pa.2009) (); Richter v. Pfundt, 2009 WL 5064383, 2009 U.S. Dist. LEXIS 120783, No. 09–2604 (E.D.Pa.2009) () (citing Yarnall v. Almy, 703 A.2d 535, 538 (Pa.Super.1997) (citing Jenkins v. County of Schuylkill, 441 Pa.Super. 642, 658 A.2d 380, 383 (1995))).
Under both the South Dakota Uniform Commercial Code and the Pennsylvania Commercial Code, “an order ... to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.” SDCL 57A–2–206; 13 Pa.C.S. § 2206(a)(2) (2010).
IFS argues that Bell acquiesced to the forum-selection clause by receiving the invoices with the attached Terms and Conditions document and accepting the items. A buyer's failure to object to the terms included with the invoice may suffice to bind the buyer to the seller's forum-selection clause. See K.K.D. Imports, Inc. v. Karl Heinz Dietrich GmbH & Co. Int'l Spedition, 36 F.Supp.2d 200, 203 (S.D.N.Y.1999). In K.K.D. Imports, the Court held that an established course of dealing evidenced the parties' intention to be bound by the terms of defendant's invoices, which incorporated a forum selection clause by reference, for 41 shipments prior to the shipments at issue in the case Id.
IFS also argues that the course of dealing between the parties establishes that Bell has acquiesced to the forum-selection clause and is bound by its terms. South Dakota and Pennsylvania law identically define a “course of dealing” as “a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.” SDCL 57A–1–303(b); 13 Pa.C.S. § 1303(b). A course of dealing between two parties “is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement.” SDCL 57A–1–303(d); 13 Pa.C.S. § 1303(d).
Authority in the Second Circuit holds that standard terms contained in order confirmations, repeatedly retained without objection, “may, over time, become part of later contracts.” New Moon Shipping Co., Ltd. v. MAN B & W Diesel AG...
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