Clisham Management v. American Steel Bldg. Co.

• Decision Date: 28 April 1992
• Docket Number: No. H-89-617 (AHN).,H-89-617 (AHN).
• Citation: 792 F. Supp. 150
• Parties: CLISHAM MANAGEMENT, INC. and Bristol Self Storage v. AMERICAN STEEL BUILDING COMPANY, INC.
• Court: U.S. District Court — District of Connecticut

792 F. Supp. 150

CLISHAM MANAGEMENT, INC. and Bristol Self Storage v. AMERICAN STEEL BUILDING COMPANY, INC.

No. H-89-617 (AHN).

United States District Court, D. Conn.

April 28, 1992.

Thomas J. Rechen, Lawrence G. Rosenthal, James G. Green, Jr., Pepe & Hazard, Hartford, Conn., for plaintiffs.

Scott P. Moser, Day, Berry & Howard, Hartford, Conn., Special Masters.

Duncan R. MacKay, Craig A. Raabe, David J. Sheldon, Frank F. Coulum, Jr., Christopher Foster, Robinson & Cole, Hartford, Conn., A. Randall Friday, Crady, Jewett & McCulley, Houston, Tex. (pro hoc vice), Frederick U. Conard, Jr., Shipman & Goodwin, Hartford, Conn., for defendant.

MEMORANDUM OF DECISION ON MOTION TO TRANSFER VENUE

NEVAS, District Judge.

This is a diversity action for breach of contract and violations of the Connecticut Unfair Trade Practices Act, Conn.Gen.Stat. §§ 42-110a et seq. ("CUTPA") and the Texas Deceptive Trade Practices Act, Tex.Bus. & Com.Code Ann. §§ 17.41 et seq. brought by Clisham Management, Inc. and Bristol Self Storage ("Clisham") against American Steel Building Company, Inc. ("American"). The action arises from a contract that was executed by the parties on March 23, 1985 in which American was to sell, design, and erect two, two-story, metal building frames. Clisham alleges that American breached the contract by providing substandard materials, defective installation, and shoddy workmanship. Clisham seeks money damages in excess of $295,000 for expenses incurred as a result of the breach.

On February 17, immediately prior to trial, the court held a hearing on a sua sponte motion to transfer venue to the Southern District of Texas, Houston Division. At the conclusion of the hearing, the court granted the motion to transfer, issued a short order disposing of the motion, and informed the parties that it would issue subsequently a memorandum setting forth the reasons for its decision. Accordingly, this memorandum articulates the basis for the court's decision to transfer venue in this matter.

Background

A. Facts

The parties executed a contract on March 23, 1989 (the "Contract") for the purchase, erection, and installation of two, two story, metal building structures designed by the defendant.¹ (See Amend.Compl., Ex. A.) The buildings were to be used as a self storage facility encompassing about 55,000 square feet of space. The materials slated for use in the construction of the buildings were manufactured in Texas and shipped by American to the construction site in Bristol, Connecticut. American also hired subcontractors responsible for the actual erection of the structures.

The erection of the structures, however, proceeded in a manner that deviated significantly from the expectations of Clisham. Specifically, Clisham alleges that American breached the Contract by: (1) supplying substandard materials, including poor quality, rusted steel components; (2) installing and designing defective concrete decks; and (3) providing shoddy workmanship in the installation and erection of the building structures. Clisham initiated this action to recover damages resulting from the alleged breach.

B. Procedural History

The procedural history of this lengthy and contentious litigation is far too cumbersome and extraneous to the issues currently before the court to require a detailed and comprehensive recitation. Certain aspects of this history, however, are helpful in understanding the procedural context in which the court takes the unusual step of transferring this case sua sponte to the Southern District of Texas.

1. American's Motion to Transfer Venue

On December 4, 1989, American filed a motion to transfer venue to the Southern District of Texas, Houston Division. (See Filing No. 18, Def.'s Mot. Trans.) The basis for American's motion was a forum selection clause (the "FSC") in the Contract which stated "it is agreed that any litigation arising hereunder shall be had in the Courts of appropriate jurisdiction in Harris County, Texas." (Amend.Compl., Ex. A, at ¶ 17.) Clisham opposed the motion on the grounds that the financial and logistical inconvenience created by a transfer of venue at that stage of the litigation would effectively deprive the plaintiffs of their day in court.

In considering American's motion, the court, relying on Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988), noted that district courts are to be accorded broad discretion in transferring the venue of a case pursuant to 28 U.S.C. § 1404(a) and that such discretion should be exercised "according to an `individualized, case by case consideration of convenience and fairness'" even in cases, such as this one, where the motion to transfer was predicated on a forum selection clause. (See Filing No. 34, Ruling on Def's Mot. Trans., No. H-89-CV-00617 (AHN) (April 12, 1990) at 3-4 ("Transfer Ruling").) After weighing competing factors, particularly the increased logistical and financial burden on the ability of the parties to litigate this case in Texas, the court was persuaded that a transfer of venue contravened the interests of justice.² Accordingly, the court denied American's motion to transfer.

2. The Choice of Law Issue

With jury selection set for February 4, 1992, American filed a memorandum regarding choice of law issues on the afternoon of January 24, 1992. (See Filing No. 160, Def.'s Mem. Choice of Law.) Specifically, American objected to the fact that Clisham sought relief under both CUTPA and DTPA, two unfair trade practice statutes from Connecticut and Texas respectively. American argued that Clisham could not seek relief under two such statutes from competing jurisdictions for what was in essence one unfair trade practices claim. Rather, American contended that, since this case was to be tried in Connecticut, Connecticut law governed the unfair trade practices claim. American concluded, therefore, that Clisham was precluded from bringing the DTPA claim in addition to the CUTPA claim.

On January 31, 1992, Clisham filed its memorandum in opposition. (See Filing No. 167, Pltf.'s Mem.Opp.Choice of Law.) Clisham contended that subtle differences between the CUTPA and DTPA causes of action along with a choice of law clause in the Contract ("CLC")³ permitted the bringing of dual claims under both statutes. Specifically, Clisham argued that the CUTPA claim was, in essence, a tort claim and, thus, not in conflict with the CLC's mandate that Texas law governs all claims arising from the Contract. Clisham insisted, however, that the DTPA claim sounded in contract and, thus, could be maintained pursuant to the CLC's pronouncement that the laws of Texas, including DTPA, were applicable to all contract claims in this dispute. Clisham also argued that, should it prevail on both unfair trade practices claims, Clisham was entitled under Texas law to elect its remedy from either statute.

Recognizing that the disposition of the choice of law issues raised in these memoranda would have a profound impact on the admissibility of evidence, the charging of the jury, and ultimately the rights of the litigants, the court scheduled an expedited oral argument for the afternoon of February 4, 1992, immediately following jury selection. At oral argument, the court informed the parties, that in the interest of time, it would evaluate the choice of law arguments immediately and provide the parties with an expedited ruling from the bench on or before February 7, 1992.

On the morning of February 7, 1992, the court, after reviewing all memoranda, oral argument, the authorities submitted by the parties, and its own research, issued its ruling from the bench that the DTPA claim was precluded under the applicable choice of law principles in this case. Specifically the court found: (1) the CLC's pronouncement that the laws of Texas governing disputes involving the Contract was limited in application to the breach of contract claim; (2) both the DTPA and CUTPA claims were rooted in tort rather than contract and, therefore, were outside the scope of the CLC, see Portland Sav. & Loan Ass'n v. Bevill, Bresler & Schulman Gov't Sec., Inc., 619 S.W.2d 241 (Tex.Civ.App. 1981) (DTPA "has its roots in the tort of misrepresentation"); Bailey Employment Sys., Inc. v. Hahn, 655 F.2d 473, 475-476 (2d Cir.1981) (CUTPA lies in tort for choice of law analysis); (3) a direct conflict existed between the DTPA and CUTPA claims and a choice of law analysis was required to resolve that conflict; (4) relying on Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1940), the court applied Connecticut choice of law principles, the law of the forum state, to govern the resolution of the choice of law dispute; (5) under Connecticut law, O'Connor v. O'Connor, 201 Conn. 632, 637, 519 A.2d 13 (1986), the principle of lex loci delicti — the governing law is that of the place where the alleged tort occurs — applies to all choice of law disputes unless the application of that law produces an arbitrary and irrational result; and (6) the application of O'Connor to the facts in this case required that CUTPA, the governing Connecticut law for unfair trade practices, and not DTPA, governed any, and all, unfair trade practices claims in this case.

Immediately following the court's ruling, counsel for Clisham objected and moved the court for reconsideration. In addition to claiming that American had not given Clisham adequate time to respond to cases cited in American's reply memorandum on the choice of law issue filed with the court on the day of oral argument, Clisham reiterated that its DTPA claim was based on breaches of express and implied warranties and, thus, sounded in contract and not tort despite case law to the contrary. Clisham argued that because its DTPA claim lay in contract and not tort, the CLC's express selection of Texas law applied to all contract claims and, thus, DTPA not CUTPA governed this aspect of the case. In support...