D'antuono v. CCH Computax Systems, Inc.

• Decision Date: 19 September 1983
• Docket Number: Civ. A. No. 83-0447S.
• Citation: 570 F. Supp. 708
• Parties: Louis M. D'ANTUONO v. CCH COMPUTAX SYSTEMS, INC.
• Court: U.S. District Court — District of Rhode Island

570 F. Supp. 708

Louis M. D'ANTUONO v. CCH COMPUTAX SYSTEMS, INC.

Civ. A. No. 83-0447S.

United States District Court, D. Rhode Island.

September 19, 1983.

Everett A. Petronio and Thomas M. Petronio, Johnston, R.I., for plaintiff.

Edwards & Angell by Wm. P. Robinson, III, Patricia A.S. Zesk, Providence, R.I., for defendant.

OPINION

SELYA, District Judge.

This action was commenced in the state superior court and seasonably removed to this court pursuant to 28 U.S.C. § 1441. Jurisdiction is premised upon diversity of citizenship and the existence of a controversy in the requisite amount. 28 U.S.C. § 1332. The defendant has now moved to transfer venue to the United States District Court for the Southern District of California. While the motion is silent as to its statutory underpinnings, the court treats it as invoking the provisions of both 28 U.S.C. §§ 1404(a)¹ and 1406(a).²

The transfer motion is buttressed by the affidavit of James W. McNeill, defendant's chief executive officer. The objection to the motion is supported by plaintiff's counter-affidavit. All of the relevant contract documents are appended to these affidavits. The matter has been extravagantly briefed. Oral argument was heard on September 6, 1983.

The underlying facts are susceptible to succinct summary. D'Antuono, a Rhode Island certified public accountant, purchased a computer system, accessories therefor, and an assortment of related software from CCH Computax Systems, Inc., a California corporation ("Computax"). The transaction was limned by a series of instruments. The purchase arose in the following context. D'Antuono first talked with the defendant's sales representative in Rhode Island. Subsequent to the initial contact, the plaintiff attended a demonstration of the system in Boston, Massachusetts on November 18, 1982. On November 22, D'Antuono, in his offices in Johnston, Rhode Island, signed a preliminary purchase order (the "Offer") and tendered a deposit. The Offer was accepted on November 24 by an officer of Computax, presumably in California. While the Offer did not specifically contain a forum selection clause, it was, by its terms, "conditional upon customer's entering into applicable standard form purchase, program license, and-or supply agreements with seller". It is nowhere disputed that such "standard form" agreements, for the defendant's products, routinely incorporated such a covenant.

A few days later, the plaintiff sojourned to Norfolk, Virginia and participated in a week-long training seminar sponsored by defendant. While there, he entered into two purchase agreements, two ancillary supply contracts, and a program license agreement. These agreements were prepared by Computax, signed by D'Antuono in Virginia, sent to Computax in California, and inscribed there on the defendant's behalf. Each agreement contained the following clauses:³

The laws of the State of California shall govern this Agreement.

This Agreement shall be treated as though it were executed in the County of San Diego, State of California, and was to have been performed in the County of San Diego, State of California. Any action relating to this Agreement shall be instituted and prosecuted in the Courts of San Diego County, California. Customer specifically assents to extra-territorial service of process.

Subsequent to the striking of the bargain and the delivery and installation of the purchased items, the relationship between the parties eroded to the point where D'Antuono brought this suit. His complaint contains three statements of claim. The first count asserts breach of warranty and misrepresentation; the second count charges violations of the so-called "Deceptive Trade Practices Act," R.I.Gen.Laws §§ 6-13.1-1 et seq.; and the third count agglomerates the first two, topping off the resultant admixture with an assertion of entitlement to punitive damages. Thus, it is plain that this action is one "relating to" the serial agreements; and therefore, if the forum selection clause quoted above is enforced, transfer of the case will ineluctably result.

A threshold question exists as to the statutory basis for the motion. As noted earlier, there are two provisions of the Judiciary Code which may arguably come into play. The federal courts have hop-scotched between these sections in weighing the effect of forum selection covenants. Compare, e.g., Cutter v. Scott & Fetzer Co., 510 F.Supp. 905, 909 (E.D.Wis.1981) (28 U.S.C. § 1406(a) controls); Full-Sight Contact Lens Corp. v. Soft Lenses, Inc., 466 F.Supp. 71, 72-73 (S.D.N.Y.1978) (same); with Plum Tree, Inc. v. Stockment, 488 F.2d 754, 756-57 (3d Cir.1973) (court, without discussion, assumes that 28 U.S.C. § 1404(a) governs); Leasing Service Corp. v. Broetje, 545 F.Supp. 362, 369-70 (S.D.N.Y.1982) (28 U.S.C. § 1404(a) controls). Some courts have avoided the question by acting simultaneously under both statutes, e.g., Kline v. Kawai America Corp., 498 F.Supp. 868, 873 n. 5 (D.Minn.1980); others have acted without explicit reference to either statute, e.g., Taylor v. Titan Midwest Construction Corp., 474 F.Supp. 145 (N.D.Tex.1979).

In this court's view, 28 U.S.C. § 1406(a) controls in such a case. That statute is to be invoked when venue is improper, see Corke v. Sameiet M.S. Song of Norway, 572 F.2d 77, 79 (2d Cir.1978), as opposed to merely inconvenient. If the pre-litigation agreements between the parties are enforceable, then the plaintiff's choice of an inconsistent venue is simply wrong and should not be allowed to stand. Hoffman v. Burroughs Corp., 571 F.Supp. 545 at 551 (N.D.Tex.1982). See C. Wright, A. Miller, and E. Cooper, Federal Practice & Procedure § 3847, at 237 (1976). Far more than naked "convenience" is involved; indeed, by consenting to the inclusion of a forum designation in the contracts, the plantiff, to the extent that such a covenant is valid in a particular case, has waived any consideration of his convenience. Full-Sight Contact Lens Corp. v. Soft Lenses, Inc., 466 F.Supp. at 74.⁴

In that 28 U.S.C. § 1406(a) controls in the first instance, the issue becomes the validity of the forum selection clause. This inquiry requires, initially, a backward glance at precedent. Historically, such clauses were held in low repute in the federal courts as being of dubious validity in that they restrained resort to the courts. E.g., Home Ins. Co. v. Morse, 87 U.S. (20 Wall) 445, 451, 22 L.Ed. 365 (1874) (dictum). The Morse view, however, is now universally regarded as "outmoded". Kolendo v. Jerell, Inc., 489 F.Supp. 983, 985 (S.D.W.Va.1980). The more enlightened perspective is that postulated by the Supreme Court a decade ago in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). While Bremen involved a suit in admiralty, its wisdom has been unhesitatingly applied in land-based diversity actions. See In re Fireman's Fund Insurance Cos., Inc., 588 F.2d 93, 95 (5th Cir.1979); Fireman's Fund American Insurance Companies v. Puerto Rican Forwarding Co., Inc., 492 F.2d 1294, 1296-97 (1st Cir.1974); Richardson Engineering Co. v. International Business Machines Corp., 554 F.Supp. 467, 468-69 (D.Vt. 1981), aff'd 697 F.2d 296 (2d Cir.1982); Kline v. Kawai America Corp., 498 F.Supp. at 871 n. 1. See also St. Paul Fire & Marine Insurance Co., v. Travelers Indemnity Co., 401 F.Supp. 927, 929-30 (D.Mass.1975).

The Bremen rule is that, under federal common law, forum selection clauses "are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be `unreasonable' under the circumstances". 407 U.S. at 10, 92 S.Ct. at 1913. The recalcitrant party (here, the plaintiff) bears a heavy burden of proof in his attempt to demonstrate unreasonableness. Id. at 17, 92 S.Ct. at 1917. Bremen pointed to some of the exemplars of such a showing: "fraud or overreaching ... or that enforcement would contravene a strong public policy of the forum in which suit is brought". Id. at 15, 92 S.Ct. at 1916. Lastly, the Court declared that "it should be incumbent on the party ... to show that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court." Id. at 18, 92 S.Ct. at 1917. The First Circuit has stated the principle thusly: "To establish that a particular choice-of-forum clause is unreasonable, a resisting party must present evidence of fraud, undue influence, overweening bargaining power or ... serious inconvenience in litigating." Puerto Rican Forwarding Co., Inc., 492 F.2d at 1297. The Ninth Circuit has echoed similar sentiments. See Crown Beverage Co., Inc. v. Cerveceria Moctezuma, S.A., 663 F.2d 886, 888 (9th Cir.1981) (per curiam); Republic International Corp. v. Amco Engineers, Inc., 516 F.2d 161, 168 (9th Cir.1975).

Nor can it be doubted but that federal — rather than state — law must in the first instance be applied to venue selection. The applicable venue statute, 28 U.S.C. § 1406(a), is, after all, a creature of the Congress; and it is deserving of a uniform national interpretation. The weight of respectable authority so holds. See e.g., Northeast Theatre Corp. v. Edie & Ely Landau, Inc., 563 F.Supp. 833, 834-35 (D.Mass. 1983); Hoffman v. Burroughs Corp., at 550; Taylor v. Titan Midwest Construction Corp., 474 F.Supp. at 147. And, to the extent that Rhode Island law may be relevant to this inquiry, cf. Kolendo v. Jerell, Inc., 489 F.Supp. at 985, there are no reported cases directly on point, and no rational basis for the assumption that Rhode Island would not align itself with the weight of modern non-federal authority, e.g., Board of Education v. W. Harley Miller, Inc., 221 S.E.2d 882 (W.Va.1975), and subscribe to the Bremen view.

Post-Bremen, the federal courts have synthesized and refined the rule, and have looked to a variety of factors in applying the Bremen yardstick of reasonableness. These include:

1. The identity of the law which...