Danka Funding v. Page, Scrantom, Sprouse, Tucker

Decision Date28 September 1998
Docket NumberCivil Action No. 98-1288.
Citation21 F.Supp.2d 465
PartiesDANKA FUNDING, L.L.C., Plaintiff, v. PAGE, SCRANTOM, SPROUSE, TUCKER & FORD, P.C., a Georgia corporation, Defendant.
CourtU.S. District Court — District of New Jersey

William Uscher, Uscher, Quiat, Uscher & Russo, Hackensack, NJ, for Plaintiff.

Morrill J. Cole, David M. Kohane, Cole, Schotz, Meisel, Forman & Leonard, Hackensack, NJ, for Defendant.

OPINION

WOLIN, District Judge.

This case is here on the motion of defendant, Page, Scrantom, Sprouse, Tucker & Ford, P.C. ("Page, Scrantom"), for the following relief: (1) dismissal of the claims of plaintiff, Danka Funding Company, L.L.C. ("DFC"), for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2); (2) dismissal of plaintiff's claims for failure to comply with N.J.S.A. 42:2B-57.a, requiring registration in New Jersey of foreign limited liability companies doing business in this state desiring to bring suit in New Jersey; or, in the alternative, (3) transfer of venue, under 28 U.S.C. § 1404, to the United States District Court for the Middle District of Georgia. The Court has considered these matters under Federal Rule of Civil Procedure 78. For the reasons stated herein, defendant's motion will be denied.

BACKGROUND
The Parties

Page, Scrantom is a law firm with its sole office in Columbus, Georgia. (George Scrantom Cert. ¶ 1). It does no business in New Jersey and has no ties to New Jersey other than this lawsuit. (Id. ¶ 2).

DFC is a New York limited liability company engaged in the business of acquiring, pledging, holding, and disposing of certain leases and equipment or interests, issuing non-recourse obligations, and related acts. (Michael Quiat Aff., Ex. D). It claims its principle place of business in New Jersey. (Nancy Bosch Aff. ¶ 1; Michael Quiat Aff., Ex. B). DFC was registered in New Jersey from December 21, 1995, until May 15, 1997, at which point the registration lapsed or was withdrawn. (Bosch Aff. ¶ 12; See David Kohane Cert., Ex. A). Due to the lapse, it appears that DFC was unregistered at the time it filed its complaint in New Jersey; it has since re-registered on May 7, 1998. (Bosch Aff. ¶ 12; Quiat Aff., Ex. D).

The Lease

On January 29, 1997, Page, Scrantom entered into a lease to rent two Konica copiers and related equipment ("the Lease"). (Scrantom Cert., Ex. A.) The Lease was signed in Georgia, and its terms required Page, Scrantom to keep and use the equipment only at the firm's Columbus, Georgia address. (Id.).

The supplier on the Lease is listed as "DANKA", with an address in Columbus, Georgia. This Court understands that "DANKA" stands for Danka Industries and/or DANKA OFFICE IMAGING COMPANY (hereinafter "Danka"), a Delaware corporation. (See Davis Laney Aff., Ex. A; Defendant's Reply Brief, p. 1). The Lessor is listed as "American Business Credit Corporation" ("ABCC"), with an address in St. Petersburg, Florida. (Laney Aff., Ex. A). ABCC is identified on the Lease's letterhead as "A Danka Company", and the copyright of the Lease identifies the lease-form as created and used by ABCC. (See Id.). Both ABCC and Danka are alleged to have their principle places of business in Florida; Page, Scrantom, however, did business with those companies through a Columbus, Georgia office. (Defendant's Reply Brief, p. 1).

The Lease contains a choice of law/forum-selection clause on its back, where the following language is printed in bold:

CHOICE OF LAW: THIS RENTAL AND EACH SCHEDULE SHALL BE GOVERNED BY THE INTERNAL LAWS FOR THE STATE IN WHICH OUR OR OUR ASSIGNEE'S PRINCIPAL CORPORATE OFFICES ARE LOCATED. YOU CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN OUR OR OUR ASSIGNEE'S STATE, AND WAIVE ANY OBJECTION RELATING TO IMPROPER VENUE. (Scrantom Cert., Ex. A).

Subsequent to the execution of the Lease, it was assigned to DFC. (Quiat Aff., Ex. B).

New Jersey Lawsuit

On January 14, 1998, DFC filed a complaint in the Superior Court of New Jersey, Bergen County, alleging that the assignor of the Lease had delivered to Page, Scrantom certain office equipment. (Id.). Page, Scrantom filed a removal to this Court based on diversity of citizenship.

DFC alleges that defendant has defaulted on its obligations by failing to make regular monthly payments due on the Lease. (Id.). Under the terms of the Lease, DFC argues that all obligations of the defendant are now accelerated and currently due, plus an additional one and one-third percent per month additional interest on all monies due. (Id.). DFC calculates the total amount owed to it as $112,452.71, in addition to other costs relating to this litigation. (Id.).

It is undisputed that all of the witnesses Page, Scrantom will likely call to testify are from Georgia. Nancy Bosch, Vice President of a company that acts as servicing manager for DFC, states in her affidavit that DFC will require "at least one, and perhaps as many as three witnesses from its home office in New Jersey" to testify in this case. (Bosch Aff. ¶ 10).

Georgia Lawsuit

On February 12, 1998, Page, Scrantom filed suit against Danka and ABCC in the United States District Court for the Middle District of Georgia, Columbus Division, Case No. 9:98-CV-32 (JRE). Page, Scrantom had learned of the New Jersey filing, but had not been served. Service of process in the Georgia lawsuit was performed on February 13, 1998, before service of this lawsuit on February 19, 1998. (Defendant's Brief, p. 5). In the Georgia lawsuit, Page, Scrantom seeks rescission of the Lease and refund of Lease payments it made for the equipment. (Scrantom Cert., Ex. B). It bases its claims for rescission in the Georgia lawsuit on its allegations that the copiers leased to it were defective upon delivery, that the defects were beyond cure, and that Page, Scrantom had justifiably rejected tender of the machines and communicated this rejection immediately. (Id.). Page, Scrantom avers through the certification of its President, W.G. Scrantom, Jr., that it filed the Georgia lawsuit "in order to protect itself from the consequences of the defective merchandise leased to it and from efforts to drag Page Scrantom into the courts of New Jersey over a transaction relating only to Georgia." (Scrantom Cert. ¶ 6).

For purposes of the Georgia lawsuit, Page, Scrantom has identified eight witnesses of its firm with particular knowledge of the facts; all are from Georgia. (Laney Aff. ¶ 7). Danka and ABCC have identified seven individuals, six identified as Georgia residents, and a seventh who's address is listed as "unknown." (Laney Aff., Ex. A).

DISCUSSION
A. Motion to Dismiss for Lack of Personal Jurisdiction

Defendant first moves to dismiss plaintiff's complaint under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. Parties to a contract are free to consent in advance to personal jurisdiction in a foreign court through the use of consent-to-jurisdiction clauses, also known as forum-selection clauses.1 See M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10-11, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (citing National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311, 315-16, 84 S.Ct. 411, 11 L.Ed.2d 354 (1964)). Because there is no question that defendant lacks the minimum contacts necessary to confer personal jurisdiction on this Court as contemplated by International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) and its progeny, the issue of whether personal jurisdiction exists rests solely on the enforceability of the forum-selection clause in question.

The Third Circuit has noted that the construction of a contract is usually a matter of state, not federal, common law. General Engineering Corp. v. Martin Marietta, 783 F.2d 352, 356 (3d Cir.1986); see also In Re Diaz Contracting, Inc., 817 F.2d 1047, 1050-52 (3d Cir.1987) (noting that "the law of the state or other jurisdictions whose law governs the construction of the contract generally applies to the enforceability determination unless `a significant conflict between some federal policy or interest and the use of state law [exists].'").

Accordingly, the initial step this Court must undertake is to determine what state law to apply when considering whether the forum-selection clause is an enforceable part of the contract agreed to by the parties. For this preliminary inquiry, the language of the clause itself is not authority for what law to apply. Rather, a federal court sitting in diversity must utilize the choice of law rules of the state in which it sits. Day & Zimmermann, Inc. v. Challoner, 423 U.S. 3, 96 S.Ct. 167, 46 L.Ed.2d 3 (1975); Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941).

New Jersey courts have implemented the governmental-interest approach to choice-of-law questions, which requires application of the law of the state with the greatest interest in resolving the particular issue raised by the underlying litigation. E.g. Gantes v. Kason Corp., 145 N.J. 478, 484-493, 679 A.2d 106 (1996). "The initial prong of the governmental-interest analysis entails an inquiry into whether there is an actual conflict between the laws of the respective states, a determination that is made on an issue-by-issue basis." Id. at 484, 679 A.2d 106 (citing Veazey v. Doremus, 103 N.J. 244, 248, 510 A.2d 1187 (1986)). In the absence of an actual conflict, the law of the forum state — in this case, New Jersey — is applied. See Schreiber v. Camm, 848 F.Supp. 1170, 1174 (D.N.J.1994) (citing, in part, Schum v. Bailey, 578 F.2d 493, 497 (3d Cir.1978)).

Here, no actual conflict exists. Regarding the standard for consent to forum-selection clauses in contracts, both New Jersey and Georgia have adopted the law as laid out by the United States Supreme Court in M/S Bremen, supra, 407 U.S. at 10, 12, 15-16, 92 S.Ct. 1907, wherein the Court found that freely negotiated forum-selection clauses are prima facie...

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