Dexter Axle Co. v. Baan Usa, Inc.

• Citation: 833 N.E.2d 43
• Decision Date: 22 August 2005
• Docket Number: No. 20A03-0502-CV-87.,20A03-0502-CV-87.
• Parties: DEXTER AXLE COMPANY, Appellant-Plaintiff, v. BAAN USA, INC., Appellees-Defendants.
• Court: Indiana Supreme Court

833 N.E.2d 43

DEXTER AXLE COMPANY, Appellant-Plaintiff, v. BAAN USA, INC., Appellees-Defendants.

No. 20A03-0502-CV-87.

Court of Appeals of Indiana.

August 22, 2005.

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Charles P. Edwards, T. Joseph Wendt, Mark J. Crandley, Barnes & Thornburg LLP, Indianapolis, for Appellant.

John D. LaDue, Boveri Murphy Rice Ryan & LaDue, South Bend, for Appellee.

Daniel D. Zegura, Rogers & Hardin LLP, Atlanta, GA, Pro Hac Vice.

OPINION

BAKER, Judge.

Plaintiff-appellant Dexter Axle Company (Dexter) appeals from the trial court's order granting defendant-appellee Baan USA., Inc.'s (Baan)¹ motion to dismiss for lack of jurisdiction. In particular, Dexter contends that the trial court erred in concluding that a forum selection clause contained in the Consulting Services Agreement between the parties was binding as to the Software Agreement and required Dexter's claims to be litigated in California. Dexter further argues that the trial court erred in granting Baan's motion to dismiss before Dexter had the opportunity to fully conduct discovery on jurisdictional issues. Finding no error, we affirm the judgment of the trial court.²

FACTS

On December 27, 2002, Baan and Dexter entered into a Software License and Support Agreement (Software Agreement) under which Baan licensed to Dexter use of several of Baan's software products including its Enterprise Resource Planning (ERP) software. ERP software is "complex business software which integrates a company's business resources and functions and can be used by manufacturing businesses with multiple manufacturing plants, processing functions and product configuration needs." Appellee's Br. p. 5. Pursuant to the Software Agreement, Dexter paid Baan more than $400,000 in return for five pieces of software and access to a telephone line for technical support.

The Software Agreement contains the following relevant clauses: (1) an integration clause stating that it "contains the entire and exclusive agreement of the parties with respect to the subject matter of the Agreement," (2) a clause defining "Agreement" as the "Agreement . . . dated December 27th, 2002," and (3) a choice of law provision requiring that the contract be interpreted and construed in accordance with the laws of Virginia. Appellant's App. p. 35. It contains no forum selection clause.

Because ERP software is not fully functional "off the shelf," the user typically engages consultants to "implement" the software, which involves configuring the software and business processes and training users to use the software. Appellee's Br. p. 5. Accordingly, on January 28, 2003, the parties entered into a second agreement—the Consulting Services Agreement (Consulting Agreement)—whereby Baan agreed to provide certain consulting services related to implementing the ERP software for Dexter. The project's goal was to implement an ERP computer system consisting of software, hardware, and implementation consulting services at Dexter's corporate office and two plant facilities located in Elkhart.

The Consulting Agreement contains a choice of law and forum selection clause: "This Agreement will be construed and controlled by the laws of the State of California, U.S.A. without reference to its conflict of laws principles, and the parties mutually consent to exclusive jurisdiction and venue in the state and federal courts sitting in Santa Clara County, California." Appellant's App. p. 74. The Consulting Agreement defines "Agreement" as the "Master Service Agreement" entered into under the "terms and conditions" set forth in that agreement and executed by the parties. Id. p. 72. Additionally, it contains an integration clause rendering it "the entire agreement between the parties with respect to the subject matter hereof and will merge all prior and contemporaneous communications." Id. p. 75.

On July 7, 2003, Dexter went "live" on the ERP software. Appellee's Br. p. 6. When the ERP computer system went live, according to Dexter it did not perform as warranted and represented by Baan. Indeed, Dexter alleges that the systemic defects were so substantial that the ERP computer system could not perform even basic functions, leading to, among other things, errors in invoices and late delivery of Dexter's products. On August 13, 2003, Dexter notified Baan that it intended to rescind or terminate the Software Agreement unless Baan was able to cure the alleged deficiencies.

Dexter eventually terminated both agreements, revoked acceptance of the ERP software under the Software Agreement, and on October 13, 2003, filed a complaint against Baan for damages. Dexter asserted twelve claims: breach of the Software Agreement and the Consulting Agreement, two claims of breach of express warranties, breach of implied warranties, fraudulent inducement of the Software Agreement and the Consulting Agreement, fraud, negligence, constructive fraud, statutory deception, and unjust enrichment. Dexter's claims related to Baan's conduct and representations to Dexter before the parties entered into the agreements, the ERP software, and the consulting services provided by Baan.

On June 8, 2004, Baan moved to dismiss Dexter's complaint pursuant to, among other things, Indiana Trial Rule 12(B)(2) for lack of jurisdiction. Baan based its argument on the forum selection clause contained in the Consulting Agreement. Dexter had previously served written discovery on Baan, and on July 2, 2004, Baan moved for a stay of discovery relating to the underlying merits of Dexter's case pending the trial court's ruling on its motion to dismiss. Baan never opposed—and the trial court never limited—any discovery relating to the jurisdictional issues raised by Baan's motion to dismiss. On August 26, 2004, following briefing and a period of time for jurisdictional discovery, the trial court heard argument on both of Baan's motions.

On January 27, 2005, the trial court granted Baan's motion to dismiss for lack of jurisdiction, concluding that both parties are businesses and had equal bargaining power, that Dexter failed to identify any compelling reason why it should be able to evade the forum selection clause, and that Dexter failed to show that enforcement of the forum selection clause would be unreasonable and unjust. Accordingly, the trial court applied Indiana law and dismissed Dexter's complaint because the parties mutually consented to exclusive jurisdiction and venue in California. The trial court did not rule on Baan's discovery motion. Dexter now appeals.

DISCUSSION AND DECISION

I. Motion to Dismiss

Dexter contends that the trial court erred in granting Baan's motion to dismiss for lack of jurisdiction. In particular, Dexter argues that the trial court erred in dismissing Dexter's complaint because the Software Agreement did not contain a forum selection clause and the Consulting Agreement's forum selection clause applies only to Dexter's contract claims arising under that agreement.

As we consider these arguments, we note that when reviewing a motion to dismiss for lack of personal jurisdiction based on Indiana Trial Rule 12(B)(2), we apply a de novo standard of review. Grott v. Jim Barna Log Sys.-Midwest, Inc., 794 N.E.2d 1098, 1101-02 (Ind.Ct.App.2003), trans. denied. Personal jurisdiction is a question of law—it either exists or it does not. Id. at 1102. The question of its existence is not entrusted to a trial court's discretion. Id. When a defendant attacks the jurisdiction over his person, he bears the burden of proof upon that issue by a preponderance of the evidence, unless the lack of jurisdiction is apparent from the face of the complaint. Id.

A. The Forum Selection Clause

Initially, we observe that forum selection provisions are enforceable if they are reasonable and just under the circumstances and if there is no evidence of fraud or overreaching such that the agreeing party, for all practical purposes, would be deprived of a day in court. Id. Additionally, the provision must have been freely negotiated. Id. Moreover, "[e]ven where the forum-selection clause establishes a remote forum for resolution of conflicts, `the party claiming [unfairness] should bear a heavy burden of proof.'" Id. (quoting Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 592, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991)).

1. Just and Reasonable Under the Circumstances

Before we can set aside an agreed-to forum selection clause, Dexter must clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud and overreaching. Grott, 794 N.E.2d at 1104. Dexter first argues that the forum selection clause is unenforceable because it would be inconvenient to transport its witnesses and evidence to California. We have held in the past, however, that "[a] claim that unnecessary travel expenses will result from trial in the contractual forum is far from sufficient, by itself, for this court to conclude that an otherwise reasonable and freely negotiated contractual provision is unenforceable." Id. To hold otherwise would be to ignore the bargain that was struck between the parties, which we will not do. It is apparent to us that any alleged inconvenience related to litigating in California was foreseeable to the parties at the time they entered into the Consulting Agreement. Dexter cannot now try to avoid a contractual provision to which it agreed based upon an inconvenience that was foreseeable when it signed the contract. Accordingly, the forum selection clause is not unreasonable and unjust because it would be inconvenient for Dexter to litigate in California.

Dexter next contends that the forum selection clause is unreasonable and unjust because it would not be enforced by California courts. We note initially that the primary matter at issue here is whether the clause is enforceable in Indiana courts. But we will briefly address this argument to the extent that Dexter is claiming...