First Interstate Leasing Service v. Sagge

• Decision Date: 17 October 1988
• Docket Number: No. 88 Civ. 0716 (PKL).,88 Civ. 0716 (PKL).
• Parties: FIRST INTERSTATE LEASING SERVICE, A DIVISION OF FIRST INTERSTATE CREDIT ALLIANCE, INC., Plaintiff, v. Ann SAGGE d/b/a M.L.C. Vendor, Defendant.
• Court: U.S. District Court — Southern District of New York

697 F. Supp. 744

FIRST INTERSTATE LEASING SERVICE, A DIVISION OF FIRST INTERSTATE CREDIT ALLIANCE, INC., Plaintiff, v. Ann SAGGE d/b/a M.L.C. Vendor, Defendant.

No. 88 Civ. 0716 (PKL).

United States District Court, S.D. New York.

October 17, 1988.

William M. Stein, Hood & Stein, Haverstraw, N.Y., for plaintiff.

Joseph E. Canciamilla, Groff & Johnson, Antioch, Cal., Martin Freedhan, New York City, for defendant.

OPINION AND ORDER

LEISURE, District Judge.

Plaintiff in this case, First Interstate Leasing Service ("First Interstate"), is a New York corporation which purchases and rents vending equipment. Lessees typically operate the equipment for their own business purposes. Defendant, Ann Sagge ("Sagge"), is an individual residing in California. Sagge has done business as "M.L. C. Vendor." Plaintiff instituted this action to collect on an alleged default of a lease executed between it and defendant.

Sagge sought to engage in vending business activities and in that regard approached the Cornelius Company, a supplier of vending machines. She initially negotiated for the purchase of 15 vending machines, but subsequently decided to finance the equipment instead of purchasing it outright. She was advised by the Cornelius Company that she could lease the equipment through plaintiff, which would act as an independent financier. Affidavit of Galen S. LeMar, sworn to on July 12, 1988 ("LeMar Affidavit"), ¶ 4.

First Interstate requested and obtained credit information on defendant from the Cornelius Company. Plaintiff then prepared a form Lease and Delivery/Installation Certificate for the vending machines. See Exhibits A ("Lease") and B ("Certificate"), Attached to LeMar Affidavit. The lease and certificate were executed by Sagge and forwarded to plaintiff. Defendant arranged for the delivery of the machines with the branch manager of plaintiff's Oregon office, Galen S. LeMar. LeMar Affidavit ¶ 1. The entire transaction was strictly commercial, and was in no sense a consumer transaction. LeMar Affidavit ¶ 3.

After receipt of the lease by plaintiff, defendant obtained possession of the vending machines. Complaint ¶ 5. Later in 1986, defendant delivered the machines to one Ronald Allen who, according to Sagge, agreed to make all payments pursuant to the Lease. Points and Authorities in Support of Motion to Change Venue ("Points in Support"), at p. 4. Apparently, Mr. Allen subsequently failed to make those payments. In 1987, defendant received a formal notice from First Interstate regarding the default in payment. Id. Upon continued nonpayment, plaintiff filed suit in the Southern District of New York to recover for the payments due under the lease. Plaintiff also claims late charges, sales tax, collection costs and attorney's fees. Complaint ¶ 7.

Defendant moved under 28 U.S.C. § 1404(a) to transfer venue. That provision states: "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." The purpose of this section is "to prevent the waste `of time, energy and money' and `to protect litigants, witnesses and the public against unnecessary inconvenience and expense....'" Van Dusen v. Barrack, 376 U.S. 612, 614, 84 S.Ct. 805, 808, 11 L.Ed.2d 945 (1964) (quoting Continental Grain Co. v. Barge FBL-585, 364 U.S. 19, 26-7, 80 S.Ct. 1470, 1474-75, 4 L.Ed.2d 1540 (1960)). Defendant cites the following reasons in support of her request to transfer venue: financial hardship in defending this action in New York and in having to travel cross country, inconvenience of potential witnesses who reside in California and Oregon, inconvenience of transferring records which are located in California and Oregon, and a proposed cross action against Ronald Allen which will be brought in California. Points in Support at 7-9.

Plaintiff First Interstate asserts that the lease entered into by the parties contained a clause consenting to jurisdiction and venue in the Southern District of New York. The forum selection clause reads as follows: "the parties and any guarantors do hereby agree to the venue and jurisdiction of any court in the State and County of New York regarding any matter arising under this contract". Lease ¶ 19. Plaintiff contends that in the present commercial context this clause is controlling, and that such clauses must be enforced in the absence of extenuating circumstances. Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Transfer ("Memorandum in Opposition"), at p. 4. Plaintiff cites as authority a series of unpublished opinions. The law with respect to this issue is clear, however, and for the following reasons the Court denies the motion to transfer.

The Forum Selection Clause

In The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), the Supreme Court was asked to decide whether or not to enforce a forum selection clause in a commercial drilling rig contract. The clause provided that any dispute would be litigated in an English court. The Court held that forum selection clauses should be enforced "absent a strong showing that the clause should be set aside." Id. at 15, 92 S.Ct. at 1916. "The correct approach is to enforce the forum clause specifically unless a party opposing its enforcement can clearly show that enforcement would be 1 unreasonable and unjust, or 2 that the clause was invalid for such reasons as fraud or overreaching."¹ Id. The "unreasonable and unjust" standard can be satisfied by a showing that a forum selection clause, although freely bargained for, is "seriously inconvenient" to one of the parties. Id. at 16, 92 S.Ct. at 1916. The Supreme Court recently commented on its approach in The Bremen when it stated: "Forum-selection clauses, which represent the parties' agreement as to the most proper forum, should receive ... the consideration for which Congress provided in § 1404(a)." Stewart Organization, Inc. v. Ricoh Corp., ___ U.S. ___, 108 S.Ct. 2239, 2241-42, 101 L.Ed.2d 22 (1988). The question, then, is whether the hardships urged by defendant require transfer of the case given all of the factors involved, including the forum selection clause.²

The Second Circuit has commented on the practical effects of The Bremen and forum selection clauses on various occasions. In AVC Nederland B.V. v. Atrium Investment Partnership, 740 F.2d 148, 156 (2d Cir.1984), Judge Friendly wrote "there can be nothing `unreasonable and unjust' in enforcing such an agreement; what would be unreasonable and unjust would be to allow one of the parties to disregard it." See also, Luce v. Edelstein, 802 F.2d 49, 57 (2d Cir.1986) (clause upheld where party attempting to avoid selection clause did not "offer any reason for us not to enforce" the clause).³

A cursory review of relevant case law indicates that the clause in the present case should be enforced. Bense v. Interstate Battery System of America, 683 F.2d 718, 720 (2d Cir.1982) involved the enforcement of a forum selection clause which provided that "the exclusive venue of any suits or causes of action arising directly or indirectly from this AGREEMENT shall be in Dallas County, Texas." This clause was in a franchise agreement between Interstate, a supplier of automobile storage batteries, and one of its distributors. Id. at 719. The franchisee brought suit against Interstate under the Sherman and Clayton Acts for wrongful termination of the franchise agreement, allegedly because of the franchisee's refusal to participate in a price-fixing plan. The action was commenced in the District of Vermont, and Interstate moved to transfer venue to Texas pursuant to the contract clause. Id. The Court held that the clause was enforceable in part because "the contract consists of two easily readable pages; the forum-selection clause ... is not in fine print or hidden in a mass of unrelated verbiage; and ... the movant is not a wholly unsophisticated business person." There, as here, the clause was "part of the bargain into which the parties freely entered." Id. at 722. See also, Mercury Coal and Coke v. Mannesmann Pipe and Steel, 696 F.2d 315, 318 (4th Cir.1982) (forum selection clause is not invalid merely because of unequal bargaining power where both parties are business people or because one party fails to read the contract before signing). The Bense Court also stated that inconvenience and expense of traveling were not, in and of themselves, adequate reasons not to enforce such a clause. Bense, 683 F.2d at 722.

Moretti & Perlow Law Offices v. Aleet Associates, 668 F.Supp. 103, 104 (D.R.I. 1987) involved a lease with a forum-selection clause which stated that all legal disputes would be adjudicated in a New York federal court. The court held that inconvenience in having to defend the action in New York was not reason to invalidate the clause. Even if the traveling were a serious inconvenience, it was contemplated by the parties when entering into the contract. Id. at 107. See also, Ronar, Inc. v....