Flexcel, Inc. v. Cos 404, Inc., 3:06-CV-39-WGH-RLY.
| Decision Date | 15 September 2006 |
| Docket Number | No. 3:06-CV-39-WGH-RLY.,3:06-CV-39-WGH-RLY. |
| Citation | 458 F.Supp.2d 935 |
| Parties | FLEXCEL, INC., Plaintiff, v. COS 404, INC. f/k/a Creative Office Seating, Inc.; Haskell Office, LLC; and Alan J. Robins, Defendants. |
| Court | U.S. District Court — Southern District of Indiana |
R. Brock Jordan, Rubin & Levin, PC, Indianapolis, IN, for Plaintiff.
Patrick J. Doran, Ronald L. Daugherty, Pelino & Lentz PC, Philadelphia, PA, Cathy Elliott, James E. Carlberg, Bose McKinney & Evans, Indianapolis, IN, for Defendant.
ENTRY ON DEFENDANTS' MOTION TO DISMISS OR IN THE ALTENATIVE TO TRANSFER TO THE EASTERN DISTRICT OF PENSYLVANIA
This matter is before the Court on Defendants' Motion to Dismiss the Plaintiffs Complaint pursuant to Federal Rule of Civil Procedure 12(b)(2), (3), and (6) or in the Alternative to Transfer the Case to the United States District Court for the Eastern District of Pennsylvania filed March 30, 2006. (Docket Nos. 18-19).1 Plaintiff, flexcel, Inc., filed its Memorandum in Opposition on May 1, 2006 (Docket No. 23), and Defendant's Reply Memorandum was filed on May 15, 2006 (Docket No. 27).
Plaintiff, flexcel, Inc., is an Indiana company with its headquarters and principal place of business in Jasper, Indiana. (Complaint, ¶ 1). Defendants, COS 404, Inc., formerly known as Creative Office Seating, Inc. ("Creative"), Haskell Office, LLC ("Haskell"), and Alan Robins ("Robins"), are all residents of Pennsylvania. (Complaint, ¶¶ 3, 4). Plaintiffs predecessor in interest, Kimball International Manufacturing, Inc. ("Kimball"), and/or Kimball's affiliates have done business with Creative for a number of years under various agreements. (Complaint, ¶ 5; Affidavit of Jeffrey L. Fenwick ("Fenwick Aff."), ¶¶ 2-6).
On October 15, 2002, Plaintiff, Creative, and Haskell entered into a Product Sale Agreement ("PSA") which, by its express terms, superceded all prior agreements between or among Creative, Haskell, Kimball, or Kimball's affiliates. Creative and Robins, in conjunction with the PSA, each executed personal Guaranties (hereinafter "the Guaranties"). The Creative Guaranty secured performance by Haskell, while Robins' Guaranty secured performance by both Creative and Haskell. (Complaint, ¶¶ 7-8; Fenwick Aff., ¶¶ 7-9).
In entering into the PSA, the parties agreed to a choice of law provision and a forum selection clause which would govern any dispute arising out of the PSA. Section 13 of the PSA specifically provides:
This Agreement shall be governed by the laws of the State of Indiana.... Any action or proceeding seeking to enforce the terms of this Agreement, or based on any right arising out of this Agreement must be brought in the appropriate court located in Dubois County, Indiana, or ... in the Federal District Court for the Southern District of Indiana located in Evansville, Indiana. The parties hereto consent to the jurisdiction and venue of said courts.
(PSA, § 13).2 Additionally, the parties provided a particular way for terminating and modifying the PSA. Section 5 of the PSA explains that the agreement is in effect "indefinitely ... unless earlier terminated under the provisions set forth [in section 6]," including notice, insolvency, bankruptcy or receivership. (PSA, §§ 5-6). Section 10 of the PSA explains that any change or modification of the agreement shall not be "valid unless it is made in writing and signed by both parties." (PSA, § 10).
Plaintiff alleges that over the course of dealings between it, Creative, and Haskell under the PSA, Creative and Haskell fell delinquent in paying for goods delivered and services rendered in compliance with the payment terms as set forth in the PSA. (Fenwick Aff., ¶ 10). Creative and Haskell also asserted the existence of alleged problems with certain of the goods and services and also asserted the existence of claims for credits due, which if allowed, would provide for a reduction in the amounts due from Creative and Haskell to Plaintiff. (Fenwick Aff., ¶¶ 10-11).
After discussion and negotiation, the parties agreed to liquidate the receivables due to Plaintiff from Creative and Haskell, taking into account alleged claims for credits due Haskell and Creative. The agreements were memorialized in Promissory Notes (hereinafter "the Notes") executed by Haskell and Creative on June 11, 2004. (Complaint. ¶¶ 9, 11; Fenwick Aff., ¶¶ 12-15). Both the Haskell Note and the Creative Note have identical forum selection clauses which state that:
The undersigned expressly agrees that all disputes, controversies or claims arising hereunder, and the interpretation of any of the provisions or the performance called for hereunder shall be governed and determined by the laws of the State of Pennsylvania and any suit or action at law or in equity involving a dispute, controversy or claim arising hereunder shall be brought and maintained by either party in a Federal or State Court located in the State of Pennsylvania only.
(See Haskell Note at 2; Creative Note at 2). However, only Creative and Haskell respectively signed the Notes. (Haskell Note at 2; Creative Note at 2). Plaintiff did not sign either Note. Creative and Haskell ceased making installment payments on the Notes commencing with the March 2005 installments. (Complaint, ¶ 12; Fenwick Aff., ¶ 21).
Plaintiff initiated this action on January 21, 2006, arguing that Creative, Haskell, and Robins were in default on their obligations to Plaintiff pursuant to the PSA, the Guaranties, and the Notes, and that pursuant to those agreements, the Defendants were liable for damages including interest and attorneys' fees.
Defendants filed their motion to dismiss claiming that the lawsuit should be either dismissed or transferred to the Eastern District of Pennsylvania. Defendants argue that this Court lacks jurisdiction to hear this lawsuit because the PSA and Guaranties are superceded by the Notes. And, according to Defendants, because the Notes contain forum selection clauses that call for suit to be brought in Pennsylvania, the Court must either grant the motion to dismiss or transfer the suit to Pennsylvania. Plaintiff responded by arguing that the PSA was not superceded by the Notes because the Notes did not constitute a novation of the PSA under Indiana law. (Plaintiffs Answer at 5-8). In addition, Plaintiff points out that it did not sign either of the Notes, and it should, therefore, not be bound by the forum selection clause.
Having determined that there are significant factual disputes, the Court concludes that Defendants' motion must be GRANTED, in part, and DENIED, in part.
When ruling on a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, the plaintiff bears a burden of demonstrating the existence of jurisdiction. Jennings v. AC Hydraulic A/S, 383 F.3d 546, 548 (7th Cir.2004). In diversity cases, a federal court must determine if a court of the state in which it sits would have personal jurisdiction over the defendant. Id.
When ruling on a Rule 12(b)(3) motion to dismiss for improper venue, the district court is not obligated to limit its consideration to the pleadings nor to convert the motion to one for summary judgment. Continental Cas. Co. v. American Nat. Ins. Co., 417 F.3d 727, 733 (7th Cir.2005). The district court may hold an evidentiary hearing to resolve material disputed facts, and the court may weigh evidence, assess credibility, and make findings of fact that are dispositive on the Rule 12(b)(3) motion. See Murphy v. Schneider National, Inc. 362 F.3d 1133, 1140 (9th Cir.2004) (citing American Nat. Ins. Co., 417 F.3d at 733). These factual findings will be entitled to deference. Id.
When ruling on a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court must accept as true all well-pleaded factual allegations contained in the complaint, as well as the inferences reasonably drawn therefrom. See Baxter by Baxter v. Vigo County School Corp., 26 F.3d 728, 730 (7th Cir.1994). A dismissal is only appropriate if the plaintiff can establish no set of facts, even if hypothesized, consistent with the allegations of its complaint that would entitle it to relief. See Sanjuan v. American Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (7th Cir.1994), cert, denied, 516 U.S. 1159, 116 S.Ct. 1044, 134 L.Ed.2d 191 (1996). Moreover, the court must only examine the complaint, and not the merits of the lawsuit. See Autry v. Northwest Premium Services, Inc., 144 F.3d 1037, 1039 (7th Cir.1998).
This Court must resolve the following issues: (1) whether the Complaint alleges a cause of action only under the Notes or whether it alleges a cause of action under the PSA or the Guaranties; (2) whether the Creative Note and Haskell Note constituted a contract novation so that the Notes supercede the PSA and the Guaranties; (3) whether the Notes materially altered the PSA so that the Guaranty by Robins was discharged; and (4) whether the causes of action against Creative and Haskell based on the Notes must be bifurcated and removed to the Eastern District of Pennsylvania.
Defendants argue, as an initial matter, that Plaintiff filed suit alleging only a breach of the Notes, and that the forum selection clause in the Notes alone should control the parties' actions. (Defendants' Motion To Dismiss Lawsuit or in the Alternative to Transfer to the Eastern District of Pennsylvania [hereinafter "Defendants' Motion"] at 5). However, after examining the Complaint, the Court finds Defendants' claim unconvincing. The Complaint clearly states:
15. By terms of the Creative Guaranty, Creative is also liable for amounts due and owing on the Haskell Note.
16. By terms of the Robins Guaranty, Robins is liable for all amounts due and owing by Creative and Haskell.
17. Pursuant to the terms...
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