Geiger v. Keilani

• Decision Date: 29 June 1967
• Docket Number: Civ. A. No. 28411.
• Citation: 270 F. Supp. 761
• Parties: Leslie GEIGER and West South American Overseas Corporation, a New York Corporation, Plaintiffs, v. Nazem Z. KEILANI, Principal Defendant, and Bank of the Commonwealth (as successor to Public Bank, a State Banking Corporation), Garnishee Defendant, and Hussein Z. Keilani, Intervening Defendant.
• Court: U.S. District Court — Western District of Michigan

270 F. Supp. 761

Leslie GEIGER and West South American Overseas Corporation, a New York Corporation, Plaintiffs, v. Nazem Z. KEILANI, Principal Defendant, and Bank of the Commonwealth (as successor to Public Bank, a State Banking Corporation), Garnishee Defendant, and Hussein Z. Keilani, Intervening Defendant.

Civ. A. No. 28411.

United States District Court E. D. Michigan, S. D.

June 29, 1967.

Lawrence I. Levi, Frank M. Wiseman, Marx, Levi, Thill & Wiseman, Detroit, Mich., for plaintiffs.

Benjamin T. Hoffiz, Jr., Detroit, Mich., for principal defendant.

William H. Merrill, Emery, Parsons, Bahr, Tennent & Hogan, Detroit, Mich., for garnishee defendant.

Joseph W. Louisell, Louisell & Barris, Detroit, Mich., for intervening defendant.

OPINION

FREEMAN, Chief Judge.

Plaintiffs in this breach of contract action are an individual citizen of New York, Leslie Geiger, and his wholly owned company, West South American Overseas Corporation. The defendant Nazem Z. Keilani is alleged to be a citizen of the Republic of Chile and the owner of various mineral rights in that country. He is not subject to personal jurisdiction in this District. Nevertheless, plaintiffs successfully garnished a Detroit bank account of which Keilani and his nephew were joint tenants, thereby enabling the Court to proceed on the basis of quasi-in-rem jurisdiction.¹

According to the complaint, the agreement in dispute provided in part that the corporate plaintiff was to furnish a 130-ton vessel equipped to accomplish the measuring, prospecting and manifestation of some of the mineral deposits in which defendant had an interest. In return, Keilani was required to take certain steps to assist West South American in carrying out these preliminaries to the actual exploitation which was the parties' ultimate ambition. The company invested $26,500, the amount now sought to be recovered, in chartering, outfitting and provisioning a ship satisfactory for use in the project, as well as for hiring both a crew to man her and a group of geologists to handle the scientific aspects of the program. The defendant, however, allegedly defaulted in his obligations by neglecting, among other things, to properly register the contract in Chile and by refusing to make available to the personnel engaged by the corporation documents and geological reports under his control. Keilani denies that he was bound to do these things.

Two motions, each filed by the defendant, are currently before the court: One is for summary judgment; the other, the topic of this opinion, demands that the suit be dismissed on the ground that it should have been brought in Chile in accordance with the final paragraph of the translation of the Spanish language contract:

For all legal purposes, the contracting parties establish their provisional residence in the city of Santiago de Chile, Muerfanos street number 979, Room 520. Any difference of opinions which may arise between the parties regarding the interpretation of this sic Option-Agreement clauses, shall be resolved by the Chilean Ordinary Courts.

Before applying substantive law to this exclusive forum clause, it is necessary to consider whether by virtue of Federal Rule of Civil Procedure 12(g) Nazem Keilani's effort to invoke the provision comes too late. Rule 12(g) states:

A party who makes a motion under this rule may join with it any other motions herein provided for and then available to him. If a party makes a motion under this rule i.e. Rule 12 but omits therefrom any defense or objection then available to him which this rule permits to be raised by motion, he shall not thereafter make a motion based on the defense or objection so omitted, except a motion as provided in subdivision (h) (2) hereof on any of the grounds there stated.

Rule 12 motions, explicitly said by Rule 12(g) — through its reference to Rule 12(h) (2) — not to be waived by a failure to consolidate, include those related to non-joinder and the merits of a controversy. An additional motion mentioned in Rule 12, viz., that challenging subject matter jurisdiction, can be made at any time. See Rule 12(h) (3). Furthermore, judgment on the pleadings may be sought whenever orderly judicial administration permits. See Rule 12(c). Prior to bringing this motion for dismissal, defendant submitted another having the same objective but founded upon the premise that since neither he nor either plaintiff resides in this District, venue was improper.² The threshold issue is whether by not submitting both at the same time he must be denied recourse to the situs-of-suits portion of his agreement.

Rule 12(g) says that a piecemeal approach costs a party the right to press just certain motions unless covered by an exemption — those named in Rule 12 — and then, of course, only if he previously brought a motion listed in Rule 12. Apart from the exceptions treated by Rule 12(c) and (h) (2) and (3), Rule 12 deals with attacks addressed to a lack of jurisdiction over the person, insufficiency of process or service, vague or otherwise unacceptable material in pleadings, and incorrect venue. Since the authorities discussed below demonstrate that an agreement purportedly confining litigation to one forum never deprives another tribunal of any jurisdiction which it would otherwise have, Rule 12(g) could be a bar in the present situation only if defendant is once again complaining of venue. While Keilani is certainly saying that this action was commenced in the wrong locality, true venue for federal courts is established by Congress and no one is now maintaining that under the pertinent legislation the matter should not be here. Therefore, his motion must be viewed as similar to a petition under 28 U.S.C. § 1404(a) for transfer to another court although initial venue is proper. Reliance upon this statute is not circumscribed by the waiver principles set out in Rule 12. See Spence v. Norfolk & W. Ry., 89 F.Supp. 823 (N.D.Ohio 1950). Thus, it seems appropriate to hold that defendant is not precluded by Rule 12(g) from urging dismissal for the currently assigned reason.

The relevant substantive law is in a state of transition. Twenty-five years ago the rule seemed fairly well settled that a contract provision, entered into before a conflict arose, by which parties consented to litigate in only one particular place was invariably ineffective if one of them otherwise had the right to sue elsewhere and chose to do so. See 56 A.L.R.2d 300 (1957). In 1955, the Court of Appeals for the Second Circuit handed down what quickly became a landmark decision in Wm. H. Muller & Co. v. Swedish American Line Ltd., 224 F.2d 806. There a New York corporation had filed a libel against a Swedish shipper, demanding compensation for the harm attributable to the loss at sea of a vessel destined from Sweden to Philadelphia and carrying goods of which the libelant was the consignee. The bill of lading noted that all claims against the carrier for injury to freight were to be determined under Swedish law and tried in the courts of that country. After ruling that this part of the shipping document was not rendered inoperative by the Carriage of Goods by Sea Act, the court considered the possibility that it was in conflict with public policy and concluded that an exclusive forum term, regardless when executed, is not per se invalid but should be sustained if in light of the surrounding circumstances it is reasonable. Ample grounds for declining jurisdiction in favor of the Swedish judiciary were found in the showing that most of the potential witnesses resided in Scandinavia and the feeling that in relation to our traditional notions of justice the courts of Sweden were of high caliber. Similarly, in subsequent contests where a stipulated forum clause was respected, the principal justification often was that the witnesses were nearer the other court. See Pakhuismeesteren, S.A. v. S/S Goettingen, 225 F.Supp. 888 (S.D.N.Y.1963); Takemura & Co. v. The S.S. Tsuneshima Maru, 197 F. Supp. 909 (S.D.N.Y.1961); Aetna Ins. Co. v. The Satrustegui, 171 F.Supp. 33 (D.P.R.1959). On the other hand, enforcement was refused in Chemical Carriers v. L. Smit & Co.'s Internationale Sleepdienst, 154 F.Supp. 886 (S.D.N.Y. 1957), largely because the opponent of the motion to dismiss had demonstrated that the measure of recovery presumed to be binding upon the alternative tribunal would be substantially less than that prevailing in the United States.³

Plaintiffs cite Carbon Black Export, Inc. v. The S.S. Monrosa, 254 F.2d 297 (5th Cir. 1958), cert. dismissed as improvidently granted, 259 U.S. 180, 79 S.Ct. 710, 3 L.Ed.2d 723 (1959), and emphasize its statement of

the universally accepted rule that agreements in advance of controversy whose object is to oust the jurisdiction of the courts are contrary to public policy and will not be enforced. 254 F.2d 300.⁴

With this proposition there can be no quarrel.⁵ However, the very fact that it is so well established tends to reduce its value, since parties to an exclusive forum arrangement are unlikely to intend a purpose which they must realize cannot be achieved. Therefore, in drafting their agreement they would normally mean not to deprive some courts of jurisdiction but to express their desire that these courts relinquish jurisdiction in deference to what was at least originally the belief that suits could be better or more conveniently tried someplace else.⁶

While it would probably be possible to write at length about whether a federal court in a diversity case should apply state law in resolving the question at hand, such a discussion would be of only academic significance in the present context. Compare Central Contracting Co. v. Maryland Cas. Co., 367 F.2d 341 (3d Cir. 1966). Extensive research discloses no Michigan precedent suggesting disapproval of Muller, which clearly represents the modern trend as well as the more sound position in an action of this kind.⁷ Furthermore, it is...