Kotan v. Pizza Outlet, Inc., Civ. Action No. 05-01119 (RCL).

• Citation: 400 F.Supp.2d 44
• Decision Date: 28 October 2005
• Docket Number: Civ. Action No. 05-01119 (RCL).
• Parties: Burak S. KOTAN, et al., Plaintiffs, v. PIZZA OUTLET, INC., et al., Defendants.
• Court: U.S. District Court — District of Columbia

400 F.Supp.2d 44

Burak S. KOTAN, et al., Plaintiffs, v. PIZZA OUTLET, INC., et al., Defendants.

Civ. Action No. 05-01119 (RCL).

United States District Court, District of Columbia.

October 28, 2005.

Athan Theodore Tsimpedes, Law Offices of Athan T. Tsimpedes, John M. Shoreman, McFadden & Shoreman, PC, Washington, DC, for Plaintiffs.

Christopher H. Grigorian, Arent, Fox, Kintner, Plotkin & Kahn, Washington, DC, for Defendants.

MEMORANDUM OPINION

LAMBERTH, District Judge.

This matter comes before the Court on the motion [2] of defendants Pizza Outlet, Inc. ("Pizza Outlet") and Vocelli Pizza, L.P. ("Vocelli") to dismiss or, in the alternative, to transfer this case to the Western District of Pennsylvania. Pizza Outlet and Vocelli (collectively "franchisors") claim that pursuant to a forum selection clause in their franchise agreement with plaintiff Kotan, the Western District of Pennsylvania is the only proper federal venue for this action. They also claim that the District of Columbia is an improper venue for this action for reasons of convenience of parties and witnesses, a claim the plaintiffs refute. The franchisors request that this Court either dismiss the case pursuant to 28 U.S.C. § 1406(a) or use its discretion under 28 U.S.C. § 1404(a) to transfer the case. Upon consideration of the parties' filings, the applicable law and the record herein, the Court shall deny the franchisors' motion to dismiss but grant their motion to transfer the case to the Western District of Pennsylvania.

I. BACKGROUND

The plaintiffs in this action are Burak S. Kotan, a resident of Maryland, and MB Group, Inc., a Maryland corporation of which Kotan is the principal. The defendants include the franchisors, both Pennsylvania corporations, and two of their franchisees, Randy Fox of Reston, Virginia and Umit Yugit of Pompano Beach, Florida. The underlying dispute stems out of a contract between Pizza Outlet and Kotan. Pizza Outlet and Vocelli franchise retail pizza restaurants nationwide under the Vocelli name. Seeking to develop and operate several Vocelli restaurants in the District of Columbia, Kotan and his then-partner Mert Onur entered into a partnership agreement and established MB Group for this purpose. On February 20, 2004, they signed an agreement with Pizza Outlet ("Development Agreement"), requiring them to open a certain number of stores. Paragraph 19(D) of the Development Agreement contains a forum selection clause, which states:

Exclusive Jurisdiction DEVELOPER [Kotan] and PO [Pizza Outlet] agree that any action arising out of or relating to this Agreement ... and the relationship of the parties shall be instituted and maintained only in a state or federal court of general jurisdiction in Allegheny County, Pennsylvania, and DEVELOPER irrevocably submits to the jurisdiction of such court(s) and waives any objection he may have to either the jurisdiction or venue of such court.

(Mot. Dismiss Ex. A.at 18) On June 1, 2005, the plaintiffs filed this action in the Superior Court for the District of Columbia alleging tortious interference, breach of contract, fraud and deceit, and misrepresentation. On June 6, 2005, the defendants removed the case to the United States District Court for the District of Columbia pursuant to 28 U.S.C. § 1441 and in accordance with 28 U.S.C. § 1446. On June 23, 2005, the franchisors filed the present motion.

II. DISCUSSION

A. Defendants' Motion to Dismiss

The franchisors' motion to dismiss is premised on 28 U.S.C. § 1406(a) (1993), which provides:

The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.

In support of this motion the franchisors claim that venue in the District of Columbia is improper because of the mandatory forum selection clause contained in the Development Agreement. (Mot. Dismiss 4-6.) However, the franchisors' reliance on § 1406(a) is misplaced. In accordance with the plain language of § 1406(a), a court may only act pursuant to this statute when a case is filed in the wrong venue. While questions of venue are generally resolved in accordance with § 1391, when a case is removed from state court to federal court, the removal statute, 28 U.S.C. § 1441, dictates venue. Polizzi v. Cowles Magazines, 345 U.S. 663, 665, 73 S.Ct. 900, 97 L.Ed. 1331 (1953). Section 1441(a) expressly provides that "the district court of the United States for the district and division embracing the place where such action is pending" is the proper venue of a removed action. 28 U.S.C. § 1441(a) (1994). Because this case was filed in the Superior Court for the District of Columbia and defendants voluntarily removed it to this Court, this Court is the proper venue under § 1441(a). See Hartford Fire Ins. Co. v. Westinghouse Elec. Corp., 725 F.Supp. 317, 320 (S.D.Miss. 1989) ("[D]efendant's voluntary application for removal confers venue over him."). Thus, the franchisors' objection under § 1406(a) to the propriety of venue in this district is not valid. See 14C CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3726, at 123-24 (3d ed.1998) (explaining that after an action is removed pursuant to § 1441, objections to venue based on § 1406(a) are not applicable even if venue is improper under § 1391). This Court therefore denies the franchisors' motion to dismiss.

B. Defendants' Motion to Transfer to Another Venue

1. Legal Standard

Foreseeing the possibility that this Court may deny their motion to dismiss the case, the franchisors requested in the alternative that this Court transfer the case to the Western District of Pennsylvania. In accord with the Court's reasoning supra Part II.A, the franchisors correctly note that the motion to transfer is governed by 28 U.S.C. § 1404(a). See Thorlabs, Inc. v. Townsend Commc'ns, L.L.C., 2004 WL 1630488, at *2 n. 1 (D.N.J.2004) (explaining that after an action is removed from state to federal court, transfer of venue is "governed only by 28 U.S.C. § 1404(a)") (emphasis added). Section 1404 gives a district court discretion to "transfer any civil action to any other district or division where it might have been brought" "[f]or the convenience of parties and witnesses, in the interest of justice." 28 U.S.C. § 1404(a) (1993).

In Stewart Org., Inc. v. Ricoh Corp., the Supreme Court held that 28 U.S.C. § 1404(a) controls the issue of whether to transfer a case to another judicial district in accordance with a forum selection clause in a contract between the parties. 487 U.S. 22, 28-29, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988). Previously, in M/S Bremen v. Zapata Off-Shore Co., the Supreme Court held that forum selection clauses are presumptively valid, unless the resisting party can show that enforcement of the clause would be "unreasonable under the circumstances." 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (internal quotation marks omitted). M/S Bremen involved a federal district court sitting in admiralty, but the presumption in favor of the enforceability of forum selection clauses has been widely adopted in diversity actions, including actions in this Court. See Stewart, 487 U.S. at 33, 108 S.Ct. 2239 (Kennedy, J., concurring) (noting that the reasoning in M/S Bremen regarding the enforcement of forum selection clauses "applies with as much force to federal courts sitting in diversity"); see, e.g., 2215 Fifth St. Assocs. v. U-Haul Int'l, Inc., 148 F.Supp.2d 50, 58 (D.D.C.2001) (quoting with approval the relevant language from M/S Bremen in a diversity action); Mann v. Papandreou (Marra I), 59 F.Supp.2d 65, 70 (D.D.C.1999) (holding that forum selection clauses should be enforced "in all but the most exceptional" circumstances) (citation omitted), aff'd, 216 F.3d 1119 (2000). However, per Stewart, a court must evaluate a § 1404(a) motion to transfer "according to an `individualized, case-by-case consideration of convenience and fairness.'" Stewart, 487 U.S. at 29, 108 S.Ct. 2239 (citing Van Dusen v. Barrack, 376 U.S. 612, 622, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964)). Such an analysis calls for a balancing of a number of factors, and "[t]he presence of a forum-selection clause ... [will] figure[] centrally in the district court's calculus." Stewart, 487 U.S. at 29, 108 S.Ct. 2239. Under the guidance of § 1404(a), a court "should consider the private interests of the parties, including their convenience and the convenience of potential witnesses, as well as other public-interest concerns, such as systemic integrity and fairness, which come under the rubric of `interests of justice.'"¹ Moses v. Bus. Card Exp., Inc., 929 F.2d 1131, 1137 (6th Cir.1991).

As a matter of policy, forum selection clauses are granted significant weight in venue transfer motions because:

[A] clause establishing ex ante the forum for dispute resolution has the salutary effect of dispelling any confusion about where suits arising from the contract must be brought and defended, sparing litigants the time and expense of pretrial motions to determine the correct forum and conserving judicial resources that otherwise would be devoted to deciding those motions.

Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593-94, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991). This Circuit has characterized a forum selection clause as "a separate contract in which the parties agree to venue" and further observed that "a forum-selection clause is best understood as ... [an] ex ante agreement to waive venue objections to a particular forum." Marra v. Papandreou (Marra II), 216 F.3d 1119, 1123-24 (D.C.Cir.2000). Hence, while this Court does not grant it dispositive weight, the forum selection clause between the franchisors and Kotan is a major consideration in the Court's evaluation the franchisors' motion to transfer.

2. Propriety of Venue in Western District of Pennsylvania

Before delving into...