Metropolitan Alloys v. State Metals Industries

• Decision Date: 22 February 2006
• Docket Number: No. 05-CV-74695.,05-CV-74695.
• Parties: METROPOLITAN ALLOYS CORP., a Michigan corporation, Plaintiff, v. STATE METALS INDUSTRIES, INC., a New Jersey corporation, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

416 F.Supp.2d 561

METROPOLITAN ALLOYS CORP., a Michigan corporation, Plaintiff, v. STATE METALS INDUSTRIES, INC., a New Jersey corporation, Defendant.

No. 05-CV-74695.

United States District Court, E.D. Michigan, Southern Division.

February 22, 2006.

Andrew L. Finn, Hickey, Cianciolo, Detroit, MI, for Plaintiff.

Michael F. Schmidt, Harvey Kruse, Troy, MI, for Defendant.

ORDER DENYING DEFENDANT'S MOTION TO DISMISS OR TRANSFER VENUE (#

STEEH, District Judge.

Defendant State Metals Industries, Inc. ("SMI") moves to dismiss for insufficiency of service of process and lack of personal jurisdiction. SMI also moves to transfer venue to New Jersey for the convenience of the parties and witnesses pursuant to 28 U.S.C. § 1404(a). A hearing on the motions was held on February 9, 2006.

I. Background

Plaintiff Metropolitan Alloys Corporation ("MAC"), a Michigan corporation, filed a complaint in Michigan's Wayne County Circuit Court on September 1, 2005 alleging MAC contracted with defendant SMI, a New Jersey corporation, in February 2004 to purchase metal materials including unplated zinc die casts and aluminum wire. MAC allegedly received the materials from SMI on February 14, 2004, and initial sample inspections revealed no contaminants. MAC alleges, however, that contaminated materials were concealed by SMI in lower levels of the shipping containers. MAC alleges it unknowingly used these contaminated materials to create zinc and zinc-aluminum alloys, which were then sold to non-party Empire Die Casting Company ("Empire"), an Ohio company. Empire allegedly made die castings from the materials, which later cracked due to contaminants. Empire has since allegedly claimed damages against MAC of over $150,000.00.

Based on these factual allegations, MAC alleges SMI is liable under Michigan's version of Article 2 of the Uniform Commercial Code ("UCC") for breach of contract, breach of implied warranty of merchantability, breach of implied warranty of fitness for a particular purpose, and fraud. The lawsuit was removed to federal court on December 9, 2005 based on the court's diversity jurisdiction. See 28 U.S.C. §§ 1332, 1441, 14-46. SMI alleges in the Notice of Removal that service of process did not meet the requirements of either the Federal or Michigan Civil Rules of Procedure.

II. Dismiss for Insufficiency of Service of Process

Federal Rule of Civil Procedure 12(b)(5) authorizes a district court to dismiss a complaint for insufficiency of service of process. The party on whose behalf service of process was made has the burden of establishing its validity. Shires v. Magnavox Co., 74 F.R.D. 373, 377 (E.D.Tenn.1977). In deciding a motion to dismiss under Rule 12(b)(5), the court may refer to record evidence in determining the sufficiency of service. Thompson v. Kerr, 555 F.Supp. 1090, 1093 (S.D.Ohio 1982). Facts as attested to in uncontroverted affidavits may be considered in ruling on a motion to dismiss under Rule 12(b)(5). See Shires, 74 F.R.D. at 376-377 (reasoning that uncontroverted facts in affidavits are deemed admitted for purposes of deciding a motion to dismiss for insufficiency of service of process).

SMI argues without factual support that MAC attempted service simply by giving a brown envelop to an unknown person standing at an SMI truck scale on October 13, 2005, and by sending a copy of the summons and complaint by certified mail to SMI's main corporate office. MAC has responded with affidavits demonstrating that it complied with the service of process requirements of Michigan Court Rule 2.105(D)(2)¹ when process server Susan Sommer hand delivered a copy of the summons and complaint to a person representing themselves to be in charge of SMI's office on September 14, 2005, and by sending by certified mail a copy of the summons and complaint to SMI's corporate office on November 9, 2005. Federal Rules of Civil Procedure 4(e) and (h) permit service upon a corporation pursuant to state law. Based on MAC's uncontested affidavits, MAC has met its burden of demonstrating the validity of service of process upon SMI. Shires, 74 F.R.D. at 376-377; Thompson, 555 F.Supp. at 1093. SMI's motion to dismiss for insufficient service of process will be denied.

III. Dismiss for Lack of Personal Jurisdiction or Transfer Venue to New Jersey

"It is a well-accepted principle that a federal court in a diversity case must apply the conflict of law rules of the state in which it sits." Banek Inc. v. Yogurt Ventures U.S.A., Inc., 6 F.3d 357, 361 (6th Cir.1993) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) and Colonial Refrigerated Transp., Inc. v. Worsham, 705 F.2d 821, 825 (6th Cir.1983)). SMI's motion to dismiss for lack of personal jurisdiction is premised on a contractual forum selection clause and a Michigan rule codified at M.C.L. § 600.745:

(3) If the parties agreed in writing that an action on a controversy shall be brought only in another state and it is brought in a court of this state, the court shall dismiss or stay the action, as appropriate, unless any of the following occur:

(a) The court is required by statute to entertain the action.

(b) The plaintiff cannot secure effective relief in the other state for reasons other than delay in bringing the action.

(c) The other state would be a substantially less convenient place for the trial of the action than this state.

(d) The agreement as to the place of the action is obtained by misrepresentation, duress, the abuse of economic power, or other unconscionable means.

(e) It would for some other reason be unfair or unreasonable to enforce the agreement.

M.C.L. § 600.745(3). SMI's motion to transfer venue under 28 U.S.C. § 1404(a) is likewise premised on a contractual forum selection clause. See Moses v. Business Card Express, Inc., 929 F.2d 1131, 1136 (6th Cir.1991) (recognizing that a forum selection clause is a "significant factor" that figures "centrally" in a district court's analysis of whether to transfer venue under, 28 U.S.C. § 1404(a)). Indeed, SMI's motion to transfer venue relies almost exclusively on the forum selection clause at issue here.²

The question presented by SMI's motions is whether MAC is bound by the following forum selection clause set forth on the reverse side of an SMI "Sales Contract":

2. ACCEPTANCE OF ORDER: Acceptance of delivery of any or part of this order shall constitute acceptance by Buyer of this order upon the terms, conditions and prices set forth herein.

* * * * * * 10. LAW: Buyer agrees that any dispute arising out of this agreement shall be resolved in the Superior Court of New Jersey, Camden County, or the Federal District Court for the District of New Jersey and buyer does agree to submit generally to the jurisdiction of these courts.

Plaintiff MAC's Exhibit 2. MAC argues it is not bound by the New Jersey forum selection clause because, as attested to by MAC Executive Vice President Gilbert Spilman, he never discussed nor agreed to the provision when placing a phone order for the subject materials with SMI's Andy Dorfman, nor was such a provision referred to in the "Purchase Order" MAC mailed to SMI on February 16, 2004. See Plaintiff MAC's Exhibit 1. No MAC representative signed the "Sales Contract." MAC argues that, pursuant to M.C.L. § 440.2207(2)(b) of the UCC, the forum selection clause is a material alteration of the parties' contract and thus did not become a part of the contract as a matter of law.

Michigan courts recognize that "[a] contractual forum selection clause, though otherwise valid, may not be enforced against one not bound by the contract." Offerdahl v. Silverstein, 224 Mich. App. 417, 420, 569 N.W.2d 834 (1997). It is for Michigan courts to determine in the first instance whether a forum selection clause is contractually binding. Id. at 419, 569 N.W.2d 834 (referring generally to M.C.L. § 600.745). M.C.L. § 440.2207 provides in pertinent part:

(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or

(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

M.C.L. § 440.2207(1-2) (emphasis added). SMI does not dispute that the New Jersey forum selection clause first appeared in the "Sales Contract" SMI mailed to MAC in response to Spilman's phone order and MAC's February 16, 2004 "Purchase Order." It is also undisputed that the parties are "merchants." The dispositive issue is therefore whether the New Jersey forum selection clause added to the back of SMI's "Sales Contract" materially altered the parties' contract, or became a part of the contract. M.C.L. § 440.2207(2)(b). The question is one of Michigan state law.

In construing questions of state law, the federal court must apply state law in accordance with the controlling decisions of the highest court of the state. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). If the state's highest court has not addressed the issue, the federal court must attempt to ascertain how that court would rule if it were faced with the issue. The Court may use the decisional law of the state's lower courts, other federal courts construing state law, restatements of law, law review commentaries, and other jurisdictions on the "majority" rule in making this determination. Grantham & Mann v. American Safety Prods., 831 F.2d 596, 608 (6th Cir.1987).

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