MKC Equipment Co. Inc. v. MAIL Code, Inc.

• Decision Date: 13 January 1994
• Docket Number: Civ. A. No. 93-2316-GTV.
• Citation: 843 F. Supp. 679
• Parties: M.K.C. EQUIPMENT COMPANY, INC., Plaintiff, v. M.A.I.L. CODE, INC., Defendant.
• Court: U.S. District Court — District of Kansas

843 F. Supp. 679

M.K.C. EQUIPMENT COMPANY, INC., Plaintiff, v. M.A.I.L. CODE, INC., Defendant.

Civ. A. No. 93-2316-GTV.

United States District Court, D. Kansas.

January 13, 1994.

COPYRIGHT MATERIAL OMITTED

Thomas H. Bornholdt, Neill, Bornholdt & Terrill, Overland Park, KS, for M.K.C. Equipment Company, Inc., a Kansas corporation.

Barbara A. Harmon, William R. Sampson, Shook, Hardy & Bacon, Overland Park, KS, Susan K. Holtberg, John C. Duffey, Stuart & Branigin, Lafayette, IN, for M.A.I.L. Code, Inc., a Delaware corporation.

MEMORANDUM AND ORDER

VAN BEBBER, District Judge.

This case is before the court on defendant's motion to dismiss plaintiff's complaint on the grounds of improper venue (Doc. 10). For the reasons explained in this Memorandum and Order, the motion is denied.

This action was originally brought in the District Court of Johnson County, Kansas. Defendant removed the action to this court which has jurisdiction pursuant to 28 U.S.C. § 1332(a)(1). The subject of the suit is a barcoding machine that plaintiff purchased from defendant and which, according to plaintiff, did not perform according to certain specifications with respect to its speed and accuracy in reading mail. Plaintiff claims damages based on breach of warranty and breach of contract.

Defendant's motion to dismiss for improper venue is apparently brought under Fed. R.Civ.P. 12(b)(3). The motion is based on a forum selection clause contained in a dealership agreement that defendant claims to be enforceable despite the fact that it was never signed by the parties. That clause requires that any claim or controversy arising out of the agreement must be resolved by an appropriate court within the State of Indiana.

I. Summary of Relevant Facts

The following facts are derived from the affidavits and other documents that the parties have submitted to the court in connection with the motion. The affidavits cited are by Ronald R. Robbins, president of defendant M.A.I.L. Code, Inc. (M.A.I.L.) and John Grauberger, president of plaintiff M.K.C. Equipment Company, Inc. (M.K.C.).

1. On January 16, 1991, John Grauberger visited the offices of M.A.I.L. in Lafayette, Indiana, and expressed an interest in becoming a dealer for M.A.I.L.'s ZBC-10000 barcoding machine. Robbins 1st Aff. ¶ 2.

2. On January 17, 1991, M.A.I.L. sent a dealer packet/questionnaire to Grauberger. This packet included general information about dealers' territories and the requirements to be accepted as a dealer. It also contained a dealer discount schedule showing the dealer prices for the barcoding machine and a listing of payment options. The dealer questionnaire is a form intended to be completed by dealer applicants. It requests that the applicant be considered for a dealership and asks certain questions about the applicant's business. Robbins 1st Aff. ¶ 4 and Ex. A.

3. Grauberger completed the dealer questionnaire and returned it to M.A.I.L. It is not clear when this was done, but the form titled "Credit References" is dated January 23, 1991. Robbins 1st Aff. ¶ 5 and Ex. B. This form was apparently completed by M.A.I.L. personnel to record the results of contacts with credit references that M.K.C. supplied on its questionnaire. This would imply that the completed dealer questionnaire was received by M.A.I.L. no later than January 23.

4. On or about March 19, 1991, M.K.C. purchased from M.A.I.L. a barcoding machine for the amount of $30,250.00. This machine was delivered to M.K.C. in April 1991. Grauberger Aff. ¶¶ 2 & 3; Robbins 1st Aff. ¶ 13. The price paid for the machine represented the dealer purchase price which was 40% off the list price. Robbins 1st Aff. ¶¶ 10-12. The discount was never returned to M.A.I.L. Robbins 2nd Aff. ¶ 10.

5. Grauberger was provided with and reviewed a copy of the Dealer Agreement which contains the forum selection clause prior to the purchase of the barcoding machine. Robbins 2nd Aff. ¶ 6. He reviewed the Dealer Agreement at M.A.I.L.'s Indiana offices prior to purchasing the barcoding machine and did not object to the forum selection clause contained in the agreement. Robbins 2nd Aff. ¶ 7. It is not clear whether this occurred during Grauberger's January 16 visit to Indiana or at some later time prior to his ordering the machine.

6. M.A.I.L. sent to M.K.C. a completed Dealer Agreement around June 3, 1991, but this agreement was never signed by either party. Grauberger Aff. ¶¶ 4 & 5; Robbins 1st Aff. ¶ 6.

7. At some time between April, 1991, when the machine was delivered, and June 3, 1991, when the Dealer Agreement was sent, M.K.C. determined that the machine was defective and representatives of M.A.I.L. acknowledged the defects. Grauberger Aff. ¶ 7.

8. Also at some time between April and June, 1991, M.K.C. decided that it would not enter into an agreement to act as a dealer or distributor of the machine. Grauberger Aff. ¶ 6.

9. M.K.C. did not consider itself bound by the terms of the Dealer Agreement and there were no discussions between the parties regarding the forum selection clause. Grauberger Aff. ¶¶ 8 & 9.

10. Nevertheless, before and after the delivery of the machine, Grauberger made statements that indicated he intended to act as a dealer. These included statements to the effect that he was showing the machine to people in order to promote it. Robbins 2nd Aff. ¶ 4. M.A.I.L. had delivered 24 brochures and order forms to M.K.C. for its marketing efforts to sell the machine. Robbins 1st Aff. ¶ 9.

11. M.K.C. applied for an "A" Dealership. Robbins 1st Aff. Ex. B. An "A" dealer has exclusive territory in which to market and sell the barcoding machine, while "B" dealers do not have protected territories. Robbins 1st Aff. ¶¶ 14-15. After M.K.C. applied for its dealership, M.A.I.L. rejected the application of another individual who had applied for a "B" dealership in the same area. Robbins 1st Aff. ¶ 16.

II. Discussion

A. Standard of Review

Plaintiff bears the burden of establishing this court's jurisdiction over the defendant. Taylor v. Phelan, 912 F.2d 429, 431 (10th Cir.1990), cert. denied, 498 U.S. 1068, 111 S.Ct. 786, 112 L.Ed.2d 849 (1991). Likewise, upon a challenge to venue, the plaintiff has the burden of showing that venue is proper in the forum state. Bartholomew v. Virginia Chiropractors Ass'n, Inc., 612 F.2d 812, 816 (4th Cir.1979), cert. denied, 446 U.S. 938, 100 S.Ct. 2158, 64 L.Ed.2d 791 (1980); General Bedding Corp. v. Echevarria, 714 F.Supp. 1142, 1144 (D.Kan.1989).

The procedure to deciding a motion to dismiss for improper venue is generally the same as for deciding a motion to dismiss for lack of personal jurisdiction. Phoenix Canada Oil Co., Ltd. v. Texaco, Inc., 78 F.R.D. 445, 452 (D.Del.1978). When a motion to dismiss for lack of jurisdiction is brought before trial and supported by affidavits and other written material, plaintiff need only make a prima facie showing of jurisdiction. Taylor, 912 F.2d at 431; Federal Deposit Ins. Corp. v. Oaklawn Apartments, 959 F.2d 170, 174 (10th Cir.1992). In assessing whether plaintiff has met its burden, allegations in the complaint that are uncontroverted by defendant's affidavits must be taken as true and all factual disputes should be resolved in favor of plaintiff. Taylor, 912 F.2d at 431.

Generally, the plaintiff's choice of forum is given great deference. The burden on the party seeking to overcome the preference for the plaintiff's chosen forum is significant. "Unless the balance is strongly in favor of the movant the plaintiff's choice of forum should rarely be disturbed." William A. Smith Contracting Co. v. Travelers Indem. Co., 467 F.2d 662, 664 (10th Cir.1972).

A valid forum selection clause may supersede the presumption in favor of the plaintiff's choice of forum. In re Ricoh Corp., 870 F.2d 570, 573 (11th Cir.1989). If the parties have previously agreed that litigation shall be conducted in a particular forum, there is a strong presumption favoring venue in that forum. See The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991). A party is obligated to abide by its contractual duties, and litigate in the agreed-upon forum. Litigation may not be conducted outside of the designated forum without meeting a "heavy burden of proof" of unfairness or inconvenience. The Bremen, 407 U.S. at 17, 92 S.Ct. at 1917. "The venue mandated by a choice of forum clause rarely will be outweighed by other 1404(a) factors." In re Ricoh Corp., 870 F.2d at 573.

B. Choice of Law

A preliminary question to resolve is which state's law applies to this action. Although the application of a forum selection clause by a federal court sitting in diversity is determined under federal rather than state law, see Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 28, 108 S.Ct. 2239, 2243, 101 L.Ed.2d 22 (1988), it is first necessary to decide whether the forum selection clause is a part of the parties' agreement. In deciding whether an agreement exists and the terms of such agreement, the court must apply state law.

Normally, this court applies Kansas choice of law rules in diversity cases to ascertain which state's substantive law to apply. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). Kansas law dictates that the law of the state where the last act necessary to form a contract took place governs conflicts over the interpretation of the contract. In this case, the laws of either Kansas or Indiana could apply, depending on one's interpretation of the relevant events.

However, as explained in the following section, the court finds that the Uniform Commercial Code (UCC) applies to the parties' agreement. Since both Kansas and Indiana have adopted the UCC and it has not been shown that there are any differences in those states' interpretation of any relevant provisions, a choice of law analysis is...