NORTH AMERICAN FINANCIAL v. AMGRAR GESELLSCHAFT, Civ. No. 4-88-687.
| Decision Date | 18 January 1989 |
| Docket Number | Civ. No. 4-88-687. |
| Citation | 702 F. Supp. 1435 |
| Parties | NORTH AMERICAN FINANCIAL CORPORATION, a Minnesota corporation, Plaintiff, v. AMGRAR GESELLSCHAFT FÜR FARMLAGEN, mbH, a Pennsylvania corporation; Donald Hershey, an individual; Hershey Equipment Company, Inc., a Pennsylvania corporation, Defendants. |
| Court | U.S. District Court — District of Minnesota |
Gordon I. Gendler, Fabyanske, Svoboda, Westra & Davis, P.A., St. Paul, Minn., for plaintiff.
Mallory K. Mullins, Maslon Edelman Borman & Brand, Minneapolis, Minn., for defendants.
Plaintiff North American Financial Corp. (NAFCO) brought this action in Hennepin County District Court for breach of an option contract to purchase leased equipment. Defendants are Amgrar Gesellschaft für Farmlagen, mbH (Amgrar), the lessee and holder of an option to purchase, and Donald Hershey and Hershey Equipment Company, Inc., the guarantors of the lease and contract. The action was removed pursuant to 28 U.S.C. § 1446, alleging diversity jurisdiction under 28 U.S.C. § 1332. Presently before the court is defendants' motion to dismiss for lack of personal jurisdiction, or in the alternative, to transfer venue.
Defendant Amgrar is engaged in poultry farming in Pennsylvania. In 1982, it entered a 5-year written lease with plaintiff NAFCO to lease two pullet houses and related equipment. At the beginning of the term the leased property was valued at $868,378.92.1 The lease included an option to purchase, which could be exercised by Amgrar before the end of the term. The lease was guaranteed by defendants Hershey and Hershey Equipment.
On September 1, 1987 Amgrar exercised its option to purchase the remaining pullet house and equipment. The parties disputed the amount which Amgrar should pay. Plaintiff then brought this action for breach of the option contract. It seeks $291,500 as the fair market value of the disputed pullet house and equipment and the fair rental value of the property from the end of the lease period to date. It also seeks to enforce the guarantee against Hershey and Hershey Equipment.
Defendants allege that this court has no personal jurisdiction over any of them and ask that the action be dismissed or transferred. Plaintiff opposes the motion and has submitted the affidavit of Gary Dreyling in support of its position. Dreyling describes defendants' direct contacts with Minnesota. Most of the correspondence and negotiation regarding the lease took place outside of Minnesota, between defendants and plaintiff's agents in Maryland. Most documents were then transferred by the agent in Maryland to plaintiff's home office in Minnesota. Defendants' direct contacts with Minnesota regarding this lease include several phone conversations with plaintiff's agents; a check sent by Amgrar from Pennsylvania to Minnesota; discussions regarding the fire and its aftermath which took place by phone with plaintiff in Minnesota; and defendants' letter exercising the option to purchase which apparently was sent directly to Minnesota. None of the defendants is claimed to have any other business relation to Minnesota, and none has entered the state, except Hershey who came once as a tourist.2
When personal jurisdiction is challenged, the plaintiff has the burden of proving that defendants are properly subject to the court's jurisdiction. Scullin Steel Co. v. National Railway Utilization Corp., 676 F.2d 309, 311 (8th Cir.1982). Plaintiff contends that defendants contracted in the lease and guarantees to be subject to the personal jurisdiction of Minnesota courts. It argues that there is jurisdiction even without the alleged consent because each defendant comes under the Minnesota longarm statute, Minn.Stat. § 543.19, and has sufficient contacts with this forum to meet due process concerns.
Plaintiff contends that the equipment lease selects Minnesota as the proper forum for resolving contract disputes. The form lease, drafted by plaintiff, states that:
This lease shall be governed by and construed in accordance with the law of the State of Minnesota.... Venue for any action hereunder or related hereto shall be in the appropriate court in the County of Hennepin, State of Minnesota, or such other court as Lessor may choose having jurisdiction over the parties.
Lease, paragraph 30, Complaint, Attachment A. Plaintiff argues that this language constitutes a consent to personal jurisdiction in Minnesota. Defendants respond that this language does not constitute a waiver of the defense of lack of personal jurisdiction, but is merely a choice of law and venue provision. They further argue that the clause was superceded by a typewritten addendum to the equipment lease which selects Pennsylvania as the forum for any contract action:
Amgrar irrevocably submits to the jurisdiction of any Pennsylvania state or federal court sitting in the Middle District of Pennsylvania over any action or proceeding arising out of or relating to this Lease, and the Lessee hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Pennsylvania state or federal court.
Lease Addendum, Lammerding Affidavit, Exhibit 3.
Interpretation of a contract is a legal issue for the court unless the language is so ambiguous that it requires resort to extrinsic evidence to determine the meaning. The Realex Chemical Corp. v. S.C. Johnson & Sons, Inc., 849 F.2d 299, 302 (8th Cir.1988). A "purported contract ambiguity does not automatically raise an issue of material fact" which would preclude resolution of the dispute as a matter of law. Id.
The first sentence of lease paragraph 30 — "This lease shall be governed by ... the laws of ... Minnesota" — is unambiguously a choice of law provision and not a consent to personal jurisdiction by defendants. "A choice-of-law clause is not sufficient to confer personal jurisdiction, particularly where ... the clause is part of a lessor's standard lease form" Dent-Air, Inc. v. Beech Mountain Air Service, 332 N.W.2d 904, 908 (Minn.1983). No personal jurisdiction over defendants therefore is obtained on that basis.
The other cited portion of lease paragraph 30 — "Venue for any action ... shall be in the appropriate Minnesota court ... or such other court as Lessor may choose having jurisdiction over the parties" — is likewise not an express consent by defendants to personal jurisdiction in Minnesota. A choice of venue provision is not the same as a contractual consent to jurisdiction or mandatory designation of forum. See, e.g., Friedman v. World Transportation, Inc., 636 F.Supp. 685, 691 (N.D.Ill.1986) ().
The portion of the phrase which states that venue is appropriate in a Minnesota court, standing alone, might suggest that defendants agreed that litigation regarding the lease could take place in Minnesota. But the phrase is ambiguous at best. That first half of the sentence must be viewed in conjunction with the qualifying phrase — "or such other court as Lessor may choose having jurisdiction over the parties," as well as the addendum to the lease designating Pennsylvania as another proper forum. When viewed as a whole, it is evident that defendants did not expressly agree to be brought into a Minnesota court if plaintiff could not establish that defendants are otherwise subject to this court's jurisdiction.
The language relied on by plaintiff cannot alone support the exercise of personal jurisdiction over defendants since it is not unequivocal. See Johns Insulation, Inc. v. Siska Construction Co., Inc., 671 F.Supp. 289, 294 (S.D.N.Y.1987) (). Defendants are therefore not subject to personal jurisdiction in this court based on any contractual consent.
Plaintiffs apparently rely on subdivision (b) of the Minnesota long arm statute, Minn.Stat. § 543.19,3 and contend that defendants have transacted business in Minnesota through the negotiation and administration of the equipment lease. The statute is construed to extend jurisdiction over foreign defendants to the maximum extent permitted by due process. Franklin Mfg. Co. v. Union Pacific RR. Co., 297 Minn. 181, 210 N.W.2d 227, 229 (1973). The key question here is whether defendants' contacts with Minnesota are sufficient to permit the exercise of personal...
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