Paul Business Systems, Inc. v. Canon U.S.A., Inc.

• Decision Date: 09 November 1990
• Docket Number: No. 900234,900234
• Citation: 240 Va. 337,397 S.E.2d 804
• Parties: , 1990-2 Trade Cases P 69,253 PAUL BUSINESS SYSTEMS, INC. v. CANON U.S.A., INC., et al. Record
• Court: Virginia Supreme Court

Page 804

397 S.E.2d 804

240 Va. 337, 1990-2 Trade Cases P 69,253

PAUL BUSINESS SYSTEMS, INC. v. CANON U.S.A., INC., et al.

Record No. 900234.

Supreme Court of Virginia.

Nov. 9, 1990.

David N. Montague (Stuart A. Saunders; Montague, Saunders & Desaulniers, Hampton, on brief), for appellant.

Conrad M. Shumadine, Norfolk (Thomas R. Watkins, Newport News, Norman Moloshok, Richard H. Silberberg, New York City, Willcox & Savage, Norfolk, Patten, Wornom & Watkins, Newport News, Dorsey & Whitney, New York City, on brief), for appellees.

Present: All the Justices.

COMPTON, Justice.

In this tort action arising from a business relationship, we determine the validity and enforceability of contractual provisions, so-called "forum selection clauses," which limit the place or court where potential causes of action may be brought between the parties. We have not addressed this specific issue before, although the question has been the subject of extensive litigation elsewhere.

In March 1989, appellant Paul Business Systems, Inc., filed a multi-count motion for judgment against Dyna-Fax, Ltd., seeking compensatory and punitive damages. In August 1989, the plaintiff amended its motion for judgment adding as defendants three Dyna-Fax employees, appellee Canon U.S.A., Inc., and two Canon employees. The amended motion included counts for defamation, intentional interference with contractual and economic relations, and conspiracy to injure the plaintiff in its reputation and business.

In the amended motion, the plaintiff alleged it is a reputable dealer in business machines and other office products with a business territory covering the Peninsula area of the state. It asserted that Canon copiers is one of the major business lines it carries for which it is an authorized dealer offering comprehensive sales and service. The plaintiff alleged that it is in direct competition with Dyna-Fax as to sales territory, potential customers, and products and services offered. Plaintiff asserted that the ability of a copy machine marketer to provide service after the sale is "crucial" to making such sales.

The plaintiff further alleged that the corporate defendants, acting through the individual defendants, made certain false representations to plaintiff's customers. According to the allegations, defendants stated that the customers should refrain from "dealing" with the plaintiff "because it was about to go out of business;" that plaintiff "would not provide an ongoing service department;" that plaintiff "was about to be 'dropped' by Canon as one of its dealers;" and that plaintiff's "business was about to be taken over" by Dyna-Fax.

Asserting that "similar statements have been made repeatedly" by defendants, plaintiff alleged that the foregoing utterances were made at an office products exposition in Virginia Beach on March 30, 1988. Further, plaintiff asserted that on August 22, 1988, as well as "on numerous other occasions, both before and after that date," the defendants "combined, associated and conspired willfully and maliciously to defame and injure Plaintiff." The plaintiff asserted that defendants informed the purchasing agent for "the Newport News Shipyard (Division of Tenneco, Inc.)" on the August date that "the shipyard should not have the Plaintiff on its bidders list because the Plaintiff was in financial trouble, was about to lose its Canon distributorship, and that it would be unable to provide service of the product line."

Under the conspiracy count, the plaintiff alleged that the conduct of defendants constituted a violation of Code § 18.2-499 (misdemeanor to combine to injure others in their reputation, trade, business, or profession). Additionally, the plaintiff claimed to be entitled to treble damages as provided in Code § 18.2-500 (civil relief afforded those injured by a violation of § 18.2-499).

Responding to the plaintiff's allegations, Canon filed a motion to dismiss. The two Canon employees named as defendants have not been served with process and have not appeared in this action. Urging dismissal, Canon contended that the action was brought in breach of plaintiff's contractual agreement "to litigate all disputes with Canon only in New York and, therefore, this Court lacks jurisdiction."

Upon consideration of the argument of counsel, the trial court ruled that the forum selection clauses in issue were valid, granted Canon's motion, and dismissed the Canon defendants from the action, but "without prejudice to the plaintiff's right to institute suit pursuant to the terms of the forum selection clause."

We awarded the plaintiff an appeal from the November 1989 dismissal order. The action remains pending in the trial court against the Dyna-Fax defendants, who have not appeared on appeal.

The clauses in question are contained in six dealer agreements between the plaintiff and Canon executed between 1983 and 1989. Pursuant to the agreements, the plaintiff was appointed as a non-exclusive authorized retail dealer of various models of Canon copiers and electronic office typewriters. The agreements were executed by the respective parties on the following dates:

Plaintiff Canon

1. March 18, 1983 March 30, 1983

Amended March 14, 1985 May 1, 1985

2. December 20, 1985 April 14, 1986

3. Signature undated August 31, 1988

4. February 22, 1989 April 17, 1989

5. February 22, 1989 April 18, 1989

6. February 22, 1989 June 20, 1989

It should be noted that agreements 3, 4, 5, and 6 were all formed after the alleged causes of action arose on March 30, 1988 and August 22, 1988.

Agreements 1, 3, 4, and 6 contained the following forum selection clause. We have italicized the pertinent language.

"This agreement shall be governed by and construed in accordance with the laws of the State of New York, and Dealer consents to the jurisdiction and venue of any local, state or federal court located within the State of New York upon service of process made in accordance with the statutes of New York and the United States, and further agrees that any and all causes of action hereunder by and between the parties hereto shall only have jurisdiction and venue in the local, state or federal courts in the State of New York. Any suit between the parties relating to this Agreement, other than for payment of the purchase price of the Products, shall be commenced, if at all, within one (1) year of the date that it accrues."

Agreements 2 and 5 contained a forum selection clause with language slightly different from the other four. We have italicized the different language.

"This Agreement shall be governed by and construed in accordance with the laws of the State of New York, and Dealer consents to the jurisdiction and venue of any local, state or federal court located within the State of New York upon service of process made in accordance with the statutes of New York and the United States, and further agrees that any and all causes of action whether or not arising under this Agreement by and between the parties hereto shall only be brought in a local, state or federal court situated within the State of New York. Any suit between the parties relating to this Agreement, other than for payment of the purchase price of the Products, shall be commenced, if at all, within one (1) year of the date it accrues."

In the past, forum selection clauses were viewed with disfavor in most American courts. These clauses, purporting to confer jurisdiction on specifically named courts for adjudication of future controversies, were viewed as unenforceable as "contrary to public policy" and as an effort to "oust the jurisdiction" of the forum court. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 9, 92 S.Ct. 1907, 1913, 32 L.Ed.2d 513 (1972); annot. 31 A.L.R.4th 404, 409. "Private individuals have no power to alter the rules of judicial jurisdiction." Restatement (Second) of Conflict of Laws § 80 comment a (1971 & Supp.1989).

In recent years, however, numerous courts, state and federal, have adopted what has been called a "more modern view," 31 A.L.R.4th at 409, and a "more hospitable attitude toward forum-selection clauses." The Bremen, 407 U.S. at 10, 92 S.Ct. at 1913.

According to the modern view, which we now embrace, contractual provisions limiting the place or court where potential actions between the parties may be brought are prima facie valid and should be enforced, unless the party challenging enforcement establishes that such provisions are unfair or unreasonable, or are affected by fraud or unequal bargaining power. See id., 407 U.S. at 10, 12, 92 S.Ct. at 1913, 1914; Restatement (Second) of Conflict of Laws (1988 Revisions) § 80 (Supp.1989); 31 A.L.R.4th at 415. The rationale most often used to support application of the modern rule is that it comports with traditional concepts of freedom of contract and recognizes the present nationwide and worldwide scope of business relations which generate potential multi-jurisdictional litigation. The Bremen, 407 U.S. at 11, 92 S.Ct. at 1913.

Our preference for the foregoing view is consistent with the rule in Virginia, established in a similar context, that where parties to a contract have expressly declared that the agreement shall be construed as made with reference to the law of a particular jurisdiction, we will recognize such agreement and enforce it, applying the law of the stipulated jurisdiction. Union Central Life Ins. Co. v. Pollard, 94 Va. 146, 151-52, 26 S.E. 421, 422 (1896). See generally Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762 (9th Cir.1989) (applying modern rule and enforcing contract provision vesting jurisdiction and venue exclusively in Gloucester County, Virginia); Bryant Elec. Co., Inc. v. City of Fredericksburg, 762 F.2d 1192, 1196-97 (4th Cir.1985) (applying Virginia law, determining that Virginia would follow the modern view, and enforcing a forum selection clause).

In ...