Ronar, Inc. v. Wallace

• Decision Date: 22 October 1986
• Docket Number: No. 86 Civ. 159 (RLC).,86 Civ. 159 (RLC).
• Citation: 649 F. Supp. 310
• Parties: RONAR, INC., Plaintiff, v. Michael WALLACE, Henry Wallace, Franz Fischer & Co. Knopffabrik and Josef Fischer, Defendants.
• Court: U.S. District Court — Southern District of New York

649 F. Supp. 310

RONAR, INC., Plaintiff, v. Michael WALLACE, Henry Wallace, Franz Fischer & Co. Knopffabrik and Josef Fischer, Defendants.

No. 86 Civ. 159 (RLC).

United States District Court, S.D. New York.

October 22, 1986.

Walter, Conston & Schurtman, P.C., New York City, for plaintiff; David B. Wolf, Gregory F. Hauser, of counsel.

Schulte, Roth & Zabel, New York City, for defendants; David M. Brodsky, E. Scott Gilbert, Donald L. Rosenthal, of counsel.

ROBERT L. CARTER, District Judge.

This diversity case, removed to this court from the New York State Supreme Court, involves various contract and business-related tort claims. Plaintiff Ronar, Inc. ("Ronar") is a New York corporation. Defendants are the West German company Franz Fischer & Co. Knopffabrik ("F & C"), its managing director Josef Fischer, and two British citizens, Henry and Michael Wallace, who are father and son.

After Ronar brought its original action in New York Supreme Court, F & C commenced a declaratory judgment proceeding in a West German court pertaining to the contractual obligations of Ronar and itself.

F & C and Josef Fischer now move to dismiss the action here for improper venue. Henry Wallace moves to dismiss for lack of personal jurisdiction. And his son Michael moves to stay litigation against him in this court pending the outcome of the West German proceedings.¹

BACKGROUND

The parties in this case deal in buttons. In mid-1980, Ronar and F & C entered into a written agreement under which F & C would manufacture buttons in West Germany and Ronar would distribute them in the United States and Canada. The contract was effective through December 31, 1981, and renewable automatically from year to year but terminable upon three months notice.

The contract remained in effect when in mid-1982, Michael Wallace emigrated from the United Kingdom to New York to work as manager and assistant to the president at Ronar. In this position of responsibility, Michael Wallace became familiar with Ronar's marketing practices.

During the fall of 1985, however, events turned sour. F & C notified Ronar in September that their contract would not be renewed effective January 1, 1986. Ronar terminated its employment of Michael Wallace in October, 1985. In December, 1985 Michael Wallace and F & C formed a new company, Fischer Wallace Corporation ("FW Corp."), for the manufacture and distribution of buttons in North America.

The circumstances surrounding these events are largely in dispute. Plaintiff contends that behind its back defendants were scheming to cut off their dealings with Ronar and do business together. For over a year, according to plaintiff, defendants planned their entry into the North American button market, taking advantage of Michael Wallace's insider knowledge of Ronar's sales network.

In its amended complaint, Ronar now charges F & C and Josef Fischer with inducing Michael Wallace to breach his employment contract. It charges Michael Wallace with both breach of the employment contract and three torts leading to the Ronar-Fischer break up: defamation, breach of fiduciary duties, and interference with prospective contractual relations.

Plaintiff also charges Henry Wallace with inducing his son's breach of contract and interfering with prospective (Ronar-Fischer) contractual relations. In connection with its charges against Henry Wallace, Ronar alleges that the elder Wallace helped finance and negotiate the formation of FW Corp., and expects to receive (or is receiving) income from it. Finally, Ronar charges all defendants with unfair competition.

Defendants paint a different picture. F & C chose not to renew its contract with Ronar, say defendants, because it was displeased with Ronar's performance and wanted to form its own business for manufacturing and distributing buttons in the United States. Michael Wallace became dissatisfied when he did not get the responsibility at Ronar that he was promised and he became anxious that Ronar's financial condition was poor. And F & C and Michael Wallace formed FW Corp. because of their disappointment with Ronar, their interest in manufacturing buttons here, and Ronar's expressed lack of interest in joining their venture.

In the meantime, according to defendants, Henry Wallace did not join his son and F & C in negotiations but merely relayed messages between them. He has not participated in the management or financing of FW Corp., and he derives no revenue from it, although he gave Michael $35,000 as a gift that his son could invest in the new business. Rather, the elder Wallace sold his own business in 1982 and, except for consulting work through 1985, he is retired. He resides in Florida and owns no property in New York.

DISCUSSION

A. Forum-Selection Clause

Defendants Josef Fischer and F & C move to dismiss the counts against them on the ground that a forum-selection provision in their contract with Ronar confers venue exclusively upon a court in West Germany.

Defendants have translated the provision from the German, without challenge by plaintiff, as follows: "The courts at Tirschenreuth, Federal Republic of Germany, shall have jurisdiction and venue." Affidavit of Peter Feuerle at 4, ¶ 8.²

Interpretation of this clause, like that of any other contract provision, begins in familiar territory. The court's goal is to honor the legitimate expectations of the parties to the contract. See The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12, 92 S.Ct. 1907, 1914, 32 L.Ed.2d 513 (1972). To do so the court generally must enforce the specific terms that the parties have chosen because those terms reflect the agreement they have freely reached. See id. To be sure, courts are not always bound by contractual language. Most notably, the terms of an agreement are not enforceable when evidence of "fraud, undue influence, or overweening bargaining power" undercuts the premise that the agreement was freely negotiated. Id. But absent a "strong showing" of such impinging circumstances, or some other reason why enforcement would be "unreasonable and unjust," a forum-selection clause is controlling. Id. at 15, 92 S.Ct. at 1916; see Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, ___, 105 S.Ct. 3346, 3356, 87 L.Ed.2d 444 (1985) (freely negotiated forum-selection clause enjoys a "strong presumption in favor of enforcement").

Ronar does not allege that fraud, undue influence, or overweening bargaining power subverted the parties' free negotiation. Instead it argues simply that enforcement of their agreement would be unfair, unjust, or unreasonable. Ronar explains that it might have difficulty getting personal jurisdiction over the British defendants in West Germany, pretrial discovery would be restricted in a West German proceeding, and many of the parties and prospective witnesses reside in the United States rather than West Germany.

These questions of convenience are hardly different from the ones the Supreme Court considered in The Bremen, which like this case involved a dispute between a German corporation and an American one. The Court noted that the inconvenience the plaintiff might suffer by being held to its bargain clearly could have been foreseen, The Bremen, supra, 407 U.S. at 17-18, 92 S.Ct. at 1917-18, and in order to escape the forum-selection provision on the ground that enforcement would be unjust and unreasonable, the American party would have to sustain the heavy burden of showing that "trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court." Id. at 18-19, 92 S.Ct. at 1917-18.

None of the possible sources of inconvenience mentioned by Ronar strikes the court as grave. See, e.g., Clinton v. Janger, 583 F.Supp. 284, 288 (N.D.Ill.1984) (plaintiff's inconvenience in suing in multiple forums because one forum does not assert jurisdiction over all defendants is not unreasonable); Karlberg European Tanspa, Inc. v. JK-Josef Kratz Vertriebsgesellschaft mbH, 618 F.Supp. 344, 348 (N.D.Ill.1985) (neither the restricted scope of discovery in West Germany, nor the fact that most of the witnesses reside in the United States rather than West Germany, is an unreasonable inconvenience). Each inconvenience was foreseeable when the parties agreed to the West German forum. In fact, the court assumes that because Ronar freely entered the agreement, it not only was aware of the potential disadvantages of the German forum but received consideration for them as part of the bargain. See Full-Sight Contact Lens Corp. v. Soft Lenses, Inc., 466 F.Supp. 71, 73 (S.D.N.Y.1978) (Pierce, J.). Judge Friendly's warning applies here: "There can be nothing `unreasonable and unjust' in enforcing such an agreement; what would be unreasonable and unjust would be to allow one of the parties to disregard it." AVC Nederland B.V. v. Atrium Investment Partnership, 740 F.2d 148, 156 (2d Cir.1984) (footnote omitted), quoted in Luce v. Edelstein, 802 F.2d 49, 57 (2d Cir.1986), aff'g in pertinent part and rev'g in part on other grounds, No. 85 Civ. 4064 (S.D.N.Y. Aug. 7, 1985) (Carter, J.).

Plaintiff also objects that in agreeing to the forum-selection clause, its president, Alfred Feiler, was thinking only of contract actions and never intended that the clause should apply to tort actions as well. If any tort claim is to come within the coverage of the clause, Ronar now argues, it must be a contract claim that is disguised or alternatively pleaded as a tort. Both sides argue at length about "some rather nice distinctions" concerning the scope of forum-selection provisions. See AVC Nederland B.V., supra, 740 F.2d at 155.

However, the terms the parties chose are very simple and very broad. Thus, nuance provides no additional illumination. That a West German court "shall have jurisdiction and venue" raises no distinction between contract and tort. It confers jurisdiction and venue over all litigation arising...