SOMERVILLE AUTO TRANS. SERV. v. AUTOMOTIVE FINANCE

• Decision Date: 04 March 2010
• Docket Number: Civil Action No. 09-10411-JLT.
• Citation: Somerville Auto Trans. Serv. Inc. v. Automotive Fin. Corp., 691 F. Supp.2d 267 (D. Mass. 2010)
• Parties: SOMERVILLE AUTO TRANSPORT SERVICE, INC., Plaintiff, v. AUTOMOTIVE FINANCE CORPORATION, Dolores Milligan, Chris Doe, Robson Merciano, and ADESA, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

691 F. Supp.2d 267

SOMERVILLE AUTO TRANSPORT SERVICE, INC., Plaintiff, v. AUTOMOTIVE FINANCE CORPORATION, Dolores Milligan, Chris Doe, Robson Merciano, and ADESA, Inc., Defendants.

Civil Action No. 09-10411-JLT.

United States District Court, D. Massachusetts.

March 4, 2010.

Matthew J. Conroy, Erica L. Endyke, Conroy & Associates, Lexington, MA, for Plaintiff.

F. Anthony Paganelli, Taft Stettinius & Hollister LLP, Indianapolis, IN, Barry S. Scheer, Parker Scheer LLP, Robert D. Stewart Parker/Scheer, Boston, MA, for Defendants.

MEMORANDUM

TAURO, J.

I. Introduction

This action arises out of disputed automobile financing transactions involving Plaintiff Somerville Auto Transport Service, Inc. ("Somerville") and Defendant Automotive Finance Corporation ("AFC"). Plaintiff Somerville initiated an action against Defendants AFC and ADESA, Inc. ("ADESA"), as well as Dolores Milligan, "Chris Doe", and Robson Merciano (collectively "Defendants") in this court on March 19, 2009, asserting civil claims under Sections 1962(c) and 1962(d) of the Racketeering Influenced and Corrupt Organizations Act ("RICO"). The Complaint also asserts causes of action for deceit/fraud, civil conspiracy, breach of contract, breach of covenant of good faith and fair dealing, conversion, and a violation of Mass. Gen. Laws ("M.G.L.") c. 93A.

Presently at issue is Defendants AFC, ADESA, and Dolores Milligan's Motion to Dismiss # 13, requesting dismissal on the grounds that valid, binding forum selection clauses require that this dispute be litigated in Indiana, where a related action is already pending.¹ The two other named defendants, Robson Merciano and Chris Doe, are not parties to the motion. For the reasons set forth below, the Motion to Dismiss is ALLOWED.

II. Background²

The following facts are taken from the Complaint, the relevant contracts, and pertinent court filings.

A. The AFC Agreement

Defendant ADESA, a Delaware corporation with its principal place of business in Indiana, operates an automobile auction in Framingham, Massachusetts (the "ADESA Framingham Auction"). Defendant AFC, an Indiana corporation, operates an independent financing booth located within the ADESA Framingham Auction, which permits auto dealers to instantaneously finance and purchase vehicles from sales representatives at the auction.

Plaintiff Somerville is an automobile dealer incorporated in Massachusetts with its principal place of business in Somerville, Middlesex County, Massachusetts. On or about October 11, 2002, Robert Souza, Somerville's president, entered into a Demand Promissory Note and Security Agreement (the "AFC Agreement"), wherein AFC agreed to provide Somerville with a $50,000 credit line in order to enable Plaintiff to purchase motor vehicles at auction. On July 7, 2003, Somerville executed an Aggregate Advance Limited Amendment to the AFC Agreement, increasing the principal sum to $100,000.

Section 9.11 of the AFC Agreement contains a forum selection clause, which provides:

JURISDICTION AND CHOICE OF LAW: THIS NOTE AND ANY AND

ALL AGREEMENTS OR AUTHORIZATIONS EXECUTED BY DEALER OR AFC IN CONNECTION HEREWITH SHALL BE GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF INDIANA, AS AMENDED FROM TIME TO TIME, WITHOUT RESORT TO PRINCIPLES OF CONFLICTS OF LAWS. BY EXECUTION OF THIS NOTE, DEALER SUBMITS TO THE PERSONAL JURISDICTION OF THE COURTS OF THE STATE OF INDIANA AND TO VENUE IN THE CIRCUIT AND SUPERIOR COURTS OF MARION COUNTY, INDIANA. ANY ACTION INITIATED BY DEALER AGAINST AFC RELATING TO THIS NOTE SHALL BE FILED AND CONDUCTED SOLELY IN SAID COURTS. AFC MAY BRING ANY SUIT AGAINST DEALER UNDER OR RELATED TO THIS NOTE IN ANY COURT OF COMPETENT JURISDICTION, AND DEALER HEREBY CONSENTS TO AFC'S CHOICE IN FORUM. DEALER FURTHER WAIVES ANY RIGHT WHICH IT MAY HAVE TO REMOVE SUCH LITIGATION OR MATTER TO A FEDERAL COURT OR TO REQUIRE THAT ANY SUCH LITIGATION OR MATTER TAKE PLACE IN A FEDERAL COURT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR AFC ENTERING INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.³

B. ADESA's Terms and Conditions

Defendant ADESA is the corporate parent of affiliated subsidiary companies that operate automotive auction houses. Only auto dealers who have obtained a Buyer Bid Badge Number can secure entry to the ADESA Framingham Auction. On October 22, 2004, Somerville and ADESA entered into the Terms and Conditions ("ADESA's Terms and Conditions") governing the relationship between the parties at ADESA's automobile auctions.

Section 20 of ADESA's Terms and Conditions, containing the agreement's forum selection clause, provides:

These Auction Terms and Conditions and any and all agreements and authorizations executed by Somerville or ADESA in connection herewith shall be governed by and interpreted in accordance with the substantive laws of the State of Indiana without resort to principles of conflicts of laws. By execution of these Auction Terms and Conditions, Somerville submits to the personal exclusive jurisdiction of the courts of the State of Indiana and to venue in Circuit Court and Superior Courts in Marion County, Indiana and the federal courts of the United States, sitting in Indiana for the adjudication of any matters arising under or in connection with these Auction Terms and Conditions. Any action initiated by Somerville against ADESA relating to these Auction Terms and Conditions shall be filed and conducted in said Courts.⁴

C. Disputed Transactions

Thereafter, on an undisclosed date, Robert Souza of Somerville authorized Defendant Merciano "for one day only"⁵ to utilize the AFC line of credit to enable Defendant Merciano to purchase vehicles for resale. Somerville allegedly informed the AFC employees at the ADESA Framingham Auction that Merciano was permitted to utilize the line of credit for that day only. Somerville also "explicitly informed" Defendant Dolores Milligan, the AFC Branch Manager, that Merciano was forbidden to utilize Plaintiff's financing contract subsequent to the single day allowance.⁶

Despite these instructions, Merciano entered into at least fifteen sales contracts utilizing financing extended by AFC pursuant to the AFC Agreement and using Somerville's Bid Badge Number. In total, AFC extended financing of $224,000 dollars to Merciano, well in excess of the $100,000 limit contained in the Aggregate Advance Limited Amendment. To facilitate these transactions, Plaintiff alleges that "the defendants engaged in a systematic pattern of fraudulent financing of motor vehicles through the use of falsified documents and identity at Adesa Auto Auctions in Framingham, Massachusetts."⁷ Plaintiff also alleges that Defendants supplied fraudulent Bid Badge Numbers to multiple individuals, knowingly aided and abetted individuals posing as legitimate buyers, and provided motor vehicle titles to imposters.

AFC never informed Somerville of the financing extended to Merciano, despite a provision in the AFC Agreement requiring that all notices, requests or other communications be forwarded directly to Somerville. Nor did Defendant Merciano reimburse AFC or Somerville for the funds advanced under the AFC Agreement. Somerville alleges, on information and belief, that statements reflecting Merciano's transactions were mailed to Merciano directly, rather than Somerville.

Thereafter, on or about January 1, 2007, Defendant Milligan appeared at Somerville's offices, demanding immediate payment in the amount of $50,000. On or about November 6, 2007, Somerville received correspondence from AFC's counsel seeking the principal, interest and fees on the fifteen motor vehicle transactions entered into by Merciano, in the amount of $161,847.07.

Somerville is now barred from all ADESA auctions as a result of this dispute and, as a result of this ban, was forced to close its car dealership business.

D. Ensuing Litigation

On October 30, 2008, AFC sued Somerville and Robert Souza in Marion Superior Court in Indiana.⁸ The complaint in that action asserts causes of action for Breach of Note and Security Agreement, Breach of Guaranty, and Victims of Crime: Deception and Fraud. In that suit, AFC seeks to recover its unpaid debt of approximately $168,070, including interest, attorneys' fees, and costs.

Roughly six months later, on March 19, 2009, Somerville filed this action, asserting the following claims against AFC, ADESA, Milligan, Merciano and Chris Doe: (1) Violation of 18 U.S.C. § 1962(c), against all defendants; (2) Violation of 18 U.S.C. § 1962(d), Conspiracy to Engage in a Pattern of Racketeering Activity, against Merciano and Milligan; (3) Violation of M.G.L. c. 93A, against all defendants; (4) Deceit/Fraud, against Milligan and Merciano; (5) Civil Conspiracy, against Milligan and Merciano; (6) Breach of Contract, against AFC; (7) Breach of Covenant of Faith and Fair Dealing, against AFC; (8) Conversion, against Milligan and Merciano; and (9) Interference with Business Relationships, against Merciano and Milligan.

Three of the five named defendants—AFC, ADESA, and Milligan—jointly filed this Motion to Dismiss. The two remaining named defendants, Robson Merciano and "Chris Doe", are not parties to this motion.

This court entered a Default against one of the remaining defendants, Robson Merciano, on motion by Plaintiff.⁹ Merciano, allegedly a key participant in this scheme, failed to plead or otherwise defend against this lawsuit following service of the Complaint and did not appear at a Motion Hearing held on March 1, 2010. According to Plaintiff, the other remaining defendant, listed only as "Chris Doe" in the Complaint, was subsequently identified as an individual named Christopher Carli.¹⁰ Plaintiff, however, never executed service of the original complaint on Mr. Carli. In its Opposition, Plaintiff informed the court that it will not file an Amended Complaint reflecting Mr. Carli as a named defendant until the resolution of this motion.¹¹

III. Discussion

In the present Motion to...