Steward v. Up North Plastics, Inc.

Decision Date05 September 2001
Docket NumberNo. 99-1483 (JRT/RLE).,99-1483 (JRT/RLE).
Citation177 F.Supp.2d 953
PartiesMr. and Mrs. Donald L. STEWARD, Plaintiffs, v. UP NORTH PLASTICS, INC., and AG-Bag International Limited, Defendants.
CourtU.S. District Court — District of Minnesota

Daniel E. Gustafson of Heins, Mills & Olson, Minneapolis, MN, For plaintiffs.

John D. French of Faegre & Benson, Minneapolis, MN, for Ag-Bag International Limited.

Frank Berman, Minneapolis, MN, Stephen Urbanczyk of Williams & Connolly, Washington, D.C., and Steven M. Hunegs of Hunegs, Stone, Leneave, Kvas & Thornton, Minneapolis, MN, for Up North Plastics, Inc.

MEMORANDUM OPINION AND ORDER

TUNHEIM, District Judge.

Defendant Ag-Bag International Limited has moved to dismiss for improper venue or in the alternative to transfer this action and both defendants have moved to dismiss plaintiffs' class action allegations.1 For the reasons that follow, the Court denies both motions.

BACKGROUND

This antitrust litigation has a five-year history that spans three separate lawsuits all before this Court. Defendants Up North Plastics, Inc. ("Up North") and Ag-Bag International Limited ("Ag-Bag") are manufacturers of silage bags and other products used to store feed or grain in the agriculture industry. Silage bags are very large disposable plastic bags that can be used to store feed or grain for up to two years. The bags are specially made to resist weather damage and, after being loaded with feed or grain, are stored outside on the ground. They are generally eight to twelve feet in diameter and are one hundred to five hundred feet long. The bags are used primarily on dairy and livestock farms, and are a relatively new storage technology. According to the complaint, Ag-Bag and Up North are the dominant sellers of silage plastic products in the United States.

I. The Hunt Action

In January 1996, Michael Hunt, a former distributor for Up North, filed suit against defendants alleging that defendants conspired to monopolize and fix prices of silage bags in violation of section one of the Sherman Act, 15 U.S.C. § 1. Hunt v. Up North Plastics, Civ. No. 4-96-22 JRT/RLE (D.Minn.). Although Hunt filed his complaint as a putative class action, the Court never made a determination as to the propriety of class certification because in October 1997 Hunt filed for bankruptcy, thus staying all proceedings.

II. The S & S Forage Action

On January 30, 1998, while the Hunt stay was in effect, plaintiffs' counsel filed a new putative class action complaint on behalf of S & S Forage & Equipment Company, Inc. ("S & S Forage"). S & S Forage & Equipment Co. v. Up North Plastics, et al., Civ. No. 98-565 JRT/RLE (D.Minn.). The complaint sought to represent the same class of silage bag purchasers as in the Hunt action. In April 1998, however, the principal owner and operator of S & S Forage died. Shortly thereafter, S & S Forage ceased its business operations but retained its interest in this litigation. S & S Forage moved for class certification which the Court denied on March 13, 2000. Although the Court found that the class allegations satisfied the numerosity and commonality requirements of Rule 23(a), the Court concluded that S & S Forage was not a typical or adequate class representative under 23(a)(3) and (4).2 At the present time, S & S Forage continues on its individual claims.3

III. The Steward Action

Plaintiffs commenced this action in September 1999. As with the Hunt and S & S Forage cases before it, the complaint asserts substantively parallel allegations against the same defendants and also seeks to represent the same class of silage bag purchasers for the same class period. The Stewards differ from Hunt and S & S Forage, however, in that they were distributors for Ag-Bag as opposed to Up North. This is a significant difference, defendants argue, because an Authorized Dealer Agreement between plaintiffs and Ag-Bag (the "Steward/Ag-Bag Agreement") contains the following choice of law and forum selection clause:

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon, and any disputes between Ag-Bag and Dealer shall be filed and tried in Clatsop County, Oregon, if in state court, or in Portland Oregon, if in federal court.

Accordingly, Ag-Bag moves to dismiss or transfer the Steward action based on the forum selection clause contained in the dealership agreement.4 In the event the Court denies that motion, defendants move to dismiss plaintiffs' class action allegations pursuant to Fed.R.Civ.P. 23(d)(4).

ANALYSIS
I. Defendants' Motion to Dismiss or Transfer

Defendants seek to dismiss or transfer this case pursuant to 28 U.S.C. § 1406(a), or alternatively, to transfer the case pursuant to 28 U.S.C. § 1404(a). The Court considers each argument in turn.

A. Motion to Dismiss or Transfer for Improper Venue Under § 1406

Defendants move to dismiss or transfer this case to the United States District Court for the District of Oregon pursuant to 28 U.S.C. § 1406(a).5 As previously mentioned, defendants base this motion on a forum selection clause contained in paragraph 7.05 of the Steward/Ag-Bag Agreement which, again, provides:

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon, and any disputes between Ag-Bag and Dealer shall be filed and tried in Clatsop County, Oregon, if in state court, or in Portland Oregon, if in federal court.

Steward/Ag-Bag Agreement ¶ 7.05.

Plaintiffs maintain that defendants have waived any objection to improper venue by failing to raise an objection at the appropriate time. In its answer to plaintiffs' complaint, Ag-Bag did not object to venue. Indeed, Ag-Bag affirmatively stated that venue was proper in the second paragraph of that pleading. In addition, defendants have filed several motions before the Court and have conducted extensive discovery in the case.

At the outset, the Court notes that there is some question whether defendants' motion under § 1406(a) is the appropriate procedural vehicle to enforce the forum selection clause contained in the Steward/Ag-Bag Agreement. "Federal law does not presently provide for a motion expressly designed for forum selection clause enforcement, and attorneys have had to invoke an assortment of rules and concepts that were not designed with forum selection clauses in mind." McCloud Constr., Inc. v. Home Depot USA, Inc., 149 F.Supp.2d 695 (E.D.Wis.2001). For instance, attorneys have moved to transfer pursuant to 28 U.S.C. § 1404(a), to dismiss or transfer under § 1406(a), to dismiss under the doctrine of forum non conveniens, to dismiss for improper venue under Fed.R.Civ.P. 12(b)(3), to dismiss for failure to state a claim under Rule 12(b)(6) and under other Federal Rules of Civil Procedure. Id. (citing Leandra Lederman, Viva Zapata: Toward a Rational System of Forum Selection Clause Enforcement in Diversity Cases, 66 N.Y.U.L.Rev. 422, 433-34 (1991)).

Although it appears that the Eighth Circuit has not yet directly addressed this issue, numerous circuit courts have split on the appropriate vehicle for bringing a motion to enforce a forum selection clause. Silva v. Encyclopedia Britannica Inc., 239 F.3d 385, 388-89 n. 3 (1st Cir.2001) (explaining that in the First Circuit, "a motion to dismiss based upon a forum-selection clause is treated as one alleging the failure to state a claim for which relief can be granted under Fed.R.Civ.P. 12(b)(6)"); Instrumentation Assocs., Inc. v. Madsen Elecs. (Canada) Ltd., 859 F.2d 4, 6 n. 4 (3d Cir.1988) (same); Lipcon v. Underwriters at Lloyd's London, 148 F.3d 1285, 1289 (11th Cir.1998) (motions to dismiss based on forum selection clause are based on Rule 12(b)(3)); Richards v. Lloyd's of London, 135 F.3d 1289, 1292 (9th Cir.1998) (same); Frietsch v. Refco, Inc., 56 F.3d 825, 830 (7th Cir.1995); (same); AVC Nederland B.V. v. Atrium Inv. Partnership, 740 F.2d 148, 153 (2d Cir.1984) (motion to enforce forum selection clause is a Rule 12(b)(1) motion); Haynsworth v. Lloyd's of London, 121 F.3d 956, 961 (5th Cir.1997) (declining to resolve the "enigmatic question of whether motions to dismiss on the basis of forum-selection clauses are properly brought as motions under Fed. R.Civ.P. 12(b)(1), 12(b)(3), or 12(b)(6), or 28 U.S.C. § 1406(a)").

Of specific relevance here are the holdings of numerous courts that § 1406(a) is not an appropriate vehicle for enforcing a forum selection clause when venue in the original forum is otherwise statutorily proper. In Stewart Org. Inc. v. Ricoh Corp., 487 U.S. 22, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988), the Supreme Court implied that when venue is statutorily proper in the district where suit is filed, a motion to dismiss or transfer under § 1406(a) based on a parties' contractual choice of venue is properly denied. Id. at 28-29 n. 8, 108 S.Ct. 2239.6 Since Stewart, numerous courts have relied on footnote eight from Stewart and concluded that venue is laid in the "wrong" division or district under § 1406 only when there is no statutory basis for venue, Salovaara v. Jackson Nat'l Life Ins. Co., 246 F.3d 289, 298 (3d Cir.2001); Jumara v. State Farm Ins. Co., 55 F.3d 873, 877-79 (3d Cir.1995); Blue Ash Dev., Inc. v. Polan, No. 94-6324, 1996 WL 1828 at *2 n. 1 (6th Cir. Jan.2, 1996) ("It does not appear under [Stewart] that a forum selection clause makes the venue "wrong" for § 1406 purposes when the action is filed in a district other than that specified in the clause."); BHP Int'l Inv., Inc. v. OnLine Exch., Inc., 105 F.Supp.2d 493, 496 (E.D.Va.2000); McCloud, 149 F.Supp.2d 695 (concluding that in light of Stewart and subsequent case law relying on Stewart's footnote eight, "1406(a) does not appear to be an appropriate vehicle to enforce a forum selection clause").

In this case, there seems to be no dispute that venue is statutorily proper in this forum, see 28 U.S.C. § 1391(c). Accordingly, it would appear under a...

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