The Hipage Co., Inc. v. ACCESS2GO, Inc.

Citation589 F.Supp.2d 602
Decision Date20 November 2008
Docket NumberCivil Action No. 2:08cv336.
PartiesTHE HIPAGE COMPANY, INC., Plaintiff, v. ACCESS2GO, INC., Defendant.
CourtU.S. District Court — Eastern District of Virginia
589 F.Supp.2d 602
THE HIPAGE COMPANY, INC., Plaintiff,
v.
ACCESS2GO, INC., Defendant.
Civil Action No. 2:08cv336.
United States District Court, E.D. Virginia, Norfolk Division.
November 20, 2008.

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Richard Hooper Ottinger, Ethan Geoffrey Ostroff, Vandeventer Black LLP, Norfolk, VA, for Plaintiff.

Julie Thrall Burrow, M. Scott Hart, Troutman Sanders LLP, Virginia Beach, VA, for Defendant.

ORDER

JEROME B. FRIEDMAN, District Judge.


Pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) and (C) and Rule 72(b) of the Federal Rules of Civil Procedure, as well as Rule 72 of the Rules of the United States District Court for the Eastern District of Virginia, by Order of Reference filed August 28, 2008, the matter was referred to United States Magistrate Judge Tommy E. Miller for a report and recommendation. The Report and Recommendation of the Magistrate Judge was filed on October 29, 2008, recommending that the defendant, Access2Go's, motion to dismiss be granted, and that the plaintiffs complaint be dismissed for improper venue.

By copy of the Report and Recommendation, each party was advised of the right to file written objections to the findings and recommendations made by the Magistrate Judge within ten (10) days from the date the Report and Recommendation was mailed. The court has received no objections from either party and the time for filing objections has expired.

The court adopts and approves in full the findings and recommendations set forth in the Report and Recommendation of the United States Magistrate Judge filed October 29, 2008. Accordingly, it is hereby ORDERED that Access2Go's motion to dismiss is GRANTED and the plaintiffs complaint is DISMISSED for improper venue pursuant Rule 12(b)(3) of the Federal Rules of Civil Procedure. The Clerk shall enter judgment in favor of the defendant.

The Clerk is REQUESTED to forward a copy of this Order to all counsel of record for the parties.

It is so ORDERED.

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REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

TOMMY E. MILLER, United States Magistrate Judge.

This action was referred to the undersigned United States Magistrate Judge pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B) and (C) and Rule 72(b) of the Federal Rules of Civil Procedure, as well as Rule 72 of the Rules of the United States District Court for the Eastern District of Virginia.

This case was referred for a report and recommendation on Access2Go, Inc.'s ("Access2Go's") Motion to Dismiss, or in the alternative, Motion to Transfer [Doc. No. 3]. For the reasons set forth below, the Court recommends GRANTING Access2Go's Motion to Dismiss.

I. FACTUAL AND PROCEDURAL HISTORY

This matter arises from a written agreement for telecommunications services. The Hipage Company, Inc. ("Hipage") is a Virginia corporation in the business of freight shipping. In July 2007, Hipage instructed its Director of Information Technology, Chris Unger ("Unger"), to obtain quotes for a new telecommunications provider. Notice of Removal [Doc. No. 1], Ex. 1 ("Compl.") ¶¶ 3, 5. Unger contacted several providers, but did not have authority to enter into any contract on behalf of Hipage. Compl. ¶¶ 6-7. Unger was contacted by Access2Go, an internet and communications provider based in Illinois. Comp. ¶¶ 2, 8-9. Access2Go's agent provided initial price estimates, but informed Unger that Access2Go needed additional information in order to issue a firm price quote. Compl. ¶ 10. Access2Go then forwarded to Hipage a Service Agreement and a series of Service Orders. Compl. ¶ 15. The Service Agreement contained the following forum selection clause:

"By its execution and delivery of this Service Agreement, each of the parties hereby irrevocably and unconditionally agrees for itself that any legal action, suit or proceeding against it with respect to any matter under or arising out of or in connection with this Service Agreement must be brought in the Circuit Court of Peoria County, Illinois or in the Federal District Court for the Central District of Illinois, which courts shall have exclusive jurisdiction of all matters arising out of or in connection with this Service Agreement."

Def.'s Br. [Doc. No. 4], Ex. 1 ("Illinois Lawsuit"), Ex. A ¶ 19. Unger executed the Service Agreement and the Service Orders, but Hipage alleges that (1) Access2Go's agent represented to Unger that the execution of the agreements would not create a binding contract, and (2) Unger expressly informed the agent that he did not have authority to enter into a binding contract. Compl. ¶¶ 16-17.

Two months after the execution of the contract, Hipage declared the contract invalid and began turning away Access2Go's service technicians. Access2Go filed suit for breach of contract against Hipage in the Circuit Court of the Tenth Judicial Circuit of Illinois, Peoria County. [Doc. No. 4], Ex. 1. This Illinois Lawsuit was filed on or about May 9, 2008, and Hipage received service on June 12, 2008. Hipage then removed the Illinois Lawsuit to the United States District Court for the Central District of Illinois on July 11, 2008. After removal, Hipage filed a motion to dismiss on the grounds of lack of personal jurisdiction, but at the time of oral argument, that motion remained pending.

On June 24, 2008, after having received notice of the Illinois Lawsuit, Hipage filed a complaint in the Circuit Court for the City of Norfolk, seeking a Declaratory Judgment that no contract exists between

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the parties. Notice of Removal [Doc. No. 1], Ex. 1. Access2Go removed the case to this Court on July 18, 2008. [Doc. No. 1]. On July 28, 2008, Access2Go filed a Motion to Dismiss or, in the alternative, a Motion to Transfer. [Doc. No. 3]. This Court heard oral argument on the motion on September 24, 2008. Richard H. Ottinger, Esq. and Ethan G. Ostroff, Esq. represented the Plaintiff, Hipage, and Julie T. Burrow represented the Defendant, Access2Go. The Official Court Reporter was Sharon Borden.

II. ANALYSIS

Access2Go has moved to dismiss Hipage's Complaint under Federal Rules of Civil Procedure 12(b)(3) and 12(b)(6)1. In the alternative, Access2Go has moved to transfer the case to the United States District Court for the Central District of Illinois.2

A. Forum Selection Clause

Access2Go asserts this Court should dismiss the Complaint under Rule 12(b)(3) for improper venue, based on the forum selection clause in the Service Agreement. At its heart, Access2Go's argument is based on the assumption that an exclusive forum selection clause, if valid, renders venue improper in a non-designated forum, even if the non-designated forum would otherwise be proper. This assumption, however logical, is not accepted by all courts. Although the U.S. Supreme Court has repeatedly held that forum selection clauses in private contracts are enforceable, the manner and "procedural vehicle by which they should be enforced ... is the subject of some confusion." BHP Int'l Inv., Inc. v. OnLine Exch., Inc., 105 F.Supp.2d 493, 495 (E.D.Va.2000).

The ambiguity underlying enforcement flows from a set of incongruous Supreme Court cases. In M/S Bremen v. Zapata Off-Shore Co., the Court announced for the first time that forum selection clauses are enforceable, unless "unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." 407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). In Steivart Org. Inc. v. Ricoh Corp., however, the Court suggested in dicta that a forum selection clause, even if enforceable under the Bremen standard, is not necessarily enforceable upon a motion to dismiss. 487 U.S. 22, 28-29 n. 8, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988)("The parties do not dispute that the District Court properly denied the motion to dismiss the case for improper venue ... because respondent apparently does business in the [district].") The motion to dismiss was not at issue in the case, but the majority opinion cited 28 U.S.C. § 1391(a) for the proposition that "venue [is] proper in judicial district in which corporation is doing business." Id. In other words, the Court's footnote implies that an enforceable forum selection clause does not automatically invalidate a venue, if that venue is proper under § 1391(a).

The Stewart Court then addressed the motion to transfer, the central issue in the case, and further subjugated the forum selection clause to the discretion of the

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district court. The opinion holds that 28 U.S.C. § 1404(a) governs the analysis, and the forum selection clause is but one "significant" factor in an "individualized, caseby-case consideration of convenience and fairness." Id. at 29. Thus, following Stewart, the appropriate method of enforcement was likely transfer, rather than dismissal, but any transfer was subject to broad discretion of the district court.

Three years later, however, the Supreme Court revived strict enforcement of valid forum selection clauses. In Carnival Cruise Lines, Inc. v. Shute, the Court held that the forum selection clause included in the cruiseline's passage contract ticket was reasonable under the relaxed standard of M/S Bremen. 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991). Specifically, the majority opinion relied on M/S Bremen's presumption in favor of enforcing forum selection clauses, which requires the party challenging enforcement to "bear a heavy burden of proof [of unfairness]." Id. at 592, 595, 111 S.Ct. 1522. The Carnival Cruise Lines Court, however, neither applied nor overruled the balancing test in Stewart. As a result, even though the Court's reversal of the Ninth Circuit's decision effected a dismissal,3 the opinion did not specifically address either (1) whether dismissal, as opposed to transfer, is the proper procedural vehicle for enforcing a forum selection clause, or (2) whether a forum selection clause trumps 28 U.S.C. § 1391(a) in determining whether...

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