Triad Systems Financial v. Stewart's Auto Supply, CivA 98-AR-2015-S.
| Citation | 47 F.Supp.2d 1332 |
| Decision Date | 29 April 1999 |
| Docket Number | No. CivA 98-AR-2015-S.,CivA 98-AR-2015-S. |
| Parties | TRIAD SYSTEMS FINANCIAL CORPORATION, Plaintiff and Counterclaim Defendant, v. STEWART'S AUTO SUPPLY, INC.; Reggie Stewart; Ellis Murphree, Defendants, Counterclaimants and Third-Party Plaintiffs, v. Cooperative Computing, Inc., (formerly known as Triad Systems Corporation), Third-Party Defendant. |
| Court | U.S. District Court — Northern District of Alabama |
Susan Salonimer Wagner, Ellen E Henderson, Frederick M Thurman, Jr, Berkowitz Lefkovits Isom & Kushner, Birmingham, AL, Samuel W Gordon, Hemar Gordon & Rousso, Encino, CA, for Triad Systems Financial Corporation, a corporation, plaintiff.
J Fred Wood, Jr, Christopher A Bottcher, Dominick Fletcher Yeilding Wood & Lloyd, Birmingham, AL, Stephen K Griffith, D Todd McLeroy, Knight & Griffith, Cullman, AL, Bruce W Blakely, Silen & Flaxman, Mill Valley, CA, for Stewart's Auto Supply, Inc., Reggie Stewart, Ellis Murphree, defendants.
For reasons which will hereinafter become apparent, this court has taken its time in the preparation of an answer to the provocative question of what constitutes the proper forum for the above-entitled case.
The complaint was originally filed in the Superior Court of the State of California for the County of Alameda. Plaintiff, Triad Systems Financial Corporation ("TSFC"), sued defendants, Stewart Auto Supply, Inc. ("Stewart Auto"), Reggie Stewart ("Stewart"), and Ellis Murphree ("Murphree"), for an alleged breach of an equipment lease by Stewart Auto and alleged breaches of personal guarantees of that lease by Stewart and Murphree. TSFC is a California resident. Defendants are residents of the Northern District of Alabama. Defendants removed the case to the United States District Court for the Northern District of California premised on diversity of citizenship. They thereupon moved for a dismissal pursuant to Rule 12(b)(2) F.R.Civ.P., or, in the alternative, for a transfer of the case to Alabama pursuant to 28 U.S.C. § 1404(a). They challenged the long-arm jurisdiction of the California court and, as a back stop, asserted forum non conveniens. The California court denied defendants' motion to dismiss, finding the existence of more than sufficient facts upon which to base in personam jurisdiction. However, the California court ordered the requested transfer, memorializing its oral order as follows:
The Court found that, for the convenience of witnesses and the parties, and in the interest of justice, this case should properly be tried in the United States District Court for the Northern District of Alabama. Accordingly, the Court granted defendants' motion to transfer the case to the District Court for the Northern District of Alabama pursuant to 28 U.S.C. § 1404(a).
Order (N.D.Cal. July 31, 1998) (transferring case).
TSFC successfully resisted defendants' motion to dismiss but unsuccessfully resisted the requested transfer. TSFC used the following language to object:
4. Suit was filed in California based upon a Contractual Forum Selection Agreement. Defendant has filed a Motion to Dismiss or in the alternative, a Motion to Transfer on Grounds of Inconvenient Forum.
5. Plaintiff believes that the Motion to Dismiss and the Motion to Transfer based upon Forum Non Conveniens should be denied because of many reasons, including the following:
a. The forum-selection clause is enforceable and no grounds exist to negotiate the chosen venue.
b. The valid Forum Selection Clause precludes granting the Forum Non Conveniens Motions.
c. Any claims against Triad Systems Corporation are subject to mandatory arbitration before the American Arbitration Association in Alameda County.
FORUM CLAUSES ARE GENERALLY UPHELD UNDER BOTH CALIFORNIA AND FEDERAL LAW.
Pl.'s Mem. in Opp. to Mot. Dismiss at 2. (emphasis in original).
In its written opinion, the California court made no mention of the provision of the contract that designates the law of California as controlling and that concedes jurisdiction in a state or federal court in California for litigating any and all disputes between the parties. That provision is as follows:
25. GOVERNING LAW. This Lease shall in all respects be governed by, and construed in accordance with, the laws of the State of California, including all matters of construction, validity and performance. You [Stewart's Auto] agree to submit to the jurisdiction of the state and/or federal courts in the State of California. This Lease was executed in the State of California (by TSFC having countersigned it in California) and is to be performed in the State of California by reason of the payments required to be made to TSFC in California.
Ex. L, to Pl.'s Mem. in Opp. to Mot. to Dismiss.
The individual defendants, Stewart and Murphree, executed purported guaranty agreements in which each "unconditionally guarantees to TSFC all of the obligations of Customer [Stewart Auto]."
After the case arrived in this court, Stewart Auto, Stewart and Murphree filed a counterclaim against TSFC and a third-party complaint against Triad Systems Corporation ("TSC"), claiming, inter alia, that TSC is the parent corporation of TSFC. As against TSC, cross-claimants invoked this court's diversity jurisdiction and served TSC, a non-Alabama corporation, claiming that TSC, as TSFC's alter ego, and TSC, together breached the subject equipment lease, committed fraud in the inducement of the lease and violated federal anti-trust laws. The counterclaim and third-party complaint was responded to by TSFC and TSC (now known as Cooperative Computing Inc.), hereinafter ("CCI"). This response consists only of an application for a stay pending mandatory arbitration. No "answers" have been filed to the counterclaim or to the cross-claim. TSFC's and CCI's application for stay invokes the arbitration clause contained in a Master Customer Agreement executed by and between TSC and Stewart Auto. That agreement provides:
13.7 Arbitration. Any claim, dispute or controversy arising out of or relating to this Agreement, or the alleged breach or termination thereof, will be settled by arbitration conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, as then in effect, except as provided in subparagraphs (a)-(d) below. You understand that by agreeing to arbitrate disputes, you are waiving your rights to a jury trial.
(a) Unless the parties agree otherwise, any such arbitration shall be held in Alameda County, California, before one arbitrator who will be selected by mutual agreement of the parties; if agreement is not reached on the selection of an arbitrator within fifteen (15) days after receipt of a demand for arbitration by the other party (the "Initial Selection Period"), then each party will have fifteen (15) days from the expiration of the Initial Selection Period to select an arbitrator. The two arbitrators will select a third neutral arbitrator and the three arbitrators will arbitrate the dispute. If either party does not timely select an arbitrator, the arbitrator selected by the other party will arbitrate the dispute.
(b) The parties will provide each other with production of all requested documents and records reasonably related to the dispute in a manner that will minimize the expense and inconvenience of both parties. Discovery will not include depositions or interrogatories except as the arbitrator(s) expressly allow(s) on a showing of need.
(c) Costs and fees of the arbitrator(s) will be borne by the non-prevailing party, unless the arbitrator(s) determine(s) otherwise. The award of the arbitrator(s), which may include equitable relief, will be final, and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. Any demand for arbitration shall be made in writing and must be made within the period set forth in Section 13.6
(d) Nothing in this Section 13.7 will be deemed as preventing either party from seeking injunctive or equitable relief (or any other provisional remedy) from any court having jurisdiction over the parties and the subject matter of the dispute as necessary to protect the complaining party's Proprietary Rights.
Ex. M, Pl.'s Mem. in Opp. to Mot. to Dismiss. (emphasis in agreement).
Although the forum selection clause invoked by plaintiff in California does not contain express words of "exclusivity," designating California as the only possible forum, the arbitration clause now being invoked by a newly added party in this court makes clear that arbitration, if and when ordered, must be conducted in California unless the parties agree otherwise, and CCI (formerly TSC) clearly does not agree.
Murphree has filed a motion for summary judgment in this court claiming that he was never a guarantor of the subject lease agreement. He seems to have a colorable basis for his contention. This court has not ruled upon TSFG's and CCI's joint motion for a stay, nor upon Murphree's motion for summary judgment. Instead, the court has informed the parties that it will treat TSFG's earlier California response to defendants' motion to transfer, together with TSFG's and CCI's joint motion to recognize binding arbitration, as a motion to re-transfer the case to the United States District Court for the Northern District of California. Stewart Auto, Stewart, and Murphree have filed a brief in opposition to re-transfer. TSFG and CCI insist that all issues between the parties must be arbitrated in California in accordance with the arbitration clause. This contention has more than colorable merit. The Federal Arbitration Act is powerful medicine.
Anything or anybody named "Stewart" is "snake-bit" when it comes to forum selection clauses in this court. The Stewart clan still has not learned to avoid signing contracts that contain forum selection clauses, especially if those clauses are going to end up in this court. The first "Stewart" ("Stewart...
To continue reading
Request your trial
-
Vortekx, Inc. v. Ias Communications, Inc.
...Express, Inc., 929 F.2d 1131, 1137 (6th Cir.1991) (discussing law of the case in transfer orders); Triad Sys. Fin. Corp. v. Stewart's Auto Supply, Inc., 47 F.Supp.2d 1332, 1338 (N.D.Ala.1999) (finding exceptional and unique circumstances warranting transfer but cautioning that "re-transfer ......