Utah Pizza Service, Inc. v. Heigel

• Decision Date: 19 February 1992
• Docket Number: Civ. No. 91-C-876B.
• Citation: 784 F. Supp. 835
• Parties: UTAH PIZZA SERVICE, INC. and Bruce O. Palanske, Plaintiffs, v. Vicki N. HEIGEL, Executrix of the Estate of Fred J. Heigel, and Little Caesar Enterprises, Inc., Defendants.
• Court: U.S. District Court — District of Utah

784 F. Supp. 835

UTAH PIZZA SERVICE, INC. and Bruce O. Palanske, Plaintiffs, v. Vicki N. HEIGEL, Executrix of the Estate of Fred J. Heigel, and Little Caesar Enterprises, Inc., Defendants.

Civ. No. 91-C-876B.

United States District Court, D. Utah, C.D.

February 19, 1992.

R. Scott Rawlings, Salt Lake City, Utah, Gary M. Austerman, Wichita, Kan., for plaintiffs.

George M. Haley, Salt Lake City, Utah, Dennis F. Keller, Holland, Ohio, R. Brent Stephens, Salt Lake City, Utah, Barry M. Heller, Washington, D.C., for defendants.

MEMORANDUM DECISION AND ORDER

BENSON, District Judge.

The Court has before it defendant Little Caesar Enterprises, Inc.'s Motion to Transfer Venue. The motion is opposed by plaintiffs Utah Pizza Service, Inc. and Bruce O. Palanske, and defendant Vicki N. Heigel.

BACKGROUND

Defendant Little Caesar Enterprises, a Michigan corporation, is a national franchisor of Little Caesar Restaurants. Plaintiff Utah Pizza Service, Inc., a Utah corporation, is a franchisee of Little Caesar, operating approximately 41 Little Caesar Restaurants in Utah and Wyoming. Plaintiff Bruce Palanske is the chief operating officer of Utah Pizza Service, and owner of 26% of Utah Pizza Service stock. Defendant Vicki N. Heigel is the executrix of the estate of Fred J. Heigel, which owns 74% of Utah Pizza Service stock.

Each of the 41 franchise operations is governed by a contract between Utah Pizza Service and Little Caesar Enterprises known as the Franchise Agreement. This suit is based on a dispute over whether the Franchise Agreements give Little Caesar Enterprises a right of first refusal to purchase shares of stock transferred between Utah Pizza Service shareholders. Utah Pizza Service filed this diversity action, seeking a declaratory judgment that Little Caesar Enterprises has no right to interfere in the transfer of stock between Utah Pizza Service shareholders.

Little Caesar Enterprises responded to the suit by filing the present motion to transfer venue to the Eastern District of Michigan. This motion was opposed by the two plaintiffs as well as by defendant Vicki N. Heigel.

DISCUSSION

Plaintiffs have chosen to pursue their claim in the District of Utah. Generally, the plaintiff's choice of forum is given great deference. The party seeking to transfer venue must overcome the presumption in favor of the plaintiff's chosen forum. This burden is significant. "Unless the balance is strongly in favor of the movant the plaintiff's choice of forum should rarely be disturbed." Wm. A. Smith Contracting Co. v. Travelers Indemnity Co., 467 F.2d 662, 664 (10th Cir. 1972).

Little Caesar Enterprises argues that the case should be transferred to Michigan because (1) the franchise agreements contain a "forum selection clause" which requires the litigation to be conducted in Michigan, and (2) the convenience factors of 28 U.S.C. § 1404(a) favor transferring the case to Michigan.

1. The Forum Selection Clause

Nineteen of the forty-one Franchise Agreements between Little Caesar Enterprises and Utah Pizza Service contain the following forum selection clause:

The parties agree that in the event of litigation between them, Franchise Owner stipulates that the courts of the State of Michigan shall have personal jurisdiction over its person, that it shall submit to such personal jurisdiction, and that venue is proper in Michigan.

Little Caesar Enterprises argues that this clause alters the presumption in favor of the plaintiffs' chosen forum. Regardless where plaintiffs chose to file suit, it is argued, they are obligated under the terms of the forum selection clause to conduct the litigation in Michigan.

A valid forum selection clause may supersede the presumption in favor of the plaintiff's choice of forum. In re Ricoh Corp., 870 F.2d 570, 573 (11th Cir. 1989). If the parties have previously agreed that litigation shall be conducted in a particular forum, there is a strong presumption favoring venue in that forum. See The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972); Carnival Cruise Lines, Inc. v. Shute, ___ U.S. ___, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991). A party is obligated to abide by its contractual duties, and litigate in the agreed-upon forum.

Litigation may not be conducted outside of the designated forum without meeting a "heavy burden of proof" of unfairness or inconvenience. The Bremen, 407 U.S. at 17, 92 S.Ct. at 1917; Shute, 111 S.Ct. at 1528. "The venue mandated by a choice of forum clause rarely will be outweighed by other 1404(a) factors." In re Ricoh Corp., 870 F.2d at 573.

A forum selection clause, however, will not alter the presumption in favor of the plaintiff unless the clause requires that the litigation be conducted only in the agreed-upon forum. That is, the clause must be mandatory rather than permissive. A mandatory forum selection clause requires that all litigation between the parties be conducted in the named forum and nowhere else.

A permissive clause, on the other hand, empowers the named forum with jurisdiction without making that jurisdiction exclusive. It allows for jurisdiction in the chosen forum but does not prohibit litigation elsewhere.

A permissive forum selection clause will not alter the presumption in favor of the plaintiff's choice of forum. Thus, the key issue in this motion is whether the forum selection clause contained in the Franchise Agreements is mandatory or permissive.

Little Caesar Enterprises argues that the clause is mandatory. It maintains that the clause requires that all litigation between Little Caesar Enterprises and Utah Pizza Service be conducted in Michigan and nowhere else. Plaintiffs, on the other hand, argue that the clause is permissive. They argue that although the clause grants jurisdiction in Michigan, it fails to make it exclusive jurisdiction and does not prohibit jurisdiction elsewhere.

Numerous courts have held that forum selection clauses which give a court jurisdiction without clearly making that jurisdiction exclusive are permissive rather than mandatory. The mere granting of jurisdiction is insufficient to make a clause mandatory. Additional language giving exclusive jurisdiction to the forum is required. Clauses which merely grant jurisdiction to a designated forum do not prohibit litigation in other appropriate fora. See e.g. Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77 (9th Cir. 1987); Citro Florida, Inc. v. Citrovale, S.A., 760 F.2d 1231, 1231-32 (11th Cir. 1985); Kachal, Inc. v. Menzie, 738 F.Supp. 371, 373-74 (D.Nev.1990); Credit Alliance Corp. v. Crook, 567 F.Supp. 1462, 1464-65 (S.D.N.Y.1983); and Coface v. Optique Du Monde, Ltd., 521 F.Supp. 500, 506-07 (S.D.N.Y.1980).

Clauses in which a party agrees to "submit" to jurisdiction are not necessarily mandatory. Such language means that the party agrees to be subject to that forum's jurisdiction if sued there. It does not prevent the party from bringing suit in another forum. See Keaty v. Freeport Indonesia, Inc., 503 F.2d 955, 956-57 (5th Cir. 1974); Sall v. G.H. Miller & Co., 612 F.Supp. 1499, 1501 (D.Colo.1985); and Webb Research Corp. v. Rockland Industries, Inc., 580 F.Supp. 990, 993 (E.D.Penn.1983). But see Central Coal Co. v. Phibro Energy, Inc., 685 F.Supp. 595 (W.D.Va.1988); and Furry v. First National Monetary Corp., 602 F.Supp. 6 (W.D.Okla.1984) (discussed below).

A mandatory clause contains clear language showing that jurisdiction is appropriate in the designated forum and none other. See Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d at 77-78; Kachal, Inc. v. Menzie, 738 F.Supp. at 373-74. ("Mandatory forum selection clauses contain language such as `exclusive' or `only'. The language mandates that the designated courts are the only ones which have jurisdiction.")

This court finds that the forum selection clause contained in the Franchise Agreements of Little Caesar Enterprises and Utah Pizza Service is permissive. The plain language of the clause reveals that it was intended to give Little Caesar Enterprises the right to bring suit in Michigan. Nothing in the provision indicates an intent to prohibit litigation elsewhere. In agreeing to the clause, Utah Pizza Service acknowledged that Michigan has jurisdiction over litigation between Utah Pizza Service and Little Caesar Enterprises, and agreed not to contest jurisdiction or venue if sued in Michigan. A fair reading of the clause, however, does not reveal that Utah Pizza Service gave up its right to bring suit elsewhere.

The clause grants jurisdiction to Michigan, but lacks the additional language necessary to make that jurisdiction exclusive. If the parties had desired to prohibit all litigation outside of Michigan, they could have easily worded the clause to reflect this desire. Mandatory clauses contain language clearly requiring exclusive jurisdiction.¹

Little Caesar Enterprises argues that an analysis of the precise language of the clause shows it to be mandatory. The forum selection clause contains three subclauses: (1) Utah Pizza Service stipulates that Michigan shall have personal jurisdiction over its person, (2) Utah Pizza Service agrees that it shall submit to such jurisdiction, and (3) Utah Pizza Service agrees that venue is proper in Michigan. Little Caesar Enterprises argues that the first subclause grants jurisdiction to Michigan, and the second subclause makes such jurisdiction mandatory. If the provision was intended to be permissive, there would be no need for the second subclause. The second subclause is repetitive of the first, unless it is interpreted as imposing exclusive jurisdiction in Michigan.

The court, however, is not persuaded by this argument. Little Caesar Enterprises' highly technical interpretation conflicts with a fair reading of the plain language of the contract. The first subclause gives Little Caesar Enterprises the right to bring suit in Michigan. The second and third subclauses prohibit Utah Pizza Service from...