Vista Food Exch., Inc. v. Champion Foodservice, L.L.C.
| Decision Date | 04 August 2014 |
| Docket Number | 14 Civ. 804 (RWS) |
| Parties | VISTA FOOD EXCHANGE, INC., Plaintiff, v. CHAMPION FOODSERVICE, L.L.C., BC&G WEITHMAN CONSTRUCTION CO., TYRONE WEITHMAN, ASHLEY SIMPSON, and LINDA ATKINSON, Defendants. |
| Court | U.S. District Court — Southern District of New York |
APPEARANCES:
Attorneys for the Plaintiff
JONATHAN C. SCOTT, P.C.
100 Highland Park Village, Suite 200
Highland Park, TX 75205
By: Jonathan Cory Scott, Esq.
Attorneys for the_J3efgjidants
BAILEY & OROZCO, L.L.C.
744 Broad Street
Newark, NJ 07102
By: Michael Andrew Orozco, Esq.
Sweet, D.J.
Plaintiff Vista Food Exchange, Inc. ("Plaintiff" or "Vista") has moved to remand its action against defendants Champion Foodservice, L.L.C. ("Champion"), BC&G Weithman Construction Co., Inc. ("BC&G," together with Champion, the "Entity Defendants"), Tyrone Weithman ("Weithman"), Ashley Simpson ("Simpson"), and Linda Atkinson ("Atkinson," and, together with the Entity Defendants, Weithman and Simpson, the "Defendants") to the Supreme Court of the State of New York. Defendants have moved to dismiss the complaint of Plaintiff or, in the alternative, transfer the action to the United States District Court for the Northern District of Ohio.
Based on the conclusions set forth below, Plaintiff's motion to remand is denied and Defendants' motion to dismiss is granted. Defendants' motion to transfer is denied.
Prior Proceedings
On January 10, 2014, Plaintiff filed its complaint alleging as to all defendants breach of contract, breach of implied duty of good faith and fair dealing, and fraud and, as to Weithman, breach of guaranty. On February 7, 2014,Defendants removed this action from the Supreme Court of the State of New York on the basis of diversity jurisdiction.
On February 18, 2014, Plaintiff filed a motion to remand to state court on the grounds that forum selection agreements signed by Defendants BC&G and Weithman precluded removal. On February 19, 2014, Defendants filed a motion to dismiss Plaintiff's complaint for lack of personal jurisdiction, improper venue, and failure to state a claim. In the alternative, Defendants requested venue transfer. All motions were marked fully submitted on April 17, 2014.
Facts
The allegations of the complaint are assumed to be true and are summarized herein only to the extent necessary to dispose of Defendant's motion to dismiss or transfer venue and Plaintiff's motion to remand.
Plaintiff is a wholesale food business incorporated in New York. (Compl. ¶ 2.) BC&G is an Ohio corporation; Champion is a corporation organized under the laws of Ohio, which Plaintiff alleges, upon information and belief, is a shell company with no significant assets, credit lines or capital.(Compl. ¶¶ 3, 5-6.) The complaint further alleges, upon information and belief, that the Entity Defendants have been operated as alter egos of one another, or have been treated by Weithman as if they were one and the same. (Compl. ¶ 4.) Each Entity Defendant is alleged to be in the business of purchasing food items from vendors and then assembling and packaging them for distribution. (Compl. ¶ 17.)
Weithman is believed to be a resident of Ohio and President of BC&G and alleged to be the "architect of the misconduct that Vista complains about." (Compl. ¶ 7.) Simpson is a resident of Michigan and was during all times relevant the comptroller of the Entity Defendants and is alleged to have prepared and/or submitted invoices to Vista in New York that she knew or should have known were inflated. (Compl. ¶¶ 8.) Atkinson is a resident of Ohio and employed by the Entity Defendants in various capacities and is alleged to have prepared and/or submitted invoices to Vista in New York that she knew or should have known were inflated. (Compl. ¶ 9.)
Plaintiff's complaint alleges that on or about March 1, 2011, BC&G sent an application for credit to Vista's office in New York (the "Credit Agreement"). (Compl. ¶ 12.) The Credit Agreement was submitted in connection withestablishing an account with Vista to purchase wholesale food products. (Compl. ¶ 13.) Included in the Credit Application was a promise to pay for all costs, expenses, and fees incurred in enforcing the obligations thereunder and the costs of collection. Id. The Credit Application also included the following language (the "venue language"):
Litigation of all kinds arising from transactions subject of this guaranty shall be subject to venue in the State and County of New York. New York law shall apply.
(Compl. ¶ 12.) Plaintiff approved the Credit Application, accepted a personal guarantee by Weithman (the "Guaranty Agreement"), and established an account at Vista in New York for BC&G. (Compl. ¶ 14.)
In or about March 2011, Plaintiff alleges that the Entity Defendants and Vista entered into an oral contract (the "Oral Agreement") in which Vista agreed to sell to Champion's food products at one cent above Vista's wholesale item cost and Champion agreed that it would use Vista as its primary supplier in connection with the Credit Application. (Compl. ¶ 16.) Champion agreed that while initially Champion would estimate its packaging or non-food costs to be charged to Vista, Champion would adjust the estimate on past and future orders to reflectChampion's actual cost for packaging and that Vista would be charged for non-food costs at Champion's actual cost. Id. The premise of the Oral Agreement was that Champion would handle packaging of Vista meals for its customers by passing through to Vista the non-food costs without a markup, and that Champion would source its food products from Vista. (Compl. ¶ 20.)
On or about June 20, 2012, a continuing guarantee was executed by Weithman that guaranteed the payment of all debts, obligations, and liabilities of every kind and description whether of the same or different nature than those arising from the previous, current or subsequent grant of credit to BC&G (the "Continuing Guaranty"). (Compl. ¶ 15.) The Continuing Guaranty contained the same venue language as the Credit Agreement. Id. Plaintiff contends that the venue language contained in both agreements constituted a binding agreement that venue would be laid in state court in New York County in the event of a conflict. (Pl.'s Mem. Supp. Remand 3-5.)
The complaint alleges that Defendants inflated their invoices and charges in order to avoid paying Vista sums due for products and services provided by Vista for a period of approximately two years. (Compl. ¶¶ 18, 23.) It contends that the Defendants knew that their packaging costs were much lessthan the amount they initially estimated, and much less than their true cost, and that Champion went directly to suppliers in order to cut Vista out of the sale. (Compl. ¶¶ 18-19.) The complaint alleges that, by paying Vista less than what was usual and customary, by overcharging Vista on the non-food costs in packaging hundreds of thousands of meals and by circumventing Vista by establishing relationships directly with Vista's suppliers, the Entity Defendants dishonored the Oral Agreement. (Comp. ¶ 20.)
As a result of the Defendants conduct, Plaintiff alleges that it was deprived of the benefit of the Oral Agreement, that Defendants avoided paying the reasonable value of the products that they purchased from Vista, that Defendants hurt Vista's relationships with its suppliers, that Defendants avoided paying Vista the sums due for products or services provided by Vista, and that Vista was misled into paying to the Entity Defendants funds to which they were not entitled. (Compl. ¶¶ 21-24.)
Discussion
Under 28 U.S.C. § 1441, a civil action brought in a state court for which federal district courts have original jurisdiction may be removed by defendants to the federal district court for the district and division embracing the place where such action is pending. 28 U.S.C. § 1441(a). The party who removes the action and asserts federal jurisdiction "bears the burden of establishing jurisdiction" is proper. Synergy Advanced Pharms., Inc. v. CapeBio, LLC, 797 F. Supp. 2d 276, 282 (S.D.N.Y. 2011) (quoting Blockbuster, Inc. v. Galeno, 472 F.3d 53, 57 (2d Cir. 2006)).
Forum selection clauses may "trump what would otherwise be a right to remove cases to federal court." Yakin v. Tyler Hill Corp., 566 F.3d 72, 76 (2d Cir. 2009). Absent extraordinary or unusual circumstances, forum selection clauses are enforced. Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas, 134 S. Ct. 568, 583 (2013); see also Bense v. Insterstate Battery Sys. of Am., 683 F.2d 718, 721-22 (2d Cir. 1982). In the event the language of a forum selection clause is vague or ambiguous, however, the clause must be construed against the drafter. JP Morgan Chase Bank, N.A. v. Reijtenbagh, 611 F. Supp. 2d 389, 391 (S.D.N.Y. 2009). A waiver of a "party's statutory right to remove a case to federal court must be clear and unequivocal."Rabbi Jacob Joseph Sch. v. Province of Mendoza, 342 F. Supp. 2d 124, 128 (E.D.N.Y. 2004) ().
Plaintiff alleges that, in removing this case, BC&G and Weithman dishonored the forum selection clauses in the Credit Agreement and Continuing Guaranty and contends that the forum selection language in both agreements constituted an agreement that, in the event of litigation, venue would be laid in the New York state courts of New York County. (Comp. ¶ 12; Pl.'s Mem. Supp. Remand 3-5.) These arguments, however, cannot be credited.
The language contained in both documents is, indeed, ambiguous. The text of each the Credit Agreement and Continuing Guaranty reads as follows: "Litigation of all kinds arising from transactions subject of this guaranty shall be subject to venue...
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