Wellmore Coal Corp. v. Gates Learjet Corp.

• Decision Date: 10 September 1979
• Docket Number: Civ. A. No. 78-0291-A.
• Parties: WELLMORE COAL CORPORATION, Plaintiff, v. GATES LEARJET CORPORATION, Defendant.
• Court: U.S. District Court — Western District of Virginia

475 F. Supp. 1140

WELLMORE COAL CORPORATION, Plaintiff, v. GATES LEARJET CORPORATION, Defendant.

Civ. A. No. 78-0291-A.

United States District Court, W. D. Virginia, Abingdon Division.

September 10, 1979.

James P. Jones, Penn, Stuart, Eskridge & Jones, W. Challen Walling, Bristol, Va., for plaintiff.

Jackson S. White, Jr., White, Elliott & Bundy, Howard C. McElroy, Abingdon, Va., for defendant.

MEMORANDUM OPINION

GLEN M. WILLIAMS, District Judge.

This matter is before the court on defendant's motion to dismiss pursuant to Fed.R. Civ.P. 12(b), or, in the alternative, to transfer this action to the United States District Court for the District of Arizona, Tucson Division, pursuant to 28 U.S.C. § 1406. Defendant bases the motion on the following grounds: (1) The court lacks personal jurisdiction over the defendant; and (2) venue is improper and subject matter jurisdiction is lacking because of a forum selection clause included in the contract under dispute.

Plaintiff, Wellmore Coal Corporation, is a corporation organized under the laws of Virginia with its principal place of business in Virginia. Defendant, Gates Learjet Corporation, is a Delaware corporation with its principal place of business in Kansas. Personal jurisdiction over defendant is asserted by plaintiff pursuant to the Virginia longarm statute, Va.Code § 8.01-328.1 (Supp. 1978). Process was served pursuant to Fed. R.Civ.P. 4(e) and Va.Code § 8.01-329 (Repl. Vol.1977), providing for substituted service on the Secretary of the Commonwealth of Virginia as statutory agent for nonresident defendants. The parties agree that the amount in controversy is over Ten Thousand Dollars; hence, subject matter jurisdiction is perfected under 28 U.S.C. § 1332(a)(2).

This case arises from breach of a contract entered into by the parties for the sale of an airplane from the defendant to the plaintiff. An area representative of the defendant flew to plaintiff's place of business in Virginia on July 7, 1978, to discuss the terms of a contract between the parties. After negotiation, plaintiff's representative, the president of Wellmore Coal Corp., signed a standard contract form which was sent to the defendant for acceptance at its corporate offices in Arizona. Contemporaneously with the Airplane Purchase Agreement, the plaintiff and defendant's agent modified and added to its terms by a document entitled "COVER LETTER New Aircraft Purchase Agreement." Plaintiff deposited with defendant the sum of One Hundred Thousand Dollars ($100,000.00) to secure delivery of the airplane in April, 1979. On September 29, 1978, plaintiff sent a mailgram to defendant cancelling its order on the aircraft and demanding a refund of its deposit. Defendant has refused to return the deposit, claiming the right to retain it as liquidated damages as specified under the Airplane Purchase Agreement. Plaintiff is suing for return of the deposit, alleging that it does not owe the sum under the terms of modification set out in the Cover Letter.

I.

Any discussion of whether personal jurisdiction was properly asserted over the defendant must be held in abeyance pending a determination of the validity and enforceability of the forum selection clause, which will determine whether the case should be transferred. It is not necessary for a court to have personal jurisdiction over a defendant in order to transfer a case, so long as subject matter jurisdiction is present. Goldlawr, Inc. v. Heiman, 369 U.S. 463, 82 S.Ct. 913, 8 L.Ed.2d 39 (1962). Subject matter jurisdiction has been found to be present under 28 U.S.C. § 1332(a)(2).

II.

The Airplane Purchase Agreement signed by plaintiff provided that the "courts of Arizona shall have exclusive jurisdiction to hear and determine all claims, disputes, actions or suits which may arise hereunder." On the basis of this provision, defendant moves that the court should dismiss the action or transfer it to the federal district court in Arizona under 28 U.S.C. § 1406 because of improper venue or lack of subject matter jurisdiction. To defeat the motion, plaintiff argues that the Cover Letter filled out by the parties was a new contract that superceded the Airplane Purchase Agreement and, consequently, the absence of a forum selection clause in the new contract will prevent transferral or dismissal of the action. Defendant counters with the proposition that the Cover Letter merely constituted a modification of the original agreement.

The court feels that the parties clearly intended the Cover Letter to be an additional instrument to be read in connection with the Purchase Agreement. It is obvious that when dealing with a standard printed contract it may be necessary to make changes in the terms to fit it to the specifications of the parties. If no room is provided for such changes or if it is impossible to delete printed matter and insert handwritten terms, then it may be necessary to make the changes on an additional sheet. In addition, as Professor Corbin has written:

Any business transaction in which a contract is made consists of a good many communications and other actions. . . The terms finally agreed on may be fully and accurately "integrated" in a single paper document, one that certainly is not to be torn apart in the process of interpretation. In many cases, however, the terms of agreement may be expressed in two or more separate documents. . . in every such case, these documents should be interpreted together, each one assisting in determining the meaning intended to be expressed by the others.

3 Corbin on Contracts § 549 (1960). The Restatement also agrees that a writing or writings that form part of the same transaction should be interpreted together as a whole. Restatement of Contracts § 235(c) (1932).

Hence, the added and modified terms in the Cover Letter will have to be read in connection with the Airplane Purchase Agreement "in order to ascertain the entire intent of the parties." 17 Am.Jur.2d Contracts § 470 (1964). The Cover Letter does not include essential terms of the contract, rather it only speaks to special conditions regarding trade-in arrangements, additional pilot training and costs, designation of persons authorized to sign commitments, and limitation on liability in event of buyer's cancellation. Price, description, and quantity of the subject of the contract are not included.

In accordance with the above, plaintiff's contention that the Cover Letter was a new contract is rejected by this court. Both instruments should be considered together as was intended by the parties at the time of execution of the agreements.

III.

Plaintiff also contends that the motion to dismiss or transfer should be denied because the forum selection clause is invalid and, therefore, is unenforceable.

The trend toward enforcing forum selection clauses is relatively recent, reflecting a distinct change from the previous negative attitude courts had toward "jurisdiction-ousting" clauses. See Annot., 56 A.L.R.2d 300 (1957); 20 Am.Jur.2d Courts § 141 (1965). In 1972, the Supreme Court indicated its approval of forum selection clauses in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). The Court held therein that, at least in admiralty suits, forum selection clauses "are prima facie valid," id. at 10, 92 S.Ct. 1907, and should be enforced unless the party resisting application of the clause can "clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." Id. at 15, 92 S.Ct. at 1916. Although Bremen was an admiralty suit, there is language in the case to support the proposition that its test should be applicable to diversity suits because the same principles on which it is based apply to interstate commercial activity:

The barrier of distance that once tended to confine a business concern to a modest territory no longer does so. . . The expansion of American business and industry will hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our laws in our courts. . . . In an era of expanding world trade and commerce, the absolute aspects of the doctrine of the Carbon Black case¹ have little place and would be a heavy hand indeed on the future development of international commercial dealings by Americans. . . . Manifestly much uncertainty and possible great inconvenience to both parties could arise if a suit could be maintained in any jurisdiction in which an accident might occur or if jurisdiction were left to any place where the Bremen or Unterweser might happen to be found. The elimination of all such uncertainties by agreeing in advance on a forum acceptable to both parties is an indispensable element in international trade, commerce, and contracting.

Id. at 8-14, 92 S.Ct. at 1912, 1913, 1915.

Previous decisions have differed on whether this is an area that federal common law governs or whether application of state substantive law is appropriate. See Cruise v. Castleton, Inc., 449 F.Supp. 564, 568 n. 4 (S.D.N.Y.1978); Maier, The Three Faces of Zapata: Maritime Law, Federal Common Law, Federal Courts Law, 6 Vand. J. Transanat'l L. 387, 397-98 (1973). Usually, a federal court sitting in Virginia must apply the substantive law of Virginia in a diversity case, Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), including the forum's choice of law rules. Klaxon v. Stentor Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). This court does not need to reach the issue of which should apply, however, for the state law that applies under Erie is in substantial conformity with the leading U.S. decision. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). "Since there is no significant difference between the federal and state rule, it is not necessary to choose between them." Cruise, 449 F.Supp....