United States District Court, E.D. Pennsylvania
April 5, 2004.
ATOFINA CHEMICALS, INC. Plaintiff, SIERRA CHEMICAL COMPANY, Defendant
The opinion of the court was delivered by: WILLIAM YOHN, JR., District Judge
Memorandum and Order
Atofina Chemicals Inc. ("Atofina") filed a breach of contract action
against defendant Sierra Chemical Company ("Sierra") for failing to pay
for goods delivered. Plaintiff subsequently filed an amended complaint,
alleging that by breaching its contract with Atofina (Count I) and by
refusing to make payment for goods received (Count II), defendant was
unjustly enriched (Count III).
Currently pending before the court is defendant's motion to 1) dismiss
the amended complaint pursuant to Federal Rule Civil Procedure 12(b)(2)
for lack of personal jurisdiction. In the event that this court finds
that personal jurisdiction is proper, defendant moves to 2) dismiss the
action pursuant to Federal Rule Civil Procedure 12(b)(3) for improper
venue; or alternatively, 3) transfer the case to the District of Nevada
pursuant to § 1404(a); or 4) dismiss part of the action pursuant to
Federal Rule Civil Procedure 12(b)(6) for failure to state a claim upon
which relief can be granted.*fn1 The motion will be denied.
Atofina, also known as Elf Atochem North America Inc., and Sierra
entered into a distributorship agreement on March 27, 1996. Def.'s Orig.
Mot. at 3 n. 2;*fn2 Amend. Compl. ¶ 4, Exhibit A. The agreement was
effective as of January 1, 1996. Def.'s Orig. Mot. v. 15; Distributorship
Agreement, see Amend. Compl., Exhibit A. Under the terms of the
distributorship agreement, Sierra acted as distributor for plaintiff's
products in Nevada, California, Utah, and Idaho. Distributorship
Agreement ¶ 3. The parties' relationship lasted until 2001; however,
the parties dispute whether the contract was still in effect beyond 1996.
Under paragraph 14 of the distributorship agreement, the agreement was to
"continue in effect for a period of one year." Def.'s Orig. Mot. at 3 n.
1, 9. Defendant argues that based on this language the contract
terminated December 31, 1996. Def.'s Orig. Mot. ¶ 17. Plaintiff
contends that the parties continued to operate in the same fashion under
the contract until the end of June 2001. Pl.'s Reply at 2; Pl.'s Memo. at
The distributorship agreement provided for jurisdiction in Pennsylvania
for disputes arising under the agreement: "[a]ny litigation arising
hereunder or related to the relationship created herein shall be instituted by DISTRIBUTOR in the appropriate
federal or state court located in Philadelphia County, Philadelphia. In
the event [plaintiff] elects to institute any action in said courts,
DISTRIBUTOR expressly consents to jurisdiction in said courts." Def.'s
Orig. Memo. at 8 n. 3; Pl's Memo. at 1-2;*fn3 Distributorship Agreement
Sometime subsequent to the execution of the 1996 distributorship
agreement, defendant allegedly sent plaintiff purchase orders containing
a choice of law provision that stated that "[t]he Buyer and Seller agree
that this Purchase Order is made and executed in the State of Nevada and
shall be governed by the laws of the State of Nevada." Def's Memo. ¶
11; Purchase Order ¶ 9, Def.'s Exhibit C.
Throughout their relationship, plaintiff also allegedly sent defendant
a series of invoices. Def.'s Orig. Memo. at 9; Pl's Memo. at 2. Each
invoice provided that "[t]his contract shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania. Any
lawsuit brought by Buyer [Sierra] arising out of the transactions covered
hereunder shall be instituted in the appropriate state or federal court
located in Philadelphia County, Pennsylvania, and Buyer [Sierra] further
submits itself to the jurisdiction of said courts in the event Seller
[Atofina] elects to institute any action in said courts."*fn4 Def.'s
Memo. ¶ 5; Pl's Memo. at 2; Invoice Terms & Conditions ¶ 14,
see Amend. Compl., Exhibit C.
Plaintiff brought this suit in the Eastern District of Pennsylvania
pursuant to the forum selection clauses included in the distributorship agreement and the
invoices. Amend. Compl. ¶¶ 5, 9.
I. Motion to Dismiss Pursuant to 12(b)(2) for Lack of Personal
A. Standard of Review
Defendant contends that this court lacks personal jurisdiction and
moves to dismiss the complaint pursuant to 12(b)(2). Def.'s Mot. ¶¶
6-8. Once a defendant raises a jurisdictional defense, the burden shifts
to the plaintiff to demonstrate that the relevant jurisdictional
requirements are met. Mellon Bank (East) PSFS v. Farino,
960 F.2d 1217, 1223 (3d Cir. 1992). Plaintiff must support this burden
through "sworn affidavits or other competent evidence." North Penn
Gas Co. v. Corning Natural Gas Corp., 897 F.2d 687, 689 (3d Cir.
1990) (citations omitted). Plaintiff meets its burden by making a prima
facie showing that jurisdiction exists. Farino, 960 F.2d at
Plaintiff contends that jurisdiction is proper because Sierra consented
to jurisdiction in Philadelphia by signing the distributorship agreement
and because of the terms and conditions printed on its invoices. Pl.'s
Memo. at 1-2. Defendant does not dispute that it consented to personal
jurisdiction by signing the distributorship agreement. Def.'s Orig. Memo
at 8 n. 3. Instead, defendant argues that the agreement, signed in 1996,
was terminated one year later, and as such the forum selection clause
contained within no longer applies. Id.; Def.'s Orig. Mot. at 3
n. 1. In response, plaintiff maintains that the parties continued to operate
under the contract acting as if it had been renewed until
the end of June 2001. Pl.'s Reply at 2-3. "It was the intent that the
terms of the Agreement, although written for one year period, would
formalize an ongoing relationship between the Plaintiff and the
Defendant. The parties continued to operate in the same fashion between
1996 and 2001." Pl.'s Memo. at 1 (citing affidavits of Kenneth Blackburn
and Lawrence Farmer). Plaintiff also contends that the forum selection
clause allows for jurisdiction because its language is purposefully broad
and applies to all litigation "related to the relationships" formed under
the agreement. Pl.'s Reply at 3.
Because "a district court sitting in diversity applies the law of the
forum state in determining whether personal jurisdiction is proper," I
look to the laws of Pennsylvania to resolve this issue. Vetrotex
Certainteed Corp. v. Consolidated Fiber Glass Prods. Co.,
75 F.3d 147, 150 (3d Cir. 1996). In Pennsylvania, a corporation is subject to
general personal jurisdiction through one of three ways, namely
incorporation under or qualification as foreign corporation under the
laws of the Commonwealth, consent, or carrying on of a continuous and
systematic part of its general business within the Commonwealth.
42 Pa. C.S.A. § 5301(a)(2).*fn5 When jurisdiction is premised on one of the
aforementioned three traditional bases, such as consent, the due process
requirements of personal jurisdiction are instantly satisfied because
these bases are traditional for the very reason that they coincide with
principles of constitutional due process. See Bane v. Netlink,
Inc., 925 F.2d 637, 641 (3d Cir. 1991) (noting that consent is "a
traditional basis for assertion of jurisdiction long upheld as
constitutional" and thus forgoing a separate due process analysis). Under Pennsylvania law, a court has personal
jurisdiction over a defendant corporation when the corporation consents
to jurisdiction. 42 Pa.C.S.A. § 5301(a)(2)(ii).
Defendant does not argue that personal jurisdiction may not be obtained
by means of a contractual forum selection clause. Def.'s Orig. Mot. at 3
n. 1. Therefore, the issue before this court is whether the terms of the
distributorship agreement govern this dispute either because of the
breadth of the language or because the clause survived the contract's
one-year expiration date.
In the first instance, I find that the broad language of the
distributorship agreement's forum selection clause provides for
jurisdiction in this district. The clause applies to "[a]ny litigation
arising hereunder or related to the relationship created
herein." Distributorship Agreement ¶ 17 (emphasis added). As
discussed below, plaintiff has demonstrated through the affidavits of
Blackburn and Farmer that its claims are related to the relationship
created by the distributorship agreement. Therefore, under the terms of
the distributorship agreement, I conclude that jurisdiction is proper.
Furthermore, I find that the terms of the distributorship agreement
survived at least for purposes of the jurisdictional argument because
there is sufficient evidence that the parties continued to act under the
terms of the contract long after its expiration date. Pl's Reply at 2;
Pl's Memo at 1. The Third Circuit has concluded that "when a contract
lapses but the parties to the contract continue to act as if they are
performing under a contract, the material terms of the prior contract
will survive." Luden's Inc. v. Local Union No. 6, 28 F.3d 347,
355-56 (3d Cir. 1994). Plaintiff has shown through affidavits that after
the one year period of the contract, the parties continued to operate
under the terms of the contract for several years. Plaintiff points to
the affidavits of Kenneth Blackburn, Atofina's business manager, and
Lawrence Farmer, general manager and later president of Atoftna Portland, who both stated
that the defendant "continuously and consistently acted as a distributor
of the Plaintiffs products during the period 1997 through 2001." Pl's
Memo. at 1; see affidavits attached to plaintiff's response to
defendant's original motion to dismiss (Doc. # 7). Blackburn stated that
the distributorship agreement was entered into to "formalize the ongoing
business arrangements between the parties" and that "[t]he parties
continued to operate in the same fashion as under the Distributor
Agreement during this entire period." Id. Defendant has not
disputed these affidavits.
I find that the forum selection clause in the distributorship agreement
governs plaintiff's claims because the claims are related to the
relationship created by the agreement. Furthermore, in light of the
parties' conduct, the termination date of December 31, 1996 has no effect
for jurisdictional purposes because the parties continued to operate
under the contract long after that date. Material terms of the contract
survive "unless either one of the parties clearly and manifestly
indicates, through words or through conduct, that it no longer wishes to
continue to be bound thereby, or both parties mutually intend that the
terms not survive." Luden's, 28 F.3d at 355-56. Defendant agrees
that the forum selection clause is a material term of the contract.
Def.'s Mot. ¶ 17. Defendant does not contend that it ever "manifestly
indicated" that it no longer wished to be bound by the forum selection
clause. Moreover, defendant's purchase orders do not provide for a new
forum; instead, they provide that the parties agree that the purchase
order "shall be governed by the laws of the State of Nevada." Def's Mot.
¶ 11. Defendant's clause is a choice of law provision, not a forum
selection clause. Because defendant never gave any indication that it no
longer wished to be bound by the contract, I find that under the terms of
the agreement, the defendant has waived its right to assert lack of
personal jurisdiction. The contractual consent manifested in the distributorship agreement vests this court with
personal jurisdiction over the defendant.
Therefore, I conclude that plaintiff has satisfied its burden of
establishing a prima facie case of personal jurisdiction over the
defendant, which defendant has not rebutted, and I will deny defendant's
motion to dismiss for lack of personal jurisdiction.
II. Motion to Dismiss for Improper Venue Pursuant to 12(b)(3)
If a claim is brought in a district in which venue is improper, then
that claim may be dismissed. 28 U.S.C. § 1406(a). Defendant argues
that venue is improper for two reasons: 1) the one year agreement (and
its forum selection clause) terminated before the action arose; and 2)
under UCC § 2-207, defendant is not bound by the terms on the back of
plaintiff's invoices because the invoices provide terms that are not in
defendant's purchase order. Def.'s Memo. at 13-14.
Defendant's first argument that venue is improper and should be
dismissed pursuant to Federal Rule of Civil Procedure 12(b)(3) is
meritless. Defendant states that it raised and briefed this issue in its
previous motion to dismiss (see Doc. #5); however, in its earlier motion,
defendant raised similar arguments only in conjunction with a F.R.C.P.
12(b)(6) motion to dismiss for failure to state a claim, not for improper
venue. Presumably, defendant now argues that the terms of the
distributorship agreement are no longer in effect, and that the forum
selection clause therein has no applicability to this litigation. Def.'s
Orig. Memo. at 9. Defendant notes that the distributorship agreement
states: "The Agreement shall continue in effect for a period of one
year." Id. Also, defendant asserts that the contract ended on
December 31, 1996. Id. Even if defendant had cogently stated its argument, I would deny
defendant's motion to dismiss for improper venue because the defendant is
subject to personal jurisdiction in this district. In a diversity action,
venue is proper in a district where the defendant resides.
28 U.S.C. § 1391(a)(1).*fn6 Within the meaning of the federal venue
provision, a corporate defendant resides "in any judicial district in which
it is subject to personal jurisdiction at the time the action is commenced."
28 U.S.C. § 1391(c). Because defendant is subject to personal
jurisdiction in this district, I conclude that venue is proper herein.
See Mountbatten Sur. Co. Inc. v. Reagerharris Inc., 2000 U.S.
Dist. LEXIS 333 at *27 (E.D. Pa. Jan. 19, 2000).
Next defendant argues that UCC § 2-207 nullifies the terms of the
invoices providing for jurisdiction in Philadelphia because the forum
selection clause in plaintiff's invoices was a material term that was
added, but not accepted, by the defendant. Under UCC §
2-207(2), additional terms are construed as proposals for additions to
the contract. Between merchants,*fn7 such terms become part of the
contract unless a) the offer expressly limits acceptance to the terms of
the offer; b) they materially alter it; or c) notification of objection
to them has already been given or is given within a reasonable time after
notice of them is received. Defendant argues that its purchase order-constitutes an offer and that plaintiffs invoices constitute
an acceptance. Defendant further contends that plaintiff's addition of a
forum selection clause in its invoices is no more than a proposal for an
addition to the contract. Defendant argues that the forum selection
clause cannot be part of the contract under UCC § 2-207(2)(a) because
defendant's purchase order expressly limited acceptance to the terms of
the offer and noted that additions and changes must be approved in
writing.*fn8 Defendant also argues that the addition of the forum
selection clause does not become part of the contract because under UCC
§ 2-207(2)(b) it materially alters the contract.*fn9
Defendant's arguments rely on the assumption that the forum selection
clause of the distributorship agreement did not survive its 1996
termination date. I find defendant's argument unavailing because I have
already found that the distributorship agreement was still in effect for
purposes of establishing consent to personal jurisdiction. Thus, I
conclude that venue is proper, and I will deny defendant's motion to
dismiss pursuant to 12(b)(3).
III. Motion to Transfer Venue Pursuant to § 1404(a)
Next defendant argues that venue is inconvenient and that venue should
be transferred to Nevada pursuant to § 1404(a). Def.'s Mot. at 16. According to the Third Circuit, "a forum selection clause is
presumptively valid and will be enforced by the forum unless the party
objecting to its enforcement establishes 1) that it is the result of
fraud or overreaching, 2) that enforcement would violate a strong public
policy of the forum, or 3) that enforcement would in the particular
circumstances of the case result in litigation in a jurisdiction so
seriously inconvenient as to be unreasonable. Coastal Steel Corp. v.
Tilghman Wheelabrator Ltd., 709 F.2d 190, 202 (3d Cir. 1983).*fn10
Defendant has not alleged fraud nor does Sierra argue that enforcement of
the clause would violate public policy. Instead, defendant argues that
enforcement of the forum selection clause would be unreasonably
inconvenient for the defendant.
Under § 1404(a), a district court may transfer a civil case to
another district or division where it might have been brought "for the
convenience of parties and witnesses, in the interest of justice."
28 U.S.C. § 1404(a). "Section 1404(a) is intended to place discretion in
the district court to adjudicate motions for transfer according to an
`individualized, case-by-case consideration of convenience and
fairness.'" Stewart Org. Inc. et al. v. Ricoh Corp. et al.,
487 U.S. 22, 29 (1988). Plaintiff's choice of forum is entitled to great
deference, and the burden is on the defendant to establish the forum's
inconvenience. Bhatnagar v. Surrendra, 52 F.3d 1220, 1226 n. 4
(3d Cir. 1995); Lacey v. Cessna Aircraft Co., 932 F.2d 170, 180
(3d Cir. 1991).
According to the Third Circuit, a forum selection clause is treated as
"a manifestation of the parties' private preferences as to a convenient forum" and is
among the relevant private interests courts consider when deciding
whether to transfer venue. Jumara v. State Farm Ins. Co.,
55 F.3d 873, 879 (3d Cir. 1995).*fn11 In deciding whether or not to
transfer venue, the court must also consider a number of public
factors*fn12 such that the parties' intentions is only one factor courts
consider when determining whether venue is appropriate. Id.
"Section 1404(a) directs a district court to take account of factors
other than those that bear solely on the parties' private ordering of
their affairs. The district court must also weigh in the balance the
convenience of the witnesses and those public-interest factors of
systematic integrity and fairness." Stewart, 487 U.S. at 30.
"This court may only consider the inconvenience of lay witnesses to the
extent that the witnesses may actually be unavailable for trial."
Jumara, 55 F.3d at 879.
Defendant argues that "it would be extremely inconvenient and
burdensome to require Sierra's employees and/or representatives to travel
half way across the country to defend itself in a forum in which it has
no contacts." Def.'s Mot. at ¶ 31. Defendant also argues that this
court would have to apply foreign law because the laws of Pennsylvania
would not apply. Id. ¶ 32.
In every respect, defendant has failed to meet its burden. Plaintiff is
a Pennsylvania corporation with its principal place of business in Philadelphia.
Amend. Compl. ¶ 1. Thus, plaintiff's choice is given great deference.
The forum selection clause signed by both parties chose Philadelphia for
the situs of litigation. Moreover, defendant has not offered any specific
reasons why the inconvenience to the witnesses would outweigh plaintiff's
choice of forum. Defendants have made only vague statements that their
unnamed witnesses would be inconvenienced by traveling to Philadelphia.
Defendants have not identified the specific witnesses who would be
inconvenienced, their residences or office locations, and the nature of
their testimony, or specified how these witnesses would be significantly
more burdened by traveling to Philadelphia. Furthermore, defendant has
provided no reason that a judgment in this district could not be enforced
elsewhere or that this court cannot apply the laws of Nevada. There is no
evidence that trial would be easier, more expeditious in the District of
Nevada. Nor has defendant presented any evidence that the docket of the
District of Nevada is significantly less congested. Also, weighing in
favor of the plaintiff is the local interest in deciding local
controversies at home. Defendant cannot claim forum non
conveniens simply so that it may shift its burden onto the
plaintiff. Thus, I find that defendant has not met its burden to
establish that litigation should be transferred to the District of
Nevada, and I will deny defendant's motion to transfer.
IV. Motion to Dismiss Pursuant to 12(b)(6)
Finally, defendant moves to dismiss the complaint for failure to state
a claim in so far as it relies on the invoices addressed to Patterson
West Chemical Company. Def.'s Mot. at 18.
A. Standard of Review
In ruling on a motion to dismiss for failure to state a claim upon
which relief may be granted, the court must accept as true all well-pleaded allegations
of fact, and any reasonable inferences that may be drawn therefrom, in
the plaintiffs complaint and must determine whether "under any reasonable
reading of the pleadings, the plaintiff may be entitled to relief."
Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996) (citations
omitted); Colburn v. Upper Darby Township, 838 F.2d 663, 665-66
(3d Cir. 1988), cert. denied, 489 U.S. 1065 (1989) (citations
omitted). Although the court must construe the complaint in the light
most favorable to the plaintiff, it need not accept as true legal
conclusions or unwarranted factual inferences. Conley v. Gibson,
355 U.S. 41, 45-46 (1957). Claims should be dismissed under Rule 12(b)(6)
only if "it appears beyond doubt that the plaintiff can prove no set of
facts in support of [its] claim which would entitle [it] to relief."
Defendant argues that twenty-three of the eighty-one invoices attached
to plaintiff's complaint are for products delivered to and directed to
the Patterson West Chemical Company. Def.'s Mot. at 18. Defendant asks
this court to dismiss the part of plaintiff's amended complaint that
relates to these invoices. Id.
As plaintiff indicates, the invoices show that the goods were shipped
to this company but were sold to the defendant. Pl's Reply at 4; Pl's
Memo. at 18; Amend. Compl., Exhibit B. Furthermore, Sierra Chemical
Company's name still appears on each of these invoices. I must accept the
allegations in the complaint and all reasonable inferences therefrom for
purposes of a motion to dismiss. Therefore, I will deny defendant's
motion to dismiss plaintiff's claims related to the twenty-three invoices
for products delivered to Patterson West Chemical Company. Conclusion
I will deny defendant's 12(b)(2) motion to dismiss for lack of personal
jurisdiction because defendant consented to jurisdiction in the Eastern
District of Pennsylvania by signing the forum selection clause in the
contract and by continuing to act under the terms of the contract long
after its one-year expiration date. I will deny defendant's 12(b)(3)
motion to dismiss for improper venue because defendant corporation is
subject to personal jurisdiction in this district. I will deny
defendant's motion to transfer venue pursuant to § 1404(a) because
defendant has failed to meet its burden to establish forum non
conveniens. I will deny defendant's 12(b)(6) motion to dismiss for
failure to state a claim for twenty-three of the eighty-one invoices
because plaintiff has alleged that those invoices were defendant's
obligation even though the goods were delivered to a third party. An
appropriate order follows. Order
And now, this ___ day of April 2004, upon consideration of the
defendant's motion to dismiss plaintiff's amended complaint (Doc. #13)
and alternatively its motion to transfer venue (Doc. #14), and the
plaintiff's opposition thereto (Doc. # 16), it is hereby ORDERED that the
defendant's 12(b)(2) motion to dismiss for lack of personal jurisdiction
is DENIED, defendant's 12(b)(3) motion to dismiss for improper venue is
DENIED, and defendant's motion to transfer venue pursuant to § 1404(a) is DENIED. Defendant's 12(b)(6)
motion to dismiss for failure to state a claim is also DENIED.
The parties shall submit to the court by letter within ten (10) days of
the date hereof their proposals for a new discovery deadline, dispositive
motion deadline and trial date.