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Sadler v. Balboa Capital Corp.

April 22, 2009


The opinion of the court was delivered by: Ambrose, Chief District Judge


This litigation has its roots in a contractual dispute involving financing for a machine used in the scrap metal business. Plaintiff Sean Sadler ("Sadler") lives in Westmoreland County, Pennsylvania. L.S. Sadler,*fn1 a Pennsylvania corporation, is in the scrap metal business. It buys and sells scrap metal around the world.

In May of 2008 acting on behalf of L.S. Sadler, Sadler obtained a quotation from a third party*fn2 for the purchase of a "container tilter." See Complaint, ¶5. The purchase price was $110,500. Id., ¶ 6. The quotation required the payment of $33,000 on or before June 6, 2008 as a down payment and prom ised delivery by June 27, 2008. Id., ¶ 7.

Sadler contacted Defendant Balboa Capital Corporation ("Balboa"), a California corporation, to obtain financing for the purchase of the equipment. Id., ¶ 8. Balboa accepted the terms as required by the third party and agreed to provide the financing for the purchase of the container tilter. Id., ¶ 9. More specifically, Balboa agreed to fund the purchase by immediately tendering $33,000 to the third party following which the third party would deliver the tilter on or before June 27, 2008. Id., ¶ 10.

On May 29, 2008, Balboa emailed to Sadler a document package containing a Master Lease Agreement ("the Lease"). Sadler refused to enter into the Lease and requested an Equipment Finance Agreement ("EFA") instead. Balboa subsequently emailed an EFA which Sadler signed on behalf of L.S. Sadler and returned with a down payment on the loan. Id., ¶ 14.

At approximately the same time, and with Balboa's knowledge, L.S. Sadler entered into an agreement to sell 2500-2700 metric tons of scrap steel at $500 per ton and to ship the steel to a customer in Korea between July 15 and August 15, 2008. Id., ¶ 15. L.S. Sadler intended to use the new container tilter to fulfill this order and Balboa knew of its intentions in this regard. Id., ¶ 17. Nevertheless, Balboa failed to send the $33,000 down payment to the third party owner of the container tilter. Id., ¶ 18. Though Balboa eventually agreed to wire the funds, the delay caused a corresponding delay in the arrival of the tilter until July 29, 2008. Id., ¶ 21-22.

Though L.S. Sadler immediately began booking containers in which to load scrap steel and making its monthly payments to Balboa, the world-wide market in scrap metal began to fall precipitously. In January of 2009 the customer in Korea refused to accept any more scrap steel at $500 per ton and canceled its order. Id., ¶ 27. L.S. Sadler lost profits in the amount of $625,000 as a result. Id., ¶ 29.

Sadler (and "S. Sadler, Inc.") thereafter filed suit against Balboa in the Court of Common Pleas of Allegheny County, Pennsylvania. Plaintiffs assert a claim for breach of contract (Count I) based upon Balboa's failure to comply with the terms of the quotation; fraudulent misrepresentation (Count II), based upon the allegation that Balboa intended to force the seller of the container tilter to accept $15,000 as down payment rather than $33,000; negligent misrepresentation (Count III), based largely upon the same allegations as those contained in Count II; and fraud (Count IV), based upon the allegation that Sadler did not sign the Master Lease Agreement which Balboa contends was signed. Balboa subsequently removed the Complaint to the United States District Court for the Western District of Pennsylvania based upon diversity jurisdiction.

Balboa has filed a Motion to Dismiss. See Docket No. [3]. According to Balboa, both the Master Lease Agreement and the Equipment Financing Agreement contain a forum selection clause mandating that any suit be filed in Orange County, California. See EFA, ¶ 25 and Lease, ¶30. As such, Balboa insists, venue in the Western District of Pennsylvania is improper and the Complaint should be dismissed with prejudice.

After careful consideration, and for the reasons set forth below, the Motion is denied.

Standard of Review

In ruling on a motion to dismiss brought pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, I must construe all allegations of the complaint in the light most favorable to the plaintiff. I must also accept as true all well-pleaded facts and allegations, and must draw all reasonable inferences therefrom in favor of the plaintiff. Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651, 653 (3d Cir. 2003). However, as the Supreme Court made clear in Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965 (2007), the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Thus, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. (citations omitted).


I will accept for purposes of this Motion that Balboa proffered to L.S. Sadler two documents, a Lease and an EFA. I will further accept that each contained a forum selection clause designating Orange County, California as the proper venue for any disputes arising from a breach thereof. What I cannot accept ...

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