Family Wireless #1, LLC v. Auto. Techs., Inc.

Family Wireless #1, LLC, et al., Plaintiffs, v. Automotive Technologies, Inc., Defendant.

Case No. 15-11215

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

September 1, 2015

Honorable Nancy G. Edmunds

OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO TRANSFER PURSUANT TO 28 U.S.C. § 1404(a) [11]

This matter comes before the Court on Defendant Automotive Technologies' motion to transfer pursuant to 28 U.S.C. § 1404(a). Plaintiffs are forty-one Wireless Zone retail store franchisees from thirteen states. Defendant is the franchisor. Twenty-four Plaintiffs have franchise agreements with valid forum-selection clauses specifying that all litigation between the parties will take place in Connecticut. ("FSC Plaintiffs"). Of the seventeen Plaintiffs whose agreements do not have valid forum-selection clauses, ("Non-FSC Plaintiffs"), only ten are located in Michigan. The other seven are located in Minnesota and Indiana. Defendant asks that the Court either transfer this entire case to the District of Connecticut or sever the FSC Plaintiffs and transfer them to the District of Connecticut. For the reasons stated below, the Court GRANTS Defendant's request to transfer the entire case to the District of Connecticut.

I. Background

Defendant is the franchisor of Wireless Zone retail stores. These stores specialize in the sale and repair of wireless communication devices. The Wireless Zone franchisesystem currently includes over 350 franchised retail stores in 25 states and the District of Columbia.

Plaintiffs are a group of forty-one franchisees who own more than one-hundred Wireless Zone franchisees in thirteen states. These states (and the number of Plaintiffs from each) are: Michigan (10), New York (8), Minnesota (6), Pennsylvania (4), Virginia (3), Massachusetts (2), Ohio (2), Florida (1), New Jersey (1), New Hampshire (1), Indiana (1), Missouri (1), and West Virginia (1). Their relationships with Defendant are governed by franchise agreements. The franchise agreements all contain forum-selection clauses stating, in relevant part, either:

This Agreement will be governed by and interpreted by the laws of the State of Connecticut. You agree that any causes of action between the parties with respect to any issue arising out of or relating to this Franchise Agreement, the breach thereof, the relationship between Franchisor and Franchisee or any other issue or dispute will only be brought in either the state or federal courts of Connecticut. . . . You irrevocably submit to the jurisdiction of these courts, waive any objection you may have to either the jurisdiction or the venue of these courts and agree not to argue that these courts are inconvenient forums.

or

This Agreement will be governed by and interpreted by the laws of the State of Connecticut. You agree that any causes of action between you and ATI for any issue arising out of relating to this Franchise Agreement, the breach thereof, the relationship between you and ATI or any other issue or dispute will only be brought in either the state or federal courts of Connecticut. . . . You irrevocably submit to the jurisdiction of these courts, waive any objection you may have to either the jurisdiction or the venue of these courts and agree not to argue that these courts are inconvenient forums.

(Def.'s Mot., Ex. A at 7-8.)

These forum-selection clauses were disclosed to Plaintiffs before they signed their franchise agreements via a Franchise Disclosure Document (FDD), which includes adescription of each party's rights and obligations and a copy of Defendant's then-current franchise agreement. The FDD cover page states in all caps as a "Risk Factor" to consider before buying a franchise that "[t]he franchise agreement requires you to resolve disputes with us by litigation only in Connecticut." (Id. at 27.) And the FDD itself states that the franchise agreement contains a choice of forum clause requiring litigation in "[s]tate or federal court in Connecticut." (Id. at 29.)

Although all of the franchise agreements contain forum-selection clauses, the parties agree that the Michigan and Indiana Plaintiffs' clauses are not valid. See Mich. Comp. Laws § 445.1527(f); Ind. Code § 23-2-2.7-1(10). The parties dispute whether the Minnesota Plaintiffs' franchise agreements contain valid clauses. For the rest of the Plaintiffs, there is no dispute that their clauses are valid.

Originally, a group of forty-two Plaintiffs filed a seven-count complaint alleging breach of contract, misrepresentation, and violations of Michigan and Connecticut franchise laws. Defendants responded with a motion to dismiss for lack of personal jurisdiction and for failure to state a claim and a separate motion to transfer venue under 28 U.S.C. § 1404(a). Plaintiffs then filed a thirteen-count amended complaint, adding claims for violations of New York, Virginia, Maryland, Pennsylvania, Ohio, and West Virginia franchise laws. This amended complaint also dropped some of the Plaintiffs included in the original complaint and added new ones, bringing the total number to forty-three. Two of these Plaintiffs were later voluntarily dismissed. Following the amended complaint, Defendant withdrew its motion to dismiss. The Court is now left to decide this motion to transfer.

II. Standard

28 U.S.C. § 1404(a) provides that "[f]or the convenience of parties and witnesses, in the interests of justice, a district court may transfer any civil action to any other district or division where it might have been brought." In the typical case, the Court's decision on whether to transfer is based on a case-by-case consideration of both private and public-interest factors. Domino's Pizza PMC v. Caribbean Rhino, Inc., 453 F. Supp. 2d 998, 1007 (E.D. Mich. 2006). These factors include:

(1) the convenience of witnesses; (2) the location of relevant documents and relative ease of access to sources of proof; (3) the convenience of the parties; (4) the locus of the operative facts; (5) the availability of process to compel the attendance of unwilling witnesses; (6) the relative means of the parties; (7) the forum's familiarity with the governing law; (8) the weight accorded the plaintiff's choice of forum; and (9) trial efficiency and the interests of justice, based on the totality of the circumstances.

Overland, Inc. v. Taylor, 79 F. Supp. 2d 809, 811 (E.D. Mich. 2000). The party seeking transfer bears the burden of proving that a transfer is appropriate by a preponderance of the evidence. Perceptron, Inc. v. Silicon Video, Inc., 423 F. Supp. 2d 722, 729 (E.D. Mich. 2006). "Courts have broad discretion to transfer an action pursuant to section 1404." Gen. Motors Co. v. Dinatale, 705 F. Supp. 2d 740, 752 (E.D. Mich. 2010).

The analysis changes, however, when the parties have a contract containing a valid forum-selection clause. In that situation, as the Supreme Court recently stated, "a district court should transfer the case unless extraordinary circumstances unrelated to the convenience of the parties clearly disfavor a transfer. Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S. Ct. 568, 575 (2013). In other words, "a valid forum selection clause [should be] given controlling weight in all but the most exceptional circumstances." Id. at 581.

In Atlantic Marine, the Supreme Court held that "the presence of a valid forum-selection clause requires district courts to adjust their usual § 1404(a) analysis in three ways." Id. First, unlike in a typical § 1404(a) transfer analysis, "the plaintiff's choice of forum merits no weight." Id. Furthermore, it is the party "defying the forum-selection clause" who bears the burden of proof that transfer to the forum specified in the clause is unwarranted. Id. Second, "a court evaluating a defendant's § 1404(a) motion to transfer based on a forum-selection clause should not consider arguments about the parties' private interests." Id. at 582. Instead, the court should consider the public-interest factors only. Id. "Because those factors will rarely defeat a transfer motion, the practical result is that forum-selection clauses should control except in unusual cases." Id. Third, "when a party bound by a forum-selection clause flouts its contractual obligations and files suit in a different forum, a § 1404 transfer of venue will not carry with it the original venue's choice of law rules." Id.

III. Analysis

The Court will perform its analysis in this way. First, the Court will determine whether it has personal jurisdiction over Defendant as this impacts whether the Court has the power to transfer the case pursuant to Section 1404(a). The Court will next determine whether transfer pursuant to Section 1404(a) is appropriate. In doing this, the Court will divide Plaintiffs into two groups: those with valid forum-selection clauses and those without valid forum-selection clauses. See In re Rolls Royce Corp., 775 F.3d 671 (5th Cir. 2014) (stating that district courts should divide parties in this way when addressing transfer motions in multi-party cases involving forum-selection clauses). The Court will then weigh the private-interest factors of each group to determine if they point in favor of transfer. After this preliminary weighing, the Court will consider the effect of the public-interest factors anddetermine whether to keep the entire case in this district, to transfer the entire case to the District of Connecticut, or to sever the FSC Plaintiffs and transfer only them to the District of Connecticut.

A. Personal Jurisdiction

There are two principal statutes that provide the Court with the authority to transfer venue: 28 U.S.C. § 1404(a) and 28 U.S.C. § 1406(a).¹ As stated above, Section 1404(a) allows district courts to transfer venue to any district where the case could have been brought "for the convenience of the parties, in the interests of justice." 28 U.S.C. § 1404(a). A court may transfer a case under this statute only where it has personal jurisdiction over ...