Kelley v. MailFinance Inc.

436 F.Supp.3d 1136

Gregory KELLEY, et al., Plaintiffs,

v.MAILFINANCE INC., and Neopost USA Inc., Defendants.

19 C 758

United States District Court, N.D. Illinois, Eastern Division.

Signed January 29, 2020

Elizabeth L. Rowe, Jeremy Michael Barr, Josiah A. Groff, Dowd, Bloch, Bennett, Cervone, Auerbach & Yokich, Chicago, IL, for Plaintiffs.

Jennifer Lynn Wyatt Devroye, Fox Rothschild LLP, Chicago, IL, Michael Eidel, Fox Rothschild LLP, Philadelphia, PA, for Defendants.

MEMORANDUM OPINION

CHARLES P. KOCORAS, DISTRICT JUDGE:

Before the Court is Defendants MailFinance Inc. ("MailFinance") and Neopost USA Inc.'s ("Neopost") (collectively, "Defendants") motion to transfer venue to the District of Connecticut under 28 U.S.C. § 1404(a). The Defendants alternatively move to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(3). For the following reasons, the Court grants Defendants' motion to transfer and denies as moot the motion to dismiss.

BACKGROUND

For purposes of this motion, the Court accepts as true the following facts from the complaint. Murphy v. Walker , 51 F.3d 714, 717 (7th Cir. 1995). All reasonable inferences are drawn in Plaintiffs' favor. Tamayo v. Blagojevich , 526 F.3d 1074, 1081 (7th Cir. 2008).

Plaintiffs are the trustees of a multiemployer benefit plan under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C §§ 1002(3) and (37A), who maintain offices and conduct business in this district (collectively, "the Fund"). The Fund has its principal office in Chicago, Illinois. Defendant MailFinance is a California corporation with its principal place of business in Milford, Connecticut. Defendant Neopost is a Delaware corporation and has its principal place of business in Milford, Connecticut. Defendants both are registered to do business in Illinois.

To meet its obligations under ERISA, the Fund shares administrative expenses with the Service Employees International Union Healthcare IL Pension Fund ("Pension Fund"), and the SEIU Healthcare IL Home Care and Child Care Fund ("Home Care Fund") (collectively, "SEIU Funds"). In August 2017, the Fund contracted with Defendants to help the SEIU Funds meet their mailing and printing logistical needs. The contract included a hardware component, in which the Fund would lease a mailing and postage machine from Defendants, and a customized software component. The software was to be integrated into the hardware component and provided various sorting, double-sided printing, and mail-merging benefits. Defendants estimated that the Fund could save $2,000 per month by using this hardware and customized software.

The Fund, on behalf of all SEIU Funds, entered into a Software Solutions Finance Agreement ("Finance Agreement") with Defendants, which became effective on August 23, 2017. By signing the Finance Agreement, the Fund agreed to "all applicable terms and conditions," which included separate hyperlinked documents, including a Software Solutions Agreement ("SSA"), a Professional Services Agreement ("PSA"), and a Maintenance Agreement ("MA").¹ These hyperlinks were accessible to the Fund in Section G of the Finance Agreement, which also stipulated that the Fund would pay monthly payments of $2,815.01 for a 60-month lease of the postage and mailing equipment. Additionally, a Software License Agreement ("SLA") was attached to the SSA via a hyperlink. The SLA also contained a link to another Professional Services Agreement ("OMS-PSA"). Both the SSA and the PSA include forum-selection clauses that grant exclusive jurisdiction in New Haven, Connecticut, while the SLA includes a permissive arbitration clause in the same jurisdiction for matters arising out of the subject matter of that specific document.

Following the Finance Agreement, the parties entered into a Solution Design Agreement ("SDA") (collectively with the Finance Agreement, SSA, PSA, MA, SLA, SDA, OMS-PSA "the Agreement") in January of 2018 detailing the specific terms of the custom software that Defendants were to provide to the Fund. Within the SDA, Defendants included a schedule for the customized software that stipulated the software and hardware components provided by Defendants would be operational within eight to sixteen weeks of January 3, 2018.

Defendants did not meet the deadlines in the SDA. This prompted the Fund to provide Defendants with a 60-day termination notice. Upon receiving the Fund's termination notice, Defendants immediately stopped providing services to the Fund and sent a "buy-out" letter dated July 17, 2018, asserting that the Agreement is "non-cancelable" and demanding $169,792.66 in termination fees. Defendants also refused to return $20,878.75 that the Fund had deposited into the postage machine.

Based on these events, the Fund sued Defendants for breach of fiduciary duty under ERISA, 29 U.S.C. § 1104(a)(1)(A), breach of contract, and declaratory judgments stating that the early termination fee is non-enforceable and that the Fund had a right to terminate the Agreement. Defendants have moved to dismiss the Fund's complaint under Federal Rules of Civil Procedure 12(b)(3), or alternatively, to transfer venue under 28 U.S.C. § 1404(a). Because we grant the motion to transfer, we do not reach the motion to dismiss.

LEGAL STANDARD

Section 1404(a) provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). Transfer is appropriate if (1) venue is proper in both the transferor and transferee court; (2) transfer is for the convenience of the parties and witnesses; and (3) transfer is in the interest of justice. See id. In ruling on a § 1404(a) motion, "the Court considers the relevant factors in light of all the circumstances of the case, an analysis that necessarily involves a large degree of subtlety and latitude," Luera v. Godinez , 2015 WL 1538613, at *2 (N.D. Ill. 2015), and the issue is therefore "committed to the sound discretion of the trial judge." Coffey v. Van Dorn Iron Works , 796 F.2d 217, 219 (7th Cir. 1986).

However, in cases involving forum-selection clauses, the United States Supreme Court has instructed that "when parties have agreed to a valid forum-selection clause, that clause should be given controlling weight in all but the most exceptional cases." Atl. Marine Const. v. U.S. District Court for the Western District of Texas , 571 U.S. 49, 64, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013). Therefore, district courts should ordinarily transfer cases to the forum specified in a forum-selection clause. Id.

The Seventh Circuit in " Atlantic Marine clarified that ‘[t]he presence of a valid forum-selection clause requires district courts to adjust their usual § 1404(a) analysis in three ways.’ " In re Mathias , 867 F.3d 727, 731 (7th Cir. 2017). First, the plaintiff's choice of forum merits no weight. Id. Second, and relatedly, "a court evaluating a defendant's [Section] 1404(a) motion to transfer based on a forum-selection clause should not consider arguments about the parties' private interests." Id. Third, to resolve a transfer motion in this context, "a district court may consider arguments about public-interest factors only." Id. Because public-interest factors will "rarely defeat a transfer to the contractually chosen forum, the practical result is that forum-selection clauses should control except in unusual cases." Id. (internal quotation marks omitted).

Accordingly, a party acting in defiance of a valid forum-selection clause bears a heavy burden "of establishing that transfer to the forum for which the parties bargained is unwarranted." Atl. Marine Const., 571 U.S. at 64, 134 S.Ct. 568. Applying this mandate, the Seventh Circuit has held that:

a forum selection clause is presumptively valid and enforceable unless (1) [its] incorporation into the contract was the result of fraud, undue influence, or overweening bargaining power; (2) the selected forum is so gravely difficult and inconvenient that [the complaining party] will for all practical purposes be deprived of its day in court; or (3) [its] enforcement * * * would contravene a strong public policy of the forum in which the suit is brought, declared by statute or judicial decision.

AAR Int'l, Inc. v. Nimelias Enters. S.A. , 250 F.3d 510, 526 (7th Cir. 2001).

DISCUSSION

Defendants urge the Court to transfer or dismiss the case, arguing that the Agreement contains a valid forum-selection clause designating the District of Connecticut as the forum for resolving disputes arising under their Agreement. The Fund responds that the forum-selection clause is not part of the Agreement because it is contradicted by a later agreement that controls. The Fund alternatively argues that the convenience of the parties outweighs the enforcement of the clause. Finally, The Fund argues that even if the clause is valid and enforceable, it should not apply to their ERISA claim.² The Court addresses each argument.

I. Whether the Forum-Selection Clause is Part of the Agreement

The validity of a forum-selection clause is a question of federal law. Nw. Nat'l. Ins. Co. v. Donovan, 916 F.2d 372, 374 (7th Cir. 1990). However, determining whether a forum-selection clause is part of a contract is a question of state law. Bourke v. Dun & Bradstreet Corp. , 159 F.3d 1032, 1036 (7th Cir. 1998). The parties do not dispute that Illinois choice-of-law rules dictate that Connecticut law governs the Agreement's interpretation. We, therefore, apply Connecticut law to determine whether the forum-selection clause is part of the Agreement.

Connecticut law requires courts interpreting contracts to construe the Agreement as a whole, including relevant provisions referenced there. Greenberg v. Greenberg , 26 Conn. App. 591, 596, 602 A.2d 1056 (1992). Contracts are construed to give effect to the contracting parties' intent. Sturman v. Socha , 191 Conn. 1, 10, 463 A.2d...