Liquid Magnetix Corp. v. Therma-Stor LLC
ORDER Defendants Motion for Transfer under 28 U.S.C. § 1404(a) ECF No. 18 is GRANTED; and This case is TRANSFERRED to the United States District Court for the Western District of Wisconsin. The Clerk shall transmit the file, by Judge William J. Martinez on 4/9/2014.(evana, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 13-cv-3151-WJM-KMT
LIQUID MAGNETIX CORP.,
ORDER GRANTING MOTION FOR TRANSFER UNDER 28 U.S.C. § 1404(a)
Plaintiff Liquid Magnetix Corp. (“Plaintiff”) brings this breach of contract action
against Therma-Stor LLC (“Defendant”). (ECF No. 3.) Before the Court is Defendant’s
Motion for Transfer under 28 U.S.C. § 1404(a) (“Motion”) asking the Court to transfer
this action to the Western District of Wisconsin based on a forum-selection clause in a
document posted on Defendant’s website. (ECF No. 18.) For the reasons set forth
below, the Motion is granted.
I. LEGAL STANDARD
“For 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). The party seeking to transfer a case pursuant to
§ 1404(a) bears the burden of establishing that the existing forum is inconvenient. See
Chrysler Credit Corp. v. Cnty. Chrysler, Inc., 928 F.2d 1509, 1515 (10th Cir. 1991). In
ruling on a motion to transfer venue, district courts must assess two issues: (1) whether
the case might have been brought in the proposed transferee district, and (2) whether
the “competing equities” weigh in favor of adjudicating the case in that district. See
Hustler Magazine, Inc. v. U.S. Dist. Ct. for the Dist. of Wyo., 790 F.2d 69, 71 (10th Cir.
1986). The competing equities include the following factors:
(1) plaintiff’s choice of forum; (2) the accessibility of witnesses and other sources
of proof, including the availability of compulsory process to insure attendance of
witnesses; (3) the cost of making the necessary proof; (4) questions as to the
enforceability of a judgment if one is obtained; (5) relative advantages and
obstacles to a fair trial; (6) difficulties that may arise from congested dockets; (7)
the possibility of the existence of questions arising in the area of conflict of laws;
(8) the advantage of having a local court determine questions of local law; and
(9) all other considerations of a practical nature that make a trial easy,
expeditious and economical.
Chrysler Credit Corp., 928 F.2d at 1516 (quoting Tex. Gulf Sulphur Co. v. Ritter, 371
F.2d 145, 147 (10th Cir. 1967)). However, the decision to transfer venue lies in the sole
discretion of the district court and should be based on an “individualized, case-by-case
consideration of convenience and fairness.” Tex. E. Transmission Corp. v. Marine
Office-Appleton & Cox Corp., 579 F.2d 561, 567 (10th Cir. 1978); Stewart Org. v. Ricoh
Corp., 487 U.S. 22, 29 (1988).
II. FACTUAL BACKGROUND
Plaintiff Liquid Magnetix is a Colorado corporation that manufactures and sells
environmental products, including switches and pumps used in dehumidifiers.
(Complaint (ECF No. 3) ¶ 4.) Defendant Therma-Stor is a Wisconsin corporation that
manufactures and sells commercial and residential dehumidifiers. (Id. ¶ 5; ECF No. 1.)
Defendant has been a long time customer of Plaintiff, having ordered custom-made
switches and pumps for use in its products. (Id. ¶ 6.) The parties developed a course
of dealing for their business transactions. (Id. ¶ 8.) Defendant would send Plaintiff a
Purchase Order requesting a certain number of products at a certain price, along with a
requested arrival date. (Id. ¶ 9.) Plaintiff would confirm an expected ship date, and
then ship the products to Defendant with an invoice seeking payment within 30 days.
Between May 24, 2012 and May 24, 2013, Defendant submitted twelve
Purchase Orders, which were handled per the parties’ course of dealing. (Id. ¶¶ 10-54.)
Plaintiff filled the orders and shipped the goods. (Id.) Defendant accepted the goods
for nine of the orders, and attempted to reject three orders. (Id.) Despite Plaintiff’s
alleged performance under the contracts, Defendant has failed to pay the amount due
under any of these orders, which totals $208.589.52. (Id. ¶ 56.)
On these facts, Plaintiff brings claims for breach of contract, promissory
estoppel, unjust enrichment, and quantum meruit. (Id. ¶¶ 55-76.) Plaintiff originally
filed this action in District Court for San Miguel County, Colorado, but Defendant
removed the case to this Court based on the complete diversity between the parties.
(ECF No. 1.) Defendant then filed the instant Motion. (ECF No. 18.)
“In the typical case not involving a forum-selection clause, a district court
considering a § 1404(a) motion (or a forum non conveniens motion) must evaluate both
the convenience of the parties and various public-interest considerations.” Atl. Marine
Constr. Co. v. U.S. Dist. Ct. for W. Dist. of Tex., 134 S. Ct. 568, 581 (2013). Ordinarily,
the district court would weigh the relevant factors and decide whether, on balance, a
transfer would serve “the convenience of parties and witnesses” and otherwise promote
“the interest of justice.” Id. (citing § 1404(a)). The calculus changes, however, when
the parties’ contract contains a valid forum-selection clause, which “represents the
parties’ agreement as to the most proper forum.” Id. (quoting Stewart Org., 487 U.S. at
31). “[A] valid forum-selection clause should be given controlling weight in all but the
most exceptional cases.” Id. (internal citation omitted).
Thus, the Court’s analysis is driven by whether there is a valid forum-selection
clause incorporated into the contracts at issue in this case. The contracts formed
between the parties here do not appear in one document; rather, the parties had a
course of dealing which involved Defendant submitting a Purchase Order, which was
then filled by Plaintiff when it shipped the goods, along with an invoice. Thus,
Defendant’s Purchase Orders constitute the offers to contract, while Plaintiff’s shipment
of the goods constitutes acceptance. See Colo. Rev. Stat. § 4-2-206 (outlining what
constitutes offer and acceptance under Colorado law). The disputed forum-selection
clause does not directly appear in either the offer or the acceptance of the contract.
Instead, Defendant argues that language in its Purchase Orders incorporates the
forum-selection clause by reference.
“Pursuant to general contract law, for an incorporation by reference to be
effective, ‘it must be clear that the parties to the agreement had knowledge of and
assented to the incorporated terms.’” Taubman Cherry Creek Shopping Ctr., LLC v.
Neiman-Marcus Grp., Inc., 251 P.3d 1091, 1095 (Colo. App. 2010) (quoting 11 Samuel
Williston & Richard A. Lord, A Treatise on the Law of Contracts § 30.25, at 234 (4th ed.
1999)). “So long as it is clear what document is being referred to and that the parties
intended for it to be a part of the [agreement], . . . it is as effectively a part thereof as if
recited therein.” In re Seymour’s Marriage, 536 P.2d 1172, 1175 (Colo. App. 1975).
The Purchase Orders in this case state: “Acknowledge Receipt of Order.
Standard Terms and Conditions are located on our website: www.thermastor.com.”
(ECF No. 26-1 at 9.) The front page of Defendant’s website contains a link entitled
“Purchase Order Terms and Conditions”, which takes the user to a document entitled
“Purchase Order Terms and Conditions”. This document contains the disputed forumselection clause. (ECF No. 18-1 at 3-6.)
Plaintiff contends that the Purchase Order Terms and Conditions were not
incorporated into Defendant’s offer to purchase Plaintiff’s goods because the Purchase
Orders did not state that the Purchase Order Terms and Conditions “apply to”, “govern”,
“are part of”, or are “incorporated by reference”. (ECF No. 26 at 14.) Notably, Plaintiff
fails to cite any case law showing that any such magic words are required to effect an
incorporation. In fact, so long as the offer plainly states which document is incorporated
and the parties intended for such incorporation, no particular language is required. In
re Seymour’s Marriage, 536 P.2d at 1175. Thus, the Court does not find this argument
Plaintiff also argues that it was not clear which document the Purchase Order
was referring to because the Purchase Order uses the phrase “Standard Terms and
Conditions”, while the website uses the phrase “Purchase Order Terms and
Conditions”. (ECF No. 26 at 11-12.) The Court is not persuaded. The reference to
“Standard Terms and Conditions” appears on a document entitled “Purchase Orders”,
and also informs the reader where the “Standard Terms and Conditions” can be found.
The Court finds that this language is sufficiently clear to signal an intent to incorporate
into the offer the Purchase Order Terms and Conditions that appear on Defendant’s
In support of its argument that the forum-selection clause is not incorporated by
reference into Defendant’s offer, Plaintiff cites two cases from this district: MemoryTen,
Inc. v. LV Admin. Servs., 942 F. Supp. 2d 1157 (D. Colo. 2013), and Leica
Geogsystems, Inc. v. L.W.S. Leasing, Inc., 872 F. Supp. 2d 1191 (D. Colo. 2012). The
Court is familiar with these cases, but finds that they are readily distinguishable from the
circumstances in this action. In Memoryten, the court held that a vague reference to
“terms and conditions consistent with past practices”—without specific reference to the
Form of Warrant that contained a forum-selection clause—was insufficient to support
an incorporation by reference. See 942 F. Supp. 2d at 1169-70. In Leica, the court
found that a forum-selection clause was not incorporated into a contract because the
contract was formed before the plaintiff was provided with access to the disputed
clause. See 872 F. Supp. 2d at 1198-99.
Contrary to these cases, Defendant’s Purchase Orders—which constitute the
original offer for each transaction—both specifically referenced the Purchase Order
Terms and Conditions and informed Plaintiff where such terms could be accessed. The
reference to the particular document to be incorporated distinguishes this case from
MemoryTen, and the timing makes it distinguishable from Leica. As such, the Court
does not find these authorities compelling. Based on the language contained in the
Purchase Orders, the Court finds that the Purchase Order Terms and Conditions—
including the forum-selection clause—were incorporated into Defendant’s offers to
purchase Plaintiff’s goods.
Plaintiff argues that, even if the Purchase Order Terms and Conditions were part
of Defendant’s offer, Plaintiff did not accept these terms as part of the contract. (ECF
No. 26 at 7.) In fact, Plaintiff contends that it was not aware of the Purchase Order
Terms and Conditions and, had it known they were part of the offer, it would not have
accepted these terms. (Id.) However, a failure to educate onself regarding the terms of
an offer does not invalidate or excuse compliance with those terms to which a party is
unaware. See Flight Concepts Ltd. P’ship v. Boeing Co., 38 F.3d 1152, 1157 (10th Cir.
1994) (“It was Mr. O’Quinn’s duty to read and understand the provisions of the
Licensing Agreement. A party cannot void a contract by claiming to be ignorant of its
contents.”). This is true even when individual persons are involved, much less
sophisticated business entities like those involved in this case. See Felling v. Hobby
Lobby, Inc., 2005 WL 928641 (D. Kan. Apr. 19, 2005) (noting that “a person who signs
a written contract is bound by its terms regardless of his or her failure to read and
understand its terms”). The law does not reward a commercial party for not reading
and understanding a contract in its entirety before signing it.
Because the Purchase Orders plainly referenced the Purchase Order Terms and
Conditions, the Court finds that these terms were incorporated by reference into
Defendant’s offer to purchase goods from Plaintiff. Plaintiff then shipped the goods to
Defendant, which constitutes acceptance of the offer. See Colo. Rev. Stat. § 4-2-206.
Plaintiff’s acceptance was not conditioned on any terms that contradicted the forum7
selection clause. As such, the Court finds that the forum-selection clause was
incorporated by reference into the contracts at the heart of this case.
The Supreme Court has held that “[t]he presence of a valid forum-selection
clause requires district courts to adjust their usual § 1404(a) analysis.” Atl. Marine
Constr. Co., 134 S. Ct. at 582. “First, the plaintiff’s choice of forum merits no weight.”
Id. “Rather, as the party defying the forum-selection clause, the plaintiff bears the
burden of establishing that transfer to the forum for which the parties bargained 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. “When parties agree to a forum-selection clause,
they waive the right to challenge the preselected forum as inconvenient or less
convenient for themselves or their witnesses, or for their pursuit of the litigation.” Id. “A
court accordingly must deem the private-interest factors to weigh entirely in favor of the
preselected forum.” Id. “As a consequence, a district court may consider arguments
about 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.
In general, forum selection clauses do not contravene any federal or state public
policy, and “a party resisting enforcement [of such a clause] carries a heavy burden of
showing that the provision itself is invalid due to fraud or overreaching or that
enforcement would be unreasonable and unjust under the circumstances.” Riley v.
Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 957 (10th Cir. 1992) (citations
omitted). In its opposition to the instant Motion, Plaintiff has not shown how keeping
this case in the District of Colorado is in the public interest. As such, transfer of this
action pursuant to the forum-selection clause is warranted.
For the reasons set forth above, the Court ORDERS as follows:
Defendant’s Motion for Transfer under 28 U.S.C. § 1404(a) (ECF No. 18) is
This case is TRANSFERRED to the United States District Court for the Western
District of Wisconsin. The Clerk shall transmit the file.
Dated this 9th day of April, 2014.
BY THE COURT:
William J. Martínez
United States District Judge
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