Continental Credit Systems, LLC v. Applied Merchants Systems West Coast, Inc.

Filing 53

MEMORANDUM OPINION AND ORDER. Mailed notice(drw, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

CONTINENTAL CREDIT SYSTEMS, LLC, a
Delaware Limited Liability Company, d/b/a
Spectra Payments,
Plaintiff,

No. 12 C 1701
Judge James B. Zagel

v.
APPLIED MERCHANT SYSTEMS WEST
COAST, INC., a California Corporation,
Defendant.
MEMORANDUM OPINION AND ORDER
Plaintiff Continental Credit Systems, LLC, a Delaware limited liability company, has
brought this action against Defendant Applied Merchant Systems West Coast, Inc., a California
corporation, for tortious interference, defamation, unfair competition under 15 U.S.C. § 1125(a),
deceptive trade practices under 815 ILCS 510/1, and common law unfair competition. Applied
Merchant Systems (“AMS”) has moved to dismiss for lack of personal jurisdiction under
Fed.R.Civ.P. 12(b)(1), or, in the alternative, for improper venue under Fed.R.Civ.P. 12(b)(3).
Because a forum selection clause in the parties’ relevant Asset Purchase Agreement requires this
action to be heard in California, AMS’s motion to dismiss for improper venue is granted.
AMS’s motion to dismiss for lack of personal jurisdiction is therefore denied as moot.
BACKGROUND
Continental Credit Systems (“CCS”) and AMS entered into an asset purchase agreement
wherein AMS agreed to purchase, inter alia, a portfolio of credit card transaction processing
1

agreements that CCS had entered into with approximately 1400 merchants. CCS asserts that the
Asset Purchase Agreement did not include sale of the credit card terminals (the hardware used to
swipe patrons’ credit cards) that CCS had provided to the merchants as part of the processing
agreements. Accordingly, shortly after the purchase agreement was executed, CCS asserted the
right it claims to the terminals by deducting their replacement cost ($1000) from the various
merchants’ bank accounts.1
Citing the Asset Purchase Agreement, AMS disputes CCS’s right to the terminals. Upon
learning of the action taken by CCS, AMS encouraged the affected merchants to direct their
banks to treat the debits as fraudulent and request that the charges be reversed. Many of the
merchants did so. CCS now argues, inter alia, that AMS’s actions constituted tortious
interference and defamation and seeks injunctive relief.
DISCUSSION
AMS asserts that this action should be brought, if at all, in the state or federal courts of
Ventura County, California, pursuant to the forum selection clause contained in the Asset
Purchase Agreement. The clause states: “Any dispute, action, litigation or other proceeding
concerning this Agreement shall be instituted, maintained, heard and decided in Ventura County,
California.” It is well-settled that contractual forum selection clauses are prima facie valid, see
M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972); Sompo Japan Insurance, Inc. v.
Alarm Detection Systems, Inc., 2003 WL 21877615 *1, (N.D.Ill., Aug 6, 2003) and the parties do
not dispute the validity of the clause here. Rather, CCS asserts that this action simply does not
trigger the forum selection clause, that is, that the claims brought do not “concern” the Asset
1 The merchants also had the option to return the terminals, though the record does not indicate how many
merchants elected to do so, and this dispute does not appear to involve those that did.

2

Purchase Agreement. I turn, then, to the meaning of the clause.
This forum selection clause is worded broadly, encompassing not just “litigation,” but
also “disputes,” “actions,” and “any other proceedings” that “concern” the agreement. To be
sure, CCS has brought this action in tort, not in contract for breach of the purchase agreement.
And, as CCS notes, the Seventh Circuit has rejected the notion that a “but for” relationship is all
that is needed between a dispute and a given contract to trigger its forum selection clause. See
Omron Healthcare, Inc. v. Maclaren Exports Ltd., 28 F.3d 600, 602 (1994). But the Seventh
Circuit has also recognized that a forum selection clause may compel dismissal of an action,
even where the clause is implicated only by a defense raised in response to the claim, rather than
the underlying claim itself. See id. at 601-02; John Wyeth & Bro. Ltd. V. CIGNA Intern. Corp.,
119 F.3d 1070, 1076 n. 5 (1997) (noting that, in Omro, “it was irrelevant to the panel that the
forum selction clause had been implicated by means of a defense”).
Here, AMS will defend its allegedly tortious conduct by challenging CCS’s asserted right
to the terminals.2 AMS believes that CCS forfeited this right to the terminals under the Asset
Purchase Agreement, which helps to explain, and could theoretically excuse, some of AMS’s
subsequent conduct. Adjudication of this dispute will consequently require review of the
agreement. By its terms, the agreement’s forum selection clause is triggered – this dispute
“concerns” the Asset Purchase Agreement.
CCS maintains that its claims are independent of the agreement. The action, CCS
contends, concerns only AMS’s allegedly tortious conduct in connection with third party
2 For example, it is well settled, both in Federal and California State Law, that truth is an absolute defense to the tort
of defamation. See Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 516-17 (1991); New York Times Co. v.
Sullivan, 376 U.S. 254, 278-79 (1964); Fellows v. National Enquirer, Inc., 42 Cal.3d 234, 245-46 (Cal. 1986). W ere
the Asset Purchase Agreement found to have forfeited CCS’s right to the terminals, as AMS argues, one could
certainly conclude that a public assertion that CCS’s subsequent conduct was improper is not defamatory.

3

contracts between CCS and various merchants. But the argument in CCS’s brief asserting the
proper understanding of the Asset Purchase Agreement belies their assertion that adjudicating its
claims “will not require the construction or interpretation of the Purchase Agreement in any
way.” The parties espouse differing understandings of their respective obligations under the
agreement. Because this dispute will need to be resolved to adjudicate at least some of the
claims CCS has brought, the forum selection clause that both parties agreed to requires the
action to be heard in Ventura County, CA.
CONCLUSION
For the foregoing reasons, Defendant’s motion to dismiss for improper venue is granted.
Defendant’s motion to dismiss for lack of personal jurisdiction is therefore denied as moot.

ENTER:

James B. Zagel
United States District Judge
DATE: October 18, 2012

4