Martin Engineering Company v. Nark
Filing
15
MEMORANDUM OPINION AND ORDER: Signed by the Honorable Harry D. Leinenweber on 8/22/2013: Defendant's Motion to Dismiss or to Transfer [ECF No. 7] is denied. Status hearing set for 9/12/2013 at 09:00 AM. Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MARTIN ENGINEERING COMPANY, an
Illinois Corporation,
Plaintiff,
Case No. 12 C 8891
v.
Hon. Harry D. Leinenweber
MALCOLM BRENT NARK,
Individually and d/b/a HIGH
TECH ASSOCIATES,
Defendant.
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant Malcolm Nark’s (hereinafter,
“Nark” or “Defendant”) Motion to Dismiss Pursuant to Federal Rule
of Civil Procedure 12(b)(3) or to Transfer Pursuant to 28 U.S.C.
§ 1406(a). [ECF No. 7.]
For the reasons stated herein, the Motion
is denied.
I.
BACKGROUND
Plaintiff Martin Engineering Company (hereinafter, “Martin” or
“Plaintiff”), an Illinois corporation, brings the instant action
against
Nark,
Associates.
individually
and
doing
business
as
High
Tech
In its Complaint, Plaintiff seeks a declaratory
judgment that it is not in breach of the parties’ April 27, 2009
Intellectual Property Assignment Agreement (the “IPAA”) and the
April
15,
2010
Addendum
Agreement (the “Addendum”).
to
Intellectual
Property
Assignment
He also requests an order declaring
how royalty payments are to be calculated and paid pursuant to
these agreements in conjunction with the parties’ April 14, 2010
Consulting Agreement.
Plaintiff and Defendant entered into the IPAA, Addendum and
Consulting Agreement to develop and patent Defendant’s snow and
ice-melting products, the Hot Edge Ice Melt System (“Hot Edge
products”). These products are “used on metal roofs and other roof
structures to prevent the formation of icicles and to melt ice dams
in order to enhance roof drainage.”
ECF No. 7.
to
a
Def.’s Mot. to Dismiss at 7,
The IPAA and Addendum provided for the sale or license
third-party
distribution
subsidiaries.
of
manufacturer,
the
Hot
Edge
or
for
products
the
by
manufacture
Plaintiff
or
and
its
According to the IPAA, Addendum and Consulting
Agreement, Defendant was to provide technical support and services
for several patent applications to be filed by Plaintiff related to
the Hot Edge products.
The agreements further stated that if
Plaintiff were to manufacture and sell a “Covered Product” directly
or through a subsidiary, Plaintiff would be obligated to make a
“Royalty Payment” to Defendant.
PageID# 19.
Compl. Ex. B, ECF No. 1-2 at
Defendant claims that in December 2010, Plaintiff,
through its Colorado subsidiary, HotEdge, Inc., began manufacturing
and selling Hot Edge products, thereby invoking the obligation to
make “Royalty Payments.”
Def.’s Mot. to Dismiss at 7-8, ECF No. 7.
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On April 27, 2012, Defendant gave notice of a dispute between
the parties pursuant to the IPAA and Addendum.
Specifically,
Defendant notified Plaintiff that it failed to make $50,000-$75,000
in Royalty Payments for 2011.
Compl. Ex. D.
Plaintiff responded
on May 23, 2012, denying any failure to make Royalty Payments
required under the agreement.
Id. Ex. E.
On October 22, 2012, Defendant submitted a written request for
mediation pursuant to the Addendum, which Plaintiff accepted on
October 26, 2012.
Id. Exs. F, G.
The request stated that
Plaintiff failed to account for, calculate, and pay all royalties
due to Defendant under the agreements.
Resp. at 1, ECF No. 12.
Id. Exs. B, F, G; Pl.’s
Ultimately, mediation was unsuccessful,
and Plaintiff filed this action on November 7, 2012.
Defendant
asserts Plaintiff brought suit in this District hastily to preempt
Defendant from filing suit in Colorado.
However, as Plaintiff
points out, Defendant does not challenge the appropriateness of
seeking declaratory relief under 28 U.S.C. § 2201(a).
Def.’s Mot.
to Dismiss at 5-6, ECF No. 7; Pl.’s Resp. at 1, ECF No. 12.
Defendant’s present Motion contests venue and seeks dismissal
pursuant to Rule 12(b)(3), or alternatively, transfer to the
District of Colorado pursuant to § 1406(a).
Plaintiff contends
venue is proper in the Northern District of Illinois because:
(1)
pursuant to 28 U.S.C. § 1391(b)(2), a substantial part of the
events giving rise to the claim occurred in this District; and (2)
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Nark consented
to
the
jurisdiction
Illinois in ¶ 19 of the IPAA.
of
the
Compl. at 1.
courts
located
in
Paragraph 19 of the
IPAA provides:
Jurisdiction.
This Agreement will be governed by and
construed in accordance with the substantive laws of the
State of Illinois, without regard to the conflicts of
laws principles thereof and to which the parties submit
to jurisdiction.
Compl. Ex. A, ECF No. 1-2 at PageID# 13.
Defendant argues venue in this District is improper because
events giving rise to the claim occurred primarily in Colorado, not
in Illinois, and further argues that ¶ 19 of the IPAA is not a
forum selection clause specifying this District as the exclusive
forum for any disputes arising out of the IPAA and Addendum.
Def.’s Mot. to Dismiss at 2, ECF No. 7.
II.
LEGAL STANDARD
When a motion to dismiss is brought under Rule 12(b)(3), the
plaintiff bears the burden of establishing proper venue.
Reeve v.
Ocean Ships, Inc., No. 10-C-8147, 2011 U.S. Dist. LEXIS 82305 at *8
(N.D. Ill. July 27, 2011).
The Court must take all allegations in
the Complaint as true and draw all inferences in favor of the
plaintiff, but it may consider matters outside the Complaint
without converting the motion to one seeking summary judgment. Id.
at *9.
The Court may dismiss the case or transfer it in the
interest of justice to a district or division in which it could
have been brought properly, but for transfer to be appropriate
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under § 1406(a), venue in the transferor district must be improper.
28 U.S.C. § 1406(a); In re LimitNone, LLC, 551 F.3d 572, 575 (7th
Cir. 2008).
III.
Defendant
argues
that
transfer, is appropriate.
ANALYSIS
dismissal,
or
in
the
alternative,
Defendant contends ¶ 19 of the IPAA is
not a forum selection clause requiring venue within Illinois, but
that instead venue is proper in Colorado because the events giving
rise
to
the
action
occurred
there.
Plaintiff
argues
that
Defendant’s consent to jurisdiction in ¶ 19 of the IPAA is an
implicit consent to venue within Illinois courts.
It is well established that forum selection clauses are
presumed to be valid and should be enforced unless the resisting
party
shows
that
circumstances.
(7th
Cir.
permissive.
enforcement
is
unreasonable
under
the
See, Hugel v. Corp. of Lloyd’s, 999 F.2d 206, 210
1993).
These
clauses
can
be
either
mandatory
or
Saxena v. Virtualabs, Inc., No. 01-C-9905, 2002 U.S.
Dist. LEXIS 8656 at *4 (N.D. Ill. May 15, 2002).
“To be considered
mandatory, a forum selection clause must clearly express an intent
that the chosen forum is both compulsory and exclusive, either by
its own terms or in conjunction with a choice of venue provision
that explicitly provides that venue is proper only within the
chosen forum.”
Id. (citing Paper Exp., Ltd. v. Pfankuch Maschinen
GmbH, 972 F.2d 753, 756 (7th Cir. 1992)).
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For example, in Paper
Express,
the
clause
provided
for
the
“[e]xclusive
place
of
jurisdiction” in Germany, and further required that “all disputes
arising out of the contractual relationship, . . . shall be filed
[there].”
Paper Exp., 972 F.2d at 755.
The Court found the
language obligatory, noting that “the phrase ‘shall be filed,’
coupled with the phrase ‘all disputes,’ clearly manifest[ed] an
intent to make venue compulsory and exclusive.”
Id. at 756.
“In contrast, a permissive forum selection clause evidences
the parties’ intent that the chosen state is a possible, but not
the sole, arena in which a suit can be filed.”
Dist. LEXIS 8656 at *5-6.
Saxena, 2002 U.S.
Courts in this District have held that
a forum selection clause will be permissive where only jurisdiction
is specified.
See, Rivera Fin. v. Trucking Servs., Inc., 904
F.Supp. 837, 839 (N.D. Ill. 1995) (“Client hereby consents to the
nonexclusive jurisdiction of the local, state or federal court
located with [sic] the State of Illinois.”); Pioneer Life Ins. Co.
v. Anderson, No. 88-C-20249, 1988 U.S. Dist. LEXIS 15302 at *4-5
(N.D. Ill. Dec. 21, 1988) (holding the clause “Winnebago County,
Illinois shall be the place of jurisdiction for service and legal
purposes” fell short of compelling suit to take place exclusively
in Illinois).
Paragraph 19 of the IPAA provides that “[t]his Agreement will
be governed by and construed in accordance with the substantive
laws of the State of Illinois, without regard to the conflicts of
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laws
principles
thereof
jurisdiction.”
and
Compl.
to
Ex.
which
A.
the
When
parties
compared
submit
to
with
the
aforementioned examples, the language at issue here is clearly
permissive.
While
indicating
that
the
parties
consent
to
jurisdiction within Illinois, there is no language expressing
clearly that Illinois was meant to be the exclusive venue for any
litigation between the parties.
Defendant argues that because the clause is permissive rather
than mandatory, venue in the Northern District of Illinois cannot
be established.
selection
Defendant is correct in asserting that forum
clauses
containing
mandatory
language
identify
the
exclusive forum to be enforced. Saxena, 2002 U.S. Dist. LEXIS 8656
at *4.
However, it does not follow that where a clause is
permissive
rather
than
mandatory,
venue
will
be
improper.
Defendant offers no support for its assertion that a permissive
forum selection clause cannot, by itself, establish venue.
In
fact, Defendant ignores case law providing that while a permissive
forum selection clause does not restrict venue to a particular
court or district, it provides consent for a claim to be brought in
the specified jurisdiction.
forum
selection
clauses
See id at *8 (finding that permissive
“operate
to
prevent
[a
party]
from
objecting to venue and personal jurisdiction” within the named
forum); Walter E. Heller & Co. v. James Godbe Co., 601 F.Supp. 319,
320–21 (N.D. Ill. 1984) (holding that the provision in which the
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lessee
“submit[ted]
to
jurisdiction”
of
Illinois
courts
“established [Illinois] as a permissible forum” and precluded
defendants from arguing venue was improper and moving for dismissal
or transfer under § 1406).
Indeed, permissive clauses such as the
one at issue operate to prevent exactly what has happened here;
they
keep
the
parties
from
objecting
to
venue
or
personal
jurisdiction in Illinois while allowing other courts to maintain
the ability to exercise otherwise proper jurisdiction or venue.
See Saxena, 2002 U.S. Dist. LEXIS 8656 at *8.
Because the Court finds the forum selection clause at issue to
be permissive, providing consent for the claim to be brought in
Illinois, venue in this District is proper.
cannot
claim
improper
venue
and
move
Rule 12(b)(3) or transfer under § 1406(a).
& Co., 601 F.Supp. at 320-21.
IV.
Therefore, Defendant
for
dismissal
under
See, William E. Heller
Defendant’s Motion is denied.
CONCLUSION
For the reasons stated herein, the Defendant’s Motion to
Dismiss or to Transfer [ECF No. 7] is denied.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Date: August 22, 2013
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