CP Anchorage Hotel 2, LLC v. Onset Financial, Inc.

Filing 26

MEMORANDUM OPINION AND ORDER: 1) Deft's motion for transfer of venue 11 is GRANTED; and 2) This case is TRANSFERRED to the U.S. District Court for the District of Utah pursuant to 28 U.S.C. §1404(a). Signed by Judge William O. Bertelsman on 10/15/2014.(ECO)cc: COR

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION AT COVINGTON
CIVIL ACTION NO. 2:14-cv-136(WOB-CJS)
CP ANCHORAGE HOTEL 2, LLC,

PLAINTIFF

VS.
ONSET FINANCIAL, INC.

DEFENDANT
MEMORANDUM OPINION AND ORDER

This lawsuit arises out of a dispute over the parties’ rights
under

an

equipment

lease.

Plaintiff

CP

Anchorage

Hotel

2,

LLC

(“Anchorage”) alleges that Defendant Onset Financial, Inc. (“Onset”)
fraudulently induced Anchorage to enter into the lease and breached
its duty of good faith and fair dealing.

Anchorage seeks as relief

reformation of the lease and a declaratory judgment.
The matter is currently before the Court on Defendant’s Motion for
Transfer of Venue (Doc. 11) to the United States District Court for
the District of Utah pursuant to 28 U.S.C. § 1404(a).

The Court has

reviewed the parties’ briefs and concluded that oral argument is not
necessary.

For the following reasons, the Court grants Defendant’s

motion.
I. FACTS
Anchorage and Onset entered into an agreement on March 6, 2012,
for the lease of 500 televisions.
at 3).

(Doc. 1-1, State Court Record,

The duration of the lease was twenty-four months.

(Id.)

Before signing the lease, the parties negotiated its terms between
September and November of 2011, via multiple telephone calls and emails.

(Id. at 5-6.)

Anchorage alleges that Onset’s salesperson,

David Broumas, indicated that Onset would allow Anchorage to purchase
the 500 televisions at the expiration of the lease for ten percent of
the televisions’ original cost.

(Id. at 6.)

Broumas allegedly told

Anchorage that, although Onset could not put a purchase price in the
lease for tax reasons, Onset had a practice of always underwriting its
leases based upon a ten-percent-buyout price at the end of the lease
term.
sent

(Id.)
e-mails

Further, Anchorage allegedly made telephone calls and
regarding

the

ten-percent-buyout

price,

and

Broumas

always verbally assured Anchorage that said price would apply at the
expiration of the lease.

(Id.)

The lease contains a forum-selection clause, Section 20(e), that
provides for exclusive jurisdiction in either state or federal court
in Utah.

(Id. at 18.)

The forum-selection clause states:

THIS LEASE (AS DEFINED IN SECTION 22 HEREIN) SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF UTAH, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
THE PARTIES AGREE
TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE OF
UTAH ANY SUIT OR OTHER PROCEEDING BROUGHT BY EITHER PARTY
TO ENFORCE OR CONSTRUE THIS LEASE (AS DEFINED IN SECTION 22
HEREIN), OR TO DETERMINE MATTERS RELATING TO THE PROPERTY
OR THE RELATIONSHIP BETWEEN THE PARTIES HERETO SHALL BE
BROUGHT ONLY IN THE STATE OR FEDERAL COURTS IN THE STATE OF
UTAH. THIS LEASE WAS EXECUTED IN THE STATE OF UTAH (BY THE
LESSOR HAVING COUNTERSIGNED IT IN UTAH) AND IS TO BE
PERFORMED IN THE STATE OF UTAH (BY REASON OF ONE OR MORE
PAYMENTS REQUIRED TO BE MADE TO LESSOR IN UTAH).
(Id.)
Once the lease expired, by its terms Anchorage had three options:
(1)

renew

the

lease

for

an

additional

year;

(2)

return

the

televisions; or (3) purchase the televisions at a price agreeable to
Onset.

(Id. at 3.)

ten-percent-buyout

Even though the parties allegedly agreed to a

price

during

negotiations,
2

the

lease

does

not

contain any provision specifying the purchase price.

(Id.)

Anchorage

gave Onset notice of its intention to purchase the televisions and
requested to pay only ten percent of the televisions’ original value.
(Id.

at

2.)

Onset

waited

over

three

months

to

respond,

finally

demanding as the purchase price sixty percent of the televisions’
original value.

(Id. at 2-3.)
II. PROCEDURAL HISTORY

Anchorage filed suit against Onset in Kenton Circuit Court in the
Commonwealth of Kentucky on July 1, 2014.

(Id. at 2.)

Onset removed

the case to this Court based on the parties’ diversity of citizenship
on July 22, 2014.

(Doc. 1, Notice of Removal, at 1.)

On August 6,

Onset filed the instant Motion for Transfer of Venue to the United
States District Court for the District of Utah.
parties have fully briefed the motion.

(Doc. 11.)

The

(See Docs. 11, 20, 25.)

III. ANALYSIS
When determining whether to enforce a forum-selection clause,
federal courts examine the following factors: “(1) whether the clause
was obtained by fraud, duress, or other unconscionable means; (2)
whether the designated forum would ineffectively or unfairly handle
the suit; and (3) whether the designated forum would be so seriously
inconvenient such that requiring the plaintiff to bring suit there
would be unjust.”

Wong v. PartyGaming Ltd., 589 F.3d 821, 828 (6th

Cir. 2009) (emphasis added).
the

forum-selection

clause

The party arguing against application of
“bears

clause should not be enforced.”

Id.

3

the

burden

of

showing

that

the

The United States Supreme Court has held that when a defendant
files a § 1404(a) motion, a district court should transfer the case
unless extraordinary circumstances unrelated to the convenience of the
parties clearly disfavor a transfer.

Atlantic Marine Const. Co., Inc.

v. U.S. Dist. Ct. for the W. Dist. of Tex., 134 S. Ct. 568, 581
(2013).

The Court reasoned that when the parties’ contract contains a

valid forum-selection clause, that clause represents their agreement
as to forum and “[should be] ‘given controlling weight in all but the
most

exceptional

cases.’”

Id.

(alteration

in

original)

(quoting

Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988) (Kennedy,
J., concurring)).
Anchorage argues that, although a valid forum-selection clause is
normally dispositive of a § 1404(a) motion to transfer, the instant
case involves an exception to the general rule: fraudulent inducement.
Anchorage contends that Onset fraudulently induced it to enter the
lease by making an extra-contractual promise prior to the lease’s
execution -- that, upon the expiration of the lease, Onset would sell
the televisions to Anchorage at ten percent of their original price -and failing to follow through on that promise.

Importantly, Anchorage

argues only that it was fraudulently induced to enter the lease based
on the eventual purchase price of the televisions, rather than arguing
that the forum-selection clause itself was the product of fraud.
Because the Supreme Court and the Sixth Circuit have held in
numerous

cases

that,

in

order

for

a

forum-selection

clause

to

be

invalid, the forum-selection clause itself must be the product of
fraud, see, e.g., Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 n.14
4

(1974); Wong, 589 F.3d at 828, Anchorage’s argument fails to satisfy
the first factor.

Anchorage therefore has not met its burden to prove

that the forum-selection clause is unenforceable in this case.
IV. CONCLUSION
For the foregoing reasons, the Court grants Defendant’s § 1404(a)
Motion for Transfer of Venue to the United States District Court for
the District of Utah.
Therefore,

having

heard

the

parties

and

the

Court

being

sufficiently advised,
IT IS ORDERED that:
(1)

Defendant’s motion for transfer of venue (Doc. 11) be, and

is hereby, GRANTED; and
(2)

This case be, and is hereby,

TRANSFERRED to the United

States District Court for the District of Utah pursuant to 28 U.S.C.
§ 1404(a).
This 15th day of October, 2014.

5