ASPHALT PAVING SYSTEMS, INC. v. GANNON et al
Filing
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MEMORANDUM OPINION AND ORDER denying 2 Motion to Transfer Case to the Eastern District of New York pursuant to 28 U.S.C. 1404(a). Signed by Judge Joseph H. Rodriguez on 6/11/2015. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
ASPHALT PAVING SYSTEMS, INC.
:
Hon. Joseph H. Rodriguez
Plaintiff,
:
Civil Action No. 14-5518
:
MEMORANDUM OPINION
& ORDER
v.
MARGARET M. GANNON, as
personal representative of the estate of :
Thomas H. Gannon, and
RICHARD GANNON,
:
Defendants.
:
This matter is before the Court on motion of Defendants to transfer the case to
the United States District Court for the Eastern District of New York pursuant to 28
U.S.C. § 1404(a). The Court considered the submissions of the parties and heard oral
argument on the motion on May 13, 2015. For the reasons set forth on the record that
day, and those below, Defendants’ motion will be denied.
Background
A Second Amended Complaint in this matter was filed in the Superior Court of
New Jersey, Law Division, Atlantic County on or about July 2, 2014. It appears to allege
fraud in the inducement of a July 1, 2008 Stock Purchase Agreement between the
parties. Defendants removed the case to this Court on September 4, 2014 with federal
jurisdiction based upon diversity of citizenship.
The facts alleged in the Second Amended Complaint are as follows. Plaintiff
Asphalt Paving Systems, Inc. is a New Jersey corporation in the paving business,
operating in the Mid-Atlantic States and Florida, with its principal place of business in
Hammonton, New Jersey. In the Spring of 2008, Thomas Gannon as President of Thos.
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H. Gannon & Sons, Inc. (“TGSI”), also a paving business, allegedly made an unsolicited
call to Plaintiff during which he proposed that Plaintiff purchase TGSI. Thomas and his
brother Richard, both citizens of New York, were each 50% owners of TGSI. During the
phone call, Thomas represented that Richard was planning to retire over the next
decade, but Thomas would stay on after the sale of TGSI to Plaintiff, slowly and steadily
transitioning his customer base “to a groomed successor.” (Sec. Am. Compl. ¶ 11.) It
appeared that this arrangement would be mutually beneficial, and negotiations for the
purchase of TSGI occurred. The parties executed the Stock Purchase Agreement for the
sale of TGSI on July 1, 2008 and thereafter closed on the purchase. (Sec. Am. Compl. ¶
15; Palladino Decl. Ex. A, executed Stock Purchase Agreement.)
Plaintiff stresses that “it was always understood that the driving force behind the
purchase was the continuity of relations established by TSGI and, more specifically,
Thomas.” (Sec. Am. Compl. ¶ 13.) After the sale closed, however, Thomas became ill; he
died September 28, 2009. (Sec. Am. Compl. ¶16.)
The Stock Purchase Agreement required the purchase price to be paid over a five
year period, corresponding with the term of the Consulting Agreement. (Palladino Decl.
Ex. A, ¶2.1-2.2.) Plaintiff made all of the payments required by both the Stock Purchase
Agreement and the Consulting Agreement. (Messina Decl. ¶ 5.) As the term of the
Consulting Agreement drew to a close, however, Plaintiff learned that Richard allegedly
was violating the noncompete provision of the Consulting Agreement by conspiring with
TGSI’s primary competitor to acquire business for the competitor on Long Island. (Sec.
Am. Compl. ¶ 21-24.) Plaintiff undertook an investigation, which included a review of
the computers used by Richard and Thomas at the TGSI offices. (Sec. Am. Compl. ¶25.)
On one of those computers, Plaintiff allegedly discovered evidence that Thomas had
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received a “shocking diagnosis” before the execution of the Stock Purchase Agreement.
(Sec. Am. Compl. ¶27.) Plaintiff has since learned that during the negotiation of the
Stock Purchase Agreement, Thomas had been diagnosed with small cell lung cancer.
(Id.; Messina Dec., ¶ 6.) Plaintiff has alleged that as a result of the diagnosis, both
Thomas and Richard knew Thomas would never have been able to fulfill his five year
commitment under the Consulting Agreement, but omitted that material fact during
negotiations with Plaintiff, which contends it never would have consummated the
transaction had Thomas’s diagnosis been disclosed.
Through the instant motion, Defendants have argued that all essential conduct
underlying the Complaint occurred in New York, all relevant and significant witnesses
reside in New York, and both the private and the public interests of the parties are best
served by transferring the case to New York, where the action could have been brought
initially.
Plaintiff’s opposition to the motion reveals that the original drafts of the Stock
Purchase Agreement required Plaintiff to agree to consent to jurisdiction in New York to
resolve any disputes arising between the parties. (Palladino Decl. ¶ 4; Ex. B, Draft Stock
Purchase Agreement, ¶14.10.) That provision, however, was replaced by the following:
14.10 Consent to Jurisdiction. The Purchaser acknowledges and agrees
that all disputes arising out of this Agreement or any promissory note
issued pursuant hereto, and all actions to enforce this Agreement or any
promissory note issued pursuant hereto, may be dealt with and
adjudicated in the State Courts of New Jersey or the Federal courts
sitting in New Jersey; and hereby expressly and irrevocably submits the
Purchaser to the jurisdiction in such courts in any suit, action or
proceeding arising out of this Agreement or any promissory note issued
pursuant hereto. So far as is permitted under applicable law, this consent
to personal jurisdiction shall be self-operative and no further instrument
or action, other than service of process or as otherwise permitted by law,
shall be necessary in order to confer jurisdiction upon the Purchaser in
any such court.
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Palladino Decl. Ex. A (emphasis added). Accordingly, it is agreed that the Stock
Purchase Agreement executed by the parties included a permissive clause authorizing
jurisdiction in New Jersey, but not prohibiting litigation elsewhere.
Discussion
28 U.S.C. § 1404(a) generally 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.” A decision to transfer
venue should consider “all relevant factors to determine whether on balance the
litigation would more conveniently proceed and the interests of justice be better served
by transfer to a different forum.” Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d
Cir. 1995). The party seeking transfer bears the burden of establishing that transfer is
warranted. Id.
In this circuit, the plaintiff’s choice of venue is of “paramount consideration” and
should be disturbed only rarely. Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir.
1970). Indeed, “unless the balance is strongly tipped in favor of transfer, the plaintiff’s
choice of forum should not be disturbed.” Yocham v. Novartis Pharm Corp., 565 F.
Supp. 2d 554, 558 (D.N.J. 2008). Further, when the plaintiff has chosen its home state
as the forum, that decision is “entitled to greater deference.” Piper Aircraft Co. v.
Reyno, 454 U.S. 235, 255 (1981).
In addition, forum selection clauses are presumptively valid and enforceable
absent a showing by the resisting party that enforcement of the clause would be
unreasonable under the circumstances. M/S Bremen v. Zapata Offshore Co., 407 U.S. 1,
10 (1972). In this case, Defendants do not argue that the forum selection clause resulted
from overreaching or fraud, nor that enforcement of the clause would be contrary to
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public policy or result in litigation in a location that would be so inconvenient as to be
unreasonable. See MoneyGram Payment Sys. v. Consorcio Oriental, S.A., 65 F. App’x
844, 846 (3d Cir. 2003). Rather, Defendants rely heavily upon the assertion that the
forum selection clause merely constitutes a permissive consent to New Jersey
jurisdiction, rather than a mandatory filing requirement. 1
When the parties have agreed to a valid mandatory forum-selection clause, the
“private interest” factors 2 otherwise considered on a motion to transfer will be given no
weight because the parties, by contract, have “waiv[ed] the right to challenge the
preselected forum as inconvenient or less convenient for themselves or their witnesses,
or for their pursuit of the litigation.” Stated otherwise, in effect, courts “must deem the
private-interest factors to weigh entirely in favor of the preselected forum.” Atlantic
Marine Const. Co., Inc. v. United States Dist. Ct. for Western Dist. of Texas, 571 US ---, --, 134 S. Ct. 568, 582, 584 (2013) (enforcement of clause was not defeated merely by
fact litigation in a distant forum might hinder party’s ability to call certain witnesses and
impose other burdens).
Further, because public interest “factors will rarely defeat a transfer motion,”
mandatory “forum-selection clauses should control except in unusual cases.” Id. at 582.
See Dawes v. Publish Am. LLLP, 563 F. App’x 117, 118 (3d Cir. 2014) (“A permissive
clause authorizes jurisdiction in a designated forum but does not prohibit litigation
elsewhere, whereas a mandatory clause . . . dictates an exclusive forum for litigation
under the contract.” (internal quotation omitted)).
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“Factors relating to the parties’ private interests include: ‘relative ease of access to
sources of proof; availability of compulsory process for attendance of unwilling, and the
cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view
would be appropriate to the action; and all other practical problems that make trial of a
case easy, expeditious and inexpensive.’” Atlantic Marine, 134 S. Ct. at 581 n.6 (quoting
Piper Aircraft, 454 U.S. at 241 n.6).
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“Public-interest factors may include ‘the administrative difficulties flowing from court
congestion; the local interest in having localized controversies decided at home; [and]
the interest in having the trial of a diversity case in a forum that is at home with the
law.’” Atlantic Marine, 134 S. Ct. at 581 n.6 (quoting Piper Aircraft, 454 U.S. at 241 n.6).
Courts also may consider “the enforceability of the judgment; practical
considerations that could make the trial easy, expeditious, or inexpensive;” and “the
public policies of the fora.” Jumara, 55 F.3d at 879-80.
Cognizant of the fact that the forum selection clause in this case is not
mandatory, the Court nonetheless finds the policy underlying Atlantic Marine
instructive. “When parties have contracted in advance to litigate disputes in a particular
forum, courts should not unnecessarily disrupt the parties’ settled expectations. . . . In
all but the most unusual cases, . . . ‘the interest of justice’ is served by holding the parties
to their bargain.” Atlantic Marine, 134 S. Ct. at 583. Further, none of the relevant
Section 1404(a) considerations tip the scale sufficiently in favor of transfer. Rather, as
discussed during oral argument, the relevant factors are, at best, in equipoise. Finally,
the Court notes that, unlike in Atlantic Marine and the majority of post-Atlantic Marine
decisions where defendants moved for transfer on forum non conveniens grounds, here
both the Plaintiff’s choice of forum and the permissive forum selection clause favor the
same venue — New Jersey. Accordingly, transfer is unwarranted.
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Conclusion
For these reasons, as well as those discussed on the record during oral argument,
IT IS ORDERED this 11th day of June, 2015 that the motion of Defendants to
transfer the case to the United States District Court for the Eastern District of New York
pursuant to 28 U.S.C. § 1404(a) [Doc. 2] is hereby DENIED.
/s/ Joseph H. Rodriguez
JOSEPH H. RODRIGUEZ
U.S.D.J.
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