LOMAX v. MERACORD LLC et al

Filing 38

OPINION. Signed by Judge Stanley R. Chesler on 10/16/13. (jd, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

REGINA LOMAX, on behalf of herself
and others similarly situated,
Plaintiff,
v.
MERACORD LLC, and JOHN DOES 1-5,
Defendants.

:
:
:
:
:
:
:
:
:
:
:
:

Civil Action No. 13-1945 (SRC)

OPINION

CHESLER, District Judge
This matter comes before the Court upon the motion filed by Defendant Meracord LLC
(“Defendant” or “Meracord”) to transfer venue pursuant to 28 U.S.C. § 1404(a). Plaintiff Regina
Lomax (“Plaintiff” or “Lomax”) has opposed the motion. The Court has considered the papers
filed by the parties and proceeds to rule on the motion without oral argument, pursuant to Federal
Rule of Civil Procedure 78. For the reasons discussed below, the Court will grant Meracord’s
motion and transfer this action to the United States District Court for the Western District of
Washington.

I.

BACKGROUND
This putative class action arises out of Plaintiff Lomax’s subscription to the “Debt

Settlement System” offered by third party P&E Solutions and her agreement to receive the
payment processing services of Defendant Meracord in connection therewith. Lomax, a resident
1

of New Jersey, retained the debt settlement services of P&E, which, according to the First
Amended Complaint, agreed to negotiate with her creditors. To make the monthly payments
required under her agreement with P&E, Plaintiff signed a “Signup Agreement” with Defendant
Meracord, authorizing Meracord to debit Lomax’s bank account and disburse the money to
creditors. Defendant Meracord is Delaware limited liability company, whose sole member is a
citizen of the State of Washington. Meracord maintains its principal place of business in
Washington.
The “Signup Agreement” states that Meracord (formerly known as “NoteWorld”) would
provide Lomax with services subject to the Agreement’s “Terms and Conditions.” Among the
listed “Terms and Conditions” is a forum selection clause. It provides as follows:
Acceptance; Governing Law; Venue. NoteWorld shall not be bound by
the Signup Agreement and no contract will exist until NoteWorld
acknowledges acceptance, renders for Customer any of the Services
subscribed for herein, or otherwise indicates its acceptance. The Signup
Agreement shall be deemed to have been accepted, if at all, by NoteWorld
in the state of Washington. The Signup Agreement will be governed by
the laws of the State of Washington. Any and all legal action must be
transacted or brought in a court located in the State of Washington.
(Signup Agreement, Terms and Conditions, ¶ 8, attached to First Amended Complaint as Ex. B.)
On November 7, 2012, Plaintiff initiated her lawsuit in New Jersey state court, asserting
three causes of action pursuant to New Jersey statutes. She filed it as a putative class action, on
behalf of other New Jersey residents. On March 27, 2013, Defendant removed the action to this
Court, on the grounds that this Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(d).

2

II.

DISCUSSION
Meracord moves to transfer this action to the Western District of Washington pursuant to

28 U.S.C. § 1404(a). That provision states: “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 or to any district or division to which all parties have
consented.” 28 U.S.C. § 1404(a). To transfer an action under § 1404(a), venue must be proper
both in the transferor court and the transferee court. Osteotech, Inc. v. GenSci Regeneration
Scis., Inc., 6 F. Supp. 2d 349, 357 (D.N.J.1998). The party seeking to transfer must show that the
alternative venue is not only adequate, but also more convenient than the current one. Jumara v.
State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir.1995); Ricoh Co., Ltd. v. Honeywell, Inc., 817 F.
Supp. 473, 480 (D.N.J.1993). The Third Circuit has held that “[s]ection 1404(a) transfers are
discretionary determinations made for the convenience of the parties and presuppose that the
court has jurisdiction and that the case has been brought in the correct forum.” Lafferty v. St.
Riel, 495 F.3d 72, 76–77 (3d Cir. 2007). 1
Meracord’s motion to transfer venue properly falls within the purview of § 1404(a), as
both the District of New Jersey and the proposed transferee district would serve as proper venues
for this action. The statute governing venue, 28 U.S.C. § 1391, provides that a civil action may
be brought in “a judicial district in which any defendant resides, if all defendants are residents of
the State in which the district is located.” 28 U.S.C. § 1391(b)(1). The only Defendant named in
this lawsuit, Meracord, resides in the State of Washington, making the federal district courts of
Washington appropriate venues. The statute also provides that a civil action may be brought in
1

At the time this action was removed, the Court reviewed the First Amended Complaint to determine that it has
subject matter jurisdiction. The Court was satisfied that this putative class action properly supported diversity
jurisdiction pursuant to 28 U.S.C. § 1332(d).
3

“a judicial district in which a substantial part of the events or omissions giving rise to the claim
occurred.” 28 U.S.C. § 1391(b)(1). Lomax, who resided in New Jersey at all relevant times,
executed the Signup Agreement and generally received, or was supposed to receive services
from Meracord in New Jersey with regard to her debts and accounts.
To determine whether, in its discretion, the Court should order a transfer of the action
pursuant to § 1404(a), it must balance various private and public interests. Jumara, 55 F.3d at
879. In Jumara, the Third Circuit provided a list of factors a district court should consider. The
private interest factors are: (1) plaintiff’s forum preference as manifested in the original choice;
(2) the defendant’s preference; (3) whether the claim arose elsewhere; (4) the convenience of the
parties as indicated by their relative physical and financial condition; (5) the convenience of the
witnesses (only to the extent that the witnesses may actually be unavailable for trial in one of the
fora; and (6) the location of books and records (only to the extent that the files could not be
produced in the alternative forum). Id. The public interest factors are: (1) the enforceability of
the judgment; (2) practical considerations that could make the trial easy, expeditious, or
inexpensive; (3) the relative administrative difficulty in the two fora resulting from court
congestion; (4) the local interest in deciding local controversies at home; (5) the public policies
of the fora; and (6) the familiarity of the trial judge with the applicable state law in diversity
cases. Id. at 879-80.
Meracord’s motion relies heavily on the contractual forum selection clause set forth in
the Signup Agreement. The Supreme Court has held that in a federal case grounded in diversity
jurisdiction, it is federal law – and particularly § 1404(a) – which governs the district court’s
enforcement of the forum selection clause in deciding whether to transfer venue. Stewart Org.,
Inc. v. Ricoh Corp., 487 U.S. 22, 32 (1988). Thus, the Court must consider this clause within the
4

rubric of the multi-factored analysis the Third Circuit articulated in Jumara. Though a forum
selection clause is not dispositive of the question of whether a transfer of venue under § 1404(a)
is warranted, it is nevertheless typically given significant weight in the analysis. Id. at 29-31;
Jumara, 55 F.3d at 880. The Third Circuit has reasoned that, when balancing the relative
convenience of two competing fora in a section 1404(a) transfer analysis, a forum selection
clause “is treated as a manifestation of the parties’ preferences as to a convenient forum. Hence,
within the framework of § 1404, Congress ‘encompasse[d] consideration of the parties’ private
expression of their venue preferences.’” Jumara, 55 F.3d at 880 (quoting Stewart, 487 U.S. at 2930)).
Here, the forum selection clause weighs heavily in favor of transferring this action to the
Western District of Washington. The clause broadly states that “[a]ny and all legal action must
be transacted or brought in a court located in the State of Washington.” (Signup Agreement,
Terms and Conditions, ¶ 8 (emphasis added)). It applies to the instant legal action, as the Signup
Agreement between Lomax and Meracord forms the basis for their relationship and for the
services performed by Meracord for Lomax. Thus, though the Complaint states non-contractual
theories of recovery, the action has a logical connection to the contract and is therefore covered
by its broad forum selection clause. John Wyeth & Bro. Ltd. v. CIGNA Int’l Corp., 119 F.3d
1070, 1074 (3d Cir. 1997).
Consistent with Third Circuit authority, this Court must interpret that clause, contained in
the contract signed by Lomax, as an expression of her agreement that the State of Washington
would be a convenient and preferable location to litigate her disputes with Meracord. See
Jumara, 55 F.3d at 880. It is well-established that a forum selection clause is presumptively
valid and enforceable. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). To defeat
5

enforcement, the objecting party must make a strong showing “(1) that it [the forum selection
clause] is the result of fraud or overreaching, (2) that enforcement would violate a strong public
policy of the forum, or (3) that enforcement would in the particular circumstances of the case
result in litigation in a jurisdiction so seriously inconvenient as to be unreasonable.” Coastal
Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 203 (3d Cir. 1983), cert. denied, 464
U.S. 938 (1983), overruled on other grounds by Lauro Lines S.R.L. v. Chasser, 490 U.S. 495
(1989)).
Lomax has not argued that this dispute falls outside the scope of the forum selection
clause, or that the clause is invalid. Rather, she contends that Meracord has waived its right to
enforce it by removing the action to the District of New Jersey and proceeding with litigation in
this venue, rather than immediately seeking enforcement of the forum selection clause in New
Jersey state court or, at the latest, raising improper venue as a basis for a motion to dismiss
pursuant to Federal Rule of Civil Procedure 12(b)(3). Plaintiff stresses that this motion to
transfer venue was not filed until eight months after removal, by which time Defendant had
already filed a motion to compel arbitration, made a Rule 68 offer of judgment and engaged in
discovery. 2 Plaintiff also notes that contrary to the Signup Agreement’s choice of law provision,
stating that Washington law will govern any disputes, Defendant relied on New Jersey law in its
motion to compel arbitration. She argues that Meracord’s conduct essentially amounts to forum
shopping, pointing out that, while Meracord’s motion to compel arbitration was ultimately
unsuccessful, at the time it filed the motion the law in New Jersey was more favorable than
2

The offer of judgment, served on Plaintiff on June 20, 2013, was not accepted. The parties have filed motions
concerning the effect of the offer of judgment on this litigation, making arguments about, among other things, the
nature and extent of relief to which Plaintiff is entitled under her statutory causes of action. Those pending motions
will be handled by the transferee court.
6

Washington’s law with regard to Meracord’s attempt to enforce an arbitration clause contained
in a contract to which Meracord was not party.
Plaintiff’s waiver argument, however, lacks legal basis. As Defendant points out, even if
the Third Circuit were to treat a motion to enforce a forum selection clause as one to dismiss for
improper venue pursuant to Rule 12(b)(3), 3 Meracord does not raise improper venue as an
affirmative defense and does not seek dismissal of the action. Rather, Meracord moves for
transfer pursuant to § 1404(a), which may be brought even after a responsive pleading is filed.
See Wright, et al., Fed. Practice & Procedure, § 3829 (2012); see also Allen v. United States
Dep’t of Homeland Sec., 514 F. App’x 421, 422 (5th Cir. 2013) (remanding action for
consideration by district court of venue transfer pursuant to § 1404(a) “[b]ecause a party may
seek a § 1404(a) transfer of venue after filing its first responsive pleading”). Plaintiff simply
cites no authority that precludes a party from seeking transfer pursuant to § 1404(a) after
conducting some litigation in the transferor venue. 4
In a related argument, Lomax maintains that Meracord is estopped from invoking the
forum selection clause because it has already argued, albeit unsuccessfully, that this dispute
should be resolved by arbitration in the State of Florida under the laws of the State of Florida

3

Lomax notes that a majority of circuits treat motions to enforce forum selection clauses as motions for improper
venue, subject to Rule 12(b)(3), and thus argues that applying the majority view, a failure to raise improper venue in
Meracord’s motion to compel arbitration waives that defense, pursuant to Rule12(h)(1). Meracord responds by
arguing that improper venue based on a forum selection clause is considered in the Third Circuit to be governed by
Rule 12(b)(6) and thus, in this jurisdiction, is not treated as a defense subject to waiver. See Salovaara v. Jackson
Nat’l Life Ins. Co., 246 F.3d 289, 298-99 (3d Cir. 2001).
4

Instead, Plaintiff cites a number of cases that deal with contractual arbitration provisions and hold that the right to
demand arbitration pursuant thereto may be waived by litigating in court. See, e.g., Nino v. Jewelry Exchange, Inc.,
609 F.3d 191, 209 (3d Cir. 2010) (holding that “prejudice is the touchstone for determining whether the right to
arbitrate has been waived by litigation conduct.”). Apart from providing no indication that the waiver analysis
applicable to arbitration clauses would apply to forum selection clauses, Plaintiff does not make a showing that she
would be prejudiced by a transfer to the Western District of Washington simply because the parties have engaged in
some motion practice and have proceeded with discovery, as ordered by the Magistrate Judge.
7

(per the terms of the arbitration clause in Lomax’s contract with the third party debt settlement
company), not through the courts and not under the laws of the State of Washington. Plaintiff
relies on the doctrine of judicial estoppel. “Judicial estoppel generally prevents a party from
prevailing in one phase of a case on an argument and then relying on a contradictory argument to
prevail in another phase.” Pegram v. Herdrich, 530 U.S. 211, 228 n. 8 (2000). The Third Circuit
has held that it is an “extraordinary remedy” and may apply only if three requirements are met:
“[F]irst, the party in question must have adopted irreconcilably inconsistent positions; second,
the party must have adopted these positions in ‘bad faith’; and third, there must be a showing that
judicial estoppel is tailored to address the harm and that no lesser sanction would be sufficient.”
Chao v. Roy's Constr., Inc., 517 F.3d 180, 186 (3d Cir.2008). Without even reaching an
examination of those requirements, this Court concludes that the doctrine is completely
inapplicable because Meracord did not persuade the Court, on the earlier motion, that it could
enforce a contractual arbitration clause despite being a non-signatory to the contract. The Third
Circuit has held that “judicial estoppel is generally not appropriate where the defending party did
not convince the District Court to accept its earlier position.” G–I Holdings, Inc. v. Reliance Ins.
Co., 586 F.3d 247, 262 (3d Cir. 2009). While Meracord made an argument for arbitration, it did
not prevail on that argument. The Court denied Meracord’s motion to compel arbitration, thus
providing Lomax no basis for her argument that, under the principles of judicial estoppel,
Meracord should be barred from invoking the forum selection clause based on its earlier effort to
compel arbitration.
Of all the arguments opposing enforcement of the forum selection clause, the one that
most closely approximates one of the narrow grounds for non-enforcement is that due to her
health and age, Lomax will be deprived of her day in court if forced to litigate in a forum
8

thousands of miles from her New Jersey home. While it is sympathetic, the Court is not
persuaded that Lomax’s personal circumstances render the Western District of Washington a
forum so seriously inconvenient as to be unreasonable. Lomax’s physical presence in
Washington State is not required to afford her a fair opportunity to litigate. “A plaintiff may
have [her] ‘day in court’ without ever setting foot in a courtroom.” Effron v. Sun Line Cruises,
Inc., 67 F.3d 7, 11 (2d Cir. 1995) (reversing district court’s decision not to enforce forum
selection clause, reasoning that district court erred in concluding that the clause, which required
an American plaintiff to litigate her claim in Greece, would deprive her of her day in court). In
addition, the availability of technology that can eliminate or lessen any need for Plaintiff’s travel
to Washington further indicates that enforcement of the clause would not be so difficult as to be
unreasonable or unjust. Indeed, Meracord states in its reply brief that it is willing to make
necessary accommodations, such as deposing Lomax in New Jersey and having her participate in
proceedings by teleconference or video conference.
In sum, Plaintiff has not made the strong showing required to establish a proper basis
upon which to invalidate a forum selection clause. The forum selection clause in the Signup
Agreement must, therefore, factor into this Court’s consideration of whether the Western District
of Washington would present a more convenient forum. The Court turns, then, to an analysis
under § 1404(a), as informed by the relevant Jumara factors.
The private factors weigh in favor of transfer. As a manifestation of the parties’ desire to
litigate in Washington, the enforceable forum selection clause is a significant consideration.
Though Lomax nevertheless chose to initiate her action in New Jersey, a plaintiff’s choice of
forum is not entitled to deference “where the plaintiff has already freely contractually chosen an
appropriate venue.” Jumara, 55 F.3d at 880. Defendant, of course, clearly prefers that the
9

litigation proceed in Washington. There is no indication, moreover, that proceeding in
Washington would pose a serious inconvenience, such as to prevent Plaintiff from effectively
participating in the litigation, as the Court discussed above. Nor has Plaintiff indicated that any
witnesses will be unavailable for trial in the transferee forum. Finally, Meracord asserts that the
relevant books and records, while available for production in either forum, are physically located
in Tacoma, Washington.
Likewise, the public factor considerations support transfer. In particular, judicial
efficiency will be served by transfer to the Western District of Washington, where a similar class
action suit is pending against Meracord. That case, captioned Canada v. Meracord, et al., No.
12-cv-5657-BHS (the “Canada action”), consolidates two actions brought by residents of Illinois
and Pennsylvania, which, incidentally, were filed before Lomax filed her suit in New Jersey state
court. The Canada action asserts various claims, including federal RICO and Washington
Consumer Protection Act claims, on behalf of a nationwide class based on Meracord’s
involvement in the debt settlement services for which plaintiffs signed up, ostensibly through
independent debt settlement companies, an overall arrangement alleged to be a sham. While
Lomax filed this action on behalf of a class of New Jersey residents, and asserts causes of action
under New Jersey statutes, the related nature of the alleged misconduct by the same defendant
involving almost identical factual circumstances to those presented in the national class action
pending in Washington strongly suggest that transfer of this action will minimize duplicative
discovery and save the courts and parties time and expense. Moreover, the Canada action
demonstrates that the dispute arising out of Meracord’s transactions in debt settlement
arrangements is not a local controversy specific to New Jersey, such that a great interest in

10

litigating in this state would be presented. The Court observes that, in her opposition brief,
Lomax does not contest any of Meracord’s arguments regarding the weight of the factors.
Based on the forum selection clause and the Jumara factors, this Court concludes, in its
discretion, that a transfer of this action to the Western District of Washington would promote the
convenience of the parties and serve the interests of justice. Meracord has demonstrated that a
transfer pursuant to 28 U.S.C. § 1404(a) is warranted.

III.

CONCLUSION
For the foregoing reasons, the Court will grant Meracord’s motion to transfer venue.

This action will be transferred, pursuant to § 1404(a), to the United States District Court for the
Western District of Washington. An appropriate Order with be filed together with this Opinion.
s/Stanley R. Chesler
STANLEY R. CHESLER
United States District Judge
Dated: October 16, 2013

11