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HEYCO, INC. v. HEYMAN

June 17, 1986

HEYCO, INC., Plaintiff,
v.
H. KERRY HEYMAN, Defendant



The opinion of the court was delivered by: EDELSTEIN

EDELSTEIN, District Judge

In this civil diversity action for breach of a restrictive covenant not to compete, defendant moves to dismiss the lawsuit for improper venue pursuant to 28 U.S.C. § 1406(a) (1982). Alternatively, defendant moves to transfer the action to the United States District Court for the District of New Jersey pursuant to 28 U.S.C. § 1404(a) (1982) on the ground that it would be in the interest of justice and convenient to the parties and witnesses for the action to be tried in New Jersey. Defendant's motion to dismiss is denied and its motion to transfer is granted, on the condition that he consent to the personal jurisdiction of courts sitting in New Jersey.

FACTS

 Defendant H. Kerry Heyman ("Heyman"), a New York domiciliary, was a long-time officer and chairman of plaintiff's predecessor corporation, Heyman Manufacturing Corporation, a New Jersey corporation with its principal place of business also in New Jersey. *fn1" Plaintiff is now known as Heyco, Inc ("Heyco"). On December 15, 1981, the parties entered into a buy-out agreement, whereby Heyman resigned his positions with and sold all of his stock in Heyco. The agreement included a covenant providing, in essence, that Heyman would not compete with Heyco. *fn2" Heyco alleges that Heyman twice breached this covenant, once in late 1984 or early 1985 and again in May 1985. *fn3"

 Heyman moves to dismiss the action for improper venue or, in the alternative, to transfer the action to New Jersey federal court. Heyman bases his motion primarily on contract provisions, which are commonly known as forum selection or consent-to-jurisdiction clauses ("forum selection clause"). These clauses read:

 9. Restrictive Covenant

 [Heyman] further acknowledge[s] that the remedy of [Heyco] for any breach of this provision shall be wholly inadequate and the [Heyco] shall, in addition to any other relief to which it may be entitled, be entitled to seek injunctive relief and damages in the Superior Court of the State of New Jersey, to whose jurisdiction [both parties] hereby consent.

 18. New Jersey Law To Govern

 This Agreement shall be deemed made in the State of New Jersey and shall be construed and enforced in accordance with the substantive law of New Jersey without resort to its choice of law rules. The parties expressly hereby submit to the personal jurisdiction of the courts of original jurisdiction of the State of New Jersey for resolution of all disputes arising under this Agreement.

 Defendant's Exhibit A at paras. 9, 18. For the reasons set forth below, this court denies defendant's motion to dismiss and grants his motion to transfer, subject to the aforementioned condition.

 DISCUSSION

 I. The § 1406(a) Motion to Dismiss.

 28 U.S.C. § 1406(a) provides: "The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." In other words, a prerequisite to invoking § 1406(a) is that venue be improper. Buhl v. Jeffes, 435 F. Supp. 1149, 1151 (M.D. Pa. 1977); 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3827, at 263 (2d ed. 1986). Venue is proper in this court, however, because defendant resides in New York County, which is located within the Southern District of New York. See 28 U.S.C. § 1391(a) (1982); 28 U.S.C. § 112(b) (1982). *fn4"

 Defendant argues that the forum selection clause renders venue in the Southern District of New York improper. See Hoffman v. Burroughs Corporation, 571 F. Supp. 545, 551 (N.D. Tex. 1982). However, in Hoffman and in cases that defendant cites to support its § 1406(a) motion, the forum selection clauses provided that a given court was to have exclusive power to hear the action. See, e.g., AVC Nederland B.V. v. Atrium Investment Partnership, 740 F.2d 148, 155 (2d Cir. 1984) ("[a]ll and any disputes, differences or questions arising from the present Agreement shall be decided and determined by the competent court at Utrecht"); Bense v. Interstate Battery System of America, 683 F.2d 718, 720 (2d Cir. 1982) ("[t]he exclusive venue of any suits or causes or actions arising directly or indirectly from this AGREEMENT shall be in Dallas County, Texas"); Mississippi River Bridge Authority v. M/V Pola de Lena, 567 F. Supp. 311, 312 (E.D. La. 1983) ("[f]or all questions arising out of the interpretation and fulfillment of these conditions, both parties will submit to the Court and tribunals of Madrid, renouncing to any other forum that could presently correspond to them, or that could correspond to them in the future"); Gaskin v. Stumm Handel GmbH, 390 F. Supp. 361, 363 (S.D.N.Y. 1975) ("it is agreed that Essen [the Republic of West Germany] shall be the forum to which any controversy must be submitted"). By contrast, the clause in this case provides merely that the parties ...


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