DiRuocco v. Flamingo Beach Hotel & Casino, Inc., 163 A.D. 2d 270, 557 N.Y.S.2d 140 (2d Dep't 1990). Absent a showing of bad faith or fraud (neither of which are alleged here), a forum selection clause need not be negotiated to be binding. Carnival Cruise Lines v. Shute, U.S. , 111 S. Ct. 1522, 1527-28, 113 L. Ed. 2d 622 (1991). Defendants' arguments that they should not be held liable under their Guaranties since they neither negotiated nor participated in any of the financing arrangements with Orix which led to the execution of their guaranties is likewise unavailing under Carnival.
The real question is what weight the Court should give to this particular contract allowing for a New York forum for the parties' dispute. It must be noted at the outset that courts in New York have consistently held that forum selection clauses are prima facie valid absent a showing they was signed as a result of fraud or overreaching, that they are unreasonable or unfair, or that enforcing them would contravene a strong public policy of the forum. The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S. Ct. 1907, 32 L. Ed. 2d 513 (1972); General Electric Credit Corp. v. Toups, 644 F. Supp. 11, 13 (S.D.N.Y. 1986) (Sweet, D.J.). The Bremen, however, is an admiralty case; and while it may prove "instructive" in resolving the parties' dispute, the factors for deciding transfer as set out in § 1404(a) control a federal court sitting in diversity jurisdiction. Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 28-29, 101 L. Ed. 2d 22, 108 S. Ct. 2239 (1988). A motion to transfer under § 1404(a) is governed by the terms of the statute itself, and a court should consider the preferences of the parties, as embodied in a contractual forum selection clause, only to the extent that the federal statute itself permits. Red Bull Assoc. v. Best Western Int'l., Inc., 862 F.2d 963, 966-67 (2d Cir. 1988) (denying effect to mandatory forum-selection clause because of strong public policy of civil rights law).
However, clauses establishing ex ante the forum have the salutary effect of dispelling any confusion about where suit may be brought (Carnival at 1527), and if the venue chosen is proper and both parties expect the clause to be binding, the contract by its terms should be enforced. See Paribas Corp. v. Shelton Ranch Corp., 742 F. Supp. 86, 90 (S.D.N.Y. 1990) (enforcing contract stating that disputes shall be adjudicated in New York courts).
Here the terms are not mandatory, however, and therefore this agreement should be given less weight under § 1404(a) than an agreement phrased in more compelling terms. The language in the Guaranties merely states that Pittman and Johnston agree to the jurisdiction of a court located in the state and county of New York, not such a court shall have jurisdiction nor that it would be the exclusive forum for all disputes arising out of this contract. New York law makes a clear distinction between permissive forum-selection clauses and mandatory clauses, and only a mandatory clause should prevent a court from ordering a change of venue absent a strong countervailing consideration, such as the Congressional policy in favor of civil rights enforcement considered by the court in Red Bull. This distinction between "permissive" and "mandatory" clauses was the law in New York even before the Supreme Court decided Ricoh. See Leasing Service Corp. v. Patterson Enterprises, 633 F. Supp. 282, 284 (S.D.N.Y. 1986); Credit Alliance v. Crook, 567 F. Supp. 1462, 1465 (S.D.N.Y. 1983) ("Cook declared nothing more than her consent to the venue and jurisdiction of a court which might otherwise not exist").
The language in these Guaranties is nothing more than a "jurisdiction-conferring clause which, although providing a plaintiff with a guaranteed forum, does not deprive him of the right to sue in another having personal jurisdiction over the defendant." AVC Nederland B.V. v. Atrium Inv. Partnership, 740 F.2d 148, 155 (2d Cir. 1984). Nothing in the Guaranties precludes Orix from bringing suit in Mississippi; nothing in them precludes this Court from transferring the action there, as a result of the balancing of factors prescribed by Ricoh and the permissive wording of the clause itself.
Transfer Pursuant to § 1404(a)
The defendants' motion to change venue is based upon 28 U.S.C. § 1404(a), which states:
For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any district or division where it might have been brought.
A district court has broad discretion to decide transfer according to individualized considerations of convenience and fairness ( Red Bull, 862 F.2d at 967), although the party seeking transfers bears the burden of establishing its propriety, Citicorp. Int'l. Trading Co. v. Western Oil & Refining Co., 708 F. Supp. 86, 89 (S.D.N.Y. 1989). The factors relevant in determining whether the defendants have satisfied their burden include the convenience to the parties, the convenience to the witnesses, the ease of access to sources of proof, the availability of process to compel the attendance of unwilling witnesses, the forum's familiarity with the law governing the case, and the "interests of justice" -- a term broad enough to cover the particular circumstances of the case. Red Bull, 862 F.2d at 967; Patterson, 633 F. Supp. at 284 (citations omitted); Don King Productions, Inc. v. Douglas, 735 F. Supp. 522, 533 (S.D.N.Y. 1990) (Sweet, D.J.).
The parties' expressed preference for a particular venue is one of these factors ( Ricoh, 487 U.S. at 29) and although a permissive forum clause is entitled to less weight than a mandatory one, the fact that both parties initially accepted the jurisdiction of the courts of New York must count. A forum selection clause is determinative of the convenience to the parties, see Richardson Greenshields Securities, Inc. v. Metz, 566 F. Supp. 131 (S.D.N.Y. 1983) (Sweet, D.J.); General Elec. Credit Corp. v. Toups, 644 F. Supp. 11, 15 (S.D.N.Y. 1986) (Sweet, D.J.) (permissive forum clause still determinative of parties' convenience).
But the convenience of the parties is only one factor under Ricoh. Other factors, such as the convenience of non-party witnesses or the availability of records, may count for more. The defendants have offered to produce Cook, Frank P. Thiel, and Donald L. Glenn, all Mississippi residents who are unwilling to travel voluntarily to New York (so the defendants aver), to testify that the Guaranties do not extend to the third-party debts of Mid-South and to testify that the terms of the Guaranties did not extend to more than Mid-South's own security interests, that the defendants were released from their Guaranties by Cook's letter, and that the sale price of PPL's equipment was "commercially unreasonable."
The contractual issues in the first two arguments are closer to Orix v. Beltway, 89 Civ. 0279, slip.op., 1989 U.S. Dist. LEXIS 1119 (S.D.N.Y. Sept. 18, 1989) (Walker, D.J.) than to Leasing Service Corp. v. Patterson Enterprises, 633 F. Supp. 282 (S.D.N.Y. 1986) (Walker, D.J.), relied on by the defendants. In Patterson, after proceeds from an auction of equipment repossessed pursuant to a security interest (and which the lender had ordered repaired and refurbished prior to sale) did not cover the outstanding debt, the lender sued for a deficiency judgement which included the costs of repairing and refurbishing the equipment. The court would have denied the defendants' motion for transfer from New York to their jurisdiction but stated that:
Tipping the scales in favor of transfer, however, are those witnesses identified by Patterson as Mississippi residents . . . who may have significant and material information regarding the condition of the equipment prior to sale and necessity of repairs.