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BREEDEN v. TRICOM BUSINESS SYSTEMS

January 21, 2003

RICHARD BREEDEN, TRUSTEE, THE BENNETT FUNDING GROUP, INC., PLAINTIFF,
v.
TRICOM BUSINESS SYSTEMS, INC., DEFENDANT.



The opinion of the court was delivered by: Munson, Senior District Judge

MEMORANDUM DECISION AND ORDER

BACKGROUND

Cleveland Microsystems, Inc., d/b/a/ Tricom Business Systems ("Tricom") is in the business of selling, leasing and servicing office equipment, mainly copiers and fax machines. Aloha Leasing, a division of the Bennet Funding Group, Inc.("BFG"), manufactured, distributed, sold and services office equipment. In May 1992, Tricom and BFG entered into a Private Label Vendor Agreement ("PLVA") that called for Tricom to assign all rights to certain equipment leases for office equipment on a continuing basis to BFG, and Tricom did so by assigning all rights to certain lease contracts with Tricom's customers located in the State of Ohio to BFG, in exchange for advance funding on these leases. BFG would then replace Tricom as the lessor, collecting the monthly rental payments from Tricom's customers, and Tricom would receive an advance fee based on the value of the equipment lease.

Among the rights obtained by BFG in these assignments were: (1) legal ownership of the leased equipment, (2) the right to collect rent due under the assigned leases, and (3) the right to repossess the leased equipment in the event of a default. Tricom warranted that it had no knowledge of any fact that would impair the value of the assigned leases, (b) the assigned leases were genuine and enforceable, (c) that it would not modify, terminate or renew any assigned lease without BFG's permission, (d) that the assigned leases and related equipment had been accepted by the lessee, and (e) that it would not accept the return of any leased equipment without BFG's permission. Tricom and BFG also entered a CPC Funding Agreement ("CPC") whereby

Tricom would sell the equipment directly to BFG, and leased back to Tricom's customers. BFG would then bill the customers for services and supplies rendered by Tricom, collect the bill payments and distribute them to Tricom. Tricom alleges that while the vast majority of the leases assigned under Tricom to BFG, as well as equipment purchased by BFG and leased back to Tricom's customers, expired by the terms of the individual leases, forty leases currently have a balance outstanding due to unpaid service fees due under the terms of the CPC agreement.

BFG contends that in the accounts covered by the PLVA, Tricom wrongfully took possession of certain equipment belonging to BFG. Tricom denies this, and maintains that there may have been about eight accounts that involved taking of equipment, but the equipment was considered abandoned and removed only after Aloha Leasing did not respond to the lessees requests to remove the equipment or provide instructions relating to its return. Tricom claims that BFG is liable for the costs of removal and storage of this equipment and for failure to remit to Tricom the monies it had collected for services Tricom had formerly performed on the equipment.

During the term of the PLVA and CPC funding agreements, Tricom formed an Ohio joint venture entity formerly known as Cajo/Tricom Association ("the Association). It was certified as a minority joint venture by the State of Ohio as part of that state's statutory affirmative action program that sought to award contracts to minority owned, managed or operated businesses.

The Association became the authorized sales and leasing representative in the State of Ohio for Panasonic Communications & Systems and then obtained two lease contracts with State of Ohio, one for the Marion Correctional Facility, the second for the Ohio Board of Employment Services. These two lease accounts were assigned to BFG under the terms of the PLVA and CPC agreements. The assignment provided that BFG would have recourse if the State of Ohio defaulted and Tricom repurchased the lease.

In January 1995, the Association concluded operating as a joint venture under Ohio law, thereupon, it was decertified as a minority joint venture by the state, and as a Panasonic distributor. The state also canceled it leases with the Association. The leased equipment was sold to the State of Ohio by Aloha Leasing on behalf of BFG. Tricom claims that the purchase price included fees owed for services performed on the equipment and supplies furnished to the state lessees by Tricom, but it has never received payment from BFG.

BFG's complaint alleges that Tricom repossessed equipment without authorization from BFG; had knowledge of facts that impaired the validity of leases assigned to BFG; modified, terminated and interfered with leases assigned to BFG; and failed to disclose that certain leases were not enforceable according to their terms. The relief sought is monetary damages. Tricom's counterclaim alleges breach of contract, account stated, unjust enrichment and conversion, and asks for monetary damages.

Several motions are currently pending before the court, and each one had been opposed. Defendant Tricom moves pursuant to 28 U.S.C § 1404(a) to transfer the case to the Northern District of Ohio, Eastern Division. Plaintiff BFG moves pursuant to Fed.R.Civ.P. 12(c) for judgment on the pleadings, and pursuant to Fed.R.Civ.P. 15(a) to amend the counterclaim reply w/ Exhibits A and B. Defendant Tricom moves for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(c) or, in the alternative, for additional time pursuant to Fed.R.Civ.P.56(f) to respond to plaintiff's motion for judgment on the pleadings or summary judgment or in the second alternative, to cross move for judgment on the pleadings, for dismissal of the complaint pursuant to Fed.R.Civ.P. 12(b)(6) or for summary judgment pursuant to Fed.R.Civ.P.56(c) with a request for a hearing.

DISCUSSION

A defendant may move to transfer a civil case for the convenience of parties and witnesses and in the interest of justice to any other district or division where it might have originally been brought. 28 U.S.C. § 1404(a). Based upon the papers submitted by the respective parties, the court concludes that it may consider defendant's motion because this action could have been brought in the Northern District of Ohio. Defendant has the burden of establishing the propriety of transfer by clear and convincing showing. Ford Motor Co. v. Ryan, 182 F.2d 329, 330 (2d Cir.) cert. denied, 340 U.S. 851, 71 S.Ct. 79, 95 L.Ed.2d 625 (1950). The court considers several relevant factors: (1) the plaintiff's choice of forum; (2) the convenience of the parties; (3) the place where the operative facts occurred: (4) the relative ease of access to sources of proof; (5) the convenience of witnesses; (6) the availability of process to compel attendance of unwilling witnesses; (7) the forum's familiarity with the governing law; and (8) trial efficiency, means of the parties and the interest of justice. Viacom International, Inc. v. Melvin Simon Products, Inc., 774 F. Supp. 858, 868 (S.D.N.Y. 1991). Each factor need not be accorded equal weight. It is well established that determining whether a transfer is warranted pursuant to § 1404(a) lies within the broad discretion of the district court and is determined upon notions of convenience and fairness on a case by case basis. In re Cayahoga Equipment Corp., 980 F.2d 110, 117 (2d Cir. 1992).

The presence of forum selection clauses are a prominent though not dispositive consideration in a court's determination of whether to transfer a case in the interest of justice. Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988). However, when a commercial agreement contains a forum selection clause, there is a strong policy in favor of enforcing such a clause. Chasser v. Achille Luro Lines, 844 F.2d 50, 54 (2d Cir. 1988), aff'd, 490 U.S. 495, 109 S.Ct. 1976, 104 L.Ed.2d 548 (1989); Mediterranean Shipping Co, v. Pol-Atlantic, 229 F.3d 397, 405 (2d Cir. 2000) (there is a "heavy presumption" in favor of enforcing forum selection clauses). Once a forum selection clause is deemed valid, the burden shifts to the opposing party to demonstrate exceptional facts why he should be relieved of his contractual duty. Strategic Marketing & Communications v. Kmart, 41 F. Supp.2d 268, 273 (S.D.N.Y. 1998).

Regarding factors 1 and 2, in its Memorandum of Law, defendant Tricom states "In light of the fact that the parties have a forum selection clause in their contracts, and plaintiff commenced this action in the New York State Supreme Court in Onondaga County, New York, the initial choice of law expressed in the parties contract is entitled to deference, and usually forecloses further consideration of convenience of the parties in favor or plaintiff's choice of forum." (Def.'s Mem.of Law, p. 14-15)

The forum selection clause also contains a choice of law provision which provides New York law is to govern the contract. The presence of this provision disfavors transfer. Ferens v. John Deere Co., 494 U.S. 516, 530, 110 S.Ct. 1274,1283, 108 L.Ed.2d 443 (1990) (diversity cases should be tried in ...


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