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Magnus Precision Manufacturing, Inc. v. TPS International

February 9, 2009

MAGNUS PRECISION MANUFACTURING, INC., PLAINTIFF,
v.
TPS INTERNATIONAL, INC., AND UNIVERSAL-AUTOMATIC CORPORATION DEFENDANTS.



The opinion of the court was delivered by: Charles J. Siragusa United States District Court

DECISION AND ORDER

Siragusa, J.

This diversity contract case is before the Court on Defendants' motion (Docket No. 6) to dismiss Plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(b)(3) and, in the alternative, 12(b)(6). Defendants contend that an exclusive choice of forum clause directs that any action must be brought in Waukesha, Wisconsin, and that in any event, Plaintiff has not made out a cause of action for breach of warranty. For the reasons stated below, the Court grants Defendants' application.

BACKGROUND

The following facts are taken from the complaint, which the Court presumes, for the purposes of this motion, to be true, and draws all inferences favorable to the non-moving party. Plaintiff Magnus Precision Manufacturing, Inc. ("Magnus") is an Ohio corporation with its principle place of business in Phelps, New York. TPS International, Inc. ("TPS"), is a Wisconsin corporation, which does business in New York, and Universal-Automatic Corporation ("UA") is an Illinois corporation, which also transacts business in New York (collectively "Defendants").

Magnus produces precision parts, tools and components for a variety of industries, including aerospace, medical, recreational and industrial. UA designs and manufactures machine tools and TPS sells machine tools. In 2003, Magnus purchased two modular concept machines designed and manufactured by UA and which it purchased from TPS: an MMS-2 Machine and an MMS-3 Machine. The parties negotiated that the MMS-2 machine had to meet certain performance criteria for a specific component relating to a project Magnus was doing for Mossberg, including standard deviations, range data, Cp/CpK values and cycle time. Magnus started making payments for the MMS2-Machine and expected delivery in 2004.

In July 2005, the parties engaged in a formal run-off of the MMS-2 at UA's Chicago facility, after which Magnus determined the machine failed to meet required criteria for Cp/CpK values. Magnus and Defendants discussed how to remedy the substandard performance of the MMS-2 machine. Following those discussions, the parties signed the MMS Machines Acceptance and Reconciliation Agreement ("Reconciliation Agreement"), a copy of which is attached to the complaint. Paragraph 15 of the Reconciliation Agreement states that, Should the MMS-2 Machine, after TPS/UA having every reasonable opportunity to bring the Machine to an acceptable level, fail to achieve the agreed upon standards (i.e. cannot make good production parts), Magnus shall have the right to return the Machine to TPS/UA at no cost in exchange for a complete refund by TPS/UA to Magnus of all the prior progress payments made on the Machine.

The Reconciliation Agreement also makes reference in paragraph 17 to the "contract documents" ("[t]he extended warranty will be treated under the same terms and conditions as provided for in the contract documents."). In paragraph 28, the Reconciliation Agreement makes the same reference to the prior contract documents ("the extended warranty on the MMS-3, which will be treated in accord with the same terms and conditions of contract documents, will expire on October 21, 2007."). In paragraph 30, the Reconciliation Agreement states that "TPS and UA agree that there will be no further or additional compensation or payment to them arising out of the Purchase Orders relating to the MMS-2 and/or MMS-3 Machines for product or services supplied up through the date of this Agreement." Also in paragraph 30 of the Reconciliation Agreement is the following language:

As contemplated by the parties, the rights and consideration afforded to Magnus by this Agreement, including the extended warranty on both Machines, shall provide the exclusive remedy for any and all past, present or future damages or expenses arising out of and any and all delivery delays or machine-related performance issues experienced or incurred by Magnus up to the effective date of this Agreement.

Magnus alleges that the MMS-2 machine was delivered in September 2005, and still does not meet the agreed-upon performance and tolerance standards. Thus, they allege breach of the Agreement and breach of warranty as causes of action against Defendants.

STANDARDS OF LAW

On a motion for improper venue, the burden is on the plaintiff to establish proper venue by a preponderance of the evidence. Since the Court will rely on pleadings and affidavits, Magnus need only make a prima facie showing that venue is proper here. Gulf Ins. Co. v. Glasbrenner, 417 F.3d 353, 355 (2d Cir. 2005).

ANALYSIS

Plaintiff argues that, since the Reconciliation Agreement does not specifically incorporate all of the prior contract terms, and only speaks to the warranty provision, the entire prior contract, with its choice of forum clause, is not applicable to Plaintiff's ...


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