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NATIONAL MICROGRAPHICS SYS. v. CANON U.S.A.

June 30, 1993

NATIONAL MICROGRAPHICS SYSTEMS, INC., Plaintiff,
v.
CANON U.S.A., INC., Defendant.



The opinion of the court was delivered by: JEROME B. SIMANDLE

 SIMANDLE, District Judge:

 Presently before the court in this diversity action is the motion of the defendant pursuant to Fed.R.Civ.P. 12(b)(3) and 28 U.S.C. § 1404(a), to dismiss this action for improper venue or, in the alternative, to transfer the action to the United States District Court for the Eastern District of New York. This motion requires us to determine the applicability and validity of two forum selection clauses which are contained in two separate, written agreements between these parties. For the reasons stated below, we will deny the defendant's motion to dismiss and will grant its motion to transfer.

 I. BACKGROUND

 This action for breach of contract, an accounting and similar claims, arises from a longstanding commercial relationship between a retail dealer and a national supplier. This court has jurisdiction pursuant to 28 U.S.C. § 1332(a)(1).

 Defendant Canon U.S.A., Inc. ("Canon") is a New York Corporation based in Lake Success, New York. It is engaged in the marketing of Canon-brand products throughout the United States.

 Defendant Canon markets its micrographics products principally through networks of authorized, non-exclusive, independent retail dealers situated throughout the country. Each such dealer has entered into one or more written dealer agreements with Canon. Canon and NMS entered into three written agreements, described below, in 1974, 1990 and 1991.

 In 1973, plaintiff NMS became the first authorized dealer of Canon products in the United States. Canon purportedly sought out NMS with the express purpose of establishing a marketing presence in the United States for its newly developed micrographics product line. It allegedly sought out NMS in particular because NMS, at that time, was an experienced and established micrographics distributor, with extensive customer contacts in the federal government.

 In May 1974, a few months after the inception of the parties' relationship, Canon and NMS (which was then known as National Microfilm Systems, Inc.) entered into a Retail Dealer Agreement. See Exhibit A annexed to the Affidavit of John M. Sullivan ("Sullivan Aff."). This Agreement appointed NMS as an authorized, non-exclusive retail dealer of Canon-brand micrographics products in a territory consisting of the District of Columbia, the State of Maryland, and portions of the Commonwealth of Virginia. While the 1974 Retail Dealer Agreement contains a choice-of-law clause providing that it is to be governed by and construed in accordance with the laws of the State of New York, id. at P 17, that Agreement does not include a forum selection clause requiring that any disputes be litigated in the New York state or federal courts.

 In or about June 1990, Canon and NMS entered into an Optical Disk Filing Products Retail Dealer Agreement (the "1990 Optical Disk Agreement"), pursuant to which Canon appointed NMS as an authorized, non-exclusive retail dealer of Canon-brand optical disk filing products, with a primary area of sales and service responsibility consisting of portions of the State of Maryland. See Sullivan Aff., Exhibit C. Paragraph 20.1 of the 1990 Optical Disk Agreement provides that "THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK" (emphasis in original), and further provides that:

 
[NMS] consents to the jurisdiction and venue of any local, state or federal court located within the State of New York . . . and further agrees that any and all causes of action whether or not arising under this Agreement by and between the parties hereto shall only be brought in a local, state or federal court situated within the State of New York. (Emphasis added).

 In or about November 1991, Canon and NMS entered into a Micrographics Dealer Agreement (the "1991 Micrographics Dealer Agreement"). This 1991 Agreement was Canon's updated form of its retail dealer agreement for its authorized, non-exclusive micrographics dealers. The Agreement assigned to NMS a primary area of sales and service responsibility consisting of portions of the Commonwealth of Pennsylvania, portions of the State of New Jersey, and the State of Delaware. Sullivan Aff. at P 7 and Exhibit B. Paragraph 17 of the 1991 Micrographics Dealer Agreement provides that "this Agreement shall be governed by and construed in accordance with the laws of the State of New York," and further provides that:

 Each of these three agreements was signed on behalf of NMS by its president, D. Richard Shonk. Mr. Shonk has more than twenty years of experience in the office equipment industry and as president of NMS. NMS never objected to nor sought to negotiate the choice of law or forum selection provisions contained in the 1990 Optical Disk Agreement and the 1991 Micrographics Dealer Agreement. Sullivan Aff. at P 11.

 NMS alleges that between 1974 and about 1978, NMS was Canon's exclusive distributor in NMS's sales territories to the Federal Government. Complaint at P 8; Affidavit of D. Richard Shonk ("Shonk Aff.") at P 4. NMS states that it developed a significant market presence for Canon products in the Federal Government during that time. Complaint at P 18; Shonk Aff. at P 4.

 According to the Complaint, in the late 1970's Canon formed a division known as the Government Marketing Center for purposes of making direct sales to the federal government. Complaint at P 14. See also Shonk Aff. at P 5. NMS objected to the establishment of that division, on the ground that the division would directly compete with NMS in NMS's sales territories. Complaint at P 14; Shonk Aff. at P 5. NMS alleges that in 1978, NMS's Shonk, and its Vice President, Stephen bring, met with Canon's then national sales manager in micrographics at NMS's office in Silver Spring, Maryland to resolve this issue. Complaint at P 15; Shonk Aff. at P 6. According to NMS, the parties allegedly agreed at that meeting to the following:

 
(a) NMS would remain a Canon distributor and use its extensive government contacts to continue to develop a market for Canon Micrographic Products with the Federal Government.
 
(b) in return, Canon agreed (i) not to sell Canon Micrographic Products to the Federal Government in NMS's sales territory; or (ii) if Canon or any other distributor sold Canon Products to the Federal Government in NMS's territory, Canon agreed to pay NMS the standard sales commission NMS would have earned on such sales.

 Shonk Aff. at P 7. See also Complaint at P 16. (This alleged agreement will hereinafter be referred to as the "1978 Oral Agreement.") NMS asserts that in reliance upon the Oral Agreement, it directed substantial efforts towards marketing Canon Products to the federal government.

 NMS alleges that while Canon abided by the terms of the Oral Agreement for a while, some time in or about 1986 Canon secretly stopped paying NMS commissions owed to NMS under the purported terms of the Oral Agreement. *fn1" NMS further alleges that Canon breached the Oral Agreement by, inter alia, announcing in January 1993 that the Canon Government Marketing ...


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