United States District Court, District of New Jersey, D.
May 18, 2000
CADAPULT GRAPHIC SYSTEMS, INC., PLAINTIFF,
TEKTRONIX, INC., DEFENDANT.
The opinion of the court was delivered by: Wolin, District Judge.
This matter comes before the Court on defendant's motion to (1)
to Rule 12 of the Federal Rules of Civil Procedure, or in the
alternative, (2) transfer venue pursuant to 28 U.S.C. § 1404(a).
Defendant, Tektronix, Inc. ("Tektronix"), argues that the
District of New Jersey is an improper forum to hear this case. In
making this argument, defendant points to a forum-selection
clause in an agreement signed by the parties which directs any
litigation to be brought in Oregon. Plaintiff, Cadapult Graphic
Systems, Inc. ("Cadapult"), opposes the motion. Cadapult
maintains that the forum-selection clause is invalid because it
is contained in a franchise agreement, thus, making it
presumptively invalid pursuant to New Jersey law. See Kubis &
Perszyk Assocs., Inc. v. Sun Microsystems, Inc., 146 N.J. 176,
680 A.2d 618 (1996). The matter has been decided on the papers,
pursuant to Rule 78 of the Federal Rules of Civil Procedure. For
the reasons stated below, the Court will grant defendant's motion
to transfer venue to the District of Oregon.
Plaintiff, Cadapult, is a Delaware corporation with its
principal place of business in New Jersey. Cadapult is in the
business of reselling digital color printers and supplies and
providing parts and service for such printers. Defendant,
Tektronix, is an Oregon corporation with its principal place of
business in Oregon. Tektronix is in the business of manufacturing
and selling digital color printers and supplies, including a
patented form of solid ink for color printers.
In October 1988, Cadapult entered into an agreement with
Tektronix, entitled "Value Added Dealer Agreement," pursuant to
which Cadapult could purchase Tektronix products at a discounted
price for resale and could use Tektronix's trademark and
advertising materials in connection with the resale of Tektronix
products. Under the terms of this agreement, Tektronix appointed
Cadapult to be an "authorized value added dealer." In August
1991, the parties entered into a subsequent "Value Added Dealer
Agreement" (the "Agreement"). Cadapult remains a "value added
dealer" pursuant to the August 1991 Agreement.
Both agreements contain a forum-selection clause. The clause
Governing Law. This Agreement and the rights of the
parties hereunder shall be governed by the laws of
the State of Oregon. Any litigation between the
parties shall be commenced and prosecuted in the
state and federal courts in Oregon.
Cadapult contends that this clause was non-negotiable.
Specifically, Cadapult asserts that, at the time of contracting,
it was a fledgling company and that it "feared" negotiations may
jeopardize its status as a "value added dealer."
Tektronix, on the other hand, maintains that Cadapult "had
every opportunity to negotiate" this clause. Indeed, Tektronix
points to an established procedure which it follows in
negotiating dealer's concerns. Moreover, defendant asserts that
they never advised Cadapult that this clause was non-negotiable,
nor did Cadapult object to the inclusion of this clause. Further,
they point out that, in 1991, Cadapult was an established
business with three years experience.
In August 1999, Cadapult filed a multicount complaint in this
Court. Notably, the complaint alleged no violation of the "Value
Added Dealer Agreement." Similarly, it did not allege that
Tektronix's practices pursuant to this Agreement violated the New
Jersey Franchise Practices Act ("Franchise Act"). Instead,
Cadapult's complaint alleged, inter alia, (1) Franchise Act
violations of a different agreement, entitled the "Premier Plus
Reseller Program," (2) breach of contract, and (3) various
federal and state statutory violations.
As to the alleged Franchise Act violations relating to the
"Premier Plus Reseller Program," the Court, in a prior opinion,
has already found those allegations substantially
devoid of merit. See Cadapult Graphic Systems, Inc. v.
Tektronix, Inc., Civ. No. 99-3779, Memorandum Op., Aug. 25,
1999. At the outset of this action Cadapult moved, based on the
alleged Franchise Act claims, for a temporary restraining order
and a preliminary injunction. Cadapult maintained that defendant
violated the Franchise Act because defendant discontinued
Cadapult's participation in the "Premier Plus Reseller Program."
The Court denied Cadapult's motion, holding that Cadapult would
not likely succeed on the merits. See id. at 7-9. The court did
so because the "Premier Plus Reseller Program" did not constitute
a franchise agreement within the meaning of the Franchise Act.
Specifically, the Court found that Cadapult failed to demonstrate
a "written agreement," a "license to Use Tektronix's tradename or
trademark," and a "community of interest" between Cadapult and
Tektronix. See id.; see also N.J.S.A. § 56:10-3(a) (defining a
"franchise" as a "written agreement in which a person grants to
another person a license to use a trade name, trade mark, service
mark, or related characteristics, and in which there is a
community of interest in the marketing of goods or services. . .
After the Court denied the preliminary injunction, Tektronix
brought the instant motion. In this motion, Tektronix seeks
either dismissal or transfer of this case pursuant to the
above-quoted forum-selection clause. Cadapult, however, maintains
that the forum-selection clause is invalid under the New Jersey
Supreme Court's decision, Kubis & Perszyk Assocs., Inc. v. Sun
Microsystems, Inc., 146 N.J. 176, 680 A.2d 618 (1996).*fn1 For
the reasons discussed immediately below, the Court will grant the
motion to transfer, finding that the facts of this case do not
The present motion hinges around the Agreement's
forum-selection clause. "In federal court, the effect to be given
a contractual forum selection clause in diversity cases is
determined by federal not state law." Jumara v. State Farm Ins.
Co., 55 F.3d 873, 877 (3d Cir. 1995); see also Stewart Org.,
Inc. v. Ricoh Corp., 487 U.S. 22, 27-32, 108 S.Ct. 2239, 101
L.Ed.2d 22 (1988).
Here, in a motion to transfer venue, the applicable federal law
is 28 U.S.C. § 1404(a).*fn2 See Stewart Org., 487 U.S. at
28-29, 108 S.Ct. 2239; Jumara, 55 F.3d at 877-78. Thus, federal
courts must view a forum-selection clause within the parameters
of section 1404 and other related federal laws. See Stewart
Org., 487 U.S. at 28-29, 108 S.Ct. 2239; Jumara, 55 F.3d at
Section 1404(a) provides:
For the convenience of parties and witnesses, in the
interest of justice, a district court may transfer
any civil action to any other district or division
where it might have been brought.
The decision whether to transfer falls in the sound discretion
of the trial court. See Lony v. E.I. DuPont de Nemours & Co.,
886 F.2d 628, 632 (3d Cir. 1989); Danka Funding, L.L.C. v. Page,
Scrantom, Sprouse, Tucker & Ford, P.C., 21 F. Supp.2d 465, 474
(D.N.J. 1998); NCR Credit Corp. v. Ye Seekers Horizon, Inc.,
17 F. Supp.2d 317, 320 (D.N.J. 1998). In exercising this discretion,
the Court must consider certain factors enunciated by the Supreme
Court and further developed by the Third Circuit. See Gulf Oil
Corp. v. Gilbert, 330 U.S. 501, 508-09, 67 S.Ct. 839, 91 L.Ed.
1055 (1947); Jumara, 55 F.3d at 879-80. These factors fall into
two groups: those relating to the private convenience of the
litigants and those affecting the public interest in the fair and
efficient administration of justice. See Jumara, 55 F.3d at
In Jumara, the Third Circuit enumerated both private and
public interests protected by section 1404(a). Private interests
include: (1) the "plaintiff's forum preference," (2) "the
defendant's preference," (3) "whether the claim arose elsewhere,"
(4) "the convenience of the parties as indicated by their
relative physical and financial condition," (5) "the convenience
of the witnesses-but only to the extent that the witnesses may
actually be unavailable for trial in one of the fora," and (6)
"the location of books and records (similarly limited to the
extent that the files could not be produced in the alternative
forum)." Jumara, 55 F.3d at 879 (citations omitted).
Public interests include: (1) "the enforceability of the
judgment," (2) "practical considerations that could make the
trial easy, expeditious, or inexpensive," (3) the relative
administrative difficulty in the two fora resulting from court
congestion, (4) "the local interest in deciding local
controversies at home," (5) "the public policies of the fora,"
and (6) "the familiarity of the trial judge with the applicable
state law in diversity cases." Id. at 879-80.
Within this framework, courts should place great weight on
valid forum-selection clauses. While a valid forum-selection
clause is not dispositive, "it is entitled to substantial
consideration." Id. at 880.
Cadapult argues that the instant forum-selection clause is
invalid and, thus, deserves no consideration. In this Circuit,
however, "in accord with the dictates of the Supreme Court, forum
selection clauses are presumptively valid." Reynolds Publishers,
Inc. v. Graphics Fin. Group, Ltd., 938 F. Supp. 256, 263 (D.N.J.
1996) (citing Coastal Steel Corp. v. Tilghman Wheelabrator
Ltd., 709 F.2d 190, 202 (3d Cir. 1983), overruled on other
ground, Lauro Lines v. Chasser, 490 U.S. 495, 109 S.Ct. 1976,
104 L.Ed.2d 548 (1989)); see also Union Steel America Co. v. M/V
Sanko Spruce, 14 F. Supp.2d 682, 686 (D.N.J. 1998). Accordingly,
courts will respect such clauses unless the resisting party makes
a "strong showing" that the clause is "unreasonable." See M/S
Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907,
32 L.Ed.2d 513 (1972) (finding that forum-selection clauses are
"prima facie valid and should be enforced unless enforcement is
shown by the resisting party
to be `unreasonable' under the circumstances"); Reynolds
Publishers, Inc., 938 F. Supp. at 263 (citing Bremen, 407 U.S.
at 10, 92 S.Ct. 1907). Such a clause is "unreasonable" only if
the party objecting to its enforcement establishes
(1) that it is the result of fraud or overreaching,
(2) that enforcement would violate a strong public
policy of the forum, or (3) that enforcement would in
the particular circumstances of the case result in
litigation in a jurisdiction so seriously
inconvenient as to be unreasonable.
Coastal Steel Corp., 709 F.2d 190 at 202; Union Steel America
Co., 14 F. Supp.2d at 686.
Cadapult argues that this clause is invalid because (1) it
violates New Jersey public policy and (2) it is the result of
overreaching. Both arguments are unavailing.
A. New Jersey Public Policy — The Kubis Decision
Primarily, Cadapult argues that the forum-selection clause is
invalid because its enforcement would violate the holding of
Kubis, thus transgressing a strong public policy of New
Jersey.*fn3 In Kubis, the plaintiff, a franchisee, brought a
claim in New Jersey state court, alleging a violation of the
Franchise Act. See Kubis, 146 N.J. at 180, 680 A.2d 618. The
alleged Franchise Act violation stemmed from the franchisor's
purported wrongful termination of the parties' "Value Added
Dealer Agreement" — a franchise agreement.*fn4 See id. at
179-81, 680 A.2d 618. Although the agreement contained a
forum-selection clause, the New Jersey Supreme Court refused to
enforce it on public policy grounds. See id. at 192-97,
680 A.2d 618. The Kubis court held that, in Franchise Act cases,
[forum-selection] clauses are presumptively invalid
because they fundamentally conflict with the basic
legislative objectives of protecting franchisees from
the superior bargaining power of franchisors and
providing swift and effective judicial relief against
franchisors that violate the Act.
Kubis, 146 N.J. at 193, 680 A.2d 618.
After substantial consideration, this Court finds that the
public policy enunciated in Kubis is not implicated here.
Notwithstanding its language concerning uneven bargaining
positions, the Court must read Kubis's holding as an organic
whole. Under this reading, the Court finds that Kubis only
applies where, unlike in the instant case, a plaintiff asserts a
valid claim under the Franchise Act. Indeed, in articulating its
public policy rationale, the New Jersey Supreme Court placed
particular emphasis upon violations of the Franchise Act. The
. . a forum-selection clause can materially
diminish the rights guaranteed by the Franchise Act
because the franchisee must assert those rights in
an unfamiliar and distant forum, with an out-of-state
counsel, and bear the added expense of litigation the
franchisor's designated forum. . . .
In such an event, the inevitable result would be to
limit severely the availability of New Jersey courts
as a forum for the enforcement of franchisee's
claims under the Act, a result the legislature
assuredly would find intolerable. . . .
The added expense, inconvenience, unfamiliarity of
litigating claims under the Act in a distant forum
could, for some marginally financed franchisees,
result in the abandonment of meritorious claims that
could have been successfully litigated in a New
Jersey court. Although the legislature expressly has
prohibited the use of forum-selection clauses only in
motor-vehicle agreements, we entertain little doubt
that the legislature would prefer to extend that
prohibition to other franchisees rather than to
permit forum-selection clauses to thwart the
vindication of franchisees' rights under the Act.
Kubis, 146 N.J. at 194-96, 680 A.2d 618
(emphasis added). The
Kubis court further noted that its holding applied
"[p]articularly in the context of a claim for wrongful
termination" of a franchise agreement — a specific violation of
the Franchise Act.
The meaning of this quoted language is plainly evident. The New
Jersey Supreme Court did not intend to extend Kubis's
protection to non-Franchise Act cases. Indeed, Kubis did not
envision a situation where the purported franchisee failed to
assert a valid Franchise Act claim. Rather, the Kubis court
presumed such forum-selection clauses invalid only where
franchisees seek "swift and effective judicial relief against
franchisors that violate the Act," id. at 193, 680 A.2d 618,
and in particular, those cases where franchisors "violate the
Act" by wrongfully terminating a franchise agreement. Id. Thus,
without question, Kubis does not extend to the facts of this
Indeed, in the instant case, unlike Kubis, plaintiff has not
alleged that defendant violated the Franchise Act, vis à vis a
wrongful termination of the "Value Added Dealer Agreement" — the
agreement which contained the forum-selection clause. See id.
at 194, 680 A.2d 618 (noting that the public policy rationale
behind Kubis applies "[p]articularly in the context of a claim
for wrongful termination [of a franchise agreement]"). Moreover,
unlike Kubis, plaintiff has failed to assert any valid
Franchise Act violation.*fn5 As a result, Kubis's concern of
enforcing Franchise Act claims has no application in this case.
Such a rule is entirely consistent with New Jersey public
policy. Indeed, outside of Franchise Act cases, New Jersey courts
routinely find forum-selection clauses prima facie valid and
enforceable. See Caspi v. Microsoft Network, L.L.C.,
323 N.J. Super. 118, 123, 732 A.2d 528 (App. Div. 1999); McNeill v.
Zoref, 297 N.J. Super. 213, 219, 687 A.2d 1052 (App. Div. 1997);
Wilfred MacDonald, Inc. v. Cushman, Inc., 256 N.J. Super. 58,
63, 606 A.2d 407 (App. Div.), certif. denied, 130 N.J. 17,
611 A.2d 655 (1992). In fact, New Jersey's treatment of forum
selection clauses substantially mirrors the favorable treatment
espoused in federal courts. See McNeill, 297 N.J.Super. at 219,
687 A.2d 1052; Wilfred MacDonald, 256 N.J.Super. at 63,
606 A.2d 407. Kubis merely created an exception to New Jersey's
general public policy of upholding the validity of such clauses.
See Caspi, 323 N.J.Super. at 123, 732 A.2d 528. Thus, to extend
Kubis outside the realm of Franchise Act cases makes little
sense. The Court refrains from doing so.
Simply because this purported "franchise agreement" contains a
forum-selection clause is insufficient, in itself, to void the
clause. To be found invalid under Kubis, the clause must run
counter to New Jersey public policy. The facts of this case do
not implicate the substantial policy concern
articulated by the New Jersey Supreme Court — "providing swift
and effective judicial relief [in New Jersey courts] against
franchisors that violate the Act." Kubis, 146 N.J. at 193,
680 A.2d 618 (emphasis added). Accordingly, the enforcement of the
instant forum-selection clause does not run counter to the
forum's public policy. The Court, thus, is unwilling to
invalidate the clause on this ground.
Cadapult also argues, apart from Kubis, that the clause is
invalid due to the parties' uneven bargaining positions. Again,
the Court disagrees.
Given the presumption in favor of enforcement, the record
inadequately details circumstances that would warrant rejection
of the clause. See Foster v. Chesapeake Ins. Co.,
933 F.2d 1207, 1219 (3d Cir. 1991) (finding that forum-selection clauses
are "prima facie valid and should be enforced unless enforcement
is shown by the resisting party to be `unreasonable' under the
circumstances" (quoting Bremen, 407 U.S. at 10, 92 S.Ct.
1907)); Caspi, 323 N.J.Super. at 122-23, 732 A.2d 528 (finding
that forum-selection clauses are prima facie valid and not
contrary to public policy).
Cadapult argues that "Tektronix made clear that it would not
consider changes to its pre-printed agreement." (Pl.Opp.Br. at
27-28). The record does not support such an assertion. Rather,
the record merely suggests that Cadapult "feared" negotiating
with Tektronix. (Levin Decl. ¶ 18). Certainly, such a "fear" does
not establish that Tektronix would never consider such a change,
nor does it suggest overweening power. See Danka Funding, 21
F. Supp.2d at 471 ("Defendant's claim that it thought the
lease-form was non-negotiable, while admitting that it had failed
to attempt to negotiate any portion of the printed terms . . .
is simply inadequate."). To the contrary, Tektronix has put
forward evidence that it had a procedure in which it would
negotiate proposed changes. (Rivera Certif. ¶¶ 3-4). Cadapult
never proposed such a change. (Id.) "That there may not have
been actual negotiations over the clause does not affect its
validity." Foster, 933 F.2d at 1219 (citing Carnival Cruise
Lines, Inc. v. Shute, 499 U.S. 585, 590-93, 111 S.Ct. 1522, 113
L.Ed.2d 622 (1991)).
Moreover, the Court notes that at the time of the 1991
Agreement, Cadapult was not as feeble as it asserts. Indeed, the
record reflects that Cadapult was a growing and moderately
successful company, not a company susceptible to every whim of
Accordingly, plaintiff has failed to sustain its burden of
demonstrating an overweening bargaining position and the
invalidity of the forum-selection clause. As a result, the Court
must engage in a section 1404 analysis giving the clause
"substantial consideration." See Jumara, 55 F.3d at 880.
C. Section 1404 factors
In an ordinary case, "the burden of establishing the need for
transfer . . . rests with the movant." Jumara, 55 F.3d at 879
(citation omitted). But "[w]here the forum selection clause is
valid, the plaintiffs bear the burden of demonstrating why they
should not be bound by their contractual choice of forum." Id.
at 880. Hence, the burden rests with Cadapult.
1. Private Factors
In most cases, the plaintiff's forum choice is "a paramount
consideration in any determination of a transfer request."
Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir. 1970). A
forum-selection clause, however, trumps this consideration. See
Jumara, 55 F.3d at 880. The Third Circuit explained that "while
courts normally defer to a plaintiff's choice of forum, such
deference is inappropriate where the plaintiff has already freely
contractually chosen an appropriate venue." Id. at 880. Indeed,
"a forum selection clause is treated
as a manifestation of the parties preferences as to a convenient
forum." Id. Any "deference to the filing forum would only
encourage parties to violate their contractual obligations." In
re Ricoh Corp., 870 F.2d 570, 573 (11th Cir. 1989); see also
Wieczenski v. The Brake Shop, Civ. No. 93-5673, 1994 WL 111082,
at *7 (D.N.J. Mar.28, 1994) ("[W]hen a party brings suit upon a
contract that contains an enforceable forum selection clause,
that party has already effectively `chosen' the forum in which to
litigate the dispute.") Accordingly, the Court places no weight
on plaintiff's choice of forum.
With respect to the next factor — where the claim arose —
Cadapult alleges that Tektronix made decisions, principally in
Oregon, that resulted in injuries in New Jersey. Because both
forums are implicated, this factor is not determinative.
Similarly, the Court finds that the factors concerning the
location of witnesses and documents have little bearing. The
Court should only consider these factors where "the witnesses may
actually be unavailable" or where the documents may "not be
produced in the other forum." Jumara, 55 F.3d at 879. Neither
party has demonstrated the lack of availability of witnesses or
Lastly, Cadapult cannot now be heard to decry the resultant
litigation expenses and inconvenience associated with a transfer
to Oregon. By executing a forum-selection clause, the parties to
the agreement bear the risks of such inconvenience. See
Wieczenski, 1994 WL 111082, at *8 (citing Sparks Tune-Up Ctrs.,
Inc. v. Padussis, Civ. No. 88-9525, 1990 WL 87283, at *2
(E.D.Pa. Jun.19, 1990)).
2. Public Factors
As to the first factor — the enforceability of a judgment,
neither party argued, nor does the Court believe that the Oregon
District Court cannot enforce a judgment as well as this Court.
The next factor — practical considerations for an easy,
expeditious, or inexpensive trial — is also non-determinative.
Because this case is at an early stage, practical considerations
do not warrant its retention in this district. The Court is
confident that District of Oregon can adjudicate this matter as
efficiently as the District of New Jersey.*fn6
Further, as to the next factor, the Court finds that both fora
have an interest in deciding this case. Oregon has an interest in
regulating the conduct of its corporations, while New Jersey has
an interest in protecting its corporations.
Lastly, as to the public policy of the forum, the Court finds
that New Jersey public policy weighs in favor of transfer. As
discussed above, the policies of Kubis have no application in
this case. Hence, New Jersey's general policy of upholding the
validity forum-selection clauses is implicated. See Caspi, 323
N.J.Super. at 123, 732 A.2d 528.
Aside from Kubis, Cadapult argues that transfer would violate
New Jersey public policy because an Oregon court may enforce a
limitation on liability provisions found in the Value Added
Dealer Agreement. This argument is misplaced. The Court is
confident that both Oregon courts and New Jersey courts can
fairly analyze and apply other state's laws.*fn7
In sum, upon review of the relevant factors, the Court believes
that the "substantial consideration" due the forum-selection
clause, must be followed. Indeed, the Court finds that the
forum-selection clause, viewed through the prism of its section
1404 analysis, leads only to one result — transfer. Accordingly,
the Court will transfer this case to the District of Oregon.
Tektronix also moved, pursuant to Rule 12, to dismiss the
Complaint based on the forum-selection clause. In the context of
this case, transfer, not dismissal, is the proper remedy. Indeed,
the interests of justice, economy, and convenience point to
transfer, rather than dismissal. If the Court dismissed the case,
Cadapult must refile its complaint in Oregon. Such action may
cause unnecessary delay to the resolution of this matter. Thus,
the Court will not dismiss the Complaint.
For the above stated reasons, the Court will grant defendant's
motion to transfer to the Federal District Court of Oregon,
pursuant to 28 U.S.C. § 1404(a), and the Court will deny
defendant's motion to dismiss pursuant to Rule 12 of the Federal
Rules of Civil Procedure.