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PARK INN INTERN., L.L.C. v. MODY ENTERPRISES

June 28, 2000

PARK INN INTERNATIONAL, L.L.C., PLAINTIFF,
V.
MODY ENTERPRISES, INC. AND BHARAT MODY AND CHAMPA MODY, DEFENDANTS.



The opinion of the court was delivered by: Wolin, District Judge.

OPINION

This matter is opened before the Court upon the motion of defendants Mody Enterprises, Inc., Bharat Mody and Champa Mody for dismissal of the complaint against them pursuant to Federal Rule of Civil Procedure 12 (b)(2) for lack of personal jurisdiction in this Court over defendants and Rule 12(b)(3) for improper venue. In the alternative, defendants move for a transfer of this matter to the United States District Court for the District of New Mexico pursuant to 28 U.S.C. § 1404 (a). The motion has been decided upon the written submissions of the parties pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, the motion will be denied.

BACKGROUND

The facts relevant to the instant motion are not in dispute and are briefly stated. This matter involves the complaint of Park Inn International, L.L.C., alleging that defendants are in default on the terms of franchise agreement*fn1 between the parties and that Park Inn has suffered damages thereby. Defendants/franchisees operate four hotels in New Mexico (Mody Supp. Cert. ¶ 3) and are citizens of that state. One of these hotels operates under the Park Inn service mark pursuant to the parties' agreement. Defendants claim that they terminated the franchise agreement pursuant to a right of unilateral termination negotiated by the parties and rightfully deemed part of the franchise agreement.

Plaintiffs have brought suit here and rely upon a forum selection clause in the franchise agreement that reads:

This Agreement will be construed in accordance with the laws of the State of New Jersey. Licensee consents to the nonexclusive personal jurisdiction of the state and federal courts situated in the State of New Jersey and further waives objection to venue in any such court.

Defendants have raised arguments relying on other terms of the franchise agreement and manner in which it was negotiated. Certain other features of the agreement are relevant, therefore. Defendants say that they were solicited by a Mr. Kilcullen, allegedly a representative of Park Inn's parent, to make one of their hotels a Park Inn franchisee. Defendants aver that they approached the possibility of a long-term relationship with Park Inn warily and with trepidation.

For this reason, defendants maintain, they negotiated amendments to Park Inn's standard form agreement. These special points allegedly included a five-year window during which they retained the right unilaterally to terminate the franchise and a cap on liquidated damages for breach not to exceed twelve-months' royalties. Defendants have submitted documents in the nature of pre-execution term sheets claiming that those documents support their assertion that they successfully negotiated these items.

However, defendants also maintain that their principal, Mr. Bahrat Mody is a native of India and is not fluent in the English language. Mr. Mody avers that he received the final draft of the proposed franchise agreement in the mail and that he executed it without carefully reading its provisions. He states that he relied upon the term sheet he had received earlier and upon the representations of Park Inn representatives that the agreement would contain the provisions of the term sheet. More directly relevant to this motion, defendants claim that they had no idea that the agreement contained a waiver of their right to contest jurisdiction or venue in courts outside of New Mexico. Throughout, defendants maintain, they lacked advice of counsel.

Defendants now say that the franchise did not perform as they had been led to expect. Defendants contend that when they attempted to exercise the special, unilateral termination right defendants believed they had negotiated, Park Inn sued for breach of the agreement. This motion followed.

DISCUSSION

1. Personal Jurisdiction

Federal Rule of Civil Procedure 4(e) mandates that the federal courts exercise personal jurisdiction over non-resident defendants as provided by the long-arm jurisdiction statute of the state where the court sits. New Jersey's long-arm statute extends the reach of the New Jersey courts' jurisdiction to the maximum extent permitted by the Due Process Clause of the Fourteenth Amendment to the United States Constitution. N.J.Rule 4:4-4(c); DeJames v. Magnificence Carriers, Inc., 654 F.2d 280, 284 (3d Cir.), cert. denied, 454 U.S. 1085, 102 S.Ct. 642, 70 L.Ed.2d 620 (1981). Therefore, though technically applying a New Jersey Rule, the courts look to federal constitutional case law to determine matters of personal jurisdiction.

The United States Supreme Court has held that a contractual consent to personal jurisdiction should be enforced unless it would be unreasonable or unjust to do so. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n. 14, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). A forum selection clause will be invalidated only if it was the product of fraud or overreaching, if the agreed forum is so inconvenient as to deprive the litigant of his day in court, or where enforcement would contravene a strong public policy of the forum in which the suit is brought. The M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 18, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).

Yet defendants argue, correctly, that where a forum selection clause will influence a personal jurisdiction question, the validity of that clause as an element of the parties' agreement is evaluated under state law. General Engineering Corp. v. Martin Marietta Alumina, Inc., 783 F.2d 352, 356-57 (3d Cir. 1986). Somewhat inconsistently, defendants argue that New Jersey law would control the validity of the clause at issue here, presumably applying New Jersey's governmental interest test for choice of law questions and finding that this state has the greater interest in the dispute. See Gantes v. Kason Corp., 145 N.J. 478, 484, 679 A.2d 106 (1996).

Leading back yet again to federal law, however, New Jersey has adopted the approach of the United States Supreme Court in M/S Bremen, 407 U.S. at 10, 92 S.Ct. 1907, with respect to forum-selection clauses. See Kubis & Perszyk Assoc. Inc. v. Sun Microsystems, Inc., 146 N.J. 176, 186-93, 680 A.2d 618 (1996) (stating that Bremen represents the modern approach to the enforceability of forum-selection clauses). This Court will therefore apply the Bremen standard as it has been applied in New Jersey and this Circuit.

Indeed, outside of Franchise Practices 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), certif. denied, 162 N.J. 199, 743 A.2d 851 (1999); 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.

Finally, the Court rejects defendants' argument that the policy of the State of New Jersey as announced in Kubis, 146 N.J. 176, 680 A.2d 618, requires invalidation of the forum selection clause or that Kubis has modified the New Jersey law of forum selection clauses outside of the statutory context in which that case arose. Kubis held that in cases governed by the New Jersey Franchise Practices Act, forum selection clauses requiring suit outside this state were subject to a rebuttable presumption of invalidity. 146 N.J. at 186-93, 680 A.2d 618. It is patent that Kubis was driven by the view that the policies of the New Jersey Act are served by ensuring that New Jersey ...


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