The opinion of the court was delivered by: Lechner, District Judge.
This is an action brought by plaintiff, Robert Hoffer ("Hoffer"),
against defendants InfoSpace.com, Inc. ("Infospace") and Naveen Jain
("Jain") (collectively, the "Defendants"). On 15 December 1999, Hoffer
filed a complaint (the "Complaint") that alleges, inter alia, a claim for
damages for breach of contract, misrepresentation, fraud, breach of the
covenant of good faith and fair dealing and promissory estoppel. See
Complaint, ¶¶ 1, 22-44. Hoffer further alleges the instant matter is
within the jurisdiction of this court pursuant to 28 U.S.C. § 1332,
see id., ¶ 2, and venue is properly laid in this District pursuant to
28 U.S.C. § 1391 (a) ("Section 1391(a)"). See id. On 31 January
2000, the Defendants filed an answer and counter claims (the
"Answer/Counterclaims"). In particular, the Defendants allege Hoffer
breached the terms of a loan agreement with Infospace, misappropriated
trade secrets and breached a confidential relationship with his
employer, Infospace. See Answer/Counterclaims, ¶¶ 60-66.
For the reasons set out below, the Motion to Transfer is granted; the
action is transferred for all purposes to the United States District
Court for the Western District of Washington.
Hoffer currently resides at One East Elbrook Drive in Allendale, New
Jersey. See Complaint, ¶ 3. It appears Hoffer has been engaged in the
business of licensing "yellow and white pages data" and syndicated
services to internet, software, database, telecommunications and media
firms. Id., ¶ 7. Hoffer alleges he began working for Infospace in or
around the "late Spring of 1996 on a consulting basis." Id., ¶ 11.
Jain is the President and Chief Executive Officer of Infospace and
resides in the State of Washington. Id., 914. See also
Answer/Counterclaims, ¶¶ 4-5. Infospace is a Delaware corporation with
its principal place of business located in Redmond, Washington. Id., ¶
5. See also Answer/Counterclaims, ¶¶ 4-5. Infospace was founded in or
around March 1996. Id., ¶ 6. Hoffer alleges Infospace is a provider
of internet services. Id. Hoffer further alleges Infospace provides these
services through its yellow pages, white pages and e-mail directories.
As mentioned, Hoffer alleges the Defendants breached the terms of an
employment agreement and, in addition, have prevented Hoffer from
exercising certain stock options given to him in an employment
agreement, dated 25 June 1996 (the "25 June 1996 Employment Agreement").
See id., ¶ 19.
Prior to March of 1996, it appears Hoffer was the general manager of
the "electronic/interactive" media division of a firm known as Database
America Companies, Inc. ("DAC"), located in Montvale, New Jersey. See
id., ¶ 7. As mentioned, Hoffer was engaged in the business of
licensing yellow and white pages data and syndicated services to
internet, software, database, telecommunications and media firms. See
In or around the late Spring of 1996, Hoffer began working with Jain on
a consulting basis. See id., ¶ 11. Hoffer alleges he agreed to work
with Jain to build an internet directory services company. See id.,
¶ 12. For his part Hoffer alleges he created a sales presentation for
"co-branding" services as well as a revenue model for the business. See
id. Hoffer further alleges he introduced Jain to several clients
including "Playboy, the New York Times, The Wall Street Journal,
Infoseek, Web TV, Advanced Internet and Riddler/Interactive Imagination."
Id., ¶ 13. In addition, Hoffer alleges he "demonstrated to Jain a
directory service application capable of supporting high traffic query
and response into very large databases via HTTP." Id., ¶ 14. Hoffer
alleges he introduced Jain to Timothy Day, a software developer, capable
of engineering the software necessary to operate the directory services
that Infospace was to provide to its customers. Id., ¶ 15.
Hoffer alleges he left DAC and officially joined Infospace based on the
representation of Jain that Hoffer would be a 50% partner with Jain. See
id., ¶ 16. Hoffer specifically alleges he "quit [DAC] in New Jersey
and joined Infospace at its new offices in Redmond, Washington." Id. Upon
arrival at Infospace, Hoffer alleges Jain "unilaterally reduced" his
prior employment offer of a 50% partnership interest in Infospace and,
instead, presented Hoffer with various employment proposals. See id.,
On or about 1 June 1996, Hoffer alleges Jain forwarded to him a "letter
agreement" that provided that Hoffer would be paid $50,000 and granted
the option to buy up to 300,000 shares of stock at $.10 per share. See
id., ¶ 17. As a result of this new employment proposal, it is alleged
that Hoffer and Jain entered into negotiations concerning an acceptable
employment arrangement. See id. It appears that on 25 June 1996,*fn3
Jain provided Hoffer with an employment agreement (see 25 June 1996
Employment Agreement), by which Jan granted Hoffer, in part, the right to
the immediate purchase of up to 75,000 shares of stock at $1.00 per
Hoffer alleges the 25 June 1996 Employment Agreement was executed by
Jain and accepted by Hoffer. See id. Thereafter, Hoffer alleges he began
working as an Infospace employee for a period of approximately four
months. See id., ¶ 18. Hoffer, however, alleges Jain fired him over
the telephone during a business trip. See id.
Upon information and belief, Hoffer alleges that Jain has "engaged in a
pattern and practice of soliciting the involvement and employment of key
personnel of competing business by promising them senior management
positions and lucrative compensation packages . . . and then terminating
the employee and reneging on his promises and agreements." Id., ¶
20. In count one of the Complaint, Hoffer alleges Infospace breached the
25 June 1996 Employment Agreement. See id., ¶ 23. Hoffer, moreover,
alleges he has performed the terms of the 25 June 1995 Employment
Agreement and completed all conditions necessary to entitle him to
exercise the options contained in the 26 June 1996 Employment Agreement.
In count two of the Complaint, Hoffer alleges the Defendants "breached
the covenant of good faith and fair dealing implied in every contract."
Id., ¶¶ 26-27.
In count three and count four of the Complaint Hoffer alleges the
Defendants committed fraud and made negligent misrepresentations in that
they misrepresented "material facts inducing [Hoffer] to terminate his
employment with [DAC] and to accept an employment position with Infospace
and to provide infospace with [Hoffer's] contacts and industry
knowledge." Id., ¶ 29. Hoffer specifically alleges that based on the
representations of Jain concerning "founders equity," he introduced the
Defendants to various business contacts that are today part of the
Infospace network. See id. Hoffer further alleges he introduced the
Defendants to "technical people who were able to develop the database
engineering tools that are used in creating the directory service and
products provided by Infospace. . . ." Id.
In addition, Hoffer alleges that based on the representations of Jain,
he left his position at DAC and joined Infospace in Redmond, Washington,
"where he was provided with paperwork which was different than the
representations that have been made by Jain to induce Hoffer to leave his
prior employment." Id., ¶ 30. See also id., 35-36.
Finally, in count five of the Complaint, Hoffer alleges the Defendants
are estopped from denying the terms of the 25 June 1996 Employment
Agreement because Hoffer reasonably relied on the misrepresentations and
inducements made by the Defendants. See id., ¶¶ 40-44.
A. The Forum Selection Clause
As mentioned, the Motion to Transfer is based, in part, on the Forum
Selection Clause contained in the NDA negotiated and signed by Hoffer and
Infospace in Redmond, Washington. See Moving Brief at 4-5, 8-14; Reply
Brief at 2-9. The Defendants argued that as a result of the employment
negotiations between Hoffer and Jain (which took place exclusively in
Redmond, Washington) Infospace drafted, and Hoffer signed the 25 June
1996 Employment Agreement and the NDA at Infospace headquarters. See
Moving Brief at 5. The Defendants specifically argued that the Forum
Selection Clause "requires that actions arising out of [Hoffer's]
employment with Infospace be filed in state court in King County,
Washington or in the United States District Court for the Western
District of Washington." Id. at 8. The Forum Selection Clause stated, in
relevant part, that the parties agreed
that this agreement shall be governed for all purposes
by the laws of the State of Washington as such law
applies to contracts to be performed within Washington
. . . and that venue for any action arising out of
this Agreement shall be properly laid in King county,
Washington or in the Federal District Court of the
Western District of Washington. . . .
The Circuit has noted that the construction of a contract is usually a
matter of State, not Federal, common law. See Bel-Ray Co., Inc. v.
Chemrite (Pty) Ltd., 181 F.3d 435, 441 (3d Cir. 1999); Danka Funding v.
Page, Scrantom, Sprouse, Tucker & Ford, 21 F. Supp.2d 465, 474 (D.N.J.
1998) (citing General Engineering Corp. v. Martin Marietta, 783 F.2d 352,
356 (3d Cir. 1986)). Accordingly, the initial step in the instant matter
is to determine which State law to apply when considering whether the
Forum Selection Clause is an enforceable part of the employment agreement
entered into between the parties. See Danka Funding, 21 F. Supp.2d at
The language of the Forum Selection Clause itself, therefore, is not
authority for what law to apply. Rather, a Federal court sitting in
diversity must utilize the choice of law rules of the forum State
— New Jersey. See Day & Zimmermann, Inc. v. Challoner, 423 U.S. 3,
96 S.Ct. 167, 46 L.Ed.2d 3 (1975); Klaxon v. Stentor Elec. Mfg. Co.,
313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); On Air Ent. Corp. v.
Nat'l. Indem. Co, 210 F.3d 146, 149 (3d Cir. 2000); Assicurazioni
Generali v. Clover, 195 F.3d 161, 164 (3d Cir. 1999) (stating that
"[D]istrict [C]ourt in . . . diversity action [is] obligated to apply the
forum's . . . choice of law rules in resolving the parties' dispute. . .
."); Robeson Indus. Corp. v. Hartford Acc. & Indem. Corp., 178 F.3d 160,
164 (3d Cir. 1999) (same); Danka Funding, 21 F. Supp.2d at 469.
New Jersey courts implement the "governmental-interest" approach to
choice of law questions, which requires application of the law of the
State with the greatest interest in resolving the particular issue raised
by the underlying litigation. See On Air Ent., 210 F.3d at 149; Robeson,
178 F.3d at 164; Gantes v. Kason Corp., 145 N.J. 478, 484-493, 679 A.2d 106
(1996). Cf. Pfizer, Inc. v. Employers Ins. of Wausau, 154 N.J. 187,
712 A.2d 634 (1998); HM Holdings, Inc. v. Aetna Cas. & Sur. Co.,
154 N.J. 208, 712 A.2d 645 (1998) (decided concurrently with Pfizer);
Unisys Corp. v. Insurance Co. of N. Am., 154 N.J. 217, 712 A.2d 649
(1998) (same); Gilbert Spruance Co. v. Pennsylvania Mfrs.' Ass'n Ins.
Co., 134 N.J. 96, 629 A.2d 885, (1993).
"The initial prong of the governmental-interest analysis entails an
inquiry into whether there is an actual conflict between the laws of the
respective states, a determination that is made on an issue-by-issue
basis." Gantes, 145 N.J. at 484-493, 679 A.2d 106. In the absence of an
actual conflict, the law of the forum State — in this case, New
Jersey-is applied. See On Air Ent., 210 F.3d at 149; Danka Funding, 21
F. Supp.2d at 469 (citing Schreiber v. Camm, 848 F. Supp. 1170, 1174
In the instant matter, no actual conflict exists with respect to the
standard for consent to forum selection clauses in contracts; the courts
of New Jersey and Washington are in accord with the law as set out by the
United States Supreme Court in M/S Bremen v. Zapata Off-Shore Co.,
407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972),*fn4 and its
progeny. Compare Copelco Capital Inc. v. Shapiro, 331 N.J. Super. 1, 4,
750 A.2d 773 (App. Div. 200 0) (stating that "forum selection clauses are
generally enforced in New Jersey." "Nevertheless, such provisions will
not be given effect if they are the result of `fraud or coercive
bargaining power,'" or if enforcement of the clause would "be seriously
inconvenient for the trial."); Caspi v. Microsoft Network,
323 N.J. Super. 118,
122, 732 A.2d 528 (App. Div. 1999); Shelter Systems v. Lanni Builders,
263 N.J. Super. 373, 375, 622 A.2d 1345 (App. Div. 1993) with In re
Matter of Kronenberg Family Trust, 2000 WL 17178, 1 (Wash.App. Div. 10
Jan. 2000) (unpublished) (observing that "Washington will enforce a forum
selection clause unless it is unreasonable and unjust."); Voicelink Data
Services, Inc. v. Datapulse, Inc., 86 Wn. App. 613, 618, 937 P.2d 1158
(1997) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n. 14,
105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)).
Analysis of the Forum Selection Clause, therefore, is necessarily
predicated on the "M/S Bremen standard" as applied by this Circuit. See
Danka Funding, 21 F. Supp2d. at 470 (stating that "[t]his [c]ourt will
therefore apply M/S Bremen standard as it has been applied in New Jersey
and this Circuit, occasionally looking to the United States Supreme Court
for guidance."). The Circuit, in accordance with the "M/S Bremen
standard, " deems forum selection clauses presumptively valid. See
Reynolds Pub., Inc. v. Graphics Financial Group, Ltd., 938 F. Supp. 256,
263 (D.N.J. 1996). In this regard, the Circuit directs that forum
selection clauses should be enforced unless the party objecting to
enforcement establishes that "it would be the result of fraud or
overreaching, enforcement would violate a strong public policy of the
forum, or that enforcement would in the particular circumstances of the
case result in litigation in a jurisdiction so seriously inconvenient as
to be unreasonable." Id., at 263. See also Dayhoff Inc. v. H.J. Heinz
Co., 86 F.3d 1287, 1297-98 (3d Cir. 1996); Danka Funding, 21 F. Supp.2d.
The arguments set forth by Hoffer, in support of his contention that
the Forum Selection Clause is unreasonable and, therefore,
unenforceable, are without merit. For example, Hoffer argued, in part,
that the presumptive validity of the Forum Selection Clause is overcome
because it was the "result of fraud or overreaching[,] . . . that
enforcement would violate a strong public policy of the forum[,] or . .
. that enforcement would in the particular circumstances of the case
result in litigation in a jurisdiction so seriously inconvenient as to be
unreasonable." Opp. Brief at 22.
1. Fraud, Overreaching and, or, Undue Influence
Hoffer argued that the Forum Selection Clause is invalid because "Jain
fraudulently misrepresented that he and Hoffer would be partners with
equal numbers of Infospace shares, thereby inducing Hoffer to resign from
his position at [DAC]."*fn5 Id. at 23.
While it is true that a forum selection clause may be set aside if it
is the product of fraud or overreaching, see Danka Funding, 21 F. Supp.2d
at 470, this is so only where the "inclusion of that clause in the
contract was the product of fraud or coercion." Id. (citing Scherk v.
Alberto-Culver Co., 417 U.S. 506, 519 n. 14, 94 S.Ct. 2449, 41 L.Ed.2d
270 (1974)). In other words, fraud and overreaching are grounds for
setting aside a forum selection clause only if it is determined that the
inclusion of the forum selection clause in the contract was the product
of deception and, or, coercion. It is insufficient,
therefore, "to allege that one was induced generally to enter into the
contract itself as a result of fraud." Nat'l Micrographics Sys. v. Canon
U.S.A., 825 F. Supp. 671, 675 (D.N.J. 1993).
In the instant matter, however, Hoffer merely argued that the
Defendants, in an initial employment discussion, "fraudulently
misrepresented that [Jan] and Hoffer would be partners with equal numbers
of Infospace shares. . . ." Opp. Brief at 23. Significantly, Hoffer did
not argue that the inclusion of the Forum Selection Clause in the NDA was
a result of either fraud, deception and, or, coercion on the part of the
Defendants. See Danka Funding, 21 F. Supp2d. at 470; Nat'l Micrographics
Sys., 825 F. Supp. at 675.
Even assuming arguendo that Hoffer argued the inclusion of the Forum
Selection Clause in the NDA resulted from fraud or coercion, there are
simply no facts to support such a conclusion. For example, the Complaint
does not mention, much more allege, that the Forum Selection Clause, or
even the NDA or the 25 June 1996 Employment Agreement, was the product of
fraud or coercion. See Complaint, ¶¶ 16-18. To the contrary, Hoffer
[o]n or about June 1, 1996 Jain provided [him] with a
proposed letter agreement that provided, in pertinent
part, that [he] was to be paid an annual salary of
$50,000 and granted [him] the option to buy up to
300,000 shares of stock at $.10 per share.
Thereafter, negotiations between Jain and Hoffer
ensued. Jain then provided Hoffer with a letter
agreement dated as of June 25, 1996 that granted
Hoffer the immediate right to purchase up to 75,000
shares of stock at $1.00 per share. The June 25, 1996
Agreement was executed by Naveen Jain, as President of
Infospace and accepted by Hoffer. Thereafter, Hoffer
worked as an employee for Infospace for a period of
approximately 4 months. . . .
Id., ¶¶ 17-18 (emphasis added). Hoffer similarly characterized the
employment "negotiations" that took place in Redmond, Washington in
"Plaintiff's Answers and Responses to Defendants' First Set of
Interrogatories and Request for the Production of Documents" (the
"Answers and Responses"), ...