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Jentar Trucking, Inc. v. Tun


July 15, 2008


On appeal from the Superior Court of New Jersey, Law Division, Hunterdon County, L-177-06.

Per curiam.


Argued February 25, 2008

Before Judges Stern, A.A. Rodríguez and Collester.

Plaintiffs, Jentar Trucking, Inc. (Jentar) and CRS Distribution, Ltd. (CRS), appeal from the December 7, 2006 amended judgment dismissing their complaint in light of the forum selection clause (FSC) in a contract with defendants Nelson Tun, Quadstar, Inc. and Anthony Manganelli, and from an order of January 23, 2007, denying reconsideration.*fn1 The Law Division found no jurisdiction to hear the matter because of the parties "Confidentiality/Non-Circumvention Agreement" (CNCA), which required litigation regarding it in California.*fn2

Plaintiffs argue that defendant Tun "waived" the FSC provision of the agreement, plaintiff Jentar was not a party to the agreement, it would be "unfair and unreasonable" to enforce the clause, that the matter was decided based on improper submissions to the trial court, that there was no agreement or "meeting of the minds" regarding the FSC, California may not accept or entertain the case (which might have to come back to New Jersey anyway - at least if California resident Gerald Newman is not made a party), the trial court misunderstood the parties' intent, and there was no evidentiary basis for the trial court's decision.


On November 17, 2003, plaintiff Jentar entered into an "Intermediary Consulting and Non-Circumvention Agreement" (ICNC) with plaintiff CRS, a Canadian entity. Under the agreement, CRS was to act as broker on behalf of Jentar in a sale of Jentar. Jentar is a New Jersey corporation based in New Jersey.

On August 12, 2004, defendant Nelson Tun, president of defendant Quadstar, Inc. (Quadstar), a prospective buyer of Jentar, executed a "Confidentiality/Non-Circumvention Agreement" (CNCA) with CRS in order to obtain information regarding Jentar in order to facilitate a potential purchase.*fn3 Quadstar is a New Jersey corporation, and Tun is a New Jersey resident.*fn4 The form CNCA used by CRS was drafted for CRS by Gerald Newman, a California attorney. Paragraph 12 of the CNCA contains a forum selection and choice of law clause providing that:

This Agreement shall be governed by and construed in accordance with the laws of the State of California. The parties hereby irrevocably consent to the jurisdiction of the state and federal courts located in Los Angeles, California, in any action arising out of or relating to this Agreement, and waive any other venue to which either party might be entitled by domicile or otherwise.

Although not a party to the CNCA, Jentar attempts to enforce its provisions against defendants in terms of asserting a breach by them. Jentar further points out that Tun and Jentar had conducted extensive negotiations on a "Sale and Purchase Agreement" that contained a governing law provision that provided the "Agreement shall be construed by the laws of the state of New Jersey and jurisdiction shall be in New Jersey." However, that Agreement was never executed by Quadstar or Tun, as Tun withdrew the offer to purchase Jentar before the agreement was executed.

In their complaint plaintiffs allege interference with plaintiffs' contractual and economic relations, interference with their economic advantage, conversion, conspiracy and breach of contract.*fn5 In support of the claim of interference with contractual and economic relations, plaintiffs allege that Tun used information that was gained from the inspection of Jentar records during the purchase negotiations and due diligence investigation to the detriment of plaintiffs and in violation of the CNCA. Specifically, they allege that Tun obtained the records of Jentar, pursuant to the CNCA, by misrepresenting financial information as Quadstar never had the ability to purchase Jentar. Plaintiffs further allege that Tun entered into the purchase negotiations solely to gain information about Jentar clients and to use the information in violation of the CNCA, and to obtain its business opportunities to the detriment of Jentar.

Plaintiffs claim that subsequent to Quadstar's failure to purchase Jentar, CRS obtained a commitment from a third party, Louis Biron, to purchase the Jentar company for $1,350,000 and Biron signed a "Letter of Intent to Negotiate Transaction in Good Faith" to that end. However, an important consideration for that sale was that defendant Anthony Manganelli, the former sole proprietor of two companies then recently acquired by Jentar, would remain as a consultant and manager for Jentar after the acquisition. Plaintiffs further allege, however, that Tun used information he had gained pursuant to the CNCA to solicit Manganelli to work for Quadstar and the departure of Manganelli decreased the value of Jentar to Biron from $1,350,000 to $1,000,000.

In support of its claim of interference with economic advantage, CRS claims that it would have received a $135,000 commission as the result of the sale of the company to Biron at the original contract price, but that Tun's actions resulted in a commission of only $25,000. CRS claims that this reduction was due to the fact that Tun's actions in soliciting Manganelli reduced the purchase price of Jentar in addition to the fact that Tun told Jentar that CRS "had done little work and otherwise had not justified being paid the 10% commission." As such, CRS demands compensatory damages of $110,000 and punitive damages.

Jentar asserts it is entitled to damages as a result of the breach of the CNCA because it was a "third party beneficiar[y]" of the contract and violation of the CNCA caused Jentar damages in the amount of the $350,000 reduction from the purchase price that Biron had originally agreed to pay.

Jentar also alleges that Manganelli breached his contract to continue to manage and consult for Jentar after the merger and Jentar was damaged because this reduced the amount that Biron was willing to pay; further Manganelli had received financial benefits in consideration of his continued employment with Jentar that he retained despite his failure to continue to work for Jentar.

In support of their conspiracy claim, plaintiffs allege that Tun, Quadstar and Manganelli unlawfully "conspired to violate" the CNCA and, thereby, violated plaintiffs' rights and economic advantage. On October 23, 2006, defendants moved to dismiss the complaint because all claims arise out of the CNCA which contains the California forum selection clause. Plaintiffs appeal from the granting of that motion.


The scope of review of a decision relating to a FSC is unsettled. In Paradise Enters. Ltd. v. Sapir we noted that:

[t]he scope of review as to that issue is an open question in New Jersey, but we note also that at least some federal court decisions seem to review the validity and enforcement of forum selection clauses de novo on the ground that the matter involves a question of law. See, e.g., Salovaara v. Jackson Nat. Life Ins. Co., 246 F.3d 289, 295 (3rd Cir. 2001) (holding that "interpretation and enforcement of a forum selection clause is a matter of law, and we exercise plenary review over it"); Silva v. Encyclopedia Britannica Inc., 239 F.3d 385, 387 (1st Cir. 2001) (stating that review of a dismissal on the basis of a forum selection clause is de novo).... [356 N.J. Super. 96, 103 n.3 (App. Div. 2002), certif. denied, 175 N.J. 549 (2003).]

We review the matter de novo here because we are dealing with a pretrial dismissal on defendants' motion and not with fact-finding after an evidentiary hearing. See, generally, e.g., Cesare v. Cesare, 154 N.J. 394, 411-12 (1998); Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974); see also Prudential Prop. & Cas. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998) (employing summary judgment standard on appeal); Paradise Enters., supra, 356 N.J. Super. at 102-03 (applying de novo scope of review); Copelco Capital, Inc. v. Shapiro, 331 N.J. Super. 1, 5 (App. Div. 2000) (applying de novo scope of review).

"As a general rule, a forum selection clause is enforceable unless it is the result of 'fraud, undue influence, or overweening bargaining power,' is 'unreasonable,' or violates a 'strong public policy.'" Paradise Enters., supra, 356 N.J. Super. at 103 (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10-15, 92 S.Ct. 1907, 1913-16, 32 L.Ed. 2d 513, 520-23 (1972)). Thus, New Jersey will enforce a forum selection clause unless "the party objecting thereto demonstrates (1) the clause is a result of fraud or overweening bargaining power, or (2) enforcement in a foreign forum would violate strong public policy of the local forum, or (3) enforcement would be seriously inconvenient for the trial." Wilfred MacDonald Inc. v. Cushman, Inc., 256 N.J. Super. 58, 63-64 (App. Div.), certif. denied, 103 N.J. 17 (1992) (internal citations omitted). See also Copelco, supra, 331 N.J. Super. at 4-5.

Furthermore, the mere fact that a clause is contained in "boiler-plate" does not make the clause a result of "fraud, undue influence, or overweening bargaining power." See Wilfred MacDonald, supra, 256 N.J. Super. at 64. Even if the contract "was not open to negotiations and, in fact, was a 'contract of adhesion,'" a forum selection clause contained therein would still be enforceable if it were between two sophisticated parties and there was no evidence of fraud or undue influence. Ibid. This is particularly so, as here, when the FSC "is part of a commercial agreement voluntarily entered [into] by a sophisticated business person." Copelco, supra, 331 N.J. Super. at 9. On the other hand, a FSC will not be enforced where "trial in the contractual forum will be so gravely difficult and inconvenient that [the party] will for all practical purposes be deprived of his day in court." Wilfred MacDonald, supra, 256 N.J. Super. at 65.

Here, it cannot be said that the forum selection clause was entered into as a result of fraud; in fact, the FSC was part of the CNCA utilized by CRS, which seeks its avoidance, and CRS admits that the forum selection clause was part of a form drafted by Newman. According to CRS, the state designated should have changed when the particular contract was executed.*fn6

Plaintiffs criticize the forum selection clause, arguing that they "paid no attention" to it and "did not realize it meant that any litigation ... would have to be handled in California" as a result of it. Blanchard certified that the forum selection clause was a "trap for the unwary ... simply left at the end of the paragraph, with nothing drawing attention to it."

The CNCA is a two-page, sixteen paragraph document. The forum selection clause is in the same typeface and font as the rest of the document and clearly states that:

This Agreement shall be governed by and construed in accordance with the laws of the State of California. The parties hereby irrevocably consent to the jurisdiction of the state and federal courts located in Los Angeles, California, in any action arising out of or relating to this Agreement, and waive any other venue to which either party might be entitled by domicile or otherwise.

We agree with the motion judge that "[t]here was no fraud which took place here and the provision regarding 'governing law' was not hidden[.]"

However, while we are not concerned with a choice of law issue, the FSC is part of a paragraph dealing with both forum selection and choice of law, and Under New Jersey law, a choice of law provision will not be honored if the state chosen has no substantial relationship to the transaction or the parties, or application of the law chosen would conflict with a fundamental public policy of a state having a greater interest in a determination of a particular issue and such state would be applicable in the absence of the choice of law provision under the governmental-interest analysis. [Stanton v. Rich Baker Berman & Co. P.A., 876 F. Supp. 1373, 1381 (D.N.J. 1995) (applying New Jersey law).]

See also D'Agostino v. Johnson & Johnson, Inc., 133 N.J. 516, 523 (1993).

Here, the only contact with California is Newman. Newman has certified in support of the motion for reconsideration that his only relationship with CRS is that he sold them "generic forms [] from the Internet ... involving sample transactions from my past." Newman further stated that he never gave "legal advice or prepare[d] legal documents" for CRS. Defendants contend that Newman had been "an active partner of CRS" and that California is an appropriate venue because Newman "is going to need to be deposed," is "absolutely" a witness in this matter, and, when the motion judge asked if Newman were a party to this action to make venue in California a "slam dunk," defendants stated that "[w]e will make him a party."*fn7 In support of this contention, defendants have produced several e-mail messages that suggest that Newman had a greater involvement with CRS than he has certified.*fn8

The judge relied on these e-mails in his decision to enforce the forum selection clause and in his denial of plaintiffs' motion for reconsideration. With respect to the latter, he stated that "by inspecting the e-mails provided by Defendants, it can be seen that Newman may have been more involved in the negotiations between the parties and, therefore, more involved in this matter than he has certified." The judge noted that in his certification in opposition to the motion to dismiss Newman acknowledged that he was the attorney who drafted the CNCA and that he resided in California.

Although we recognize that Newman's certification can be said to be self-serving, to avoid litigation in California where he can easily be served and joined as a party, we see no basis to require enforcement of the FSC merely because the credibility of his certification has been challenged and cannot be tested here.

As already noted, a forum is seriously inconvenient for the trial when "trial in the contractual forum will be so gravely difficult and inconvenient that [a party] will for all practical purposes be deprived of his day in court." Wilfred MacDonald, supra, 256 N.J. Super. at 65 (quoting M/S Bremen, supra, 407 U.S. at 18, 92 S.Ct. at 1917, 32 L.Ed. 2d at 525). The motion judge acknowledged that California is a very burdensome and illogical location for the trial. He stated "[y]ou are making the [plaintiffs] suffer and you are making yourself suffer" by bringing this case in California. He further went on to acknowledge that "anyone looking at this objectively would come to [the] conclusion" that bringing the case in California does not make practical sense. We agree that requiring litigation of the case in California is extremely impractical for all present parties. This is not a case in which a suit has already been brought against Newman in California or is pending there, and the question of its jurisdiction should not delay disposition here of the New Jersey plaintiff's action against the defendants, a New Jersey resident and a New Jersey business entity.*fn9 Moreover, it is not insignificant that the principal plaintiff was not a party to the CNCA, even though it seeks to assert rights and benefits thereunder (which might well be a contested and disputed issue at the trial).

Newman is not now a party to this litigation and his involvement was questioned only when enforcement of the forum selection clause became an issue. In any event, before us defendants have produced no justification for why they would prefer this case to be in California (other than to put a testimonial and financial burden on Jentar) or what interest California might have in the absence of any action commenced against Newman. To our knowledge, none has yet been filed, even assuming the statute of limitations has not run. While we deal with a FSC, and not issues of forum non conveniens, we find no basis on which to sustain the dismissal of the action. If the trial court determines that the choice of law provisions of the agreement are enforceable independent of forum selection, New Jersey can apply California law. Simply stated, we see no reason, as a matter of New Jersey public policy, for holding that this litigation commenced by a New Jersey entity (and another entity with no relationship with California other than its attorney had offices there) should be required to litigate their suit against two New Jersey defendants in California when there is no defendant who resides in, has offices in, or has any meaningful relationship with California. The Canadian co-plaintiff joins the New Jersey plaintiff in wanting to litigate their case against New Jersey defendants, the only defendants, in New Jersey. In these circumstances, they have that right.

We reverse and remand for further proceedings consistent with this opinion.

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