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Howard Johnson International, Inc., A Delaware Hon. Dennis M. v. Mississippi Hospitality Services

February 28, 2011

HOWARD JOHNSON INTERNATIONAL, INC., A DELAWARE HON. DENNIS M. CAVANAUGH CORPORATION, PLAINTIFF,
v.
MISSISSIPPI HOSPITALITY SERVICES, LLC, A MISSISSIPPI LIMITED LIABILITY COMPANY; AND SURESH BHULA, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Dennis M. Cavanaugh, U.S.D.J.:

NOT FOR PUBLICATION

OPINION

This matter comes before the Court upon motion by Defendants to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(3) or, in the alternative, to transfer venue to the Southern District of Mississippi pursuant to 28 U.S.C. § 1404(a) and/or 28 U.S.C. § 1406(a). No oral argument was heard pursuant to Rule 78. For the reasons stated below, Defendants' motion is denied.

I. BACKGROUND*fn1

On or about June 16, 2006, Plaintiff entered into a License Agreement (the "Agreement") with Defendant Mississippi Hospitality Services ("MHS") for the operation of a 164-room Howard Johnson guest lodging facility in Hattiesburg, Mississippi. Compl. ¶ 2. The Agreement stipulates that MHS is to operate the Howard Johnson for fifteen years and is required to make certain periodic payments to Plaintiff for recurring fees such as royalties, service assessments, taxes, and interest. Compl. ¶¶ 11-14. Defendant Suresh Bhula ("Bhula"), the principal of MHS provided Plaintiff with a guaranty of MHS' obligations under the Agreement. Compl. ¶ 16. As such, Bhula agreed that he would "immediately make each payment and perform or cause to be performed each obligation required of Licensee . . . ." Compl. ¶ 17.

Included in the Agreement was the following choice-of-law provision and forum selection clause:

You [MHS] consent and waive your objection to the non-exclusive personal jurisdiction of and venue in the New Jersey state courts situated in Morris County, New Jersey and the United States District Court for the District of New Jersey for all cases and controversies under this Agreement between we and you.

Compl., Ex. A § 17.6.3. The above provision is adopted by reference in the guaranty signed by Bhula. Defs.' Br. 1. Neither MHS nor Bhula were represented by counsel when they entered into the Agreement. Defs.' Br. 3.

Per the Agreement, MHS operated the facility in Mississippi as a Howard Johnson franchise from 2006 to 2009. Defs.' Br. 2. In April 2009, Plaintiff notified MHS that it was in default of the Agreement for failure to pay certain recurring fees. Compl. ¶ 20. Apparently the hotel was not doing well because on August 2009, MHS ceased its operation as a Howard Johnson and took on a new name. Defs.' Br. 2. On May 1, 2010, MHS ceased all operations of the facility. MHS is no longer a going concern. Defs.' Br. 2.

Plaintiff instituted the present diversity action on January 27, 2010, asserting a breach of the Agreement and seeking repayment of fees due. Venue was predicated on the forum selection clause in § 17.6.3 of the Agreement. Defendants now seek to have the action dismissed for improper venue, or transferred to the Southern District of Mississippi.

II. DISCUSSION

A. Motion to Dismiss for Improper Venue

A defendant seeking dismissal under Rule 12(b)(3) bears the burden of showing that venue is improper. See Myers v. Am. Dental Ass'n, 695 F.2d 716, 724-25 (3d Cir. 1982). Defendants assert that venue is improper in New Jersey, despite the forum selection clause in the Agreement, because the clause is unenforceable. This Court disagrees.

A forum selection clause is presumptively valid and enforceable unless the objecting party "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. v. Tilghman ...


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