R. BROOKE JACKSON, District Judge.
This case is before the Court on defendant Action Environmental Solutions, LLC's Motion to Dismiss Due to Improper Venue or in the Alternative Motion to Transfer to the Southern District of New York [ECF No. 11]. For the reasons explained below, the motion is now denied.
The present dispute began with a contract between plaintiff Karl W. Schmidt & Associates, Inc. ("KWS") and defendant Action Environmental Solutions, LLC ("Action"). See ECF No. 4 at ¶ 8. KWS, a Colorado corporation headquartered in Commerce City, Colorado, manufactures and sells conveyor belts, sorters, and other system components for use in waste management and recycling facilities. ECF No. 4 at ¶¶ 1, 6. Action is a limited liability company with its principal place of business in either Newark, New Jersey or Bronx, New York that sorts recyclable commodities for resale and performs other waste collection functions. See ECF No. 4 at ¶¶ 2, 7; Affidavit of Frank A. Blandino, ECF No. 11-1, at ¶ 6. Under the contract, Action hired KWS to manufacture, deliver, and install a Commercial Single Stream System ("the System"), a complex system designed to sort recyclable materials. ECF No. 4 at ¶ 8.
According to the complaint, plaintiff delivered and installed the System but has not been fully paid. ECF No. 4 at ¶¶ 16, 18. In the contract, Action agreed to pay KWS $9,587,970 in installments, with the final payment due 30 days after the System became operational. ECF No. 4 at ¶¶ 16, 18. Action allegedly paid the first seven installments, but not the final two, despite the system's becoming operational in June of 2013. ECF No. 4 at ¶¶ 11, 12. Plaintiff alleges that the defendant now owes KWS $973,497. ECF No. 4 at ¶ 13.
Several facts about the contract's geographic ties are relevant here. Action initially contacted KWS employees at their offices in Colorado. Affidavit of Karl W. Schmidt, ECF No. 18-1, at ¶ 4. The parties executed the contract either in Bronx, New York or at defendant's former headquarters in Newark, New Jersey, although the contract itself states that "[a]ny contract with the Buyer [here, Action] shall be deemed to have been made in the state of Colorado." Affidavit of Frank A. Blandino, ECF No. 11-1, at ¶ 6; Contract, ECF No. 4 Ex. A, at 10, ¶ 16. The contract also includes a choice of law provision and forum selection clause: "[This contract] shall be governed by the laws of the State of Colorado, and any legal action connected with [this] contract may be brought in the City and County of Denver." Contract, ECF No. 4 Ex. A, at 10, ¶ 16. After the contract was executed, KWS employees designed and manufactured the System in KWS's Colorado manufacturing facility (although some of the parts delivered to Action's facility came directly from various locations in Europe). See Affidavit of Karl W. Schmidt, ECF No. 18-1, at ¶¶ 4, 10, 12. The components of the system were then shipped from Colorado to Action's New York facility, where KWS employees installed them. Id. at ¶ 11. Later on, parts of the System were repaired and replaced at the same facility, where the system is presently located. Affidavit of Frank A. Blandino, ECF No. 11-1, at ¶ 8, 9. Finally, payments made to KWS from Action apparently originated in New York but were received by plaintiff in Colorado. See id. at ¶ 11; Contract, ECF No. 4 Ex. A, at 9, ¶ 2.
The plaintiff initially filed this action in Colorado state court. ECF No. 4. The defendant removed to federal court, ECF No. 1, and now seeks dismissal or transfer.
Defendant seeks two alternative actions in its motion. First, defendant moves for dismissal for improper venue. Second, defendant seeks the transfer of this action to the Southern District of New York. The Court will address each in turn.
"Once venue is attacked, the plaintiff bears the burden to show proper venue." Ervin & Associates, Inc. v. Cisneros, 939 F.Supp. 793, 796 (D. Colo. 1996). However, the plaintiff need only make a prima facie showing that venue is proper. JD Parker Constr., Inc. v. E. Equity Partners, L.L.C., No. CIV.A. 08-CV-01392LT, 2009 WL 151491, at *3 (D. Colo. Jan. 22, 2009). In reviewing a Rule 12(b)(3) motion to dismiss for improper venue, the Court may examine facts outside the complaint,
Under 28 U.S.C. §1406(a), "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought." To determine if venue is proper where an action was filed, courts look to 28 U.S.C. §1391(b), which provides that:
A civil action may be brought in—
28 U.S.C. §1391(b). The plaintiff argues that venue is proper in Colorado under both §1391(b)(1) and §1391(b)(2). The Court finds that venue is proper under §1391(b)(2) and thus does not reach the question of whether it is also proper pursuant to §1391(b)(1).
The Court here focuses on the analysis of where "a substantial part of the events or omissions giving rise to the claim occurred" under §1391(b)(2). As an initial matter, "venue is not limited to the district with the most substantial events or omissions," but rather it can be appropriate in any district where a substantial part of the events giving rise to the claim occurred. Employers Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 1165-66 (10th Cir. 2010) (discussing a prior version of §1391(b)(2)). The Tenth Circuit applies a two-part test in reviewing challenges to venue under §1391(b)(2). Id. at 1166. First, a court should "examine the nature of the plaintiff's claims and the acts or omissions underlying those claims. . . . Second, [the court must] determine whether substantial events material to those claims occurred in the forum district." Id.
Beginning with the first step, plaintiff's claim centers on the contract for the System that defendant allegedly breached. See ECF No. 4 at ¶¶ 8, 13. The acts and omissions underlying the claim took place in Colorado, New York, and possibly New Jersey. Action contacted the owner and CEO of KWS at his offices in Colorado to request that KWS manufacture the System. Affidavit of Karl W. Schmidt, ECF No. 18-1, at ¶ 4. The parties then executed the contract either in Bronx, New York or at defendant's former headquarters in Newark, New Jersey.
Turning now to the second step of the §1391(b)(2) analysis, the Court must determine whether substantial events material to plaintiff's claim occurred in Colorado. Considering the entire sequence of events discussed in the first step above, see Employers Mut. Cas. Co., 618 F.3d at 1166, the Court concludes that plaintiff has made a prima facie showing sufficient to satisfy this standard. Discussions leading up to the execution of the contract took place with the plaintiff's employees in Colorado, and much of the plaintiff's performance under the contract— designing and manufacturing the System—occurred in Colorado as well. Finally, plaintiff received payments under the contract in Colorado. These are substantial events material to plaintiff's breach of contract claim, and thus the court finds that venue is proper under 28 U.S.C. §1391(b)(2). Because the plaintiff has made a prima facie showing that venue is proper in Colorado, the Court declines to dismiss its claim under Rule 12(b)(3) and 28 U.S.C. §1406(a).
Defendant argues in the alternative that the Court should transfer this action to the Southern District of New York under either 28 U.S.C. §1404(a) or 28 U.S.C. §1406(a). Because the Court found in the analysis above that venue is proper in Colorado, transfer under §1406(a) is not appropriate. As explained below, the Court also declines to transfer this case under §1404(a).
"[The] party moving to transfer a case pursuant to § 1404(a) bears the burden of establishing that the existing forum is inconvenient." Scheidt v. Klein, 956 F.2d 963, 965 (10th Cir. 1992). "[U]nless the balance is strongly in favor of the movant the plaintiff's choice of forum should rarely be disturbed." Id. Furthermore, "[m]erely shifting the inconvenience from one side to the other . . . obviously is not a permissible justification for a change of venue." Id. at 966. "When reviewing a motion to transfer venue under § 1404, a court may consider evidence outside of the pleadings but must draw all reasonable inferences and resolve factual conflicts in favor of the non-moving party." Sleepy Lagoon, Ltd. v. Tower Grp., Inc., 809 F.Supp.2d 1300, 1306 (N.D. Okla. 2011).
§1404(a) provides that "[f]or 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 Court will assume without deciding that this action could have been brought in the Southern District of New York, as defendant argues. Having made this assumption, the Court would ordinarily go on to evaluate the convenience of the parties and various public-interest considerations in a multi-factor test to determine whether to transfer the case. Atl. Marine Constr. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S.Ct. 568, 581 (2013). However, recent Supreme Court precedent alters this analysis when the parties have agreed to a valid forum selection clause. See id. Thus the Court will first address the role of the parties' forum selection clause in the §1404(a) analysis, then examine the factors relevant to whether transfer is appropriate.
As an initial matter, the Court must determine what role the forum selection clause plays in deciding whether to transfer this case. The contract between the parties provides that "any legal action connected with [this] contract may be brought in the City and County of Denver."
Id. at 581 (internal citations and quotations omitted). Thus the Court expressed a clear policy interest in enforcing forum selection clauses in the context of motions to transfer under §1404(a).
However, despite the quoted language above, the Atlantic Marine decision is not directly on-point here. In that case, the forum selection clause was a mandatory one that the defendant sought to enforce.
There is no Tenth Circuit case addressing the applicability of Atlantic Marine in these circumstances, but a handful of district courts have analyzed its applicability in cases involving permissive clauses. Most have declined to apply the case in this context: "Although Atlantic Marine never addressed the `permissive' versus `mandatory' distinction, district courts across the country have generally limited the Atlantic Marine framework to situations where the forum selection clause is mandatory." Waste Mgmt. of Louisiana, L.L.C. v. Jefferson Parish, No. CIV.A. 13-6764, 2014 WL 4403447, at *12 (E.D. La. Sept. 5, 2014), motion to certify appeal on this issue granted sub nom. Waste Mgmt. of Louisiana, L.L.C. v. Parish, No. CIV.A. 13-6764, 2014 WL 5393362 (E.D. La. Oct. 22, 2014). See also Fin. Cas. & Sur., Inc. v. Parker, No. CIV.A. H-14-0360, 2014 WL 2515136, at *3 (S.D. Tex. June 4, 2014) ("District courts across the country have . . . recognized that the analysis on a motion to transfer based on a forum-selection clause begins with whether the clause is mandatory or permissive. If the forum-selection clause is permissive, the courts have consistently declined to apply Atlantic Marine.").
However, all of the cases involving a permissive clause that the opinions cited above rely on deal with a defendant seeking transfer through the enforcement of a forum selection clause, not a plaintiff relying on the clause to remain in its chosen forum.
No. CIV.A. 13-6764, 2014 WL 4403447, at *13 (internal citations omitted). This reasoning, however, is not applicable to a case like the present one in which the plaintiff relies on the forum selection clause in opposing a motion to transfer. Affording the clause controlling weight in this context would not have the effect of transforming it into a mandatory clause, but rather would hold the parties to their bargain by keeping the suit in a forum expressly allowed by their contract. Thus the Court does not find the analysis in cases like Waste Management to be persuasive in this context.
Indeed, it seems appropriate to apply some of the reasoning in Atlantic Marine in the present case. Beyond the general language emphasizing the importance of holding the parties to their bargain, the Atlantic Marine Court laid out three specific ways in which a forum selection clause affects the §1404(a) analysis: (1) when the plaintiff defies the forum selection clause, the plaintiff's choice of forum is not entitled to any weight; (2) a court should not consider arguments about the parties' private interests, but instead should only weigh public-interest factors; and (3) "when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum," a § 1404(a) transfer of venue will not carry with it the original venue's choice-of-law rules. Atl. Marine Constr. Co., 134 S. Ct. at 581-82. The first and third guidelines clearly cannot apply when the plaintiff files in the forum contemplated by the clause; however, determining the relevance of the second requires a more detailed analysis.
The Supreme Court held that courts should not consider the parties' private interests when a mandatory forum selection clause exists because "[w]hen parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the litigation." Id. at 582. Furthermore, "whatever inconvenience the parties would suffer by being forced to litigate in the contractual forum as they agreed to do was clearly foreseeable at the time of contracting." Id. This reasoning applies equally in the present context, where the parties agreed that any court in Denver was an acceptable forum. Any inconvenience that Action will experience litigating in Colorado was clearly foreseeable at the time of contracting, and the Court will hold the parties to their bargain in this regard.
The Court thus adopts the Atlantic Marine approach in disregarding any arguments about the parties' private interests.
The Court now turns to the multi-factor test employed by courts to evaluate the convenience of the parties and public-interest considerations. See Atl. Marine Constr. Co., 134 S. Ct. at 581. In light of the above analysis, the Court deems all of the private-interest factors to weigh in favor of Colorado, the parties' pre-selected forum, and examines only the public-interest factors and the plaintiff's choice of forum in determining whether transfer is appropriate. As the Supreme Court explained in Atlantic Marine,
134 S. Ct. at 581 n.6 (internal citations and quotations omitted). Thus the factors that the Court will undertake an analysis of here are: (1) administrative difficulties related to court congestion, (2) the interest in deciding localized controversies at home, (3) the interest in trying a diversity case in a forum that is at home with the law, and (4) the plaintiff's choice of forum.
The first two—administrative difficulties and the interest in deciding localized controversies at home—do not dictate strongly in favor of either forum. Neither side has argued that court congestion should be a factor weighing in one side's favor, and the Court sees no basis for assigning it any weight in this analysis. Similarly, whether this case involves a controversy local to Colorado is debatable. The dispute has geographic ties to both Colorado and New York, and thus the Court does not find that this second factor weighs in favor of either forum.
The latter two factors, however, both undoubtedly weigh in the plaintiff's favor. The contract in this case contains a choice of law provision stating that it "shall be governed by the laws of the State of Colorado." Contract, ECF No. 4 Ex. A, at 10, ¶ 16. Thus the interest in trying a diversity case in a forum that is at home with the law weighs in favor of keeping the case in this Court. Additionally, the plaintiff chose this forum, and therefore the final factor also supports the decision to keep the case in Colorado.
In sum, the Court deems all of the private factors to weigh in favor of Colorado and finds that the remaining factors either also weigh in Colorado's favor or should not be assigned any weight in this particular case. The Court therefore finds that the defendant has not met its burden of demonstrating that transfer is appropriate in this case and denies defendant's motion to transfer under §1404(a).
Defendant's Motion to Dismiss Due to Improper Venue or in the Alternative Motion to Transfer to the Southern District of New York [ECF No. 11] is DENIED.
