Forum Selection Clause Fails: Insufficient Evidence
By In 2006, Johnny Ray Franklin bought a Gulf Stream motor home from a dealership located in Tennessee, where he lives. Gulf Stream is an Indiana corporation, and its dealer is a Florida corporation doing business in Tennessee. Gulf Stream filed a motion to dismiss the lawsuit claiming that the Eastern District of Tennessee was an improper venue. Alternatively, Gulf Stream asked to have the lawsuit transferred to the U.S. District Court for the Northern District of Indiana.
Gulf Stream’s motion was based on the Limited Warranty that its dealer had Mr. Franklin sign when he bought the motor home. The warranty stated that, if there was a problem, Mr. Franklin should contact Gulf Stream. The warranty had a forum selection clause that granted exclusive jurisdiction for any claims “in the courts in the State of Manufacture.”
The court denied the motion to dismiss for improper venue. The court held that “whether a forum selection clause should be enforced is a matter of contract interpretation rather than venue.” Since the Eastern District of Tennessee was a proper venue (because the “sale and subsequent destruction of plaintiffs’ motor home” happened there), “Rule 12(b)(3) is not the proper avenue for Gulf Stream to raise its forum selection clause argument.”
The court then addressed Gulf Stream’s request to transfer venue to the Northern District of Indiana. As an initial matter, the court criticized Gulf Stream for not providing proof that Indiana was the “State of Manufacture.” There was an allegation in the complaint that Gulf Stream’s principal place of business was Indiana. But there was no proof about where the vehicle had been manufactured. Due to the lack of proof, the court held that 28 U.S.C. ยง1404(a), the venue transfer statute, was “of no benefit to Gulf Stream.”
The court went further. It said that, even if Gulf Stream had presented evidence that the motor home had been built in Indiana, it would still deny the transfer request. The court recited the standard balancing test for determining whether to transfer a case, and noted that forum selection clauses should be considered, but not be determinative. The court also noted that there were witnesses in both Tennessee and Indiana - so that factor was not conclusive either. Ultimately, the court relied on a “public interest concern” to keep the case in Tennessee. Specifically, the court ruled that the Florida dealer had not signed the forum selection clause, and it was unclear whether an Indiana court would have personal jurisdiction over the dealer. So, in order to avoid the risk of piecemeal litigation, the court decided to not enforce the forum selection clause.
The full decision is Franklin v. Domestic Corporation, et al., 2010 WL 2342433 (E.D. Tenn. June 7, 2010).
Related content
- Restrictive Covenant Lawsuit Dismissed for Lack of Personal Jurisdiction
- Diversity Jurisdiction and Fraudulent Joinder
- An Interactive Website Can Constitute Purposeful Availment for Purposes of Specific Jurisdiction
Previous Post