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ZENITH ELECTRONICS CORP. v. KIMBALL INTERN. MFG.

October 4, 2000

ZENITH ELECTRONICS CORPORATION, ZENITH ELECTRONICS CORPORATION OF TEXAS, AND ZENCO DE CHIHUAHUA, S.A. DE C.V., PLAINTIFFS,
V.
KIMBALL INTERNATIONAL MANUFACTURING, INC., KEPCO, INC. KIMBALL DE JUAREZ, S.A. DE C.V., KEPCO REALTY, S.A. DE C.V., AND BANK ONE TRUST COMPANY, N.A., FORMERLY KNOWN AS NBD BANK, NA, DEFENDANTS.



The opinion of the court was delivered by: Alesia, District Judge.

MEMORANDUM OPINION AND ORDER

Currently before the court are (1) plaintiffs' motion to remand and (2) defendants' motion to dismiss and/or transfer venue to the United States District Court for the Southern District of Indiana. For the following reasons, the court (1) denies plaintiffs' motion to remand; (2) denies defendants' motion to dismiss for lack of venue; and (3) grants defendants' motion to transfer venue. The court orders this case to be transferred forthwith, pursuant to 28 U.S.C. § 1404(a) and Local Rule 83.4, to the United States District Court for the Southern District of Indiana, Indianapolis Division.

The principal question before the court is whether diversity of citizenship exists in light of the fact that the domestic citizens on both sides of the action are diverse, but in addition, there are Mexican parties on both sides of the action.

I. BACKGROUND

Plaintiff Zenith Electronics Corporation is a Delaware corporation with its principal place of business in Glenview, Illinois. Plaintiff Zenith Electronics Corporation of Texas is a Texas corporation with its principal place of business in Glenview, Illinois. Plaintiff Zenco de Chihuahua, S.A. de C.V. is a Mexican corporation with its principal place of business in Ciudad Juarez, Chihuahua, Mexico.

Defendants Kimball International Manufacturing, Inc. and Kepco, Inc. are Indiana corporations with their principal places of business in Jasper, Indiana. Defendants Kimball de Juarez, S.A. de C.V. and Kepco Realty, S.A. de C.V. are Mexican corporations with their principal places of business in Juarez, Chihuahua, Mexico.

In 1999, defendants purchased a manufacturing plant from plaintiffs, and all the parties signed a contract called "Purchase Agreement by and among Kimball International Manufacturing, Inc., Kepco, Inc., Kimball de Juarez, S.A. de C.V., and Kepco Realty, S.A. de C.V. (`Buyers') and Zenith Electronics Corporation, Zenith Electronics Corporation of Texas, and Zenco de Chihuahua, S.A. de C.V. (`Sellers')" ("Purchase Agreement").*fn1 The Purchase Agreement incorporated an Escrow Agreement which required that one million dollars of the purchase price for the Juarez Plant be held in escrow. This case arises out of an alleged breach of that Escrow Agreement.

The Purchase Agreement also included a forum-selection clause which reads in pertinent part:

(i) Jurisdiction and Venue. Each of the Parties irrevocably submits to the exclusive jurisdiction of the federal courts of the United States sitting in the Southern District of Indiana (Indianapolis, Indiana) in connection with any action relating in any way to this Purchase Agreement or any of the Transaction Agreements. . . . Each of the Parties irrevocably waives, to the fullest extent permitted by all applicable laws, any objection that it may now or hereafter have to the laying of venue of any action brought in the federal courts of the United States sitting in the Southern District of Indiana (Indianapolis, Indiana) and any claim that any action brought in any such court has been brought in an inconvenient forum.

(Def.Mot.Ex. A at 43.)*fn2

Defendants asserted claims to a portion of the funds in the Escrow Account. However, plaintiffs contend that defendants wrongfully asserted these claims. In response, on July 19, 2000, plaintiffs filed this action in the Circuit Court of Cook County, Illinois, for breach of contract, declaratory judgment, specific performance, and fraud. On August 17, 2000, defendants filed a timely notice of removal in this court, alleging subject matter jurisdiction under 28 U.S.C. § 1332(a). On the same day, the defendants filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(3) and/or transfer venue, pursuant to 28 U.S.C. § 1404(a), to the United States District Court for the Southern District of Indiana. Defendants base their motion on the forum-selection clause contained in the Purchase Agreement in which the parties "irrevocably submit[ted] to the exclusive jurisdiction of the federal courts of the United States sitting in the Southern District of Indiana (Indianapolis, Indiana) in connection with any action relating in any way to this Purchase Agreement or any of the Transaction Agreements." (Def.Mot.Ex. A at 43.) Then, on September 7, 2000, plaintiffs filed a motion to remand the action to state court, arguing that this court does not have diversity jurisdiction. Plaintiffs base their argument on the fact that there are Mexican corporations on both sides of the action.

II. DISCUSSION

A. Jurisdiction

Defendants removed this action based on federal diversity jurisdiction and now argue that venue is not proper here because the forum-selection clause mandates that this action proceed in the United States District Court for the Southern District of Indiana. Plaintiffs, on the other hand, assert that this court lacks jurisdiction, and, therefore, has no authority to hear or transfer this case, but instead must remand the action back to the Circuit Court of Cook County. Under 28 U.S.C. § 1441(a), "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or defendants, to the district court of the United States. . . ." 28 U.S.C. § 1441(a). Because § 1441 allows removal of actions only within the federal court's original jurisdiction, and because § 1404(a) allows a court to transfer actions only within its jurisdiction, the first question for consideration is whether this court has jurisdiction.

United States District Courts are courts of limited jurisdiction. Defendants base their removal of this action on 28 U.S.C. § 1332, which gives the court subject matter jurisdiction based on diversity of citizenship. 28 U.S.C. § 1332. In order for the court to have diversity jurisdiction over a case, the complaint must allege (1) the amount in controversy exceeds $75,000, exclusive of costs and interest and (2) there exists complete diversity of citizenship between the parties. Id.

In this case, the amount in controversy exceeds $75,000. Further, there are diverse domestic citizens on both sides of this action. However, there are additional parties — foreign parties — on both sides as well. In this case, therefore, the court's jurisdiction is predicated upon 28 U.S.C. § 1332(a)(3) which states, "[t]he district courts shall have original jurisdiction of all civil actions where the matter in controversy . . . is between . . . citizens of ...


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