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AGA Shareholders, LLC v. CSK Auto

December 14, 2006

AGA SHAREHOLDERS, LLC, PLAINTIFF
v.
CSK AUTO, INC., DEFENDANT.



The opinion of the court was delivered by: Judge Joan B. Gottschall

MEMORANDUM OPINION AND ORDER

Plaintiff AGA Shareholders, LLC ("AGA") filed suit against defendant CSK Auto, Inc. ("CSK") for breach of a requirements contract. CSK promptly moved to dismiss AGA's complaint pursuant to Rules 12(b)(2) and (3) of the Federal Rules of Civil Procedure. Specifically, CSK argues that the complaint must be dismissed because the court does not have personal jurisdiction over CSK and, even if it did, a forum selection clause contained in the contract applicable to this dispute divests the court of jurisdiction. For the reasons detailed below, the court concludes that venue is improper under Rule 12(b)(3) because the forum selection clause requires that AGA's suit be filed in Arizona. Rather than granting the relief sought in CSK's motion to dismiss, however, the court instead exercises its discretion to transfer this case to the proper venue. As the court's holding on the venue issue is dispositive, the court does not consider whether it has personal jurisdiction over CSK under Rule 12(b)(2).

I. BACKGROUND

This case concerns a business relationship between AGA and CSK that spanned more than four years but ended abruptly when CSK elected to discontinue purchasing AGA's products. The court will recite the facts surrounding this relationship in favor of AGA,*fn1 as is customary when ruling on a 12(b)(3) motion to dismiss for improper venue. See Interlease Aviation Investors II (Aloha) LLC v. Vanguard Airlines, Inc., 262 F. Supp. 2d 898, 913 (N.D. Ill. 2003); Nagel v. ADM Investor Servs., Inc., 995 F. Supp. 837, 843 (N.D. Ill. 1998).

AGA was an Illinois corporation that was formed in 1928 as a family-owned manufacturing business.*fn2 Sometime in the 1960s AGA began to focus exclusively on remanufacturing automobile parts. Remanufacturing is a process whereby used or defective parts known in the automobile industry as "cores" are used by a manufacturer to rebuild viable parts for resale. AGA specialized in remanufacturing automobile alternators and starters. CSK, an Arizona corporation, is also involved in the automobile parts industry. Specifically, CSK owns and operates a national chain of more than 1,200 retail stores that sell automobile parts under names such as Checker Auto Parts.

In November of 1998, CSK Vice-President Michael Thompson ("Thompson") met AGA Vice-President of Sales Joseph Resnick ("Resnick") at a trade show in Las Vegas, Nevada. They discussed the possibility of CSK purchasing automobile parts from AGA, and one month later Thompson visited AGA's manufacturing plant in Illinois to review its operations. Thompson and Resnick met at another trade show in Las Vegas in early November of 1999, and at that time Thompson requested a price quote for remanufactured alternators and starters. Following the trade show, Thompson and Resnick began negotiating the product prices via telephone and fax. The men came to a preliminary agreement, and on November 24, 1999, Resnick met with Thompson at CSK's offices in Arizona to discuss the terms of a business relationship between AGA and CSK. At that meeting, Thompson and Resnick agreed that CSK would begin purchasing from AGA all of its requirements for remanufactured automotive and light-duty truck alternators and starters for resale in CSK's stores pursuant to CSK's Three-Year Warranty (OE Quality) Alternator and Starter Program ("the Program"). Thompson and Resnick also discussed and agreed upon most of the terms of the business relationship between their respective companies. However, their entire agreement was not immediately reduced to writing. Instead, Thompson gave Resnick a copy of a standardized CSK form entitled "Master Vendor Agreement," along with its accompanying Terms and Conditions (hereinafter jointly referred to as "MVA"), and an addendum to the MVA ("Addendum 1") that allowed the parties to modify the allowances, discounts, and warranties set forth in the MVA. These documents contained many of the provisions that the parties had agreed would govern their relationship but were also left blank in several areas. Resnick took the MVA and Addendum 1 back to Illinois with him and completed them by filling in the blank terms with language he and Thompson had agreed to during their meeting. Resnick also drafted a second addendum ("Addendum 2"), which contained some additional terms he and Thompson had discussed that were not covered by Addendum 1. Resnick signed all of the documents on behalf of AGA on November 29, 1999, and returned them to Thompson along with a letter and copies for Thompson to sign and return to AGA.

The MVA, Addendum 1, and Addendum 2 set forth many of the terms of the business relationship between CSK and AGA, including discounts, allowances, warranties, and ordering and delivery terms. Several particular provisions of the MVA that are relevant to the issues before the court warrant mention. The MVA itself provided that "[t]he Terms and Conditions, and any Addenda or other documents referenced in this document are incorporated herein as part of this MVA and made a part hereof. This MVA shall govern all purchases made by CSK from [AGA] during the term of this Agreement unless the parties agree specifically in writing to the contrary." Mem. in Supp. of Def.'s Mot. to Dismiss Ex.1 at 5. While the MVA purported to be the baseline for the parties' relationship, it did not purport to be the final word. Instead, the MVA stated that "[t]he parties may from time to time mutually agree to additional allowances, discounts, and warranties, or to revise the foregoing allowances, discounts, and warranties, provided that any such mutual agreement is documented in an Addendum to this MVA or in another writing(s) executed by both parties." Id.

Of particular importance, the "Term and Termination" section of the MVA provides as follows:

This MVA shall only become effective upon execution by both parties. The term of the MVA shall commence upon the date first written on page one of this MVA and shall continue until January 31, 1999. Thereafter the term shall be automatically renewed for successive one (1) year terms unless within thirty days prior to such renewal one party sends written notice to the other party that it does not intend to renew the MVA.

Id. at 7. In addition, the "Applicable Law" section of the MVA states:

The MVA is made with reference to and under the laws of the State of Arizona which shall be deemed to govern the validity and interpretation of the MVA and the rights and remedies of the parties hereunder. Any legal action instituted by the parties arising out of this MVA shall be within, and the parties hereto stipulate to the jurisdiction of, the Courts of Maricopa County, Arizona.

Id. at 10.

Neither Thompson nor any other CSK employee ever signed the MVA, Addendum 1, or Addendum 2. Thompson did, however, sign a separate addendum to the MVA that contained additional terms of the parties' business relationship during his meeting with Resnick in Arizona. On November 24, 1999, Thompson and Resnick both signed a document denoted as the Store Conversion Support Addendum to the Master Vendor Agreement ("Conversion Addendum").*fn3 In the Conversion Addendum, AGA agreed to support the costs associated with CSK's conversion of recently acquired stores by giving CSK a five percent discount on all invoices during a certain time frame. According to AGA, Resnick signed the Conversion Addendum because Thompson told him that AGA's conversion support was an essential component of the business relationship since CSK's previous supplier -- whom AGA was replacing -- had agreed to such a discount. AGA asserts that its agreement to the terms of the Conversion Addendum was a pre-condition to the negotiation of the remaining terms of the business relationship.

As AGA notes, the MVA and the addenda referenced above did not cover all aspects of the parties' relationship. For example, the parties initially agreed that CSK would receive a 9.5 percent discount on AGA products, a discount that included the five percent new store conversion discount, a one percent trade show allowance discount, a one percent prompt payment discount, and a 2.5 percent advertising discount. While the MVA and its addenda referenced the first three discounts, they did not mention the 2.5 percent advertising discount. The MVA also did not discuss in any detail the "core bank," which was an important component of the parties' relationship.*fn4 During their meeting at CSK's offices in November of 1999, Thompson told Resnick that CSK owned a large number of starter and alternator cores and that CSK wanted to deliver them to AGA to use in remanufacturing parts for CSK. The parties agreed that CSK would ship cores to AGA, to be stored in a "core bank" at AGA's warehouse in Illinois, and that AGA would issue ...


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