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Inhalation Plastics, Inc. v. Medex Cardio-Pulmonary

February 5, 2007

INHALATION PLASTICS, INC., PLAINTIFF,
v.
MEDEX CARDIO-PULMONARY, INC., DEFENDANT.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Defendant Medex Cardio-Pulmonary, Inc.'s ("Medex") motion to dismiss. For the reasons stated below, we grant the motion to dismiss.

BACKGROUND

Plaintiff Inhalation Plastics, Inc. ("IPI") alleges that in May 2002 it entered into a series of agreements with Medex ("IPI Agreements"), the purposes of which were for Medex to acquire IPI and its business. Under the IPI Agreements, Medex allegedly leased from IPI the machinery and equipment utilized by IPI in the manufacture and distribution of medical products. Medex also allegedly purchased virtually all of IPI's other assets. Under the IPI Agreements, Medex was allegedly required to make certain continuing payments to IPI, depending on the performance of the business purchased from IPI. Medex allegedly began operations with the IPI business in Chicago, Illinois and disagreements allegedly arose between Medex and IPI regarding Medex's obligations under the IPI Agreements.

In December 2004, Medvest Holdings Corporation ("Medvest"), the company that owned Medex, allegedly entered into an agreement to merge with a wholly owned subsidiary of Smiths Medical Holdco Limited ("Smiths Holdco") and to become a wholly owned subsidiary of Smiths Holdco. Smiths Holdco allegedly owns a business, named Smiths Medical ASD ("Smiths Medical ASD"), that manufactures and sells medical devices. According to IPI, after the formation of the merger agreement with Medvest, Medex gradually ceased its operations and distributed its product lines to Smiths Medical ASD. Medex also allegedly attempted to assign to Smiths Medical ASD all of IPI's former assets and Medex's rights and obligations under the IPI Agreements. IPI claims that it advised Medex that the assignments to Smiths Medical ASD violated some of the IPI Agreements such as the Asset Purchase Agreement ("Asset Purchase Agreement") and the Equipment Production Lease Agreement ("Production Lease Agreement"). IPI also claims Medex failed to honor its obligations under the IPI Agreements that required Medex to provide IPI with certain financial reports. IPI brought the instant action and includes in its complaint a breach of written contract claim (Count I) and a breach of an oral contract claim (Count II). Medex now moves to dismiss this action for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3) ("Rule 12(b)(3)").

LEGAL STANDARD

Rule 12(b)(3) provides that a party may move to dismiss an action when the action is not filed in the proper venue. Fed. R. Civ. P. 12(b)(3). A party seeking to invoke a forum selection clause to challenge venue should bring a motion to dismiss pursuant to Rule 12(b)(3). Muzumdar v. Wellness Int'l. Network, Ltd., 438 F.3d 759, 760 (7th Cir. 2006).

DISCUSSION

Medex argues that IPI's claims are based on an alleged breach of the Asset Purchase Agreement and that the agreement contains a forum selection clause that provides that Franklin County, Ohio is the proper venue for an action based on the agreement. IPI contends that Medex is bound by a forum selection clause in the Production Lease Agreement, which IPI claims makes Illinois a proper venue for the instant action.

I. Forum Selection Clause in the Asset Purchasing Agreement Medex Argues that the Forum Selection Clause in the Asset Purchase

Agreement provides that venue for actions relating to the agreement will proceed solely in Franklin County, Ohio. A court should enforce a forum selection clause "where venue is specified with mandatory or obligatory language," but if the clause merely references an acceptable jurisdiction, the forum selection clause should not be enforced "unless there is some further language indicating the parties' intent to make venue exclusive." Id. at 762; see also Paper Express Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753, 757 (7th Cir. 1992)(stating that "where venue is specified with mandatory or obligatory language, the clause will be enforced; where only jurisdiction is specified, the clause will generally not be enforced unless there is some further language indicating the parties' intent to make venue exclusive"). In the instant action, the Asset Purchase Agreement referenced in the complaint includes a forum selection clause that states the following:

All actions or proceedings under or relating to this Agreement will be resolved in a state or federal court located in Franklin County, Ohio. . . .

Each party hereby (I) agrees to submit to the jurisdiction of the federal and state courts located in Franklin, Ohio; (ii) agrees to appear in any such action; (iii) consents to the jurisdiction of such courts; and (iv) waives any objection it might have as to venue in any such court.

(Reply Ex. A, Sec. 8.4);(Ans. 1). The above provision of the Asset Purchase Agreement contains mandatory language, clearly indicating that actions based upon the agreement "will be resolved" solely in Franklin County, Ohio, and that such a venue is not simply one possible venue for such action. Id. Such language makes it clear that Franklin County, Ohio is not merely one of the possible venues available for an action relating to ...


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