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Miglin v. Mellon

July 17, 2008

MARILYN MIGLIN, PLAINTIFF,
v.
JAMES JOSEPH "TED" MELLON, DEFENDANT .



The opinion of the court was delivered by: Virginia M. Kendall, United States District Judge

Judge Virginia M. Kendall

MEMORANDUM OPINION AND ORDER

Plaintiff Marilyn Miglin ("Miglin") brought suit in the Circuit Court of Cook County Illinois alleging fraud against James Joseph "Ted" Mellon ("Mellon"). The case was then removed to this Court. Mellon now moves for transfer to the United States District Court for the District of Nevada, arguing that such transfer is required by a forum selection clause in the Stock Purchase Agreement as well as under 28 U.S.C. § 1404.

STATEMENT OF FACTS

Miglin alleges that Mellon fraudulently induced her to invest in a new spider vein treatment to be distributed by American Medical Products ("AMP"). Complaint at ¶ 4. Specifically, Miglin asserts in her Complaint that Mellon fraudulently induced her into buying $2,500,000 of stock in AMP as well as paying additional sums to AMP in order to promote and market the spider vein treatment. Id. at ¶¶ 4-7. Mellon also allegedly told her that he would invest $2,500,000 in AMP when he in fact did not and instead withdrew money from AMP for the benefit of himself and a company in which he had an interest. Id. at ¶¶ 7-8. Miglin asserts that Mellon continues in a scheme to defraud her by demanding money for his stock in AMP, alleging that he has a contract with her for the purchase of such stock. Id. at ¶ 13.

Miglin signed a Stock Purchase Agreement in connection with her acquisition of stock in AMP. Id. at ¶ 7; Stock Purchase Agreement at p. 5. The Agreement states: "This Agreement and the legal relations between the parties hereto shall be governed by and construed in accordance with the internal laws of the State of Nevada applicable to contracts made and to be performed wholly within such state. Any legal action or other proceeding for the enforcement of this Agreement shall be brought only in the County of Clark, State of Nevada." Stock Purchase Agreement at ¶ 14.

DISCUSSION

The Effect of the Forum Selection Clause

The first question before the Court is whether to honor the forum selection clause contained within the agreement in dispute. We start with the first premise that forum selection clauses are prima facie valid and enforceable. Penn, L.L.C. v. New Edge Network, Inc., No. 03 C 5496, 2003 WL 22284207, at *2 (N.D.Ill. October 3, 2003) citing Nw. Nat'l Ins. Co. v. Donovan, 916 F.2d 372, 375-76 (7th Cir. 1990). Such clauses are enforced even when parties allege that the contract containing the clause is void or unenforeceable. Muzumdar v. Wellness Int'l Network, Ltd., 438 F.3d 759, 762 (7th Cir. 2006). A forum selection clause is invalid only if the clause itself was procured by fraud. Id. Here, Miglin makes no allegations that the forum selection clause in the Stock Purchase Agreement was procured by fraud and thus we presume that it is valid and enforceable.

Courts construe forum selection clauses very broadly. Forum selection clauses in contracts govern claims other than breach of contract, including claims of fraud. "A dispute over a contract does not cease to be such merely because instead of charging breach of contract the plaintiff charges fraudulent breach or fraudulent inducement, or fraudulent performance." Am. Patriot Ins. Agency v. Mut. Risk Mgmt., 364 F.3d 884, 889 (7th Cir. 2004) (suit concerned contracts other than that containing the forum selection clause and plaintiffs argued fraud). See also, Penn L.L.C., No. 03 C 5496, 2003 WL 22284207, at *2 (forum selection clause governed tortious interference and fraud claims). Indeed, "where the relationship between the parties is contractual, the pleading of alternative non-contractual theories of liability should not prevent enforcement of such a bargain [as to the appropriate forum for litigation]." Hugel v. Corp. of Lloyd's, 999 F.2d 206, 209 (7th Cir. 1993) citing Coastal Steel Corp. v. Tilghman Wheelabrator, Ltd., 709 F.2d 190, 203 (3rd Cir. 1983) (tortious interference claim covered by forum selection clause).

The forum selection clauses in American Patriot, Hugel and Penn L.L.C. are admittedly broader in language than the one before the Court. Am. Patriot, 364 F.3d at 886 (the agreement "shall be exclusively governed and construed in accordance with the laws of Bermuda and any dispute concerning this Agreement shall be resolved exclusively by the courts of Bermuda); Hugel, 999 F.2d at 208 ("The courts of England shall have exclusive jurisdiction to settle any dispute and/or controversy of whatsoever nature arising out of or relating to the Member's membership of, and/or underwriting of insurance business at Lloyd's"); Penn L.L.C., No. 03 C 5496, 2003 WL 22284207, at * 1 ("For any action or suit to enforce any right or remedy of this agreement, (except for actions to enter or collect on judgments) the parties consent to exclusive jurisdiction and venue in Clark County, Washington"). However, the breadth of these forum selection clauses at issue does not make these decisions inapposite here. The Seventh Circuit held in American Patriot that a dispute over a contract is governed by the forum selection clause regardless of whether it is framed as fraud is independent of the language of the forum selection clause at issue. Am. Patriot, 364 F.3d at 889 ("Not only does the clause refer to disputes concerning the contractual relationship between the parties, however those disputes are characterized. More important, a dispute over a contract does not cease to be such merely because instead of charging breach of contract the plaintiff charges a fraudulent breach, or fraudulent inducement, or fraudulent performance"). Also, although the clauses in Penn L.L.C. and Hugel are broad, their specific language does not cover the causes of action they are held to govern. Specifically, the forum selection clause in Penn L.L.C. by its language would exclude a claim for tortious interference, as tortious interference is not a "right or remedy" of the agreement. Penn L.L.C., No. 03 C 5496, at * 1. Perhaps most notably, in Hugel, the court held that the forum selection clause governed an action regarding Lloyd's disclosure of the plaintiff's confidential information to an investigator. Hugel, 999 F.2d at 209. Although this action is not one for enforcement per se, it is one in which Miglin seeks to recoup her rights and intended gains under the contract, and the forum selection clause in the contract governing the relations between the parties governs. At the very least, it weighs very heavily in favor of transfer.

Section 1404 Factors

Mellon also argues that transfer is proper under the factors of 28 U.S.C. § 1404. Section 1404 states: "For the convenience of the 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." 28 U.S.C. § 1404. The District of Nevada qualifies as a district where this action may have been brought. A diversity action may be brought in a judicial district in which a substantial part of the events giving rise to the claim occurred. 28 U.S.C. § 1391(a)(2). AMP, the corporation central to this case, is a ...


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