Facts
- Power Paragon, Inc. (Power) was an engineering firm incorporated in Delaware with its principal place of business in Anaheim, California.
- Precision Technology USA, Inc. (Precision) was incorporated in Virginia with its principal place of business in Roanoke, Virginia.
- Precision contacted L-3 (Power’s parent company) around October 5, 2005, seeking a motor controller for an aircraft barricade stanchion to be installed on a U.S. Navy ship.
- On December 20, 2005, L-3 sent a written proposal stating, among other terms, that (i) the offer was valid for 45 days, (ii) acceptance was expressly conditioned on assent to the proposal’s terms, and (iii) disputes would be resolved by arbitration.
- The parties continued discussing the transaction after the 45-day proposal period.
- On March 10, 2006, Precision issued a purchase order that included (i) a Virginia choice-of-law term and (ii) a forum-selection clause requiring disputes to be heard in the appropriate state or federal court in Roanoke, Virginia (the federal court being the Western District of Virginia).
- On September 11, 2006, the motor controller was shipped to Michigan and then to New York for functional testing.
- On May 30, 2008, the controller was shipped to Newport News, Virginia (within the Eastern District of Virginia) for installation on the ship.
- Precision made partial payment but allegedly failed to pay the remaining amount due.
- Power sued Precision in the United States District Court for the Eastern District of Virginia, alleging breach of contract and unjust enrichment.
- Precision moved to dismiss for improper venue, relying on the federal venue statute and the forum-selection clause in its purchase order.
Issues
- Was venue proper in the Eastern District of Virginia under 28 U.S.C. § 1391(a)?
- Was the Roanoke forum-selection clause part of the parties’ agreement and enforceable, requiring the case to proceed in the Western District of Virginia?
Decision
- The court concluded that venue was not supported by § 1391(a)(2)’s “events or omissions” language because the substantial events tied to contract formation and performance did not occur in the Eastern District of Virginia.
- The court concluded that venue was nevertheless proper under § 1391(a)(2)’s “property” language because a substantial part of the property that was the subject of the action—the motor controller—was located in Newport News, Virginia.
- The court also found venue proper under § 1391(a)(1) because Precision’s contacts were sufficient for it to be treated as residing in the district for venue purposes.
- On the contract-terms dispute, the court treated the forum-selection clause in Precision’s purchase order as part of the operative agreement, notwithstanding the earlier arbitration language in L-3’s time-limited proposal.
- The court held the forum-selection clause enforceable because Power did not show fraud, overreaching, or such serious inconvenience that litigation in Roanoke would effectively deny Power a fair opportunity to be heard.
- The court denied the motion to dismiss for improper venue and transferred the case to the United States District Court for the Western District of Virginia to give effect to the forum-selection clause.
Legal Principles
- In a diversity case governed by the pre-2011 version of 28 U.S.C. § 1391(a), venue may be proper in a district where a substantial part of the events or omissions occurred, or where a substantial part of the property that is the subject of the action is situated.
- For § 1391(a)(1), a corporate defendant may be treated as residing in a district where its contacts are sufficient to support personal jurisdiction.
- A forum-selection clause in a commercial contract is generally enforceable unless the resisting party shows fraud, overreaching, fundamental unfairness, or grave inconvenience that would effectively deny a day in court.
- When exchanged writings contain conflicting dispute-resolution terms, a court may treat later purchase-order terms as controlling when earlier offer terms have expired and the parties proceed with performance in a manner showing assent to the purchase order.
- When a valid forum-selection clause points to a different federal district, transfer under 28 U.S.C. § 1404(a), rather than dismissal, is an appropriate means of enforcing the parties’ chosen forum.
Conclusion
The Eastern District of Virginia was an available statutory venue because the motor controller at the center of the dispute was located in Newport News and Precision’s contacts supported venue, but the court enforced Precision’s mandatory Roanoke forum-selection clause and transferred the case to the Western District of Virginia under § 1404(a).