Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-02527/USCOURTS-caed-2_06-cv-02527-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

 A fourth defendant, Robert Logel, did not join in the 1

pending motion. 

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

DAVID W. PONG, individually

and as Trustee of the David

W. Pong Revocable Trust,

Plaintiff,

NO. CIV. S-06-2527 LKK/DAD

v.

AMERICAN CAPITAL HOLDINGS,

INC., BARNARD A. RICHMOND,

RICHARD CRAIG TURNER, 

ROBERT LOGEL, and DOES 1

through 25, inclusive O R D E R

Defendants.

 /

David W. Pong, plaintiff, brings suit for breach of contract

and other claims related to a fraudulent investment scheme. The

complaint was originally filed in state court and was removed based

on diversity jurisdiction. Pending before the court is a motion

to dismiss for improper venue and lack of personal jurisdiction

filed by three of the named defendants: American Capital Holding,

Inc. (“ACH”); Barnard A. Richmond; and Richard Craig Turner. For 1

the reasons explained herein, the motion to dismiss will be denied

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 1 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

2

but the motion to transfer will be granted.

I.

Factual Allegations 

Plaintiff, a resident of Sacramento, California, alleges that

the named defendants made false representations about investment

opportunities. Based on these representations, plaintiff loaned

defendants approximately 1.5 million dollars over the course of

several months. Defendants have failed to repay these loans

according to the terms of the promissory notes they made in

connection with the loan. Plaintiff avers that in the fall of 2003

defendant Logel represented to plaintiff that Spaulding Ventures

LLLC (operated by Logel) was a thriving venture capital fund.

Based on these representations, plaintiff purchased membership in

Spaulding. Allegedly, Logel did not inform plaintiff that at the

time plaintiff invested with Spaulding, it was in the process of

finaling a transaction with American Capital Holdings, Inc.

(“ACH”), a merchant-banking corporation and a named defendant in

this lawsuit. Compl. at 2:6-14. ACH is located in Florida. The

majority of the discussions and dealings concerning the loans took

place in Florida and California. 

In December of 2003, Logel, allegedly acting on behalf of

defendants Richmond, Turner and ACL persuaded plaintiff to exchange

the Spaulding membership interests he owned for shares of ACH

stock. Logel made several representations about ACH’s potential,

representations that plaintiff now believes to have been false.

Logel told plaintiff that there was absolutely no risk to the

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 2 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

3

principal amount of his loan or his investments, as it would be

“100% guaranteed.” Based on Logel’s statements, plaintiff loaned

ACH $500,000 and received a promissory note on December 15, 2003.

Compl. at 3:6-13. Logel reportedly told plaintiff that he would

make “boatloads of money” with the investments with ACH. Pong

Decl. in Support of Opp’n to Def.’s Mot. to Dismiss. Plaintiff

believed that Logel “was working with the other defendants to

solicit loans and investments” from him. Id. 

In May, 2004, defendant Richmond made representations that

ACH’s public offering was imminent and that it needed a short term

cash infusion. Plaintiff wired $80,711.93 to ACH’s account. 

In June of 2004, defendants again lead plaintiff to believe

that ACH would be “going public” shortly and that plaintiff would

“reap extremely large returns.” Compl. at 4:7. Based on these

representations, plaintiff loaned ACH an additional $250,000.00 and

received a promissory note on June 4, 2004 to that effect.

Finally, in August of 2003, plaintiff was again told that if

he loaned ACH additional funds, plaintiff would be “taking steps

that would dramatically increase the value of his ACH shares.”

Compl. at 4:11-13. Plaintiff loaned ACH an additional $400,000.00

and a promissory note was executed to that effect on August 23,

2004. 

Both the June and August promissory notes have matured and

defendants have failed to repay any of the loans. Plaintiff

subsequently filed suit for breach of contract and fraud.

Plaintiff also brought claims for rescission and damages under

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 3 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

4

California Corporations Code Section 25501. 

Plaintiff avers that defendants breached the terms of the June

and August promissory notes and that defendants engaged in fraud

when making representations to plaintiff about ACH’s potential.

As a result of the breach of contract and the false

representations, plaintiff avers that he has lost $1,730,711.93,

plus interest.

Both the June and August promissory notes contain the

following forum selection clause:

"This note . . . shall be construed, governed and enforced in

accordance with the laws of the State of Florida with venue being

agreed to as Palm Beach County, Florida." See Plf.'s Compl., Ex.

2, June 4, 2004 Promissory Note for $250,000.00 & Ex. 3, August 23,

2004 Promissory Note for $400,000.00.

II.

Standards

Fed. R. Civ. P. 12(b)(3) governs a motion to dismiss premised

on the enforcement of a forum selection clause. Argueta v. Banco

Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996); see also Offshore

Sportswear, Inc. v. Vuarnet Int'l, B.V., 114 F.3d 848, 851 (9th

Cir. 1997) ("We treat dismissal based on a forum selection clause

like a dismissal for improper venue under Rule 12(b)(3)").

If venue is improper in this district, then the court may

transfer the case to any district or division in which it could

have been brought if it is in the interests of justice. 28 U.S.C.

§ 1406(a). Section 1406(a) provides that: "the district court of

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 4 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

5

a district in which is filed a case laying venue in the wrong

division or district shall dismiss, or if it be in the interest of

justice, transfer such a case to any district or division in which

it could have been brought." 

It is well established that "[o]nce venue is challenged, the

burden is on the plaintiff to show that venue is proper." Whiteman

v. Resort, 1999 WL 163044, at *1 (N.D.Cal.1999) (citing Piedmont

Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th

Cir.1979)).

III.

Analysis

Defendants contend that this court lacks personal jurisdiction

and, alternately, that the forum selection clauses contained in the

promissory notes mandate that venue is proper only in Florida. As

explained below, the court concludes that the forum selection

clauses contained in the promissory notes are binding and

therefore, venue in the Eastern District of California is improper.

Given that this motion may be resolved on the forum selection

clause issue alone, the court need not address the question of

whether defendants are subject to personal jurisdiction in the

Eastern District.

A. Whether the Forum Selection Clause Should be Given Effect 

Within the Ninth Circuit, federal law governs the validity of

a forum selection clause. Manetti-Farrow, Inc. v. Gucci America,

Inc., 858 F.2d 509, 512-13 (9th Cir. 1988). The Supreme Court has

explained that forum selection clauses are prima facie valid and

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 5 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

6

should not be set aside unless the party challenging enforcement

of such a provision can show it is “ ‘unreasonable’ under the

circumstances.” The M/S Bremen v. Zapata Off-Shore Co., 407 U.S.

1, 10 (1972). 

Preliminarily, the court must determine if the forum selection

clause is mandatory or permissive. The Ninth Circuit has held that

“where venue is specified with mandatory language the clause will

be enforced.” Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d

762, 764 (9th Cir. 1989). However, if the language is merely

permissive, the forum selection clause will not bar suits from

being filed in other venues. Hunt Wesson Foods, Inc. v. Supreme

Oil Co., 817 F.2d 75, 77 (9th Cir. 1987). 

In short, the court must make three determinations. First,

the court must determine whether the forum selection clauses are

mandatory or permissive. Second, the court must determine whether

enforcement of the clauses would be unreasonable, and third, if the

clauses are enforceable, whether the case should be dismissed or

transferred. The court addresses each in turn.

1. Whether The Clauses Are Mandatory Or Permissive 

As noted, both promissory notes at issue in this case contain

the following language: "This note . . . shall be construed,

governed and enforced in accordance with the laws of the State of

Florida with venue being agreed to as Palm Beach County, Florida."

See Plf.'s Compl., Ex. 2, June 4, 2004 Promissory Note for

$250,000.00 & Ex. 3, August 23, 2004 Promissory Note for

$400,000.00. The parties dispute whether this language is

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 6 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

7

mandatory or permissive.

Several key Ninth Circuit decisions guide the court’s

analysis. First, in Docksider, Ltd. v. Sea Technology, Ltd., the

court found the following language mandatory: 

This agreement shall be deemed to be a contract made

under the laws of the State of Virginia, United States

of America, and for all purposes shall be interpreted in

its entirety in accordance with the laws of said State.

Licensee hereby agrees and consents to the jurisdiction

of the courts of the State of Virginia. Venue of any

action brought hereunder shall be deemed to be in

Gloucester County, Virginia.

Docksider, Ltd., 875 F.2d at 763. Similarly, in Pelleport

Investors, Inc. v. Budco Quality Theatres, Inc., the court found

mandatory a clause which read: 

Exhibitor [Budco] expressly agrees that any and all

disputes arising out of or in connection with this

Agreement shall be litigated only in the Superior Court

for Los Angeles, California (and in no other), and

Exhibitor hereby consents to the jurisdiction of said

court.

Pelleport, 741 F.2d 273, 275 (9th Cir. 1984).

In contrast, in Hunt Wesson, the court determined that the

following clause was permissive: 

Buyer and Seller expressly agree that the laws of the

State of California shall govern the validity,

construction, interpretation*764 and effect of this

contract. The courts of California, County of Orange,

shall have jurisdiction over the parties in any action

at law relating to the subject matter of the

interpretation of this contract.

Hunt Wesson Foods, 817 F.2d at 76.

In comparing the difference between permissive and mandatory

language, the Docksider court remarked that: 

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 7 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

8

Hunt Wesson is distinguishable because the forum

selection clause underlying this action [Docksider]

contains the additional sentence stating that ‘[v]enue

of any action brought hereunder shall be deemed to be in

. . . Virginia.’ This language requires enforcement of

the clause because Docksider not only consented to the

jurisdiction of the state courts of Virginia, but

further agreed by mandatory language that the venue for

all actions arising out of the license agreement would

be Gloucester County, Virginia. This mandatory language

makes clear that venue, the place of suit, lies

exclusively in the designated county.

Docksider, 875 F.2d at 764. While the line between permissive and

mandatory language is uncertain, as a general rule, when venue is

specified with mandatory language (such as “shall be”), the clause

is enforceable. See Northern California Dist. Council of Laborers

v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1037 (9th Cir.

1995). 

The clauses at issue in this case appear closer to the

contract language in Docksider and Pelleport than the clause in

Hunt Wesson. 

Giving words in a contract common or normal meaning is a basic

rule of contract interpretation. Hunt, 817 F.2d at 77 (citing 4

S. Williston, A Treatise on the Law of Contracts, § 618 (W. Jaeger

3d ed.1961)). Here, the words “shall be construed” and “venue

being agree to...” clearly indicate that the clauses exclude

plaintiff from suing outside of Palm Beach County. Put somewhat

differently, an ordinary reading of these words indicates that the

language is mandatory and not permissive. 

The wording of the forum selection clauses in the case at bar

are also similar to other forum selection clauses which were also

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 8 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

9

found to be mandatory. See e.g., Nascone v. Spudnuts, Inc., 735

F.2d 763, 765 (3d Cir.1 984) ("This franchise shall be construed

according to the laws of the State of Utah, and venue for any

proceeding relating to the provisions hereof shall be Salt Lake

County, State of Utah" construed as mandatory); In re Fireman's

Fund Insurance Companies, 588 F.2d 93, 94 (5th Cir. 1979) (“If the

Sub-contractor shall institute any suit or action for the

enforcement of any of the obligations under this agreement, the

venue of such suit or action shall be laid in the County of Essex

and State of New Jersey" deemed enforceable); Excell, Inc. v.

Sterling Boiler & Mechanical, Inc., 106 F.3d 318, 320 (10th Cir.

1997) (holding the following words mandatory: "Jurisdiction shall

be in the State of Colorado, and venue shall lie in the County of

El Paso, Colorado”). 

Having concluded that the forum section clauses are mandatory,

the court turns next to the question of whether enforcing the

clauses is reasonable. 

2. Whether Enforcement of Clauses is Reasonable and Just 

It is well established that a forum selection clause should

govern absent strong countervailing factors. M/S Bremen, 407 U.S.

at 10. The Supreme Court has explained that a forum selection

clause is unreasonable if (1) its incorporation into the contract

was the result of fraud, undue influence, or overweening bargaining

power, Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 591

(1991) (2) the selected forum is so “gravely difficult and

inconvenient” that the complaining party will “for all practical

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 9 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

10

purposes be deprived of its day in court,” Bremen, 407 U.S. at 18

or (3) enforcement of the clause would contravene a strong public

policy of the forum in which the suit is brought. Id. at 15. 

In the case at bar, plaintiff fails to demonstrate that

enforcing the forum selection clause would be unreasonable.

Plaintiff presents three arguments, which the court addresses in

turn.

a. Public Policy Concerns 

First, plaintiff argues that the forum selection clause

violates California’s “anti-waiver” statute for securities fraud

actions. 

Plaintiff asserts that “California has a strong public policy

against waiver of the right to bring actions for rescission or for

damages for securities fraud in a California court under California

Corporations Code Section 25701.” Pl.’s Opp’n at 8. This section

of the California Corporations Code applies to offers to sell or

buy securities in California and provides that: “Any condition,

stipulation or provision purporting to bind any person acquiring

any security to waive compliance with any provision of this law or

any rule or order hereunder is void.” Cal. Corp. Code § 25701. 

Plaintiff, however, fails to explain how this provision

“declares” that enforcement of the forum selection clause would

violate California public policy. See Bremen at 15. The

provision, does not, specifically address waiver and venue. In

Jones v. GNC Franchising, Inc., the Ninth Circuit upheld the

district court's repudiation of the forum selection clause because

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 10 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

The Securities Act of 1933 (the “ '33 Act”) provides 2

that: “Any condition, stipulation, or provision binding any person

acquiring any security to waive compliance with any provision of

this subchapter or of the rules and regulations of the Commission

shall be void.” 15 U.S.C. § 77n. The 1934 Securities Exchange Act

(the “ '34 Act”) contains a substantially similar provision. 15

U.S.C. § 78cc(a). 

11

California law specifically provided that a "provision in a

franchise agreement restricting venue to a forum outside this state

is void. . ." 211 F.3d 495, 498 (9th Cir. 2000) (quoting Cal. Bus.

& Prof. Code § 20040.5). The Ninth Circuit reasoned that

California Business and Professions Code § 20040.5 expresses a

strong public policy to protect California franchisees from the

expense, inconvenience, and possible prejudice of litigating in a

non-California venue. Id. Given the absence of similar language,

California Corporations Code Section 25701 does not appear to

express a strong public policy regarding venue. On this ground

alone, plaintiff fails to meet his “heavy burden” of showing that

the forum selection clause should not be enforced because it

contravenes strong public policy. See Bremen. 

Although there are no published cases which discuss Section

25701 specifically, its language mirrors the anti-waiver language

in the federal Securities Act of 1933 and the Securities Exchange

Act of 1934. Whether the anti-waiver provisions in the 2

Securities Acts invalidate forum selection clauses is an issue that

has been litigated extensively. 

The Ninth Circuit’s decision in Richard’s v. Llyod’s of London

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 11 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

 Though the Richard’s case pertains to international 3

contracts, it addresses the strength of the presumption of validity

that is accorded to forum clauses. Indeed, many of the decisions

regarding forum selection clauses pertain to international

contracts, yet the legal conclusions remain binding on this court.

See e.g., Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324-25 (9th

Cir.1996) (noting that the standard set forth in Bremen “has been

widely applied to forum selection clauses in general” and not

limited to the admiralty context).

12

is instructive. In Richard’s, plaintiffs were United States 3

citizens and the defendant was the English insurance market, Lloyds

of London. Plaintiffs signed a contract containing a forum

selection clauses designating British courts and choice of law

clauses designating English law. Subsequently, plaintiffs sought

to invalidate the forum selection and choice of law provisions on

the grounds that they violated the strong public policies of United

States, as expressed in the anti-waiver provisions of the United

States Securities Acts of 1933 and 1934 as well as parallel state

securities law and RICO. 

The Ninth Circuit rejected the contention and observed that

the anti-waiver provisions are worded very broadly, as they cover:

‘“any condition, stipulation, or provision binding any person

acquiring any security to waive compliance with any provision of

this subchapter....’” Richards, at 1293 (citing anti-waiver

provision, emphasis in original). The court went on to observe

that “this language is broad enough to reach any offer or sale of

anything that could be alleged to be a security, no matter where

the transaction occurs.” Id. 

The court rejected plaintiffs’ argument that the anti-waiver

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 12 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

13

provision constituted strong public policy and thus invalidated the

forum selection clause. In rejecting plaintiffs’ argument, the

court reasoned, “[t]his assertion, if true, expands the reach of

federal securities law to any and all such transactions, no matter

how remote from the United States.” Id. at 1293. The court went

on to agree with the Fifth Circuit that “we must tread cautiously

before expanding the operation of U.S. securities law in the

international arena.” Id., citing Haynsworth v. The Corporation,

121 F.3d 956, 966 (5th Cir. 1997).

The case at bar does not pertain to international contracts.

Nonetheless, the logic applies with equal force in the domestic

setting. In Richard’s, the court ultimately held that the forum

selection clause did not contravene public policy. In so holding,

the Ninth Circuit joined the majority of other circuits in finding

that forum selection clauses are valid despite anti-waiver

provisions. See Haynsworth v. The Corporation, a/k/a Lloyd's of

London, 121 F.3d 956, 962 (5th Cir. 1997); Allen v. Lloyd's of

London, 94 F.3d 923, 928 (4th Cir. 1996); Shell v. R.W. Sturge,

Ltd., 55 F.3d 1227, 1229-30 (6th Cir. 1995); Bonny v. Society of

Lloyd's, 3 F.3d 156, 159 (7th Cir. 1993), cert. denied, 510 U.S.

1113, 114 S.Ct. 1057, 127 L.Ed.2d 378 (1994); Roby v. Corporation

of Lloyd's, 996 F.2d 1353, 1362-63 (2d Cir.); Riley v. Kingsley

Underwriting Agencies, Ltd., 969 F.2d 953, 957 (10th Cir.); Lipcon

v. Underwriters at Lloyd's, London, 148 F.3d 1285, 1291 (11th Cir.

1998).

Together, these cases reflect a trend: “Federal courts have

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 13 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

 Defendants provided the court with excerpts of the Florida 4

statute. In comparing the codes of the two states, it appears that

the protections are the same and plaintiff has not argued to the

contrary.

14

. . . increasingly enforced private stipulations in securities

fraud litigation, despite the antiwaiver provisions of the federal

securities laws.” Alan R. Palmiter, Toward Disclosure Choice in

Securities Offerings, 1999 Colum. Bus. L. Rev. 1, 74 (1999). In

most of these cases, the courts’ holdings rely on the proposition

that the forum provided for in the forum selection clause provides

remedies to the plaintiff. See, e.g., Society of Lloyd's v.

Reinhart, 402 F.3d 982 (10th Cir. 2005) (holding that the forum

selection clause naming English courts was enforceable because

there was no indication that English remedies were inadequate

substitutes for those of state securities act); Haynsworth, 121

F.3d at 969 (enforcing forum selection clause because “English law

provides a variety of protections for fraud and misrepresentations

in securities transactions.”) 

Florida law provides similar, if not identical, protections

for fraud and misrepresentation in securities transactions.

Plaintiff has failed to explain how the remedies he seeks under

California law are not available under Florida law, or how the

protections under California law are greater than under Florida

law. 4

Concluding that the forum selection clause should be enforced

is consistent with the holdings of other district courts faced with

similar circumstances. For example, in Gagnon v. Ryerson, Inc.,

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 14 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

 Plaintiff cites to Nutracea v. Langley Park Investments 5

PLC, 2007 WL 135699, 3 (E.D. Cal. 2007). The Nutracea case,

however, is distinguishable. In that case, plaintiffs were in

California, defendants in England and the forum selection clause

provided that venue was in New York. The court found it

significant that neither of the parties had any relationship to New

York. The same cannot be said of the case at bar. Here, the

defendants clearly have a relationship to Florida and plaintiff has

failed to demonstrate that Florida law does not provide the same

protections. 

15

the court rejected plaintiff’s argument that Oregon public policy

regarding noncomplete agreements rendered a forum selection clause

unenforceable. The court noted that “plaintiff did not present any

evidence that Illinois law provides less protection than Oregon law

and, therefore, failed to prove that the Noncompete Clause would

be enforced any differently in Illinois.” Gagnon v. Ryerson, Inc.,

No. 07-68-AS, Slip Op. at 4. (D. Or. Fed. 1, 2007). 

The Gagnon court concluded that “[i]n the absence of any clear

showing that Plaintiff will be prejudiced by the litigation of this

matter in the Illinois courts, this court finds no reason not to

enforce the forum selection clause set forth in the Agreement.”

Id., at 5. See also E. & J. Gallo Winery v. Andina Licores S.A.,

440 F. Supp. 2d 1115 (E.D. Cal. 2006) (in rejecting plaintiff’s

public policy argument, court reasoned “the [f]act that forum or

choice of law specified by contract affords remedies that are

different or less favorable to laws of forum preferred by plaintiff

is not alone valid basis to deny enforcement of forum selection and

choice of law provisions.”)5

The court finds that the forum selection clause is reasonable

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 15 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

16

in that enforcement of the clause would not “contravene a strong

public policy of the forum in which suit is brought, whether

declared by statute or by judicial decision.” Bremen, at 15. 

b. Inconvenience to Plaintiff

Plaintiff also argues that he would be at a “distinct

disadvantage if he had to litigate in Florida.” Pl.’s Opp’n to

Def.’s Mot. to Dis. at 15. Plaintiff maintains that he has no

contacts with Florida. Id. While undoubtedly true, plaintiff

fails to provide any evidence that litigating this case in Florida

“would be so difficult and inconvenient that the party would

effectively be denied a meaningful day in court.” Pelleport, 741

F.2d at 281 (citing Bremen, 407 U.S. at 18). 

Pursuing a lawsuit in another state is not per se

unreasonable. See Carnival Cruise Lines, 499 U.S. at 594; see also

Fireman's Fund Insur. Co. v. M/V DSR Atlantic, 131 F.3d 1336, 1338

(9th Cir. 1998) (“serious inconvenience” of litigating in Korea did

not render clause “unreasonable”); Flake v. Medline Industries,

Inc., 882 F. Supp. 947, 949-950 (E.D. Cal. 1995) (J. Levi) (clause

requiring California plaintiff to litigate in Illinois upheld);

Koresko v. RealNetworks, Inc. 291 F. Supp. 2d 1157, 1158 (E.D.

Cal. 2003)(J. Wanger)(upholding clause requiring California

plaintiff to file suit in Washington state). 

c. Allegation that Promissory Notes were Obtained Through

Fraud 

Lastly, plaintiff argues that since the promissory notes were

obtained through fraud, they cannot be enforced and therefore, the

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 16 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

17

forum selection clauses cannot be enforced. See Pl.’s Opp’n at 9.

It is well established, however, that a party opposing the

enforcement of a forum selection clause must establish that the

forum selection clause itself (as opposed to the entire contract)

was obtained through fraud. See Argueta, 87 F.3d at 325 (“forum

selection clause is unreasonable if . . . its incorporation into

the contract was the result of fraud, undue influence, or

overweening bargaining power”)(citing Carnival Cruise Lines, 499

U.S. at 591). Although plaintiff maintains that the promissory

notes were obtained through fraud, the complaint and plaintiff’s

opposition fail to show that the inclusion of the forum selection

clauses themselves were the product of fraud. Again, plaintiff

fails to meet his burden of showing that the forum selection clause

should not be enforced.

In sum, plaintiff has failed to show that enforcing the forum

selection clause would be “unreasonable or unjust, or that the

clause [is] invalid for reasons such as fraud or overreaching.”

Manetti-Farrow, 858 F.2d at 512. Accordingly, the court finds

that the forum selection clauses contained in the June and August

promissory notes are binding. 

B. Transfer under 28 U.S.C. § 1406

Section 1406(a) provides: "The district court of a district

in which is filed a case laying venue in the wrong division or

district shall dismiss, or if it be in the interest of justice,

transfer such a case to any district or division in which it could

have been brought." 28 U.S.C. § 1406(a).

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 17 of 18
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

18

Under §1406, this court may transfer the pending case to the

Southern District of Florida or dismiss the action altogether. 

“Normally transfer will be in the interest of justice because

normally dismissal of an action that could have been brought

elsewhere is time-consuming and justice-defeating.” Miller v.

Hambrick, 905 F.2d 259, 262 (9th Cir. 1990) (addressing transfer

under 28 U.S.C. § 1631). Here, plaintiff states in his opposition

brief that he would prefer the action be transferred, not

dismissed. Given plaintiff’s preference, transfer is in the

interest of justice in this case. 

V.

Conclusion

1. Defendants’ Motion to Transfer is GRANTED. 

2. The case is ordered TRANSFERRED to the Southern District of

Florida. 

IT IS SO ORDERED. 

DATED: February 28, 2007. 

Case 2:06-cv-02527-LKK -DAD Document 33 Filed 02/28/07 Page 18 of 18