Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-00772/USCOURTS-caed-1_05-cv-00772-3/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Contract Dispute

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

ACES TRANSPORT, L.L.C., a Nevada )

Limited Liability Company, )

)

Plaintiff, )

v. )

)

RTS FINANCIAL SERVICES, a Kansas )

business entity; RYAN )

TRANSPORTATION SERVICES, INC., )

a Kansas Corporation; and DOES 1-20, )

Inclusive, )

)

Defendants. )

____________________________________)

CIV F 05-0772 AWI DLB

ORDER ON DEFENDANTS’

RULE 12(b)(2), RULE 12(b)(6),

and RULE 12(b)(3), or in the

alternative TRANSFER UNDER

28 U.S.C. § 1406(a), MOTIONS

This case stems from UCC-1 financing statements and an allegedly usurious “factoring”

contract between Plaintiff Aces Transport (“Aces”) and Defendants Ryan Transportation

Services and RTS Financial Services (collectively “RTS”). RTS removed to this Court on

diversity grounds and has filed a motion to dismiss for improper venue based on a forum

selection clause, a motion to dismiss for lack of personal jurisdiction, and a motion to dismiss

California state law claims on the basis of a choice-of-law contractual provision. 

 BACKGROUND

Plaintiffs’ Complaint

From the complaint, Aces is a Nevada limited liability company whose principal place of

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1Aces makes numerous objections to nearly every paragraph in the Declarations of Andreoli and Ryan. The

objections are bare, have little if any elaboration, and generally are for hearsay, relevance, lack of knowledge and

lack of foundation. However, personal knowledge can be inferred from the affidavits themselves, see Sea-Land

Serv. v. Lozen, Int., L.L.C., 285 F.3d 808, 819 (9th Cir. 2002); Barthelemy v. Air Line Pilots Ass’n, 897 F.2d 999,

1018 (9th Cir. 1990), and statements by agents and/or employees may be considered statements of a party opponent. 

See Fed. R. Evid. 801(d)(2)(C), (D). To the extent relied on in this order, Aces’s objections are overruled as without

merit. 

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business is in Kern County California. RTS are Kansas business entities. Aces alleges that RTS

loaned it money under a Factoring Agreement (the “Agreement” or the “Aces Agreement”) dated

on or about April 21, 2004. Although they use the term “Factors,” RTS is in reality a lender of

money. Aces alleges that RTS was required to be licensed under the California Finance Lenders

Law, but are not so licensed. 

Aces alleges that the Agreement is secured, by its terms, by Aces’s accounts receivables,

related instruments, and proceeds thereof. Under the Agreement, RTS are specifically permitted

to file a financing statement to perfect its security interest in the collateral, all of which financing

statements were filed within California. The Agreement also provides for a “Factoring Fee,”

which is in reality interest, of 2.5% per invoice per account of Aces. This translates into an

interest rate of 2.5% per month, or 30% per annum. The Agreement also requires Aces to

repurchase unpaid accounts, an indicator that the transaction is a loan, rather than a purchase of

receivables without recourse. 

Aces’s complaint contains causes of action for: (1) a declaration that there is no duty to

pay the usurious interest rate of the Agreement and for the recovery of usurious interest paid; (2)

money had and received based on money paid to RTS under a usurious interest rate; (3) recision

of the Agreement; (4) intentional interference with contract; (5) negligent interference with

contract; (6) conversion; and (7) violation of the California Unfair Business Practices Act for

charging a usurious interest rate, doing business in California although not qualified to do

business in the state, and lending money without complying with California laws.

Declarations of Marc Andreoli and Martin Ryan1

From the declarations of Marc Andreoli and Martin Ryan, and the attached exhibits, prior

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2

See also Declaration of Martin J. Ryan at ¶ 4.

3

See also Declaration of Martin Ryan at ¶ 4.

4

See also Declaration of Martin Ryan at ¶ 5.

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to execution of the Aces Agreement, RTS had a factoring agreement with Southern Logistics,

Inc. (“SLI”). See Declaration of Marc Andreoli at ¶ 3.2 Barragan, the president of Aces, was

also the president of SLI. Id. at ¶ 2. Around April 5, 2004, SLI shut down its business without

notice to Ryan, disconnected its phones, left no forwarding address, and Ryan was unable to

communicate with SLI. Id. at ¶ 3. RTS had $450,000 of unpaid accounts receivables owed to it

by clients of SLI. Id. at ¶ 4.3 RTS sent notification to SLI’s account debtors instructing them to

send payments on the SLI accounts to RTS. Id. On April 6, 2004, Barragan contacted RTS and

told Andreoli that he had shut down SLI and transferred its business to Aces. Id. at ¶ 5. 

Barragan indicated that he wanted RTS to continue to finance Aces. Id. Andreoli declares that

SLI/Aces staff confirmed that SLI materials, resources and personnel had been transferred to

Aces. Id. at 6. On April 7, 2004, RTS faxed account set-up documents to Aces. Id. at ¶ 5.4

Also, RTS received telephone calls from SLI account debtors indicating that SLI was attempting

to divert monies owed to RTS back to SLI. Id. at ¶ 6. Andreoli called SLI at the SLI/Aces

number and demanded that the conduct cease. Id. The following day, RTS received similar calls

from other account debtors. Id. at ¶ 7. On April 12, 2004, RTS wrote Barragan and demanded

that SLI cease diverting monies owed to RTS; this correspondence also threatened legal action if

no response was received. Id. at ¶ 10. When no response was received, RTS filed suit on April

13 in federal court seeking an injunction prohibiting the diversion of monies. Id. Also on April

13, Barragan called RTS and agreed that RTS needed “to be protected” and that Barragan wanted

Aces to continue factoring with RTS. Id. at ¶ 11. On April 15, 2004, RTS filed a UCC-1

financing statement on Aces’s accounts receivable with the Nevada Secretary of State. Id. at ¶

12. On April 21, Barragan requested that RTS enter into a new factoring agreement with Aces. 

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See also Declaration of Martin Ryan at ¶ 7.

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Id. at ¶ 13.5 RTS prepared and sent the factoring agreement to Barragan on April 21, 2004. Id.

On April 27, 2004, Barragan then forwarded the Agreement signed by Aces back to Kansas. Id.

RTS then signed the factoring agreement in Kansas. Id. RTS then filed a UCC-1 financing

statement on Aces’s accounts receivable with the California Secretary of State on July 8, 2004. 

Id. at ¶ 14. In September 2004, Barragan notified RTS that he wanted a new factor for Aces. Id.

at ¶ 15. 

Around September 28, 2004, RTS learned that Barragan had filed a bankruptcy petition

on behalf of SLI on August 9, 2004. Id. RTS was willing to accept a buyout of the Agreement,

but was not willing to release its UCC-1 financing statements filed against Aces unless an

acceptable buyout agreement was reached in light of the SLI bankruptcy. Id. at ¶ 16. To resolve

the issue, RTS filed a motion in the bankruptcy proceeding, which was subsequently granted. Id.

at ¶ 17. RTS then gave notice to the Aces account debtors that its previous notice of assignment

was terminated, and RTS then released its UCC-1 filings. Id. at 18.

Declaration of Baldo Barragan

Barragan declares that he is the president of Aces and was the former president of SLI. 

See Declaration of Baldo Barragan at ¶ 2. RTS was a factor of SLI. Id. at ¶ 3. SLI went out of

business and Aces is a completely separate entity from SLI. Id. at ¶¶ 4-5. Barragan declares that

he never told Andreoli that SLI transferred its business to Aces, and in fact SLI did not transfer

any of its assets, customers, or business to Aces. Id. at ¶ 8. Without notice and without a

contract with Aces, in approximately early April 2004, RTS recorded a UCC-1 financing

statement against Aces. Id. at ¶ 9. Aces learned of the “wrongful filing” because a prospective

lender told Aces. Id. at ¶ 10. Aces was in the process of signing documents with the prospective

lender when the lender said that it could not agree to lend money to Aces as long as the UCC-1

was recorded. Id. at ¶ 10. In fact, no other lender would loan money to Aces as long as RTS’s

UCC-1 was on file. Id. at ¶ 11. Barragan spoke to Andreoli about this, and Andreoli said that

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Aces was really SLI with a new name and that there was nothing Aces could do about it. Id. at ¶

12. On more than one occasion, Barragan requested that Andreoli release the UCC-1, but

Andreoli refused. Id. at ¶ 13. No lender would lend Aces money with the UCC-1 on file, and

RTS refused to release it. Id. at ¶ 14. RTS knew that it was “starving” Aces financially, and

Barragan believes that this was the intent of RTS. Id. Without financing, Aces was quickly

failing and would have failed. Id. at ¶ 15. Barragan declares that, “under duress and with no

other option,” Aces gave in to RTS’s demand that Aces pay $1500 per week on SLI’s debt; the

terms of the new contract were not negotiable. Id. Paying $1500/week on the debt of an

unrelated company was a hardship, and Barragan was able to negotiate a reduction of $500/week,

but even that was a burden. Id. at ¶ 17. In September 2004, Barragan told Andreoli that Aces

would no longer pay SLI’s debt. Id. Andreoli said that was not Barragan’s choice, and RTS cutoff Aces’s funding and its ability to look at the status of its accounts receivable on-line, seized

reserve accounts, and applied it to SLI’s debt without notice or consent. Id. Aces tried to obtain

funding through Phoenix and have Phoenix pay off RTS. Id. RTS refused through a series of

“frivolous” demands to allow pay off and thus, continued its habit of starving Aces into

submission. Id. at ¶ 18. When Aces was on the verge of going out of business because of RTS’s

conduct, Barragan told RTS that Aces was going to file bankruptcy and pursue lender liability

against RTS. Id. at ¶ 19. RTS then began funding again, but required Aces to rebuild its reserve

account, and did not return the funds it took from Aces’s reserve account to pay SLI’s debt. Id.

Eventually, Aces obtained different funding and settled its issues with Phoenix that were created

by RTS. Id. at ¶ 20. Phoenix was paid a substantial amount of money and RTS was paid in full. 

Id. After RTS was paid, it sent correspondences to Aces’s customers instructing them to send

payments to RTS. Id. at ¶ 21. Thereafter, the UCC-1 was released. Id. at ¶ 21.

Provisions of the SLI Factoring Agreement and the Aces Factoring Agreement

The SLI factoring agreement and the Aces Agreement are essentially identical, the

primary difference being the names on the agreements. Cf. Exhibit A to the Declaration of

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The “collateral” described is essentially accounts receivable. See Exhibit A to the Declaration of Martin

Ryan at § 4.

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Martin Ryan (Aces Agreement) with Exhibit A to the Declaration of Marc Andreoli (SLI

Agreement). In relevant part, both agreements read:

SECTION 4. SECURITY INTEREST

. . . Factor [RTS] may file financing statements and all amendments

thereto describing as the collateral any or all of the foregoing collateral by any

description Factor deems appropriate in any jurisdiction or office Factor deems

appropriate to perfect its security interest in foregoing collateral.6

. . . . . . . . . . . . . .

SECTION 10. GOVERNING LAW AND CONSENT TO JURISDICTION

10.1 This Agreement is accepted and made in the state of Kansas and this

Agreement and the rights of the parties hereunder shall be interpreted under and

governed as to construction, enforcement and validity by the laws of the state of

Kansas.

10.2 Factor and Assignor [SLI and Aces] agree that any legal suit, action

or proceeding arising out of or related to this Agreement shall be instituted, heard

and resolved solely and exclusively in a State or Federal Court in or for Johnson

County, Kansas. Factor and Assignor submit to the jurisdiction of the State and

Federal Courts for Johnson County, Kansas for the purpose of deciding any

questions, disputes or causes, arising under this Agreement, and in the event

Assignor is not qualified to do business in the State of Kansas, the Secretary of

State of the state of Kansas is hereby designated as Assignor’s agent for service of

process for any actions commenced under or to enforce this Agreement in the

State of Kansas, provided that a copy of any such process shall be mailed to

Assignor in accordance with the notice provisions of this Agreement.

. . . . . . . . . . . . 

SECTION 12. MODIFICATION, SEVERABILITY, SUCCESSORS AND

ASSIGNS, ETC.

This Agreement may be modified only by written instrument signed by the

parties hereto. . . . This Agreement supersedes all prior agreements between the

parties, and shall bind the successors and assigns of Assignor and shall inure to

the benefit of the successors and assigns of Factor. . . .

Exhibit A to the Declaration of Martin Ryan (Aces Agreement); Exhibit A to the Declaration of

Marc Andreoli (SLI Agreement).

 LEGAL STANDARDS

Forum Selection Clauses

Federal courts sitting in diversity apply federal law to determine the effect and scope of a

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forum selection clause. Jones v. GNC Franchising, Inc., 211 F.3d 495, 497 (9th Cir. 2000);

Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 513 (9th Cir. 1988); Flake v. Medline

Industries, Inc., 882 F.Supp. 947, 949 (E.D. Cal. 1995). “The rule set forth by the Supreme

Court in M/S Bremen v. Zapata Off-Shore Co. controls the consideration of a motion to dismiss

for improper venue based upon a forum selection clause.” Jones, 211 F.3d at 497; ManettiFarrow, 858 F.2d at 513. Accordingly, forum selection clauses are presumptively valid and the

party challenging the clause “bears a heavy burden of proof” and “must clearly show that

enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as

fraud or over-reaching.” M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-15 (1972);

Murphy v. Schneider National, Inc., 362 F.3d 1133, 1140 (9th Cir. 2003); see also Jones, 211

F.3d at 497. Enforcement of a forum selection clause is unreasonable under three narrow

exceptions: 

(1) if the inclusion of the clause in the agreement was the product of fraud or

overreaching; (2) if the party wishing to repudiate the clause would effectively be

deprived of his day in court were the clause enforced; or (3) if enforcement would

contravene a strong public policy of the forum in which the suit is brought. 

Murphy, 362 F.3d at 1140; see also M/S Bremen, 407 U.S. at 12-18; Jones, 211 F.3d at 497;

Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 325 (9th Cir. 1996); Sarmiento v. BMG

Entertainment, 326 F.Supp.2d 1108, 1107 (C.D. Cal. 2003). “Overreaching” is a ground “short

of fraud,” Murphy, 362 F.3d at 1141, and is “that which results from an inequality of bargaining

power or other circumstances in which there is an absence of meaningful choice on the part of

one of the parties.” Haynsworth v. The Corporation, 121 F.3d 956, 965 n.17 (5th Cir. 1997). 

Overweening bargaining power, see Argueta, 87 F.3d at 325, and duress or coercion are also

included within the first exception. See Security Watch, Inc. v. Sentinel Sys., 176 F.3d 369, 375

(6th Cir. 1999); Afram Carriers v. Moeykens, 145 F.3d 298, 301-02 (5th Cir. 1998); 2215 Fifth

St. Assocs., LP v. U-Haul Int'l, Inc., 148 F.Supp.2d 50, 55-56 (D.D.C. 2001); American Life Ins.

Co. v. Parra, 25 F.Supp.2d 467, 478 (D. Del. 1998). Furthermore, a party seeking to avoid

enforcement of the forum selection clause under the first exception must show that the inclusion

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of the clause itself into the agreement was improper; it is insufficient to allege that the agreement

as a whole was improperly procured. See Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 n.14

(1974); Marano Enters. of Kansas v. Z-Teca Rests., L.P., 254 F.3d 753, 757 (8th Cir. 2001);

Batchelder v.Nobuhiko Kawamoto, 147 F.3d 915, 919 (9th Cir. 1998); Afram Carriers, 145 F.3d

at 301-02; Haynsworth, 121 F.3d at 963-65; Moses v. Business Card Express, Inc., 929 F.2d

1131, 1138 (6th Cir. 1991); One Beacon Ins. Co. v. JNB Storage Trailer Rental Corp., 312 F.

Supp. 2d 824, 832 (E.D. Va. 2004); cf. Cohen v. Wedbush, Noble, Cook, Inc., 841 F.2d 282, 287

(9th Cir. 1988) (discussing arbitration agreement).

A forum selection clause will be enforced where venue is specified through mandatory

language. Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762, 764 (9th Cir.1989). However,

if the language of the forum selection clause is non-mandatory, the forum selection clause will

not preclude suit elsewhere. Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77 (9th

Cir. 1987). To be mandatory, the clause must contain language that clearly designates a

particular forum as the exclusive forum. Northern California Dist. Council of Laborers v.

Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1037 (9th Cir. 1995). “When only jurisdiction is

specified the clause will generally not be enforced without some further language indicating the

parties’ intent to make jurisdiction exclusive.” Docksider, 875 F.2d at 764. A forum selection

clause must contain additional language mandating that venue be in a particular place or

mandatory language requiring a case be litigated in only one forum. Pittsburg-Des Moines Steel,

69 F.3d at 1037. 

Even if claims in an action do not allege breach of the contract containing the forum

selection clause, the forum selection clause still applies if the claims asserted arise out of the

contractual relation or implicate the contract’s terms. Manetti-Farrow, 858 F.2d at 514; Crescent

Intern., Inc. v. Avatar Communities, Inc., 857 F.2d 943, 944-45 (3d Cir. 1988); see also Hugel v.

Corporation of Lloyd’s, 999 F.2d 206, 209 (7th Cir. 1993) (“Regardless of the duty sought to be

enforced in a particular cause of action, if the duty arises from the contract, the forum selection

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clause governs the action.”); Bense v. Interstate Battery System of America, 683 F.2d 718, 720

(2d Cir.1982) ( holding that a forum selection clause applied to anti-trust claims because a forum

selection clause covers “causes of action arising directly or indirectly from” the agreement).

Rule 12(b)(3)

Federal Rule of Civil Procedure 12(b)(3) allows a defendant to move for dismissal of the

case on the basis of improper venue. See Fed. R. Civ. P. 12(b)(3); Abrams Shell v. Shell Oil Co.,

165 F.Supp.2d 1096, 1102 (C.D. Cal. 2001). The plaintiff bears the burden of showing that

venue is proper in the chosen district. Koresko v. Realnetworks, Inc., 291 F.Supp.2d 1157, 1160

(E.D. Cal. 2003); American Homecare Fed'n v. Paragon Sci. Corp., 27 F.Supp.2d 109, 112 (D.

Conn. 1998); see also Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th

Cir.1979) (holding that plaintiff bears the burden to show proper venue in context of summary

judgment). When there are multiple parties and/or multiple claims in an action, the plaintiff must

establish that venue is proper as to each defendant and as to each claim. Pacer Global Logistics,

Inc. v. AMTRAK, 272 F.Supp.2d 784, 788 (E.D. Wis. 2003); Bearse v. Main St. Invs., 170

F.Supp.2d 107, 116 (D. Mass. 2001); Payne v. Marketing Showcase, Inc., 602 F.Supp. 656, 658

(N.D. Ill. 1985). Unlike a motion to dismiss for failure to state a claim under Rule 12(b)(6), the

pleadings need not be accepted as true and the court may consider supplemental written materials

and consider facts outside of the pleadings in deciding the Rule 12(b)(3) motion. Murphy, 362

F.3d at 1337; Argueta, 87 F.3d at 324 (holding that “the pleadings are not accepted as true” and

that “facts outside of the pleadings” may be considered in a 12(b)(3) motion). If there are

contested factual issues, the court is obligated to draw all reasonable inferences and resolve the

factual conflicts in favor of the non-moving party. Murphy, 362 F.3d at 1138. Alternatively, the

district court may hold a pre-trial evidentiary hearing on the disputed facts or may deny the

motion with leave to re-file if further development of the record would eliminate any genuine

factual issues. Id. at 1139. Where venue is improper, the district court has the discretion to

dismiss the case under Rule 12(b)(3) or transfer the case in the interests of justice to an

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28 U.S.C. § 1406(a) reads: 

(a) 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 case to any district or division in which it could have been brought.

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appropriate jurisdiction under 28 U.S.C. § 1406(a). See King v. Russell, 963 F.2d 1301, 1304

(9th Cir. 1992); Kawamoto v. CB Richard Ellis, Inc., 225 F.Supp.2d 1209, 1212 (D. Haw. 2002). 

A court need not have personal jurisdiction over the defendant in order to transfer, rather the

court may order transfer so that jurisdiction may be established in the “transferee court.” See

Goldlawr, Inc. v. Heiman, 369 U.S. 463, 466-67 (1962); Abrams Shell, 165 F.Supp.2d at 1103. 

“A determination of improper venue does not go to the merits of the case and therefore must be

without prejudice.” See In re Hall, Bayoutree Assocs., Ltd., 939 F.2d 802, 804 (9th Cir. 1991);

Schwarzer, Tashima, Cal. Prac. Guide: Fed. Civ. Pro. Before Trial ¶ 9:145.1 at 9-40. 

 ANALYSIS

RTS’s Argument

RTS moves for dismissal or transfer under Rule 12(b)(3) and 28 U.S.C. § 1406(a).7 The

motion is based on the affidavits and attached exhibits of Martin Ryan and Marc Andreoli and

the memorandum of points and authorities. RTS argues that the Agreement between itself and

Aces contains a mandatory forum selection clause in which the parties agreed that the exclusive

and sole venue for any dispute arising under the agreement were the Federal and State Courts for

Johnson County, Kansas. The Agreement was freely signed by the parties, and none of the three

recognized exceptions for avoiding a forum selection clause applies. Since the forum selection

clause is mandatory, the clause must be enforced and this case should either be dismissed or

transferred to the Federal District Court of Kansas. 

Aces’s Opposition

Aces argues that because this case involves a forum selection clause that provides for

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28 U.S.C. § 1404(a) reads:

(a) For the convenience of 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.

9

This is the entirety of Aces’s argument against enforcement of the forum selection clause. Aces does not

argue inconvenience or that enforcement violates public policy. 

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venue in a federal district court, the proper analysis is under 28 U.S.C. § 1404(a)8 and Stewart

Org. v. Ricoh Corp., 487 U.S. 22 (1988); the standard under M/S Bremen and § 1406(a) is not to

be applied. See, e.g., Brock v. Baskin-Robbins USA Co., 113 F.Supp.2d 1078, 1082-85 (E.D.

Tex. 2000). Aces argues that RTS does not contend that venue is otherwise improper under 28

U.S.C. § 1391. Aces then argues, apparently relying on the declaration of Baldo Barragan, that

RTS’s motion should be denied since:

the forum selection clause resulted from fraud and overreaching by Ryan and the

forum-selection clause is not applicable to many of the claims alleged which

occurred before the parties entered into the forum-selection-clause. Further, it

would be patently unfair for the Court to allow Ryan to use the provisions of the

forum selection clause as a vehicle to dismiss this action or transfer venue as it

was obtained through Ryan’s superior bargaining position.

Plaintiff’s Opposition at 5:19-25.9

RTS’s Reply

RTS argues that the Ninth Circuit has spoken on the proper standard to apply with respect

to a forum selection clause, and that standard is 12(b)(3) and § 1406. RTS argues that Aces has

not argued that Kansas is too difficult or inconvenient nor does Aces rely on a public policy

argument against enforcement of the clause. RTS argues that Aces is simply saying that the

contract was an adhesion contract made under duress without sufficient factual support. There

can be no legal duress since RTS was merely exercising its rights under the SLI factoring

agreement against Aces as the successor to SLI. See Exhibit A to the Declaration of Marc

Andreoli. Further, a forum selection clause is enforceable even when it is contained in a contract

of adhesion. Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593-94 (1991). RTS also argues

that Aces is an experienced interstate trucking company whose predecessor corporation had

entered into an identical agreement with Ryan. 

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Discussion

1. Mandatory or Permissive Clause

As an initial matter, no party argues that the forum selection clause is permissive. The

clause reads “that any legal suit, action or proceeding arising out of or related to this Agreement

shall be instituted, heard and resolved solely and exclusively in a State or Federal Court in or for

Johnson County, Kansas.” Exhibit A to the Declaration of Martin Ryan (emphasis added). This

clause contains language that clearly designates State and Federal Courts for Johnson County,

Kansas as the exclusive forum; it is therefore mandatory. Pittsburg-Des Moines Steel, 69 F.3d at

1037; Docksider, 875 F.2d at 764. 

2. Scope of the Forum Selection Clause

Aces argues that the forum-selection clause is not applicable to many of the claims

alleged which occurred before the parties entered into the forum-selection clause. Aces does not

elaborate on this assertion or develop its argument. 

The complaint contains causes of action for: (1) a declaration that a that there is no duty

to pay the usurious interest rate of a factoring agreement and for the recovery of usurious interest

paid; (2) money had and received based on money paid to RTS under a usurious interest rate; (3)

recision of the factoring agreement; (4) intentional interference with contract; (5) negligent

interference with contract; (6) conversion; and (7) violation of the California Unfair Business

Practices Act for charging a usurious interest rate, doing business in California although not

qualified to do business in the state, and lending money without complying with California laws. 

The complaint refers to the Aces Agreement as “the Agreement,” and realleges and incorporates

by reference under each cause of action all of the prior paragraphs. Plaintiff’s Complaint at ¶¶ 6,

11, 20, 22, 34, 55, & 60. The forum selection clause is broad and covers “any legal suit, action

or proceeding arising out of or related to this Agreement.” Exhibit A to the Martin Declaration. 

 With these considerations in mind, a review of the allegations in the complaint make it

clear that causes of action 1, 2, 3, 6, and 7 all relate to and arise under the Aces Agreement. The

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10Negligent interference with contractual relationship is not a recognized cause of action in California. See

Fifield Manor v. Finston, 54 Cal.2d 632, 636067 (1960); LiMandri v. Judkins, 52 Cal.App.4th 326, 349 (1997);

California Jury Instructions – Civil: Comment to § 2204 (July 2004 ed). Accordingly, the Court will not consider

the Fifth Cause of Action for purposes of RTS’s venue motion.

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First Cause of Action seeks a declaration that involves only the Aces Agreement. The Second

Cause of Action seeks “money had and received” on the basis of paying a usurious interest rate

which, when read in light of the incorporated paragraphs, can only refer to the Aces Agreement. 

The Third Cause of Action seeks recision of the Aces Agreement. The Sixth Cause of Action

seeks damages for the conversion of funds and monies which, when read in light of the

incorporated paragraphs, refers to conduct related to and arising under the Aces’s Agreement. 

The Seventh Cause of Action for unfair business practices is essentially based on a usurious

interest rate and the failure to follow California law and, when read in light of the incorporated

paragraphs, is conduct related to and arising under the Aces Agreement. These claims clearly

arise out of the contractual relationship with RTS and implicate the contract’s terms. See

Manetti-Farrow, 858 F.2d at 514.

The Fourth Cause of Action is not as clear.10 With respect to the cause of action for

intentional interference with contract, Aces alleges that it entered into a contract with Phoenix

Capital Group and that RTS had knowledge of this contract as well as “other contractual

relationships.” Plaintiff’s Complaint at ¶¶ 35-37. Aces alleges that RTS intentionally interfered

with the Phoenix contract by, inter alia, refusing to withdraw a UCC-1 financing statement and

wrongfully exercising dominion and control over Aces’s funds. Id. at ¶ 38. When compared

with the allegations incorporated by reference, it is unclear whether Aces is alleging interference

with the Phoenix relationship through the UCC-1 financing statement that was filed before

execution of the Aces Agreement or a financing statement filed after execution. However, the

Barragan Declaration indicates that Aces unsuccessfully attempted to obtain funding from

Phoenix after Aces had negotiated payment down from $1500/week to $500/week and after RTS

cut off funding and seized reserve accounts. Barragan Declaration at ¶¶ 17-20. Thus, the

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interference with the contractual relationship with Phoenix through a UCC-1 financing statement

and the exercise of dominion and control over funds by RTS occurred under and as per the Aces

Agreement. Accordingly, the Phoenix interference claim arises out of the contractual

relationship with RTS and implicates the contract’s terms. Manetti-Farrow, 858 F.2d at 514.

Aces also alleges under the Fourth Cause of Action that RTS intentionally interfered with

other contracts by, inter alia, wrongfully exercising dominion and control over accounts

receivables, refusing to permit it to pay off its obligations to RTS, and sending communications

to customers designed to prevent it from rightfully receiving payment from these customers. 

Plaintiff’s Complaint at ¶ 39. The allegations in Paragraph 39, when viewed in light of the

incorporated allegations, are consistent with conduct which allegedly occurred under the Aces

Agreement. Moreover, Barragan’s declaration at Paragraphs 17 and 21 contain similar

allegations as Paragraph 39 of the complaint. Cf. Plaintiff’s Complaint at ¶ 39 with Barragan

Declaration at ¶¶ 17, 21. Paragraphs 17 and 21 of the Barragan Declaration describe events that

occurred after execution of the Aces Agreement. Id. Accordingly, this claim also arises out of

the contractual relationship with RTS and implicates the contract’s terms. See Manetti-Farrow,

858 F.2d at 514.

Aces has not elaborated on its assertion that many of its claims are outside the scope of

the forum selection clause. As described above, the complaint’s causes of action are directly

related to and implicate the Aces Agreement. Furthermore, the Barragan Declaration appears to

confirm that Aces’s intentional interference claim deals with interference during the Aces

Agreement and the alleged interference stems from conduct by RTS under the Aces Agreement. 

Accordingly, each of the causes of action in the complaint relate to or implicate the Aces

Agreement and are within the scope of the forum selection clause. See Manetti-Farrow, 858 F.2d

at 514.

3. Method of Analysis

Despite Aces’s argument, the Court cannot say that the proper method of analysis is

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Stewart Corp./§ 1404(a). The cases that support Aces’s position essentially indicate that, if a

federal court has diversity jurisdiction, venue is otherwise proper under the venue statutes, and

the forum selection clause sets venue in a different federal district as opposed to a state or foreign

venue, then the proper analysis is Stewart Corp./§ 1404(a). See, e.g., Viron Int'l Corp. v. David

Boland, Inc., 2002 U.S. Dist. LEXIS 4917 (W.D. Mich. 2002); Brock, 113 F.Supp.2d at 1082-85. 

However, other courts hold that Stewart and § 1404(a) are limited to cases where the party trying

to enforce a forum selection clause utilizes § 1404(a) as the medium of enforcement. See, e.g.,

Outek Caribbean Distribs. v. Echo, Inc., 206 F.Supp.2d 263, 266 (D.P.R. 2002); Knudsen v. Elite

Trading Group, 2000 U.S. Dist. LEXIS 5535 at *10-*12 (D. Or. 2000). In other words, if a party

moves to dismiss, then the M/S Bremen standards control, but if a party moves to transfer venue

under § 1404(a), then the Stewart standards control. Id. The Ninth Circuit itself has twice noted

Stewart was inapplicable where the party seeking to enforce a forum selection clause did not

move to transfer under § 1404(a). See Shute v. Carnival Cruise Lines, Inc., 897 F.2d 377, 388

n.9 (9th Cir. 1990), rev’d on other grounds, 499 U.S. 585 (1991); Manetti-Farrow, 858 F.2d at

512 n.2 (9th Cir. 1988); see also Flake, 882 F.Supp. at 951-52. Moreover, the Ninth Circuit has

recently dealt with a very similar case to the one at bar and did not hold that Stewart/§ 1404(a)

was the exclusive method of analysis for forum selection clause enforcement.

In Jones v. GNC Franchising, the parties entered into an agreement that any action

instituted against GNC “in any court, whether federal or state, shall be brought only within the

Commonwealth of Pennsylvania in the judicial district in which [GNC] has its principal place of

business.” Jones, 211 F.3d at 496. Jones brought suit in state court, but GNC removed to federal

court on the basis of diversity. Id. GNC then moved to dismiss under 28 U.S.C. § 1406(a) and,

in the alternative, to transfer under 28 U.S.C. § 1404(a) to the Western District of Pennsylvania. 

Id. at 496-97. The district court denied both motions and the Ninth Circuit affirmed the denials. 

Id. at 496. In affirming the district court, the Ninth Circuit engaged in two separate analyses: one

under § 1406 and the standards of M/S Bremen and a second analysis under § 1404(a) and the

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11Defendant’s Notice of Motion to Dismiss for Improper Venue or, in the Alternative, to Transfer at 2:2-6.

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standards of Stewart. Id. at 497-99. The Ninth Circuit held that denial of the § 1406(a) motion

was appropriate because enforcement of the clause would contravene California public policy as

reflected in Cal. Bus. & Prof. Code § 20040.5. Id. at 497-98. The Ninth Circuit then undertook a

separate and distinct analysis under § 1404(a), in which it cited Stewart, and found that the

Stewart factors weighed against transfer. Id. at 498-99. Nowhere in Jones did the Ninth Circuit

hold or suggest that Stewart/§ 1404(a) was the proper or exclusive method of analysis to the

exclusion of any other provision or mechanism. See id. at 497-99. In fact, the Jones analysis

depended on which mechanism the party chose to enforce the forum selection clause. See id.

Since GNC sought to enforce the forum selection clause under both § 1406(a) and § 1404(a), the

Ninth Circuit utilized both M/S Bremen and Stewart. See id. This is consistent with the Ninth

Circuit’s previous observations in Shute and Manetti-Farrow. Cf. Jones, 211 F.3d at 497-99

with Shute, 897 F.2d at 388 n.9 and Manetti-Farrow, 858 F.2d at 512 n.2; cf. also Echo, 206

F.Supp.2d at 266; Flake, 882 F.Supp. at 950-52. Given Jones, Shute, and Manetti-Farrow,

whether Stewart applies depends on whether the party seeking to enforce the forum selection

clause seeks to transfer venue under § 1404(a). Here, because Defendant moves to dismiss under

Rule 12(b)(3) or transfer under 28 U.S.C. § 1406(a),11 Stewart/§ 1404(a) does not apply. See

Jones, 211 F.3d at 497-99; Shute, 897 F.2d at 388 n.9; Manetti-Farrow, 858 F.2d at 512 n.2; see

also Echo, 206 F.Supp.2d at 266; Flake, 882 F.Supp. at 950-52. 

4. Enforcement

Aces argues that the forum selection clause should not be enforced because the clause

resulted from fraud, overreaching, and/or superior bargaining power by RTS. The Barragan

declaration indicates that Aces entered into a factoring agreement with RTS because RTS had

wrongfully filed a UCC-1 financing statement against Aces for SLI’s debt and no other lender

would lend money as long as the UCC-1 statement was on file. See Barragan Declaration at ¶¶

11, 15. Barragan also declares that he spoke with Andreoli to release the UCC-1, that Andreoli

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12The Haynsworth court also noted that a “take-it-or-leave-it” argument is an attack against the formation of

the contract as a whole and not a specific challenge against the forum selection clause. Haynsworth, 121 F.3d at 965. 

Additionally, forum selection clauses are enforceable even when found in adhesion contracts. Carnival Cruise Lines,

499 U.S. at 593-94.

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maintained that Aces was the successor of SLI, that RTS refused to release the UCC-1, and that

RTS knew that its actions were “starving” Aces financially. See id. at ¶ 12-14. Barragan then

declares that Aces signed the contract with RTS around April 21, 2004 and that the terms were

non-negotiable. Id. at ¶¶ 15-16. Without express argument, this appears to be the basis for

Aces’s claims of fraud, duress, overreaching, and/or superior bargaining power. 

The flaw with Aces’s position is that none of the complained of conduct goes to the

forum selection clause itself. In its opposition, Aces simply states that the forum selection clause

resulted from fraud and overreaching. Further, Barragan’s declaration never mentions the forum

selection clause and instead deals with RTS’s conduct and the Aces Agreement as a whole. 

When attacking a forum selection clause, inclusion of the clause itself must be the product of

fraud, duress, coercion, overreaching or overweening bargaining power. Scherk, 417 U.S. at 519

n.14; Murphy, 362 F.3d at 1140; Marano Enters. of Kansas, 254 F.3d at 757; Batchelder, 147

F.3d at 919; Afram Carriers, 145 F.3d at 301-02; Haynsworth, 121 F.3d at 963-65; Argueta, 87

F.3d at 325; Moses, 929 F.2d at 1138; Cohen, 841 F.2d at 287. Arguing and producing evidence

that goes to the formation of the contract as a whole and not specifically to the forum selection

clause is insufficient to prevent enforcement of the forum selection clause. Marano Enters. of

Kansas, 254 F.3d at 757; Batchelder,147 F.3d at 919; Afram Carriers, 145 F.3d at 301-02;

Haynsworth, 121 F.3d at 963-65; Moses, 929 F.2d at 1138; Cohen, 841 F.2d at 287; One Beacon

Ins., 312 F.Supp.2d at 832; U-Haul Int'l, 148 F.Supp.2d at 55-56. In the words of the Fifth

Circuit, evidence of fraud, duress, overweening bargaining power, and overreaching “must be

aimed straight at the [forum selection clause] in order to succeed.” Haynsworth, 121 F.3d at

963.12 Viewed in the light most favorable to Aces, Barragan’s declaration does not address the

inclusion of the forum selection clause itself, but instead only describes the formation of the Aces

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13Additionally, the Court notes that Barragan does not appear to be an unsophisticated party as he is the

President of Aces and former President of SLI. Moreover, the SLI Agreement, which was signed by Barragan,

contained the same forum selection clause as the Aces Agreement. Also, although Barragan declares simply that the

contract was “non-negotiable,” there is no indication that he attempted to negotiate the removal of the forum

selection clause. Cf. Arentowicz v. Cap Gemini Ernst & Young U.S. LLC, 2004 U.S. Dist. LEXIS 16536 at *12-*14

(D.N.J. 2004) (noting that Plaintiff was a sophisticated businessman and did not allege that he attempted to

negotiate); National Sch. Reporting Servs. v. National Schs., 924 F. Supp. 21, 24 (S.D.N.Y. 1996) (noting that

parties had entered into agreements with the same terms on prior occasions). Barragan does declare, however, that

he was able to negotiate a reduction in the weekly payments from $1500/week to $500/week. See Barragan

Declaration at ¶ 17. Finally, the complaint focuses on the 2.5% “factoring fee” provision as the repugnant

contractual term. These considerations indicate that the forum selection clause was not particularly troubling to

Aces.

14Given the resolution of this motion, Defendant’s Rule 12(b)(2) and 12(b)(6) motions are denied without

prejudice as moot. See Abrams Shell, 165 F.Supp.2d at 1110 (granting Rule 12(b)(3) motion, transferring case

under 28 U.S.C. § 1406(a), denying Rule 12(b)(2) motion as moot, and denying Rule 12(b)(6) motion without

prejudice to re-filing in transferee court).

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Agreement. The declaration is insufficient to resist enforcement of the forum selection clause on

the basis of fraud, duress, overweening bargaining power, or overreaching.13 

As the forum selection clause is enforceable and the claims in the complaint fall within

the scope of the clause, enforcement is appropriate. The Court has discretion to either dismiss

the case or transfer the case through 28 U.S.C. § 1406(a). See King, 963 F.2d at 1304;

Kawamoto, 225 F.Supp.2d at 1212. Where a forum selection clause can be enforced by

transferring a case to an appropriate federal district court, transfer is generally in the interests of

justice. See Pratt v. Silversea Cruises, Ltd., 2005 U.S. Dist. LEXIS 14339 at *13 (C.D. Cal.

2005); Flake, 882 F.Supp. at 949; cf. Miller v. Hambrick, 905 F.2d 259, 262 (9th Cir. 1990). 

Given the claims involved, the clarity of the forum selection clause, the alternative request to

transfer, the nature of Aces’s business and no suggestion of significant inconvenience, the Court

sees no reason why dismissal is more appropriate than transfer. Accordingly, the Court will

transfer this case to the Federal District Court of Kansas, Kansas City Division.14

 CONCLUSION

Defendant has moved for dismissal under Ruler 12(b)(3) or transfer under 28 U.S.C. §

1406(a). The forum selection clause in this case is mandatory and requires suit to be brought in

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the State or Federal Courts for Johnson County, Kansas. Aces argues that many of its claims are

outside the scope of the forum selection clause, but it fails to elaborate on this argument and a

review of the complaint and declarations leads to a contrary conclusion. Accordingly, the claims

in the complaint are within the scope of the forum selection clause. 

Under Ninth Circuit precedent, the standards of M/S Bremen control enforcement of the

forum selection clause in this case. Aces must meet a heavy burden to avoid enforcement of the

clause. Aces attempts to avoid enforcement by arguing that the clause was the result of fraud,

duress, overweening bargaining power and/or overreaching. However, the evidence submitted in

opposition to RTS’s motion does not specifically address the forum selection clause. Instead, the

evidence addresses the Aces Agreement as a whole. Because evidence of fraud, duress,

overreaching or overweening bargaining power must be specifically aimed at the forum selection

clause, and because it is insufficient to merely attack the formation of a contract as a whole, Aces

has failed to meet its heavy burden. Because transfer is generally preferred to dismissal and there

is no apparent reason not to transfer to the District of Kansas, transfer of this case to the Federal

District Court of Kansas, Kansas City Division is appropriate.

Accordingly, IT IS HEREBY ORDERED that:

1. Defendant’s Rule 12(b)(3) Motion to Dismiss and in the Alternative to Transfer is

GRANTED and this case is hereby TRANSFERRED to the Federal District Court

of Kansas, Kansas City division;

2. Defendant’s Rule 12(b)(2) Motion to Dismiss is DENIED as moot; and

3. Defendant’s Rule 12(b)(6) Motion to Dismiss California State Law Claims is

DENIED without prejudice to re-filing.

IT IS SO ORDERED.

Dated: September 15, 2005 /s/ Anthony W. Ishii 

0m8i78 UNITED STATES DISTRICT JUDGE

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