Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-03247/USCOURTS-azd-2_05-cv-03247-0/pdf.json

Nature of Suit Code: 196
Nature of Suit: Franchise
Cause of Action: 28:1332 Diversity-Breach of 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

27

28

1 In their motion, Defendants request oral argument on this

matter. Motion (doc. 5). Finding oral argument unnecessary, the

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Best Western International, )

Inc., )

)

Plaintiff, ) No. CIV 05-3247-PHX RCB

)

vs. ) O R D E R

)

Kantilal J. Govan and Aruna )

K. Govan, )

)

Defendants. ) )

In August 2005, Plaintiff Best Western International, Inc.

("Best Western") brought suit against Defendants Kantilal J. Govan

and Aruna K. Govan in the Superior Court of the State of Arizona in

Maricopa County. Complt. (doc. 1) at Exbt. 1. Defendants promptly

removed the action to this federal forum, Notice of Removal (doc.

1), and now moves to dismiss the action for improper venue, or,

alternatively, moves for a transfer of venue to the Eastern

District of California (doc. 5).1 Best Western opposes Defendants'

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 1 of 13
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

27

28 Court shall deny this request.

- 2 -

motion. Resp. (doc. 7). This motion was fully briefed on November

11, 2005. Reply (doc. 9). Having carefully considered the

arguments raised, the court now rules.

I. Background Facts

Best Western is an Arizona non-profit corporation organized

under the laws of the State of Arizona. It is a non-profit

association pursuant to A.R.S. § 10-3601, et seq. 

On or about February 9, 2001, Defendants became Best Western

members. At that time, Defendants entered into a Membership

Application and Agreement (the "Agreement") with Best Western. As

such, Defendants enjoyed the right to use Best Western's trade

name, trademarks, service marks, logos and other similar

identification symbols (the "Best Western Marks") in connection

with the operation of a hotel that they owned known as the Madera

Valley Inn, located in Madera, California (the "Hotel"). In

addition to their right to use the Best Western Marks in connection

with the Hotel, Best Western provided to Defendants various

services, including a worldwide satellite reservation system and

worldwide marketing campaigns, as well as the option to participate

in collective purchasing of hotel services. Best Western employs a

large number of employees worldwide, but mostly in Arizona, who

provide Best Western's members with its hotel services.

Contained within the Agreement are "Application of Law and

Choice of Forum" clauses. Exbt. A (doc. 7) at ¶¶ 37, 38. Under

the Application of Law clause, the contract states:

This Membership Application and Agreement shall be

governed and construed according to the laws of

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 2 of 13
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

27

28

- 3 -

the State of Arizona, unless any obligations under

this Membership Application and Agreement shall be

invalid or unenforceable under such laws, in which

event the laws of the jurisdiction whose law can

apply to and validate the obligations under this

Membership Application and Agreement shall apply. 

This Membership Application and Agreement shall be

deemed executed in Phoenix, Arizona.

Id. at ¶ 37. Under the Choice of Forum clause, the contract

states:

Applicant acknowledges that Best Western is

headquartered in Phoenix, Arizona, that the

majority of Best Western's records and employees

are in Phoenix, Arizona, and that Phoenix, Arizona

is the most convenient locale for actions between

Best Western and Applicant. 

Id. at ¶ 38.

On or about April 12, 2005, Best Western notified Defendants

that their membership was terminated. Thereafter, on May 17, 2005,

Best Western demanded that Defendants pay certain amounts that

allegedly remained due and owing to Best Western after the

termination of Defendants' membership, which represented certain

fees, dues and charges imposed on Defendants as Best Western

members, as well as the costs of goods and services provided by or

through Best Western, including interest.

Pursuant to the Agreement, Defendants were obligated to cease

use of the Best Western Marks within 15 days following the

termination of their membership. However, Best Western asserts

that Defendants continued to use the Best Western Marks in

connection with the Hotel. Best Western claims that, as a

consequence of Defendants' alleged continued use of the Best

Western Marks, they are liable to Best Western for liquidated

damages to be calculated utilizing the formula contained in the

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 3 of 13
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

27

28

- 4 -

Agreement. Consequently, on August 25, 2005, Best Western filed a

Complaint in the Superior Court of the State of Arizona in Maricopa

County against Defendants for breach of contract, unjust

enrichment, breach of implied covenant of good faith and fair

dealing, and for liquidated damages. Exbt. 1 (doc. 1) at 8-12. 

II. Discussion

In their motion, Defendants request, pursuant to 28 U.S.C. §

1406(a) and Rule 12(b)(3), that this case either be dismissed for

improper venue or, in the alternative, transferred to the Eastern

District of California. Mot. (doc. 5) at 1. Defendants argue that

California is the only proper venue in this case because (1) under

the restrictions of 28 U.S.C. § 1391(a), California is the only

appropriate venue, and (2) the forum selection clause in the

parties' contract is void and unenforceable. Id. at 2-5.

A. Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(3) allows a defendant to

move for dismissal of a case on the basis of improper venue. Fed.

R. Civ. Pro. 12(b)(3). 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 appropriate

jurisdiction under 28 U.S.C. § 1406(a). See King v. Russell, 963

F.2d 1301, 1304 (9th Cir. 1992). 

Title 28, United States Code, section 1391(a) provides in

pertinent part:

A civil action wherein jurisdiction is founded

only on diversity of citizenship may, except as

otherwise provided by law, be brought only in (1)

a judicial district where any defendant resides,

if all defendants reside in the same State, (2) a

judicial district in which a substantial part of

the events or omissions giving rise to the claim

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 4 of 13
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

27

28

- 5 -

occurred, or a substantial part of property that

is the subject of the action is situated, or (3) a

judicial district in which any defendant is

subject to personal jurisdiction at the time the

action is commenced, if there is no district in

which the action may otherwise be brought.

Id. "Under federal law, a forum selection clause is prima facie

valid and should be enforced unless enforcement is shown by the

resisting party to be 'unreasonable' under the circumstances."

Sarmiento v. BMG Entertainment, 326 F. Supp. 2d 1108, 1110 (C.D.

Cal. 2003) (citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1,

10 (1972). A forum selection clause may be found to be

unreasonable if (1) its incorporation into the contract was induced

by fraud, undue influence, or overweening bargaining power; (2) the

complaining party "will for all practical purposes be deprived of

his day in court" because of the grave inconvenience or unfairness

of the selected forum; or (3) its enforcement would contravene a

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

Id.; see also Bremen, 407 U.S. at 18. However, a forum selection

clause is not unconscionable, despite the fact that the clause may

now be disadvantageous to Defendants, even if it was presented to

them on a take it or leave it basis or in a form contract. See

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

39 (9th Cir. 1997). Any inconvenience a party "would suffer by

being forced to litigate in the contractual forum as it agreed to

do was clearly foreseeable at the time of contracting." Bremen,

407 U.S. at 17-18.

In the case at bar, Defendants assert that, under 28 U.S.C. §

1391(a), venue in this matter is only proper in California because

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 5 of 13
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

27

28

- 6 -

"Defendants are both California residents, because the hotel at

issue in this case is located in California, and because all of

Defendants' alleged actions/inactions, as well as Plaintiff's

investigation thereof, took place in California." Mot. (doc. 5) at

2. Additionally, Defendants maintain that all of their witnesses

that will testify at trial live in California. Id. at 3. 

In regard to the Agreement's forum selection clause, which

provides that "Phoenix, Arizona is the most convenient locale for

actions between [Plaintiff] and [Defendants]," Defendants contend

that the clause is unconscionable because it is one-sided and

invalid under the California Franchise Relations Act. Mot. (doc.

5) at 3, n.3; see also Exbt. A (doc. 7) at 7. As to the latter

point, Defendants specifically assert that enforcement of the forum

selection clause would contravene a "strong public policy" of

California, and is therefore invalid. Id. They note that the

court in Jones v. GNC Franchising, Inc., 211 F.3d 495 (9th Cir.

2000), found that the California Franchise Relations Act (the

"Act") evinces the "strong public policy" necessary to override an

otherwise enforceable contractual forum selection clause. Id. at

4. 

Under the Act, "[a] provision in a franchise agreement

restricting venue to a forum outside [California] is void with

respect to any claim arising under or relating to a franchise

agreement involving a franchise business operating within

[California]." CAL. BUS. & PROF. CODE § 20040.5 (West 1997). 

Defendants note that in Jones, the Ninth Circuit upheld a district

court's denial of a franchisor's motion to dismiss or transfer

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 6 of 13
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

27

28

- 7 -

venue of the case based on a contractual forum selection clause. 

Mot. (doc. 5) at 4. The Court, applying the Supreme Court's

"strong public policy" test for forum selection clauses as outlined

in Bremen, held that the Act "expresses a strong public policy of

the State of California to protect California franchisees from the

expense, inconvenience, and possible prejudice of litigating in a

non-California venue." Jones, 211 F.3d at 498. Thus, the court

concluded that the forum selection clause contained in the parties'

franchise agreement, which required the California franchisee to

resolve claims related to the franchise agreement in a nonCalifornia court, directly contravened California's strong public

policy and was thus unenforceable under the directives of Bremen. 

Id. Consequently, Defendants argue that, "[b]ecause the Ninth

Circuit has already held that § 20040.5 reflects the 'strong public

policy' that overrides a forum selection clause, the Court must

reach the same conclusion in this case." Mot. (doc. 5) at 4. 

In opposition to Defendants' motion, Plaintiff asserts that,

under 28 U.S.C. 1441(a) venue is proper in Arizona, and, in any

event, argues that Jones is irrelevant to this analysis and does

not make the Agreement's forum selection clause unreasonable. 

Resp. (doc. 7) at 4-10. First, Plaintiff asserts that Defendants'

contention that venue is improper is erroneous because, "[w]hen a

case is removed to federal court, venue in the court embracing the

place where the action is pending is automatically proper." Id. at

5. Plaintiff cites Thermal Components Company v. Griffith, 98 F. 

Supp. 2d 1224 (Dist. Kan. 2000) and Polizzi v. Cowles Magazines,

Inc., 345 U.S. 663 (1953), in support of its argument. Plaintiff

notes that in Polizzi, the Supreme Court held that venue of an

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 7 of 13
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

27

28

- 8 -

action removed from state court properly lies in the district court

of the United States for the district and division embracing the

place where such action is pending. 343 U.S. at 665. Moreover, it

notes that in Thermal Components, the court determined that the

removal statute, 28 U.S.C. § 1441(a), and not the ordinary federal

venue statute, governs venue in removed cases. 98 F. Supp. 2d

1231-32. In their reply, Defendants respond to this argument by

construing it to allege that they waived their right to raise any

venue objection. Reply (doc. 9) at 1-3.

Second, Plaintiff responds that Arizona is the proper venue

for this matter due to the Agreement's forum selection clause. 

Resp. (doc. 7) at 7-10. Plaintiff argues that Jones is irrelevant

to the case at bar because, in Jones, the court followed the

analysis of Bremen and analyzed whether enforcement of the forum

selection clause "contravenes the strong public policy of the forum

in which the suit is brought." Resp. (doc. 7) at 10. Thus,

because this matter was originally filed in Arizona, even if the

Court were to follow Jones, it would have to review whether the

Agreement's forum selection clause contravenes a strong public

policy of the State of Arizona. Id. With no evidence indicating

such, Plaintiff maintains that Arizona is a proper venue for this

case. Id. 

The Court has considered the arguments of the parties and

concludes that venue is proper in the District of Arizona. At the

outset, the Court concurs with Plaintiff's assertion that venue in

cases removed from state court are governed by 28 U.S.C. § 1441(a),

rather than 28 U.S.C. § 1391. See Polizzi, 343 U.S. at 665. Under

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 8 of 13
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

27

28

- 9 -

28 U.S.C. § 1441(a), venue is proper in the judicial district

encompassing the state court where the action was brought. 

Defendants argue that, despite their removal of this case to the

federal district court, they have not waived their right to

challenge the venue of this case based on the contested forum

selection clause. Reply (doc. 9) at 2-3. Defendants note that in

Tanzman v. Midwest Express Airlines, Inc., 916 F. Supp. 1013, 1018

(S.D. Cal. 1996), the court stated that neither Polizzi nor 28

U.S.C. § 1441(a) stands for waiver of venue objections due to

removal. Id. at 2. 

The statements by the Polizzi Court do not mention

waiver and the case does not hold that waiver of a

venue objection based on other federal venue

statutes is necessarily implied from the mere act

of removal. Without more, Polizzi and § 1441(a)

simply stand for the proposition that the initial

venue of a removed action lies in the district

court where the action had been pending.

 

Tanzman, 916 F. Supp. at 1018. 

Other courts have found that, despite removal, a defendant may

seek dismissal where a forum selection clause renders venue

improper in the forum state. See Tokio Marine & Fire Ins. Co.,

Ltd. v. Nippon Express U.S.A., Inc., 118 F. Supp. 2d 997, 1000

(C.D. Cal. 2000); IBC Aviation Services, Inc. v. Compania Mexicana

de Aviacion, 125 F. Supp. 2d 1008, 1013 (N.D. Cal. 2000); Lambert

v. Kysar, 983 F.2d 1110, 1113 n.2 (1st Cir. 1993). However, these

cases generally discussed the enforcement of a contracted forum

selection clause or challenges based on state court venue

requirements. See Tokio Marine, 118 F. Supp. 2d at 1000; IBC, 125

F. Supp. 2d at 1013; Lambert, 983 F.2d at 1112. In contrast,

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 9 of 13
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

27

28

- 10 -

Defendants here seek to have the forum selection clause deemed

unenforceable, not enforced. 

Recognizing this deficiency, Defendants, in their reply,

assert that "the rationale applied in those cases for transferring

venue after removal, rather than merely sticking to the initial §

1441 venue, applies with equal force in this case." Reply (doc. 9)

at 3. Specifically, they argue that courts enforce the forum

selection clauses in light of the public policy underlying them,

therefore in California, where the Act "reflects a 'strong public

policy' that overrides forum selection clauses," the clause should

be deemed unenforceable. Id. The Court disagrees. 

Venue in cases removed from state court are governed by 28

U.S.C. § 1441(a), rather than 28 U.S.C. § 1391. See Polizzi, 343

U.S. at 665. Under 28 U.S.C. § 1441(a), venue is proper in the

judicial district encompassing the state court where the action was

brought. Defendants do not challenge the venue of this matter

under the provisions of 28 U.S.C. § 1441(a). In light of this

conclusion, the Court need not analyze Defendants' argument

regarding whether the enforcement of the forum selection clause

would contravene a "strong public policy" of California. 

Defendants' motion to dismiss shall be denied. 

B. Motion to Transfer

Alternatively, Defendants contend that relevant factors

support a change of venue to the Eastern District of California. 

On a motion to transfer, the burden is on the defendant to show

that the convenience of parties and witnesses and the interest of

justice require transfer to another district. See CFA Northern

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 10 of 13
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

27

28

- 11 -

Cal., Inc. v. CRT Partners LLP, 378 F. Supp. 2d 1177, 1185 (N.D.

Cal. 2005). Title 28, United States Code, section 1404(a) provides

that "[f]or 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." The Ninth Circuit has held that a fourth factor for the

court to consider is the plaintiff's choice of forum. CFA, 378

F.Supp.2d at 1185; see also Securities Investor Protection Corp. v.

Vigman, 764 F.2d 1309, 1317 (9th Cir. 1985). The purpose of

Section 1404(a) is to "prevent the waste 'of time, energy, and

money' and 'to protect litigants, witnesses and the public against

unnecessary inconvenience and expense[.]'" Van Dusen v. Barrack,

376 U.S. 612, 616 (1964). However, "unless the balance of factors

is strongly in favor of the defendants, the plaintiff's choice of

forum should rarely be disturbed." Securities, 764 F.2d at 1317. 

Determination of a motion to transfer lies within the broad

discretion of the district court and is based on individualized

considerations of convenience and fairness. See Jones, 211 F.3d at

498. The party moving for transfer of venue must establish (1)

that venue is proper in the transferor district; (2) that the

transferee district is one where the action might have been

brought; and (3) that the transfer will serve the convenience of

the parties and witnesses and will promote the interest of justice. 

Goodyear Tire & Rubber Co. v. McDonnell Douglas Corp., 820 F. Supp. 

503, 506 (C.D. Cal. 1992). 

In their motion, Defendants argue that venue in this matter is

only proper in California because "Defendants are both California

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 11 of 13
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

27

28

- 12 -

residents, because the hotel at issue in this case is located in

California, and because all of Defendants' alleged

actions/inactions, as well as Plaintiff's investigation thereof,

took place in California." Mot. (doc. 5) at 2. Additionally,

Defendants assert that the transfer will serve the convenience of

their witnesses. Id. at 3. Defendants maintain that all of their

witnesses that will testify at trial live in California. Id.

However, these factors alone do not sufficiently support a change

of venue to the Eastern District of California. 

It is undisputed that Best Western is an Arizona non-profit

corporation, which is organized under the laws of Arizona and

employs most of its employees in Arizona. It is also undisputed

that the Agreement, which is at the crux of this lawsuit, was

executed in Arizona. Moreover, Plaintiff chose the present forum

for this litigation and the Court must give weight to Plaintiff's

choice of forum. Defendants agreed to this forum and venue

pursuant to the terms of the Agreement. According to the

agreement, Defendants also acknowledged and agreed that "the

majority of Best Western's records and employees are in Phoenix,

Arizona, and that Phoenix, Arizona is the most convenient locale

for actions between [the parties]." Exbt. A (doc. 7) at ¶ 38. 

Upon consideration of these relevant factors, and in the interest

of the administration of justice, the Court has determined that

Defendants' motion to transfer venue to the Eastern District of

California, shall be denied.

Therefore,

IT IS ORDERED Defendants' Motion to Dismiss or Transfer Venue

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 12 of 13
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

27

28

- 13 -

(doc. 5) is DENIED.

DATED this 29th day of August, 2006.

Copies to counsel of record

Case 2:05-cv-03247-RCB Document 12 Filed 08/30/06 Page 13 of 13