Danka Funding Company, L.L.C. v. The Mitchell Company, Inc.

98-153 (U. S. Dist. Ct. D. N.J. 1998) (Unpublished)
  • Opinion Date: June 4, 1998

CONTRACTS; DRAFTING; FORUM SELECTION—Designating a state in which a potential future assignee maintains its principal office as the venue for lawsuits is a valid forum selection provision even if the subject matter of the contract has no relationship to that forum and even though the contracting party objecting to the use of that forum didn’t know of its identity in advance.

This case deals with a forum selection clause in a personal property lease. The lease contained a choice of the law/forum selection clause which provides: “This lease and each schedule shall be governed by the internal laws for the state in which our or our assignee’s principal corporate offices are located. You consent to the jurisdiction of any local, state or federal court located within our or our assignee’s state, and waive any objection relating to improper venue.”

The lessee was an Alabama corporation with its principal place of business in Alabama. The lessor was a Florida corporation with its principal place of business in Florida. The lessor assigned its interest in the lease to its parent company, a Delaware corporation with its principal place of business in Florida. The lessor never dealt with the assignee and claimed that all invoices under the lease had been rendered in the name of the original lessor and all payments had been made to the original lessor. In addition, the lessee did no business in New Jersey and had no ties in New Jersey other than this lawsuit. To the extent that the lessee ever had custody of the equipment identified in the lease agreement, it was kept only at its locations in Alabama and Florida. The lease and negotiations regarding the lease occurred in Alabama. The primary contact people for both the lessor and lessee resided in Alabama and no longer were employed by either party. On behalf of the assignee, an affidavit was submitted by its servicing agent explaining that the assignee “enters into business relations using the standard lease form with the knowledge that the forum selection clause allows it to pursue defaulting lessees in New Jersey, which in turn allows” the assignee to “offer more competitive financial terms overall to prospective lessees.” It stated that the original lessor ordinarily knows that its leases will be assigned to its parent company before the lessee executes the lease. It appears from the record that the assignee’s servicing company maintains offices in New Jersey. It was also submitted that the assignee does not follow through with financing until after its agent or employee has contacted the lessee directly to confirm the terms of the lease.

Having satisfied the Court that the lease agreement was in fact assigned, the standard forum selection clause gave the Court personal jurisdiction over the lessee. The Court recited that “there is a strong presumption in favor of the enforcement of the forum selection clause.” That the forum selection clause could have subjected the lessee to suit in any of the 50 states did not make it unenforceable. The lessor knew to whom the lease would be assigned. Prior to signing the lease, the lessee could have learned that, under the forum selection clause, it was subjected to suit in New Jersey. Evidence submitted by the assignee’s servicing company persuaded the Court that the provision was not one of adhesion because, at other customers’ requests the assignee often changed the jurisdictional terms in this lease form. Moreover, even if a party is unaware of the contents of a forum selection clause in the contract it signs, the clause is enforceable because the party can be “presumed to have received appropriate consideration in the form of a lower price.” In addition, where a party to a contract is sophisticated, it cannot escape its obligations by pleading ignorance of clearly stated contractual terms.