Allied Sound, Inc. v. Dukane Corp.

Citations: 934 F. Supp. 272; 1996 U.S. Dist. LEXIS 16379; 1996 WL 368194Docket: 3-96-0310

Court: District Court, M.D. Tennessee; May 13, 1996; Federal District Court

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The United States District Court for the Middle District of Tennessee addressed defendant Dukane Corporation's motion to dismiss for improper venue in the case of Allied Sound, Inc. v. Dukane Corporation. Allied Sound, a Tennessee corporation, had been an authorized distributor for Dukane, a Delaware corporation, since 1961. Following the termination of their distributorship agreement in early 1995, Allied Sound filed a lawsuit against Dukane for tortious interference with contractual relations after losing a contract for a hospital renovation due to Dukane's actions.

Dukane argued that the case should be dismissed based on a choice of forum clause in their agreement, claiming proper venue was in the Northern District of Illinois. The court analyzed the application of 28 U.S.C. § 1406, which allows for dismissal or transfer of cases filed in an improper venue. The court noted that while such clauses are generally enforceable, they may be disregarded if shown to be unreasonable or inconvenient. Ultimately, the court denied Dukane's motion to dismiss, indicating that it would not enforce the venue change at this time.

The plaintiff contends that the choice of forum clause is inapplicable to the current case because the agreement between the parties was terminated before the defendant's alleged tortious actions occurred. The plaintiff interprets the clause as an executory obligation that did not survive the termination. The plaintiff further argues that the lack of explicit language in the agreement regarding the survival of the clause upon termination supports this interpretation. However, the court disagrees, citing the case Advent Elec. Inc. v. Samsung Semiconductor, which established that a choice of forum clause may survive contract termination unless the contract expressly states otherwise. The court finds no indication that the parties intended for the clause to become invalid upon termination. 

The plaintiff also claims that the choice of forum clause is unenforceable because the action does not arise from the agreement. The court refutes this argument, noting a clear link between the agreement and the facts of the plaintiff's case, particularly pointing out that the allegations stem from the termination of the agreement. Lastly, the court addresses the plaintiff's assertion that the clause only applies to contract actions since it references the agreement; it clarifies that the second sentence of the clause does not limit its application solely to actions related to the agreement, emphasizing its broader scope.

When a dispute arises from a contractual relationship, the choice of forum clause within that contract governs the venue for legal actions. The Court determined that the plaintiff's claims are closely related to the contract, making the choice of forum clause valid and enforceable unless it can be shown to be seriously inconvenient. The plaintiff failed to demonstrate any significant inconvenience regarding filing in Illinois, leading the Court to presume that enforcement of the clause is reasonable. The Court also noted that under Section 1406, it is preferable to transfer a case filed in an improper venue rather than dismiss it, to promote judicial efficiency and avoid injustice. As the defendant did not raise any potential injustice from a dismissal, and it appeared that the venue was appropriate in Illinois, the Court decided to transfer the case to the Northern District of Illinois. Consequently, the defendant's motion to dismiss for improper venue was denied, and the Clerk was instructed to facilitate the transfer. The defendant's request for oral argument was deemed moot. The governing law and choice of forum clause specified that any legal proceedings must be initiated in the Northern District of Illinois or the Circuit Court of Cook County. The exact date of contract termination remains undetermined but was not necessary for addressing the choice of forum clause.