Preferred Capital, Inc. v. Aetna Maintenance, Inc.

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 06a0865n.06
Filed: November 29, 2006

No. 05-4072

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

PREFERRED CAPITAL, INC., )
) ON APPEAL FROM THE
Plaintiff-Appellant, ) UNITED STATES DISTRICT
) COURT FOR THE
v. ) NORTHERN DISTRICT OF
) OHIO
AETNA MAINTENANCE, INC., )
)
Defendant-Appellee. )
___________________________________________

BEFORE: GILMAN and GRIFFIN, Circuit Judges; and HEYBURN, Chief District Judge.*

PER CURIAM. In this diversity action stemming from the alleged breach of an equipment

rental agreement, plaintiff-appellant Preferred Capital, Inc. (“PCI”) appeals the order of the

magistrate judge granting defendant-appellee Aetna Maintenance, Inc.’s (“Aetna”) motion to dismiss

pursuant to Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. The present

case centers on the validity of a forum selection clause in the rental agreement, which the magistrate

judge found to be unjust and invalid. Because we have recently addressed precisely the same issue

in Preferred Capital, Inc. v. Associates in Urology, 453 F.3d 718 (6th Cir. 2006), a case involving

the same plaintiff, same forum selection clause, and analogous circumstances, and held that the

forum selection clause is in fact valid and enforceable, our decision in Associates in Urology is

*
The Honorable John G. Heyburn II, Chief United States District Judge for the Western
District of Kentucky, sitting by designation.
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dispositive of the present matter. We therefore conclude that the district court erred in granting

Aetna’s motion to dismiss for lack of jurisdiction, and reverse and remand for further proceedings

consistent with this opinion.

Aetna is a Florida corporation that, in February 2004, entered into an equipment rental

agreement (the “agreement”) with non-party NorVergence, Inc., a New Jersey corporation, for the

rental of certain telecommunications equipment. Aetna agreed to make monthly payments for a term

of sixty months and received and accepted delivery of the equipment, consisting of software

purportedly designed to reduce Aetna’s overall telecommunications expenses. The agreement

allowed NorVergence to sell, assign, or transfer all or any part of the agreement to an assignee.

Unbeknownst to Aetna at the time it executed the agreement, NorVergence already had in place a

Master Program Agreement (“MPA”) with PCI, an Ohio corporation, pursuant to which

NorVergence agreed to assign newly acquired rental agreements to PCI. On February 4, 2004, the

day after NorVergence signed the agreement with Aetna, Aetna was given notice that the agreement

had been assigned to PCI, with all payments to be made directly to that company at its Brecksville,

Ohio, business address. All other terms and conditions of the agreement remained unchanged.

In July 2004, NorVergence was forced into Chapter 11 bankruptcy protection and thereafter

ceased to provide services. PCI, however, continued to seek and enforce payments under the

agreement, despite the cessation of services, and, when Aetna failed or refused to make such

payments, PCI filed this action alleging breach of the agreement in Ohio state court. The case was

thereafter removed by Aetna to federal court.

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Preferred Capital v. Aetna Maintenance

On May 5, 2005, Aetna filed a motion to dismiss, alleging, in pertinent part, that PCI’s

complaint should be dismissed for lack of personal jurisdiction pursuant to Federal Rule of Civil

Procedure 12(b)(2). Aetna argued that the forum selection clause in the agreement, specifying that

the law of the state of incorporation of the equipment lease assignee should apply, was void and

unenforceable. The agreement provided in this regard:

This agreement shall be governed by, construed and enforced in accordance with the
laws of the State in which Rentor’s principal offices are located or, if this Lease is
assigned by Rentor, the State in which the assignee’s principal offices are located,
without regard to such State’s choice of law considerations and all legal actions
relating to this Lease shall be venued exclusively in a state or federal court located
within that State, such court to be chosen at Rentor or Rentor’s assignee’s sole
option. You hereby waive a right to a trial by jury in any lawsuit in any way relating
to this rental.

In its motion to dismiss, Aetna complained that enforcement of the forum selection clause

would be patently unreasonable and unjust because it did not identify a specific forum or jurisdiction

where Aetna may be subject to suit; consequently, its vague terms were insufficient to render the

clause enforceable. Aetna further argued that it had no notice that it would be required to defend in

Ohio and no opportunity to negotiate the terms of the forum selection clause. Finally, Aetna

maintained that litigation in the forum of Ohio would be inconvenient and cost prohibitive.

In an opinion and order dated June 14, 2005, the magistrate judge found the forum selection

clause to be unjust and unenforceable and granted Aetna’s motion to dismiss for lack of personal

jurisdiction.

NorVergence’s lease agreements and ensuing bankruptcy have spawned a multitude of

lawsuits not only in Ohio, where PCI is located, but in other states as well, where other assignees

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Preferred Capital v. Aetna Maintenance

have their principal offices. A consistent topic in these suits is the validity of the standard forum

selection clause in the equipment lease agreements and the concomitant issue of personal

jurisdiction. In one such case, Preferred Capital, Inc v. Power Engineering Group, Inc., 163 Ohio

App. 3d 522, 2005-Ohio-5113, 839 N.E.2d 416 (Ohio Ct. App. Sept. 28, 2005), appeal allowed 108

Ohio St. 3d 1471, 2006-Ohio-665, 842 N.E.2d 1052 (Ohio Feb. 22, 2006), the Ohio Supreme Court

has granted review to consider the enforceability of the same NorVergence forum selection clause

at issue herein.

The federal courts, too, have entertained suits emanating from the alleged breach of these

NorVergence lease agreements. On June 27, 2006, we issued a stay in the present case pending this

court’s decision in Associates in Urology, an appeal involving the same plaintiff (PCI), the standard

NorVergence rental agreement and identical forum selection clause, and a comparable jurisdictional

challenge to that clause by a different defendant, Associates in Urology, a medical practice group

with its principal place of business in Pennsylvania.

On July 12, 2006, this court released its opinion in Associates in Urology, concluding that

the forum selection clause was valid and enforceable under both federal and Ohio law. We first

noted that, “unless there is a showing that the alleged fraud or misrepresentation induced the party

opposing a forum selection clause to agree to inclusion of that clause in a contract, a general claim

of fraud or misrepresentation as to the entire contract does not affect the validity of the forum

selection clause.” Assocs. in Urology, 453 F.3d at 722 (quoting Moses v. Bus. Card Express, 929

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Preferred Capital v. Aetna Maintenance

F.2d 1131 (6th Cir. 1991)). Finding no evidence of fraud, misrepresentation, or overreaching, the

Associates in Urology court opined:

Defendant is a commercial entity, and should have realized the implications of
agreeing to the inclusion of a forum selection clause that did not identify an assignee
or specified jurisdiction. Having failed to object to the terms of the forum selection
clause, Defendant now claims that it is disadvantageous for it to have to litigate this
case in Ohio. While Defendant may be dissatisfied with the litigation forum, it is not
our task to save Defendant from the consequences of an agreement it freely entered
into.

We also do not agree with the contention of the district court and Defendant that
Defendant had no notice that it could face litigation in Ohio. Not only did Defendant
expressly agree to submit to jurisdiction anywhere in the country, including Ohio,
Defendant was also given written notice of the assignments on May 11, 2004, the day
after the agreements were executed. The letters providing notice identified Plaintiff
as the assignee and listed Plaintiff’s business address as Brecksville, Ohio. Given the
terms of the forum selection clause in the agreements that Defendant signed,
Defendant was indeed on notice practically from the inception of the agreements that
any disputes would be litigated in Ohio, where the offices of Plaintiff-assignee are
located.

Id. at 723-24.

In sum, given the dearth of evidence demonstrating that enforcement of the forum selection

clause would be unreasonable or unjust, we concluded that the forum selection clause was valid and

enforceable and thus reversed the district court’s order granting the defendant’s motion to dismiss

for lack of personal jurisdiction.1

1
The Seventh Circuit Court of Appeals has reached the same conclusion, using the same
rationale, in yet another case involving a NorVergence lease agreement and forum selection clause.
See IFC Credit Corp. v. Aliano Bros. Gen. Contractors, 437 F.3d 606 (7th Cir. 2006).

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Our decision in Associates in Urology is dispositive of the present case, the circumstances

of which are not materially distinguishable. We therefore reverse the order of the magistrate judge

dismissing the case for lack of personal jurisdiction and remand for further proceedings consistent

with this opinion. Our decision does not preclude the district court revisiting the issue in the event

that the Ohio Supreme Court rules to the contrary in the appeal currently pending before it in Power

Engineering Group, Inc.

Reversed and remanded for further proceedings consistent with this opinion.

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