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Buckeye Check Cashing of Arizona, Inc. v. Lang

February 23, 2007

BUCKEYE CHECK CASHING OF ARIZONA, INC., PLAINTIFF,
v.
EDGAR LANG, ET AL., DEFENDANTS.



The opinion of the court was delivered by: James L. Graham United States District Judge

OPINION AND ORDER

This is an action brought by plaintiff Buckeye Check Cashing of Arizona, Inc., an Ohio corporation, against defendants Edgar Lang, Daniel Flores and David Vejar, who are residents of the state of Arizona. The action was originally filed in the Court of Common Pleas of Franklin County, Ohio. Defendants then filed a notice of removal of the action to this court on the basis of diversity of citizenship. Plaintiff operates check cashing stores in Arizona, and the defendants are former employees who worked in plaintiff's stores in Maricopa County, Arizona. Plaintiff alleges that after leaving their employment with plaintiff, defendants obtained employment with Cash Advantage in stores located in Maricopa County. Plaintiff alleges that Cash Advantage is a competitor of plaintiff, and asserts claims under Ohio law against the defendants for breach of contract, based on a "NON-COMPETITION AND NON-DISCLOSURE AND NON-SOLICITATION AGREEMENT" ("the Agreement") signed by the defendants, and unjust competition.

This matter is before the court on defendants' motion to dismiss. Defendants have moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction. Defendants have also moved to dismiss the unfair competition claim pursuant to Fed.R.Civ.P. 12(b)(6) for failure to state a claim. In the alternative, defendants have requested that this action be transferred pursuant to 28 U.S.C. §1404(a) to the United States District Court for the District of Arizona, Phoenix Division, and that this action be stayed pending the outcome of a declaratory judgment action filed by defendants in the Superior Court of Maricopa County, Arizona, prior to the commencement of the instant action.

I. Motion to Dismiss for Lack of Personal Jurisdiction

A. Procedure

In considering a motion to dismiss under Rule 12(b)(2), the court may determine the motion on the basis of affidavits alone. Serras v. First Tennessee Bank Nat. Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989). In this case, the defendants have submitted affidavits in support of their motion. When a court rules on a motion to dismiss pursuant to Rule 12(b)(2) without conducting an evidentiary hearing, it must consider the pleadings and affidavits in the light most favorable to the plaintiff. See CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996). In such a case, the plaintiff bears the burden of making a prima facie showing that in personam jurisdiction exists. Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir. 1998). To establish a prima facie showing of personal jurisdiction, plaintiff must show that: 1) the defendant is amenable to suit under the forum state's long-arm statute; and 2) the due process requirements of the Constitution are met. CompuServe, 89 F.3d at 1262.

B. Forum Selection Clause

1. Basis for Personal Jurisdiction

Plaintiff argues that this court has personal jurisdiction over the defendants due to the forum selection clause contained in the Agreement. That clause states:

Any action brought by either Employer or Employee concerning the subject matter of Employee's employment shall be instituted and maintained only in the state courts of Franklin County, Ohio. Employee expressly consents to the exercise of that court's jurisdiction over him/her and waives any objections regarding personal jurisdiction and/or venue.

The requirement that a court have personal jurisdiction over a party is a waivable right. Preferred Capital, Inc. v. Associates in Urology, 453 F.3d 718, 721 (6th Cir. 2006). The use of a forum selection clause is one way in which contracting parties may agree in advance to submit to the jurisdiction of a particular court. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n. 14 (1985)(personal jurisdiction requirement may be waived through forum selection clause in contract); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972)(where forum selection provisions have been obtained through freely negotiated agreements and are not unreasonable and unjust, their enforcement does not offend due process). The Agreement in this case also contains a choice of law clause which states: "The validity, construction and enforcement of this Agreement shall be deemed governed by the laws of the State of Ohio." However, the Sixth Circuit has noted that Ohio and federal law treat forum selection clauses similarly. Preferred Capital, 453 F.3d at 721.

2. Effect of Arizona Court Decision

Plaintiff argues that the issue of the validity of the clause has been conclusively determined by the Superior Court of Maricopa County, Arizona. Prior to the filing of the instant case, the defendants filed an action for declaratory judgment, styled as Lang v. Buckeye Check Cashing of Arizona, Case Number CV 2006-011624, in the Arizona court seeking a ruling that the Agreement is unenforceable. On October 23, 2006, the judge in the Arizona case issued a brief order which stated: "The Court has had under advisement Defendant's Motion to Dismiss for Improper Venue. The motion is granted." Plaintiff's Memorandum Contra, Ex. 6. The order further specified that the case was dismissed "without prejudice."

The res judicata effect of a state-court judgment in federal court is governed by the Full Faith and Credit Act, 28 U.S.C. §1738. Federal courts must give to a state court judgment the same preclusive effect that would be given that judgment under the law of the state in which the judgment was rendered. Migra v. Warren City Sch.Dist. Bd. of Educ., 465 U.S. 75, 81 (1984); Young v. Township of Green Oak, 471 F.3d 674, 680 (6th Cir. 2006).

Under the doctrine of res judicata, a judgment on the merits in a prior suit involving the same parties or their privies bars a second suit based on the same cause of action. Gilbert v. Board of Med. Exam'rs, 155 Ariz. 169, 174, 745 P.2d 617, 622 (App. 1987). For issue preclusion to apply, the issue must have been actually litigated in a previous proceeding, the parties must have had a full and fair opportunity and motive to litigate the issue, a valid and final decision on the merits must have been entered, the resolution of the issue must be essential to the decision, and there must be common identity of the parties. Garcia v. General Motors Corp., 195 Ariz. 510, 514, 990 P.2d 1069 (App. 2000).

Defendants argue that the decision of the Arizona court is not preclusive because they intend to appeal that decision. However, under Arizona law, a judgment is final for the purposes of applying res judicata even though it may be appealed. Arizona Downs v. Superior Ct., 128 Ariz. 73, 76, 623 P.2d 1229 (1981); Murphy v. Board of Med. Exam'rs, 190 Ariz. 441, 449, 949 P.2d 530 (App. 1997).

Plaintiff relies on the decision in Robert Schalkenbach Found. v. Lincoln Found., Inc., 208 Ariz. 176, 91 P.3d 1019 (App. 2004). In that case, the court held that a prior dismissal without prejudice under Ariz.R.Civ.P. 12(b)(6) due to lack of standing was a final judgment for purposes of issue preclusion, because the issue of standing must necessarily have been decided in ruling on the motion. Id., 208 Ariz. at 181. In reaching that conclusion, the court cited the Ninth Circuit decision in Offshore Sportswear, Inc. V. Vuarnet International, B.V., 114 F.3d 848, 850 (9th Cir. 1997), in which that court, applying federal law, held that the enforceability of the forum selection clause could not be relitigated even though the previous dismissal was without prejudice, where the issue which lead to the dismissal was adjudicated on its merits.

That is not the situation here. In the Arizona action brought by the defendants in this case, plaintiff filed a motion to dismiss for improper venue under Ariz.R.Civ.P. 12(b)(3). It is not apparent from the brief decision issued by the Arizona court that the court considered and rejected defendants' arguments as to why the forum selection clause should not be enforced. The resolution of the issue on the merits was not essential to the decision. The briefs informed the Arizona court that the plaintiff had filed an action involving the same matters in Ohio, and that the law of Ohio controlled the interpretation of the Agreement. The Arizona court may have simply concluded that the Ohio action would be the best forum in which to litigate any defenses to the forum selection clause. The decision does not indicate that any of the defendants' arguments against the enforcement of the forum selection clause were rejected on the merits.

This court further notes that a dismissal "without prejudice" usually has no res judicata effect under Arizona law. See Adams v. Bear, 87 Ariz. 288, 293, 350 P.2d 751 (1960); Oldenburger v. Del E. Webb Development Co., 159 Ariz. 129, 133, 765 P.2d 531 (App. 1989). Under Ariz.R.Civ.P. 41(b), a dismissal without prejudice for lack of jurisdiction, for improper venue, or for failure to join a party does not operate as an adjudication on the merits. See Vance v. Vance, 124 Ariz. 1, 3-4, 601 P.2d 605 (1979)(res judicata did not apply to dismissal for failure to join a party in light of Rule 41(b)). This court concludes that Arizona law does not require this court to give preclusive effect to the dismissal of defendants' Arizona action in considering whether to enforce the forum selection clause.

3. Language of Clause

Defendants argue that the forum selection clause does not apply to plaintiff's claims. The defendants note that the clause refers to actions "concerning the subject matter of Employee's employment[.]" They argue that "Employee's employment" refers to defendants' employment at plaintiff's stores, and not their subsequent employment by other employers which forms the basis for plaintiff's claims in this case.

Under Ohio law, common words appearing in a written instrument will be given their ordinary meaning unless manifest absurdity results, or unless some other meaning is clearly evidenced from the face or overall contents of the instrument. Foster Wheeler Enviresponse, Inc. v. Franklin County Convention Facilities Auth., 78 Ohio St.3d 353, 361, 678 N.E.2d 519 (1997). A writing executed as part of the same transaction ...


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