The Franchise Memorandum

In Minnesota Supply Co. v. Mitsubishi Caterpillar Forklift America Inc., et al., 2011 U.S. Dist. LEXIS 113913 (D. Minn. Sep. 30, 2011), a Minnesota-based equipment dealer was a party to three different agreements with three different, but related, suppliers.  The first agreement had an Ohio forum selection clause.  The second had Virginia choice of law and forum selection clauses.  In 2009, those suppliers merged, consolidating the supply of both equipment lines in a single source, but retaining their separate distribution agreements.  In 2010, the dealer entered into an agreement with a third related supplier, which provided for arbitration in London, England, under the jurisdiction of the London Court of International Arbitration.  In 2010, the dealer sued all three suppliers in Minnesota, alleging breaches of all three agreements and violations of Minnesota and Wisconsin relationship statutes. Each supplier/manufacturer entity then sought dismissal or transfer of the dealer’s claims, in accordance with the forum selection clauses of the respective agreements. 

The dealer argued both that the Minnesota Heavy and Utility Equipment Dealers Act and the Wisconsin Fair Dealership Act invalidated the forum selection clauses and that convenience and justice mandated that all of the parties’ interrelated disputes be heard in a single forum. The court first held that the claims under the third agreement must be arbitrated in London, relying on the Federal Arbitration Act’s strong presumption of the enforceability of contractual arbitration clauses, as well as its preemption of state laws that mandate a local forum. With respect to the claims against the domestic entities, the court analyzed whether transfer to district courts in Ohio and Virginia pursuant to 28 U.S.C. § 1404(a) was required in light of the venue provisions. Again, the dealer asserted that state law permitted the dealer to sue in Minnesota. But in considering a motion to transfer under section 1404(a), the court was required to balance the individualized facts of each case in its consideration of “convenience and fairness.” While the venue provisions of the contracts and state law were both relevant factors in this analysis, neither was found to be dispositive. After analyzing all factors, the court held that the dealer’s claims should be transferred to federal courts in Ohio and Virginia. In doing so, the court stated that although it appreciated the dealer’s “apparent dilemma” of pursuing claims against three defendants in three different forums, “some fragmentation” was inevitable anyway given the necessity of arbitrating in London on the final set of claims.