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Kotan v. Pizza Outlet

October 28, 2005

BURAK S. KOTAN, ET AL., PLAINTIFFS,
v.
PIZZA OUTLET, INC., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Royce C. Lamberth, United States District Judge,

MEMORANDUM OPINION

This matter comes before the Court on the motion [2] of defendants Pizza Outlet, Inc. ("Pizza Outlet") and Vocelli Pizza, L.P. ("Vocelli") to dismiss or, in the alternative, to transfer this case to the Western District of Pennsylvania. Pizza Outlet and Vocelli (collectively "franchisors") claim that pursuant to a forum selection clause in their franchise agreement with plaintiff Kotan, the Western District of Pennsylvania is the only proper federal venue for this action. They also claim that the District of Columbia is an improper venue for this action for reasons of convenience of parties and witnesses, a claim the plaintiffs refute. The franchisors request that this Court either dismiss the case pursuant to 28 U.S.C. § 1406(a) or use its discretion under 28 U.S.C. § 1404(a) to transfer the case. Upon consideration of the parties' filings, the applicable law and the record herein, the Court shall deny the franchisors' motion to dismiss but grant their motion to transfer the case to the Western District of Pennsylvania.

I. BACKGROUND

The plaintiffs in this action are Burak S. Kotan, a resident of Maryland, and MB Group, Inc., a Maryland corporation of which Kotan is the principal. The defendants include the franchisors, both Pennsylvania corporations, and two of their franchisees, Randy Fox of Reston, Virginia and Umit Yugit of Pompano Beach, Florida. The underlying dispute stems out of a contract between Pizza Outlet and Kotan. Pizza Outlet and Vocelli franchise retail pizza restaurants nationwide under the Vocelli name. Seeking to develop and operate several Vocelli restaurants in the District of Columbia, Kotan and his then-partner Mert Onur entered into a partnership agreement and established MB Group for this purpose. On February 20, 2004, they signed an agreement with Pizza Outlet ("Development Agreement"), requiring them to open a certain number of stores. Paragraph 19(D) of the Development Agreement contains a forum selection clause, which states:

Exclusive Jurisdiction DEVELOPER [Kotan] and PO [Pizza Outlet] agree that any action arising out of or relating to this Agrement . . . and the relationship of the parties shall be instituted and maintained only in a state or federal court of general jurisdiction in Allegheny County, Pennsylvania, and DEVELOPER irrevocably submits to the jurisdiction of such court(s) and waives any objection he may have to either the jurisdiction or venue of such court.

(Mot. Dismiss Ex. A.at 18)On June 1, 2005, the plaintiffs filed this action in the Superior Court for the District of Columbia alleging tortious interference, breach of contract, fraud and deceit, and misrepresentation. On June 6, 2005, the defendants removed the case to the United States District Court for the District of Columbia pursuant to 28 U.S.C. § 1441 and in accordance with 28 U.S.C. § 1446. On June 23, 2005, the franchisors filed the present motion.

II. DISCUSSION

A. Defendants' Motion to Dismiss

The franchisors' motion to dismiss is premised on 28 U.S.C. § 1406(a) (1993), which provides:

The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought.

In support of this motion the franchisors claim that venue in the District of Columbia is improper because of the mandatory forum selection clause contained in the Development Agreement. (Mot. Dismiss 4-6.) However, the franchisors' reliance on § 1406(a) is misplaced. In accordance with the plain language of § 1406(a), a court may only act pursuant to this statute when a case is filed in the wrong venue. While questions of venue are generally resolved in accordance with § 1391, when a case is removed from state court to federal court, the removal statute, 28 U.S.C. § 1441, dictates venue. Polizzi v. Cowles Magazines, 345 U.S. 663, 665 (1953). Section 1441(a) expressly provides that "the district court of the United States for the district and division embracing the place where such action is pending" is the proper venue of a removed action. 28 U.S.C. § 1441(a) (1994). Because this case was filed in the Superior Court for the District of Columbia and defendants voluntarily removed it to this Court, this Court is the proper venue under § 1441(a). See Hartford Fire Ins. Co. v. Westinghouse Elec. Corp., 725 F. Supp. 317, 320 (S.D. Miss. 1989) ("[D]efendant's voluntary application for removal confers venue over him."). Thus, the franchisors' objection under § 1406(a) to the propriety of venue in this district is not valid. See 14C CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3726, at 123-24 (3d ed. 1998) (explaining that after an action is removed pursuant to § 1441, objections to venue based on § 1406(a) are not applicable even if venue is improper under § 1391). This Court therefore denies the franchisors' motion to dismiss.

B. Defendants' Motion to Transfer to Another Venue

1. Legal Standard

Foreseeing the possibility that this Court may deny their motion to dismiss the case, the franchisors requested in the alternative that this Court transfer the case to the Western District of Pennsylvania. In accord with the Court's reasoning supra Part II.A, the franchisors correctly note that the motion to transfer is governed by 28 U.S.C. § 1404(a). See Thorlabs, Inc. v. Townsend Commc'ns, L.L.C., 2004 WL 1630488, at *2 n.1 (D.N.J. 2004) (explaining that after an action is removed from state to federal court, transfer of venue is "governed only by 28 U.S.C. § 1404(a)") (emphasis added). Section 1404 gives a district court discretion to "transfer any civil action to ...


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