BKJRT v. Sovereign Bank dba Merchant Services (2011)

MEMORANDUM OF DECISION RE MOTION TO DISMISS # 107

FACTS

In this action for declaratory judgment and breach of contract, the plaintiff, BKJRT, Inc. d/b/a Chuck's Steakhouse and Margaritagrill, brought suit against the defendant, MasterCard International, Inc.,¹ seeking a determination with respect to fines assessed pursuant to a “merchant processing agreement” (agreement).   On September 9, 2010, the defendant filed a motion to dismiss for improper venue and a memorandum of law in support of the motion.   On October 13, 2010, the plaintiff filed an objection to the motion to dismiss and a memorandum of law in support of the objection.   On October 26, 2010, the defendant filed a reply to the plaintiff's objection.

The plaintiff alleges the following facts in its complaint.   The plaintiff is a Massachusetts corporation with a principal office in Auburn, Massachusetts.   In 2003, the plaintiff entered into the agreement with Sovereign Bank d/b/a Merchant Services, A First Data Alliance (Sovereign) for the processing of credit card payments by the defendant.   Pursuant to the plaintiff's agreement with Sovereign, the plaintiff agreed to be “PCI compliant” when dealing with the storage of cardholder accounts data.   The plaintiff breached the agreement when it failed to be PCI compliant.   Sovereign informed the plaintiff that the defendant assessed a $50,000 fine based on the breach.   Pursuant to the plaintiff's agreement with Sovereign, the plaintiff agreed to pay any fines imposed on Sovereign by the defendant and Sovereign withdrew the fine from the plaintiff's account.   The fine imposed was arbitrary and not based upon the actual amount of card data that was compromised.

DISCUSSION

“A motion to dismiss ․ properly attacks the jurisdiction of the court, essentially asserting that the plaintiff cannot as a matter of law and fact state a cause of action that should be heard by the court ․ A motion to dismiss tests, inter alia, whether, on the face of the record, the court is without jurisdiction.”  (Internal quotation marks omitted.)  R.C. Equity Group, LLC v. Zoning Commission, 285 Conn. 240, 248, 939 A.2d 1122 (2008).   “The motion to dismiss shall be used to assert ․ improper venue ․” Practice Book § 10-31(a).

When considering a motion to dismiss, the trial court “must consider the allegations of the complaint in their most favorable light ․ In this regard, a court must take the facts to be those alleged in the complaint, including those facts necessarily implied from the allegations, construing them in a manner most favorable to the pleader.”  (Internal quotation marks omitted.)   Conboy v. State, 292 Conn. 642, 651, 974 A.2d 669 (2009).   However, “if the complaint is supplemented by undisputed facts established by affidavits submitted in support of the motion to dismiss ․ other types of undisputed evidence ․ and/or public records of which judicial notice may be taken ․ the trial court, in determining the jurisdictional issue, may consider these supplementary undisputed facts and need not conclusively presume the validity of the allegations of the complaint ․ If affidavits and/or other evidence submitted in support of a defendant's motion to dismiss conclusively establish that jurisdiction is lacking, and the plaintiff fails to undermine this conclusion with counteraffidavits ․ or other evidence, the trial court may dismiss the action without further proceedings ․ If, however, the defendant submits either no proof to rebut the plaintiff's jurisdictional allegations ․ or only evidence that fails to call those allegations into question ․ the plaintiff need not supply counteraffidavits or other evidence to support the complaint, but may rest on the jurisdictional allegations therein.”  (Citations omitted;  internal quotation marks omitted.)  Id., 651-52.

The defendant moves to dismiss the plaintiff's complaint for improper venue.   The defendant argues that the relationship of the parties and the plaintiff's claims arise from two contracts:  a contract between the plaintiff and Sovereign and a contract between Sovereign and the defendant.   The defendant argues that the plaintiff invokes the doctrine of equitable subrogation in its complaint in order to bring its claims against the defendant.   The defendant asserts that under the doctrine of equitable subrogation the plaintiff succeeds to the rights of Sovereign pursuant to the defendant's contract with Sovereign and, as such, is bound by the forum selection clause therein.   To the extent that the plaintiff relies on its contract with Sovereign to pursue its claims, the defendant argues that the plaintiff is bound by the forum selection clause in that contract.   The defendant argues that both forum selection clauses are valid and preclude litigation in this court.

In response, the plaintiff argues that there was no written contract between the plaintiff and the defendant and, therefore, the plaintiff cannot be bound by the forum selection clause contained within the agreement between Sovereign and the defendant.   The plaintiff also states that “[a]s to the merits of any Forum Selection Clause being appropriate in this case, [the plaintiff] ․ incorporates the Memorandum of Law in Support of the Objection to [the Motion to] Dismiss filed by Sovereign ․” Memorandum of Law in Support of Objection to Motion to Dismiss by MasterCard International Incorporated, p. 2. In the plaintiff's objection to Sovereign's motion to dismiss, the plaintiff argues that the forum selection clause is contained within an adhesion contract that was not specifically negotiated and unsigned.   Further, the plaintiff argues that the clause is entitled improperly and in small font.   Additionally, the plaintiff asserts that the inclusion of the forum selection clause was deceptive in nature and therefore the clause should not be enforced.

I

The court begins with the issue of which forum selection clause, if any, applies to the plaintiff's claim against the defendant.   The plaintiff argues that neither forum selection clause is enforceable.   With respect to the forum selection clause in the contract between the defendant and Sovereign, the plaintiff asserts that the clause does not apply because the plaintiff was not a party to that contract.   With respect to the clause contained in the contract between the plaintiff and Sovereign, the plaintiff incorporates the arguments it asserted in opposition to the motion to dismiss filed by Sovereign.

When considering this motion, the court is mindful that it must construe the allegations of the complaint in the light most favorable to the plaintiff.   Conboy v. State, supra, 292 Conn. 651.   The court notes, however, that the basis for the plaintiff's claims against the defendant is unclear from the allegations of the complaint and the plaintiff's arguments.   The complaint contains few relevant allegations with respect to the defendant.   The plaintiff alleges that it contracted with Sovereign to process credit card payments by the defendant;  Complaint, ¶ 2;  and that the plaintiff agreed to pay any fines imposed on Sovereign by the defendant.   Complaint, ¶ 6.   The plaintiff claims that the defendant assessed a $50,000 fine;  Complaint, ¶ 7, 8;  and that the fine was excessive and arbitrary.   Complaint, ¶ 9, 14.   Finally, the plaintiff alleges that Sovereign withdrew money from the plaintiff's account based on the fine imposed by the defendant.   Complaint, ¶ 15.

In its memorandum in opposition to this motion to dismiss, the plaintiff first argues that it “has no contract with [the defendant].   It stands to reason that a forum selection clause must be found in a written document between contracting parties.”  (Emphasis omitted.)   Memorandum of Law in Support of Objection to Motion to Dismiss by MasterCard International Incorporated, p. 1. The plaintiff continues, however, that the defendant “did ‘assess' a fine of $50,000 and ․ Sovereign ․ took the money from [the plaintiff's] accounts ․ The sole reason that Sovereign ․ took $50,000 from [the plaintiff] was due to the demand by [the defendant.]”   Memorandum of Law in Support of Objection to Motion to Dismiss by MasterCard International Incorporated, p. 1. The plaintiff concludes that the defendant “is a proper defendant in this action since it, not Sovereign ․ established the fine of $50,000.   Sovereign ․ took the funds from [the plaintiff's] accounts based solely on the actions of [the defendant].”   Memorandum of Law in Support of Objection to Motion to Dismiss by MasterCard International Incorporated, p. 2.

Count I of the plaintiff's complaint seeks a declaratory judgment with respect to the plaintiff's claims and count II is a claim for breach of contract.   Both counts are brought against the defendant and Sovereign.   It is unclear to the court, based on the allegations and the plaintiff's arguments, which contractual relationship the plaintiff relies upon to bring its claims.   Accordingly, the court will analyze the parties' arguments with respect to both forum selection clauses.

II

The court turns to the issue of equitable subrogation and the forum selection clause contained within the contract between Sovereign and the defendant.   “[T]he right of [legal or equitable] subrogation is not a matter of contract;  it does not arise from any contractual relationship between the parties but takes place as a matter of equity, with or without an agreement to that effect ․ The object of [legal or equitable] subrogation is the prevention of injustice.   It is designed to promote and to accomplish justice, and is the mode which equity adopts to compel the ultimate payment of a debt by one who, in justice, equity, and good conscience, should pay it ․ As now applied, the doctrine of [legal or] equitable subrogation is broad enough to include every instance in which one person, not acting as a mere volunteer or intruder, pays a debt for which another is primarily liable, and which in equity and good conscience should have been discharged by the latter.”  (Internal quotation marks omitted.)  Wasko v. Manella, 269 Conn. 527, 532-33, 849 A.2d 777 (2004).  “[I]t is axiomatic that a subrogee merely succeeds to the legal rights or claims of a subrogor.”  (Internal quotation marks omitted.)  Id., 536.

The court notes that the plaintiff has not responded to the defendant's arguments with respect to equitable subrogation.   The plaintiff has not indicated whether the basis for its claims against the defendant are based on the doctrine of equitable subrogation or based on another theory of liability.   The plaintiff's complaint contains several allegations relevant to this argument.   The plaintiff alleges that “[p]ursuant to the Merchant Processing Agreement between ․ Sovereign ․ and [the plaintiff, the plaintiff] agreed ․ to pay any fines imposed on Sovereign ․ by the defendant, MasterCard.”   Complaint, ¶ 6.   Additionally, the plaintiff alleges that “[o]n or about April 13, 2009 ․ Sovereign ․ informed [the plaintiff] that the defendant, MasterCard, had imposed a fine of $50,000 ․” Complaint, ¶ 8.   Finally, the plaintiff alleges that “Sovereign ․ has withdrawn from the plaintiff's account ․ $50,000 for the MasterCard penalty ․” Complaint, ¶ 15.   Additionally, the plaintiff notes in its memorandum in opposition that the defendant “is a proper defendant in this action since it, not Sovereign Bank, established the fine of $50,000.   Sovereign Bank took the funds from [the plaintiff's] accounts based solely on the actions of [the defendant].”   Memorandum of Law in Support of Objection to Motion to Dismiss by MasterCard International Incorporated, p. 2.

Based on the plaintiff's allegations and arguments, the court finds that the plaintiff's claims against the defendants can be construed to be based on the doctrine of legal or equitable subrogation.   The plaintiff alleges that Sovereign paid a debt for which the plaintiff was primarily liable.   Further, the plaintiff alleges that funds were withdrawn from its accounts in order to discharge the debt.   Accordingly, the plaintiff's claims could arise from its status as subrogee.   As such, the plaintiff succeeds to the legal rights and claims of Sovereign, the subrogor.   If the plaintiff's claims are based on the doctrine of equitable subrogation, the plaintiff is bound by the terms of the agreement between Sovereign and the defendant.   Accordingly, the court will analyze the forum selection clause contained within the contract between Sovereign and the defendant.

“The existence of [a forum selection] clause does not deprive the trial court of personal jurisdiction over the parties, but presents the question whether it is reasonable for the court to exercise its jurisdiction in the particular circumstances of the case.”  Reiner, Reiner & Bendett, P.C. v. Cadle Co., 278 Conn. 92, 103, 897 A.2d 58 (2006).  “[P]arties to a contract may agree in advance to submit to the jurisdiction of a given court ․ Absent a showing of fraud or overreaching, such forum clauses will be enforced by the courts ․ At the same time, jurisdiction may not be asserted in such a way as to make litigation so gravely difficult and inconvenient that a party unfairly is at a severe disadvantage in comparison to his opponent.”  (Citations omitted internal quotation marks omitted.)  United States Trust Co. v. Bohart, 197 Conn. 34, 42, 495 A.2d 1034 (1985);  see also Reiner, Reiner & Bendett, P.C. v. Cadle Co., supra, 278 Conn. 102 n.9.

Judges of the Superior Court have adopted a two-part analysis to determine whether a forum selection clause should be enforced.   First, “the court must look to contract formation itself to ascertain whether the clause was the product of fraud or deception or whether the bargaining power of the parties was so out of balance that the clause should not be enforced ․ This step allows, inter alia, consideration [of] whether the provision is contained in an adhesion or take or leave it contract which the party was compelled to accept without argument, or discussion.”  (Citation omitted;  internal quotation marks omitted.)   Powell v. Spruce Peak Realty, LLC, Superior Court, judicial district of Middlesex, Docket No. CV 09 5006181 (September 17, 2009;  Jones, J.).   Second, the court considers “whether, even if there existed no fraud, deception, or significantly uneven bargaining power, enforcement of the clause would cause such inconvenience to the party bringing suit that the otherwise valid contractual provision should not be enforced.”   Alliance Food Management Corp. v. Rensselaer Hartford Graduate Center, Inc., Superior Court, judicial district of Waterbury, Docket No. CV 05 5002441 (April 10, 2007, Gallagher, J.) (43 Conn. L. Rptr. 146, 147).

With respect to the first step, the fact that a forum selection clause is contained within a “take it or leave it contract” does not, in and of itself, make the clause the product of fraud or deception.   See, e.g., Powell v. Spruce Peak Realty, LLC, supra, Docket No. CV 09 5006181;  Arute v. Carnival Corp., Superior Court, judicial district of New Haven, Docket No. CV 05 5001407 (September 10, 2008, Corradino, J.).   Nor is the court precluded from finding that a forum selection clause is valid because the clause is in small print or the clause is contained in a document other than the one that was signed by the parties.   See, e.g., Alliance Food Management Corp. v. Rensselaer Hartford Graduate Center, Inc., supra, 43 Conn. L. Rptr. 147.   Trial courts have found forum selection clauses to be valid in far more extreme situations than the present case.   For example, one court found that there was no showing of fraud or deception even when the plaintiff did not receive all of the pages of the terms and conditions by facsimile, including the pages of the agreement that contained the forum selection clause.   Post Road Furniture Group, Inc. v. Landmark Merchant Solutions, LLC, Superior Court, judicial district of Ansonia-Milford, Docket No. CV 04 0085820 (November 18, 2004, Moran, J.).   The reasoning in cases such as Post Road is based on the rule that “where a person [who is] of mature years and who can read and write, signs or accepts a formal written contract affecting his pecuniary interests, it is [that person's] duty to read it and notice of its contents will be imputed to [that person] if [that person] negligently fails to do so.”  (Internal quotation marks omitted.)  Phoenix Leasing, Inc. v. Kosinski, 47 Conn.App. 650, 654, 707 A.2d 314 (1998).

The plaintiff has not specifically addressed the forum selection clause contained within the agreement between Sovereign and the defendant.   The plaintiff has, however, incorporated its arguments with respect to the agreement between itself and Sovereign and the affidavits submitted in objection to Sovereign's motion to dismiss.   The court will consider the arguments and evidence to the extent that they apply to the forum selection clause in the contract between Sovereign and the defendant.

In the present case, the forum selection clause is contained within the rules promulgated by the defendant.   The defendant's rules state, in relevant part:  “Any action initiated by a Member regarding and/or involving the Corporation, the Standards and/or any Member and Activity must be brought, if at all, only in the United States District Court for the Southern District of New York or the New York Supreme Court for the County of Westchester ․” MasterCard Rules, October 2008, § 3.4. The rules are incorporated into the card member license agreement;  Card Member License Agreement, p. 3, ¶ 16;  which is signed by Sovereign's senior vice president, Scott Abercrombie.   Card Member License Agreement, p. 4. The clause is printed in a standard type size and it is contained under the bold heading “Choice of Laws.” MasterCard Rules, October 2008, § 3.4. Sovereign's officer had a duty to read the rules and take notice of the forum selection.   That notice is imputed to Sovereign based on the vice president's signature.   There is no evidence that the agreement between the defendant and Sovereign was the product of fraud, deception or significantly unequal bargaining power.   The court must now consider whether, even though the forum selection clause is otherwise valid, enforcement of the provision would cause such inconvenience to the plaintiff that the clause should not be enforced.  “It has been repeatedly held that the ‘inconvenience’ necessary to persuade a court to decline to enforce a forum selection clause that has been found to be valid must be serious inconvenience, such inconvenience as would effectively deprive a plaintiff ․ of a forum in which to pursue its claim ․ The added expense and time of litigating in the selected forum falls far short of meeting that standard.”   Total Telecommunications, Inc. v. Target Telecom, Inc., Superior Court, judicial district of Ansonia-Milford, Docket No. CV 96 053516 (March 11, 1997, Corradino, J.), see also Post Road Furniture Group, Inc. v. Landmark Merchant Solutions, LLC, supra, Docket No. CV 04 0085820 (“Although the Connecticut appellate courts have not defined the degree of inconvenience necessary to persuade a court to decline to enforce a forum selection clause, courts have held that the additional time and expense required to travel to the selected forum are not, standing alone, adequate reasons to disregard the clause.”).

The plaintiff argues that the forum selection clause in the contract between the defendant and Sovereign “requires the action to be heard in Westchester County, New York where the Forum Selection Clause in the Program Guide with Sovereign ․ and [the plaintiff] requires that the action be heard in Suffolk County, New York. The [p]laintiff cannot be expected to litigate against each defendant separately.”   Memorandum of Law in Support of Objection to Motion to Dismiss by MasterCard International Incorporated, pp. 1-2.   The plaintiff presents no evidence, however, with respect to the hardship it would suffer from having to engage in litigation in the United States District Court for the Southern District of New York or the New York Supreme Court for the County of Westchester.   Without such evidence, the court cannot conclude that the forum selection clause would cause an unreasonable amount of inconvenience to the plaintiff.   Based on the foregoing, the court concludes that the forum selection clause contained within the contract between Sovereign and the defendant is valid and enforceable.

III

The court turns to the forum selection clause contained within the contract between the plaintiff and Sovereign.   With respect to the forum selection clause in that contract, the plaintiff relies entirely upon the arguments contained within its objection to Sovereign's motion to dismiss.   The court assessed the validity of that clause in its memorandum of decision regarding that motion to dismiss.   In the memorandum of decision, this court determined that it could not conclude “that the agreement was the product of fraud, deception or significantly unequal bargaining power, even when considering the size of the plaintiff's business and the lack of other negotiations regarding the agreement.”   Memorandum of Decision re Motion to Dismiss # 105, p. 7. Further, the court concluded that “the plaintiff has provided little evidence that it would be inconvenienced in any way other than the increased amount of travel.   The court cannot find that there would be a substantial inconvenience to the plaintiff based on the evidence presented in the present case.”   Memorandum of Decision re Motion to Dismiss # 105, p. 9. Based on these conclusions, this court determined that the forum selection clause contained within the contract between the plaintiff and Sovereign is reasonable and enforceable.

CONCLUSION

In an effort to construe the complaint in the light most favorable to the plaintiff, the court has analyzed both forum selection clauses and determined that both are enforceable.   The court finds that neither clause was the product of fraud, deception or significantly unequal bargaining power.   Further, the evidence presented does not show that enforcement of either of the clauses would cause unreasonable inconvenience to the plaintiff.   Accordingly, the defendant's motion to dismiss for improper venue is granted.

Martin, J.

FOOTNOTES

FN1. MasterCard International, Inc. is one of two named defendants in this action.   This motion to dismiss, however, was filed only by MasterCard International, Inc. Accordingly, MasterCard International, Inc. will be referred to singularly as “the defendant” hereinafter..  FN1. MasterCard International, Inc. is one of two named defendants in this action.   This motion to dismiss, however, was filed only by MasterCard International, Inc. Accordingly, MasterCard International, Inc. will be referred to singularly as “the defendant” hereinafter.

Martin, Robert A., J.