Access Care, Inc. v. Sten-Barr Network Solutions, Inc.

1 Rule 12(b)(3) of the Federal Rules of Civil Procedure is applicable here pursuant
to Rule 7012 of the Federal Rules of Bankruptcy Procedure. 	In Salovaara v. Jackson
National Life Insurance, 246 F.3d 289, 298 n.6 (3d Cir. 2001), the Third Circuit recognized,
without resolving the issue, that there is “much disagreement” over whether a motion to
dismiss based on a forum 	selection clause should be made pursuant to Fed.R.Civ.P.
12(b)(3) for improper venue or 12(b)(6) for failure to state a claim upon which relief can be
(continued...)
IN THE U NITED S TATES B ANKRUPTCY C OURT
F OR THE E ASTERN D ISTRICT OF P ENNSYLVANIA
IN RE 	: C HAPTER 11
:
ACCESS C ARE, INC ., 	:
:
D EBTORS 	: BANKRUPTCY N O . 04-30771(SR)
:
:
:
ACCESS CARE, INC ., 	:
: ADVERSARY N O . 05-533
PLAINTIFF, 	:
:
V. 	:
:
STEN -BARR N ETWORK SOLUTIONS, INC ., 	:
:
D EFENDANT . 	:
:
___________________________________:
OPINION
By: 	STEPHEN RASLAVICH , UNITED STATES BANKRUPTCY J UDGE .
Defendant, Sten-Barr Network Solutions, Inc. (“Sten-Barr”), moves pursuant
to Federal Rule of Civil Procedure 12(b)(3), to have the complaint of plaintiff/debtor,
Access Care, Inc. (“Debtor”), dismissed based upon the forum selection clause
(“Forum Selection Clause”) contained in the parties’ contracts. 1 In the alternative,
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granted. This issue is similarly unresolved in the Fourth Circuit. See Millennium Studios,
Inc. V. Man Roland, Inc. (In re Millennium Studios, Inc.), 286 B.R. 300, 306 (D. Md. 2002)
(recognizing that in the Fourth Circuit, there “is currently no procedural mechanism
specifically tailored to handle a motion to dismiss based on a forum selection clause
[because] ...[t]he Fourth Circuit has not decided the issue of what approach to take and
which subsection of Rule 12(b) is most appropriate for the situation.”). Debtor raises this
point regarding the correct procedural mechanism for seeking a dismissal based upon a
forum selection clause in its response to Sten-Barr’s motion, stating that “it may be
inappropriate to utilize Rule 12(b)(3) as a means to enforce a forum selection clause” since
venue in the Eastern District of Pennsylvania is proper. See Response of Access Care,
Inc. to Motion of Sten-Barr Network Solutions, Inc. To Dismiss Complaint (“Response”) at
3 n.8. However, at the hearing on Sten-Barr’s motion, Sten-Barr requested this Court, as
an alternative to dismissing this proceeding, to transfer it to Florida. See Transcript, dated
October 11, 2005 (“Transcript”), at 7. Since transfer is the remedy which Sten-Barr is being
granted, it is unnecessary to resolve the issue of whether Sten-Barr erred by relying upon
Rule 12(b)(3) rather than Rule 12(b)(6) in seeking dismissal of this proceeding.
2
Sten-Barr seeks to have the adversary proceeding transferred to Brevard County,
Florida.
Upon consideration, Sten-Barr’s request for dismissal shall be denied. 	Its
request for transfer shall be granted albeit not to its requested forum. 	This
proceeding shall be transferred to the federal district court in Hillsborough County,
Florida which is located in Tampa. 	Hillsborough County is one of the two
jurisdictions identified in the parties’ Forum Selection Clause. The case is not being
transferred to Brevard County, as Sten-Barr requested, because there is no federal
court within that county.
Background
When Debtor was in business, it sold and/or leased products and goods, such
as beds, bedding and other rehabilitation hardware, that were used by nursing home
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2 At the hearing, Debtor’s counsel argued that the Forum Selection Clause is
ambiguous because it grants Sten-Barr sole discretion to choose the county (Brevard or
Hillsborough) and court (state or federal) for any lawsuit under the parties’ agreements
regardless of whether Debtor is the party initiating the lawsuit. Transcript at 13-17. This
(continued...)
3
facilities and hospitals. Complaint ¶8. While in business, Debtor entered into seven
agreements with Sten-Barr to act as its sub-distributor. Id. ¶¶ 9–10, 14-15, 19-20,
24-25, 29-30, 34-35, 39-40. Debtor entered into six of these agreements (the “Six
Agreements”) between February of 2002 through June of 2003; it entered into the
seventh agreement (the “Seventh Agreement”) at some unspecified time. Id. All Six
Agreements contain the following provision:
Attorney’s Fees - Litigation: In the event that any party
hereto institutes a legal action (at law and/or in equity) to
enforce any provision of this Agreement, the prevailing
party shall be entitled to recover from the other party any
costs incurred, including reasonable attorney’s fees, both
at trial and appeal. 	The jurisdiction and venue for
purposes of this Agreement shall be Hillsborough
County 	or 	Brevard 	County, 	Florida, 	at 	the 	sole
discretion of Sten-Barr Network Solutions, Inc.
Id., Exhibits A through F (emphasis added). The Forum Selection Clause limits the
location at which a lawsuit under the agreements can be maintained to two counties
in Florida, namely Hillsborough or Brevard Counties. As the clause is worded, it is
within 	Sten-Barr’s 	“sole 	discretion” 	to 	choose 	between 	these 	two 	counties.
Moreover, because the clause does not specify whether suit must be brought in
state or federal court, it is also within Sten-Barr’s “sole discretion” to choose to
litigate in state or federal court. 2 However, since there is no federal court located in
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argument is not persuasive. 	Id. at 17. 	The language of the Forum Selection Clause is
definite and clear. Simply because the parties agreed that Sten-Barr has sole discretion
to decide between the choices identified in the clause does not render it ambiguous.
3 In the Complaint, Debtor alleged that Sten-Barr breached its agreements with
Debtor “by, among other things, failing to pay Access Care for the products and services
which Access Care provided as the exclusive sub-distributor of Sten-Barr.” Complaint ¶46.
However, at the hearing, Debtor’s counsel indicated, that while she did not have all of the
facts, that she was under the impression that the parties’ agreements were terminated for
reasons “that had nothing to do with billing issues or collection of receivables.” Transcript
at 21.
4 At the hearing, Debtor’s Counsel explained this point, stating:
[A]ll of the contracts were terminated in June prior to the filing
of the bankruptcy case. However, there was still a course of
dealings between the debtor and Sten-Barr after June of 2004.
Specifically, Sten-Barr had requested that the debtor maintain
the equipment at certain facilities. ... Sten-Barr requested that
rather than we remove the bed from under the patient, that we
continue to provide services to these patients.
Transcript at 9.
4
Brevard County, the only federal court in which this proceeding could be litigated in
compliance with the Forum Selection Clause is in Hillsborough County.
In June of 2004, the parties terminated their agreements. 	Transcript at 9.
Prior to the terminations, Sten-Barr “failed and refused” to pay Debtor for certain
amounts due and owing thereunder. 	Complaint ¶¶ 13, 18, 23, 28, 33, 38, 43.
Nevertheless, Debtor contends that the parties terminated the agreements for
reasons unrelated, or at least not wholly related, to Sten-Barr’s failure or refusal to
pay.3 After the terminations, Debtor continued providing certain products and goods
to Sten-Barr’s customers at Sten-Barr’s request, 4 but Sten-Barr continued to fail and
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5 In its Response, Debtor notes that, in its bankruptcy case, Sten-Barr filed an Entry
of Appearance and a Request for Notice Pursuant to Rule 2002, Response ¶3, participated
in various hearings concerning the sale of Debtor’s assets, id. ¶4, and filed an objection to
the entry of an order authorizing the sale of certain inventory of the Debtor’s assets (which
Sten-Barr argued was its ‘inventory.’”). Id. In the event that Debtor is relying upon these
allegations to argue (which it never directly does) that Sten-Barr waived its right to rely
upon the Forum Selection Clause, the Court rejects the argument. The Third Circuit has
specifically held that a litigant can file a proof of claim in a bankruptcy case without waiving
the provisions of a forum selection clause. 	See Coastal Steel Corporation v. Tilghman
Wheelabrator Ltd., 709 F.2d 190, 204 (3d Cir. 1983), overruled on other grounds, Lauro
Lines v. Chasser, 490 U.S. 495 (1989) (holding that orders declining to enforce forum
selection clauses are not immediately appealable) . 	A litigant can certainly 	act
defensively in a bankruptcy case located in a forum which the debtor has chosen without
waiving its right under a forum selection clause. See N. Parent, Inc. v. Cotter & Company
(In re N. Parent, Inc.), 221 B.R. 609, 617-18 (Bankr. D. Mass. 1998).
6 Debtor conceded in its Response that “this Court may take judicial notice of
matters of record in the Bankruptcy Case[.]” Response at 1 n.1 (citing to In re Indian Palms
Associates, Ltd., 61 F.3d 197, 204-05 (3d Cir. 1995)).
7 In Article XI, the Plan provides, inter alia, for this Court’s retention of jurisdiction
post-confirmation to: (1) “hear and determine” adversary proceedings involving account
receivables owed to the Debtor: (2) “recover” all assets and property of the Debtor; and (3)
“adjudicate and determine all adversary proceedings permitted under the Code.” 	Plan,
Article XI, ¶¶ 11.4, 11.12, 11.18. However, as Judge Fox held in Unified Data Systems,
Inc. V. Almarc Corp. (In re Almarc Corp.), 94 B.R. 361, 365 & 366 n.5 (Bankr. E.D. Pa.
(continued...)
5
refuse to pay for the same. Transcript at 9, 21.
On August 6, 2004, Debtor filed a Voluntary Petition under Chapter 11 of the
Bankruptcy Code. 5 Complaint ¶5. Thereafter, Debtor continued providing certain
products and goods for Sten-Barr; however, Sten-Barr continued to fail and refuse
to pay Debtor for amounts due and owing.
Debtor’s confirmed Chapter 11 plan of reorganization is a liquidation plan. 6
See Debtor’s Modified First Amended Chapter 11 Plan of Reorganization (“Plan”)
¶5.8. 7 Pursuant to the terms of its Plan, Debtor sold certain assets which were
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1988), a debtor cannot confer post-confirmation jurisdiction upon the bankruptcy court
contrary to the parties’ forum selection clause by merely inserting a provision in a plan or
order of confirmation reserving jurisdiction when the party who seeks to enforce the clause
was not a creditor of the estate, had no prepetition claim and did not vote upon the
confirmed plan. 	See also Coastal Steel Corporation, supra, 709 F.2d at 204 (although
provision in debtor’s plan of reorganization provided for the retention of jurisdiction over the
parties’ litigation, the plan did not “adjudicate anything respecting” the enforcement of the
parties’ forum selection clause.)
6
warehoused in Pittsburgh and Philadelphia for approximately $408,000. See Order
Approving Debtor’s Motion for Sale of Debtor’s Assets Free and Clear of Lien and
Encumbrances, dated November 30, 2004; Order Approving Motion of Debtor for the
Entry of an Order Authorizing the Sale of Certain Portions of the Debtor’s Assets and
Approval 	of 	the 	Auction 	of 	Concentrators 	Free 	and 	Clear 	of 	Liens 	and
Encumbrances Pursuant to 11 U.S.C. §§ 105 and 363 and Fed.R.Bank.P. 6004. In
addition, Debtor sold certain inventory which it had used in its operations in New
England for approximately $210,000. See Debtor’s Auction Report.
In addition to the sales of its assets, Debtor’s liquidation Plan provides for the
collection of account receivables, including those allegedly owed by Sten-Barr. See
Plan ¶5.2; Disclosure Statement in Respect of the Debtor’s First Amended Chapter
11 Plan of Reorganization ¶11.4
On or about August 23, 2005, Debtor commenced this adversary proceeding
against Sten-Barr to collect account receivables. Debtor’s Complaint alleges the
following 	two 	causes 	of 	action: 	(1) 	breach 	of 	contract; 	and 	(2) 	unjust
enrichment/quantum meruit.
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8 The $277,000 is the total amount of account receivables which Sten-Barr allegedly
owes. As of the date of the hearing, Debtor’s counsel did not know and, indeed, wanted
permission to conduct discovery to determine, what amount of the receivables is
attributable to pre-termination versus post-termination of the parties’ 	agreements.
Transcript at 22-23. 	Accordingly, at this stage of the proceeding, Debtor has pled its
counts, for breach of contract and quantum meruit, in the alternative. Part of the $277,000
may be for pre-termination services and part of the $277,000 may be for post-termination
services. While claims for quantum meruit are “precluded when the relationship between
the parties is founded on a written agreement or express contract,” Surya Systems v.
Sunku, 2005 WL 1514225, *4 at (E.D. Pa. June 24, 2005) (citing Benefit Trust Life In. Co.
v. Union National Bank, 776 F.2d 1174, 1177 (3d Cir. 1985) (“[Q]uantum meruit is
inapplicable when the parties’ contract is founded on express contract.”)), it unclear from
the pleading, how the amount is divided between these time periods. 	For purposes of
enforcing the parties’ Forum Selection Clause, it is unnecessary to resolve this issue. The
Complaint specifically alleges that account receivables are owed for goods and products
(continued...)
7
In Count I, Debtor alleges that Sten-Barr breached the parties’ seven
agreements by, “among other things, failing to pay” the account receivables which
it owes and that, “as a direct and proximate cause” of the breaches, Debtor has
suffered damages in the amount of $277,000. In addition, Debtor alleges, based
upon the parties’ agreements, that the prevailing party in the litigation is entitled ‘to
... costs incurred, including reasonable attorney’s fees.” 	Complaint ¶ 49. 	Debtor
seeks damages in the amount of $277,000 plus interest and costs, including
reasonable attorney’s fees.
In Count II for “Unjust Enrichment/Quantum Meruit,” Debtor alleges that: (1)
Sten-Barr has retained valuable benefits from Debtor; (ii) it would be inequitable to
allow Sten-Barr to retain such benefits without compensating Debtor for them; and
(iii) Debtor has suffered damages in the amount of $277,000 which, notably, is the
same amount of damages alleged in Count I. 8 In this count, Debtor seeks judgment
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provided pre-termination. As to these account receivables, the Forum Selection Clause
applies and shall be enforced. As to any account receivables owed for goods and products
provided post-termination, the Court shall utilize its discretion, based on judicial efficiency,
to transfer these claims too so that the entire adversary proceeding may be resolved in the
same forum. See infra at 11-12. See also MAI Systems Corp. v. Bass (In re MAI Systems
Corp.), 1995 WL 84210, at *3 (Bankr. D. Del., Feb. 22, 1995) (reasoning that adversary
proceeding should be transferred, in its entirety, to district court in Michigan pursuant to
forum selection clause because even though “some of the claims in the complaint do not
relate to the [agreement with the forum selection clause],”...[j]udicial efficiency and other
considerations suggest that the ‘unrelated’ portions of MIA’s adversary be heard in the
same Michigan action.”).
9 The parties’ agreements do not contain a choice of law provision. However, since
the parties agree that the M/S Bremen rule governs this proceeding, the Court shall apply
it here. However, even if state law rather than federal law was applied here (the state law
would either be the law of Pennsylvania, where the dispute was filed, or the law of Florida,
which is the state identified in the Forum Selection Clause), the result would be the same
because the law of Florida and Pennsylvania is the same as, or similar to, the Supreme
Court’s ruling in M/S Bremen.
In 1986, the Florida Supreme Court specifically adopted the view of the Supreme
Court in M/S Bremen and held that “forum selection clauses should be enforced in the
absence of a showing that enforcement would be unreasonable or unjust.” Manrique v.
Fabbri, 496 So.2d 437, 440 (Fla. 1986). 	The state court also noted that the test of
“unreasonableness is not mere inconvenience or additional expense” but requires a
showing that trial in the contractual forum would be so gravely difficult and inconvenient that
the respondent would be, for all practical purposes, deprived of his day in court. Id. at 440
n.4.
The law of Pennsylvania is similar to the Supreme Court’s ruling in M/S Bremen.
In Central Contracting Co. v. C.E. Youngdahl & Co., 418 Pa. 122, 133, 209 A.2d 810, 816
(continued...)
8
against for $277,000.
Arguments
The parties agree that the general rule established by the Supreme Court in
M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), for determining the validity
and enforcement of forum selection clauses governs the instant dispute. 9 Motion
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(1965), the Pennsylvania Supreme Court held that “a court in which venue is proper and
which has jurisdiction should decline to proceed with the cause when the parties [to a forum
selection clause] have freely agreed that litigation should be conducted in another forum
and where such agreement is not unreasonable at the time of litigation.” See also Morgan
Trailer Mfg. Co. v. Hydraroll, Ltd., 759 A.2d 926, 930 (Pa. Super. 2000). 	Under
Pennsylvania law, as under the law of Florida, “a clause is not unreasonable if it makes
enforcing the agreement merely inconvenient or expensive.” 	Id. at 930.
9
¶7; Response ¶¶7-8; Transcript at 8 (Debtor’s counsel stated: “[First, let me say that
the debtor doesn’t dispute the elements set forth in the Bremen Supreme Court
case.”). The Third Circuit Court of Appeals summarized the M/S Bremen rule in
Coastal Steel Corporation v. Tilghman Wheelabrator Ltd., supra, stating as follows:
The Bremen ... rule is that a forum selection clause is
presumptively valid and will be enforced by the forum
unless the party objecting to its enforcement establishes
(1) that it is the result of fraud or overreaching, (2) that
enforcement would violate a strong public policy of the
forum, or (3) that enforcement would in the particular
circumstances 	of 	the 	case 	result 	in 	litigation 	in 	a
jurisdiction 	so 	seriously 	inconvenient 	as 	to 	be
unreasonable.
709 F.2d at 202. 	Based on Third Circuit precedent, the M/S Bremen rule is
applicable in bankruptcy proceedings. Diaz Contracting, Inc. v. Nanco Contracting
Corp. (In re Diaz Contracting, Inc.), supra, 817 F.2d at 1050 (citing Coastal Steel,
709 F.2d at 202) (“[T]his Court, in Coastal Steel, held that The Bremen standard was
applicable even in a bankruptcy proceeding.”).
Debtor contends that the Forum Selection Clause should not be enforced
under the M/S Bremen rule because the second and third exceptions apply here.
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10 Debtor asserts in footnote 6 of its Response that “[t]his collection proceeding
accounts for the largest receivable sought by the Debtor, the impact of which will
significantly impact distributions to creditors under the Plan.” 	Response at 3 n.6 (italics
added). Presumably based on this footnote, Sten-Barr’s counsel argued at the hearing that
Debtor is raising “what is . . . characteristically called a linchpin argument, in that the
litigation is a linchpin to the Chapter 11 debtor’s plan of reorganization.” Transcript at 3.
If Debtor is, in fact, asserting a linchpin argument, its effort in this regard is limited to
footnote 6 of its Response. Debtor never mentioned the argument at the hearing. In any
event, the argument fails because, as this Court explained in New Knight, Inc. v. National
Wire & Metal Technologies, Inc. (In re New Knight), 291 B.R. 367, 375-76 (Bankr. E.D. Pa.
2003), the linchpin theory of “core” jurisdiction is limited to complex Chapter 11 cases
generally involving insurance coverage issues and thousands of personal injury claimants.
11 The “enforcement of pre-petition contract actions or breaches of that contract are
non-core related proceedings.” Yarosz v. National American Insurance Company (In re
Yarosz), 1995 WL 311867, at *2 (Bankr. M.D. Pa. March 24, 1995).
10
This Court disagrees. However, rather than dismissing this proceeding based on the
Forum Selection Clause, this Court shall utilize its discretion to transfer the
proceeding to the district court in Hillsborough County.
(I) The Second Exception of the M/S Bremen Rule
Debtor argues that enforcement of the Forum Selection Clause would violate
the strong public policy which exists in favor of centralizing all proceedings in a
bankruptcy case in the bankruptcy court where the case is pending. 10 According to
Debtor, a portion of its claims is for good and products which it provided to Sten-Barr
post-petition, rendering a portion of its claims within the “core” jurisdiction of this
Court. 11 Response ¶¶12-13. Debtor asserts that this distinction between “core” and
“non-core” proceedings “can be critical” because there is “a line of cases [which] ...
clearly supports the proposition that where a ‘proceeding falls within a bankruptcy
court’s core jurisdiction, a forum clause will not override.’” See Id. ¶14 (quoting N.
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Parent, Inc., supra, 221 B.R. at 621, citing In re Wheeling Pittsburgh Steel Corp.,
108 B.R. 82 (Bankr. W.D. Pa. 1989)).
While there is undoubtedly a public policy which exists in favor of “facilitating
the collection and distribution of debtor estates,” Coastal Steel Corporation, supra,
709 F.3d at 202, 	but see Hays and Company v. Merrill, Lynch, Pierce, Fenner &
Smith, 885 F.2d 1149, 1157 (3d Cir. 1989) (observing that “it is clear that in 1984
Congress did not envision all bankruptcy related matters being adjudicated in a
single forum.”), it is debatable whether any of Debtor’s claims fall within the
bankruptcy 	court’s 	“core” 	jurisdiction. 	See 	McCrary 	& 	Dunlap 	Construction
Company, LLC. v. CED Construction Partners, Ltd. (In re McCrary & Dunlap
Construction Company, LLC., 256 B.R. 264, 266 (Bankr. M.D. Tenn. 2000) (“An
action instigated by the debtor in the context of bankruptcy to collect an account
receivable is most likely non-core.”). 	It is arguable that even Debtor’s claims for
goods provided post-petition fall within this Court’s “related to” rather than “core”
jurisdiction since they do not invoke any substantive right created by the Bankruptcy
Code and could exist outside of a bankruptcy case. See In re New Knight, Inc. v.
National Wire & Metal Technologies, Inc., supra, 291 B.R. at 373-74 (explaining
meaning of core, non-core and related proceedings).
Even if some of Debtor’s claims are within the “core” jurisdiction of this Court,
they are inextricably intertwined with Debtor’s non-core, related claims. It would be
inefficient for this Court to retain jurisdiction over the “core” claims while transferring
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the “related” claims to Florida. 	See N. Parent, Inc., supra, 221 B.R. at 630
(concluding that resolution of the debtor’s “core claims was inextricably intertwined
with or duplicative of the facts and law necessary to determine the debtor’s non-core
fraud, breach of contact and usury claims” and that “it would be inappropriate for this
Court to determine those core issues, while transferring the non-core issues
elsewhere” because it would promote neither “judicial economy nor the efficient
administration of the estate.”).
(II) The Third Exception of the M/S Bremen Rule
Debtor also contends that enforcement of the Forum Selection Clause fits
within the third exception to the M/S Bremen rule. With regard to this exception, the
Third Circuit has ruled that the “party objecting to the enforcement of a forum
selection clause as ‘unreasonable’” must meet a “heavy burden” of proof. 	Diaz
Contracting, Inc., 817 F.2d at 1051-52. Enforcement of the clause “‘may be denied
only where it would be ‘seriously inconvenient,’ such that the resisting party ‘would
be effectively deprived of its day in court.’” Id. at 1052 (quoting General Engineering
Corp. V. Martin Marietta Alumina, Inc., 783 F.2d 352, 356 (3d Cir 1986)).
Debtor contends that it would be seriously inconvenient to litigate this dispute
in Florida because:
(1) Debtor and all of its records are located here in
Pennsylvania;
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12 At the hearing, Sten-Barr’s counsel contended that “any issues pertaining to third
parties are really minimized in this case because of the billing dispute between the parties.”
Transcript at 6. In response, Debtor’s counsel stated:
Contrary to Mr. Hinchman’s depiction of third parties, what we
have here, to the extent that the records between the debtor
and Sten-Barr don’t match. 	The third parties are medical
facilities in Pennsylvania. To the extent that we need to look
at their records or depose any of those personnel, it would
have to be done up here. 	I don’t believe Florida has
jurisdiction over those people. We’re talking video depositions,
et. cetera. 	So, I believe that the cost of actually moving the
matter down to Florida is a little more expensive than as so
characterized by Mr. Hinchman.
Id. at 13 (emphasis added). By making this statement, Debtor’s counsel to a certain extent
hoisted herself on her own petard. The standard for unreasonableness under M/S Bremen
is far from satisfied by a financial burden that can be summarized as a “little more
expensive” as that characterized by the opposing party.
13
(2) Sten-Barr has local counsel who is intimately familiar
with this Court, the proceedings before this Court and with
Debtor’s Plan;
(3) All of the third parties whose records may have to be
reviewed or whose employees may have to be deposed or
called as witnesses at trial are located in Pennsylvania;
and
(4) Third party witnesses would be subject to compulsory
process here but not in Florida. Debtor would be forced to
utilize 	videotape 	trial 	depositions 	for 	any 	third 	party
witnesses whom it seeks to call at trial, rendering the cost
of trial more expensive. 12 Moreover, since Debtor would
have to rely upon trial depositions, the presentation of its
case at trial would be seriously undermined.
These factors do not satisfy Debtor’s burden.
It may be inconvenient and expensive for Debtor to litigate in Florida since its
records, its employees, all third party records and all third party witnesses are
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located in Pennsylvania, but “‘mere inconvenience or additional expense is not the
test of unreasonableness.” 	Diaz Contracting, Inc.,, 817 F.2d at 1053 (quoting
Deolalikar v. Murlas Commodities, Inc., 602 F. Supp. 12, 15 (E.D. Pa. 1984) (quoting
Central Contracting Co. v. Maryland Casualty Co., 367 F.2d 341, 344 (3d Cir.
1966)). 	There is no evidence that when Debtor agreed to the Forum Selection
Clause, it had reason to expect that these circumstances (i.e., location of the
witnesses & records) would be otherwise in any litigation between the parties. See
General Engineering Corporation v. Martin Marietta Alumina, Inc., supra, 783 F.2d
at 359 (reasoning that witness unavailability was easily foreseeable at the time when
the forum selection clause was agreed upon).
Moreover, Debtor failed to offer any evidence to establish that its records
cannot be transported to Florida and no evidence to substantiate its assertion that
its presentation of video depositions at trial will detrimentally affect the delivery of its
case. Indeed, Debtor made no effort to identify any of its witnesses or describe their
anticipated testimony. 	Absent a record supporting its assertions, Debtor has not
satisfied its “heavy” burden of proof. See Arrow Plumbing and Heating, Inc. v. North
American Mechanical Services Corp., 810 F. Supp. 369, 372-73 (D. R.I. 1993)
(granting defendant’s motion for a transfer of the action to Texas based on the
parties’ forum selection clause because plaintiff failed to carry its burden of
specifying who the key witnesses were and why their testimony was materially
necessary to the resolution of the matter).
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The Court also notes that whether Sten-Barr has counsel who is familiar with
this Court and the proceedings here is irrelevant to the determination of whether
enforcement of the Forum Selection Clause would be unreasonable. The standard
is not whether it would be more inconvenient for Sten-Barr to litigate here than for
Debtor to litigate in Florida, but whether it would be so gravely inconvenient for
Debtor to litigate in Florida that it will be effectively deprived of its day in court if
forced to do so.
Since Debtor has not satisfied its burden of proof, the Forum Selection Clause
shall be enforced. See Diaz Contracting, Inc., supra, 817 F.2d at 1054 (“[A]bsent a
strong showing by the party opposing enforcement that the conditions under the
Bremen have been met, the bankruptcy court must enforce the forum selection
clause.”). This conclusion, however, does not end the inquiry.
III. Discretion to Transfer Rather than Dismiss
In Salovaara v. Jackson National Life Insurance Company, supra, 246 F.3d
289 (3d Cir. 2001), the Third Circuit explained that while a district court faced with
a Rule 12 dismissal motion based on a forum selection clause has the power to
grant a dismissal, it may also consider whether transferring the case to another
federal forum “is the better course.” Id. at 298-99. Acknowledging its preference for
transfer over dismissal, the Third Circuit stated:
We acknowledge that, as a general matter, it makes better sense, when
venue is proper but the parties have agreed upon a not-unreasonable
forum selection clause that points to another federal venue, to transfer
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rather than dismiss.
Id. at 299. 	The Third Circuit noted that transfer is only available where a federal
forum is identified in the parties’ forum selection clause. If the only forum identified
in the forum selection clause is a state court, the only available remedy is dismissal.
See id. at 298 (noting that transfer is not an option “when a forum selection clause
specifies a non-federal forum.”).
While Salovaara dealt with a non-bankruptcy action filed in district court, the
Third Circuit’s rationale seems equally applicable here. See MAI Systems Corp. V.
Bass (In re MAI Systems Corp.), supra (transferring adversary proceeding to the
district court in the Eastern District of Michigan based on forum selection clause in
parties’ agreement). 	In the instant case, transfer is an option because the Forum
Selection Clause allows litigation in both the federal and state courts. 	See
Salovaara, supra, 246 F.2d at 298 ( noting that transfer is not an option “when a
forum selection clause specifies a non-federal forum.”).
As this Court observed in Schlein v. Golub (In re Schlein), 182 B.R. 110, 114
(Bankr. E.D. Pa. 1995), the following factors are relevant to a motion for transfer:
(1) convenience of the parties;
(2) interest of justice;
(3) choice of forum;
(4) enforceability of judgment;
(5) timeliness and fairness;
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(6) the proximity of assets, creditor, debtor, respective
principals, evidence and witnesses to the venue of the
home court and the court for the proposed venue;
(7) the economical and efficient administration of the
estate;
(8) judicial economy;
(9) the applicability of state law to the proceeding; and
(10) a local interest in having a localized controversy
decided at home.
Weighing these factors under the circumstances of this case, this Court concludes
that this proceeding should be transferred. 	When the parties entered into their
agreements, they contractually agreed that they would litigate in Florida; it was their
chosen forum. 	While it may be less convenient for Debtor to litigate in Florida, it
contractually agreed to do so. Moreover, because Debtor has not met its burden of
proof under the M/S Bremen rule, a transfer of this proceeding is “in the interest of
justice.” Litigating this proceeding in Florida will not detrimentally affect the efficient
administration of the estate which already has a confirmed plan for liquidation or the
enforceability of any judgment. Lastly, since state law rather than bankruptcy law
governs breach of contract claims, the expertise of this Court in the area of
bankruptcy law will not be utilized in resolving the claims.
Therefore, this proceeding shall be transferred to Florida. 	Since the only
district court in Brevard or Hillsborough County is in Tampa, the proceeding shall be
transferred there.
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Summary
Debtor has not met the standard necessary to deny enforcement of the Forum
Selection Clause. 	Since transfer is an option over dismissal, the proceeding shall
be transferred, in its entirety, to the United States District Court in the Middle District
of Florida.
BY THE C OURT :
__________________________
STEPHEN R ASLAVICH
U NITED STATES BANKRUPTCY JUDGE
Dated: November 30, 2005
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IN THE U NITED S TATES B ANKRUPTCY C OURT
F OR THE E ASTERN D ISTRICT OF P ENNSYLVANIA
IN RE 	: C HAPTER 11
:
ACCESS C ARE, INC ., 	:
D EBTORS 	: BANKRUPTCY N O . 04-30771(SR)
:
ACCESS CARE, INC ., 	:
: ADVERSARY N O . 05-533
PLAINTIFF, 	:
V. 	:
STEN -BARR N ETWORK SOLUTIONS, INC ., 	:
D EFENDANT . 	:
___________________________________:
ORDER
A ND NOW, this 30th day of November, 2005, upon consideration of the Motion
of Defendant Sten-Barr Network Solutions, Inc. to Dismiss the Complaint of Plaintiff
Access Care, Inc. (“Motion”), and after hearing with notice, and for the reasons set
forth in the Court’s Opinion, it is hereby ORDERED and DECREED that:
1. 	The Motion is GRANTED in part.
2. 	The Adversary Proceeding is transferred to the
United States District Court for the Middle District of
Florida in Tampa, Hillsborough County, Florida.
BY THE C OURT :
STEPHEN R ASLAVICH
U NITED STATES BANKRUPTCY JUDGE
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MAILING LIST:
Counsel for Debtor/Plaintiff
Bonnie R. Golub, Esquire
Weir & Partners LLP
Suite 500, The Widener Building
1339 Chestnut Street
Philadelphia, PA 19107
Counsel for Defendant/Movant
William Hinchman, Esquire
Adelman, Lavine, Gold & Levin
Four Penn Center
Suite 900
Philadelphia PA 19103
George Conway, Esquire
Office Of The U.S. Trustee
833 Chestnut Street
Suite 500
Philadelphia PA 19106
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