INTERNATIONAL GRAPHIC SERVICES, INC. V. HOST COMMUNICATIONS, INC.
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RENDERED: OCTOBER 18, 2002; 2:00 p.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2001-CA-001361-MR
INTERNATIONAL GRAPHIC SERVICES, INC.
APPELLANT
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE JOHN R. ADAMS, JUDGE
ACTION NO. 99-CI-00210
V.
HOST COMMUNICATIONS, INC.
APPELLEE
OPINION AFFIRMING
* * * * * * * *
BEFORE:
GUDGEL, JOHNSON, and SCHRODER, Judges.
GUDGEL, JUDGE:
International Graphic Services, Inc. (IGS)
appeals from the Fayette Circuit Court’s orders determining that
it was a proper forum for this lawsuit, and granting summary
judgment to Host Communications (Host) in a contract dispute
concerning the sale and purchase of a printing press.
We affirm.
IGS sells machinery and supplies used in the printing
business.
In August 1998, the parties entered into a contract
whereby IGS was to acquire a printing press from White Horse
Machinery (White Horse) in England and sell it to Host for
$945,000.
The agreement contained a price adjustment clause
providing that IGS could revise the price by written notice at
any time prior to ten days before shipment.
If Host desired to
cancel the agreement, it was required to do so in writing within
ten days of the notice’s receipt.
Host paid IGS a $60,000
earnest money deposit in conjunction with the contract’s
execution.
On September 21, 1998, Bill Litviak of IGS faxed a
message to Mike Wells of Host.
Attached to the fax was a copy of
a fax from Robin Vouvello of White Horse to Jeff Moore of IGS.
Although the two documents, read together, indicated that IGS’s
cost of purchasing the press from White Horse would increase, the
Litviak fax did not specifically indicate that IGS intended to
increase the price it would charge Host.
The parties
subsequently discussed the price increase by telephone, including
a discussion on September 24 regarding how, if at all, the price
increase would impact the contractual price.
On October 1, IGS
wrote to Host indicating that it might be able to absorb some
portion of the price increase, but clearly implying that there
would be some increased cost to Host for purchasing the press.
On October 7, Host informed IGS of its intent to cancel the
contract, and it demanded return of the $60,000 earnest money
deposit.
IGS asserted that Host’s effort to cancel the contract
was untimely, and it refused to return the earnest money.
On
January 20, 1999, Host filed a complaint in the Fayette Circuit
Court seeking return of the earnest money.
IGS apparently filed
a breach of contract lawsuit in Maryland on the same date and
moved to dismiss the Fayette County case pursuant to the
contract’s forum selection clause.
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On March 23, 1999, the
Fayette Circuit Court entered an order denying the motion to
dismiss and holding that it was a proper forum for the
proceeding.
Host subsequently filed a motion for summary judgment,
arguing that it was first given notice of a price increase on
October 1, 1998, and that its notification of cancellation on
October 7 therefore was timely.
IGS argued in response that Host
had notice of the price increase as of September 21, 1998, and
that the attempted cancellation therefore was untimely.
On May
25, 2001, the trial court found that the October 1 correspondence
provided the first proper notice of the price increase and
entered an order granting summary judgment to Host.
Final
judgment, awarding Host $60,000 plus interest, was entered on
June 8, 2001.
This appeal followed.
First, IGS contends that the trial court erred by
denying its motion to dismiss based upon the contract’s forum
selection clause, which provided:
This contract shall be governed by the laws
of Maryland and VENUE for any legal action
sought must be a competent Maryland court.
It is therefore necessary to determine whether Kentucky or
Maryland law should be used in interpreting the forum clause.
Having reviewed Prezocki v. Bullock Garages Inc., Ky., 938 S.W.2d
888 (1997), we conclude that Kentucky law should be used at any
stage of the proceedings in which the validity and enforceability
of the forum selection clause is at issue.
In Prezocki, the plaintiff filed a complaint against
Bullock Garages in Oldham County, Kentucky, alleging breach of
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contract, negligence, and breach of state and local building
codes and ordinances.
Bullock Garages subsequently filed a
motion to dismiss, asserting that any lawsuit was required to be
filed in Illinois pursuant to the contract’s forum selection
clause, which stated as follows:
ILLINOIS LAW TO GOVERN
This contract shall be governed by the laws
of the State of Illinois, both as to
interpretation and performance. The place of
this contract, its situs and forum, shall at
all times be the State of Illinois. All
matters relating to the validity,
construction, interpretation and enforcement
of this contract shall be determined in the
appropriate courts in the State of Illinois.
(Emphasis added.)
938 S.W.2d at 888.
The Kentucky Supreme Court ultimately
remanded the matter to the trial court for additional factual
determinations in accordance with Prudential Resources Corp. v.
Plunkett, Ky. App., 583 S.W.2d 97 (1979).
The supreme court
indicated that the forum selection clause’s enforceability should
be determined in light of the adoption in Prudential of the
Restatement (Second) of Conflict of Laws § 80 (1971), which
states:
The parties' agreement as to the place of the
action cannot oust a state of judicial
jurisdiction but such an agreement will be
given effect unless it is unfair or
unreasonable.
Further, the Prezocki court noted that Prudential identified
several factors which should be considered in determining whether
a forum selection clause was unreasonable, including “the
inconvenience created by holding the trial in the specified
forum; the disparity of bargaining power between the two parties;
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and whether the state in which the incident occurred has a
minimal interest in the lawsuit.”
Prudential, 583 S.W.2d at 99-100).
938 S.W.2d at 889 (citing
See James T. Gilbert, Choice
of Forum Clauses in International and Interstate Contracts, 65
Ky.L.J. 1, 32-42 (1976).
819 (E.D. Ky. 1983).
See also Horning v. Sycom, 556 F. Supp.
Where the parties have contractually
selected a forum, it is incumbent upon the resisting party to
establish that the choice was unreasonable, unfair or unjust. M/S
Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32
L.Ed.2d 513, 520 (1972).
Here, consistent with its duty to do so, the trial
court analyzed the enforceability of the forum selection clause
in light of Prudential, and found that enforcement of the clause
would be unfair or unreasonable.
In doing so, the court
determined that Maryland would be a seriously inconvenient forum,
and that Kentucky had more than a minimal interest in the action.
Contrary to appellant’s assertions, the trial court made both
factual findings and legal conclusions, which are supported by
the record, in reaching its choice of forum determination.
In
our view, the trial court’s decision not to enforce the forum
selection clause clearly did not amount to an abuse of its
discretion.
As such, it may not be disturbed.
Next, IGS contends that the trial court improperly
granted summary judgment as to whether Host gave proper and
timely notice of its decision to cancel the contract.
disagree.
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We
The appellate standard of review of a summary judgment
is whether the trial court correctly found that there was “no
genuine issue as to any material fact and that the moving party
is entitled to judgment as a matter of law.”
CR 56.03.
Further,
"[t]he record must be viewed in a light most favorable to the
party opposing the motion for summary judgment and all doubts are
to be resolved in his favor."
Steelvest, Inc. v. Scansteel
Service Center, Inc., Ky., 807 S.W.2d 476, 480 (1991).
Summary
judgment should only be used "when, as a matter of law, it
appears that it would be impossible for the respondent to produce
evidence at the trial warranting a judgment in his favor and
against the movant." Id. at 483 (citing Paintsville Hospital Co.
v. Rose, Ky., 683 S.W.2d 255 (1985)); Turner v. Pendennis Club,
Ky. App., 19 S.W.3d 117, 119 (2000).
The contract between IGS and Host provided as follows:
PRICE ADJUSTMENT:
It is agreed between the parties that
the price or terms applying to the sale of
the equipment herein may, by written notice,
be revised by the Seller at any time prior
to, but no later than, 10 days after the date
of shipment of the equipment. On receipt of
such notice, Buyer shall give to Seller a
notice in writing accepting the said new
price or canceling the contract, within ten
(10) days after the date of notice of
revision of price terms.
IGS communicated with Host in writing on September 211 and
October 1, 1998, concerning the price of the printing press.
While the parties apparently also had verbal communications
1
Although Host contends that it never received the September
21 fax, for summary judgment purposes we assume that it did.
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between those dates, such communications are irrelevant here
since the contract required any price increase notification to be
in writing.
Host then notified IGS on October 7 that it was
canceling the contract.
Hence, whether Host is entitled to
summary judgment depends upon whether there is any genuine issue
of material fact as to whether the September 21 communication
from IGS notified Host that there would be a price increase.
The record shows that the September 21 communication
included Litviak’s fax transmittal sheet to Wells, plus a copy of
a fax from Vouvello to Moore.
Litviak’s fax stated:
I received this fax this afternoon. I tried
to contact Jeff Moore who is in route to
England today. I must admit that I have been
out of the loop since I was away. I had
hoped to have reached Jeff this afternoon to
tell me how to proceed, but he has not
responded. That is why I am forwarding you
this fax.
The enclosed fax indicates the price has
increased and it will be shipping in three
weeks. Please let me know how you want me to
proceed.
Vouvello’s fax in turn advised Moore that IGS’s cost of
purchasing the printing press was increasing by 50,000 pounds
sterling, or approximately $82,500 depending upon the exchange
rate.
The message also stated, “[p]lease urgently advise whether
[Host Communications] is able to absorb this price increase to
enable us to finalis [sic] this press or not.”
Viewing the September 21 communication in the light
most favorable to IGS and resolving all doubts in its favor, we
conclude that the communication did not inform Host that IGS was
giving notice of an increase in the purchase price of the press.
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Indeed, in the transmittal sheet Litviak stated that he had been
“out of the loop” on the printing press sale, and that he was
sending the Vouvello fax to Mike Wells of Host only because he
had been unable to reach Jeff Moore.
Further, while the
communication informed Host that White Horse was increasing the
cost of the press to IGS, it did not inform Host that any of the
increase would be passed through to it, with the result that it
did not satisfy the contract’s requirement that IGS give Host
written notice of any “new price.”
Hence, the September 21
communication did not trigger Host’s obligation to notify IGS of
its rejection of a price increase, and Host’s October 7 rejection
was timely as it was given within the ten-day cancellation period
from the October 1 communication.
Thus, we agree with the trial
court’s determination that Host was entitled to summary judgment.
For the foregoing reasons, the judgment of the Fayette
Circuit Court is affirmed.
JOHNSON, J., CONCURS.
SCHRODER, J., DISSENTS AND FILES SEPARATE OPINION.
SCHRODER, JUDGE, DISSENTING.
The trial court applied
the four Prudential factors, beginning with whether the clause
was freely negotiated.
The record discloses that Host
Communications is a large and sophisticated sports marketing
company which, among other things, publishes sports brochures and
programs for colleges and universities throughout the United
States.
The trial court found that Host Communications was on
equal footing with International Graphic in negotiating the
contract (both large companies) and I find no abuse of discretion
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in finding a freely negotiated provision of the contract.
Unless
the trial court’s findings were clearly erroneous, we cannot find
the trial court abused its discretion and we must affirm the
finding of fact.
National Collegiate Athletic Ass’n. v. Lasege,
Ky., 53 S.W.3d 77 (2001).
The trial court next considered whether the specified
forum was a seriously inconvenient place for trial.
The trial
court concluded:
Although IGS will be inconvenienced slightly
by the trial in Kentucky, the true
inconvenience would fall on Host if it were
in Maryland. The nature of this action is
rescissional and therefore almost all of the
witnesses will be in Kentucky where Host
alleges they rescinded the contract. There
will also be the question of whether Host
received the change in the price from IGS and
that question will be answered by witnesses
in Kentucky. Furthermore, Host does not do
business in Maryland, but IGS has chosen to
do business in Kentucky.
I do not disagree with the trial court’s finding that
Host Communications will be inconvenienced if the case is
litigated in Maryland.
However, I believe the mere finding of
inconvenience does not meet the requisite legal standard.
International Graphic would be equally inconvenienced if the
litigation is held in Kentucky, and Host Communications has at
least equal legal and financial resources to litigate in another
forum.
M/S Bremen, 407 U.S. 1, 92 S. Ct. 1907, 32 L. E. 2d 513,
articulated the standard:
it should be incumbent on the party seeking
to escape his contract to show that trial in
the contractual forum will be so gravely
difficult and inconvenient that he will for
all practical purposes be deprived of his day
in court. Absent that, there is no basis for
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concluding that it would be unfair, unjust,
or unreasonable to hold that party to his
bargain.
Id. 407 U.S. at 18, 92 S. Ct. at 1917, 32 L. Ed. 2d at 525.
Kentucky adopted this standard in Fite & Warmath Construction Co.
v. MYS Corp., Ky., 559 S.W.2d 729 (1977).
Where the issue is a
question of law, the reviewing court decides de novo.
Kraft, Ky. App., 916 S.W.2d 779 (1996).
met this factor.
Scifres v.
I do not believe Host
See Prudential, 583 S.W.2d at 99.
The third factor in Prudential is whether enforcement
would contravene a strong public policy of the forum in which
suit is brought.
Prudential, 583 S.W.2d 97, and Prezocki, 938
S.W.2d 888, approve forum selection clauses.
The trial court
found the facts of this case differed from Horning, 556 F. Supp.
819, wherein a large corporation was taking advantage of a small
business man.
Here, the trial court concluded both companies
were sophisticated companies that involved no public policy
considerations or conflicts in laws.
by the record.
This finding is supported
Lasege, 53 S.W.3d 77.
The last factor in Prudential requires that the trial
court consider whether Kentucky has more than a minimal interest
in the lawsuit.
This lawsuit concerns the purchase by a Kentucky
corporation from a Maryland corporation of a printing press
shipped from England.
The collateral for the contract will
remain in Kentucky and although IGS is based in Maryland, it did
business in Kentucky while Host Communications has no other
connections with Maryland.
The trial court found that Kentucky
has more significant contacts with this action than Maryland.
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Appellants do not really argue that Kentucky does not have more
than a minimal interest, but rather that Maryland has a valid
interest too.
Under Prudential, this is just one factor to
consider and under Lasege, 53 S.W.3d 77, I cannot say the finding
was clearly erroneous.
Finally, the trial court found the forum selection
clause itself was ambiguous because it stated “venue should be in
a competent Maryland court, . . .”
(Emphasis added.)
However,
this statement contradicts the court’s finding on page two of its
opinion that states the clause in issue is as follows: “and VENUE
for any legal action sought must be a competent Maryland court.”
(Emphasis added.)
There is no ambiguity in the word “must” even
according to the trial court.
I am persuaded that the trial court erred by not
enforcing the forum selection clause of the contract.
I would
reverse the judgment of the Fayette Circuit Court and remand for
an order of dismissal.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Albert F. Grasch, Jr.
Jason V. Reed
Lexington, KY
Barbara B. Edelman
Mindy G. Barfield
Lexington, KY
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