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National Food Group, Inc. v. Great Host International, Inc.

United States District Court, E.D. Michigan, Southern Division

July 16, 2018

NATIONAL FOOD GROUP, INC., Plaintiff,
v.
GREAT HOST INTERNATIONAL, INC. d/b/a ANDALUCIA NUTS, Defendant.

          OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS, TRANSFER, OR STAY (ECF NO. 16)

          LINDA V. PARKER U.S. DISTRICT JUDGE

         Plaintiff National Food Group, Inc. (“NFG”) initiated this declaratory judgment action against Defendant Great Host International, Inc. d/b/a Andalucia Nuts (“Andalucia”) on November 13, 2017. (ECF No. 1.) NFG requests this Court to declare the alleged Sales Contract between it and Andalucia invalid. Presently before the Court is Andalucia's motion to dismiss pursuant to 28 U.S.C. § 2201, or to transfer pursuant to 28 U.S.C. § 1404(a), filed March 22, 2018. (ECF No. 16.) The motion has been fully briefed. Finding the legal arguments sufficiently presented in the parties' brief, the Court is dispensing with oral arguments pursuant to L.R. 7.1(f)(2). For the reasons that follow, the Court grants Andalucia's motion.

         I. Factual and Procedural History

         NFG is a wholesale food distributor with its principal place of business in Novi, Michigan. (ECF No. 1 at Pg ID 2.) Andalucia is a producer of nut-based foods with its principal place of business in Houston, Texas. (Id.) While bidding on a contract to supply peanut butter to the Texas Department of Corrections (“TDOC”), NFG began discussions with Andalucia to supply peanut butter. (Id. at Pg ID 2.) According to NFG, the two discussed price, quantity, delivery, and the United States Department of Agriculture (“USDA”) stamping and grading. (Id.) After NFG notified Andalucia that TDOC accepted NFG's bid, Andalucia requested NFG to complete a credit application, which a NFG officer or representative, Scott Kamen, completed and executed on July 27, 2017. (ECF No. 16-6.) The credit application contained a forum selection clause that required all disputes to be filed in a Texas federal or state court. (Id.) Specifically, the clause stated: “Any suit or legal proceeding relating to this Application or the matters contemplated by this Agreement shall be brought in the state or federal courts sitting in Houston, Texas, and the Applicant hereby waives any claims or defense that such forum is not convenient or proper.” (Id.)

         On August 31, 2017, NFG sent Andalucia a purchase order for five orders of 1, 440 cases of peanut butter (“August 31 Purchase Order”). (ECF No. 19-2.) On September 13, 2017, NFG sent Andalucia an additional purchase order for two orders of peanut butter, one case of 464 and another case of 1, 440 (“September 13 Purchase Order”). (ECF No. 19-5.) Each purchase order contained the following: “All purchases of goods and services by National Food Group, Inc., are subject to the Terms and Conditions of Purchase located at http://www.nationalfoodgroup.com/terms-of-purchase.” (ECF Nos. 19-2 & 19-5.) Section 7 of the Terms and Conditions of Purchase stated:

Purchaser may, at anytime, make changes to the Order, and Seller shall accommodate such request, provided Purchaser shall pay any additional reasonable costs of Seller by reason of any change. Any claim by Seller for a change pursuant to this Section as a result of the Purchaser's change must be asserted in writing within ten (10) days from the date of receipt by Seller of Purchaser's notification of any change. Purchaser will have the right to verify all claims hereunder by auditing relevant records of Seller. If Purchaser does not agree to pay such additional charges, the Purchaser may, at its option, proceed with the Purchase Order in the form previously provided to the Seller or cancel the Purchase Order without further liability to the Seller, and shall notify the Seller accordingly. If Purchaser agrees to additional charges as provided in this Section, Seller agrees to proceed with the Purchase Order as changed under this Section 7.

(ECF No. 16-22 at Pg ID 229-30; ECF No. 19-3 at Pg ID 281.) Finally, the Terms and Conditions of Purchase provided that “[t]he Agreement, these Terms and Conditions and the relationship between the parties shall be governed by the law of the State of Michigan, USA, without giving effect to any choice or conflict of law provision or rule (whether of the State of Michigan or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Michigan shall be the exclusive jurisdiction for all disputes. The Oakland County Circuit Court or the Federal District Court for the Eastern District of Michigan is a convenient venue for both parties.” (ECF No. 16-22 at Pg ID 235.)

         On September 5, 2017, Andalucia emailed NFG a “Sales Contract” that contained Andalucia's terms for supplying peanut butter. (ECF No. 1 at Pg ID 3.) The Sales Contract was dated September 5, 2017 and provided that Andalucia would provide NFG 1, 900, 050 pounds of peanut butter-creamy-USDA stamped between September 2017 and August 2018. (ECF No. 16-5.) It estimated the price of the peanut butter to be $1, 672, 044.00. (Id.) The Sales Contract also contained the following remarks: “All chargers outside (exporter's country) on buyer's account”; “minimum order/pull 1440 cases”; “load pulls: 4-8 per month”; “buyer responsible for 3 month supply of packaging material”; “USDA inspection/stamp fee is to Buyer's account”; “itemized receipt for the USDA inspection to be provided with invoice”; and “delays in pick ups and pulls may result in upcharge of 3-5 cents/lb monthly.” It also included a note that stated, “[q]uantity can be 10%.” (Id.)

         On September 11, 2017, NFG representative, Christina Morianti, executed the Sales Contract and indicated that the quantity note needed clarification. (ECF No. 16-11 at Pg ID 130-33.) NFG alleges that Andalucia never provided clarification for the intended meaning of “quantity can be 10%, ” and, therefore, the parties never reached a meeting of the minds. (ECF No. 1 at Pg ID 3.) However, in a September 11, 2017 email, Andalucia responded to NFG's concern and expressed that the language was standard in all contracts and not a concern for NFG. (ECF No. 19-5.) In the same email thread, Ms. Morianti responded, “okay.” (Id.) After the email exchange, between September 11, 2017 and September 18, 2017, Ms. Morianti emailed Andalucia to check on the status of the previous orders. (ECF No. 16-6 at Pg ID 298.)

         On September 19, 2017, TDOC canceled its contract with NFG. (ECF No. 1 at Pg ID 4.) NFG immediately notified Andalucia, and on September 29, 2017, NFG informed Andalucia that it was canceling the August 31 and September 13 Purchase Orders. (Id.) NFG based its cancellation on the Terms and Conditions of Purchase referenced in the purchase orders. (Id.; ECF No. 19-3 at Pg ID 281.) From there, the parties began settlement negotiations for the peanut butter Andalucia produced prior to the cancellation. (ECF No. 16-4.)

         On October 6, 2017, NFG sent Andalucia a repudiation letter, indicating there was never an agreement to purchase peanut butter between the parties because Andalucia never signed the agreement. (ECF No. 16-7.) On October 20, 2017, Andalucia sent NFG a demand letter, stating that the repudiation letter constituted grounds for insecurity under the Texas Business and Commerce Code. (ECF No. 16-8.) The demand letter also requested adequate assurance of performance under the Sales Contract by October 27, 2017. (Id.) On October 30, 2017, NFG responded to Andalucia's demand letter and reemphasized there was no agreement between the parties, as well as informed Andalucia that it was prepared to defend its position in the Eastern District of Michigan, pursuant to the Terms and Conditions of Purchase. (ECF No. 16-18 at Pg ID 182-84.) From November 1, 2017 through November 10, 2017, the parties continued to discuss settlement. (ECF Nos. 16-15 at Pg ID 153-54; ECF No. 16-17 at Pg ID 180.)

         NFG contends that despite there being no agreement between the parties, Andalucia claims that NFG is liable under the Sales Contract. As such, on November 13, 2017, NFG initiated this declaratory judgment action against Andalucia in this district. (ECF No. 1.) Thereafter, on November 20, 2017, Andalucia initiated its own lawsuit in the District Court of Harris County, Texas. (ECF No. 16-3.) Andalucia's four-count complaint was for (1) suit on account under T.R.C.P. 185, (2) statutory repudiation of contract, (3) common law breach of contract, and (4) promissory estoppel. (Id.) The allegations arise out of the same transaction that is before this Court. On December 27, 2017, NFG removed the Texas state case to the Southern District of Texas, based on diversity jurisdiction. (Great Host Int'l Inc., d/b/a Andalucia Nuts v. National Food Group, Inc., No. 18-cv-11163, ECF No. 1 at Pg ID 1-5.) In the Texas case, NFG filed a motion to dismiss, or to transfer venue to the Eastern District of Michigan on January 2, 2018. (ECF No. 16-19.) NFG also sought transfer and dismissal based on the first-to-file rule. (Id.) On April 11, 2018, the Southern District of Texas granted NFG's motion and, on April 12, 2018, transferred the case to this court. (Great Host Int'l Inc., d/b/a Andalucia Nuts v. National Food Group, Inc., No. 18-cv-11163, ECF Nos. 1 & 2.) However, the Texas court reserved the issue of proper venue for this Court, stating, “[w]hether the circumstances alleged by [Andalucia] should prevent consolidation or merit a return to this Court are proper matters for the Michigan court to decide.” (Great Host Int'l Inc., d/b/a Andalucia Nuts v. National Food Group, Inc., No. 18-cv-11163, ECF No. 2 at Pg ID 52.)

         Based on the forum selection clause in the credit application, on March 22, 2018, Andalucia filed the instant motion to dismiss or transfer the case. (ECF No. 16.) NFG filed its response on April 9, 2018, and Andalucia filed a reply on April 17, 2018. (ECF Nos. 19 & 20.) NFG takes the position that venue is proper pursuant to the Terms and Conditions of Purchase in the purchase orders.

         II. Applicable ...


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