Power Paragon, Inc. v. Precision Technology, Inc.

United States District Court for the Eastern District of Virginia · Contracts

ContractsVenueForum Selection ClausesUCC Battle of the Formsimproper venueRule 12(b)(3)§ 1391(a)(1)§ 1391(a)(2)

Facts

L-3, plaintiff's parent company in California, and defendant in Roanoke, Virginia negotiated a contract for a motor controller to be installed on a U.S. Navy ship in Newport News, Virginia, along with related field support services. Defendant's March 10, 2006 purchase order set the price and included terms stating that Virginia law governed disputes and that venue would be the applicable state or federal court in Roanoke, Virginia; it also referenced plaintiff's prior proposals and correspondence. Plaintiff manufactured, tested, and delivered the product outside the Eastern District, later performed field support, and alleged that defendant failed to pay the remaining product milestone payments and field support invoices. By the time of suit, the product had been shipped to the Newport News shipyard and remained in the Eastern District.

Issue

Whether venue in the Eastern District of Virginia was proper under 28 U.S.C. § 1391 despite defendant's Rule 12(b)(3) motion, and if so, whether the contract's forum selection clause nevertheless required the case to proceed in Roanoke. A related question was whether defendant's purchase order terms, including the venue clause, became part of the contract.

Rule

Under 28 U.S.C. § 1391(a), venue is proper where a substantial part of the events or omissions giving rise to the claim occurred, where a substantial part of the property that is the subject of the action is situated, or where a corporate defendant resides, meaning any district in which it is subject to personal jurisdiction. Under Virginia's UCC, if a prior offer has expired, a later purchase order may operate as the operative offer, which may be accepted by prompt manufacture, shipment, or promise to ship; the purchase order's terms then define the contract. A forum selection clause is prima facie valid and enforceable unless the resisting party shows fraud or overreaching, grave difficulty and inconvenience depriving it of its day in court, or contravention of strong public policy, and enforcement should be by transfer rather than dismissal.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

Crescent Motion Systems, a California manufacturer, built and tested a custom turbine controller in Nevada, then shipped it to a shipyard in Norfolk, Virginia, where it now sits awaiting installation. Blue Harbor Fabrication, a Virginia buyer, allegedly failed to pay the last four progress payments, and Crescent sued in federal court in Norfolk.

Which is the strongest basis for venue in the Norfolk federal court under the majority's reasoning?

Explanation. The majority distinguished the events prong from the property prong of § 1391(a)(2). For a nonpayment claim, the substantial events are the seller's performance entitling it to payment, such as procurement, fabrication, testing, and delivery. But venue may still be proper under the separate property branch when a substantial part of the property that is the subject of the action is situated in the district. The statute does not require the property to have been there before suit. (Derived from Power Paragon, Inc. v. Precision Technology, Inc. (n.d.).)