Dixieben Co. v. Falkenburg

737 F. Supp. 1542, 1990 WL 71224
CourtDistrict Court, N.D. Alabama
DecidedApril 19, 1990
DocketNo. CV-89-N-0780-S
StatusPublished
Cited by3 cases

This text of 737 F. Supp. 1542 (Dixieben Co. v. Falkenburg) is published on Counsel Stack Legal Research, covering District Court, N.D. Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dixieben Co. v. Falkenburg, 737 F. Supp. 1542, 1990 WL 71224 (N.D. Ala. 1990).

Opinion

MEMORANDUM OF OPINION

EDWIN L. NELSON, District Judge.

This is a civil action in which the plaintiff seeks compensatory damages under certain agreements allegedly entered into between these parties and others. Jurisdiction is founded upon diversity of citizenship among the parties. 28 U.S.C. § 1332. The action is presently before the court on cross motions for summary judgment. Both motions are now ripe for decision.

I. The Background of the Motions

The principal players are: (1) Benetton S.p.A., an Italian corporation, and Benetton Manufacturing Corporation, a Delaware corporation, each engaged in the business of manufacturing and selling clothing (Benetton); (2) Dixieben Company, a Louisiana corporation contracted to Benetton to locate retailers to operate Benetton clothing stores in the states of Alabama, Mississippi and Louisiana (Dixieben); (3) Al-Ben, Inc., an Alabama corporation which contracted with Dixieben to operate Benetton clothing stores in Birmingham, Huntsville and Tuscaloosa, Alabama (Al-Ben); and (4) the defendants here, Frank and Karle Falken-burg, owners of all the stock of Al-Ben (the Falkenburgs).

[1544]*1544On June 1, 1984 Benetton S.p.A and Dix-ieben entered into a contract through which Dixieben agreed to arrange for retail store operators (“Clients”) to sell Benetton products exclusive of the products of other manufacturers. For its services Dixieben was to receive a commission of seven per cent of Benetton’s net sales to Dixieben’s clients in its three-state area. In that contract Dixieben agreed to guarantee the accounts of its clients.1 The contract specifically provided that it was to be governed by Italian law. From the fall of 1984 until the summer of 1988 Al-Ben operated several retail Benetton stores in Alabama, but by the middle of 1987 it had fallen far in arrears on payments for merchandise which it had received from Benetton and other “Suppliers.”2 On July 1, 1987, Al-Ben agreed to indemnify Dixieben against any losses it might incur under its agreement with Benetton [the “Al-Ben Indemnification”]. Contemporaneously with that agreement, the Falkenburgs each signed separate agreements by which they guaranteed payment of Al-Ben’s obligations to Dixieben arising as a result of the Al-Ben Indemnification, and all other “liabilities” of Al-Ben to Dixieben [the “Falkenburg Guaranties”].3 The Al-Ben Indemnification, the Falkenburg guaranties and the Falkenburg pledges were all entered into in Alabama but provided that they were to be governed by the law of the state of Louisiana.

Al-Ben’s financial difficulties continued, and on February 17, 1988 both Falken-burgs revoked their continuing guaranties, as they were entitled to do. Subsequently, Benetton made written demand upon Dixie-ben for payment of Al-Ben’s debts and Dixieben, in turn, made demand upon the Falkenburgs.

II. The Applicable Law

Generally, a federal court sitting in a diversity case must apply the law of the state in which it is located. Klaxon Co. v. Stentor Electrical Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). However, when a case was filed in a district court in which venue was proper, and the defendants seek and obtain a transfer to a district court in another state under 28 U.S.C. § 1404(a), the change in venue is but a “change in courtrooms, and not a change in applicable law”. Van Dusen v. Barrack, 376 U.S. 612, 639, 84 S.Ct. 805, 820, 11 L.Ed.2d 945, 962-63 (1964). The Supreme Court has rejected the notion that parties may “get a change of law as a bonus for a change of venue”. Id. This action was initially filed in the United States District Court for the Eastern District of Louisiana and was transferred to this court pursuant to 28 U.S.C. § 1404(a) on motion of the defendants for the “convenience” of the parties and witnesses. This court, therefore, is duty bound to apply the law that would have been applied by the district court for the Eastern District of Louisiana had the case remained there.

Louisiana law provides that the parties may agree to apply the law of any jurisdiction to their contracts so long as the public [1545]*1545policy of the State of Louisiana is not offended. Lirette v. Union Texas Petroleum Corp., 467 So.2d 29, 32 (La.App. 1st Cir.1985). Furthermore, one who seeks to invalidate an agreement that a contract will be governed under the law of a particular state bears the burden of proving a violation of Louisiana public policy. The courts of that state are reluctant to void such provisions as against public policy. Delhomme Industries, Inc. v. Houston Beechcraft, Inc., 669 F.2d 1049 (5th Cir.1982). “They will do so only if there is ‘an express legislative or constitutional prohibition or a clear showing that the purpose of the contract contravenes good morals or public interest’ ”. Id. [citations omitted]. There is no suggestion here that the law selection provisions of any of the contracts violate Louisiana public policy as evidenced by an express legislative or constitutional provision. Also there is nothing to suggest that any of the contracts or any provision of them is against good morals or the public interest. The court must therefore enforce the contract clauses which specify the laws of either Louisiana or Italy as controlling. Accordingly, the court finds that the Dixie-ben/Benetton contract is governed by Italian law and the Al-Ben indemnification and the Falkenburg guaranties are governed by the law of Louisiana.

III. The Motions for Summary Judgment

A. The Evidentiary Materials

It is undisputed that in June 1984 Benetton S.p.A. and Dixieben entered into a contract by which Dixieben undertook to secure store operators in Alabama who would sell at retail a line of clothing manufactured by Benetton. In return for its service Dixieben was to receive a commission of seven per cent on goods purchased by its “Clients.” Dixieben agreed that it would be responsible for the accounts of its clients.4 Among the “Clients” secured by Dixieben was Al-Ben, an Alabama corporation which operated Benetton stores in Huntsville, Birmingham, and Tuscaloosa, Alabama. On July 31, 1987, after Al-Ben had been unable to pay for merchandise sold and delivered by Benetton, Al-Ben, in consideration for Dixieben securing additional extensions of credit from Benetton and other “Suppliers,” executed and delivered to Dixieben an indemnification agreement which stated in pertinent part:

[I]n consideration of Dixieben having established credit for Al-Ben with the Suppliers for merchandise sold and delivered or to be sold and delivered in the future

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Related

Dixieben Co. v. Falkenberg
974 F.2d 1348 (Eleventh Circuit, 1992)

Cite This Page — Counsel Stack

Bluebook (online)
737 F. Supp. 1542, 1990 WL 71224, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dixieben-co-v-falkenburg-alnd-1990.