Tele-Save Merchandising Company v. Consumers Distributing Company, Ltd.

814 F.2d 1120, 1987 U.S. App. LEXIS 4087
CourtCourt of Appeals for the Sixth Circuit
DecidedApril 1, 1987
Docket86-3115
StatusPublished
Cited by80 cases

This text of 814 F.2d 1120 (Tele-Save Merchandising Company v. Consumers Distributing Company, Ltd.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tele-Save Merchandising Company v. Consumers Distributing Company, Ltd., 814 F.2d 1120, 1987 U.S. App. LEXIS 4087 (6th Cir. 1987).

Opinions

BOYCE F. MARTIN, JR., Circuit Judge.

Plaintiff Tele-Save Merchandising Company appeals the grant of defendant’s motion for summary judgment in this diversity action brought under the provisions of 28 U.S.C. § 1332(a). Tele-Save’s original complaint contained four allegations against Consumers Distributing Company, Ltd.; count one, alleging violations of the Ohio Business Opportunity Plans Act, is the sole subject of this appeal. For the reasons set forth below we affirm the decision of the district court.

Tele-Save was an Ohio corporation with its principal place of business in Columbus, Ohio. Consumers is a Canadian corporation with an office in New Jersey. In early 1981, the parties began negotiation of an agreement whereby Consumers, a large chain of catalog showroom operators, would supply products and services to TeleSave. Tele-Save would in turn operate as a catalog retail showroom under the direction of Consumers. An agreement was reached in late July 1981. Paragraph 17 of the agreement reads:

This Agreement shall be governed by, and construed in accordance with, the laws of the State of New Jersey.

Tele-Save opened its store in late September 1981 offering for sale general merchandise received from Consumers and from other suppliers who advertised in the Consumers catalog. In January 1982, Consumers notified Tele-Save that it was cancelling its catalog program. Tele-Save asked Consumers to reimburse the cost of merchandise purchased through the agreement and to accept its return. Consumers’s refusal prompted this lawsuit.

Count one of Tele-Save’s complaint, and the only issue presented on this appeal, charged Consumers with violating Ohio’s Business Opportunity Plans Act, Ohio Revised Code Chapter 1334: The Act, which took effect in October 1979, regulates the sale of business opportunity plans and provides certain rights and remedies for Ohio purchasers who are defrauded by dishonest or negligent sellers. Specifically, TeleSave alleged Consumers violated section [1122]*11221334.02 by failing to provide a written disclosure statement in connection with the transaction, section 1334.03 by failing to make certain disclosures regarding potential sales, income, and profits, by making false and misleading statements, and by accepting a down payment in excess of twenty percent of the initial payment, and section 1334.06 for failing to give the required notice of cancellation and failing to follow specific procedures with regard to cancellation.

Consumers filed a motion for summary judgment arguing that the Ohio Act was inapplicable to its agreement with TeleSave because paragraph 17 of the agreement stipulated that the contract would be governed by New Jersey law. Tele-Save opposed the motion, arguing that the contractual choice-of-law provision was ineffective because application of New Jersey law violated a fundamental public policy of Ohio and because Ohio had a materially greater interest in the resolution of the dispute than New Jersey. The district court granted the defendant’s motion and never reached the merits of the claim of violations of the Act.

Federal courts sitting in diversity must apply the choice-of-law principles of the forum. Klaxon Co. v. Stentor Electric Manufacturing Company, 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Accordingly, Ohio choice-of-law principles are applicable in this case.

The Ohio Supreme Court in considering the deference to give contractual choice-of-law provisions has adopted the guidelines of the Restatement (Second) of Conflict of Laws, § 187(2) (1971):

The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either
(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or
(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

Schulke Radio Productions, Ltd. v. Midwestern Broadcasting Company, 6 Ohio St.3d 436, 438-39, 453 N.E.2d 683 (1983).

Ohio’s receptivity to contractual choice-of-law was further discussed in the recent decision of Jarvis v. Ashland Oil, Inc., 17 Ohio St.3d 189, 478 N.E.2d 786 (1985). In Jarvis, the Ohio Supreme Court held that “where the parties to a contract have made an effective choice of the forum law to be applied, the Restatement of the Law 2d, Conflict of Laws (1971) 561, Section 187(2), will not be applied to contravene the choice of the parties as to the applicable law.” Id. 17 Ohio St.3d at 192, 478 N.E.2d 786. The court then added a narrow limitation to this rule: “[W]here the law of the chosen state sought to be applied is concededly repugnant to and in violation of the public policy of [Ohio], the law of Ohio will only be applied when it can be shown that [Ohio] has a materially greater interest than the chosen state in the determination of the particular issue.” Id.

These recent comments by the Ohio Supreme Court indicate that Ohio choice-of-law principles strongly favor upholding the chosen law of the contracting parties. We see no reason to disturb the parties’ choice absent the application of another state’s law that would be concededly repugnant to Ohio public policy.

Tele-Save contends that the contractual choice-of-law provision should be ignored in this case and that Ohio law should be applied because of a non-waiver provision found in the Ohio Business Opportunity Plans Act. Section 1334.15 of the Act states:

The remedies of sections 1334.01 to 1334.15 of the Revised Code are in addition to remedies otherwise available for the same conduct under federal, state, or [1123]*1123local law. Any waiver by a purchaser of sections 1334.01 to 1334.15 of the Revised Code is contrary to public policy and is void and unenforceable.

Tele-Save argues that because the Ohio legislature chose to adopt the Act, including section 1334.15, we must infer that the application of another state’s law would be contrary to a fundamental public policy of Ohio and that Ohio has a materially greater interest in the resolution of the conflict. We are unwilling to make these assumptions.

In order to find the first prong satisfied, we would have to find both that the Ohio statute represents fundamental state policy and that the parties’ chosen law would be contrary to this fundamental policy.

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814 F.2d 1120, 1987 U.S. App. LEXIS 4087, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tele-save-merchandising-company-v-consumers-distributing-company-ltd-ca6-1987.