We’ve previously written about how judges in the Westchester Commercial Division will dismiss cases in which the contract at issue contains a forum selection clause requiring the parties to resolve their dispute elsewhere. On September 10, 2019, Justice Linda Jamieson issued another decision doing just that.
Satin v. 1-800 NY Bulbs Limited, Index No. 63512/2018, concerned the sale of defendant 1-800 NY Bulbs Limited (“Bulbs”). A Stock Purchase Agreement (“SPA”), among defendant Tarsier Ltd., plaintiff Satin, and non-party Lawrence Merson, was one of several agreements relevant to the parties’ relationship. The SPA referenced and attached a Management Agreement between Bulbs and plaintiff NY Bulbs Management LLC. The Management Agreement was signed on the same date as the SPA and referenced the SPA on the first page.
The SPA contained a forum selection clause, which stated that: “EACH PARTY HEREBY CONSENTS TO JURISDICTION AND VENUE EXCLUSIVELY IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NASSAU FOR RESOLUTION OF ANY DISPUTE ARISING FROM, BASED ON, OR RELATED TO THIS AGREEMENT AND/OR ANY OTHER BUSINESS RELATIONSHIP BETWEEN THE PARTIES.” Justice Jamieson noted that this was one of only two provisions in the SPA written in all capital letters.
There was no dispute that the SPA was “the foundational agreement among the parties, even though not all of the parties are parties thereto.” Justice Jamieson also concluded that based on a review of the complaint, “the [SPA] is the critical document in this dispute.” In addition, “[t]he fact that certain of the parties did not sign the [SPA] [was] not relevant in this matter, because ‘a non-signatory may invoke a forum selection clause if the relationship between the nonparty and the signatory is sufficiently close so that the nonparty’s enforcement of the forum selection clause is foreseeable by virtue of the relationship between the signatory and the party sought to be bound’” (quoting Freeford Ltd. v. Pendleton, 53 A.D.3d 32, 40, 857 N.Y.S.2d 62, 68 (1st Dep’t 2008)).
Against this backdrop, the defendants moved to dismiss based on the forum selection clause. The Court held that “a ‘contractual forum selection clause is prima facie valid and enforceable unless it is shown by the challenging party to be unreasonable, unjust, in contravention of public policy, invalid due to fraud or overreaching, or it is shown that a trial in the selected forum would be so gravely difficult that the challenging party would, for all practical purposes, be deprived of its day in court. Absent a strong showing that it should be set aside, a forum selection agreement will control’” (citations omitted).
As the plaintiffs failed to make such a showing, the Court dismissed the case without prejudice and directed the Clerk of the Court to transfer the file to Nassau County.
Takeaway: If you file in Westchester and the governing agreement requires the parties to resolve their dispute elsewhere, you’re getting the boot.
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