Opinion
00 Civ. 6214 (RLC)
January 18, 2001
Beth D. Jacob, Arron M. Zeisler, Brobeck, Phleger, Harrison LLP, New York, New York, for plaintiff.
Murray Rafsky, Costello, Shea Gaffney, New York, New York, for defendant.
OPINION
Defendant America's Senior Financial Services, Inc. moves to transfer this action from the Southern District of New York to the Southern District of Florida, pursuant to 28 U.S.C. § 1404 (a). Plaintiff Fennell Avenue LLC opposes this motion.
Defendant contends that the court should also "consider the forum non conveniens aspect of this lawsuit." (Defendant's Motion to Transfer Venue ¶ 30). Since less of a showing of inconvenience is needed under Section 1404(a) than for a forum non conveniens dismissal, defendant's argument will be considered under Section 1404(a) only. See Russell v. Hilton Int. of Puerto Rico, Inc., 1994 WL 38516, at *7 (S.D.N.Y. Feb. 4, 1994) (Wood, J.) (citing Norwood v. Kirkpatrick, 349 U.S. 29, 32 (1955)).
BACKGROUND
Given the scope of the instant claim, a detailed exploration of the facts is unnecessary. It is sufficient to note that plaintiff is a Cayman Islands limited liability company with its principal place of business in the Cayman Islands. Plaintiff is engaged in the business of investing private capital. Defendant is a Florida corporation with its principal place of business in Florida. Defendant is engaged in the business of originating, processing and funding mortgage loans.
In May, 1999 plaintiff entered into a series of contracts with defendant regarding the purchase of a convertible debenture. These contracts included a securities purchase agreement, a debenture agreement, and a common stock purchase warrant. Pursuant to these contracts, plaintiff invested a base amount of $2.5 million in a convertible debenture with defendant. On August 18, 2000, plaintiff filed the instant suit in the Southern District of New York pursuant to 28 U.S.C. § 1332, alleging breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, repayment of money had and received, and conversion. Defendant now moves to transfer this suit. Plaintiff opposes this motion, claiming that defendant is bound by mandatory forum selection clauses in each of the underlying contracts. Those clauses are worded identically and read as follows:
Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of New York, . . . in connection with any dispute arising under this Agreement, and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non convenions, to the bringing of any such proceeding in such jurisdiction
(Ex. A ¶ 9a; Ex. B ¶ 14; Ex. C ¶ 10.)
I.
On a Section 1404(a) motion to dismiss, a district court must weigh a number of case-specific factors such as convenience of the witnesses, systematic integrity, and fairness. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988). The Supreme Court in Stewart acknowledged that "[t]he presence of a forum-selection clause . . . will be a significant factor that figures centrally in the district court's calculus." Id. The Second Circuit has developed a strong policy of honoring forum selection clauses absent injustice or fraud. See Strategic Mktg. Commun. Inc., v. Kmart Corp., 41 F. Supp.2d 268, 270 (S.D.N.Y. 1998) (Carter, J.) (citing Bense v. Interstate Battery Sys. of Am., Inc., 683 F.2d 718, 721 (2d Cir. 1982)). In the context of a Section 1404(a) motion, the district court must determine whether the forum selection clause is valid, and whether the clause should be enforced. Id. at 271. Once a mandatory choice of forum clause is deemed valid, "the burden shifts to the [movant] to demonstrate exceptional facts explaining why he should be relieved from his contractual duty." See Weiss v. Columbia Pictures Television, Inc., 801 F. Supp. 1276, 1278 (S.D.N Y 1992) (Leisure, J.).
Defendant directs the court to the substantive venue law of Florida and New York. However, precedent is clear that in diversity cases, federal common law governs venue disputes involving forum selection clauses. See Strategic Mktg. Commun. Inc., 41 F. Supp. 2d at 271.
II.
In order for the forum selection clauses to be valid, defendant must have had notice of their existence. See American Fin. Servs. Group v. Technimar Indus., Inc., 1998 WL 684589, at *2 (S.D.N.Y. Sept. 30, 1998) (Batts, J.). Here, defendant does not deny that it had notice of the forum selection clauses. Further, the forum selection clauses figure prominently in the signed contracts appended to the complaint, and were "the product of arms-length negotiation by experienced and sophisticated businessmen." M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12 (1972).See Leasing Serv. Corp. v. Graham, 646 F. Supp. 1410, 1415 (S.D.N.Y. 1986) (Leisure, J.) ("[A] businessman acting in a commercial context, is held to have understood the consequences of his having signed [contracts], which designate New York as the appropriate forum for any action arising thereunder."). The court therefore finds the forum selection clauses valid.III.
Next, the court must inquire whether the forum selection clauses should be enforced. Defendant asserts that it will be seriously inconvenienced and prejudiced by a trial in the Southern District of New York because its thirteen material witnesses are located in Florida. The court has found that "[m]ere inconvenience and expense of traveling are not themselves adequate reasons to disturb the parties' contractual choice of forum." Strategic Mktg. Commun. Inc., 41 F. Supp. 2d at 274. Moreover, defendant has not explained why the presentation of the testimony of any of the witnesses by deposition would be inadequate. See id.
Defendant further contends that Florida was the locus of a substantial part of the events at issue. In Elite Parfums, Ltd. v. Rivera, 872 F. Supp. 1269, 1272 (S.D.N.Y. 1995) (Baer, J.), the court found that despite the fact that a contract contemplated performance in Texas, and the negotiation, signing and alleged breach of contract occurred in Texas, these factors were insufficient to warrant overriding a forum selection clause on a Section 1404(a) motion.
Here, defendant alleges that the negotiations underlying the contracts took place exclusively in Florida, consideration for the debenture arrived from outside the United States directly to Florida, and the alleged non-performance of the contracts took place in Florida. Furthermore, defendant asserts that neither party has any contacts with New York, whereas the defendant's state of incorporation and primary place of business is in Florida. Even if these allegations were true, a fact disputed by plaintiff, they would not warrant overriding the forum selection clause. Where, as here, plaintiff presents a valid forum selection clause, and asserts that substantial negotiation, drafting and money transfer occurred in and through New York, and that defendant is licensed to do business in New York, New York is a valid forum.
Defendant has therefore failed to demonstrate exceptional circumstances that would require relief from its contractual burden, and the forum selection clause, as agreed to by the parties, should control.
CONCLUSION
For the foregoing reasons, defendant's motion to transfer venue is denied.
IT IS SO ORDERED.