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General Electric Capital Corporation v. Mehta

United States District Court, S.D. New York
Apr 3, 2002
01 Civ. 11259 (SAS) (S.D.N.Y. Apr. 3, 2002)

Summary

holding forum selection clause enforceable where the contract was "only two pages in length, and the forum selection clause [was] clear and set off in a separate [titled] paragraph"

Summary of this case from HSM Holdings v. Mantu I.M. Mobile Ltd.

Opinion

01 Civ. 11259 (SAS)

April 3, 2002

Michael Tsang, Esq., James M. Jorissen, Esq., Oppenheimer Wolf Donnelly LLP, New York, NY, for Plaintiff.

Bharat Mehta, Minisha Mehta, Austin, TX, for Defendants, (Pro Se).


OPINION AND ORDER


General Electric Capital Corporation ("GE Capital") brings this suit against Bharat and Minisha Mehta for breaching a guaranty agreement. The Mehtas, proceeding pro se, now move to dismiss under Federal Rules of Civil Procedure 12(b)(2) and 12(b)(3). The Mehtas argue that (1) this Court lacks personal jurisdiction over them because they do not have "minimum contacts" with New York, and (2) New York is an improper venue because they live in Texas. The motion is denied for the reason that the Mehtas signed a contract consenting to this Court's jurisdiction and waiving objections to venue.

Subject matter jurisdiction is proper pursuant to 28 U.S.C. § 1332 (a)(1) because there is complete diversity of citizenship and the amount in controversy exceeds $75,000.

I. BACKGROUND

A. Guaranty of Equipment Lease, Forum Selection Clause

In November 2000, an equipment lease ("Equipment Lease") was executed by Media Dimensions, Inc. ("Media Dimensions") and Wells Fargo Equipment Finance, Inc. ("Wells Fargo"), neither of which is a party to this lawsuit. See 11/30/00 Equipment Lease, Ex. A to Plaintiff's Complaint ("Compl."). Two days prior, in order to persuade Wells Fargo to enter into the Equipment Lease with Media Dimensions, the Mehtas executed and delivered to Wells Fargo separate Guaranty Agreements (collectively, the "Guaranty Agreement") ensuring Media Dimensions' performance under the lease. See 11/28/00 Guaranty Agreement Executed and Signed by Bharat Mehta, Ex. B to Compl. ("Guar. Agmt."); 11/28/00 Guaranty Agreement Executed and Signed by Minisha Mehta ("Guar. Agmt."), Ex. C to Compl. Each defendant thus agreed to be held personally liable to Wells Fargo. See Guar. Agmt.; Compl. ¶ 8.

The contracts are identical, and therefore are treated in this opinion as one Guaranty Agreement.

Bharat Mehta is President of Media Dimensions. See Plaintiff's Opposition to Defendants' Motion to Dismiss ("Pl. Opp.") at 2.

The Guaranty Agreement contains the following clause:

Consent to Jurisdiction; Waiver of Jury Trial. Guarantor hereby irrevocably consents to the jurisdiction of the courts of the State of New York and of any federal court located in such state in connection with any action or proceeding arising out of or relating to this Guaranty Agreement.

Guar. Agmt. ¶ 9. The same clause states that "Guarantor waives any objections based on venue or forum non conveniens in connection with any such action or proceeding." Id.

B. Assignment to GE Capital, Default

In December 2000, Wells Fargo assigned GE Capital its rights under the Equipment Lease and the corresponding Guaranty Agreement. See 12/29/00 Specification of Assigned Interest ("Assignment Agreement"), Ex. E to Compl. After the assignment, Media Dimensions paid rent to GE Capital under the Equipment Lease.

Actually, a company by the name of Charter Financial, Inc. assigned all of its rights and obligations to GE Capital under a master assignment agreement in 1999, and then merged with Wells Fargo prior to December 2000. See Compl. ¶¶ 11-13.

The Guaranty Agreement provides that it may be freely assigned, that the defendants' liability will not be affected by assignment, and that the agreement runs to the benefit of Wells Fargo's successors and assigns. See Compl. ¶ 10; Guar. Agmt. ¶¶ 3, 11.

At some point in 2001, Media Dimensions stopped making payments to GE Capital. See Compl. ¶ 14. In accordance with the terms of the Equipment Lease, GE Capital accelerated and declared all amounts to be immediately due, and made a demand on Media Dimensions for payment in full of this sum. See id. Since GE Capital's demand, Media Dimensions has not paid any rent under the Equipment Lease. See id. ¶ 15. In November 2001, GE Capital made a similar demand on Bharat and Minisha Mehta, as guarantors. See 11/15/01 Letter from Constantine Karides, Counsel for GE Capital to Bharat Mehta, and 11/15/01 Letter from Karides to Minisha Mehta, Ex. F to Compl.; Compl. ¶ 16. The Mehtas have not paid any amount allegedly owed under the Guaranty Agreement. See Compl. ¶ 17. GE Capital thus seeks a judgment against Bharat and Minisha Mehta, jointly and severally, for the principal sum due under the Equipment Lease, $1,879,571.22, together with other fees and costs for a total of $1,934,868.96. See id. ¶¶ 19, 23, 27.

II. DISCUSSION

A. Personal Jurisdiction

Courts are given "`procedural leeway'" in deciding Rule 12(b)(2) motions to dismiss for lack of personal jurisdiction. Dorfman v. Marriott Int'l Hotels Inc., No. 99 Civ. 10496, 2001 WL 69423, at *3 (S.D.N.Y. Jan. 29, 2001) (quoting Marine Midland Bank N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981)). A court may assume that all of the plaintiff's factual allegations are true, "notwithstanding a controverting presentation by the moving party," and resolve all doubts in plaintiff's favor. Louros v. Cyr, 175 F. Supp.2d 497, 518 (S.D.N.Y. 2001) (citation omitted) But see infra note 8 (citing a Second Circuit ruling that affects Rule 12(b)(2) standard in this case). In any event, to avoid dismissal at this stage, a plaintiff need only make a prima facie showing that jurisdiction exists. See id. (citing Kernan v. Kurz-Hastings, Inc., 175 F.3d 236, 240 (2d Cir. 1999)). Because it is appropriate to submit affidavits and evidence in support of personal jurisdiction, see Plunket v. Doyle, No. 99 Civ. 11006, 2001 WL 175252, at *3 (S.D.N.Y. Feb. 22, 2001), I have considered the Guaranty Agreement submitted by plaintiff.

The "requirement of personal jurisdiction represents an individual right" and therefore "can, like other such rights, be waived." Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 704 (1984). Thus, "parties to a contract may agree in advance to submit to the jurisdiction of a given court." Id. (quotation omitted). An express written agreement to confine litigation arising from a contract to a particular jurisdiction, is referred to as a forum selection clause.

The Supreme Court has repeatedly held forum selection clauses enforceable. See, e.g., Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 589-95 (1991); The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 8-18 (1972). The Bremen held that forum selection clauses should be upheld unless the resisting party "could clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." The Bremen, 407 U.S. at 15. See also New Moon Shipping Co. v. MAN B W Diesel AG, 121 F.3d 24, 29 (2d Cir. 1997) (stating that forum selection clauses are enforceable unless unreasonable or product of fraud); Harris v. Razei Bar Indus., Ltd., 37 F. Supp.2d 186, 189 (E.D.N.Y. 1998) (same); Stamm v. Barclay's Bank of N.Y., 960 F. Supp. 724, 729 (S.D.N.Y. 1997) (enforceable unless "clear showing" that the clause was "unreasonable or unjust"); Forschner Group v. B-Line AG, 943 F. Supp. 287, 291 (S.D.N.Y. 1996) (same). The validity of forum selection clauses in diversity cases is governed by federal law. See Jones v. Weibrecht, 901 F.2d 17, 19 (2d Cir. 1990).

Here, defendants make no allegation of fraud or coercion regarding the forum selection clause. Instead, they argue that they lack minimum contacts with New York. This argument is irrelevant where defendants have expressly consented to be sued in New York. See Guar. Agmt. ¶ 9; supra Part I. Defendants do not allege facts clearly showing that the clause is unreasonable. Indeed, the clause appears eminently reasonable even when viewed in the light most favorable to the Mehtas. Similar to Bense v. Interstate Battery Sys. of Am., Inc., 683 F.2d 718, 721 (2d Cir. 1982), where "the contract consist[ed] of two easily readable pages [and] the forum-selection clause in the contract [wa]s not in fine print or hidden in a mass of unrelated verbiage," id. at 722, the Guaranty Agreement is also only two pages in length, and the forum selection clause is clear and set off in a separate paragraph entitled "Consent to Jurisdiction." Guar. Agt. ¶ 9 (emphasis in original). It is written in plain English. Further, as in Bense, defendants may not be large corporations — but they are "not wholly unsophisticated business person[s]," either. 683 F.2d at 721. In fact, defendants do not contest plaintiff's description of Bharat Mehta, president of Media Dimensions, as a sophisticated businessman, see Pl. Opp. at 2.

A party challenging a forum selection clause on the basis of fraudulent inducement must allege facts with respect to the specific clause, not the contract as a whole. See Scherk v. Alberto-Culver Co., 41 U.S. 506, 519 n. 14 (1974) (relying on Prima Paint Corp. v. Flood Conklin Mfg., 388 U.S. 395, 406 (1967)). Defendants allege no such facts with respect to either the contract or the clause.

"Defendant is a nonresident of the forum state and has had no purposeful contacts with the State of New York. Defendant is an individual and does not reside or do business in New York." B. Mehta's Memorandum in Support of Motion to Dismiss for Lack of Personal Jurisdiction ("Def. Mem.") at 1 ("Introduction"). Mehta goes on to discuss International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945), and its progeny, for the remainder of his brief. See Def. Mem. at 2-5. Minisha Mehta's memorandum is identical.

See New Moon, 121 F.3d at 29 ("[A] a party seeking to avoid enforcement of [a forum selection] clause is . . . entitled to have the facts viewed in the light most favorable to it.").

I have considered defendants' lack of legal representation by liberally construing their motion to dismiss. The Mehtas' memorandum argues, by implication, that the forum selection clause is unreasonable because defendants are mere individuals who live many miles from New York and it would be unreasonable and unfair to force them to litigate here. Yet, the Mehtas surely contemplated, or should have contemplated, this very situation before signing the Guaranty Agreement. See The Bremen, 407 U.S. at 16 (rejecting similar objection to forum clause where "the parties . . . contemplated the claimed inconvenience."). Because the Mehtas have made no showing to rebut the presumption of validity, the forum selection clause must be enforced.

Nor are we dealing with "an agreement between two Americans to resolve their essentially local disputes in a remote alien forum," The Bremen, 407 U.S. at 16-17 (clearly referring to foreign country), which may show that the agreement is an adhesive one. Here, New York is not a remote alien forum as understood by The Bremen. Further, there is no suggestion that this Agreement, where a corporate executive guaranteed his company's performance of a lease, was adhesive.

B. Venue

"On a motion to dismiss for improper venue pursuant to Rule 12(b) (3), a court must accept the facts alleged in the complaint as true and construe all reasonable inferences in the plaintiff's favor." V.R.S. Indus. v. B.H.P.C. Mktg., No. 01 Civ. 570, 2001 WL 1297809, at *2 (S.D.N.Y. Oct. 25, 2001) (citation, quotation marks omitted). See also Fed.R.Civ.P. 12(b)(3). Plaintiff bears the burden of proving that venue is proper. See V.R.S. Indus., 2001 WL 1297809, at *2 (citation omitted).

Although these pro se defendants do not specifically invoke Rule 12(b) (3), their memorandum of law can be understood to argue that plaintiff cannot meet this burden, and that the action should be prosecuted in Texas, because (1) it will be a burden on them to litigate in New York, (2) none of the records, files or witnesses are located in the New York, and (3) all of the witnesses defendants may call, and records they may rely upon, are located in Texas. Again, however, defendants must have contemplated this situation when they waived objections to venue in the Guaranty Agreement. See Guar. Agmt. ¶ 9 ("Guarantor waives any objections based on venue"); supra Part I. GE Capital has thus sustained its burden of showing that venue is not improper. Defendants' arguments regarding venue are therefore rejected.

III. CONCLUSION

For the aforementioned reasons, defendants' motion to dismiss is denied. An initial conference is scheduled for April 29, 2002 at 4:30 p.m.


Summaries of

General Electric Capital Corporation v. Mehta

United States District Court, S.D. New York
Apr 3, 2002
01 Civ. 11259 (SAS) (S.D.N.Y. Apr. 3, 2002)

holding forum selection clause enforceable where the contract was "only two pages in length, and the forum selection clause [was] clear and set off in a separate [titled] paragraph"

Summary of this case from HSM Holdings v. Mantu I.M. Mobile Ltd.
Case details for

General Electric Capital Corporation v. Mehta

Case Details

Full title:GENERAL ELECTRIC CAPITAL CORPORATION, Plaintiff v. BHARAT MEHTA and…

Court:United States District Court, S.D. New York

Date published: Apr 3, 2002

Citations

01 Civ. 11259 (SAS) (S.D.N.Y. Apr. 3, 2002)

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