Summary
In HNY Assoc. L.L.C. v. Summit Resort Prop., Inc., No. 01 Civ. 0428, 2001 WL 456250 (S.D.N.Y. Apr. 30, 2001) (Baer, J.), this Court applied the reasoning of Carnival to a forum selection clause that was allegedly the result of unequal bargaining power.
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01 Civ. 0428 (HB)
April 30, 2001
OPINION ORDER
HNY Associates, L.L.C. ("HNY") asserted claims against Summit Resort Properties, Inc., Grand Summit Resort Properties, Inc. (collectively, "defendants") for payment of monies owed under a financial brokerage agreement ("Agreement"). Defendants move to dismiss the First Amended Complaint ("complaint") because the Agreement contains a choice of forum clause that designates the state and federal courts of California. In opposition, HNY argues that the choice of forum clause is "unreasonable," and thus should not be enforced. In the alternative, HNY seeks transfer of the action to the federal courts of California.
For the reasons discussed below, defendants Motion to Dismiss is granted.
BACKGROUND
On January 23, 1997, the defendants and Hunter Capital Group, L.L.C. ("Hunter"), plaintiffs predecessor-in-interest, entered into an Agreement whereby Hunter would locate debt financing for the construction of hotels at New England ski resorts in return for a commission. Subsequently, Hunter was successful in locating $55 million in financing from Textron Financial, and was paid approximately $200,000 by defendants.
On January 19, 2001, Plaintiff filed suit to recover additional commission it claims is owing under the Agreement. Defendants moved to dismiss on the basis of a forum selection clause included in the Agreement that provides "any action or proceeding based hereon, or arising out of [plaintiff's] engagement hereunder, shall be brought and maintained exclusively in the courts of the state of California or in the United States District Court for California." (Pl.'s Compl. Ex. A at 4).
DISCUSSION
Motion to Dismiss Standard
In deciding a motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief may be granted, the court "must accept the material facts alleged in the complaint as true." Cohen v. Koenig, 25 F. 1168, 1172 (2d Cir. 1994). Dismissal is appropriate only where "it appears beyond doubt that plaintiff can prove no set of facts in support of the claim which would entitle him to relief" Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
Forum Selection Clause
The Second Circuit has a strong policy of honoring forum selection clauses as written, and such clauses are presumptively enforceable. Roby v. Corporation of Lloyd's, 996 F.2d 1353 (2d Cir. 1993). The presumption of validity may be overcome by a clear showing that the clause was ""unreasonable' under the circumstances." Roby, 996 F.2d at 1363 (quotingThe Bremen et al. v. Zapata Off-Shore Co. 407 U.S. 1, 10, 32 L.Ed.2d 513, 92 S.Ct. 1907 (1972)). The "unreasonableness" exception is construed narrowly, and renders a forum selection clause unenforceable in the following limited circumstances:
(1) if [its] incorporation into the agreement was the result of fraud or overreaching; (2) if the complaining party "will for all practical purposes be deprived of his day in court," due to the grave inconvenience or unfairness of the selected forum; (3) if the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy; or (4) if the clauses contravene a strong public policy of the forum state.Id. Here, plaintiff, a sophisticated entity engaged in complex financial services, has not shown that enforcement of the clause would be anything other than reasonable and consistent with the parties' intentions. The facts of the case simply do not fall within any of the four Roby exceptions.
First, though the contract formed part of the boilerplate and was not negotiated, the incorporation of the agreement was not the result of fraud. (Roby exception "1"). Plaintiff has alleged no facts that suggest frauds and alleges fraud only to the extent of plaintiff's wholly conclusory allegation that the purpose of the forum selection clause was to deter litigation. As plaintiff itself has conceded, no court has found this to be a reason to refuse enforcement of a forum selection clause, and this Court sees no reason to be the first. See Composite Holdings, L.L.C. v. Westinghouse Elec. Corp., 992 F. Supp. 367 ("[t]here is no reason to disregard this undertaking on the ground that Westinghouse had an evil motive in seeking it as long as Westinghouse did not procure this specific agreement by deception."). Defendants' nexus to California — an issue which forms the basis of plaintiffs motion — has no independent significance and bears on the reasonableness analysis only to the extent that it suggests deception or otherwise indicates unreasonableness. Plaintiff has not alleged that defendants procured the forum clause through deception; in fact, plaintiff alleges in its brief that defendants refused to engage Hunter's services unless Hunter agreed to the forum clause. Hunter may have regretted the term, but it entered into the contract with eyes open.
Further, the allegation that Hunter suffered from unequal bargaining power is not sufficient to render a choice of forum clause unreasonable.Licensed Practical Nurses v. Ulysses Cruises, Inc., 2000 U.S. Dist. LEXIS 16619 (S.D.N.Y. 2000). Since the Supreme Court enforced a choice of forum clause embedded in a contract of adhesion between a large international company and individual passengers, Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 113 L. Ed.2d 622, 111 S.Ct. 1522 (1991), it is self-evident that the choice of forum in this case — incorporated into a contract between sophisticated parties through which the plaintiff received a fee of nearly $200,000 — is not unreasonable simply because it was not a negotiated term. The law does not relieve a commercial entity of an obligation knowingly assumed simply because the complaining party lacked the bargaining leverage to avoid the unwanted contract term.
Second, plaintiff cannot show that enforcement of the clause will deprive plaintiff of its day in court. (Roby exception "2.") Plaintiff has not alleged that it is destitute, in fact it received nearly $200,000 in commission. Rather, plaintiffs argument seems to be that litigating this case in California would be relatively inconvenient because all the witnesses in the case are located in New Jersey. However, the relative inconvenience of California as a forum does not warrant this Court's refusal to honor the contact as written. See, e.g., The Bremen, 407 U.S. at 17-18; K.K.D. Imports. Inc. v. Karl Heinz Dietrich GmbH Co., 36 F. Supp.2d 200, 202 (S.D.N.Y. 1999) (enforcing agreement requiring the parties to litigate in Germany rather than New York); Design Strategy Corp. v. Nghiem, 14 F. Supp.2d 298, 301 (S.D.N.Y. 1998) (finding that employee in a contract dispute had not met "heavy burden of proof' to demonstrate that the expense of litigating in New York renders it an "inconvenient forum" so as to set aside a forum-selection clause).
Plaintiff has not attempted to satisfy the third or fourth exceptions of the Roby "reasonableness" test by showing either that California law would be fundamentally unfair in resolving this contract dispute, or that the enforcement of forum selection clauses contravenes public policy in California. In fact, such an effort would have been futile since California courts also find forum selection clauses to be presumptively valid. See, e.g., Tokio Marine Fire Ins. Co. v. Nippon Express U.S.A., Inc., 118 F. Supp.2d 997 (C.D. Cal. 2000).
Thus, the Court is satisfied that the forum selection clause in the Agreement is reasonable and should be enforced.
Dismiss or Transfer
Defendants moved to dismiss pursuant to Fed.R.Civ.Pro. 12(b)(6) and 12(b)(3). Plaintiff argued that if the Court enforces the forum selection clause it should transfer the case to California pursuant to 28 U.S.C. § 1404 (a) rather than dismiss.[1] While transfer may be available to the court, dismissal is the more appropriate remedy in this case. See GMAC Comm. Credit, LLC v. Dillard Dept. Stores, Inc., 198 F.R.D. 402, 409; Licensed Practical Nurses v. Ulysses Cruises, Inc., 2000 U.S. Dist. LEXIS 16619 at *39.[2] Whether a court should dismiss or transfer depends upon which remedy is most consistent with the forum selection clause. Since the forum selection clause here permits the parties to bring suit in the federal and state courts of California, transferring the case would deprive the parties of their contractual right to choose between state and federal court. See GMAC Comm. Credit, LLC v. Dillard Dept. Stores, Inc., 198 F.R.D. 402, 409.3 Thus, dismissal is more consistent with the forum selection clause than transfer.
CONCLUSION
For the aforementioned reasons, this court grants defendants motion to dismiss without prejudice and denies plaintiff's request that the case be transferred.
SO ORDERED.