Summary
rejecting a "sophisticated businessman" claim that he had to sign an agreement on a "take-it-or-leave-it basis"
Summary of this case from Mark IV Transp. & Logistics, Inc. v. Nat'l Indep. Contractor Ass'n, Inc.Opinion
Civ. No. 03-5881 (WGB).
July 16, 2004
Bruce P. McMoran, Esq., Douglas S. Bramley, Esq., Michael F. O'Conner, Esq., McMORAN, O'CONNOR BRAMLEY, Tinton Falls, NJ, Attorneys for Plaintiff.
Gerald D. Silver, Esq., WINSTON STRAWN LLP, New York, NY, Attorneys for Defendant.
OPINION
Defendant Cap Gemini Ernst Young U.S. LLC ("Defendant" or "CGEY") moves to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6), alleging that the parties are bound by a forum selection clause requiring that disputes be litigated in any state or federal court located in the City of New York. Alternatively, Defendant CGEY moves to transfer this action to the Southern District of New York pursuant to 28 U.S.C. § 1404 or § 1406, or for a stay of this action pending the outcome of proceedings in New York City.
The Court has jurisdiction pursuant to 28 U.S.C. § 1332. For the following reasons, CGEY's motion to dismiss is granted.
I. FACTS AND PROCEDURAL HISTORY
In 1999, Plaintiff Charles Arentowicz ("Plaintiff" or "Arentowicz") was a Consulting Partner with Ernst Young's Management Consulting Practice. In 2000, Cap Gemini acquired Ernst Young's Management Consulting Practice and created CGEY.
On or about April 22, 2000, Arentowicz signed a written employment contract (the "Agreement") to be employed as a vicepresident and consultant with CGEY. (Compl. at ¶ 20.) The Agreement contains an arbitration clause that requires in part, that:
any dispute, controversy or claim between us arising out of or relating to or concerning the provisions of this Agreement, any agreement between you and the Firm relating to or arising out of your employment with us or otherwise concerning any rights, obligations or other aspects of your employment relationship, including, without limitation, discrimination claims, or your relationship in respect to the Firm (" employment related matters"), shall be finally settled by arbitration in the City of New York before, and in accordance with the arbitration procedures set forth in the attached Annex 4, and the commercial arbitration rules then obtaining of the American Arbitration Association (the "AAA"). . . . . Subject to the provisions of Annex 4, we each hereby waive any right to seek judicial intervention and agree that all rights and obligations under this Agreement and employment related matters may be determined in the arbitration proceeding. If there is any conflict among these procedures and the AAA Rules, this Agreement shall control.
(Agreement, attached as Ex. 1 to Affidavit of Gerald D. Silver ("Silver Aff."), at ¶ 5.) (emphasis added). The Agreement further provides that it is governed by the laws of the State of New York. (Id. at ¶ 6.)
If, on a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the Court considers matters outside the pleading, then the motion must be treated as one for summary judgment pursuant to Rule 56. Fed.R.Civ.P. 12(b)(6); see also Eli Lilly Co. v. Roussel Corp., 23 F. Supp.2d 460, 475 n. 21 (D.N.J. 1998) ("unless a Court converts a Rule 12(b)(6) motion into a motion for summary judgment pursuant to Fed.R.Civ.P. 56, the court cannot consider material outside the pleadings (i.e. facts presented in briefs, affidavits or exhibits"). However, "[e]xceptions to the general rule of conversion have been made where the materials considered at the dismissal stage are either public records deemed to be undisputably authentic or materials directly relied upon in the plaintiff's complaint." Greer v. Smith, 2003 WL 1090708, at *492 n. 1 (3d Cir. March 10, 2003) (citing as examples Southern Cross Overseas Agencies, Inc. v. Wah Kwong Shipping Group Ltd., 181 F.3d 410, 426-27 (3d Cir. 1999); City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 259 (3d Cir. 1998); Pension Benefit Guar. Corp. V. White Consol. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993)). Therefore, the Court will consider materials directly relied on in Arentowicz's Complaint, pleadings and other public records that the Court deems to be undisputably authentic.
Finally, the Agreement also has a forum selection clause requiring that any claims that are not otherwise arbitrable, including disputes regarding the enforceability of the arbitration provision, be adjudicated in any state or federal court of competent jurisdiction in the City of New York. Specifically, the Agreement states:
THE EMPLOYEE AND THE EMPLOYER HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN THE CITY OF NEW YORK OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO OR CONCERNING THIS EMPLOYMENT AGREEMENT OR ANY EMPLOYMENT RELATED MATTERS THAT IS NOT OTHERWISE ARBITRATED OR RESOLVED ACCORDING TO THE PROVISIONS OF SECTION 5 OF THE EMPLOYMENT AGREEMENT. This includes any suit, action or proceeding to compel arbitration, to obtain a temporary restraining order or preliminary injunction or such other temporary emergency relief, or to enforce an arbitration award. The employee and the Employer acknowledge that the forum designated above has a reasonable relation to the employment Agreement, and to the employee's relationship to the Employer.
(Id. at Annex 4.) (emphasis added).
Less than three years later, CGEY terminated Arentowicz in an alleged reduction in force. Notwithstanding the forum selection and mandatory arbitration provisions in the Agreement, on October 28, 2003, Arentowicz filed suit in New Jersey Superior Court against CGEY alleging age discrimination under the New Jersey Law Against Discrimination, N.J.S.A. § 10:5-12(a), et seq. and seeking a judgment declaring that the arbitration provisions of the Agreement are unenforceable. (Compl. at ¶¶ 46-51.) Specifically, Arentowicz, in part, claims that as a condition of his employment, he was coerced into signing the Agreement because if he did not continue his employment with CGEY, he would have forfeited significant employee benefits that he had accrued during the nearly twenty years that he had worked for Ernst Young and its predecessors. Further, Arentowicz claims that he was not represented by counsel and had no opportunity to negotiate the terms of the Agreement.
On or about December 10, 2003, CGEY removed the New Jersey state court action to this Court (the "New Jersey Action").
On January 14, 2004, CGEY filed a Demand for Arbitration before the American Arbitration Association (the "AAA") seeking, among other things, a judgment declaring that the claims asserted by Arentowicz in the New Jersey Action Complaint are without merit. (See Demand for Arbitration attached as Ex. 4 to Silver Aff.)
At the same time, CGEY also commenced an action in the Southern District of New York ("New York Action"), to obtain a declaratory judgment that Arentowicz must pursue his claims before the AAA in New York City as well as a stay of the New Jersey Action. (See New York Action Compl. attached as Ex. 5 to Silver Aff.) Refusing to arbitrate, Arentowicz moved to dismiss or stay the New York Action on the grounds that the New Jersey Action was the "first filed". CGEY cross moved to compel arbitration of Arentowicz's discrimination claims. By Memorandum and Order dated June 22, 2004, Judge Deborah A. Batts, U.S.D.J., denied Arentowicz's motion to dismiss or stay and granted CGEY's motion to compel arbitration. Rejecting Arentowicz's contention that the Agreement was a contract of adhesion and unconscionable, Judge Batts concluded that the arbitration clause was valid and enforceable and that Arentowicz's discrimination claims clearly fell within the scope of the arbitration clause. (June 22, 2004 Mem. and Order, at 12-14, 14-16.)
Pending before this Court is CGEY's motion to dismiss the complaint on the grounds that the parties are bound by the forum selection clause. Alternatively, CGEY moves to transfer this action to the Southern District of New York, or for a stay of this action pending the outcome of proceedings in New York City.
Although the parties also dispute the enforceability of the arbitration clause, the Court need not address that issue. First, notwithstanding arguments related to the arbitration clause made in CGEY's moving papers, CGEY clearly notes in its reply brief and subsequent correspondence to the Court that the threshold issue to be decided by this Court is not the enforceability of the arbitration provision, but of the forum selection clause. (See CGEY Reply Br., at 1; May 12, 2004 Letter to this Court, at 2.) Second, because the enforceability of the forum selection clause was to be determined first, by Order dated February 3, 2004, Magistrate Judge Shwartz directed Arentowicz to withdraw without prejudice, as premature, his motion seeking partial summary judgment on his claim that the arbitration provision is unenforceable. (Id.) Third, the enforceability of the arbitration provision has been already been decided by Judge Batts, and need not be readjudicated by this Court. See supra.
When CGEY filed its motion, the New York Action was still pending because Judge Batts had not yet issued her June 22, 2004 decision.
II. DISCUSSION
A. Standard for Fed.R.Civ.P. 12(b)(6) Motion to Dismiss
Federal Rule of Civil Procedure 12(b)(6) allows a party to move for a dismissal based upon the pleader's "failure to state a claim upon which relief can be granted." Since the longestablished federal policy of civil litigation is to decide cases on the proofs, district courts generally disfavor Rule 12(b)(6) motions. Melo-Sonics Corp. v. Cropp, 342 F.2d 856 (3d Cir. 1965); Panek v. Bogucz, 718 F. Supp. 1228, 1229 (D.N.J. 1989).
In deciding a motion to dismiss for failure to state a claim, all allegations in the pleadings must be accepted as true and the plaintiff must be given the benefit of every favorable inference that can be drawn from those allegations. See Conley v. Gibson, 355 U.S. 41, 48 (1957); Wisniewski v. Johns-Manville Corp., 812 F.2d 81, 83 n. 1 (3d Cir. 1987); Markowitz, 906 F.2d at 103. "All the rules require is a short and plain statement of the claim that gives the defendant fair notice of the plaintiff's claim and the grounds upon which it rests."Conley, 355 U.S. at 47.
Rule 12(b)(6) does not countenance "dismissals based on a judge's disbelief of a complaint's factual allegations." Neitzke v. Williams, 490 U.S. 319, 326-27 (1989). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheur v. Rhodes, 416 U.S. 232, 236 (1974).
Accepting the facts in the pleadings as true and giving them all reasonable inferences, a court must dismiss under Rule 12(b)(6) "[i]f as a matter of law `it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Neitzke, 490 U.S. at 326-27.
B. Dismissal Analysis Under Fed.R.Civ.P. 12(b)(6)
1. Validity of Forum Selection Clause
CGEY moves to dismiss the complaint based on the forum selection clause contained in the Agreement. The forum selection clause requires that all disputes between the parties not subject to arbitration, including disputes regarding the enforceability of the arbitration provision, be decided in New York City.
In response, Plaintiff contends that the forum selection clause is part of an unenforceable contract of adhesion, prepared by a party with excessive bargaining power, and presented to Plaintiff on a take-it-or-leave-it basis. He claims he had no meaningful opportunity to negotiate the Agreement and had no choice but to accept its terms if he wished to remain employed by CGEY and keep the benefits he had accrued over his twenty year career.
"In federal court, the effect to be given a contractual forum selection clause in diversity cases is determined by federal not state law." Jumara v. State Farm Ins. Co., 55 F.3d 873, 877 (3d Cir. 1995); see also Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 27-32 (1988).
Thus, Arentowicz's citation to Circuit City Stores v. Adams, 279 F.3d 89 (9th Cir.), cert. denied, 535 U.S. 1112 (2002) is unhelpful as that case was decided under California law. Similarly, Arentowicz's reliance on the dissent inMartindale v. Sandvik, Inc., 173 N.J. 76 (2002) is equally misplaced.
Forum selection clauses are presumptively valid unless "the resisting party makes a `strong showing' that the clause is `unreasonable.'" Cadapult Graphic Systems, Inc. v. Tektronix, Inc., 98 F. Supp. 2d 560, 564-65 (D.N.J. 2000) (citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972)). To show that a forum selection clause is "unreasonable," the party objecting to its enforcement must establish "(1) that it is the result of fraud or overreaching, (2) that enforcement would violate a strong public policy of the forum, or (3) that enforcement would in the particular circumstances of the case result in litigation in a jurisdiction so seriously inconvenient as to be unreasonable." Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190, 202 (3d Cir.), cert. denied, 464 U.S. 938 (1983); see also Foster v. Chesapeake Ins. Co., Ltd., 933 F.2d 1207, 1219 (3d Cir. 1991) (noting that forum selection is "unreasonable" where resisting party can make a "strong showing" that the selected forum is "so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court . . .") (citing The Bremen, 407 U.S. at 15-18).
In this case, as discussed below, Arentowicz has not made a "strong showing" of any of these elements.
a. Coercion
First, a forum selection clause may be set aside for fraud or overreaching only if the "`inclusion of that clause in the contract was the product of fraud or coercion.'" Hoffer v. InfoSpace.com, Inc., 102 F. Supp. 2d 556, 563 (D.N.J. 2000) (emphasis added) (citing Danka Funding, L.L.C. v. Page, Scrantom, Sprouse, Tucker Ford, P.C., 21 F. Supp. 2d 465, 470 (D.N.J. 1998)). Thus, "[i]t is insufficient . . . to allege that one was induced generally to enter into the contract itself as a result of fraud." Id. at 563-64 (emphasis added) (citingNat'l Micrographics Sys. v. Canon U.S.A., 825 F. Supp. 671, 675 (D.N.J. 1993)). Here, Arentowicz has not argued that the inclusion of the forum selection clause specifically was the product of coercion; rather, he has only claimed that he was induced generally to enter into the Agreement.
In any event, even if Arentowicz's allegations of duress or coercion regarding the Agreement generally are applied to the forum selection clause, Arentowicz's claim of having to sign the Agreement on a take-it-or-leave-it basis is not compelling given that he was a "sophisticated businessman", as evidenced by his position as a partner at Ernst Young, and as a vice president at CGEY. See, e.g., Danka Funding, L.L.C. v. Page, Scrantom, Sprouse, Tucker Ford, P.C., 21 F. Supp. 2d 465, 471 (D.N.J. 1998) (holding that "the defendant must be considered to have entered into exactly the type of arm's-length negotiation by experienced and sophisticated businessman that favors upholding such [forum selection] clauses" where despite the defendant law firm's assertions that it signed the lease agreement on a take-it-or-leave-it basis, the signatory to the lease on behalf of defendant was a vice-president and partner of the firm who had been employed by defendant for over 23 years).
Moreover, although Arentowicz summarily concludes that he had no opportunity to negotiate or modify the terms of the Agreement and that he was not represented by counsel, he does not allege that he even attempted to hire counsel or to negotiate any of the terms of the Agreement. See id. (noting that the defendant's claim that it thought the lease-form was non-negotiable, while admitting that it failed to attempt to negotiate any portion of the printed terms, was an inadequate basis on which to find that forum selection clause was the result of fraud, undue influence or unequal bargaining power); Foster v. Chesapeake Ins. Co., Ltd., 933 F.2d 1207, 1219 (3d Cir. 1991) ("That there may not have been actual negotiations over the [forum selection] clause does not affect its validity.")
b. Public Policy
Next, Arentowicz advances the position that compelling a New Jersey resident who is a victim of discrimination to litigate in New York violates New Jersey public policy where New York has absolutely no contact with the matter in dispute and no local interest in enforcing New Jersey's anti-discrimination laws. The forum selection clause, however, does not encompass Arentowicz's discrimination claim. According to Judge Batts' ruling, Arentowicz's discrimination claim falls clearly within the scope of the arbitration clause. See discussion supra. The forum selection clause instead governs claims that are not arbitrable, including disputes regarding the enforceability of the arbitration provision. The Court sees no reason why a forum selection clause that requires parties to litigate the issue of arbitrability in the only forum that has the authority to compel arbitration in this case would violate any New Jersey public policy. See In the Matter of the Petition of the Home Ins. Co., 908 F. Supp. 180, 182 (S.D.N.Y. 1995) ("[O]nly the district court where the arbitration will proceed may order arbitration.") Indeed, enforcement of the forum selection clause is in accordance with "New Jersey's general policy of upholding the validity of forum-selection clauses." Cadapult, 98 F. Supp.2d at 568 ("New Jersey courts routinely find forum-selection clauses prima facie valid and enforceable").
c. Inconvenience
Finally, Arentowicz has failed to establish, or even allege, that the forum selection clause is "unreasonable," because enforcement of such a clause would "result in litigation in a jurisdiction so seriously inconvenient as to be unreasonable." Here, as CGEY points out, the New Jersey Action is pending in Newark, which is nearly, if not less than, 30 minutes from New York City. Given the close proximity of the two cities, litigation in New York City can hardly be considered terribly inconvenient for Arentowicz. In fact, "a forum selection clause is treated as a manifestation of the parties' preferences as to a convenient forum." Jumara, 55 F.3d at 880. In any event, "[m]ere inconvenience or additional expense is not the test for unreasonableness." Danka, 21 F. Supp.2d at 472 (quotingCentral Contracting Co. v. Maryland Casualty Co., 367 F.2d 341, 344 (3d Cir. 1966)).
Additionally, Arentowicz has not submitted any evidence to show that enforcement of the forum selection clause would be "so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court." See Foster, 933 F.2d at 1219.
Because Arentowicz has not made a "strong showing" that: (1) the forum selection clause was the result of coercion; (2) that it violates New Jersey's public policy; or (3) that its enforcement would so seriously inconvenient as to be unreasonable or to deprive Arentowicz of his day in court, the forum selection clause is not "unreasonable" and is therefore presumptively valid.
2. Fed.R.Civ.P. 12(b)(6) Dismissal
Arentowicz contends that the Court must conduct a transfer analysis under 28 U.S.C. § 1404(a), rather than Fed.R.Civ.P. 12(b)(6), to determine whether dismissal based on the forum selection clause is proper. Arentowicz is clearly incorrect. The Third Circuit has unequivocally stated that "a 12(b)(6) dismissal is a permissible means of enforcing a forum selection clause that allows suit to be filed in another federal forum." Salovaara v. Jackson Nat'l Life Ins., 246 F.3d 289, 298 (3d Cir. 2001).
While 28 U.S.C. § 1404(a) provides for the transfer of a case where both the original and the requested venue are proper, and 28 U.S.C. § 1406 applies where the original venue is improper, of the two venue statutes, only 28 U.S.C. § 1406 can support a dismissal. Jumara, 55 F.3d at 878. Moreover, dismissal pursuant to § 1406 is inapplicable here because venue would be proper in this Court provided no forum selection clause covered the subject matter of this lawsuit. See Salovaara, 246 F.3d at 298 (citing Jumara, 55 F.3d at 878-79).
While the Court is aware that, "as a general matter, it makes better sense, when venue is proper but the parties have agreed upon a non-unreasonable forum selection clause that points to another federal venue, to transfer [under § 1404] rather than dismiss," id. at 299, in this case, transfer does not make "better sense" in light of Judge Batts' dismissal of the New York Action based on her determination that the arbitration clause is enforceable and encompasses Arentowicz's discrimination claims.
Therefore, because, as discussed above, the forum selection clause is valid, CGEY's motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) is granted. Accordingly, the Court need not address CGEY's alternative motions to transfer or stay.
III. Conclusion
For the foregoing reasons, Defendant's motion to dismiss is granted.
An appropriate Order follows.