Opinion
01 Civ. 3027 (JGK)
March 4, 2002
OPINION AND ORDER
The plaintiff, MasterCard international Inc. ("MasterCard") brings this action against the defendant, Argencard Sociedad Anonima ("Argencard"), seeking a declaration that MasterCard has (i) the right under a license agreement entered into between the parties (the "License Agreement") to terminate the exclusivity provisions in that Agreement and (ii) the right to terminate Argencard's membership in the MasterCard licensing program pursuant to MasterCard's Corporate Rules and By-laws. MasterCard also seeks appropriate injunctive relief allowing it to terminate Argencard's exclusive licensing rights under the License Agreement.
There are currently two motions pending before this Court. First, Argencard moves pursuant to Rules 12(b)(2) and 12(b)(3) of the Federal Rules of Civil Procedure to dismiss this action on the ground that this Court lacks personal jurisdiction over Argencard, and under the doctrine of forum non conveniens and out of deference to a prior pending action in Argentina. The action pending in Argentina involves one of the principal questions in this case, namely, whether MasterCard has the right under the License Agreement to terminate Argencard's exclusivity rights under that Agreement. Second, MasterCard moves for a preliminary injunction prohibiting Argencard from proceeding with the Argentine litigation.
I.
The relevant facts, as alleged in the Complaint and the affidavits and declarations submitted by the parties in connection with the current motions, are as follows. MasterCard is a joint venture partnership organized under the laws of the State of Delaware, with its principal place of business in New York. See Am. Compl. ¶ 14, attached as Ex. 1 to Declaration of Gary R. Carney dated May 23, 2001 ("Carney Decl."). MasterCard operates a global credit payment system through which consumers and merchants can conduct transactions using credit or debit cards bearing the MasterCard logo. See id. MasterCard does not directly issue these cards to consumers or enter into agreements with merchants to accept the cards, but rather licenses member corporations to perform those tasks in return for use of the MasterCard brand name. See id.
On September 1, 1977, Argencard entered into an agreement with MasterCard, which, among other things, allowed Argencard to use certain MasterCard trademarks in Argentina (the "Original License Agreement").See original License Agreement, attached as Ex. A to Am. Compl. Pursuant to this Agreement, Argencard became a member of MasterCard and agreed to be governed by its Standards, By-laws and Rules. See id. at ¶¶ 2, 6, 13. The original Licensing Agreement was non-exclusive except as otherwise stated in its Attachment A. See id. at ¶ 1. On December 1, 1992, the parties executed a Revised Attachment A, which provided that the grant of the license to Argencard for Argentina would be exclusive for an initial term of five years, after which it would be automatically renewable for periods of three years, unless the parties terminated the Agreement. See Revised Attachment A at ¶¶ 2-4, attached as Ex. B. to Am. Compl. This grant of exclusivity was, however, conditioned upon Argencard's compliance with certain performance objectives. See id. ¶ 3. The Original License Agreement as amended by the Revised Attachment A will be referred to as the "License Agreement."
Section 2(a) of the Revised Attachment A states that MasterCard "shall have the right to terminate this exclusivity provision, by a majority vote of the Licensor's Board of Directors . . . upon one (1) year prior written notice . . . in the event that the Licensee fails to meet any of its Performance Objectives during any Performance Period . . . ." Id. at ¶ 2(a). Revised Attachment A also has a separate provision, Section 5(b), which allows MasterCard to terminate Argencard's exclusivity rights "if at any time . . . there occurs a change in the competitive or business conditions in Licensee's Area of Use." However, MasterCard cannot terminate under this provision with only one year advance written notice, as described in Section 2(a), because a termination under Section 5(b) is effective only "upon the later of the end of the Initial term or three (3) years after Licensor provides written notice to the Licensee of said termination." Id. ¶ 5(b).
MasterCard concedes that when Revised Attachment A was first executed in 1992, Argencard enjoyed an industry leadership position in Argentina and that Argencard maintained that position through at least 1995. See Declaration of Jean Rozwadowski dated May 22, 2001, at ¶ 8 ("Rozwadowski Decl."). Thereafter, however, Argencard began to lose this position for reasons that are disputed between the parties. Argencard takes the position that it has complied with all of the relevant performance objectives in the License Agreement, and that any changes in its leadership position are due to changed business conditions in Argentina, such that Section 5(b) of the Revised Attachment A is the sole provision under which MasterCard can terminate Argencard's exclusivity rights due to its present status in the market. MasterCard takes the position that Argencard has lost its leadership role in the industry due to a change in ownership, which has resulted in changed policies and a failure to meet the performance objectives set forth in License Agreement. MasterCard also takes the position that failure to meet the performance objectives in the License Agreement gives MasterCard a right to terminate the exclusivity provisions under the Agreement even if the failure was due to changed business circumstances.
The disputes concerning Argencard's performance and the consequences of this performance under the terms of the License Agreement continued until, on March 23, 2000, MasterCard's Board of Directors adopted a resolution directing MasterCard management to provide Argencard with written notice that MasterCard would terminate the exclusivity rights in the License Agreement if MasterCard determined that Argencard was not meeting its performance objectives by April 30, 2001. See Rozwadowski Decl. Ex. 2. On April 24, 2000, MasterCard sent a written notice to Argencard conveying this message. See Am. Compl. Ex. C.
Over the course of the next year, the parties continued to dispute whether MasterCard had the right to terminate Argencard's exclusivity rights under the License Agreement in light of Argencard's performance in Argentina. The parties also engaged in continual discussion regarding a potential business solution to the dispute. See Rozwadowski Decl. ¶ 12. On July 13, 2000, in the course of these discussions and in response to perceived threats of litigation on the part of Argencard, MasterCard sent Argencard a letter stating, among other things, "[i]f litigation were to be instituted against MasterCard, or is seriously threatened again, MasterCard will then look to its other options with respect to Argencard." See Letter from Robert W. Selander, President and C.E.O. of MasterCard International, to Carlos Fuks, Director of Argencard, S.A., dated July 13, 2000, at 2, attached as Ex. A to Second Declaration of Francisco Perez Abella dated June 11, 2001. At oral argument, both parties indicated that they understood this letter to threaten an effective termination of Argencard's exclusivity arrangement with MasterCard by means other than termination of the License Agreement's exclusivity provision, such as by actions taken by the Board of Directors pursuant to MasterCard's rights under the By-laws.
In March 2001, shortly before MasterCard's proposed termination was to become effective, Argencard filed an action in Argentina seeking, among other things, a declaration that MasterCard did not have the right to terminate Argencard's exclusivity rights under the License Agreement and an invalidation of the Board Resolution to terminate this exclusivity based on the April 2001 review. See Argentine Compl., attached as Ex. B to Declaration of Martin Campbell dated May 23, 2001 ("Campbell Decl."). In the Argentine litigation, Argencard, acting ex parte, also sought and obtained on March 22, 2001 an injunction prohibiting MasterCard from terminating Argencard's exclusivity rights under the License Agreement or from using any of MasterCard's contractual or by-law rights to terminate the License Agreement or the exclusivity provision during the Argentine litigation. See Argentine Injunction Order, at 1-2, 9, attached as Ex. 3 to Carney Decl. MasterCard alleges that it learned of this action and the injunction only on April 9, 2001. See Razwadowski Decl. ¶ 13. On April 10, 2001, MasterCard filed the present action seeking, among other things, a declaration that it has the right under the License Agreement to terminate Argencard's exclusivity rights and the right under its own By-laws and Rules to terminate Argencard's membership in MasterCard. See Am. Compl. at 10-13.
On April 11, 2001, MasterCard informed Argencard that it did not believe Argencard had attained the relevant performance objectives and indicated that the grant of exclusivity under the License Agreement would terminate effective April 30, 2001. See Rowzwadowski Decl. Ex. 3. The parties are currently litigating their disputes both in this Court and in the Argentine courts.
II.
Argencard moves to dismiss this action on the ground that the Court allegedly lacks personal jurisdiction over Argencard. A district court has broad discretion in deciding how to proceed with a motion to dismiss for lack of personal jurisdiction, including whether to allow discovery, conduct an evidentiary hearing or even postpone deciding the issue until trial. See CutCo Indus., Inc. v. Naughton, 806 F.2d 361, 364 (2d Cir. 1986); APC Commodity Corp. v. Ram Dis Ticaret A.S., 965 F. Supp. 461, 464 (S.D.N.Y. 1997); International Customs Assocs., Inc. v. Ford Motor Co., 893 F. Supp. 1251, 1258-59 (S.D.N.Y. 1995), aff'd, 201 F.3d 431 (2d Cir. 1999). The plaintiff must establish personal jurisdiction by a preponderance of the evidence. See Marine Midland N.A. v. Miller, 664 F.2d 899 (2d Cir. 1981). Because there has not been an evidentiary hearing in this case, MasterCard need only make a prima facie showing of personal jurisdiction over Argencard to survive a motion to dismiss, and the pleadings and any supporting affidavits are to be interpreted in the light most favorable to MasterCard. See PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir. 1997); A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993). In any event, no party has sought an evidentiary hearing in this case, and it is clear from the affidavits and concessions of the parties that the Court has personal jurisdiction over Argencard.
As an initial matter, Argencard is a member of MasterCard, and, as a member, it has indisputedly consented to be governed by its By-laws. See License Agreement ¶¶ 2, 6, 13. As MasterCard correctly points out, Rule 1.02 of the MasterCard Bylaws and Rules contains a forum selection clause, which states that:
[i]n the event of any litigation regarding and/or involving the Corporation Standards (i) the member and/or its agent agrees to only initiate such litigation in the United States District Court for the Southern District of New York or the New York Supreme Court for the County of Westchester, and hereby waives any claims of forum non conveniens and (ii) the member hereby submits to the jurisdiction of such courts and waives any claims of lack of personal jurisdiction, improper venue, and forum non conveniens.See MasterCard By-laws and Rules, at 1-1, attached as Ex. 2 Carney Decl. The present case clearly involves MasterCard's standards because MasterCard's second cause of action is, in part, for a declaratory judgment holding that it is permitted to terminate Argencard's membership in MasterCard pursuant to these By-laws and Rules. See Am. Compl. at 12-13. By becoming a member of MasterCard, Argencard has consented to the personal jurisdiction of this Court in the present action and has waived any arguments related to lack of personal jurisdiction.
At oral argument, Argencard pointed out that this forum selection clause was only added in 1997. However, in executing the License Agreement in 1977, Argencard consented to be governed by the MasterCard By-laws "as they are now in effect, and any future modifications or interpretations thereof or supplements thereto which are adopted by Licensor and made applicable as standards for the Marks or the Charge Card Business in connection with which any of the Marks are used." License Agreement ¶ 2. Argencard does not contest that it is bound by the forum selection clause in the current By-laws.
In any event, the undisputed facts and affidavits submitted by the parties in this case establish that the Court has personal jurisdiction over Argencard. As a general rule, "the amenability of a foreign corporation to suit in a federal court in a diversity action is determined in accordance with the law of the state where the court sits, with `federal law' entering the picture only for the purpose of deciding whether a state's assertion of jurisdiction contravenes a constitutional guarantee." Bank Brussels Lambert v. Fiddler Gonzalez Rodriquez, 171 F.3d 779 (2d Cir. 1999) (citing Arrowsmith v. United Press Int'l, 320 F.2d 219, 223 (2d Cir. 1963) (en banc)) (quotation marks omitted). Thus, the first question is whether New York law provides for personal jurisdiction over Argencard. See CutCo, 806 F.2d at 365.
New York State's long-arm provision allows for an exercise of personal jurisdiction over any foreign defendant who "transacts any business within the state." N.Y.C.P.L.R. § 302(a)(1). For a court to exercise jurisdiction under this provision, the claim must also "arise from" the transaction of business within the State. See Hoffritz For Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 56-57 (2d Cir. 1985). Where, as here, the parties dispute their respective rights under a License Agreement, a court determining whether a defendant meets this standard must consider a variety of factors, including: (i) whether the defendant has an on-going contractual relationship with a New York corporation; (ii) whether the contract was negotiated or executed in New York, and whether, after executing a contract with a New York business, the defendant has visited New York for the purpose of meeting with parties to the contract regarding the relationship; (iii) what the choice-of-law clause is in the contract; (iv) whether the contract requires franchisees to send notices and payments into the forum state or subjects them to supervision by the corporation in the forum state. See Agency Rent A Car System, Inc. v. Grand Rent A Car Corp, 98 F.3d 25, 29 (2d Cir. 1996) (collecting cases). None of these factors is dispositive, and a court must look at the totality of factors in deciding whether it has personal jurisdiction under Section 302(a)(1). See PaineWebber Inc. v. Westgate Group, Inc., 748 F. Supp. 115, 118 (S.D.N.Y. 1990).
A consideration of these factors indicates that this Court would have personal jurisdiction over Argencard even if Argencard had not explicitly consented under the By-laws to jurisdiction in this Court. MasterCard has its principal place of business in New York, see Am. Compl. ¶ 8, and both parties agree that Argencard has been in an ongoing contractual relationship with MasterCard since at least 1977, when the two parties entered into the Original License Agreement. As part of this arrangement, Argencard became a member of MasterCard and consented to be governed by its By-laws. See Original License Agreement ¶¶ 2, 6, 13. Although it is unclear exactly how much of the negotiations of these agreements occurred in New York, Argencard does not dispute that some of those negotiations occurred in New York, and the License Agreement was by its express terms executed and made effective in New York. See License Agreement ¶ 23. Moreover, both the License Agreement and the By-laws are governed by New York law, see License Agreement ¶ 21; MasterCard By-laws and Rules Rule 1.02. Argencard concedes that it has sent payments to MasterCard in New York. MasterCard has also presented ample evidence indicating that after execution of the Original License Agreement, Argencard representatives have made numerous visits to New York in connection with the arrangement. See, e.g., Declaration of Ernesto E. Grether dated May 23, 2001, at ¶¶ 1, 3, 6; Declaration of Francisco Perez Abella dated May 23, 2001, at ¶ 21; Declaration of Michael J. Timko dated June 7, 2001, at ¶ 7; Declaration of Malvina Camejo dated June 11, 2001, at ¶ 11. Although Argencard argues that most of its business activities with cardholders, merchants and financial institutions has taken place in Argentina, it is clear that this business arises out of an ongoing relationship with MasterCard, which is headquartered in New York. See Agency Rent A Car, 98 F.3d at 30 (finding transaction of business in New York where very few personal representatives entered the State and where the breach occurred outside of New York, but where the defendant's "very businesses arise out of an ongoing contractual relationship with [a company] headquartered in New York."). In these circumstances, the Court has personal jurisdiction over Argencard with respect to the causes of action raised in the First Amended Complaint.
There is also no question that an exercise of personal jurisdiction is consistent with due process in this case. See International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (outlining minimal contacts that a defendant must have with a forum state in order for an exercise of personal jurisdiction over the defendant to be consistent with federal due process). Argencard explicitly consented to personal jurisdiction by becoming a member of MasterCard and agreeing to be bound by the terms of its By-laws, thus obviating any due process concerns that might otherwise arise because of an exercise of jurisdiction. See, e.g., National Union Fire Ins. Co. v. Fanelli, No. 89 Civ. 8348, 1990 WL 134895, at *3 (S.D.N.Y. Sept. 11, 1990) (citing National Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311 (1964)) ("It is well-settled that jurisdiction by consent satisfies constitutional principles of due process . . ."). Moreover, by obtaining the License Agreement through the conduct discussed above, Argencard purposefully availed itself of the privilege of conducting activities in New York, thus invoking the benefits and protection of its laws. See Longines-Wittnauer Watch Co. v. Barnes Reinecke. Inc., 209 N.E.2d 68, 71-76 (N Y 1965); see also Burger King Corp., v. Rudzewicz, 471 U.S. 462, 479-82 (1985) (finding that Florida court could constitutionally assert personal jurisdiction over party with no physical presence in Florida when dispute grew out of the party's contractual relationship with Florida corporation and the contract contained choice-of-law provision specifying that disputes were to be governed by Florida law); United Res. 1988 — I Drilling Completion Program. L.P. v. Avalon Exploration, Inc., 1994 WL 9676, at *4 (S.D.N.Y. Jan. 10, 1994) (finding sufficient minimum contacts with New York to sustain personal jurisdiction over bank that made phone calls and sent letters to plaintiffs in New York and opened an account for a deposit wired from New York)
Therefore, Argencard's motion to dismiss this action for lack of personal jurisdiction is denied.
II.
Argencard moves to dismiss this case under the doctrine of forum non conveniens. However, as MasterCard correctly argues, Argencard has waived this argument with respect to the present case by consenting to be a member of MasterCard and to be governed by Rule 1.02 of its By-laws, for the same reasons discussed above.
In any event, the Supreme Court has held that federal courts should dismiss actions under the doctrine of forum non conveniens only rarely.See Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 721 (1996); see also Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947). In order to grant a motion to dismiss on forum non conveniens grounds, the Court must determine, first, that there is an adequate alternative forum elsewhere, and, second, that a weighing of the public and private interests identified indicate that adjudication in the alternative forum will "be most convenient and will best serve the ends of justice." See Alfadda v. Fenn, 159 F.3d 41, 45-46 (2d Cir. 1998) (quoting Peregrine Myanmar Ltd. v. Segal, 89 F.3d 41, 46 (2d Cir. 1996)) (quotation marks omitted); see also Iragorri v. United Techs. Corp., 274 F.3d 65, 73-74 (2d Cir. 2001) (en banc). The defendant bears the burden of establishing these factors, and the defendant must show that this balance tilts strongly in favor of the foreign forum. See PT United Can Co. Ltd. v. Crown Cork Seal Co., 138 F.3d 65, 74 (2d Cir. 1998); R. Maganlal Co. v. M.G. Chem. Co., 942 F.2d 164, 167 (2d Cir. 1991)
Moreover, the Supreme Court has held that in making these determinations, "there is ordinarily a strong presumption in favor of the plaintiff's choice of forum." Piper Aircraft Co. v. Reynco, 454 U.S. 235, 255 (2d Cir. 1981). A plaintiff should not be deprived of the presumed advantages of litigating in its home forum:
except upon a clear showing of facts which either (1) establish such oppressiveness and vexation to a defendant as to be out of all proportion to plaintiff's convenience, which may be shown to be slight or nonexistent, or (2) make trial in the chosen forum inappropriate because of considerations affecting the court's own administrative and legal problems.Koster v. (American) Lumbermens Mut. Cas. Co., 330 U.S. 518, 524 (1947) (cited with approval in Wiwa, 226 F.3d at 101-02); see also Piper, 454 U.S. at 255 n. 23. The plaintiff's choice is afforded even greater deference, where, as here, an American plaintiff is filing suit against a foreign defendant. See Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 101-02 (2d Cir. 2000); Firma Melodiya v. ZYX Music GmbH, 882 F. Supp. 1306, 1317 (S.D.N.Y. 1995); Nationsbank v. Banco Exterior, 867 F. Supp. 167, 170-71 (S.D.N.Y. 1994) (collecting cases); see also Swift Co. Packers v. Compania Colombiana, 339 U.S. 684, 697 (1950) ("Application of forum non conveniens to a suit by a United States citizen against a foreign respondent brings into force considerations very different form those in suits between foreigners."). At the same time, this deference is afforded American plaintiffs because the home forum is presumed to be convenient to such plaintiffs, and this deference should therefore be discounted to the degree that the plaintiff has no bona fide reasons for litigating in a domestic court and the plaintiff's choice masks purely tactical or dilatory strategies. See Iagorri, 274 F.3d at 71-72.
These factors indicate that dismissal on forum non conveniens grounds would be inappropriate. With regard to the first issue, an alternative forum is ordinarily adequate if the defendant is amenable to process in that forum. See Gilbert, 330 U.S. at 501 (1947); Piper, 454 U.S. at 254 n. 22. The Court of Appeals for the Second Circuit has "repeatedly emphasized that [i]t is not the business of our courts to assume the responsibility for supervising the integrity of the judicial system of another sovereign nation." Blanco v. Banco Industrial De Venezuela. S.A., 997 F.2d 974, 982 (2d Cir. 1993) (internal citations and quotations omitted). Hence, "some inconvenience or the unavailability of beneficial litigation procedures similar to those available in the federal district courts does not render an alternative forum inadequate." Id. (internal quotation and citation omitted); see also PT United Can Co., Ltd., 138 F.3d at 73. In this case, it is clear that MasterCard can sue Argencard in Argentina, and thus Argentina is an available alternative forum for this litigation. Although MasterCard argues that recent turmoil in Argentina has affected the judicial process in Argentina, there is no evidence that such difficulties would affect the possible litigation in this case or MasterCard's ability to get a fair hearing. Hence, there is nothing in the present record to support the contention that Argentina is an inadequate forum for this case. See, e.g., Piper, 454 U.S. at 254 n. 22 ("In the absence of extraordinary circumstances, as where the foreign court does not allow for litigation of the subject matter of the dispute or for recovery, amenability of process is sufficient to render a foreign forum adequate.").
However, turning to the public and private interests that are at stake — the so-called "Gilbert" factors — the most important public interests to consider are: (1) the local interest in having local disputes settled at home; (2) the avoidance of problems in applying foreign law; and (3) the potential burden to jurors if they have to decide a case that has no impact on their community. See Gilbert, 330 U.S. at 508-09. None of these public interests weighs in favor of dismissal in this case because this case involves a dispute that is governed by New York law and arises between a corporation headquartered in New York and an Argentine corporation. Hence, the dispute will have obvious impact on the New York community. Moreover, with regard to private interests and convenience, courts have traditionally considered the following Gilbert factors: (1) the ease of access to evidence; (2) the cost of obtaining witnesses to attend trial; (3) the availability of compulsory process; and (4) other factors that might shorten trial or make it less expensive. See id. Courts also consider issues related to court congestion. See id. Although there is some dispute over whether most of the documents and evidence are located in New York or in Argentina, and although an answer to this question will depend in part on whether Section 5(b) provides the sole basis for terminating Argencard's exclusivity rights under the License Agreement or whether Section 2(a) provides another basis, MasterCard correctly argues that most if not all of its own documents and witnesses are in this country. There is certainly a very real convenience to MasterCard in proceeding in this forum, and, in the present circumstances, this bona fide interest is enough to outweigh any inconveniences that the foreign defendant might have in proceeding only in Argentina. See Koster, 30 U.S. at 524 ("In any balancing of conveniences, a real showing of convenience by a plaintiff who has sued in his home forum will normally outweigh the inconvenience the defendant may have shown.").
Having carefully weighed all of the Gilbert factors, and acknowledging the great deference ordinarily given to an American plaintiff's choice of forum when suing a foreign defendant, Argencard has not met its burden of establishing that the private and public interests weigh strongly in favor of dismissal. Hence, Argencard's motion to dismiss under the doctrine of forum non conveniens is denied.
III.
Argencard moves to dismiss this action on the ground that there is a prior action pending in Argentina. A court has inherent power to dismiss or stay an action based on the pendency of a related proceeding in a foreign jurisdiction. See Landis v. North Am. Co., 299 U.S. 248, 254 (1936); Evergreen Marine Corp. v. Welgrow Int'l, Inc., 954 F. Supp. 101, 103 (S.D.N Y 1997); Houbigant, Inc. v. ACB Mercantile, Inc., 914 F. Supp. 997, 1003 (S.D.N.Y. 1996); Ronar, Inc. v. Wallace, 649 F. Supp. 310, 318 (S.D.N.Y. 1986). A court's discretion to dismiss an action that is within its jurisdiction is not boundless, however, and is limited by the "virtually unflagging obligation of the federal courts to exercise the jurisdiction given to them." Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976); see also Dragon Capital Partners L.P. v. Merrill Lynch Capital Servs. Inc., 949 F. Supp. 1123, 1127 (S.D.N Y 1997); Caspian Invs., Ltd. v. Vicom Holdings, Ltd., 770 F. Supp. 880, 884 (S.D.N.Y. 1991); Advantage Int'l Mgmt, Inc. v. Martinez, No. 93 Civ. 6227, 1994 WL 482114, at *2 (S.D.N.Y. Sept. 7, 1994) In determining whether to dismiss a case out of deference to a pending foreign action, courts should consider factors including: (i) the similarity of the parties and issues; (ii) the adequacy of the alternative forum; (iii) the convenience of the parties; (iv) the promotion of judicial efficiency; (v) the possibility of prejudice to either party; and (vi) the temporal sequence of the filings.See MLC (Bermuda) Ltd. v. Credit Suisse First Boston Corp., 46 F. Supp.2d 249, 251 (S.D.N.Y. 1999)
In this case, the suits were filed almost simultaneously. Argencard brought the Argentine action and sought and obtained a preliminary injunction from the Argentine court that was issued on March 22, 2001. MasterCard filed the present action shortly thereafter, on April 10, 2001. When MasterCard filed this action, the Argencard action was still in its infancy, and MasterCard had not yet answered the Argentine Complaint. See, e.g., Herbstein v. Bruetman, 743 F. Supp. 184, 190 (S.D.N.Y. 1990) (refusing to dismiss in favor of foreign litigation on sole ground that foreign action was "still in its preliminary stages");compare also Brinco Mining Ltd. v. FDIC, 552 F. Supp. 1233, 1241-43 (D.D.C. 1982) (deferring to foreign proceedings that had "progressed beyond `incipiency'" through the filing of an answer). Moreover, the submissions by the parties indicate that Argencard engaged in the proceedings in Argentina ex parte, while the parties were seeking to negotiate a settlement, and that MasterCard did not learn of those proceedings until after the Argentine injunction had issued, possibly as late as April 9, 2001. See Rozwadowski Decl. Ex. 4; Carney Decl. Ex. 3. It appears that the Argentine action was an effort to "jump the gun," while the parties were still negotiating a business resolution. In these circumstances, the temporal priority of the Argentine action does not weigh heavily, it at all, in favor of dismissal, and many of the specific rationales behind the doctrine allowing for abstentions in favor of prior actions pending are absent.
Moreover, although the issues related to exclusivity rights under the License Agreement are substantially similar in both cases, MasterCard also seeks in this action a declaration of MasterCard's rights under its By-laws to terminate Argencard's membership in MasterCard. This is an issue that is not raised in Argencard's complaint in the Argentine litigation and that could not be raised there without violating the forum selection clause in the By-laws. There need not be strict identity between the parties and issues in two actions in order to defer to a prior pending foreign action. See, e.g., Landis, 299 U.S. at 254; Caspian Investments, 770 F. Supp. at 884. However, the fact that MasterCard raises claims that are not properly adjudicable in that forum weighs against dismissal.
Argencard argues that the conveniences to the parties and the courts tilt in favor of deferring to the Argentine action. However, Argencard has not cited any exceptional circumstances warranting such deference, and, for the reasons discussed above, there are substantial reasons of convenience and deference to the plaintiff's choice of forum that counsel against dismissal. See Quackenbush, 517 U.S. at 716 (federal courts are obliged to exert their jurisdiction absent exceptional circumstances). Moreover, although there is some overlap between the two litigations, that overlap arises from the business decisions of the parties to include a New York forum selection clause in the By-laws but not in the License Agreement. The two litigations can proceed at the same time. See, e.g., United States Fid. Guaranty Co. v. Petroleo Brasileiro S.A.-Petrobras, No. 98 Civ. 3099, 1999 WL 307642, at *11-12 (S.D.N.Y. May 17), aff'd, 199 F.3d 94 (2d Cir. 1999) (per curiam). For all of the foregoing reasons, it would be inappropriate to dismiss this action in favor of the action pending in Argentina.
IV.
MasterCard moves for a preliminary injunction prohibiting Argencard from proceeding in the Argentine litigation. It is well established that federal courts have the power to enjoin foreign suits by persons subject to their jurisdiction. See United States v. Davis, 767 F.2d 1025, 1038 (2d Cir. 1985); Laker Airways Ltd. v. Sabena Belgian World Airlines, 731 F.2d 909, 926 (D.C. Cir. 1984). Such injunctions operate directly on the parties themselves, rather than on a foreign court. See Laker Airways, 731 F.2d at 926. Anti-foreign-suit injunctions can nevertheless effectively restrict the jurisdiction of a foreign court, thus raising issues of international comity. See China Trade Dev. Corp. v. M.V. Choong Yong, 837 F.2d 33, 35-36 (2d Cir. 1987). Therefore, anti-foreign-suit injunction should be "used sparingly," Davis, 767 F.2d at 1038, and should be granted "only with care and great restraint."China Trade, 837 F.2d at 36 (quotation marks omitted). There is, in fact, a fundamental corollary to the existence of concurrent jurisdiction, which makes parallel proceedings possible: "parallel proceedings on the same in personam claim should ordinarily be allowed to proceed simultaneously, at least until a judgment is reached in one which can be pled as res judicata in the other." Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 926-27 (D.C. Cir. 1984) (quoted with approval in China Trade, 837 F.2d at 36); see also United States Fid. Guaranty Co., 1999 WL 307642, at *1, *10-13 (allowing parallel proceedings with overlapping claims to proceed in federal and Brazilian courts, when courts had concurrent jurisdiction).
In order to obtain an anti-foreign-suit injunction, the moving party must first make two threshold showings: first, that the parties in both suits are the same, and, second, that the resolution of the case before the enjoining court would be dispositive of the enjoined action. See China Trade, 837 F.2d at 36. It is undisputed that the primary parties in both this action and the Argentine action are MasterCard and Argencard. Although one of Argencard's controlling shareholders, Credit Card Holding Co., has intervened in the Argentine action, this party is not a necessary party to that action, and the present cases are sufficiently similar in terms of parties to meet the first threshold criterion for an anti-foreign-suit injunction extending to Argencard and MasterCard. Moreover, with regard to the second threshold criterion, in this action MasterCard seeks in part a declaration under the License Agreement that it may revoke Argencard's exclusivity, which is precisely the main issue raised by Argencard in the Argentine action. Both threshold elements for an injunction are thus present in this case.
Anti-foreign-suit injunctions are by their nature equitable, however, and once these threshold elements have been satisfied, courts deciding whether to grant them must consider (1) whether the foreign litigation poses a threat to the enjoining court's jurisdiction; (2) whether the foreign litigation would frustrate important United States policies; (3) whether the foreign action is vexatious; (4) whether adjudication of the same issues in separate actions would result in delay, inconvenience, expense, inconsistency, or a race to judgment; and (5) other equitable considerations, including the possibility of prejudice to either party if the foreign action were to proceed. See American Home Assurance Corp. v. Insurance Corp., 603 F. Supp. 636, 643 (S.D.N.Y. 1984); see also China Trade, 837 F.2d at 36. The Court of Appeals for the Second Circuit has made it clear that in light of the sparing nature with which foreign-anti-suit injunctions should be issued, the important international comity interests at play, and the basic rule allowing parallel litigations to proceed in multiple forums, the first two criteria are the most important. See China Trade, 837 F.2d at 36. Hence, absent extraordinary circumstances, the Court should only issue such an injunction if the Argentine litigation presents either a threat to this Court's jurisdiction or a threat to an important domestic policy. See id.
There is nothing in this case to suggest that the Argentine action poses a threat to this Court's jurisdiction over the present action. MasterCard does not materially contest this fact and instead argues that the Argentine action poses a threat to the domestic policy of enforcing forum selection clauses. See Farrell Lines Inc. v. Columbus Cello-Policy Corp., 32 F. Supp.2d 118, 130-31 (S.D.N.Y. 1997) (granting anti-suit injunction to preserve important public policies where it was conceded that action was brought in foreign court to evade both a clearly applicable forum selection clause and the liability limitations in the Carriage of Goods by Sea Act, 46 App. U.S.C. § 1300 et seq.); International Fashion Prods., B.V. v. Calvin Klein, Inc., No. 95 Civ. 0982, 1995 WL 92321, at *2 (S.D.N.Y. March 7, 1995) (granting anti-suit injunction when foreign action threatened both jurisdiction of the court and public policy favoring the enforcement of forum selection clauses);see also M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-15 (1972) (discussing rationales behind enforceability of forum selection clauses). In this case, it is unnecessary to decide whether the preservation of a forum selection clause by itself is a sufficiently important domestic policy to warrant an anti-foreign-suit injunction because the License Agreement does not contain a forum selection clause. Hence, there is nothing offensive to this policy in allowing Argencard to proceed with a suit in Argentina claiming only that MasterCard lacks the right under the License Agreement to terminate its exclusivity provisions. MasterCard executed a License Agreement that allows for such lawsuits to proceed in Argentina, and MasterCard cannot now argue that such a lawsuit would offend any domestic policies favoring the enforcement of forum selection clauses.
On the other hand, Argencard has also successfully moved in the Argentine litigation for a preliminary injunction prohibiting MasterCard not only from terminating Argencard's exclusivity rights under the License Agreement but also from terminating Argencard's membership in MasterCard or otherwise taking actions pursuant to other contracts or its own By-laws to threaten Argencard's exclusivity rights during the pendency of the Argentine litigation. MasterCard argues that this injunction "involves" its By-laws, within the meaning of Rule 1.02 of the By-laws, and that Argencard has thus violated the forum selection clause in Rule 1.02 by seeking an injunction in Argentina that involves these By-laws. Allowing Argencard to proceed with the Argentine litigation would, in MasterCard's view, therefore undermine the domestic public policy favoring the enforcement of forum selection clauses.
To the extent that Argencard has violated this forum selection clause, allowing Argencard to continue litigating that action does not significantly threaten the policy at issue. As an initial matter, the issue in the Argentine action involves only whether MasterCard has the right under the License Agreement to terminate Argencard's exclusivity rights, not whether MasterCard has the right under its By-laws to terminate Argencard's membership as a non-exclusive licensee. See Argentine Compl. Although the injunction that Argencard sought and obtained is broader, it does not purport to decide whether MasterCard has the right under its By-laws to terminate Argencard's membership. See Argentine Injunction Order at 2-8. It merely prevents MasterCard from terminating Argencard's membership during the pendency of that litigation, see Argentine Injunction Order at 1, which, as discussed above, directly involves rights under the License Agreement.
Moreover, an anti-foreign-suit injunction would only prevent the parties from pursuing that litigation further; it would not vacate the injunction. The Argentine court that issued the injunction explained that it thought this broader injunction was warranted, when it was issued, because Argencard had presented credible evidence that MasterCard might attempt effectively to circumvent the court's final rulings on the License Agreement issue by terminating Argencard's membership altogether before the court had ruled. See Argentine Injunction Order at 8. As both parties agreed at oral argument, this evidence included a letter from MasterCard to Argencard dated July 13, 2000 threatening to explore such options if Argencard were to litigate the exclusivity issue. The injunction's breadth is thus somewhat peripheral to the underlying issues being litigated in the Argentine action.
In any event, courts generally have broad power to issue injunctions to preserve the status quo during a pending litigation and ensure that they maintain jurisdiction over any dispute properly submitted to them. See, e.g., 28 U.S.C. § 1651 (a); Hawaii Hous. Auth. v. Midkiff, 463 U.S. 1323, 1324 (1983) (Opinion of Rehnquist, J. as Circuit Justice). There is no question that Argencard could have brought a suit to resolve its rights under the License Agreement in an Argentine court without violating any forum selection provisions. By its own terms, the injunction will be extinguished once the Argentine court renders a final ruling on the merits of the underlying licensing disputes. See Argentine Injunction Order at 28. The fact that Argencard has sought and obtained interim relief prohibiting MasterCard from taking certain actions pursuant to its By-laws during the pendency of that litigation is insufficient, in these circumstances, to threaten any domestic policies favoring the enforcement of forum selection clauses.
In sum, the Argentine litigation does not threaten either the jurisdiction of this Court or any important public policies identified by the parties. In these circumstances, the fact that allowing parallel proceedings in multiple jurisdictions might cause some additional costs, delay and vexation is insufficient to outweigh the important international comity interests that arise when foreign and domestic courts have concurrent jurisdiction over the same in personam claim. See China Trade, 837 F.2d at 36. Indeed, the existence of the parallel proceedings is simply the result of the agreements the parties executed. MasterCard's motion for an anti-suit injunction is therefore denied.
CONCLUSION
For the foregoing reasons, Argencard's motion to dismiss is denied. MasterCard's motion for an anti-foreign suit injunction is also denied.
SO ORDERED.