Opinion
Index No. 651989/2024 Motion Seq. Nos. 001 002 NYSCEF DOC. No. 62
07-10-2024
ZOEY PAINT CORP., 5 SEASON LSB CORP. Plaintiffs, v. COMMERCIAL CREDIT GROUP INC., NLB CORP., Defendants.
Unpublished Opinion
MOTION DATE 05/15/2024, 05/21/2024
DECISION + ORDER ON MOTION
JOEL M. COHEN, J.S.C.
The following e-filed documents, listed by NYSCEF document number (Motion 001) 25, 26, 27, 28, 29, 30, 31,32, 33, 53, 54, 55, 56, 57, 58, 59, 60 were read on this motion to DISMISS
The following e-filed documents, listed by NYSCEF document number (Motion 002) 34, 35, 36, 37, 38, 39, 40, 41,42, 43, 44, 45, 46, 48, 49, 50 were read on this motion for PRELIMINARY INJUNCTION
Defendant Commercial Credit Group Inc.'s ("CCG") motion (Mot. Seq. No. 1) to dismiss Plaintiffs Zoey Paint Corp.'s ("Zoey Paint") and 5 Season LSB Corp.'s ("5 Seasons") Amended Verified Complaint (NYSCEF 12) pursuant to CPLR 3211(a)(1) and (a)(8) and for fees, costs, and sanctions pursuant to 22 NYCRR § 130-1.1 is granted in part to the extent that the Complaint is dismissed pursuant to CPLR 3211(a)(1) based on a mandatory contractual forum selection clause without prejudice to Plaintiffs refiling in North Carolina, and is otherwise denied. Plaintiffs' motion (Mot. Seq. No. 2) for a preliminary injunction to restrain a UCC sale of certain collateral is denied.
A. Background
a. The Loan Documents
CCG and Zoey Paint are parties to three Negotiable Promissory Note and Security Agreements ("Agreements" [NYSCEF 13, 16, 18]). CCG and 5 Seasons are parties to a Secured Guaranty of the Agreements ("Guaranty" [NYSCEF 14] and with the Agreements the "Loan Documents"). The Loan Documents include the following exclusive venue provision:
MAKER/DEBTOR AND HOLDER/SECURED PARTY HEREOF AGREE TO THE EXCLUSIVE VENUE AND JURISDICTION OF ANY STATE OR FEDERAL COURT PRESIDING IN MECKLENBURG COUNTY, NORTH CAROLINA FOR ALL ACTIONS, PROCEEDINGS, CLAIMS, COUNTERCLAIMS OR CROSSCLAIMS ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, OR IN ANY WAY RELATED TO THIS SECURITY AGREEMENT, WITH THE SOLE EXCEPTIONS THAT AN ACTION TO RECOVER POSSESSION OF ALL OR PART OF THE COLLATERAL OR ANY OTHER ASSETS OF THE MAKER/DEBTOR OR ANY GUARANTOR HOWEVER DENOMINATED, MAY, IN THE SOLE DISCRETION OF THE HOLDER/SECURED PARTY, BE BROUGHT IN A STATE OR FEDERAL COURT HAVING JURISDICTION OVER THE COLLATERAL, AND/OR SUCH OTHER ASSETS, AND THAT JUDGMENTS MAY BE CONFESSED, ENTERED, OR ENFORCED IN ANY JURISDICTION WHERE THE MAKER/DEBTOR, OR ANY GUARANTOR, OR THE COLLATERAL AND/OR ANY OTHER ASSETS OF THE MAKER/DEBTOR, OR GUARANTOR MAY BE LOCATED. MAKER/DEBTOR AND HOLDER/SECURED PARTY WAIVE ANY RIGHT THEY OR ANY OF THEM MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT IN ACCORDANCE HEREWITH. MAKER/DEBTOR AND HOLDER/SECURED PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND ALL RIGHT TO A TRIAL BY JURY OF ANY AND ALL CLAIMS, DEFENSES, COUNTERCLAIMS, CROSSCLAIMS AND SETOFF OR RECOUPMENT CLAIMS ARISING EITHER DIRECTLY OR INDIRECTLY BETWEEN OR AMONG THEM AND/OR INVOLVING ANY PERSON OR ENTITY CLAIMING ANY RIGHTS ACQUIRED BY, THROUGH OR UNDER ANY PARTY AND FURTHER WAIVE ANY AND ALL RIGHT TO CLAIM OR RECOVER ANY PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO ACTUAL DAMAGES.
b. The Instant Action is Filed in New York County
On February 2, 2024, CCG informed Zoey Paint that it intended to conduct a sale of certain collateral under the terms of the Agreements (NYSCEF 19). Plaintiffs commenced this action on April 17, 2024, by filing a Summons and Complaint (NYSCEF 1). Plaintiffs filed the Amended Verified Complaint as of right on April 29, 2024 (NYSCEF 12). The Amended Verified Complaint acknowledges the mandatory venue provision and provides:
20. Although the subject contractual agreements contain a venue provision, which designates Mecklenburg County, North Carolina, this instant action is subject to exception to said provision as this instant Action seeks "to recover possession of all or part of the collateral or any other assets of the Maker/Debtor or any guarantor..."
21. Furthermore, Venue is proper in the State of New York as Plaintiffs were not informed with said venue provision when entering the agreements and Defendant CCG failed to provide any copy of said agreements to the Plaintiffs until a day before the Private Sale
On April 25, 2024, counsel for Plaintiffs advised CCG that it intended to seek a temporary restraining order to preclude the UCC sale of certain collateral used to secure the Agreements and Guaranty (NYSCEF 28). CCG responded that, per the Loan Documents' exclusive venue provision, this case belonged in North Carolina and that the collateral was not located in New York. Later that day, counsel for CCG reiterated that the Loan Documents' venue provision applied, and that CCG would seek sanctions if an application for an injunction was filed in New York (NYSCEF 29, 30).
c. The Parties Agree to a Briefing Schedule and for the Motions to be Decided on Submission
On May 15, 2024, CCG moved to dismiss the Amended Complaint on the grounds that the mandatory forum provision applies (NYSCEF 25). On May 21, 2024, Plaintiff moved by order to show cause for a preliminary injunction restraining CCG from selling the collateral. Following an informal conference, the parties agreed to a briefing schedule and tor both motions to be decided on submission (NYSCEF 47).
On May 24, 2024, CCG submitted opposition to Plaintiffs' motion for a preliminary injunction (NYSCEF 48). On May 31, 2024, Plaintiffs submitted opposition to CCG's motion to dismiss (NYSCEF 53-59).
B. Discussion
a. The Complaint is Dismissed Without Prejudice and the Motion for a Preliminary Injunction is Denied
"Under CPLR 3211(a)(1), a dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law. . ." (Leon v Martinez, 84 N.Y.2d 83, 88 [1994] [citation omitted]). A contractual forum section cause is documentary evidence that may be considered at the motion to dismiss stage (Lischinskaya v Carnival Corp., 56 A.D.3d 116, 123 [2d Dept 2008] Iv. denied 12 N.Y.3d 716 [2009]).
Under New York law, "parties to a contract may freely select a forum which will resolve any disputes over the interpretation or performance of the contract. Such clauses are prima facie valid and enforceable unless shown by the resisting party to be unreasonable" (Brooke Group Ltd. v JCH Syndicate 488, 87 N.Y.2d 530, 534 [1996]). Generally, a venue clause may be disregarded only where a plaintiff has "demonstrated that enforcement of the venue clause would be unjust or would contravene public policy, or that the clause was rendered invalid by fraud or overreaching" (Bhonlay v Raquette Lake Camps, Inc., 120 A.D.3d 1015, 1016 [1st Dept 2014] [citation omitted]).
There is no dispute that the parties entered the Loan Documents. Plaintiffs' attempt to avail itself of the venue provision's exception permitting an action to recover the collateral to be brought in any jurisdiction that has jurisdiction over the collateral or in which the collateral is located is unavailing. That exception - assuming it applies on its terms - may be invoked "in the sole discretion" of CCG, not Plaintiffs. The exception does not permit Plaintiffs to bring suit in New York. Plaintiffs' conclusory assertion that they were unaware of the venue provision is without merit as Plaintiffs signed the Loan Documents including the venue provision, which is in all bold, capital letters (AO Asset Mgt., LLC v Levine, 119 A.D.3d 457, 461 [1st Dept 2014]).
Contrary to Plaintiffs' contention, "forum-selection clauses areprima facie valid" and allegations that "the signatory to the contract, did not read the provision, or that it was not brought specifically to [their] attention are of no avail, since, as a signatory to the contract, [they are] presumed to know the contents of the instrument [they] signed and to have assented to such terms" (Br. W. Indies Guar. Tr. Co., Ltd. v Banque Internationale a Luxembourg, 172 A.D.2d 234, 234 [1st Dept 1991]). Plaintiffs have not met their burden to establish any reason to disregard the venue provision, let alone that a trial in North Carolina "would be so gravely difficult and inconvenient that [Plaintiffs] would, for all practical purposes, be deprived of [their] day in court" (SterlingNatl. Bank v. Eastern Shipping Worldwide, Inc., 35 AD.3d 222, 222, 826 N.Y.S.2d 235 [1st Dept. 2006]). Accordingly, CCG's motion to dismiss is granted without prejudice to Plaintiffs filing their claims in the appropriate venue.
In light of the Court's determination on venue, it would be improper for the Court to address Plaintiffs motion for a preliminary injunction. The Court declines to grant sanctions.
* * * *
Accordingly, it is
ORDERED that Defendant Commercial Credit Group Inc.'s motion to dismiss Plaintiffs' Amended Complaint (Mot. Seq. 001) is GRANTED without prejudice to Plaintiffs refiling in a proper venue; it is further
ORDERED that Plaintiffs' motion for a preliminary injunction (Mot. Seq. 002) is DENIED without prejudice; it is further
ORDERED that Plaintiffs submit a letter on NYSCEF and via email to sfc-part3 @nycourts. gov addressing whether they intend to continue this action against Defendant NLB Corp.
This constitutes the decision and order of the Court.