KTV Media International, Inc. v. Galaxy Group, LA LLC
2011 U.S. Dist. LEXIS 76038
| S.D.N.Y. | 2011Background
- KTV Media International sued Galaxy Group LA LLC for breach and anticipatory breach relating to website development for lottery ticket sales.
- Galaxy Operating Agreement contains a forum selection clause favoring California courts for disputes arising under the agreement.
- Plaintiff contends the Galaxy Agreement does not govern the Website development, which was under separate 2009 Terms and Benchmarks and a February 2010 assignment.
- Galaxy moves to dismiss under Rule 12(b)(3) for improper venue and, alternatively, to transfer to the Central District of California.
- Court analyzes scope and enforceability of the forum clause, including whether Plaintiff is bound as a non-signatory and whether the clause covers the claims at issue.
- Court concludes the forum selection clause applies and grants dismissal without prejudice, denying transfer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Galaxy forum clause cover the plaintiff's claims? | KTV Media argues clause does not cover Website disputes under separate agreements. | Galaxy contends clause extends to all actions arising out of or in connection with the agreement and transactions. | Yes; clause broadly covers the claims. |
| Is the forum clause mandatory rather than permissive? | Plaintiff argues for flexibility to sue in other forums. | Clause uses exclusive jurisdiction language and is mandatory. | Mandatory; exclusive California forum. |
| Is the non-signatory (KTV Media International) bound by the clause? | Plaintiff contends it is not a signatory and not bound. | Plaintiff is closely related to signatory KTV Media; bound as successor/related party. | Yes; as a closely related successor, bound by clause. |
| Does rescission of the contract affect enforceability of the forum clause? | Rescission purportedly defeats Galaxy's enforceability of the clause. | Galaxy subjects remain governed by the forum clause despite arguments of rescission. | Rescission not proven; clause remains enforceable. |
| Should the case be dismissed or transferred due to the forum clause? | Plaintiff seeks to pursue in California; or at least allow a transfer option. | Transfer to California would deprive plaintiff of its rights under the clause to sue in California. | Dismissal is appropriate; transfer denied. |
Key Cases Cited
- Phillips v. Audio Active Ltd., 494 F.3d 378 (2d Cir. 2007) (four-part test for forum selection clause enforceability)
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (U.S. 1972) (forum clauses require strong justification to avoid enforcement)
- Aguas Lenders Recovery Group LLC v. Suez, S.A., 585 F.3d 696 (2d Cir. 2009) (non-signatories may be bound to forum clauses under closely related circumstances)
- Roby v. Corp. of Lloyd's, 996 F.2d 1353 (2d Cir. 1993) (forum selection clauses extend to disputes arising in connection with a contract)