Leviton Manufacturing Co. v. Reeve
942 F. Supp. 2d 244
E.D.N.Y2013Background
- Levitón sued four defendants for breach of contract, fraud, and negligent misrepresentation related to a stock sale of ECES.
- ECES was Florida-incorporated; Reeves owned all ECES shares; Levitón purchased ECES stock for $2 million on May 6, 2009.
- Stock Purchase Agreement included reps/warranties (4.2), access to ECES records (6.1-6.2), and closing conditions (7).
- Garel, as attorney for the Reeves, issued an Opinion Letter stating no litigations could adversely affect ECES or sellers.
- After closing, EEOC racial-discrimination claims against ECES emerged; Levitón settled related matters and incurred fees; Levitón filed this action in 2011.
- The court later refined its rulings: Attorney Defendants lacked NY long-arm basis for jurisdiction; Reeves defendants’ forum clause basis gave jurisdiction; subject matter jurisdiction existed via diversity; punitive damages claim was dismissed; fraud claims against Reeves survived.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over Attorney Defendants | Garel-associated forum clause binds non-signatory | Forum clause does not bind non-signatory Garel | Attorney Defendants lacked jurisdiction (11) |
| Forum selection clause binding non-signatory | Garel closely related to Reeves; clause should bind | Non-signatory not sufficiently closely related | Clause not enforceable against Garel; no jurisdiction over Attorney Defendants (2) |
| Subject matter jurisdiction | Diversity exists between Delaware Levitón and Florida defendants; damages exceed $75k | Diversity insufficient due to forum/RES; no jurisdiction | Diversity jurisdiction exists; case not dismissed for lack of subject matter jurisdiction (2) |
| Fraud claims sufficiency under Rule 9(b) | Fraud alleged with particularity against Reeves and Garel | Claims vague as to individual defendants; insufficient specificity | Fraud claims survive; Rule 9(b) satisfied for pleaded parties (1) |
| Punitive damages viability under NY law | Punitive damages allowed for egregious fraud in contract context | Punitive damages not allowed for ordinary breach absent public impact | Punitive damages dismissed; no public-harm basis (1) |
Key Cases Cited
- D.H. Blair & Co. v. Gottdiener, 462 F.3d 95 (2d Cir. 2006) (forum-selection clauses can bind to enforce jurisdiction)
- Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 171 F.3d 779 (2d Cir. 1999) (long-arm and forum considerations for jurisdiction)
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (U.S. 1972) (forum-selection clauses should be enforced (economic predictability))
- Phillips v. Audio Active Ltd., 494 F.3d 378 (2d Cir. 2007) (enforceability of forum-selection clauses; presumption of enforceability)