Pence v. GEE Group, Inc.
236 F. Supp. 3d 843
S.D.N.Y.2017Background
- Pence, a Kentucky attorney and former chairman of GEE Group, signed a July 9, 2009 Indemnity Agreement at a board meeting in Oakbrook Terrace, Illinois; GEE is incorporated in Illinois but operates principally from Florida.
- GEE's bylaws promised indemnification to directors/officers; the Indemnity promised indemnification and advancement of expenses and contained a choice-of-law (Illinois) and forum-selection clause requiring suit only in an "Illinois Court."
- Pence incurred legal expenses during a federal criminal investigation and an SEC civil action; GEE refused to indemnify or advance fees.
- Pence sued in the Southern District of New York seeking declaratory relief and damages for breach of the Indemnity, breach of the bylaws, and promissory estoppel (based on a letter from GEE’s counsel).
- GEE moved to dismiss on forum non conveniens or to transfer under 28 U.S.C. § 1404(a); the court treated the motion under § 1404(a) and analyzed enforceability/scope of the forum-selection clause.
- The court concluded the Indemnity’s forum-selection clause unambiguously required litigation in Illinois (state or federal courts there), enforced the clause, and granted transfer of the entire case to the Northern District of Illinois for reasons of forum clause and judicial efficiency.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1404(a) or forum non conveniens governs enforcement of a forum selection clause that allows suit in state or federal court | Atlantic Marine doesn't apply when the clause points to a state forum; forum non conveniens should control | Atlantic Marine applies where the transferee is a federal district court even if clause allows state or federal court | Court applied §1404(a) (Atlantic Marine) because the clause permitted suit in federal or state court and transfer was to a federal district court |
| Whether the Indemnity’s forum-selection clause was mandatory and reasonably communicated | Pence did not contest notice; argued definition of "Illinois Court" was ambiguous and could mean any federal or state court | GEE argued "Illinois Court" means courts located in Illinois; clause is mandatory and covers disputes arising out of the Indemnity | Court held clause was mandatory, reasonably communicated, and unambiguously limited suits to Illinois courts (state or federal) |
| Whether the Indemnity claim should be transferred under §1404(a) despite plaintiff's choice of forum | Pence argued inconvenience and judicial resource waste if other claims stayed in NY | GEE argued public-interest factors and forum clause favor transfer | Under Atlantic Marine private-interest factors are disregarded; plaintiff failed to show public-interest factors overwhelmingly disfavor transfer; Indemnity claim must be transferred |
| Whether the remaining claims (bylaws and promissory estoppel) should remain in SDNY or be transferred | Pence argued they are not governed by the Indemnity clause and could remain in NY | GEE argued the broad clause covers "any action arising out of or in connection with" the Indemnity; transfer promotes efficiency | Even assuming the clause did not apply, §1404(a) factors (efficiency, overlapping facts, law familiarity) favored transfer of these claims to Illinois; entire case transferred |
Key Cases Cited
- Atlantic Marine Constr. Co. v. U.S. Dist. Court, 134 S. Ct. 568 (Sup. Ct.) (forum-selection clauses receive controlling weight and §1404(a) governs transfers to federal courts)
- Phillips v. Audio Active Ltd., 494 F.3d 378 (2d Cir.) (forum-selection clause enforceability: communicated, mandatory, and scope)
- Martinez v. Bloomberg L.P., 740 F.3d 211 (2d Cir.) (burden to overcome a valid forum-selection clause)
- N.Y. Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102 (2d Cir.) (factors for §1404(a) transfer analysis)
- Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22 (Sup. Ct.) (forum-selection clause precedent on weight to be given parties’ contractual forum choice)
- Paper Express, Ltd. v. Pfankuch Maschinen GmbH, 972 F.2d 753 (7th Cir.) (distinguishing mandatory vs permissive forum-selection language)