Schmitt v. Lewis-Goetz & Company Inc
3:17-cv-01557
D.S.C.Oct 31, 2017Background
- Four sellers (Plaintiffs) sold Action Industrial Group, LLC to Lewis‑Goetz (Defendant) under a Membership Interest Purchase Agreement (MIPA) that included indemnity provisions and required escrow of part of the purchase price with JPMorgan Chase.
- After closing, Lewis‑Goetz asserted a claim against the escrow funds and notified Chase it would not release escrowed funds until the claim was resolved; Plaintiffs allege Lewis‑Goetz refused joint release instructions and thereby breached the agreements.
- Plaintiffs sued in the District of South Carolina seeking declaratory relief, specific performance, and injunctive relief and alleged breach of contract and breach of the implied covenant of good faith and fair dealing.
- Defendant moved to transfer the case to the Southern District of New York under the MIPA’s forum‑selection clause and alternatively moved to dismiss the implied‑covenant claim.
- Plaintiffs responded that MIPA §12.9 permits any party to seek injunctive relief ‘‘from any court of competent jurisdiction,’’ arguing that provision preserves South Carolina as a proper forum; they did not argue the forum clause was unreasonable under Albemarle.
- The court held the MIPA unambiguous, found §12.9’s injunctive‑relief language inapplicable because Plaintiffs sued to remedy an alleged existing breach (not to prevent a breach), enforced the forum‑selection clause, and granted transfer to S.D.N.Y.; it declined to rule on the alternative dismissal motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MIPA forum‑selection clause bars suit in S.D. of S.C. | §12.9 preserves right to seek injunctive relief in any court of competent jurisdiction, so S.C. court is proper | §12.5 is a mandatory forum‑selection clause requiring exclusive litigation in NY courts; §12.9 does not negate it here | Forum‑selection clause is valid and controls; transfer to S.D.N.Y. granted |
| Whether §12.9 is an exception to §12.5 | Plaintiffs: §12.9 allows injunctive relief in any competent court, so it creates an exception | Defendant: §12.9 preserves equitable remedies but does not override exclusive forum selection for disputes arising from the Agreement | Court: Contract unambiguous; §12.9 applies to preventing breaches but Plaintiffs allege an existing breach, so exception inapplicable |
| Whether court should consider private‑interest factors under §1404(a) | Plaintiffs: (by opposing transfer) implicit reliance on forum convenience | Defendant: Atlantic Marine requires only public‑interest factors when clause exists | Court: Applied Atlantic Marine framework; private factors not considered once clause enforced |
| Whether implied covenant claim should be dismissed (alternative) | Plaintiffs: Facts allege bad faith actions by Lewis‑Goetz that justify implied covenant claim | Defendant: Alleged misconduct is covered by express contract terms; no contractual gap | Court: Declined to rule on dismissal; left to transferee court |
Key Cases Cited
- M/S Bremen v. Zapata Off–Shore Co., 407 U.S. 1 (U.S. 1972) (forum‑selection clauses presumptively valid absent unreasonableness)
- Atlantic Marine Construction Co. v. United States District Court, 134 S. Ct. 568 (U.S. 2013) (when a valid forum‑selection clause exists, courts give it controlling weight and limit §1404(a) analysis)
- Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (U.S. 1988) (forum‑selection clause evidences parties’ agreement on proper forum)
- Albemarle Corp. v. AstraZeneca UK Ltd., 628 F.3d 643 (4th Cir. 2010) (standards for enforceability of forum‑selection clauses in the Fourth Circuit)
- In re Ralston Purina Co., 726 F.2d 1002 (4th Cir. 1984) (district court’s discretion in transfer analysis)