959 F. Supp. 2d 459
S.D.N.Y.2013Background
- Thales (French aerospace co.) contracted with Globalstar for satellites; Globalstar obtained financing that required a $12.5M DSRA and asked Thales to guarantee it. Thales paid the $12.5M and sought reimbursement from Thermo under a 2009 Reimbursement Agreement.
- Thales and Globalstar disputed performance under the Supply Agreement; arbitration awarded Thales ~€52.7M. To continue business, the parties negotiated 2012 Settlement and Release Agreements signed by Thales, Globalstar, and Thermo.
- The Release Agreement broadly released claims relating to the Guarantee and the Reimbursement Agreement; the Settlement Agreement required Thermo to pay Thales $12.5M (by Dec. 31, 2012) and contained a New York choice-of-law and forum-selection clause.
- Thales alleges Thermo failed to pay the $12.5M and sued in the Southern District of New York to collect. Thermo moved to dismiss for failure to state a claim and lack of personal jurisdiction, arguing lack of consideration and that any forum clause is governed by the earlier English agreement.
- The court considered whether Thales plausibly pleaded a binding Settlement Agreement (consideration issue) and whether the Settlement Agreement’s New York forum-selection clause supports personal jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence/enforceability of Settlement Agreement (consideration) | Thales: mutual releases and settlements provided bargained-for consideration; Thales released claims and the Settlement extinguished prior obligations. | Thermo: promise to pay $12.5M merely restates a preexisting duty under the 2009 Reimbursement Agreement (no new consideration). | Court: Denied dismissal — Thales plausibly pleaded consideration; the Release extinguished prior obligations and supports a new bargained-for exchange. |
| Consideration flowing from Thales | Thales: consideration may benefit a third party (Globalstar); settlement and release of large arbitral claims constituted consideration. | Thermo: Thales gave no new consideration to Thermo. | Court: Allegations and agreement language plausibly show Thales provided consideration (benefit to Globalstar and mutual covenants). |
| Preexisting duty rule application | Thales: parties agreed to release prior obligations and form a new agreement, so preexisting duty rule does not bar enforcement. | Thermo: obligations under the Reimbursement Agreement made the Settlement promise redundant. | Court: Release Agreement’s terms plausibly discharged prior duties, so preexisting duty defense premature on Rule 12(b)(6). |
| Personal jurisdiction via forum-selection clause | Thales: Settlement Agreement contains an exclusive New York forum-selection and jurisdiction-consent clause; enforceable and therefore confers jurisdiction. | Thermo: English forum selection (in earlier Reimbursement Agreement) controls; claims must be litigated in England. | Court: Denied jurisdictional dismissal — New York forum-selection clause was communicated, mandatory, applies to these parties/claims, and Thermo made no strong showing against enforcement; English forum was displaced by the Release/Settlement. |
Key Cases Cited
- Phillips v. Audio Active Ltd., 494 F.3d 378 (2d Cir. 2007) (four-part test for enforcing forum-selection clauses)
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (freely negotiated forum-selection clauses presumptively enforceable)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985) (contractual consent can establish minimum contacts for jurisdiction)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard; plausible claim requirement)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard for factual plausibility)
- Diesel Props S.r.l. v. Greystone Bus. Credit II LLC, 631 F.3d 42 (2d Cir. 2011) (elements required to plead a breach of contract)
- Mencher v. Weiss, 306 N.Y. 1 (1953) (benefit to third party constitutes sufficient consideration)