DONNAY USA LIMITED, Plаintiff, -against- DONNAY INTERNATIONAL S.A., INTERNATIONAL BRAND MANAGEMENT LIMITED, BRANDS HOLDINGS LIMITED, Defendants.
15-CV-5969 (JMA) (SIL)
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK
September 1, 2016
AZRACK, United States District Judge
For Online Publication Only
Jerry Choe
48 Jericho Turnpike
Jericho NY, 11753
Attorney for Plaintiff
Robert W. Sacoff
Seth I. Apple
Pattishall, McAuliffe, Newbury, Hilliard & Geraldson LLP
200 S. Wacker Drive, Suite 2900
Chicago, Illinois 60606
Anthony DiPaolo
Anthony DiPaolo, P.C.
235-07 Braddock Avenue
Queens Village, New York 11428
Attorneys for Defendant
MEMORANDUM & ORDER
AZRACK, United States District Judge:
Plaintiff Donnay U.S.A. Limited filed this suit against defendants Donnay International S.A., International Brand Management Limited, and Brands Holdings Limited, alleging that defendants breached a license agreement between the parties and tortiously interfered with plaintiff‘s business. Before the Court is defendants’ motion to dismiss the complaint. Defendants move to dismiss based on the agreement‘s forum selection clause. Defendants also argue that
I. BACKGROUND
On September 30, 2015, plaintiff Donnay U.S.A. Limited (“plaintiff“) filed this action in state court against defendants Donnay International S.A. (“Donnay International“), International Brand Management Limited (“IBML“), and Brands Holdings Limited (“BHL“), regarding the parties’ license agreement. Plaintiff‘s counsel is also the president of the plaintiff. Defendants removed the case to this Court in October 2015.
A. The Parties and the License Agreement
In March 2009, plaintiff entered into a license agreement with defendants Donnay International, IBML, and BHL. (Compl. ¶¶ 5–6, ECF No. 1-1.) The license providеd plaintiff with the exclusive right to manufacture and sell “Donnay” brand golf and tennis apparel and accessories in the United States, Canada, Japan, and Korea, “in exchange for an aggressive minimum royalty payment.” (Id. ¶¶ 6–7.)
The license agreement named plaintiff as licensee, Donnay International as licensor, IBML as agent for licensor, and BHL as guarantor of the licensor‘s obligations under the agreement. (Donnay Trademark License (“License“) at 1, Ex. A to Compl., ECF No. 1-1.) Donnay International is registered in Belgium and has its principal place оf business in Belgium. (Id.) IBML and BHL are both incorporated under the laws of England and Wales and have their registered offices in the United Kingdom. (Id.)
The license provided that plaintiff was entitled to sell products wholesale online through several websites. (Id. ¶ 2.5.) Under the license terms, defendant Donnay International or its
According to the license, if plaintiff breached any material term of the agreement, the licensor reserved the right to terminate the agreement by giving written notice of the termination. (Id. ¶ 17.9.) Upon termination, any proprietary rights held by plaintiff were to vest “absolutely, irrevocably and unconditionally in the licensor.” (Id. ¶ 18.1.) Additionally, plaintiff agreed that upon the agreement‘s expiration or termination, or upon Donnay International‘s or IBML‘s request, plaintiff would transfer the internet domain names back to the licensor. (Id. ¶ 2.7.)
The license included a forum selection clause, which states: “This Agreement shall be governed and construed in accordance with the laws of England and Wales and the parties for this purpose hereby submit to the exclusive jurisdiction of the courts of England and Wales.” (Id. ¶ 26.9.)
B. The Parties’ Business Relationship and the Amendment to the License Agreement
From the beginning of the business relationship in 2009, the parties had disputes, including disagreements over plaintiff‘s administrative access to the website www.donnay.com. (Compl. ¶¶ 15–17.) For example, after the parties agreed to the license, “[t]he licensor demanded that the plaintiff sign two supplemental agreements regarding the functionality of the website,” to which plaintiff objected.1 (Id. ¶ 16.) The disputes culminated in a disagreement over the minimum royalty payments due under the license. (Id. ¶ 17.) In 2012, the licensor “threatened to cancel the whole license agreement.” (Id. ¶ 18.) Plaintiff maintains that the licensor did not have this power and only had the right to convert the agreement to a non-exclusive license. (Id. ¶ 22.) According to plaintiff, the licensor only had the right to convert—rather than terminate—the agreement
Because plaintiff‘s “enormous financial investment and business efforts had resulted in [plaintiff] being on the brink of vastly profitable future,” the licensor proposed an amendment to the agreement in order to “gain[ ] control of [plaintiff].” (Compl. ¶ 18.) The proposed amendment required that plaintiff pay $1 million to the licensor within “a very short period of time,” even though the licensor “knew full well that the licensee was exрeriencing financial difficulties . . . .” (Id. ¶¶ 19, 21; First Supplemental Deed to License Agreement (“Amendment“) at ¶ 17.4, Ex. F. to Compl., ECF No. 1–2.) Plaintiff signed the proposed amendment during the summer of 2012 because the licensor took advantage of plaintiff‘s financial difficulties and used “economic duress, compulsion, and coercion” to force plaintiff to agree. (Compl. ¶¶ 21–23.)
The amendment included its own forum selection clause, providing:
This deed and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the laws of England and Wales and the parties for this purpose hereby submit to the exclusive jurisdiction of the courts of England and Wales.
(Amendment ¶ 3.)
Initially, plaintiff avoided any breach of the amended agreement by making the payments required for August and September 2012. (Compl. ¶ 24.) However, plaintiff was unable to make the payments due in October 2012. (Id.) The “licensor” then attempted a “take-over” of the business, in which the licensor would receive a majority and controlling interest in plaintiff and plaintiff‘s prinсipals would eventually be terminated. (Id. ¶ 25.) After plaintiff rejected this proposal, in January 2013, the “licensor purported to terminate” the parties’ license agreement.
According to plaintiff, defendants’ notice of termination should be construed to terminate only the amendment and not the license in its entirety because the notice specifically refers to the “Trade Mark License Agreement dated 29 May 2012 . . . as amended,” rather than “any document executed in 2009.” (Compl. ¶¶ 26–27.) In other words, plaintiff alleges that the original license agreement, without the 2012 amendment, is in “full force and effect as a non-exclusive license.” (Id. ¶¶ 29–30.) Consequently, plaintiff maintains that the licensor has breached the terms of the agreement and has “independently and separate and apart from the agreement, intentiоnally and tortiously interfered with licensee‘s active and prospective business relations and tortiously interfered with its prospective economic advantages.” (Id. ¶ 30.)
Specifically, plaintiff alleges that the licensor sent a letter to one of plaintiff‘s major customers, Tennis Warehouse, stating that Tennis Warehouse was “illegally dealing in the licensor‘s product.” (Id. ¶ 31.) As a result, Tennis Warehouse put plaintiff‘s account “on hold,” causing substantial loss of business. (Id.) Then, “either the licensor or one of its agents contacted licensee‘s manufacturer in China, Wu Yi Tan, and again alleged that the license agreement had been terminated . . . .” (Id. ¶ 32.) Plaintiff had to find a new manufacturer, but defendants are trying to seize these new shipments as well. (Id.)
The complaint also alleges that defendants have taken down plaintiff‘s Facebook page and are directing internet traffic away from plaintiff‘s website, resulting in substantial harm to
Based on these facts, plaintiff asserts five claims. First, plaintiff seeks a declaratory judgment that the original license is in effect and the 2012 amendment is null and void. (Id. ¶ 38.) Second, plaintiff asserts a claim for business disparagement because defendants knowingly published writings calculated to prevent others from engaging in business with plaintiff. (Id. ¶ 40.) Third, plaintiff alleges tortious interference with prospective advantage because defendants knowingly prevented plaintiff from entering into contracts with vendors, manufacturers, and customers. (Id. ¶ 43.) Fourth, plaintiff brings a claim for tortious interference with existing contracts because defendants told other parties that the license agreement had been terminated. (Id. ¶ 46.) Fifth, and finally, plaintiff asserts a claim for tortious destruction of goodwill because defendants diverted internet traffic away from plaintiff‘s websites. (Id. ¶ 49 (misnumbered ¶ 40).)
The defendants have moved to dismiss this action, based on the forum selection clauses in the original license and the amendment. For the reasons set forth below, defendants’ motion to dismiss is granted.2
II. DISCUSSION
A. Legal Standard
“‘[T]he appropriate way to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of forum non conveniеns.‘” Martinez, 740 F.3d 211, 217 (2d Cir. 2014) (quoting Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S. Ct. 568, 580 (2013)). In determining whether to dismiss a case based on a forum selection clause, the
A forum selection clause is presumed valid and enforceable, unless the resisting party can show that enforcement would be unreasonable under the circumstances or that the forum selection clause itself is invalid. Magi XXI, Inc. v. Stato della Citta del Vaticano, 714 F.3d 714, 720–21 (2d Cir. 2013). Courts “give ‘substantial deference’ to the forum selected by the parties, particularly where this choice ‘was made in an arm‘s-length negotiation by experienced and sophisticated businessmen.‘” Id. at 721 (quoting New Moon Shipping Co. v. MAN B & W Diesel AG, 121 F.3d 24, 29 (2d Cir. 1997)).
Courts apply a four-part analysis in determining whether to enforce a forum selection clause. Initially, the court considers: (1) “whether the clause was reasonably communicated to the party resisting enforcement“; (2) whether the clause is mandatory, rather than permissive; and (3) “whether the claims and parties involved in the suit are subject to the forum selection clause.” Id. If the first three inquiries are answered in the affirmativе, the clause is presumptively enforceable. Id. Finally, the court asks: (4) “whether the resisting party has rebutted the presumption of enforceability by making a sufficiently strong showing that ‘enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching.‘” Id. (quoting Phillips v. Audio Active Ltd., 494 F.3d 378, 383–84 (2d Cir. 2007)).
“The overriding framework governing the effect of forum selection clauses in federal courts . . . is drawn from federal law.” Martinez v. Bloomberg LP, 740 F.3d at 217. Thus, to answer whether a forum selection clause is enforceable, i.e., step four in the analysis, courts apply federal law. Id.; see also Phillips, 494 F.3d at 383–84; Amto, LLC v. Bedford Asset Mgmt., LLC, No. 14-CV-9913, 2016 WL 1030141, at *5 (S.D.N.Y. Mar. 10, 2016). “In answering the
B. Analysis
1. Threshold Issues
Before discussing the application of the four-part framework, there are several threshold issues to be addressed.
First, defendants moved to enforce the forum selection clause pursuant to
Second, as explained above, a forum selection clause is interpreted according to the law selected in a valid choice-of-law provision. See Martinez, 740 F.3d at 217–18; Phillips, 494 F.3d at 386. However, neither party cites English law in their briefs; instead, they rely solely on federal law in addressing the scope of the forum selection clause. Therefore, the parties have impliedly consented to application of general contraсt law principles and federal precedent to the questions of interpretation at parts two and three of the analysis. See Phillips, 494 F.3d at 386 (citing Motorola Credit Corp. v. Uzan, 388 F.3d 39, 61 (2d Cir. 2004); John Wyeth & Brother Ltd. v. CIGNA Int‘l Corp., 119 F.3d 1070, 1074 (3d Cir. 1997)) (finding that where the parties’ briefings did not cite English law, despite an English choice-of-law provision, the court would apply “general contract law principles and federal precedent to discern the meaning and scope of the forum clause“).
Third, plaintiff contends that only the forum selection clause in the original license is relevant to the analysis. In the complaint, plaintiff alleges that defendants’ notice of termination, given in January 2013, terminated only the 2012 amendment. Therefore, plaintiff contends that the original license is the sole agreement in effect. Although plaintiff suggests that the amendment‘s forum selection clause would not survive the amendment‘s termination, plaintiff provides no authority to support this position. Moreover, plaintiff‘s argument on this point is irrelevant because both clauses are enforceable and encompass all of plaintiff‘s claims.
The original license provides: “This Agreement shall be governed and cоnstrued in accordance with the laws of England and Wales and the parties for this purpose hereby submit to the exclusive jurisdiction of the courts of England and Wales.” (License ¶ 26.9.) The amendment‘s clause states:
This deed and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the laws of England and Wales and the parties for this purpose hereby submit to the exclusive jurisdiction of the courts of England and Wales.
(Amendment ¶ 3.)
Under the four-part analysis, both forum selection clauses are presumptively enforceable. At the first step, both the original license‘s clause and the amendment‘s clause were reasonably communicated, in clear and unambiguous language, through the contracts that plaintiff signed. See Effron v. Sun Line Cruises, Inc., 67 F.3d 7, 9 (2d Cir. 1995). Second, both clauses state that the “agreement” or “deed” ”shall be governed and construed in accordance with the laws of England and Wales and the parties for this purpose hereby submit to the exclusive jurisdiction of the courts of England and Wales.” (License ¶ 26.9; Amendment ¶ 3 (emphases added).) “A forum selection clause is viewed as mandatory when it confers exclusive jurisdiction on the designated forum or incorporates obligatory venue language.” Phillips, 494 F.3d 378, 386 (2d Cir. 2007); cf. John Boutari & Son, Wines & Spirits, S.A. v. Attiki Importers & Distributors Inc., 22 F.3d 51, 53 (2d Cir. 1994) (finding a clause was not mandatory when it did not contain specific language of exclusion). Plaintiff has failed to raise any argument that this language is permissive, rather than mandatory. There is also no dispute that all the parties involved in this suit were parties to the agreement and, thus, subject to the clause.
Here, the language of the original forum selection clause encompasses plaintiff‘s tort claims. See Direct Mail, 2000 WL 1277597, at *3, *6 (finding that a clause encompassed copyright and tort claims when the clause stated that the “Agreement shall be governed by and construed in accordance with English law and the parties hereto agree that the English courts shall have exclusive jurisdiction“); Ronar, Inc. v. Wallace, 649 F. Supp. 310, 312 (S.D.N.Y. 1986) (finding that a clause that dictated “[t]he courts at Tirschenreuth, Federal Republic of Germany, shall have jurisdiction and venue” applied to both contract and tort claims). In Direct Mail, the court held that an essentially identical forum selection clause encompassed the plaintiff‘s tort and
Plaintiff provides no case law suggesting a narrower scope for the clause at issue here. Here, all five of plaintiff‘s claims require reference to the parties’ rights and duties under the license. First, plaintiff requests a declaratory judgment that the original license agreement is in effect and the 2012 amendment is null and void. This is clearly a contract claim, which requires interpretation of the agreement‘s provisions regarding termination. Similarly, all of plaintiff‘s tort claims involve defendants’ statements that the license agreement is no longer in effect and defendants’ alleged interference with plaintiff‘s customers, manufacturers, and websites. These claims all require reference to the agreement to determine whether defendants gave proper notice
Plaintiff‘s arguments to rebut the presumption of enforceability fail.
First, plaintiff argues that the forum selection clause is unenforceable, based on fraud and overreaching. Notably, these arguments have little bearing on the forum selection clause in the original license аgreement because plaintiff presents these arguments almost exclusively in the context of the 2012 amendment. Plaintiff argues he only agreed to the amendment because defendants threatened to terminate the agreement if he did not agree. (Pl.‘s Mem. at 6, ECF No. 18.) Plaintiff has also alleged that defendants had no right to terminate the agreement. Plaintiff‘s arguments are insufficient to rebut the presumption of enforceability.
“‘Fraud in the inducement of [an agreement], as distinct from fraud in the inducement of the forum selection clause specifically, is insufficient to defeat the forum selection clause.‘” Dollar Phone Access, Inc. v. AT & T Inc., No. 14-CV-3240, 2015 WL 430286, at *8 (E.D.N.Y. Feb. 2, 2015) (quoting J.B. Harris, Inc. v. Razei Bar Indus., Ltd., 37 F. Supp. 2d 186, 191 (E.D.N.Y. 1998), aff‘d, 181 F.3d 82 (2d Cir. 1999)); see Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 n.14 (1974). Plaintiff argues that he was fraudulently coerced into entering the amendment, without any specific allegations about the forum selection clause‘s inclusion. Therefore, plaintiff‘s fraud argument fails.
Plaintiff‘s argument based on overreaching also fails. Plaintiff generally argues that he would be deprived of his day in court if defendants’ choice of forum were enforced. Plaintiff
Plaintiff‘s efforts to invalidate the amendment‘s forum selection clause bаsed on economic duress also fail. Plaintiff alleges that he entered into the amendment only after defendants’ threatened to terminate the license if he did not. However, defendants’ threats to terminate the
Plaintiff also argues that defendants should be estopped from enforcing the forum selection clause here because in plaintiff‘s previous lawsuit against defendant Donnay International, defendant consented to this Court‘s jurisdiction for purposes of its motion to dismiss under
Finally, plaintiff generally argues that enforcement of the clause would be unjust. Plaintiff‘s counsel explains that although he is an attorney, he is not experienced and cannot afford to litigate abroad. However, the costs of litigation in a foreign country are insufficient to overcome enforcement of a forum selection clause. See, e.g., Effron, 67 F.3d at 11 (noting that a forum is not inconvenient solely because it requires travel); Phillips, 494 F.3d at 393 (upholding forum selection clause in England because although litigation may be costly or difficult abroad, it was neither impossible nor unforeseeable, given that the plaintiff had agreed to litigate in England). Plaintiff‘s counsel, as a businessman and an attorney, cannot now be excused from the terms to which he agreed. Therefore, enforcement of the forum selection clause here is not unfair.
III. CONCLUSION
I have considered plaintiff‘s remaining arguments and find that they are without merit.4
For the reasons set forth above, defendants’ motion to dismiss is granted, based on forum non conveniens, and the case is dismissed in its entirety. The Clerk of Court is directed to enter judgment accordingly and close the case.
SO ORDERED.
Dated: September 1, 2016
Central Islip, New York
/s/ (JMA)
JOAN M. AZRACK
UNITED STATES DISTRICT JUDGE