Adar Bays, LLC v. Aim Exploration, Inc.

251 F. Supp. 3d 704, 2017 U.S. Dist. LEXIS 59762
CourtDistrict Court, S.D. New York
DecidedApril 18, 2017
Docket17-CV-1290 (VM)
StatusPublished
Cited by2 cases

This text of 251 F. Supp. 3d 704 (Adar Bays, LLC v. Aim Exploration, Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Adar Bays, LLC v. Aim Exploration, Inc., 251 F. Supp. 3d 704, 2017 U.S. Dist. LEXIS 59762 (S.D.N.Y. 2017).

Opinion

DECISION AND ORDER

VICTOR MARRERO, United States District Judge.

On February 21, 2017, Plaintiff Adar' Bays, LLC (“Adar Bays” or “Plaintiff’) commenced this action against Aim Exploration, Inc. (“Aim Exploration” or “Defendant”) alleging breach of contract and unjust enrichment. (“Complaint,” Dkt. No. 1.)'

By letter dated March 13, 2017, Aim Exploration requested that Adar Bays voluntarily dismiss the action or, in the alternative, that the Court - schedule a. pre-motion conference regarding Aim Exploration’s contemplated motion to dismiss the complaint based on the forum selection clause contained in the note (“Note”) upon which Plaintiffs breach of contract claim is based (the “Note Forum Selection Clause”). (See Dkt. No. 9.) The Note' Forum -Selection Clause states that the parties “consent to exclusive jurisdiction and venue in the courts of the State of New York [.] ” (Dkt. No. 13, Ex. B ¶14.) Defendant argued that courts in this District1 have held that language identifying “courts of the State of New York”' denotes “sovereignty rather than geography” 'and' that venue is proper in state court only. (Dkt. No. 9.)

By letter dated March 21, 2017, Adar Bays-declined to withdraw the Complaint and argued that Aim Exploration failed to address the forum selection clause contained in a securities purchase agreement (“SPA”) entered into in conjunction with the Note, (See Dkt. No. 10.) Adar Bays noted that Section 5(a) of the SPA (the “SPA'Forum Selection Clause”) states that “ [a]ny action brought by either party against the other concerning the transactions contemplated by this agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York” and further states that the parties to the SPA “hereby irrevocably waive any objection to jurisdiction of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.” (Id.; see also Dkt. No. 13, Ex. A Section 5(a).)

In response to Defendant’s pre-motion letter, this Court held a telephone conference with the parties on March 30, 2017, and directed Plaintiff to file an amended complaint and the parties to submit letter briefs addressing the relationship'between the Note Forum Selection Clause and the SPA Forum Selection Clause. (See Dkt. Minute Entry for Mar. 30, 2017.)

On April 6, 2017, Adar Bays filed an amended complaint alleging breaches of both the SPA and Note and a letter brief outlining the relationship between the SPA and Note. (See “First Amended Complaint,” Dkt. No. 11;. Dkt. Nos. 12-13.) Adar Bays argues that the SPA and Note are inextricably linked, as “[t]he Note itself, the conversion right, Plaintiffs right to own and sell Defendant’s common stock, and Defendant’s obligation to ensure the stock is delivered upon conversion all arise from the terms of the SPA.” (Dkt. No. 12.) Adar Bays argues that the two documents are therefore “inextricably linked and the forum selection .clauses must be interpreted together as to not render either superfluous.” (Id.) Finally, Adar Bays cites to recent authority from this District in whieh the Court was faced with identical dueling forum selection clauses and held that “the SPA and the Note should be ‘read and interpreted together,’ since they were executed the same day, involved the same parties, and served the same purpose— [707]*707namely to effectuate [Defendant’s] sale of a convertible note to Plaintiff[,]” and accordingly that the forum selection clauses must be read to include both federal and state courts located in the state of New York. (Union Capital LLC v. Vape Holdings, Inc., No. 16-cv-1343, Dkt. No. 18, at 5 (S.D.N.Y. Mar. 9, 2016).)

In its letter brief dated April 12, 2017, Aim Exploration argues that the Note Forum Selection Clause necessitates jurisdiction in New York state courts only; the Court reached the wrong result in Union Capital; and that the Note is akin to a contract for a loan and therefore independent from the SPA, which is “nothing more than a simple conditional option .,, to acquire stock at some future point by electing to take stock without risk, at a tremendous discount to market, instead of payment in cash from the defendant[.]” (Dkt. No. 14, at 3.)

The Court now construes Aim Exploration’s letter briefs as a motion to dismiss the First Amended Complaint. (“Motion,” Dkt. Nos. 10, 14.) For the reasons stated below, the Motion is DENIED.

I. DISCUSSION

A. LEGAL STANDARD

To determine whether dismissal of a claim based on a forum selection clause is warranted, courts in this Circuit must engage in a four-prong analysis:

The first inquiry is whether the clause was reasonably communicated to the party resisting enforcement. The second step requires us to' classify the clause as mandatory or permissive, i.e., to decide whether the parties are required to bring any dispute to the designated forum or simply permitted to do so. Part three asks whether the claims and parties involved in the suit are subject to the forum selection clause. If the forum clause was communicated to the resisting party, has mandatory force and covers the claims and parties involved in the dispute, it is presumptively enforceable. The fourth, and final, step is to ascertain 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.

Phillips v. Audio Active Ltd., 494 F.3d 378, 383-84 (2d Cir. 2007). (internal citations and quotation marks omitted).

Where the parties have agreed in advance on a forum that is exclusive of all others, and where the forum clause was communicated to a resisting party and covers the claims and parties, involved m the dispute, the contractual choice of forum is accorded a presumption of enforceability. See id. at 383; see also Midamines Sprl Ltd. v. KBC Bank NV, No. 12 Civ. 8089, 2014 WL 1116875, at *9 (S.D.N.Y. Mar. 18, 2014) (“Under the doctrine of forum non conveniens, a valid forum-selection clause requiring suit in a state or foreign forum must be given ‘controlling weight in all but the most exceptional cases.’ ”) (citing Atlantic Marine Const. Co., Inc. v. U.S. Dist. Court for Western Dist. of Texas, — U.S. -, 134 S.Ct. 568, 579, 187 L.Ed.2d 487 (2013)).

In M/S Bremen v. Zapata OffShore Co., the Supreme Court held that this presumption may be rebutted only by a strong showing that the clause should be set aside. 407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). The Second Circuit further elaborated that a mandatory forum selection clause is enforceable unless: “(1) its incorporation was the -result of fraud or overreaching; (2) the law to be applied in the selected forum is fundamentally unfair; (3) enforcement contravenes a strong pub-[708]*708lie policy of the forum state; or (4) trial in the selected forum will be so difficult and inconvenient that the plaintiff effectively will be deprived of his day in court.” Phillips, 494 F.3d at 392.

Ordinarily, a forum selection clause stating that “![a]ny proceeding shall be initiated in the courts of the State of New York, clearly establishes exclusive jurisdiction in New York State courts.” Phoenix Global Ventures, Inc. v.

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Bluebook (online)
251 F. Supp. 3d 704, 2017 U.S. Dist. LEXIS 59762, Counsel Stack Legal Research, https://law.counselstack.com/opinion/adar-bays-llc-v-aim-exploration-inc-nysd-2017.