Summary
holding the same for clause governing any action "arising out of or relating to this Agreement"
Summary of this case from Jones v. Ponant U.S. LLCOpinion
No. 01 CIV. 11815 (DLC).
June 20, 2002
For Plaintiff: Dan Cherner, Esq. of the Law Offices of Dan Cherner from New York, NY.
For Defendants: Jeffrey W. Gutchess of Hunton Williams from New York, NY.
OPINION AND ORDER
In this diversity action, plaintiff Kennon Brennen ("Brennen") alleges that companies which he helped to create, defendants Phyto-Riker Pharmaceuticals, Ltd. ("Phyto-Riker Ltd.") and Phyto-Riker Pharmaceuticals, Inc. ("Phyto-Riker Inc.") (collectively "Phyto-Riker"), breached their contract of employment with him. Phyto-Riker has its principal place of business in Ghana and is engaged in the manufacture and sale of pharmaceuticals in Africa. Brennen also asserts claims of defamation against all defendants and tortious interference with a business relationship against defendant Stephen Cashin. Relying on a forum selection clause in the employment contract, the defendants have moved pursuant to Rule 12(b)(3), Fed.R.Civ.P., to dismiss the action for lack of venue. For the reasons that follow, defendants' motion is granted.
The defendants have also moved to dismiss the complaint pursuant to Rule 12(b)(6), Fed.R.Civ.P., for failure to state a claim. Brennen has cross-moved for partial summary judgment and has also moved to strike certain portions of affidavits submitted by the defendants in support of their motion to dismiss and in opposition to plaintiff's motion for partial summary judgment.
BACKGROUND
The uncontested facts presented in connection with the venue motion show the following. Brennen is the co-founder of Phyto-Riker, which manufactures and distributes drugs and pharmaceuticals in Africa. Phyto-Riker Inc. was created in 1996, for the purpose of bidding for the Ghanaian government-owned pharmaceutical company GIHOC Pharmaceuticals Ltd. The GIHOC acquisition was completed in March 1998.
Courts may consider materials outside the pleadings when deciding a motion to dismiss for improper venue under Rule 12(b)(3), Fed.R.Civ.P. See, e.g., New Moon Shipping Co., Ltd. v. Man B W Diesel AG, 121 F.3d 24, 26 (2d Cir. 1997).
Brennen obtained Phyto-Riker Inc.'s initial equity investment from JVW Investments and obtained a loan for Phyto-Riker Inc. convertible to equity from Modern Africa Growth and Investment Company ("Modern Africa"), a direct equity investment fund established to invest in Sub-Saharan Africa. JVW Investments' principal, J. Virgil Waggoner, became Chairman of the Board of Directors of Phyto-Riker Inc. Two of Modern Africa's officers, defendants Stephen Cashin and Francis Nyirjesy, became Directors of Phyto-Riker Ltd.
Phyto-Riker Ltd. is a Bermuda corporation and Phyto-Riker Inc. is a Delaware corporation; both companies have their principal places of business in Ghana. After the GIHOC acquisition, Phyto-Riker retrofitted the GIHOC plant, established sources of supply, established relations with customers, recruited and trained personnel for commencement of operations, and raised capital for the African operations. Phyto-Riker's only operating company, Phyto-Riker (GIHOC), is located in Ghana, as are its plant and inventory. Phyto-Riker's research is done in Ghana, its revenues are generated in Ghana, and more than 97% of Phyto-Riker's current employees live and work in Ghana. Phyto-Riker has registered an array of 23 products with 22 countries in Africa, and sells to both private distributors and public sector clients, such as the governments of Ivory Coast, Mali, Senegal, Gabon, Benin, and Ghana. Brennen, who became President and CEO of Phyto-Riker Inc. in March 1996, generally spent less than six months in any given year in Africa, but split his time between the United States and Africa evenly in late 1998 and early 1999.
The allegations in the complaint include the following. On April 10, 1998, Brennen executed a contract of employment with J. Virgil Waggoner, then Chairman of Phyto-Riker Inc. The contract was subsequently assigned and transferred to Phyto-Riker Ltd. On October 24, 2001, Brennen gave notice of resignation of his position to take effect on November 30, 2001. The next day, on October 25, the Board of Directors of Phyto-Riker Ltd. terminated Brennen's employment, effective immediately. Brennen claims that the defendants breached the employment contract by not paying him the severance owed under the contract and by failing to effect and pay compensation for a consultancy agreement provided for in a modification to the contract.
Before resigning, Brennen had arranged a meeting with several major pharmaceutical company executives regarding the HAMDAT trust, a trust set up by the plaintiff to raise funds to distribute drugs to combat HIV and AIDS in Africa. Brennen alleges that this business opportunity was solely his and was created by him. He alleges that defendant Cashin "unilaterally cancelled" the meeting. As a result, Brennen contends that his credibility has been damaged and a business opportunity lost.
Finally, the plaintiff alleges that the defendants, and specifically Cashin, have falsely told others that Brennen "stole" the severance payment that he had received. The defendants have refused to comply with Brennen's demands that these false statements be retracted in writing.
The defendants have submitted evidence that Brennen transferred money from the company to himself the day before he resigned.
DISCUSSION
The defendants move to dismiss the complaint for improper venue based on a forum selection clause in the employment agreement between Phyto-Riker and Brennen. For a forum selection clause to be effective the language delineating the "choice of forum must be mandatory rather than permissive." John Boutari Son, Wines Spirits, S.A. v. Attiki Importers Distrib., Inc., 22 F.3d 51, 53 (2d Cir. 1994); see also U.S. Fid. Guar. Co. v. Petroleo Brasileiro S.A. — Petrobras, No. 98 Civ. 3099 (JGK), 2001 WL 300735, at *14 (S.D.N.Y. Mar. 27, 2001). While a forum selection clause will "generally not be enforced without some further language indicating the parties' intent to make jurisdiction exclusive," where "mandatory venue language is employed, the clause will be enforced." John Boutari Son, 22 F.3d at 52-53 (citations omitted). It is well-settled that an exclusive forum selection clause is presumptively valid in international transactions. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972); see also Roby v. Corp. of Lloyd's, 996 F.2d 1353, 1362-63 (2d Cir. 1993).
The presumptive validity of a forum selection clause may only be overcome if "enforcement is shown by the resisting party to be `unreasonable' under the circumstances." Bremen, 407 U.S. at 10. Forum selection clauses are unreasonable:
(1) if their incorporation into the agreement was the result of fraud or overreaching; (2) if the complaining party will for all practical purposes be deprived of his day in court, due to the grave inconvenience or unfairness of the selected forum; (3) if the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy; or (4) if the clauses contravene a strong public policy of the forum state.Roby, 996 F.2d at 1363 (citations omitted). Where there is a valid forum selection clause, it is "incumbent on the party seeking to escape his contract to show that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court." Bremen, 407 U.S. at 18; see also New Moon Shipping Co. v. Man B W Diesel AG, 121 F.3d 24, 32 (2d Cir. 1997);Effron v. Sun Line Cruises, Inc., 67 F.3d 7, 11 (2d Cir. 1995).
The clause at issue here states:
To the fullest extent permissible by law, the parties irrevocably submit to the exclusive jurisdiction of the New York State Supreme Court, New York County, or the United States District Court for the Southern District of New York, or the courts of Ghana, Africa at the sole discretion of Phyto-Riker over any action, suit or proceeding arising out of or relating to this Agreement.
(Emphasis supplied). The defendants seek to exercise their right to select a Ghanaian court as the forum for the plaintiff's claims.
The forum selection clause in Brennen's employment contract is a mandatory forum selection clause. The inclusion of the phrase "exclusive jurisdiction" indicates an intent that any dispute "arising out of or relating to" the employment agreement be filed in one of the fora specified — New York State Court in New York County, the federal district court in the Southern District of New York, or a court in Ghana. The fact that the forum selection clause permits suit in three venues does not render it a permissive clause, for the ultimate selection of the forum is left to the "sole discretion" of Phyto-Riker. See, e.g., Jamco Prod., Inc. v. Topsytail Co., No. 93 Civ. 3245 (MGC), 1993 WL 524916, at *2 (S.D.N.Y. Dec. 14, 1993); cf. Aloha Group, Inc. v. ITT Commercial Fin. Corp., No. 86 Civ. 9890 (RWS), 1987 WL 17421, at *2 (S.D.N.Y. Sept. 16, 1987) (construing clause with "sole discretion" language to be permissive). Accordingly, through this motion the defendants are "simply implement[ing] their contractual right to select the forum." Jamco Prod., 1993 WL 524916, at *2.
Brennen contends that, even if the forum selection clause is mandatory, it should not be enforced because this case presents an "essentially local dispute" and will impose serious inconvenience and great cost on all parties required to litigate in Ghana. Brennen's argument directly contravenes the commitment he made in his employment contract that he would not contend that Ghana was an "inconvenient forum." The provision of Brennen's employment contract which contains the forum selection clause states:
The parties irrevocably waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the laying of the venue of any such action, suit or proceeding brought in such a court or that any such action, suit or proceeding is an inconvenient forum.
The "costs and difficulties" entailed in suing in Ghana, "being but the obvious concomitants of litigation abroad, do not satisfy The Bremen [inconvenience] standard." Effron, 67 F.3d at 10 (citation omitted).
Brennen further argues that enforcing the forum selection clause will contravene a strong public policy of New York State since the employment agreement mandates that New York law shall govern all disputes arising out of the agreement, and a Ghanaian court is less qualified to interpret the laws of New York. That New York courts are undoubtedly more familiar with New York law does not implicate a "public policy" warranting disregard of the parties' agreement. Indeed, United States courts have permitted foreign courts to apply United States law, even complex statutory regimes, to disputes. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (enforcing arbitration clause requiring Japan's Commercial Arbitration Association to apply United States antitrust law); Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974) (enforcing agreement that disputes would be arbitrated in Paris in a suit based on the securities laws, specifically § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5).
Finally, the plaintiff argues that the forum selection clause does not extend to his claims for tortious interference with a business opportunity and defamation. The reach of a forum selection clause is not always limited to a claim for breach of the contact containing the clause. Roby, 996 F.2d at 1361. The appropriate inquiry is "whether the scope of the forum selection clause extends to tort-based claims arising in conjunction with the contract claims governed by the forum selection clause." New Moon Shipping Co., 121 F.3d at 33. As recently summarized by the Honorable Sidney H. Stein,
circuit courts have held that a contractually-based forum selection clause will also encompass tort claims if the tort claims ultimately depend on the existence of a contractual relationship between the parties, or if resolution of the claims relates to interpretation of the contract, or if the tort claims involve the same operative facts as a parallel claim for breach of contract.
Regardless of the differences in terminology, one common thread running through these various formulations is the inquiry whether the plaintiff's claims depend on rights and duties that must be analyzed by reference to the contractual relationship.Direct Mail Prod. Serv. Ltd. v. MBNA Corp., No. 99 Civ. 10550 (SHS), 2000 WL 1277597, at *6 (S.D.N.Y. Sept. 7, 2000) (citations omitted).
The forum selection clause at issue is broad. It applies to "any action, suit or proceeding arising out of or relating to this Agreement." In New York, an employee cannot state a claim for tortious interference with a business opportunity where the opportunity belongs to his employer and not to him. Robins v. Max Mara, U.S.A., Inc., 923 F. Supp. 460, 468 (S.D.N.Y. 1996); Frishberg v. Esprit de Corp., Inc., 778 F. Supp. 793, 804 (S.D.N.Y. 1991). The success of Brennan's claim for tortious interference with a business opportunity ultimately depends upon an analysis of what business opportunities belong to Phyto-Riker and what business opportunities Brennen may pursue individually under the terms of his employment agreement. In particular, Section 3(b)(iii) of the employment contract provides that Brennen shall not, during his employment with Phyto-Riker, engage in any competitive business "for his own account." Given that Phyto-Riker is in the business of distributing pharmaceuticals in Africa, and that the HAMDAT trust is intended to fund the distribution of HIV/AIDS drugs in sub-Saharan Africa, the success of Brennen's claim will depend at least in part on whether the business opportunity at stake here was rightfully Brennen's as opposed to Phyto-Riker's. Even if the trust's work would have benefited Phyto-Riker, as Brennen asserts, resolution of his claim will nonetheless require the interpretation and application of the employment agreement to his activities. See, e.g., U.S. Fid. Guar. Co., 2001 WL 300735, at *20 (enforcing forum selection clauses where the tortious interference claim "is dependent on and is derivative of the contractual relationship") (collecting cases).
Brennen claims that Cashin defamed him by saying that he stole money from the company, money which Brennen admits he received but to which he contends he was entitled under his employment contract as a severance payment. Because the defamation claim will involve construction of the employment contract and involves the "same operative facts" as Brennen's claim for breach of contract — namely, whether the employment agreement was breached and what amount was due Brennen — it also falls within the scope of the forum selection clause. See, e.g., Spradlin v. Lear Siegler Mgmt. Serv. Co., 926 F.2d 865, 866 (9th Cir. 1991) (slander); Hill v. Pac. Gas Elec. Co., No. 94 Civ. 4247 (FMS), 1995 WL 86567, at *2 (N.D. Cal. Feb. 21, 1995) (slander); but see Berrett v. Life Ins. Co. of the Southwest, 623 F. Supp. 946, 949 (D. Utah 1985) (defamation).
CONCLUSION
The defendants' motion to dismiss this action for lack of venue pursuant to Rule 12(b)(3), Fed.R.Civ.P., is granted and the action is dismissed without prejudice to its filing in Ghana and the defendants' consent to be sued in Ghana.