Forum Selection Clause Applies to a Non-party to Agreement When Found to be "Closely Related" to the Party: Montoya v Cousins Chanos Casino, LLC
In a January 12, 2012 decision by Justice Kornreich, the court granted in part defendants’ motion to dismiss a declaratory judgment action that sought a declaration that plaintiffs complied in all respects with a Subscription Agreement.
The case arose out of an investment in a Law Vegas casino. In response to defendants’ threats of suing plaintiffs for misleading them in an investment, plaintiffs brought this action seeking, among other things, a declaration that they fully performed their obligations to defendants under the terms of the Subscription Agreement and that any common-law claims based on defendants’ investment are preempted by New York's Martin Act, (NY General Business Law §§ 352. After plaintiffs commenced this action, defendants filed suit in Nevada. The Nevada action alleges that plaintiffs engaged in fraud, fraudulent concealment and securities fraud in connection with the solicitation of investments; deceptive trade practices; unjust enrichment; conspiracy; breach of fiduciary duties; aiding and abetting breach of fiduciary duties and gross mismanagement.
On this motion to dismiss, defendants argue that plaintiffs were not signatories to the Subscription Agreement and, as a result, lack standing to bring this declaratory judgment action. Moreover, they claim that the forum selection clause in the Subscription Agreement is inapplicable because the causes of action in the Nevada complaint, common-law and statutory claims, do not arise from the Subscription Agreement. In addition, defendants contend that this action should be dismissed because there is another action pending between the parties in Nevada and this action was commenced solely in an effort to circumvent Nevada's adjudication of defendants' claims.
The Court held that a non-party may enforce a forum selection clause if the non-party is "closely related" to one of the signatories. Here, the Subscription Agreement contains both New York choice of law and forum selection clauses. By signing the Subscription Agreement containing the forum selection clause, defendants agreed to submit to the jurisdiction of the New York courts. Plaintiffs do have standing to bring this action because they are intended beneficiaries of the agreement and/or are closely related to the entity, one of the signatories of the agreement. Dismissal of this action, which was the first filed, is not warranted, since plaintiffs are merely asking the court to declare the parties' respective rights and remedies under the Subscription Agreement. The court observed that New York courts routinely enforce contractual forum selection clauses and pursuant to New York's General Obligations Law (GOL) § 5-1402.
The Court also concluded that no private right of action for damages exists under the Martin Act. Rather, the court reasoned that it appeared that plaintiffs were seeking an impermissible advisory opinion from the court to determine whether they have viable defenses to defendants' lawsuit. Plaintiffs' request for a declaration that they complied in all respects with the Subscription Agreement, requires the court to declare findings of fact, rather than to decide issues of law.
Montoya v. Cousins Chanos Casino, LLC, Sup Ct, New York County, Jan. 12, 2012, Kornreich J, Index No. 651353/2011.
Court Holds Jimmy Kimmel Live is Newsworthy and Dismisses Invasion of Privacy Claim: Sondik v Kimmell
In a December 15, 2011 decision by Justice Schmidt, the court dismissed an action brought against Jimmy Kimmel claiming he invaded the plaintiff’s privacy by using a picture of the plaintiff taken from a YouTube video in a comedic sketch on Jimmy Kimmel Live. The court first addressed a choice of law issue and rejected the plaintiff’s argument that California law applied because the YouTube video was downloaded in California. Applying tort choice of law rules, the court found that New York law, which does not recognize a common law invasion of privacy claim, applied rather than California law, which does recognize such common law claim, because the plaintiff alleged he was domiciled and was injured in New York and, thus, New York had the strongest interest in seeing the rights of its citizens vindicated. The court then found that the claim failed because the Jimmy Kimmel Live segment in which the plaintiff’s image appeared satisfied the broadly construed “newsworthy exception” to New York Civil Rights Law §§ 50 and 51, which are strictly limited to nonconsensual commercial appropriation of a name, portrait or picture of a living person.” Even if the video did not fall into the “newsworthy exception,” the court found First Amendment concerns required dismissal of the claim.
Sondik v Kimmel, Sup Ct Kings County, December 15, 2011, Schmidt, J, Index No. 30176/10
Court Upholds Allegations of Officer Misconduct after Resignation Finding that Fiduciary Duties Survive the Fiduciary Relationship: First Games Publ. Network, Inc. v Afonin
In an August 12, 2011, decision by Justice Bransten, the court denied defendant-former officer’s motion to dismiss plaintiff-computer game developer’s action for breach of contract and breach of fiduciary duty.
Plaintiff developed an internet-based computer game and hired a consulting company to help develop the software for the game. Plaintiff sought to purchase the software company, but after plaintiff and defendant entered into a confidentiality agreement in which defendant agreed not to use plaintiff’s intellectual property for his own benefit or the benefit of third parties, the company was sold to a third party in which defendant had an alleged and undisclosed interest. Defendant resigned shortly thereafter. Plaintiff brought this action alleging that defendant had breached the confidentiality agreement, as well as his fiduciary duties to plaintiff, after learning that the software company was using its intellectual property to develop a similar game.
On defendant’s motion, the court rejected his argument that he was the rightful, registered owner of the game’s domain name because he allegedly re-registered and sought to auction off the domain name after executing the confidentiality agreement. The court also rejected defendant’s interpretation of the agreement as not strictly prohibiting conflicts of interest and otherwise found that plaintiff sufficiently pleaded the elements of a cause of action for breach of contract. As to defendants claims for breach of fiduciary duty, the court held that the heightened pleading requirement of CPLR 3016 “does not require a plaintiff to have perfect knowledge of the facts underlying its claim at the initial stage of a litigation” and that “New York law has recognized duties that outlive the fiduciary relationship” and therefore upheld plaintiff’s allegations in support of its claims despite having alleged misconduct on the part of defendant well after he had resigned.
First Games Publ. Network, Inc. v Afonin, Sup Ct, New York County, August 12, 2011, Bransten, J., Index No. 650092/2010
Counsel Cannot Represent Both LLC and Its Members Due to Conflict of Pecuniary Interests: Big Brows LLC v Devitt
In an August 12, 2011, decision by Justice Demarest, the court granted defendant-LLC member’s motion to disqualify counsel for plaintiffs-LLC and its other individual members, and granted plaintiffs’ cross-motion to dismiss defendant’s counterclaim for prima facie tort. Defendant formed a company for purposes of opening a salon and bar with the individual plaintiffs as managing members. The company entered into an asset purchase agreement to acquire an existing café in order to start their business. The agreement was subject to the approval of an application for a liquor license, and defendant allegedly continued to invest significant start-up monies despite having received an initial denial of the application. When the state liquor authority finally denied the application, plaintiffs sued defendant for breach of the operating agreement and breach of fiduciary duty. Defendant counterclaimed against the other individual members and moved to disqualify plaintiffs’ counsel based on a conflict of interest in connection with her representation of both the company and its members. Plaintiffs cross-moved to dismiss defendant’s counterclaim for prima facie tort. Because defendant’s affirmative defenses and/or counterclaims potentially implicated the individual plaintiffs in terms of breaching their own fiduciary responsibilities to each other and the company – effectively “placing them in an untenable adverse relationship” – the court found there to be an “irreconcilable conflict in the professional allegiance of counsel” and granted defendant’s motion to disqualify. The court also granted plaintiff’s motion to dismiss defendant’s counterclaim, finding that defendant altogether failed to plead the elements of a prima facie tort claim, particularly with respect to “alleg[ations] that plaintiffs were motivated by malice, with the intent to harm defendant.”
Big Brows LLC v Devitt., Sup Ct, Kings County, August 12, 2011, Demarest, J., Index No. 27255/2010
Court Rules Wu-Tang Clan Member's Summary Judgment Motion is Premature: Coles v Wu-Tang Prod., Inc.
In a June 20, 2011 decision in a case originating in the commercial division (Lowe, J.) and on remand from the First Department, Justice Saliann Scarpulla denied the motion for summary judgment by Dennis Coles, a/k/a “Ghostface Killah”, a member of the Wu-Tang Clan, which sought unpaid royalties and unpaid damages stemming from an earlier trial in which Coles successfully challenged the defendants’ respective 25% and 50% withholdings. The First Department modified that earlier decision, by finding that defendant Wu-Tang Productions could continue to receive its 25% deductions and remanded the case for a new calculation of damages. In the new complaint, Coles alleged that he had not received any damages from the first action, nor any royalties that were accounted after the first suit. The court denied the motion for summary judgment as premature because: (1) defendant Diggs had not answered the complaint and, therefore, issue had not been joined; and (2) the damages calculation ordered by the First Department on the remand had not yet been determined and therefore, it was not yet apparent that Wu-Tang Productions had any liability to Coles.
Coles v Wu-Tang Prods., Inc, Sup Ct New York County, June 20, 2011, Scarpulla, J, Index No. 602896/09
Failure to Attach Rule 19-a Statement Does Not Doom Motion: North River Restaurant LLC v Paratore et al.
In a March 28, 2011 decision by Justice Bransten the Court denied plaintiff’s motion to amend and partially granted defendants’ motion for summary judgment. The case arose from a leasing dispute over a restaurant. Defendant Paratore originally operated a restaurant in New York City. After his restaurant went out of business plaintiffs sought to open a new restaurant at the same location, with some of the same personnel, including Paratore. Paratore allegedly told plaintiff that he would either negotiate a lease for the restaurant on the same terms as his old lease or assign his old lease to plaintiff. That didn’t happen and plaintiff brought suit.
Defendants moved for summary judgment and plaintiff moved to amend the complaint. The Court denied the motion to amend because: (i) it was untimely and (ii) it was not supported by any real evidence of merit (the supporting attorney’s affirmation was insufficient as was a client “affidavit” which was not notarized). The Court also granted defendants summary judgment on the fraudulent misrepresentation and negligent misrepresentation claims but allowed the common law fraud and unjust enrichment claims continue because there were issues of fact.
Of note, the Court granted the summary judgment motion even though defendant did not to include in his submission a statement pursuant to Commercial Division Rule 19-a; finding “there is no requirement that the court must deny a motion for summary judgment to dismiss on this ground.”
North River Restaurant LLC v Paratore et al, Sup Ct, New York County, March 28, 2011, Bransten, J, Index No. 110410/2008
Court Extends Judicial Comity to Decision by Canadian Court and Dismisses Complaint by Carl Ichan; Ichan v Lions Gate Entertainment Corp.
In a March 30, 2011 decision by Justice Sherwood, the Court extended judicial comity to a decision by a British Columbia court dismissing a complaint by Carl Icahn against the Lions Gate Entertainment Corp. that asserted claims of shareholder oppression and breach of fiduciary duty, and dismissed the complaint brought in New York County which alleged causes of action for breach of a Standstill Agreement, tortious interference with contractual rights, tortious interference with prospective business relations, and violations of the New York Stock Exchange Rules. In dismissing the complaint, the court adhered to the longstanding policy of New York courts to give preclusive effect to foreign country judgments, especially judgments from Canadian courts where plaintiffs have substantive rights similar to those available in U.S. courts, and in this case, where the British Columbia courts maintain a statutory mechanism to address a shareholder’s claim of oppression. The court also found that the doctrine of res judicata barred Icahn from litigating in New York because (1) the Canadian decision was based on the merits (and not solely on procedural standing) which were similar to the claims raised in the New York action, (2) the Canadian action involved the same parties and series of transactions, (3) Icahn could have, but failed to raise the other claims in the Canadian action, and (4) a judgment for Icahn would effectively invalidate the British Columbia court’s judgment premised on a finding that there was no breach of the Standstill Agreement. The court specifically rejected Icahn’s argument that he could not have asserted the common law breach of contract claim in the Canadian action on the grounds that the mere procedural differences to assert the breach of contract and oppression claims did not foreclose Icahn’s ability to bring the claim; the Canadian statutes providing for oppression remedies also allowed for corporate derivative actions; there were numerous Canadian cases where claims for oppression and breach of contract were alleged; and Icahn failed to identify any Canadian procedural rule barring the claims he asserted in New York.
Icahn v Lions Gate Entertainment Corp., Sup Ct NY County, March 30, 2011, Sherwood, J, Index No. 651076/10
Court Finds Seinfeld Master of Children's Cookbook Domain and Dismisses Slander and Misappropriation Suit: Lapine v Seinfeld
Although not venued in the Commercial Division, in a February 23, 2011, decision by Justice Friedman, the court granted defendants’ motion to dismiss with prejudice. Plaintiff published a cookbook of healthy-food recipes for children. After defendant-publisher later released a similar cookbook written by defendant-Seinfeld’s wife, plaintiff brought suit alleging that defendant-publisher wrongfully used her idea for a cookbook about hiding nutritious ingredients in children’s favorite foods. The court dismissed plaintiff’s cause of action for misappropriation against defendant-publisher because she failed to plead a legally-sufficient relationship between the parties, her idea was not sufficiently novel, and because her cause of action, in any event, would be preempted by the Copyright Act. Plaintiff also sued defendant-Seinfeld for referring to her as, among other things, a “wacko” and “nut job” on David Letterman and E! News in connection with the lawsuit. The court also dismissed plaintiff’s cause of action for defamation, concluding that Seinfeld’s statements were expressions of opinion regarding the lack of merit of plaintiff’s claims and therefore not actionable.
Lapine v Seinfeld, Sup Ct, New York County, February 23, 2011, Friedman, J., Index No. 150051/10
The New York Racing Association and Charles Hayward v Nassau Regional Off-Track Betting Corp. et al, Sup Ct, Nassau County, July 29, 2010, Bucaria, J, Index No. 21993/09
In a July 29, 2010 decision by Justice Bucaria, the court, inter alia, denied a motion to dismiss claims for conversion and unfair competition and granted a motion to dismiss a defamation claim. The claims arose out of Nassau Regional Off-Track Betting’s (“NROTB”) broadcasting, via the internet and television, races at the Aqueduct, Belmont and Saratoga racetracks, which New York Racing Association (“NYRA”) claimed were unauthorized.
NYRA brought claims for, inter alia, conversion and unfair competition and NYRA’s President brought a defamation claim based on statements made about him by NROTB’s President. The court found that NYRA’s “electronically stored data” (such as the live audio-visual simulcast of the races) could be converted even though NYRA was not excluded from access to the electronic data transmission. Similarly, the court found that the misappropriated live audio-visual simulcast could support a claim for unfair competition.
However, the court dismissed the defamation by NYRA’s president, finding that he was a public figure and therefore malice was required to state a defamation claim, which the Complaint was lacking.
