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Current Developments in the Commercial Divisions of the
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Posted: November 25, 2015

Action Dismissed Based on Forum Selection Clause

On November 13, 2015, Justice Platkin of the Albany County Commercial Division issued a decision in HMS Holdings Corp. v. Moiseenko, 2015 NY Slip Op. 51647(U), dismissing an action based on a forum selection clause.

In HMS Holdings Corp., the plaintiff brought an action for, among other things, breach of fiduciary duty and theft of trade secrets, against a former employee. The parties had entered into both a non-compete agreement and a separation agreement, both of which made Texas the forum for any lawsuit related to the agreements. The plaintiff nonetheless brought the action in New York. When the defendant moved to dismiss based on the forum selection clauses, the plaintiff conceded that the breach of fiduciary claim was governed by the choice of venue clause and asked the court to “sever the claim so that it may be litigated in the proper forum.” However, the plaintiff argued that its claim to “enforce its rights under the Texas Uniform Trade Secrets Act and the common law of trade secrets” was not governed by contract, and thus was not governed by the forum selection clauses. The court disagreed and dismissed the claim, explaining:

Under New York law, forum selection clauses are prima facie valid and enforceable. They provide certainty and predictability in the resolution of disputes. In interpreting a forum selection clause, the Court must be guided by basic principles of contract interpretation which instruct that a contract should be construed to give effect to the parties’ intent as gleaned from the four corners of the document itself, provided that its terms are clear and unambiguous.

. . .

[The plaintiff’s] claim that [the defendant] misappropriated [its] trade secrets is sufficiently related to the confidentiality provisions of the Noncompetition Agreement and Separation Agreements (collectively “Agreements”) as to require the matter to be litigated in the courts of Texas.

The language of the forum selection clauses is mandatory, broad and unequivocal, encompassing not only matters “arising under” the Agreements, but also matters “relating to” any provision thereof. To “arise out of” generally indicates a causal connection, whereas the phrase “relating to” is defined more broadly to simply mean connected by reason of an established or discoverable relation.

. . .

Moreover, while [the plaintiff] has chosen to forego the assertion of contract claims based upon alleged breaches of the confidentiality provisions of the Agreements, a party cannot avoid the consequences of the forum selection clause through artful pleading. . . . [T]he cause of action for trade secret misappropriation is premised largely upon the same operative facts as the unasserted breach-of-contract claim.

The confidentiality provisions of the Agreements also are implicated by the relief sought by [the plaintiff] on its misappropriation claim.

(Internal quotations and citations omitted) (emphasis added).

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