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Posted: June 14, 2016

Court Enjoins Participation in Out-of-State Action Violating New York Forum Selection Clause

On May 27, 2016, Justice Kornreich of the New York County Commercial Division issued a decision in GE Oil & Gas, Inc. v. Turbine Generation Services, L.L.C., 2016 NY Slip Op. 50825(U), enjoining a party from participating in an out-of-state action brought in violation of a forum selection clause.

In GE Oil & Gas, the plaintiff sought “an injunction prohibiting defendants/third-party plaintiffs, Turbine Generation Services, L.L.C. (TGS) and Michael B. Moreno, its principal, from continuing to litigate a parallel action in a Louisiana state court that violates the parties’ contractual forum selection clause.” The court granted the injunction, explaining:

Courts in New York have long recognized the propriety and importance of issuing anti-suit injunctions where a parallel action in a foreign court is being prosecuted in contravention of a New York forum selection clause and where such parallel action undermines the integrity of the court’s judgments.

[T]he First Department [has] held that the issuance of an anti-suit injunction was proper in the face of the mandatory choice of law and forum selection clauses. The Court explained that comity was not implicated because there was no possibility of treading on the legitimate prerogatives of the foreign jurisdictions to which defendant had repeatedly turned, and that the injunction was consonant with our policy of enforcing choice of law and forum election clauses. Moreover, the Court held that where, as here, once there is a New York judgment on the merits, the courts of this State are entitled to protect it by issuing an anti-suit injunction to prohibit defendant’s harassing and bad faith foreign litigation.

. . .

An anti-suit injunction is warranted here. The TGS Parties’ commencement and continued maintenance of the Louisiana State Court Action is a clear violation of the parties’ forum selection clause. The issues in both cases are not merely duplicative and a waste of resources, but the risk of inconsistent judgments is very real. This court has considered the merits of the TGS Parties’ joint venture claims at length on three separate occasions (i.e., in the SJ Decision, and at the oral arguments on March 30 and May 18) and rejected them (as did Judge Doherty, the Louisiana federal judge). The issue had to be reached in the summary judgment decision because the TGS parties claimed the $25 million loan and guarantee, thoroughly papered by the counselled, sophisticated parties and signed by them, was really an investment in a joint venture. A judgment has been issued. Yet, the TGS Parties are seeking to collaterally challenge this court’s judgment in the Louisiana State Court Action by continuing to press the merits of the joint venture claim and by asking that court not to give res judicata or collateral estoppel effect to this court’s decision and judgment. Doing so not only violates the parties’ forum selection clause, it evinces an utter disregard for this court’s authority.

The court cannot allow the integrity of its judgment to be challenged. Litigants, such as the extremely sophisticated parties (aided by extremely sophisticated counsel) in this action, expressly agree to litigate in New York and apply New York law to their complex commercial disputes because this court is seen as capable of providing a level of certainty not found in other jurisdictions. The TGS Parties would see that certainty undermined.

(Internal quotations and citations omitted).

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