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Posted: April 20, 2016

Forum Selection Clause Can Bind Nonsignatory Closely Related to Signatory and Dispute

On March 25, 2016, Justice Kornreich of the New York County Commercial Division issued a decision in SRT Capital Ltd. v. Soleil Capital Ltd., 2016 NY Slip Op. 30593(U), refusing to dismiss claims against individual defendants who had not signed the agreement containing the forum selection clause giving the court jurisdiction over the parties, explaining:

As noted, defendants concede that the MLAs’ forum selection clause applies to the Corporate Defendants. The Individual Defendants, however, contend that they only signed the MLAs in their corporate capacity on behalf of the Corporate Defendants. That, however, is of no moment. The First Department has held that a nonparty that is closely related to one of the signatories can enforce a forum selection clause where the relationship between the nonparty and the signatory is sufficiently close so that enforcement of the clause is foreseeable by virtue of the relationship between them. More recently, in expounding on this rule, the First Department expressly adopted the approach of the federal and Delaware courts that have long held that a forum selection clause can bind nonsignatory defendant that has a sufficiently close relationship with the signatory and the dispute to which the forum selection clause applies.

The Individual Defendants are closely related to the Corporate Defendants. The closely related doctrine applies where, as here, the non-signatory is a principal of the signatory company and played an active role in the transaction. The Individual Defendants wholly own and control the Corporate Defendants and signed the MLAs on their behalf. Indeed, the underlying margin loans were sought by the Individual Defendants on behalf of their own companies. The Individual Defendants, therefore, are bound by the MLAs’ forum selection clause and subject to jurisdiction in this court.

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

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