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Posted: February 20, 2018

Judge Bianco Dismisses Action For Improper Venue Based On Forum Selection Clause That designated “The Courts Of The State Of New York” As Venue

Posted by Solomon N. Klein, Litigation Partner

A recent decision by District Judge Joseph F. Bianco offers a reminder that the right to exercise federal jurisdiction can be contractually waived in a forum selection clause. (Wiest Int’l, GMBH v. Zobel, 17-CV-6722 (E.D.N.Y Feb. 6, 2018) (JFB) (GRB)).

Forum selection clauses – typically not the focus of great attention when parties negotiate an agreement – can result in a waiver of the right to bring an action in federal court. These clauses often are drafted to restrict venue geographically, e.g., requiring lawsuits to be maintained in the “courts within the State of . . .” – which could include both federal and state courts within that location. But such clauses can also be drafted to restrict venue to a specific state court, as occurred in this case.

In this action for breach of an operating agreement and other claims, defendant moved to dismiss for improper venue based on a forum selection clause that read as follows: “The parties and members designate the courts of the State of New York, County of Suffolk as the venue to resolve any disputes that may arise among them[.]” (Emphasis added).

The Court held that such a designation is mandatory and that the language “courts of the State of New York” required that the lawsuit be pursued in state court:

As an initial matter, the parties dispute whether the forum selection clause sets venue in this Court. Specifically, plaintiff asserts that the phrase “courts of the State of New York, County of Suffolk” should be read to include a federal court located in Suffolk County. Well-established precedent forecloses plaintiff’s argument. See, e.g., Dart Mech. Corp. v. Johnson Controls, Inc., No. 13-CV-2941JS WDW, 2013 WL 5937424, at *2 (E.D.N.Y. Nov. 4, 2013) (“The language, ‘Courts of the State of New York,’ sets venue in New York State courts.”); Phoenix Glob. Ventures, Inc. v. Phoenix Hotel Assocs., Ltd., No. 04–CV– 4991, 2004 WL 2360033, at *6 (S.D.N.Y. Oct. 19, 2004), aff’d, 422 F.3d 72 (2d Cir. 2005) (“The language, ‘[a]ny proceeding shall be initiated in the courts of the State of New York,’ clearly establishes exclusive jurisdiction in New York state courts.”); Rogen v. Memry Corp., 886 F. Supp. 393, 396 (S.D.N.Y. 1995) (“The use of the word ‘of’ and the phrase ‘State of’ is sufficiently specific and unambiguous to require that actions regarding the Agreement be litigated in New York State court.”). Thus, the Court concludes that the forum selection clause does not set venue in this Court.
. . .
Here, the forum selection clause provides that the parties “designate the courts of the State of New York, County of Suffolk as the venue to resolve any disputes” between them. (Pl’s Br. Ex. A at 22 (emphasis added).) The Court concludes that the clause is mandatory because it “designates” a specific venue— state court in Suffolk County—as “the” venue to resolve disputes among them. The mandatory force of the word “designates” and the use of the word “the” before venue support this conclusion. In other words, the forum selection clause conveys the clear intent to confer exclusive jurisdiction on state courts in Suffolk County, and is not broad or general enough to contemplate other venues.

(Wiest Int’l, GMBH v. Zobel, 17-CV-6722 (E.D.N.Y Feb. 6, 2018) (JFB) (GRB)).

Posted by Solomon N. Klein, Litigation Partner

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