Commercial Division Blog

Posted: September 16, 2019 / Categories Commercial, Forum Non Conveniens, Forum Selection Clause

General Obligations Law 5-1402 Bars Forum Non Conveniens Motion

On September 5, 2019, Justice Borrok of the New York County Commercial Division issued a decision in HH Trinity Apex Invs. LLC v. Hendrickson Props. LLC, 2019 NY Slip Op. 32623(U), holding that GOL 5-1402 barred a forum non conveniens motion, explaining:

When the court finds that in the interest of substantial justice the action should be heard in another forum, the court, on the motion of any party, may stay or dismiss the action in whole or in part on any conditions that may be just. The domicile or residence in this state of any party to the action shall not preclude the court from staying or dismissing the action.

The question of whether to grant a motion brought pursuant to CPLR § 327 is left to the sound discretion of the trial court. A defendant challenging a forum on this basis bears the burden to demonstrate relevant private or public interest factors which militate against accepting the litigation. Importantly, a plaintiff's choice of forum is generally entitled to deference and should not be disturbed unless the balance is strongly in favor of the defendant. Among the factors that a court must consider on forum non conveniens motion are: the residency of the parties, the potential hardship to proposed witnesses including, especially, nonparty witnesses, the availability of an alternative forum, the situs of the underlying actionable events, the location of evidence, and the burden that retention of the case will impose upon the New York courts. No one single factor is controlling.

Under CPLR § 327(b), however:

Notwithstanding the provisions of [CPLR 327(a)], the court shall not stay or dismiss any action on the ground of inconvenient forum, where the action arises out of or relates to a contract, agreement or undertaking to which section 5-1402 of the general obligations law [GOL] applies, and the parties to the contract have agreed that the law of this state shall govern their rights or duties in whole or in part.

As relevant, GOL § 5-1402 provides that a party may maintain an action in New York against a foreign defendant if the parties have entered into an agreement that: (i) contains a New York forum selection clause, (ii) contains a New York choice of law provision, and (iii) involves a transaction that in the aggregate is over $1 million.

Here, it is undisputed that the Note and Security Agreement contain New York choice of law provisions. The AMAs do as well. The Security Agreement also contains a clear and unequivocal New York forum selection clause, which not only submits to New York's jurisdiction but specifically waives the argument the defendants are now making: i.e., PLEDGE OR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO SUCH VENUE AS BEING AN INCONVENIENT FORUM. Although the loan was initially only $500,000, at present, the amount outstanding is alleged to be in excess of $1.3 million, and the parties' business dealings, in the aggregate, totaled approximately $87 million. As such, New York is an appropriate and convenient forum for the determination of this dispute as a matter of law, because the loan agreement, of which the aggregate value is more than $1 million, contains a provision whereby defendants agreed that New York law would govern their rights and duties under the agreement and agreed to submitted to the jurisdiction of the New York courts.

In addition, and putting aside CPLR 327(b), which dictates the result here, the relevant forum non conveniens factors do not bode in favor of a North Carolina forum. The residency of the parties and the location of parties and witnesses are hardly dispositive factors here, particularly considering technological advances vis a vis video depositions and electronically stored/transmitted documents. In addition, to the extent that the location of documents and witnesses is a relevant factor, the court notes that, here, it is the evidentiary burden at trial of the Plaintiffs, not the defendants, of proving their case in this forum.

Significantly, all three of the Plaintiffs allege that they maintain their principal place of business in New York. Although the residence of a plaintiff is not the sole determining factor on a motion to dismiss on grounds of forum non conveniens, it is generally the most significant factor in the equation. Moreover, while the defendants are not New York residents, they executed a Note and Security Agreement with a New York-based company, containing New York choice of law and forum selection provisions. This case involves an integrated transaction. Among other things, the Plaintiffs allege that the loan would not have been made but for Mr. Hendrickson's alleged extortion. Inasmuch as pursuant to the Security Agreement, the defendant Pledgors consented to the jurisdiction of the courts of the state of New York "over any suit, action or proceeding arising out of or relating to this Agreement and irrevocably waived, to the fullest extent permissible by law, any objection it may no or hereafter have to such venue as being an inconvenient forum, it was not only entirely foreseeable for the defendant Pledgors to have to defend a lawsuit in New York concerning the transaction, but they should have anticipated defending such lawsuit in New York.

Finally, there is no particular burden placed upon this court by the maintenance of this action in New York as New York courts routinely adjudicate commercial disputes of this nature. Certainly, the burden on this court is no greater than the burden would be on a North Carolina court to apply New York law in accordance with the choice of law provisions in the parties' various agreements if this action were to be brought in North Carolina.

(Internal quotations and citations omitted).

Disputes regarding commercial contracts involving international parties end up being heard in New York courts. Even if the court has the power to assert jurisdiction of the parties, it can, under the forum non conveniens doctrine discussed above, dismiss the dispute so it can be heard in a forum that is more convenient for the parties. As this decision shows, however, the bar for dismissal on forum non conveniens grounds is a high one. Contact Schlam Stone & Dolan partner John Lundin at if you or a client face a situation where you are unsure whether New York is the appropriate forum in which a dispute should be heard.