Lack of Nexus to New York Weighs Heavily in Decision Granting Forum Non Conveniens Dismissal

On April 6, 2020, Justice Borrok of the New York County Commercial Division issued a decision in New Media Holding Co. LLC v. East W. United Bank SA, 2020 NY Slip Op. 50390(U), holding that the lack of a nexus to New York weighed heavily in favor of granting a forum non conveniens dismissal, explaining:

CPLR § 327 codifies the common law doctrine of forum non conveniens. Pursuant to CPLR § 327, a court may dismiss an action if it finds that in the interest of substantial justice the action should be heard in another forum. The resolution of a motion to dismiss on forum non conveniens grounds is left to the sound discretion of the trial court.

Courts consider the burden on New York courts, potential hardship to the defendant, the unavailability of an alternative forum in which the plaintiff may bring suit, the residence of the parties, and whether the transaction at issue arose primarily in a foreign jurisdiction. Significantly, the plaintiff's choice of forum should rarely be disturbed unless the balance is strongly in favor of the defendant and a substantial nexus between New York and the action is lacking.

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Norex Petroleum Ltd. v Blavatnik is instructive here and guides the court's analysis. In Norex, a protracted 13-year litigation, the plaintiff brought a tort action alleging that the defendants had wrongfully wrested away the plaintiff's majority interest in a Russian oil company. The trial court initially dismissed the case based on a statute of limitation defense. The Appellate Division, First Department, affirmed, but the Court of Appeals reversed and remanded. Following remand, the defendants filed five new motions to dismiss and the trial court then dismissed certain portions of the amended complaint on other grounds, and the remaining portions of the amended complaint on the grounds of forum non conveniens. The First Department affirmed, writing:

the motion court providently exercised its discretion in applying the doctrine of forum non conveniens. What is left of the instant New York state complaint after the Know-How case is the claim that plaintiff (a Cypriot corporation with an office in Canada) should have received dividends from Yugraneft (a Russian company that owns an oil field in Siberia). The key events underlying the claim took place in Russia, where the bulk of the witnesses and documents are located. That the individual defendants may have wired funds from New York does not require a contrary result. Our courts should not be under any compulsion to add to their heavy burdens by accepting jurisdiction of a cause of action having no substantial nexus with New York.

Significantly — and unlike the instant matter where none of the parties are New York residents — six of the defendants in Norex — Leonard Blavatnik, Victor Vekselberg, Simon Kukes, Access Industries and Renova, Inc. — maintained New York residence. The trial court did not find this connection to New York sufficient because none of the defendants that allegedly committed the actual tortious acts are residents of New York and importantly, the plaintiff Norex is also not a resident of New York. Thus, the trial court concluded this factor weighed in favor of dismissal. In the instant matter, as discussed more fully below, the facts weigh heavier in favor of dismissal.

A. Residence of the Parties

The residency of the parties in this case, as in Norex, supra, is a factor that weighs in support of dismissal on forum non conveniens. Although the Plaintiffs conduct business in New York, neither are New York entities and their registered headquarters are in Connecticut. And although the Plaintiffs' founder and principal, Vladimir Gusinski, asserts that he has lived mainly in the United States and Israel since 2000 and that his family resides in Greenwich, Connecticut, he is not a resident of New York and he owns property in London. The Plaintiffs do not address the residency of the parties, except to argue that residence is merely one factor in the overall analysis and except to the extent that Mr. Gusinski states that, New York is the most convenient forum for me to testify in this case. Under these circumstances, it cannot be said that the Plaintiffs are residents of New York, whereas East-West is certainly a Luxembourg entity.

B. New York Nexus

In Norex, supra, the trial court explained there was an insufficient nexus of the events complained of to the New York forum because the location of the events giving rise to the transaction at issue occurred outside of New York and the only alleged connection to New York is that some Defendants participated and directed the tortious conduct that occurred in Russia from New York, which is an insufficient connection with New York. The same is true here: the only connection asserted with New York in this globe-spanning action is that certain loan documents which were allegedly used as the tools of East-West's alleged attempt to gain control over the Library were negotiated by the Plaintiffs (but not East-West) in New York and funded in New York where the Library exists. New York courts need not entertain causes of action lacking a substantial nexus with New York. The focus of a forum non conveniens inquiry is to ensure that the trial will be convenient and will serve the ends of justice. Trial of this action in New York based on the facts alleged herein simply is not required and, as discussed further below, may involve a number of difficulties such as the inability to bring witnesses and documents across the globe to New York. This factor weighs heavily in favor of dismissal.

C. Burden on New York Courts

The applicability of foreign law is another consideration in a forum non conveniens analysis. In the Amended Complaint, the first and fifth causes of action expressly involve violations of Luxembourg law. At the outset, the court notes that there are at least three or four interlocking agreements at issue. In none of them did the parties negotiate for application of New York law or that disputes would be adjudicated in New York courts. Among certain Pledge Agreements that form the basis for the Plaintiffs' breach of contract claim, the relevant agreement with New Media Programming is governed by Cayman Islands law and the relevant agreement with New Century Holdings Limited is governed by the law of Switzerland. The Plaintiffs also plead that East-West's conduct violated European Union banking regulations. Perhaps most importantly, in the Credit Agreement, i.e., the document that bears the closest relationship to East-West, the parties expressly agreed that even "non-contractual" obligations between the parties were governed by English law and subject to arbitration. Thus, the Plaintiffs had no expectation (and bargained for none) of being able to seek New York courts or New York law to adjudicate their dispute. This intentional and express choice by the parties as to non-contractual obligations (i.e., the gravamen of this lawsuit) weighs heavily when considering whether Plaintiffs should now be allowed to burden New York courts when they chose the exact opposite result when they made their deal with East-West. In short, it is curious that the Plaintiffs claim hardship when a ruling of forum non conveniens only places them in exactly the position they placed themselves in voluntarily under the Credit Agreement with East-West and where the principal of the Plaintiff owns property (albeit, perhaps not his residence). As a result, the application of the laws of England, Luxembourg, the Cayman Islands, and Switzerland in this case favors dismissal on forum non conveniens grounds.

To the extent that the Plaintiffs argue that New York law applies to its claims for tortious interference, East-West disagrees that this is the appropriate conclusion on choice of law principles. Here, the record is not sufficiently developed to conduct a proper choice of law analysis. However, the court notes that the East-West's objections do not appear to be without merit given that the conduct underlying the claims for tortious interference involved East-West's purported interference with the proposed OTT project between NM Group and Sistema, as well as East-West's initiation of proceedings in London and Moscow that were allegedly commenced to reduce the value of the New Media Group. And, perhaps most importantly, as discussed above, inasmuch as the Credit Agreement itself provided that non-contractual disputes were to be governed by English law, it is peculiar that the Plaintiffs now argue that New York law should govern these very claims. Accordingly, this factor also weighs in favor of dismissal.

D. Hardship to East-West

East-West argues that litigation in New York also poses a special hardship because all its witnesses and documents are located overseas. By way of example, East-West refers to the Amended Complaint, which identifies individuals who were allegedly involved in East-West and Sistema's scheme to seize the Library: Sistema representative Mr. Shebdurasulov, Sistema CEO Mr. Shamolin, and Sistema founder Mr. Yevtushenkov.

Although the Plaintiffs assert that East-West possesses the resources as an international bank, the court cannot entirely turn a blind eye to the hardship that would accrue to East-West, a foreign defendant, and its Russian parent, Sistema, in having witnesses travel overseas to participate in this New York litigation. In fact, East-West's likely inability to compel critical witnesses to testify in New York (or the cost of bringing willing witnesses) is almost certain to unfairly prejudice its ability to defend against this action. And, it is hard to understand why there would be any hardship to East-West or the Plaintiffs in not getting the law and being compelled to litigate in England, the very forum they bargained for. Indeed, given that the guarantors and East-West have already arbitrated issues in England, which East-West claims mirror the claims set forth in the Amended Complaint, it does not appear that litigating in England posses any real hardship to any of the parties. Accordingly, the potential burden of requiring East-West to litigate in New York also favors dismissal.

E. Location of Witnesses and Relevant Documents

The Plaintiffs argue that the majority of their non-party witnesses reside in New York or the US such that this factor supports a substantial nexus between New York and this action. In particular, the Plaintiffs identify three non-party witnesses that reside in New York: CFO of the New Media Group Chris Renaud, former President of Media Most International, Inc., Sergey Shestakov, and the Plaintiffs' contract lawyer. The Plaintiffs also identify two non-party witnesses that reside in Washington, D.C. and New Jersey, respectively. However, the record is silent as to how testimony from the majority of these individuals is relevant to the alleged scheme between East-West and Sistema. An affidavit from the Plaintiffs' counsel explains that Mr. Renaud worked extensively with East-West during the dispute, however, it is not clear how or to what extent the other individuals were involved in the alleged misconduct between the Plaintiffs, East-West, and Sistema as set forth in the Amended Complaint. Further, in accordance with the foregoing, East-West's non-party witnesses from Sistema are not located in New York.

To the extent that the Plaintiffs claim that the relevant documents, agreements, and license agreements governing the Library are stored in New York, given the allegations, it is not clear that the gravamen of the Amended Complaint involves the governing documents of the Library as the Amended Complaint involves improper acceleration of the credit facility and violations of the Pledge Agreements to gain control over the Library. In any event, East-West asserts that its records are located in Luxembourg. Accordingly, at best, the location of foreign non-party witnesses and documents is a neutral factor.

F. Alternative Forum

The availability of an alternative forum is not a precondition to dismissal under New York state law, but remains an important factor to consider. East-West proposes England and Luxembourg as available alternatives. The Plaintiffs assert that litigation overseas would be inconvenient where its witnesses and documents are not located in England or Luxembourg. However, the key witnesses and documents in this case are spread among the U.S., Luxembourg, England and Russia, such that there will inevitably be inconvenience to at least one, if not every, party when litigating in any given forum. Although litigation in Luxembourg may require that certain documents be translated into French, this is no different from the required translation of documents into English if a matter in a New York court concerns foreign parties.

The Plaintiffs also argue that they would be severely prejudiced by the lack of a trial by jury in both England and Luxembourg, but they fail to explain why this is so. To the extent that the Plaintiffs assert that New York provides full and open discovery procedures, there is no indication that the Plaintiffs would encounter discovery issues when litigating before an English court. Accordingly, England and Luxembourg are alternative fora for this dispute.

Ultimately, and most significantly, this case simply does not have a substantial nexus to New York. Although the Plaintiffs argue that the relevant agreements were negotiated by the Plaintiffs in New York and that certain witnesses, along with the Library, are located in New York, these factors are insufficient to demonstrate that the matter is tied to New York. The Pledge Agreements at issue provide that foreign law governs the obligations arising thereunder. Notably, none of the parties to the Pledge Agreements are New York corporations or even parties to this lawsuit other than East-West. The Plaintiffs are not New York residents, the court would be required to apply the laws of Luxembourg, the Cayman Islands, and Switzerland, East-West's non-party witnesses and documents are located overseas, and there exists an alternative forum for the Plaintiffs to bring their litigation. Under these circumstances, the balance of the factors on a forum non conveniens analysis favor dismissal.

(Internal quotations and citations omitted).

Disputes regarding commercial contracts involving out-of-state and 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. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com 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.