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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: January 15, 2021

Plaintiffs not Bound by Forum Selection Clause Because Agreement to Clause Procured by Fraud

On December 30, 2020, Justice Borrok of the New York County Commercial Division issued a decision in Marcal Fin. SA v. Sutton, 2020 NY Slip Op. 51576(U), holding that plaintiffs were not bound by a forum selection clause that was procured by fraud, explaining:

The defendants argue based on the Atlas Forum Selection clause, which provides that, “the exclusive forum for any proceeding [against Atlas] are headquarters of ATLAS or of the branch dealing with the customer,” i.e., Geneva, Switzerland that the court should dismiss the complaint. As discussed above, the argument fails because the plaintiffs were never provided with the Atlas Forum Selection clause or the Atlas Account Opening Agreements. The Atlas Account Opening Agreements were executed by Mr. Kostenbaum pursuant to his fraudulently obtained power of attorney in the Marcal Trust Agreement and Bellpond Trust Agreement, which agreements were allegedly fraudulently obtained by Mayer Sutton. Under these circumstances, equity does not permit the Atlas Forum Selection Clauses to be enforced.

(Internal citations omitted).

New York generally enforces contracts as written, including contractual provisions specifying where a lawsuit may be brought. There are exceptions, as this decision discusses, but they are limited and narrowly construed. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure whether a contract limits where an action can be brought.

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