JUDITH M. BARZILAY, Senior District Judge.
BARZILAY, Senior Judge: Plaintiff KTV Media International, Inc. ("Plaintiff or "KTV Media International"), a web developer incorporated in the State of New York, filed this action for breach and anticipatory breach of contract against Defendant Galaxy Group, LA LLC ("Defendant" or "Galaxy"). The parties, through alleged predecessors-in-interest, originally contracted that KTV Media International would construct an online, user-friendly system for the sale of lottery tickets, though Galaxy subsequently terminated this agreement. See generally Am. Compl. Galaxy brings the instant motion to dismiss based on a forum selection clause contained in a particular operating agreement, which, it argues, mandates that a state or federal court in California hear these claims. Def.'s Mot. to Dismiss 1-2. Alternatively, Defendant requests that the court transfer this case to the District Court for the Central District of California. Def.'s Mot. to Dismiss 17. The principal question before the court asks whether the broad language of the forum selection clause encompasses Plaintiff's claims. For the reasons below, the court finds that it does and therefore grants Defendant's motion to dismiss without prejudice and denies its motion to transfer.
The instant dispute emerges out of a host of agreements executed by the parties or their alleged predecessors-in-interest between 2008 and 2010. In July 2008, Danger Dust LLC ("Danger Dust"), alleged predecessor-in-interest to Plaintiff, entered into the first of these agreements with LottoGopher LLC ("LottoGopher"), a California-based media company and predecessor-in-interest to Defendant, see generally Taddeo Decl. Ex. 1, to develop a website that would allow users to purchase lottery tickets, pool these tickets into groups, and track their winnings (the "Website"), Am. Compl. ¶ 10; Def.'s Mot. to Dismiss 1. In return for timely development of the Website, the parties agreed
Third-party designers hired by LottoGopher and other factors beyond Danger Dust's control purportedly prevented timely completion of the Website. Am. Compl. ¶ 13-14. Nevertheless, the parties agreed that Danger Dust would continue its work on the website despite the missed deadline and, in later amendments to the LottoGopher Operating Agreement, altered the equity interest consideration. Am. Compl. ¶¶ 13-14; Meyers Decl. Ex. J (amended equity interest in Second, Third, and Seventh Amendments to LottoGopher Operating Agreement).
By the end of 2009, neither Danger Dust nor LottoGopher remained parties to the Website development agreement. In July of that year, Danger Dust assigned its interest in the agreement to KTV Media, Inc. ("KTV Media"), Am. Compl. ¶ 15, and that fall KTV Media and LottoGopher executed new terms and benchmarks for development of the Website (the "2009 Terms and Benchmarks"). The 2009 Terms and Benchmarks set an updated timetable for development of the site and provided that LottoGopher would make payments of $17,000 to KTV Media and $60,000 to a KTV Media principal and would "reinstate [the five percent] equity [due] to Danger Dust upon full and satisfactory completion of the benchmarks.. . ."
To govern membership interests in and maintenance of the company, members of Galaxy executed an LLC operating agreement on January 16, 2010 (the "Galaxy Operating Agreement"). See generally Taddeo Decl. Ex. 5. Among other parties, KTV Media signed the agreement, and Exhibit A of the Galaxy Operating Agreement lists Danger Dust as a member with a five percent "Member's Percentage Interest" and a "Member's Capital Contribution" of "LottoGopher, LLC Membership,
Taddeo Decl. Ex. 5 at 14. The language of this forum selection clause mirrors text on the same topic found in the LottoGopher Operating Agreement. Meyers Decl. Ex. J at 18.
KTV Media and LottoGopher subsequently assigned the 2009 Terms and Benchmarks to Galaxy on February 2, 2010 (the "February 2010 Assignment Agreement"). See Taddeo Decl. Ex. 6. In so doing, the parties represented that all terms in the 2009 agreement would remain in full force and effect with the exception of the "change from LottoGopher LLC to Galaxy Group LA, LLC in all instances" and that the $60,000 payment would now go to a different KTV Media principal, Josh Kimberg ("Kimberg"). Taddeo Decl. Ex. 6. Notably, Kimberg also serves as principal of Danger Dust, Compl. ¶ 11 (Plaintiff's original complaint describing Danger Dust as a "Josh Kimberg limited liability company"), and concurrently as registered agent for Plaintiff, Taddeo Dec. Ex. 3.
According to Plaintiff, KTV Media assigned the 2009 Terms and Benchmarks and the February 2010 Assignment Agreement to KTV Media International "on or about February 2010," with Defendant's full knowledge and consent. Am. Compl. ¶ 19; Meyers Decl. Ex. C (email from Plaintiff's counsel to Galaxy's counsel representing that assignment comprised "February 2, 2010 writing and an amendment thereafter").
In the spring of 2010, the relationship between the parties broke down.
This court has subject matter jurisdiction over the case pursuant to 28 U.S.C. § 1332(a)(1).
Determining the scope of a forum selection clause is a matter of contractual interpretation, see Yakin v. Tyler Hill Corp., 566 F.3d 72, 76 (2d Cir.2009); Phillips, 494 F.3d at 387 (forum selection clause
First, the court finds the forum selection clause was "reasonably communicated" to Plaintiff. As noted, Kimberg — registered agent for KTV Media International — has signed many, if not all, of the agreements executed between the parties on behalf of Danger Dust and later KTV Media, including the Galaxy Operating Agreement. See Taddeo Decl. Ex. 4 (2009 Terms and Benchmarks, with Kimberg signing on behalf of KTV Media/Danger Dust); Taddeo Decl. Ex. 6 (February 2010 Assignment Agreement, with Kimberg signing on behalf of KTV Media); Meyers Decl., Ex. H (intellectual property agreement between KTV Media and Galaxy regarding Website, with Kimberg signing on behalf of KTV Media); cf. Taddeo Decl. Ex. 5 at 16 (Galaxy Operating Agreement, with same signature as appearing on documents signed by Kimberg and with initials "JK" next to change from Danger Dust to KTV Media); Meyers Decl. Ex. I at 3 (First Amendment to LottoGopher Operating Agreement, with same signature as appearing on documents signed by Kimberg); Meyers Decl. Ex. L at 6 (Final Dissolution Agreement for LottoGopher, with same signature as appearing on documents signed by Kimberg). Additionally, KTV Media International claims successor-in-interest status under at least two agreements that provide equity in Galaxy, a matter governed by the Galaxy Operating Agreement. Indeed, Plaintiff does not contend that it was unaware of either the Galaxy Operating Agreement or the forum selection clause contained therein when it allegedly acquired those interests. These facts demonstrate that the forum selection clause was "reasonably communicated" to Plaintiff. Regardless, as discussed below, even "[i]n the absence of direct communication of a forum-selection clause to a non-signatory, the non-signatory may be nevertheless bound by the clause" if, as in this case, the non-signatory is "closely related" to a signatory to the contract containing the forum selection clause. Great N. Ins. Co. v. Constab Polymer-Chemie GmbH & Co., No. 5:01-CV-0882, 2007 WL 2891981, at *8 (N.D.N.Y.2007) (citation omitted).
With respect to the second prong, the court turns to the language of the forum selection clause to determine if it is mandatory as opposed to permissive. S.K.I. Beer Corp., 612 F.3d at 708 (citing Phillips, 494 F.3d at 386). As noted, the clause provides that each member in Galaxy "consents to the exclusive jurisdiction of the state and federal courts sitting in California." Taddeo Decl. Ex. 5 at 14.
On the issue of whether the parties and Plaintiffs claims fall within the scope of the clause, the court answers affirmatively. Defendant argues that Plaintiff cannot seek recovery for development of the Website — including equity ownership in Galaxy — while simultaneously denying the enforceability of the Galaxy Operating Agreement. See generally Def.'s Mot. to Dismiss; Def.'s Reply. Defendant also avers that the merger clause of the Galaxy Operating Agreement renders that agreement the sole surviving contract between the parties. Def.'s Mot. to Dismiss 2, 4-5; Def.'s Reply 1-3. Plaintiff responds that it never signed the operating agreement, that the operating agreement does not govern the parties' dispute concerning development of the Website, and that, in any case, the agreement's ambiguous terms render it unenforceable. Pl.'s Opp'n 2, 4-9. The court finds Plaintiff's arguments unpersuasive.
Turning first to the relevant text, the broad language of Paragraph 10.11 of the Galaxy Operating Agreement extends the reach of the clause to any action "arising out of, under or in connection with this Agreement or the transactions contemplated by this Agreement." Taddeo Decl. Ex. 5 at 14. Where broadly worded, a "forum selection clause is not limited solely to claims for breach of the contract that contains it." Cfirstclass Corp. v. Silverjet PLC, 560 F.Supp.2d 324, 329 (S.D.N.Y. 2008) (citing Roby v. Corp. of Lloyd's, 996 F.2d 1353, 1361 (2d Cir.1993)). In determining whether the clause extends to Plaintiff's claims, this court "examine[s] the substance of those claims, shorn of their labels." Phillips, 494 F.3d at 388 (citation omitted). While Plaintiff's claims arguably may not "aris[e] out of the Galaxy Operating Agreement,
Plaintiff fails to persuade the court that the clause does not cover the subject parties and claims. As an initial matter, the fact that the Galaxy Operating Agreement does not list KTV Media International as a signatory "is insufficient, standing alone, to preclude enforcement of [the] forum selection clause." Aguas Lenders Recovery Grp. v. Suez, S.A., 585 F.3d 696, 701 (2d Cir.2009). A movant seeking dismissal may enforce a forum selection clause against a non-signatory where the non-signatory is "closely related" to one of the signatories to the contract containing the subject clause such that "enforcement of the forum selection clause is foreseeable by virtue of the relationship between the signatory and the party sought to be bound." MGM Studios Inc. v. Canal Distrib. S.A.S., No. 07-CV-2918, 2010 WL 537583, at *5 (S.D.N.Y. 2010) (quoting Direct Mail Prod. Servs. Ltd. v. MBNA Corp., No. 99-CV-10550, 2000 WL 1277597, at *3 (S.D.N.Y.2000)). Previous courts have repeatedly found non-signatories "closely related" to signatories where their "interests are `completely derivative' of and `directly related to, if not predicated upon' the signatory party's interests or conduct." Weingrad v. Telephathy, Inc., No. 05-CV-2024, 2005 WL 2990645, at *5 (S.D.N.Y.2005) (citing Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285, 1299 (11th Cir.1998)). While successors-in-interest unquestionably fit within the definition of "closely related," see MGM Studios Inc., 2010 WL 537583 at *5 (citation omitted); Aguas Lenders Recovery Grp. LLC, 585 F.3d at 701 (successors-in-interest subject to presumption of enforceability of mandatory forum selection clause), "[i]t is well established that a range of transaction participants, parties and non-parties, should benefit from and be subject to forum selection clauses," Atlasjet Uluslararasi Havacilik A.S. v. EADS Aeroframe Servs., LLC, No. 07-CV-212, 2009 WL 436420, at *4 (S.D.N.Y.2009) (quoting Weingrad, 2005 WL 2990645 at *4); see also Firefly Equities, LLC v. Ultimate Combustion Co., 736 F.Supp.2d 797, 800 (S.D.N.Y.2010) (corporate president who signed contract on behalf of company subject as individual to forum selection clause); MGM Studios Inc., 2010 WL 537583 at *5 (corporate parents allegedly owning majority shares, with direct or indirect controlling interest in signatory, "closely related"); Bluefire Wireless, Inc., 2009 WL 4907060 at *2 n. 4 (non-signatory defendants "closely related" where plaintiff "base[d] their alleged liability exclusively on conduct of [signatory]"); Weingrad, 2005 WL 2990645 at *5-6 (non-signatories who allegedly acted in concert with signatory "closely related").
The record establishes that KTV Media International is "closely related" to KTV Media. Plaintiff's claims for breach and anticipatory breach completely derive from and directly relate to KTV Media's conduct developing the Website. See Am. Compl. ¶¶ 19, 21-22; see also id. ¶ 25 ("Plaintiff, individually and through its
The court finds similarly unavailing Plaintiff's suggestion that the forum selection clause does not apply to its claims because the Galaxy Operating Agreement does not govern the Website's development. While leaving the court in the dark as to whether KTV Media ever assigned the Galaxy Operating Agreement to KTV Media International, Plaintiff argues that this dispute arises out of the "independent understanding" the parties promulgated in the 2009 Terms and Benchmarks and February 2010 Assignment Agreement, and that the Galaxy Operating Agreement "has been superseded by the combination of the[se] two computer contracts." Pl.'s Opp'n 9; see id. 7 ("[The] [2009 Terms and Benchmarks] does what the Galaxy [Operating Agreement] does not. A computer contract, it provides the terms of the [W]ebsite development and production work and forms of consideration expected.. . ."). The court views Plaintiff's efforts as a mere attempt to "plead around the [Operating] Agreement's forum selection clause," Russbeer Int'l LLC v. OAO Baltika Brewing Co., No. 07-CV-1212, 2008 WL 905044, at *5 (E.D.N.Y.2008) (forum selection clause enforceable where resisting party argued claim arises under separate contract, but gravamen of claim arose under agreement containing clause), as Plaintiff has offered no evidence that these two documents have in any sense superseded the Galaxy Operating Agreement. The court will not allow a "forum selection clause [to] be defeated by artful pleading of claims not based on the contract containing the clause if those claims grow out of the contractual relationship, or if the gist of those claims is a breach of that relationship." Weingrad, 2005 WL 2990645 at *4 (quoting Anselmo v. Univision Station Grp., Inc., No. 92-CV-1471, 1993 WL 17173, at *2 (S.D.N.Y.1993) (internal quotation marks omitted)).
Once the court deems a forum selection clause presumptively enforceable, a party seeking to avoid enforcement bears a "heavy burden" of rebutting this presumption. E.g., Bluefire Wireless, Inc., 2009 WL 4907060 at *2. Plaintiff may avoid enforcement by demonstrating that "(1). . . incorporation [of the clause] was the result of fraud or overreaching; (2) the law to be applied in the selected forum is fundamentally unfair; (3) enforcement contravenes a strong public policy of the forum state; or (4) trial in the selected forum will be so difficult and inconvenient that the plaintiff effectively will be deprived of his day in court." Phillips, 494 F.3d at 392 (citing Roby, 996 F.2d at 1363). "The Supreme Court has construed this exception narrowly," Tropp v. Corp. of Lloyd's, 385 Fed.Appx. 36, 37 (2d Cir.2010) (citation omitted), and Plaintiff has failed to meet this demanding burden. If any
Further seeking to avoid application of the forum selection clause, Plaintiff points to several examples of purported ambiguity in the Galaxy Operating Agreement, the most relevant of which is that Exhibit A to the agreement lists Danger Dust, as opposed to KTV Media, as a member, and that the agreement fails to clearly define Plaintiff's capital contribution of "Services." Pl.'s Opp'n 5-6. Plaintiff concludes that "[a]dditional documentary and parole evidence is obviously necessary to resolve these ambiguities . . . before the forum selection clause can possibly be enforced." Pl.'s Opp'n 6. This argument must fail. As Defendant notes, the Galaxy Operating Agreement contains a severability clause providing that "[i]f any provision of this Agreement or the application of such provision to any person or circumstance shall be held invalid, the remainder of this Agreement or the application of such provision to persons or circumstances other than those to which it is held invalid shall not be affected thereby." Taddeo Decl. Ex. 5 at 13. Assuming that Plaintiff could show irreconcilable ambiguity in the document,
Finally, as noted above, Defendant devotes much of its motion to the argument that the merger clause contained in the Galaxy Operating Agreement integrates all other agreements between the parties, including the 2009 Terms and Benchmarks and the February 2010 Assignment Agreement, and therefore "is the only [agreement] which now governs." Def.'s Mot to Dismiss 4. Paragraph 10.1 of the Galaxy Operating Agreement provides that it and Galaxy's Articles of Incorporation "constitute the complete and exclusive statement of agreement among the Members with respect to the subject matter herein and therein and replace and supersede all prior written and oral agreements among the Members." Taddeo Decl. Ex. 5 at 13. The court declines to read this clause as extending to the website development contracts, particularly as the parties executed the latter after the Galaxy Operating Agreement came into effect and the February 2010 Assignment Agreement provides that the 2009 Terms and Benchmarks "is in full force and effect." Taddeo Dec. Ex. 6. Regardless, the broad language of the forum selection clause covers Plaintiffs claims even if the merger clause does not integrate all agreements, and therefore the court need not reach the question of the scope of the merger clause.
Plaintiff briefly concludes that even if the court deems the Galaxy Operating Agreement enforceable, Defendant rescinded the contract by "withdrawing its
It is "within the sound discretion of the district court" whether to grant dismissal or order transfer of the case to another district in which it could have been brought. Minnette v. Time Warner, 997 F.2d 1023, 1026 (2d Cir.1993). Courts in this District typically will dismiss rather than transfer a case where an applicable forum selection clause allows a plaintiff a choice of more than one permissible forum. See, e.g., GMAC Commercial Credit, LLC v. Dillard Dep't Stores, Inc., 198 F.R.D. 402, 409 (S.D.N.Y.2001); Weingrad, 2005 WL 2990645 at *6 ("Courts in this district have dismissed cases involving clauses that permit suit in both federal and state courts of a foreign jurisdiction. . . ."). The forum selection clause in the Galaxy Operating Agreement provides that members consent to "the exclusive jurisdiction of the state and federal courts sitting in California," Taddeo Decl. Ex. 5 at 14, but does not restrict prospective plaintiffs as to which. To transfer this case to the District Court for the Central District of California, as Defendant alternatively requests, would therefore "depriv[e] plaintiff of its right under the forum selection clause of this contract to bring suit in either state or federal court." GMAC Commercial Credit, LLC, 198 F.R.D. at 409 (emphasis in original).
Therefore, upon consideration of Defendant's Motion to Dismiss or Transfer, Plaintiff's Memorandum of Law in Opposition, the applicable legal standards and relevant facts, and all other documents filed in this proceeding, the court hereby