salary and benefits allegedly due the Fassi brothers under the Employment
Agreement. LJN Toys is not a defendant in either of those Italian
Subsequently, AL-ES filed for bankruptcy in the Bankruptcy Court of
Milan. Because AL-ES is now in bankruptcy, all claims against it,
including the Fassis' claim for repayment of loans, must be brought in
the Milan Bankruptcy Court. The Fassis' action in the Labor Court for
salary and benefits, including the claim against LJN Italy, has been
stayed pending the outcome of the AL-ES bankruptcy proceedings
C. This Action
Plaintiffs brought this action on March 30, 1990, against LJN Toys and
MCA. MCA has since sold LJN Toys to Acclaim Entertainment, Inc. Before
doing so, however, through its subsidiary MCA Toys Holdings, Inc., MCA
bought LJN Toys' 80% interest in LJN Italy. Seven claims are asserted in
this complaint, six against LJN Toys for breach of contract and one
against LJN Toys and MCA for a declaratory judgment.
The first claim alleges that LJN Toys breached both the Employment
Agreement and the Umbrella Agreement by failing to pay Johnny Fassi's
salary and by liquidating LJN Italy and AL-ES before they had done so.
The second claim parallels the first with respect to payment of benefits
rather than salary.*fn1
Claims three and four of the complaint each allege that the Umbrella
Agreement was breached when LJN Toys liquidated LJN Italy and AL-ES
before performance of a specified obligation under the Umbrella
Agreement. Specifically, the third claim alleges that the Fassis loans to
AL-ES had not been repaid and the fourth claim alleges that the loan by
Zerga to LJN Italy had not been repaid. The fifth claim alleges that LJN
Toys breached section 15 of the Umbrella Agreement by failing to buy out
Zerga's 20% interest in LJN Italy. The sixth claim alleges that LJN Toys
breached Section 10 of the Umbrella Agreement by failing to cause its
Hong Kong subsidiary to liquidate Superest and pay ALN for its 20%
investment. The seventh claim seeks a declaratory judgment that pursuant
to Section 19 of the Umbrella Agreement, Zerga is entitled to 20% of any
American insurance proceeds recovered by LJN Toys and MCA for the 1988
D. Defendants' Motion to Dismiss
Defendants have moved to dismiss on several grounds. Defendants argue
that this action should be dismissed on the ground of forum non
conveniens, that a forum selection clause in the Employment Agreement
dictates dismissal of claims one and two; that claims one through five
should be dismissed for failure to join necessary parties; and that
claims six and seven should be dismissed for failure to state a claim.
Alternatively, defendants ask this court to stay the action pending
resolution of the actions against AL-ES and LJN Italy now pending in
Italian courts. For the reasons discussed below, I find that the private
and public interest factors governing forum non conveniens as described
in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055
(1947), require dismissal of this action. Therefore, I do not reach
defendants' other arguments for dismissal.
A prerequisite to dismissal on the ground of forum non conveniens is
the existence of an alternative forum. See Gulf Oil, 330 U.S. at 506-07,
67 S.Ct. at 842. In this case, another forum does exist: Italy.
Defendants have represented that they will waive the defenses of lack of
personal jurisdiction and statute of limitations if these claims are
brought in Italy. In addition, defendants have represented
that they will make their employees available in Italy as witnesses for
The factors to be considered in deciding a motion to dismiss on the
ground of forum non conveniens were set out by the Supreme Court in Gulf
Oil. Considerations in the private interest of the parties include:
the relative ease of access to sources of proof;
availability of compulsory process for attendance of
unwilling, and the cost of obtaining attendance of
willing, witnesses; possibility of view of premises,
if view would be appropriate to the action; and all
other practical problems that make trial of a case
easy, expeditious and inexpensive.
Gulf Oil, 330 U.S. at 508, 67 S.Ct. at 848. Public interest factors
include the local interest in having localized controversies decided at
home and the difficulty of applying foreign law. See id. at 508-09, 67
S.Ct. at 843.
A plaintiff's choice of forum is generally entitled to great weight.
But when the plaintiffs are foreign, their choice of an American forum is
entitled to less deference. See Piper Aircraft v. Reyno, 454 U.S. 235,
255-256, 102 S.Ct. 252, 265-66, 70 L.Ed.2d 419 (1981). In this case, all
of the plaintiffs are Italian. The plaintiff corporations do no business
in the United States and have no offices here.
A. Ease of Access to Relevant Sources of Proof
The location of the relevant documents in this case favors dismissal.
Most of the relevant evidence in this case is located abroad. Four of
plaintiffs' claims allege liquidation of defendants' Italian subsidiaries
before they carried out their contractual obligations to plaintiffs. The
fifth claim alleges failure to buy out Zerga's interest in one of those
subsidiaries. The books and records of those subsidiaries are located in
Italy and are in Italian.
The evidence on claim six includes the records of LJN Toys' Hong Kong
subsidiary Superest. Some of those records are located in Hong Kong, and
some have been sent to MCA in California. Neither of those locations
supports New York as a more convenient forum than Italy for this
The documents relevant to the claim for a declaratory judgment that the
Umbrella Agreement entitles Zerga to share in defendants' American
insurance proceeds for the Italian warehouse fire do not support New York
as a forum. Although evidence of the existence of proceeds might be
located in the United States, such evidence is not needed to decide
Zerga's claim of entitlement under the Umbrella Agreement.
B. Attendance of Witnesses
The location of the witnesses also supports Italy as a more appropriate
forum for this action. The witnesses include the plaintiffs and those
employees of the defendants who are familiar with the contracts sued upon
and the operations of the Italian subsidiaries. All of the individual
plaintiffs reside in Italy. The employees of the corporate plaintiffs are
in Italy as well. So are the former employees of the liquidated
subsidiaries, AL-ES and DIN Italy, whose testimony could not be compelled
in an action in New York.
Defendants have agreed to make their employees available as witnesses
for trial in Italy. In addition, the two employees of defendants with the
greatest knowledge of the facts, Janice Melhorn and Victor Temkin, reside
in California and would not be subject to compulsory process for trial in
this court or in Italy. In fact, their depositions have already been
Plaintiffs argue that because they speak English and the American
witnesses do not speak Italian, trial in Italy would require burdensome
and expensive translation. This argument is not compelling. The
individual plaintiffs are all Italian and speak Italian. Employees of the
corporate plaintiffs presumably speak Italian as well. The books and
records of the corporate plaintiffs and the defendants' Italian
subsidiaries are in Italian. Thus, only the testimony of defendants'
American employees would require translation in an Italian trial. Given
that this action concerns a dispute
over events that occurred mainly in Italy, a need to translate some
testimony into Italian does not alter the conclusion that Italy is a more
convenient forum than New York for this litigation. The key witnesses are
either in Italy or available for trial in Italy.
C. Local Interest in The Controversy
The only connection this litigation has with New York is that defendant
LJN Toys is a New York corporation. Plaintiffs point out that this action
is against LJN Toys, not its Italian subsidiaries, for breach of LJN Toys
independent duties. Plaintiffs contend that LJN Toys negotiated, executed
and breached the agreements from New York. Nonetheless, this action is
essentially a dispute about events in Italy, specifically, about the
operation of LJN Toys Italian subsidiaries. Although LJN Toys undertook to
run its subsidiaries until they performed their contractual duties, those
duties were to be performed in Italy.
The Employment Agreement was entirely concerned with an employment
relationship between two Italian parties, to be performed in Italy. The
Umbrella Agreement also contemplated performance in Italy. Most of its
provisions address the management of AL-ES and LJN Italy or transactions
between them and the Fassis companies. Four of the seven claims asserted
here concern such wholly Italian transactions. Claim five, for repayment
by LJN Toys of Zerga's 20% investment in LJN Italy, is also to be
performed in Italy.
The provision sued upon in claim six, requiring LJN Toys' Hong Kong
subsidiary to liquidate Superest and repay the investment of ALN, does
require performance outside of Italy. Yet even this transaction between a
Hong Kong subsidiary and an Italian subsidiary has greater ties to Italy
than to New York. LJN Toys' duty to pay Zerga a share of certain American
insurance proceeds is to be performed in Italy and adds little to the
Umbrella Agreement's slight connections with the United States.
In sum, LJN Toys major obligation under the Umbrella Agreement was to
operate its Italian subsidiaries until they had performed their
obligations to the Fassis. The underlying obligations of those
subsidiaries, upon which most of the obligations of LJN Toys depend, were
to be performed entirely in Italy and have no relation to New York.
D. Choice of Law
Choice of law also favors Italy as a forum for this action. Under both
Gulf Oil, 330 U.S. at 509, 67 S.Ct. at 843, and Piper Aircraft, 454 U.S.
at 251, 102 S.Ct. at 263-64, the necessity of applying foreign law
supports dismissal. The Employment Agreement expressly states that it is
governed by Italian law. Thus, Italian law would govern the underlying
claims to salary and benefits from LJN Italy and AL-ES that are the
subject of the first two claims.
There is no choice of law provision in the Umbrella Agreement.
Defendants argue that it too is governed by Italian law. Plaintiffs
contend that it would be governed by New York law in an action in this
court. Although the agreement was negotiated and executed in part in New
York, Italy appears to have the most significant contacts with its
E. The Italian Litigation
Defendants contend that the Fassis are already litigating in Italy the
claims they have brought here. Plaintiffs distinguish this action as
based on the independent obligations of LJN Toys and MCA, as opposed to
those of LJN Italy and AL-ES. Plaintiffs also rely on the fact that their
Italian actions have been stayed as an argument for New York as an
LJN Toys did assume independent obligations to plaintiffs. Yet three of
plaintiffs' seven claims against LJN Toys in this action stem from the
same underlying breaches by LJN Italy and AL-ES that plaintiffs have
asserted in their two Italian actions. Claims one and two here, for
salary and benefits owed by LJN Toys to plaintiff Johnny Fassi, seek the
same relief from LJN Toys as Johnny Fassi sought from AL-ES and LJN Italy
in the Labor
Court of Monza. Claim three here, for repayment of loans made to AL-ES
asserts substantially the same claim as the Fassi brothers asserted
against AL-ES in the Court of Monza, in the action that has been
transferred to the Bankruptcy Court of Milan. That similar actions are
pending in Italy does not deprive this court of jurisdiction, but it does
suggest that this action could proceed conveniently in Italy.
The fact that this action against LJN Toys, if brought in Italy, might
be stayed by, or transferred to, the Milan Bankruptcy Court does not
alter the inference that Italy is a convenient forum for this
litigation. Plaintiffs' desire to avoid the effect of a possible
bankruptcy stay in the courts of their own country is not a reason for
this court to proceed on their claims. Indeed, if plaintiffs' claims
against LJN Toys are so related to AL-ES bankruptcy proceedings that
Italian courts would consolidate or stay them, that very relatedness
suggests that Italy is the most appropriate forum for them.
This action arises from breaches of contracts governing the
relationship between Italian plaintiffs and defendants' Italian
subsidiaries. Analysis of the factors enumerated in Gulf Oil favors
dismissal on the ground of forum non conveniens. Accordingly, defendants'
motion to dismiss is granted on the condition that defendants waive any
personal jurisdiction or statute of limitations defenses in an action
against them in Italy on these claims, and that they make their employees
available to plaintiffs as witnesses for trial in Italy.