The opinion of the court was delivered by: Conboy, District Judge:
MEMORANDUM OPINION AND ORDER
Currently pending before this Court are plaintiff's motion to
remand this case to the New York State Supreme Court, New York
County, plaintiff's motion for Rule 11 sanctions, and
defendants' cross-motion to transfer this case to the United
States District Court for the District of Maryland. For the
reasons that follow, plaintiff's motion to remand is granted,
his motion for Rule 11 sanctions is denied, and defendants'
cross-motion is denied.
Plaintiff Sanford Asher ("Asher") is a New York resident and
a trustee of the Judith Katz Clayton Trust ("trust").
Defendants Henry H. Goldberg ("Goldberg"), Alan B. Geller
("Geller"), and Jack I. Luria ("Luria") are Maryland residents
and are general partners in GGL Investment Partners ("GGL"), a
Maryland general partnership. On August 11, 1988, Goldberg
executed and delivered a $1,665,000 promissory note to Asher as
partial consideration for Goldberg's purchase from the trust of
the trust's interest in eleven limited partnerships. On August
12, 1988, Goldberg assigned the eleven partnerships to GGL, and
GGL assumed Goldberg's obligation on the promissory note.
On July 30, 1990, the trust, GGL, Goldberg, Geller, and Luria
entered into a modification agreement that provided, inter
alia, that should the aggregate net worth of Goldberg, Geller,
and Luria fall below $77,179,535 for any one year, the trust
would have the right to "accelerate the maturity of the Note to
the Date that is ten (10) days after the date on which the
Trust gives notice to GGL of its election to accelerate based
on such a reduction in aggregate net worth." Modification
Agreement at ¶ 10. The modification agreement also provided
that "[i]n the event of a dispute under the Note or this first
modification, the Supreme Court of the State of New York shall
have jurisdiction." Modification Agreement at ¶ 24.
On June 10, 1991, Goldberg, Geller, and Luria delivered to
Asher documents that stated that Goldberg, Geller, and Luria's
aggregate net worth exceeded $77,179,535. Believing that
Goldberg, Geller, and Luria's aggregate net worth was less than
that amount, Asher notified them on June 13, 1991, that he had
elected to accelerate the maturity of the note.
On July 15, 1991, Asher commenced this action in the New York
State Supreme Court, New York County, to recover on the
$1,665,000 note plus interest and liquidated damages. On August
13, 1991, pursuant to 28 U.S.C. § 1441(a) and on the basis of
diversity of citizenship, defendants removed the state court
action to this court. Arguing that ¶ 24 of the modification
agreement is a mandatory forum selection clause, Asher now
moves that the instant case be remanded to the New York State
Supreme Court, New York County. Defendants contend that the
forum selection clause is permissive and they cross-move that
this case be transferred to the United
States District Court for the District of Maryland pursuant to
28 U.S.C. § 1404(a).
The first issue in this case is whether the instant forum
selection clause is permissive or mandatory. In Seward v.
Devine, 888 F.2d 957 (2d Cir. 1989), the Court of Appeals was
faced with a forum selection clause in a purchase agreement
which stated that "the New York State Supreme Court, Delaware
County, shall have jurisdiction over all litigation which shall
arise out of any disputes or disagreements between the parties
concerning a breach or interpretation of any of the terms of
the agreement." Id. at 962. The Second Circuit held that this
language mandated that the suit be remanded to the New York
State Supreme Court, Delaware County. The forum selection
clause in the instant case is virtually identical to the clause
that the Second Circuit discussed in Seward, and therefore the
instant clause requires that this case be remanded to the
Supreme Court of the State of New York, New York County.*fn1
Defendants contend that Seward is distinguishable from the
instant case because the Court in Seward was interpreting three
separate forum selection clauses in three related agreements,
and two of the clauses specified that venue as well as
jurisdiction was to lie in the New York State Supreme Court,
Delaware County. The defendants apparently maintain that had
the Second Circuit in Seward been faced, as this court is faced
in the instant case, with only a provision which stated that
"jurisdiction shall be in the New York State Supreme Court,"
the Second Circuit would have held that provision permissive.
However, nowhere in the Seward opinion does the Court of
Appeals indicate that the specification of venue in the other
two agreements informed the court as to the interpretation of
the forum selection clause that did not specify venue. To the
contrary, the Second Circuit indicated that, standing alone,
the forum selection provision in the purchase agreement had the
same meaning as the forum selection provisions in the two other
agreements. See Seward, 888 F.2d at 962 ("We . . . note that
these agreements plainly provided that venue was to be solely
to the state court in Delaware County. The Farm Purchase
Agreement stated that `the New York State Supreme Court,
Delaware County shall have jurisdiction. . . .' Similarly, both
the Joint Venture and Limited Partnership Agreements provided
for `venue and jurisdiction' in Delaware County. . . ."
(emphasis added) (citations omitted)); see also General
Electric Co. v. Southwest Silicone Co., 1991 WL 16022, *5
(N.D.N.Y. 1991) ("When a specific court is identified as being
the court with jurisdiction over all litigation arising out of
disputes concerning a breach or interpretation of any term of
the contract, all litigation must be brought in that court.")
(citing Seward at 962); ASM Communications, Inc. v. Allen,
656 F. Supp. 838, 839-40 (S.D.N.Y. 1987) (use of the word "shall" in
a forum selection clause makes the clause mandatory).
Defendants point to First National City Bank v. Nanz, Inc.,
437 F. Supp. 184 (S.D.N.Y. 1975) to support their position that
the forum selection clause in the instant case is permissive.
In Nanz, the court held permissive a contractual provision
which stated that "[t]he Supreme Court of the State of New
York, within any county of the city of New York, shall have
jurisdiction of any dispute between the parties." While Nanz is
directly on point, the Second Circuit's decision in Seward has
implicitly overruled Nanz's holding in this area.
Having decided that the forum selection clause in the instant
case is mandatory, we turn next to the issue of whether this
court should enforce the clause. The Second Circuit
has held that when a court in a diversity case is faced with a
mandatory forum selection clause that dictates that an action
proceed in state rather than federal court, the court "should
enforce [the] contractual forum selection clause unless it is
clearly shown that enforcement would be unreasonable and unjust
or that the clause was obtained through fraud or overreaching."
Jones v. Weibrecht, 901 F.2d 17, 18, 19 (2d Cir. 1990); accord
Karl Koch Erecting Co. v. New York Convention Center
Development Corp., 838 F.2d 656, 659 (2d Cir. 1988). In the
instant case, defendants have failed to make such a showing,
and therefore this case must be remanded to the New York State
Supreme Court, New York County.
Because we hold that the instant forum selection clause
mandates that this case be remanded to the New York State
Supreme Court, New York County, the defendant's cross-motion to
transfer this action to the United States District Court for
the District of Maryland is ...