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CAMBRIDGE NUTRITION A.G. v. FOTHERINGHAM

January 10, 1994

CAMBRIDGE NUTRITION A.G. and CAMBRIDGE NUTRITION INTERNATIONAL, B.V., Plaintiffs,
v.
BILL FOTHERINGHAM, Defendant.


Lasker


The opinion of the court was delivered by: MORRIS E. LASKER

LASKER, D.J.

 In an action for breach of contract, breach of trust and unfair competition, defendant moves to dismiss the complaint pursuant to the doctrine of forum non conveniens or, in the alternative, on the grounds that the exercise of jurisdiction in this case would exceed the limits of due process.

 I.

 Plaintiffs Cambridge Nutrition A.G. ("CNAG"), *fn1" a Swiss corporation, and Cambridge Nutrition International, B.V. ("CNI"), a Netherlands corporation, manufacture and sell a dietary formulation known as the "Cambridge Diet."

 Defendant Bill Fotheringham, a permanent resident of Spain since 1968, was a former employee and shareholder of CNAG. Fotheringham also served as the sole administrator of CNAG's Spanish subsidiary, C.P. Iberica, S.A. ("Iberica").

 In July 1986, the shareholders of CNAG entered into an agreement ("Agreement") to sell all of the company's shares to CNI. The aggregate purchase price paid by CNI to the shareholders was $ 1.24 million. In Section 7 of the Agreement, CNAG shareholders, officers and employees covenant that they will not compete with the Cambridge Diet or use the Cambridge trademarks or tradenames in the manufacture and sale of dietary formulas. As consideration for the promise not to compete, the shareholders received $ 10,000, of which Fotheringham's share was $ 900.

 After the Agreement was executed in a closing held in New York, Fotheringham continued to serve as Iberica's sole administrator. Iberica had an exclusive distribution agreement with Cambridge Plan, S.A. ("CP-Spain"), an independent Spanish company, to distribute Cambridge products in Spain. Fotheringham oversaw Iberica's distribution arrangement with CP-Spain and his actions in this regard are the heart of this dispute. Plaintiffs allege that Fotheringham owned shares of stock in CP-Spain and made business decisions favorable to CP-Spain and beneficial to himself, to the detriment of CNAG. The acts complained of include pricing the formula to favor CP-Spain and inducing CP-Spain to register certain Cambridge trademarks.

 Plaintiffs now sue for breach of the covenant not to compete, breach of trust and unfair competition. Plaintiffs commenced suit in this court because Section 15 of the Agreement states:

 
"This Agreement shall be governed by the laws of the State of New York, U.S.A. All parties hereby submit to the jurisdiction of the courts of the state of New York in regard to any claim, dispute or controversy relating to this Agreement, and all parties agree to accept service of process by mail."

 II.

 Fotheringham moves to dismiss on forum non conveniens grounds. Plaintiffs argue that Fotheringham is precluded from litigating this dispute elsewhere by the forum-selection clause in the Agreement. Accordingly, the threshold question on this motion is whether Fotheringham is bound by the forum-selection clause to litigate the case in New York.

 Federal law


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