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GENERAL TEXTILE PRINTING & PROCESSING CORP. v. EXP

July 7, 1995

GENERAL TEXTILE PRINTING & PROCESSING CORP., Plaintiff, against EXPROMTORG INTERNATIONAL CORP., CAROLINA TRADING CO., and GUENNADI RAZOUVAEV, Defendants.


The opinion of the court was delivered by: PETER K. LEISURE

 LEISURE, District Judge:

 This is an action for breach of contract brought by plaintiff, General Textile Printing & Processing Corp. ("GTP"). GTP is a Connecticut corporation with offices in New York City. Defendants are Expromtorg International Corp. ("Expromtorg"), and company president, Guennadi Razouvaev ("Razouvaev") (collectively, "defendants"), residents of Michigan. The amount in controversy exceeds the sum of $ 50,000.00, exclusive of interest and costs. This Court has diversity jurisdiction founded on 28 U.S.C. § 1332(a)(1).

 Defendants move to stay litigation in favor of arbitration, pursuant to 9 U.S.C. § 3, and to dismiss the amended complaint for lack of personal jurisdiction, pursuant to Fed. R. Civ. P. 12(b)(2), to the extent that it states a claim against Razouvaev. Plaintiff has made a cross-motion to stay the arbitration. For the reasons stated below defendants' motions are granted in part and denied in part, and plaintiff's motion is denied.

 Expromtorg is an importer of cotton fabric, and GTP was a purchaser of that fabric. On or about April 1, 1994, the parties entered into two sets of sales notes, *fn1" which comprise the original sales notes between the parties (the "OSN"). The OSN contain an arbitration provision.

 On July 28, 1994, GTP filed a complaint alleging breach of the OSN. During the course of subsequent settlement attempts, the parties amended the OSN, creating new sales notes ("NSN") that had their pre-printed arbitration clauses crossed out. The NSN were created as part of a stipulation and order of settlement ("Stipulation") that Expromtorg signed on or about August 23, 1994. GTP, however, did not sign the Stipulation, and on September 2, 1994, GTP returned the first shipment of goods made pursuant to the NSN. The Stipulation was not filed with the Court, and litigation proceeded. GTP filed an amended complaint on November 23, 1994, adding Razouvaev as a defendant on claims arising under the OSN. Defendants interposed their answer and counterclaims and participated in a number of court conferences. On February 21, 1995, defendants filed the instant motion.

 DISCUSSION

 Defendants contend that the complaint should be dismissed for lack of personal jurisdiction to the extent that it states a claim against Razouvaev. *fn2" Defendants also argue that the instant action should be stayed pending arbitration. They maintain that the four claims asserted by GTP against Expromtorg each relate to a controversy involving deliveries allegedly required under the OSN, and thus, each are subject to the OSN's arbitration clause. Defendants further maintain that there has been no waiver of the arbitration clause.

 Plaintiff does not contest that its claims arise under the OSN's arbitration clause. Rather it seeks to stay arbitration, contending that because defendants signed the Stipulation, which lacked an arbitration provision, and affirmatively proceeded with litigation for several months, no valid agreement to arbitrate presently exists. Plaintiff also contests defendants' claim that the Court has no personal jurisdiction over Razouvaev.

 I. DISMISSAL FOR PERSONAL JURISDICTION

 A. New York Law

 This is a diversity case, and under the laws of the forum state, New York, the parties to litigation may, by their conduct, consent to the application of New York law. See Wm. Passalacqua Builders v. Resnick Developers South, 933 F.2d 131, 137 (2d Cir. 1991); Walter E. Heller & Co. v. Video Innovations, Inc., 730 F.2d 50, 52 (2d Cir. 1984). The choice of law under all of the sales notes is New York. See Affidavit of Guennadi Razouvaev, sworn to on February 15, 1995 (the "Razouvaev Aff."), at Schedule D, Exhs. 3, 5. Consequently, New York law governs here.

 It is well established that "New York law allows the corporate veil to be pierced either when there is fraud or when the corporation has been used as an alter ego." Itel Containers Int'l Corp. v. Atlanttrafik Express Serv. Ltd. 909 F.2d 698, 703 (2d Cir. 1990) (emphasis in original); see Carte Blanche Pte, Ltd. v. Diners Club Int'l, Inc., 2 F.3d 24, 26 (2d Cir. 1993); Passalacqua, 933 F.2d at 138 ("Liability . . . may be predicated either upon a showing of fraud or upon complete control by the dominating corporation that leads to a wrong against third parties."); Gartner v. Snyder, 607 F.2d 582, 586 (2d Cir. 1979) ("Because New York courts disregard corporate form reluctantly, they do so only when the form has been used to achieve fraud, or when the corporation has been so dominated by an individual . . . that it primarily transacted the dominator's business rather than its own and can be called the other's alter ego.").


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