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NEWMAN & SCHWARTZ v. ASPLUNDH TREE EXPERT CO.

March 12, 1996

NEWMAN & SCHWARTZ, Plaintiff, against ASPLUNDH TREE EXPERT CO., Defendant.


The opinion of the court was delivered by: BATTS

 DEBORAH A. BATTS, United States District Judge.

 Plaintiff brought suit for payment of legal fees alleged to be guaranteed by Defendant, but incurred by an employee of the Defendant's subsidiary. Defendant has moved for dismissal pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim. For the reasons stated below, Defendant's Motion is granted, and Plaintiff's Complaint is dismissed in its entirety.

 I. BACKGROUND

 In May 1990, Defendant Asplundh Tree Expert Co. ("Asplundh") entered into a stock sale agreement with Robert E. Bates ("Bates"), who was the CEO and majority shareholder (Compl. P 5), of Vanguard Meter Service, Inc. ("Vanguard"), and other Vanguard Shareholders for the sale to Asplundh of all the Vanguard stock. *fn1" (Bates Aff. P 4.) Bates received $ 3.5 million in exchange for the shares. (Tatoian Aff. P 2.) At that time, Bates entered into an Employment Agreement with Vanguard for a term of 5 years. (Bates Aff. P 5.) Following the sale, Bates was elected to the Board of Directors at Vanguard. (Compl. P 6.) In August 1991, Bates was asked to resign because both the United States Attorney's Office and the New York County District Attorney's Office had commenced investigations of Bates and Vanguard. (Bates Aff. PP 7-8, 10.) As a result of the requested resignation, a second Employment Agreement was negotiated on August 20, 1991. (Bates Aff. P 13.) Asplundh, Vanguard and Bates executed the Employment Agreement ("1991 Agreement") (Compl. P 7), which described Bates's restricted duties at Vanguard and provided for the salary and benefits guaranteed to Bates. *fn2" (1991 Agreement.)

 Also on August 21, 1991, Bates, Vanguard and Asplundh executed a letter agreement ("Letter Agreement") which provided, among other things, *fn4" for the payment, by Vanguard, of Bates's legal fees for defense of any criminal actions brought against him in the scope of his employment. (Letter Agreement P 5.) *fn5"

 In November 1991, Bates retained Plaintiff Newman & Schwartz ("N&S") to represent him in connection with a 206-count-indictment brought in New York County, charging Bates and Vanguard with fraud, perjury, and the filing of false instruments. (Compl. P 9; Def.'s Mem. Law at 3.) On November 6, 1991, N&S faxed a copy of its retainer agreement with Bates, containing a guaranty of payment rider by Asplundh for signature, and a cover letter, to Mr. Phillip Tatoian, General Counsel of Asplundh. (Tatoian Aff. P 9, Ex. C; Newman Aff. Ex. B.) On November 7, 1991, N&S sent a second letter again requesting Asplundh's guarantee of Bates's legal fees. (Tatoian Aff., Ex. D; Newman Aff. Ex. D.) There is no evidence of an Asplundh reply to either communication. (Newman Aff. PP 11-12; Tatoian Aff. P 9.)

 N&S represented Bates at the arraignment on November 7, 1991, until the conclusion of the case against Bates on November 2, 1994, at which time Bates pled guilty to a misdemeanor. *fn6" (Compl. PP 11-14.) At the conclusion of N&S's representation of Bates, the legal fees totalled $ 494,419.97. (Compl. P 16.) Vanguard has filed for bankruptcy and Plaintiff has submitted a claim for attorney's fees which is currently pending. (Tatoian Aff. P 11.)

 II. DISCUSSION

 "On a motion to dismiss under Rule 12(b)(6), the court must accept as true the factual allegations in the complaint, and draw all reasonable inferences in favor of the plaintiff." Bolt Elec., Inc. v. City of N.Y., 53 F.3d 465, 469 (1995) (citations omitted). "The district court should grant such a motion only if, after viewing plaintiff's allegations in this favorable light, 'it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Walker v. City of N.Y., 974 F.2d 293, 298 (2d Cir. 1992) (quoting Ricciuti v. New York City Transit Auth., 941 F.2d 119 (2d Cir. 1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957))), cert. denied, 507 U.S. 961 (1993).

 A. Whether the Complaint Fails to State a Claim for Breach of Contract

 1. Forum Selection Clause

 The 1991 Agreement contains a forum selection clause which indicates that, in the event of a dispute, Kentucky law shall apply. The Second Circuit has consistently held that, in cases brought under diversity jurisdiction, a forum selection clause shall be upheld, unless it can be 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 (2d Cir. 1990) (citing M/S Bremen v. Zapata ...


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