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United States District Court, Southern District of New York

July 23, 2003


The opinion of the court was delivered by: Lewis Kaplan, District Judge


This diversity action asserts two claims for breach of contract, one pertaining to the so-called EPC Agreement and the other to the so-called Interfacing Agreement. See Def. Mot. Exs. B ("EPC Agreement), H ("Interfacing Agreement"). Defendant moves to dismiss on the ground of improper venue or, alternatively, forum non conveniens, arguing that the dispute would be resolved best as part of a mechanic's lien action pending in an Illinois state court.

The EPC Agreement contains a mandatory forum selection clause whereby the parties submitted "to the exclusive jurisdiction of the state and federal courts located in the state of New York for the purpose of litigating a Dispute under this Section 18.2. . . ." EPC Agreement § 18.2. Section 18.1 of the EPC Agreement effectively defines the term Dispute as any controversy "regarding the application or interpretation of any provision of" the EPC Agreement. Id. § 18.1. The Agreement contains also a New York governing law clause. Id. § 19.10. The parties appear to agree that Count I of the complaint embraces a Dispute.

The Interfacing Agreement contains a permissive forum selection clause whereby the parties submitted to the non-exclusive jurisdiction of this Court and the New York Supreme Court, County of New York, with respect to "[a]ny legal action or proceeding with respect to this Agreement." Interfacing Agreement § 3.2(b). It too has a New York governing law clause. Id. § 3.2(a).

The submissions to jurisdiction in this district rendered defendant subject to personal jurisdiction here irrespective of whether it otherwise could have been sued in New York. In consequence, it is deemed to reside here, and venue therefore is proper in this district. 28 U.S.C. § 1391(a)(1), 1391(c). Accordingly, defendant's improper venue argument is baseless unless, as defendant contends, the forum selection clauses are unenforceable.

The parties agree that a forum selection clause will be enforced unless (1) the complaining party "`for all practical purposes would be deprived of his day in court,' due to the grave inconvenience or unfairness of the selected forum," (2) the "unfairness of the chosen law may deprive the plaintiff of a remedy," or (3) the clause would "contravene a strong public policy of the forum state." Roby v. Corp. of Lloyd's, 996 F.2d 1353, 1363 (2d Cir. 1993) (internal citations omitted).

By all usual measures, this is not a convenient forum for this dispute. Neither, for that matter, would the state court in Yorkville, Illinois, where defendant would prefer to litigate. But these large and sophisticated parties entered into these complex agreements for a multimillion dollar project. There is no serious suggestion that litigating here would deprive defendant of its day in court. In particular, there is no reason to believe that defendant could not reduce its contractual counterclaim to judgment here and then enforce that judgment in the context of the Illinois mechanic's lien action.

Defendant contends also that application of the chosen law — that of New York — would be fundamentally unfair. Upon close inspection, however, the argument presupposes that the governing law clause would oust it of any in rem rights it otherwise might have under Illinois law. But that argument, as suggested above, is unconvincing. There would be no unfairness in determining defendant's contractual rights under New York law, as the parties agreed. If, given that determination, defendant is entitled to a remedy in the in rem action in Illinois, it would be free to seek it.

The defendant's suggestion that application of the forum selection clauses would violate Illinois public policy is incorrect. The argument is based on an Illinois statute which, although it does invalidate governing law clauses that would subject disputes regarding construction projects to be performed in Illinois to the law of other jurisdictions, only took effect on July 16, 2002. See 815 ILL. COMP. STAT. ANN. 665/10; see also id. 665/99. Under Illinois law, in the absence of a legislative indication as to whether retroactivity is intended, a statute will be applied retroactively only if doing so would not "`impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed.'" Commonwealth Edison Co. v. Will County Collector, 196 Ill.2d 27, 38, 749 N.E.2d 964, 970-71 (2001) (quoting and adopting Landgraf v. USI Film Prods., 511 U.S. 244,280 (1994)); accord Ford Motor Co. v. Motor Vehicle Review Board, 338 Ill. App.3d 880, 889-90, 788 N.E.2d 187, 193-94 (1st Dist. 2003). In this case, invalidation of the governing law clauses would strip plaintiffs of rights for which they bargained and which they possessed at all relevant times. In consequence, the statute in question has no application here. In any case, it would be largely beside the point. The focus of this motion is on forum selection, not the governing law. And Roby makes clear that it is the public policy of the forum state — here New York — that is pertinent with respect to that issue. There is no contention that enforcement of the forum selection clauses would contravene the public policy of New York.

Defendant argues, finally, that the Court should dismiss on the ground of forum non conveniens in favor of the Illinois state court even if venue is proper here.

"An evaluation of a motion to dismiss on the grounds of forum non conveniens proceeds in several stages. As comprehensively explained in Iragorri v. United Technologies Corp., 274 F.3d 65 (2d Cir. 2001) (en banc), the `first level of inquiry' pertains to `determining whether the plaintiff's choice [of forum] is entitled to more or less deference.' Id. at 73. A determination of what degree of deference is owed a plaintiff's choice of forum does not dispose of a forum non conveniens motion, however, because even after determining what deference to accord the plaintiff's choice, a district court still must conduct the analysis set out in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055 (1947). See Iragorri, 274 F.3d at 73. Thus, the next level of inquiry requires a court under Gilbert to determine whether an adequate alternative forum exists. When such is the case the court must go to the third step and balance factors of private and public interest to decide, based on weighing the relative hardships involved, whether the case should be adjudicated in the plaintiff's chosen forum or in the alternative forum suggested by the defendant." Pollux Holding Ltd. v. Chase Manhattan Bank, 329 F.3d 64,70 (2d Cir. 2003).
The plaintiff's choice of a forum specified in a mandatory forum selection clause will not be disturbed unless the party who sought to escape application of the clause "could clearly show that [its] enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972). The plaintiff's choice of a forum permissively designated in such a clause is entitled to "considerable deference," albeit not the nearly conclusive deference required by Bremen. Blanco v. Banco Indus. de Venezuela, S.A., 997 F.2d 974, 979 (2d Cir. 1993).

Defendant argues that the two agreements should be read together in such a way as to render both forum selection clauses permissive. There does not seem to be much merit in the argument. But the point need not be determined. Even if defendant were right, plaintiffs' choice of this forum would be entitled to "considerable deference."

Having determined that the choice of forum is entitled at least to that level of deference, the next question is whether there is an adequate alternative forum. The Illinois state court unquestionably satisfies that standard. So the issue turns on the balance of public and private interest factors referred to in Gilbert.

The private factors do not cut in favor either of this Court or the Illinois forum. Neither will have significantly greater access to witnesses or sources of proof than the other, as the parties — which are based in Minnesota and Pennsylvania — are not located in or near either, and there is no suggestion that any witnesses are more readily accessible to either court.

The public interest factors also are equivocal. The contracts both are governed by New York law, thus giving this Court a (very) marginal advantage over the Illinois forum. On the other hand, there is something to be said for having the dispute resolved in the context of the Illinois mechanic's lien litigation already before the Illinois state court.

The Court of Appeals has made clear that an "action should be dismissed [on forum non conveniens grounds] only if the chosen forum is shown to be genuinely inconvenient and the selected forum significantly preferable." Iragori, 274 F.3d at 74-75. Thus, even if defendant were right in contending that the forum selection clauses both should be read as permissive, the perhaps extremely small balance of public interest factors favoring the Illinois forum would be insufficient to overcome the deference due plaintiffs' choice of a forum in which the parties agreed was a permissible choice.

Defendant's motion to dismiss and for other relief is denied.



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