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United States District Court, S.D. New York

March 5, 2004.

MERCURY WEST A.G., INC., Plaintiff, -against- R.J. REYNOLDS TOBACCO COMPANY, Defendant

The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge


Procedural Background

  Plaintiff Mercury West A. G., Inc. ("Mercury West") brought this action seeking compensatory and punitive damages from Defendant R.J. Reynolds Tobacco Company ("Reynolds"). Mercury West accuses Reynolds of breaching a series of contracts, being unjustly enriched at Mercury West's detriment, tortuously converting one of Mercury West's trademarks and willfully engaging in deceptive business practices. Mercury West initiated this action by filing a Summons and Complaint in New York State Supreme Court. Reynolds timely removed the action to this Court. Reynolds subsequently brought the present motion to dismiss the Complaint pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure ("Rule 12(b) (3)") and 28 U.S.C. § 1406(a) (" § 1406(a)").


  According to Mercury West, in October of 2001, Reynolds's Manager — Purchasing Operations Gregory Feron ("Feron") approached Mercury West executives about doing business with Mercury West. Reynolds, claims Mercury West, was interested in Mercury West's familiarity with overseas markets. In particular, Reynolds was interested in taking advantage of Mercury West's contacts in Russia, the Republic of Georgia and the Far East to market Reynolds's cigarettes in those regions. See Godelman Aff. ¶ 6. Reynolds disputes Mercury West's characterization of the initial Page 2 contacts between the two companies, both with regard to how they were initiated and their purpose. See Feron Decl. ¶ 4. In light of the fact that this is a motion to dismiss, however, Mercury West, as the party in opposition to the motion, is entitled to have all of the relevant facts viewed in the light most favorable to it. See New Moon Shipping Co., Ltd, v. Man B & W Diesel AG, 121 F.3d 24, 29 (2d Cir. 1997).

  Shortly after October, 2001, Mercury West and Reynolds began some type of business relationship. Representatives from each company attended meetings in Moscow, Vienna and Washington, B.C. in 2002 in order to discuss business possibilities. See Godelman Aff. ¶ 6. It appears as though the relationship centered on Reynolds's production and sale of cigarettes to Mercury West for Mercury West's distribution in targeted overseas markets under the trademark of "Senator". Exactly how it is claimed the business arrangement was structured is unclear from Mercury West's submissions.

  In April of 2002, Feron informed Mercury West that Reynolds wanted Mercury West to enter into a Master Purchasing Agreement ("MFA"). Mercury West Vice-President Alex Godelman claims that Feron told him the agreement was one that Reynolds required all of its business partners to sign and was little more than a mere "formality." See id. ¶ ll. On April 15, 2002, Godelman signed the MPA on Mercury West's behalf. According to Godelman, he signed Page 3 the agreement without seeking the assistance of counsel. See id. L. Joe Inman, Reynolds's Vice-President of Manufacturing, signed the MFA on his company's behalf.

  Among the provisions included in the MFA is what is commonly referred to as a forum selection clause. In pertinent part, Section 11.3, entitled "Jurisdiction," states:

The parties hereto hereby agree that all actions or proceedings initiated by any party hereto arising directly or indirectly out of this Agreement shall be litigated only in the Superior Court for Forsyth County, North Carolina with a request that the case be assigned to the Honorable Ben F. Tennille (or his successor), The Special Superior Court Judge For Complex Business Cases. Each party hereto hereby expressly submits and consents in advance to such jurisdiction and venue in any action or proceedings commenced by any party hereto in such Court; agrees that jurisdiction and venue is proper in such Court; . . . . Each party hereto waives any claim that said court is an inconvenient forum or an improper forum based on lack of venue.
Relying on this clause, Reynolds contends that this Court is not the appropriate forum for Mercury West's causes of action to be prosecuted. By this motion, Reynolds seeks to enforce the forum selection clause and have Mercury West's complaint dismissed.


 I. Proper Procedural Framework

  The initial issue that must be resolved is to determine what is the proper framework within which to examine this motion. A motion to dismiss a complaint based on the enforcement of a forum selection clause does not fit neatly within any of the mechanisms Page 4 prescribed by the Federal Rules of Civil Procedure or the United States Code. Although several courts have confronted this question, a clear and definitive answer has not emerged. See New Moon Shipping Co., Ltd., 121 F.3d at 28 (finding a lack of consensus on this issue among circuit courts); Jockey Int'l, Inc. v. M/V "Leverkusen Express", 217 F. Supp.2d 447, 450 (S.D.N.Y. 2002) ("The Second Circuit has not decided what rule governs dismissals based on a forum selection clause."). Motions to enforce forum selection clauses have been brought pursuant to each of Rules 12(b)(1), 12(b)(3), 12(b)(6) and § 1406(a). Each provides a logical basis for supporting such a motion, but none provide a perfect fit for a party seeking to enforce a forum selection clause. Importantly, the scope of materials a court may consider in reaching its decision differ depending upon which provision governs. Nonetheless, courts of this circuit have made clear that courts do possess the ability under either Rule 12(b)(3) or § 1406(a) to dismiss a case upon a motion that a forum selection clause renders venue in a particular court improper. Id.; Tech. Express, Inc. v. FTF Bus. Sys. Corp., 2000 WL 222628 (S.D.N.Y. Feb. 25, 2000).

  The instant motion is framed as both a Rule 12(b)(3) and § 1406(a) motion and each side has offered supporting materials that go beyond the original pleadings. Were the Court to deem the motion one governed by Rule 12(b)(6), consideration of materials Page 5 not included as part of the pleadings would be prohibited. Mercury West has not objected to the Court considering the additional materials or treating the motion as one brought pursuant to Rule 12(b)(3) or § 1406(a). The motion will, therefore, be treated as such and all of the supporting materials will be considered.

 II. The Forum Selection Clause is Valid and Enforceable

  At one time forum selection clauses were routinely greeted with hostility by courts that viewed them as attempts to "oust" courts of proper jurisdiction. Driven by the growth and development of international commerce, this is no longer the case. See Bense v. Interstate Battery Sys, of Am., Inc., 683 F.2d 718, 721 (2d Cir. 1982) (stating that "any such `general hostility' towards forum — selection clauses is today simply a vestigial remainder of an outmoded doctrine."). In fact, in what represents a 180 degree turn, now when confronted with forum selection clauses courts presume them to be valid. See Ferraro Foods. Inc. v. M/V Izzet Incekara, 2001 WL 940562, at *2 (S.D.N.Y. Aug. 20, 2001). The seminal case in terms of the current presumption in forum selection clauses/ favor is M/S Bremen v. Zapata Off — Shore Co., 407 U.S. l (1972). In Bremen, the Supreme Court held forum selection to be prima facie valid and enforceable unless the party opposing the clause can demonstrate that enforcement would be, JJP, unreasonable under the circumstances Id., at 10; see also Roby v. Page 6 Corp, of Lloyds, 996 F.2d 1353, 1362 (2d Cir. 1993); Baosteel Am., Inc. v. M/V "Ocean Lord", 257 F. Supp.2d 687, 688 (S.D.N.Y. 2003).

  Initially after Bremen was decided there existed some debate as to whether its holding was limited solely to the field of admiralty cases. The Second Circuit has since determined that the Bremen holding applies with equal force to cases brought pursuant to diversity jurisdiction. See Jones v. Weibrecht, 901 F.2d 17, 18 (2d Cir. 1990) ("[The Bremen] rule has been extended in this and other circuits to diversity and other non — admiralty cases."); see also Tech Express, Inc., 2000 WL 222628, at *2. Moreover, the Second Circuit has developed a policy of honoring forum selection clauses. See Strategic Mktg. & Communications. Inc. v. Kmart Corp., 41 F. Supp.2d 268, 270 (S.D.N.Y. 1998). Underlying this policy is an understanding that forum selection clauses carry an economic benefit to at least one of the parties *that is typically reflected in the overall economics of the contract. As such, these clauses are bargained for terms of the contract that deserve to be honored by courts. See Carnival Cruise Lines v. Shute, 499 U.S. 585, 594 (1991); Ins. Corp, of Hanover, Inc. v. Latino Americana de Reaseguros, S.A., 868 F. Supp. 520/1 529 (S.D.N.Y. 1994).

  Parties seeking to avoid enforcement of a forum selection clause bear the heavy burden of making a "strong showing" in order Page 7 to overcome the presumption of validity from which these clauses benefit. See New Moon Shipping Co., Ltd., 121 F.3d at 29. More specifically, the party must convince the court that enforcement would be unreasonable and unjust, or that the clause is the result of fraud or overreaching. See Id.; Bense, 683 F.2d at 721-22; Jockey Int'l, Inc., 217 F. Supp.2d at 451; U.S. West Fin. Servs., Inc. v. Cipriano, 1990 U.S. Dist. Lexis 7364, *5-6. A forum selection clause may be found, unreasonable or unjust if its enforcement will for all practical purposes deprive the complaining party of its day in court due to the grave inconvenience or unfairness of the selected forum, or if the clause contravenes a strong public policy of the forum state. Roby, 996 F.2d at 1363; Ins. Corp, of Hanover, Inc., 868 F. Supp at 529.

  Mercury West contends that enforcement of this particular selection clause would be unreasonable because it would effectively eliminate the company's opportunity to obtain a remedy. According to Mercury West, it is a small and financially destitute company unable to litigate in North Carolina. As discussed, Mercury West must demonstrate that requiring it to litigate in North Carolina would be so gravely difficult and impractical as to effectively deprive it of its day in court. See Bremen, 407 U.S. 18 (stating that when a party has contracted to litigate in a forum "it should be incumbent on the party seeking Page 8 to escape his contract to show that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court.").

  Mercury West has failed to convince the Court that it could not prosecute its claims in North Carolina. Simply claiming financial distress does not warrant setting aside a valid forum selection clause. See generally Envirolite Enters., Inc. v. Glastechnishe Industrie Peter Lisec Gesechaft M.B.H., 53 B.R. 1007 (S.D.N.Y. 1985) (refusing to find that enforcement of a forum selection clause would be unreasonable simply because the plaintiff was bankrupt). Although certain costs relative to travel and temporary lodging would have to be incurred, those costs can be controlled and are not significant enough to be considered a barrier to the prosecution of its claims. Mercury West was able to send representatives to North Carolina to negotiate and do business with Reynolds. See Blynn Aff. ¶ 5. Litigating claims in North Carolina that it alleges to be worth at least $7.5 million should not be so onerous as to deprive the company of its day in court, even in Mercury West's claimed weak financial circumstances.

  In addition to being unreasonable, Mercury West alleges the clause should be deemed a product of overreaching. According to the plaintiff, the forum selection clause is the result of a bigger, more company exerting its strength to take Page 9 advantage of an unequal business partner in a lesser bargaining position. This is an argument that carries extremely little weight with the Court. Mercury West is a corporation engaged in significant international commerce. — Despite what Mercury West seems to want this Court to believe, there is no evidence that Mercury West is a naive company unschooled in the ways of business that was taken advantage of.

  Of equally little weight is Mercury West's argument that enforcement of the forum selection clause would be unjust because the company was directed to sign the contract as a mere "formality" required of those doing business with Reynolds. For starters, presumably Mercury West has been involved in enough business contracts to know that it should carefully review the terms of any contract it is asked to sign. Cf. Feron Decl. ¶ 4. Being told that the contract represented a mere formality does not translate into an example of fraud or overreaching. Even if the Court were inclined to view terming the contract a "formality" an act akin to fraudulent inducement — which the Court is by no means inclined to do — in order to invalidate the forum selection clause, the clause itself would have to have been the product of fraud. See Gen. Elec. Capital Corp, v. Mehta, 2002 WL 511553, *2, n.6 (S.D.N.Y. Apr. 4 2002); Envirolite Enters., Inc., 53 B.R. at 1012. Mercury West has not alleged that the forum selection clause is the product of fraud. Page 10

  It also should be noted that the forum selection clause was in no way hidden from Mercury West or buried in contract minutia. Rather, the clause was its own paragraph, set — off by a title clearly indicating its purpose. See MPA ¶ 11.3, attached as Ex. A to Blynn Aff. Far less clear and significantly more camouflaged forum selection clauses have been upheld by courts. See, e.g., Carnival Cruise Lines, Inc., 499 U.S. 585 (1991); Effron v. Sun Line Cruises, Inc., 67 F.3d 7 (2d Cir. 1995); Gen. Elec. Capital Corp., 2002 WL 511553. The plainly obvious presence of the provision within the contract was enough to both provide Mercury West with the requisite notice and to have prompted Mercury West's option to reject the provision or the contract had it so desired. See Computer Servs. Group, Inc. v. Apple Computer. Inc., 2002 WL 575649, at *1 (S.D.N.Y. Apr. 16, 2002). Mercury West did not object to the forum selection clause, and did sign the MPA.

  To ignore the forum selection clause even though it is unambiguously set forth in the body of a binding contract between two corporations would be the unreasonable and unjust act. Not only would such a decision allow Mercury West to pick and choose which contract terms it wants enforced, it would deprive Reynolds of a bargained for benefit of the MPA. See Princeton Pike Park, Inc. v. High-Tec. Inc., 1990 U.S. Dist. Lexis 8163, at *15-16 (S.D.N.Y. July 3, 1990). Even assuming, as Mercury West claims, the terms of the MPA — and specifically the forum selection clause Page 11 were not the subject of actual bargaining, the clause is still valid and enforceable. The forum selection clause need not have been the subject of express negotiation to be considered a bargained for benefit of the contract. A forum selection clause included in a non — negotiated form contract has the power to bind parties. See Karl Koch Erecting Co., Inc. v. N.Y. Convention Ctr. Dev. Corp., 838 F.2d 656, 659 (2d Cir. 1988) (holding that the absence of negotiation over the terms of a contract does not render a forum selection clause unenforceable); Computer Servs. Group, Inc., 2002 WL 575649, at *1 (stating that a forum selection clause can bind the contracting parties even where the agreement is a form contract and not subject to negotiation); Strategic Mktg. & Communications. Inc., 41 F. Supp.2d at 272 (same); see also Vitricon, Inc. v. Midwest Elastomers, Inc., 148 F. Supp.2d 245, 247 (E.D.N.Y. 2001) ("Where a company conducts business in many states, a non — negotiated forum selection clause included in a sales contract may be enforced even if it was not the subject of bargaining."). All the Court need believe in order to find the forum selection clause valid is that the clause and the contract are the products of an arm's — length business agreement. See Bremen, 407 U.S. at 10; Medoil Corp, v. Citicorp, 729 F. Supp. 1456, 1459 (S.D.N.Y. 1990). Such is the case with respect to the MPA, regardless of the fact that it is essentially a form contract and was presented to Mercury West as a formality required of doing Page 12 business with Reynolds.

  Although Mercury West does not offer it as an explicit argument, the company does make a few references to the fact that North Carolina is the home venue of Reynolds. This fact is not determinative, nor is it even persuasive in the present circumstance. Mercury West bears the heavy burden of having to show that the selected forum would treat it unfairly and deny it a chance to gain a remedy. See Roby, 996 F.2d at 1363. Simply alleging a belief that the forum would be hosfile to its claims because the forum is its opponent's home forum does not satisfy this burden. See Medoil Corp., 729 F. Supp. at 1460. Mercury West does not dispute that the Superior Court for Forsyth County, North Carolina "offer[s] an attractive court system," capable of handling this matter. Godelman Aff. ¶ 23. Considering that Mercury West concedes the attractiveness of the selected forum, it is reasonable to believe — as Reynolds suggests — that the forum was selected as a capable court with a degree of expertise in the types of claims that might be raised. So long as a party had such a good — faith basis in selecting the forum it did, selecting its home forum is acceptable. See GMAC Commercial Credit, LLC v. Dillard Dep't Stores. Inc., 198 F.R.D. 402, 408 (S.D.N.Y. 2001); Composite Holdings. L.L.C. v. Westinghouse Elec. Corp., 992 F. Supp. 367, 370 (S.D.N.Y. 1998).

  Having considered each of Mercury West's arguments as to why Page 13 the forum selection clause should be deemed invalid and enforcement considered unreasonable and unjust, the Court believes the clause to be valid and enforceable. The plaintiff's arguments are not persuasive.


III. The Forum Selection Clause Covers Mercury West's Causes of Action
  Mercury West argues that even if the forum selection clause is valid, it is not relevant to the causes of action raised in this action. It is Mercury West's contention that the instant claims for relief do not relate to the MPA, but rather are based upon prior agreements' between the company and Reynolds and torts committed by Reynolds. According to the plaintiff, prior to engaging in the MPA, Mercury West and Reynolds had entered into other agreements. It is the violation of those prior contracts that Mercury West claims form the basis of its breach and deceptive business practices actions. The other cause of action in the complaint is for tortuous conversion, a claim the company does not believe to be within the scope of the forum selection clause.

  The notion that the breach and deceptive business practices claims are predicated upon prior agreements is fatally flawed by the fact that no prior agreements exist. The MPA contains a merger clause that explicitly establishes that the MPA represents the entirety of Mercury West and Reynolds's contractual relationship and that any prior agreements are thereby superseded. Page 14 Section 11.4, entitled "Entire Agreement; Amendments," of the MPA states:

This Agreement, including Appendices and Exhibits hereto, constitutes the entire agreement between the Parties, and supercedes any prior oral and written agreements entered into by the Parties. There are no prior or contemporaneous agreements or representations affecting the same subject matter other than those expressly stated in this Agreement.
This clause, in no uncertain terms, states that no other agreements exist. In addition, case law holds that if one agreement expressly supersedes others, any prior agreements relating to the same subject matter are, by definition, extinguished. See Health-Chem Corp, v. Baker, 915 F.2d 805, 811 (2d Cir. 1990); Kreiss v. McCown De Leeuw & Co., 37 F. Supp.2d 294, 301 (S.D.N.Y. 1999).

  Even if it were to ignore the merger clause, the Court would be hard — pressed to accept Mercury West's argument in the face of a near complete lack of evidence as to the existence of actual prior contracts. Mercury West has not offered any legitimate evidence that any such agreements existed prior to the MPA. The letters attached to the Godelman affidavit are demonstrative of the fact that Mercury West and Reynolds had some sort of business relationship that pre-dated the signing of the MPA, but they are not examples or proof of contracts. Although Mercury West is entitled to the benefit of all inferences, its assertions must have a basis in. fact supportable by evidence. Page 15

  Turning to the tort claim, forum selection clauses are not restricted solely to breach of contract claims. See Roby, 996 F.2d at 1361 ("There is ample precedent that the scope of clauses similar to those at issue here is not restricted to pure breaches of the contracts containing the clauses."). In some circumstances, forum selection clauses are construed to cover tort claims. See New Moon Shipping Co., Ltd., 121 F.3d at 33. "[T]he circuit courts have held that a contractually — based forum selection clause will also encompass tort claims if the tort claims ultimately depend on the existence of a contractual relationship between the parties, or if resolution of the claims relates to interpretation of the contract or if the tort claims involve the same operative facts as a parallel claim for breach of contract." Direct Mail Prod. Servs. Ltd, v. MBNA Corp., 2000 WL 1277597, at *6 (S.D.N.Y. Sept. 7, 2000) (internal quotations and citations omitted).

  In the instant case, it is readily apparent that the causes of action are the products of the contractual relationship contemplated in and memorialized by the MPA. The claimed tort relates directly to the subject of the MPA — — the — production of cigarettes marketed under the trademark of "Senator". In fact, Mercury West ties its claim regarding the conversion of the Senator trademark to the termination of the MPA. See Godelman Aff. ¶ 14. With respect the contract and unjust enrichment claims, Page 16 the MFA covers the same countries as those involved in Mercury West's causes of action. See MFA Ex. A; Godelman Aff. ¶ 12. The undeniable nexus between the claims and the subject matter of the MFA bring this action within the purview of the forum selection clause. This reality is underscored by the fact that the forum selection clause covers actions arising both "directly" and "indirectly" from the MFA. See MFA § 11.3. Artful pleading should not be allowed to frustrate the purpose and benefit of a forum selection clause. See Direct Mail Servs. Ltd., 2000 WL 1277597, at *6.

 IV. A § 1404(a) Analysis is Not Warranted

  Mercury West premises a great deal of its opposition to Reynolds' s motion on the argument that New York is a more convenient forum than North Carolina. Mercury West attempts to usher the Court through an analysis of the factors set forth for the consideration of a motion to transfer pursuant to 28 U.S.C. § 1404 (a). This is not a motion to transfer pursuant to 28 U.S.C. § 1404 (a), however. The instant motion is one to dismiss and enforce a valid forum selection clause.

  As already discussed, courts in this circuit have recognized a court's ability to dismiss a complaint under Rule 12(b)(3) and § 1406(a) when the court is not an appropriate forum by reason of a valid and enforceable forum selection clause. Because this motion is one to dismiss and the court has found a valid and enforceable Page 17 forum selection clause to exist, a S 1404(a) analysis is not warranted. Furthermore, even if the Court were inclined to transfer, which it is not, compliance with the forum selection clause would require a transfer to the Superior Court for Forsyth County, North Carolina. Remands aside, federal courts do not have the power to transfer a case to a state court. Section 1406(c) makes apparent that "district", as used in § 1406, does not include state courts. Thus, having found the forum selection clause to be valid and enforceable, the Court has no option but to dismiss. This dismissal, however, is without prejudice so as to allow Mercury West to bring the suit in the proper, designated forum.


  For the reasons set forth herein, the Complaint is hereby dismissed. This dismissal is without prejudice toward refiling in the Superior Court for Forsyth County, North Carolina. The Court orders this case closed and directs the Clerk of Court to remove it from the Court's active docket.



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