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Private One of New York, LLC v. JMRL Sales & Service

January 24, 2007


The opinion of the court was delivered by: Townes, United States District Judge


Plaintiff, Private One of New York, LLC, initially commenced this action in the Supreme Court of the State of New York, Kings County, alleging that defendant JMRL Sales & Service, Inc., d/b/a Craftsmen Limousine and Specialty Bus Manufacturers, LLC ("JMRL"), breached certain agreements by selling buses to Coach USA and refusing to sell them to plaintiff. Defendants subsequently removed this action to this Court, and JMRL now moves to dismiss the claims against it pursuant Rule 12(b)(3) of the Federal Rules of Civil Procedure and 28 U.S.C. § 1406(a) or, in the alternative, to transfer this action pursuant to 28 U.S.C. § 1404(a) to the United States District Court for the Western District of Missouri. In addition, JMRL requests that this Court award it attorneys' fees in accordance with the terms of the agreements between plaintiff and JMRL.

For the reasons set forth below, plaintiff's claims against JMRL are dismissed without prejudice. JMRL's motion for attorneys' fees is denied, but JMRL is granted permission to file a counterclaim against plaintiff within thirty (30) days of the date of this Memorandum and Order.


In conjunction with another corporation, plaintiff operates CitySights N.Y. LLC ("CitySights"), a bus company that offers tours of New York City. Verified Complaint at ¶¶ 5-6. CitySights uses open-air "top decker buses" -- double-decker buses in which most or all of the seating is on the upper deck. Id. at ¶ 7. Gray Line, Inc., which is wholly owned by defendant Coach USA, is CitySights' main competitor. Id. at ¶ 7.

In November 2004, plaintiff entered into a contract with JMRL for the manufacture of a new type of top decker bus, dubbed "The Roman Chariot." This contract, which is attached to the complaint and referred to therein as "Agreement One," consisted of two parts: a three-page document entitled, "Agreement to Construct Sightseeing Bus," and a three-page addendum entitled, "Terms Sheet." In the first part, JMRL agreed to build a single prototype of "The Roman Chariot," and plaintiff agreed to pay a total of $220,000 -- a $50,000 deposit and $170,000 after the bus was manufactured. This part consisted primarily of a list of specifications, but included some warranty provisions.

The second part provided, inter alia, that plaintiff would have the option to reject the prototype or to order additional buses. Specifically, the Terms Sheet required JMRL to deliver the prototype to plaintiff's Brooklyn, New York, offices by December 21, 2004, where it could be inspected by plaintiff and its "booking agents." Terms Sheet (included in Ex. A to the Declaration of Zev Marmurstein (the "Marmurstein Dec.") and Ex. A to the Declaration of Robert M. Haswell (the "Haswell Dec.")) at ¶¶ 1-3. Plaintiff could then either accept the prototype and wire $170,000 to JMRL, or reject the bus and forfeit the $50,000 deposit (unless JMRL or plaintiff managed to sell the prototype within two weeks). Id. at ¶¶ 4-5.

In addition, the Terms Sheet gave plaintiff the option to purchase additional buses. It obligated JMRL to produce the first additional bus within five or six weeks after plaintiff agreed to purchase it and to deliver one bus per week thereafter or pay a penalty of $5,000 per bus. Id. at ¶ 7. The Terms Sheet did not limit the number of additional buses that plaintiff could order, but stated, "By April 01, 2005[,] JMRL will have delivered a total of 10 buses including prototype provided orders are given according to this schedule." Id.

The Terms Sheet also contained a restrictive covenant, which is central to this litigation. Entitled, "Right of First Refusal," this covenant provided:

JMRL . . . and their agents, successors, and subsidiaries agree not to build or sell plans for a sightseeing bus with the open air raised platform design for anyone else in the state of New York other than Private One or their agents or their successors. This exclusive agreement will be voided should Private One cease to purchase their open-air sightseeing buses from JMRL . . . and are purchasing said buses from another manufacturer. JMRL . . . agrees to give Private One the first right of refusal for . . . the Roman Chariot and or any other open air raised platform bus prior to accepting orders from anyone else in the United States of America. This agreement will be voided should Private One attempt to use its terms to force a reduction in the amount agreed upon for the cost of . . . the Roman Chariot. JMRL . . . agrees to build all the buses ordered by Private One for a twelve month period from the date of execution of this agreement at the . . . price of $220,000.00. This price is fixed and agrees [sic] to no more than five percent increase in the 2nd twelve months from said date of this agreement. Id. at ¶ 8.

After JMRL delivered a satisfactory prototype in December 2004, plaintiff decided to order six additional buses. Although plaintiff acknowledges that "Agreement One provided for . . . additional buses to be delivered," plaintiff maintains that "the parties instead worked on a separate second agreement for new buses." Plaintiff's Memorandum of Law in Opposition to Motion for Dismissal ("Plaintiff's Memo") at 4. On or about December 27, 2004, plaintiff and JMRL negotiated a new "Terms Sheet" (hereinafter, the "Second Terms Sheet") which differed from the prior one in three significant respects. First, it omitted five paragraphs -- paragraphs 2 through 6 -- which related solely to the prototype bus. Second, instead of describing the manner in which the delivery schedule was to be calculated, it implicitly applied the scheduling provisions set forth in Agreement One and provided that if the contract was signed and plaintiff's deposit was received by January 3, 2005, plaintiff would receive the six additional buses by March 15, 2005. Second Terms Sheet (included in Ex. C to the Marmurstein Dec. and Ex. C to the Haswell Dec.) at ¶ 2.

Third, the Second Terms Sheet altered the purchase terms significantly. The original Terms Sheet contained "Purchase Terms on the prototype only," Terms Sheet at ¶ 1, and required a $50,000 deposit "to defray the expenses of JMRL . . . in developing this unique vehicle should Private One decide not to purchase this prototype bus." Id. at ¶ 6. Under the new terms, however, plaintiff was required to provide only a $20,000 non-refundable deposit, plus "a personal guarantee from Yakov (Jack) Marmurstein for an additional $30,000" for each bus. Second Terms Sheet at ¶ 1. The Second Terms Sheet provided that Mr. Marmurstein's guarantee would be provided "as per attached addendum." Id.

In all other respects, the Second Terms Sheet was almost identical to the prior one. The restrictive covenant contained in the new sheet was exactly the same as the one contained in the prior sheet, with two exceptions. First, the new version provided that the covenant would be voided only if plaintiff purchased "new" buses, rather than any open-air sightseeing buses, from other manufacturers. Second Terms Sheet at ¶ 3. Second, the new covenant included a sentence providing that if additional optional equipment was ordered by plaintiff, the parties would negotiate an increase in the price. Id.

On or before December 27, 2004, the parties drafted the addendum relating to Mr. Marmurstein's guarantee. This document, entitled, "Addendum to contract for the construction of Sightseeing buses" and hereinafter referred to as "the Guarantee," stated that, although JMRL wanted a deposit of $50,000 for each additional bus ordered, JMRL would accept a deposit of $20,000 per bus, plus the personal guarantee of one of plaintiff's shareholders -- variously identified in the document as either Yakov (Jack) Mermurstein or Yakov (Jack) Marmurstein -- to pay an additional $30,000 for each bus plaintiff ordered but failed to purchase. See Marmurstein Dec., Ex. B; Haswell Dec., Ex. B. The Guarantee also contained the following provision, which is central to JMRL's motion:

Should there be any disagreement between said parties that requires litigation to settle said disagreement, Private One, and or Yakov (Jack) Mermurstein agree that they will be responsible for any legal fees necessary for all litigation, including such fees accrued by JMRL, and further agree that any litigation concerning the contract, or this guarantee ...

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