The opinion of the court was delivered by: Gerard E. Lynch, District Judge
Plaintiffs in this action seek an injunction prohibiting defendants from proceeding with a foreign arbitration and also demand equitable and monetary relief for breach of contract and for copyright infringement. Plaintiffs filed a motion for a preliminary injunction to bar the arbitration, and defendants cross-moved to stay the instant proceedings and compel arbitration. On April 16, 2007, the Court held an evidentiary hearing solely on the question of whether the arbitration should be enjoined. Because defendants have expressed no intention to submit any evidence or further argument on this issue at a subsequent stage, and based on the findings of fact and conclusions of law stated below, defendants shall be permanently enjoined from proceeding with the foreign arbitration. Defendants' cross-motion will therefore be denied. The Court at this point makes no findings or conclusions with respect to plaintiffs' remaining claims.
Plaintiffs Spanski Enterprises, Inc. ("SEI"), and Poltel International L.L.C. are affiliated business entities organized in Canada and the U.S., respectively.*fn1 They purport to hold exclusive rights under a contract with defendant Telewizja Polska, S.A. ("TVP"), a Polish entity, to broadcast via television and internet, within a particular region and time period, certain Polish-language television programming produced by TVP.
This January, defendants filed a complaint against plaintiffs in the Court of Arbitration at the Polish Chamber of Commerce, to challenge various aspects of the contract. (See Feb. 6, 2007, Decl. of B. Spanski, Ex. K.) Plaintiffs then commenced suit in this Court, in relevant part requesting that defendants be enjoined from pursuing the Polish arbitration on the ground that the parties had agreed that any disputes arising under the contract be resolved not by the Polish arbitration court but rather by the federal court in New York City.
The parties entered into the contract ("Agreement"), granting plaintiffs the allegedly exclusive broadcast rights on December 14, 1994. Pertinent to the instant arbitrability dispute, Section 11 ("Arbitration Clause"), of the Agreement provided: "1. This Agreement is subject to Polish law. 2. Any disputes resulting from this Agreement will be handled by the Court of Arbitration at the Polish Chamber of Commerce in Warsaw in accordance with its rules of procedure." (April 2, 2007, Decl. of B. Spanski ("Spanski Decl."), Ex. 2.)
In subsequent years, the parties modified aspects of their contractual relationship in various ways as reduced to two written instruments. (See Spanski Decl., Exs. 8, 10.) The second such instrument ("Second Amendment"), which describes itself as "Amendment No. 2 to the Agreement of December 14, 1994" as modified by the first, here irrelevant, instrument, was entered into on April 29, 2002. (Spanski Decl., Ex. 10.) In the instant arbitrability dispute, the parties disagree about the effect of Section 8 ("Forum Selection Clause"), of the Second Amendment, which reads, "The Agreement is subject to the law of the State of New York, USA, and all disputes will be regulated by the Federal Court in New York City." (Id.) It is clear from the face of the Second Amendment that every mention of "Agreement" refers to the 1994 Agreement,*fn2 and that "Amendment" refers to the Second Amendment except where used in the phrase "Amendment of November 4, 1999." (Id.) Accordingly, the Forum Selection Clause by its terms provides for litigation in New York of all disputes relating to the entire Agreement, not merely of disputes relating to the specific terms added or modified by the Second Amendment.
Boguslaw Spanski, the president of SEI and sole managing member of Poltel International, has attested by a sworn declaration and by testimony during the April 16 hearing to certain events leading up to the formation of the Agreement and the Second Amendment. Defendants have offered no evidence to controvert Spanski's factual statements, and the Court finds no reason, having reviewed his written and oral testimony, to doubt the substance or credibility of his affirmations.
Spanski stated that he left Poland in approximately 1981 during a time of political turmoil, receiving political asylum abroad and ending up in Canada. Eventually he perceived a market for Polish-language television programming outside of Poland. He negotiated the 1994 Agreement between SEI and TVP.
Spanski also negotiated the Second Amendment with TVP on behalf of SEI. In a series of e-mails, printed versions of which were submitted to the Court by plaintiffs without contest (see Spanski Decl., Exs. 12, 13, 15, 16, 17, 18, 19, 20, 21, 22, 23), the two sides specifically negotiated the fate of the Arbitration Clause. Spanski initially raised the issue in a March 27, 2002, e-mail, explaining that a certain third party involved in SEI's broadcasting of TVP's material "will not broadcast the signal, without an amendment to the provisions of [the Agreement] as regards Polish law governing." (Spanski Decl., Ex. 12.) He stated that SEI had had similar problems with broadcasting associates in the past. (See id.) He further wrote, "The only remaining hope is . . . if in the language of the . . . Addendum to the contractual Agreement . . . the following language can be incorporated: Subparagraph (1) of § 11 shall read as follows[:] [']This Agreement shall be governed by the laws of the United States of America.' Subparagraph (2) of § 11 shall read as follows: 'Any disagreements arising under the instant Agreement shall be resolved in accordance with the law of the State of New York, by the Federal Court of the City of New York.'" (Id.) He added, "Please let me know if we are going to be given the [']green light.' This matter is incredibly urgent!!!!" (Id.)
In several exchanges of e-mails, according to plaintiffs' exhibits, TVP at first resisted replacing the Arbitration Clause with the language Spanski proposed, but Spanski continued to insist. Spanski testified that negotiations over the change "were very extensive. I have spent over a month . . . negotiating nothing else but this particular provision with then director of the law department of TVP." (4/16/07 Tr. 38-39.) In addition to the e-mail communications, Spanski said that he "made numerous phone calls" to TVP representatives. (4/20/07 Tr. 39.) He testified that negotiations were "taking very long, it was over a month," and at "first the board of TVP was reluctant, they didn't want to change the governing law and change to New York courts, federal courts." (Id.) But, he said, "as the time progresses, as I have used arguments and discussed the matter with [TVP representatives], they have agreed." (Id.) TVP drafted, and both parties eventually accepted, the final language of the Forum Selection Clause.
In agreeing to adopt the Forum Selection Clause, Spanski avers, TVP expressed to him an intention to revoke the Arbitration Clause. He swears that "[a]t no time . . . did anyone at TVP communicate to me or SEI any belief or understanding that SEI and TVP would still be bound to arbitrate any disputes following the execution of the Second [Amendment]. To the contrary, TVP's representatives . . . told me on numerous occasions that TVP . . . understood the meaning of these changes and that was why it took over a month to negotiate a single provision of the Second [Amendment]." (Spanski Decl. ¶ 30.)
At the hearing, in response to questioning by the Court, Spanski testified more specifically as to TVP's expressed understanding of the Forum Selection Clause's effect. The Court asked whether, "[i]n any of those discussions [with TVP] that you can recall," the topic of arbitration versus litigation, "as distinct from the subject of whose law would govern," was discussed. (4/16/07 Tr. at 39-40.) Spanski answered, "Explicitly the arbitration was gone . . . . It could not make any sense in [my] mind . . . or anybody at TVP at the time that we could have New York's law and federal courts in New York dealing in arbitration in Poland. It is totally absurd." (Id. at 40.) The Court followed up, "When you said that it was explicit that this [Forum Selection Clause] was replacing arbitration, who said that?" (Id.) Spanski replied, "the head of the legal ...