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Giro, Inc. and Warranty House v. Malaysian Airline System Berhad

June 3, 2011


The opinion of the court was delivered by: John G. Koeltl, District Judge


The defendant, Malaysian Airline System Berhad ("MAS"), is a foreign corporation that entered into an agreement with the plaintiffs, Giro, Inc. and Warranty House International, Inc. (collectively "the plaintiffs" or "WHI"). WHI is a wholly owned subsidiary of Giro. The agreement provided that the plaintiffs would identify and prepare warranty claims on behalf of MAS, and that, in return, the plaintiffs would collect a fee of thirty-five percent of any recovery received by MAS as a result of the plaintiffs' work. The plaintiffs sued the defendant for breach of contract, breach of oral contract, fraud, and unjust enrichment. The defendant has brought a motion to dismiss based on improper venue pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure, or in the alternative, on the grounds of forum non conveniens. Alternatively, the defendant also moves to dismiss the causes of action for oral contract, fraud, and unjust enrichment for failure to state a claim pursuant to Rule12(b)(6).

I. On a motion to dismiss, the allegations in the complaint are accepted as true. See Grandon v. Merrill Lynch & Co., 147 F.3d 184, 188 (2d Cir. 1998); Cohen v. Koenig, 25 F.3d 1168, 1172-73 (2d Cir. 1994). A court generally may consider documents referenced in the complaint and documents that are in the plaintiff's possession or that the plaintiff knew of and relied on in bringing suit. See Brass v. Am. Film Tech., Inc., 987 F.2d 142, 150 (2d Cir. 1993); Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir. 1991); VTech Holdings Ltd. v. Lucent Techs., Inc., 172 F. Supp. 2d 435, 437 (S.D.N.Y. 2001). In particular, in deciding a motion to dismiss for improper venue, the "court may examine facts outside the complaint to determine whether venue is proper. The court must draw all reasonable inferences and resolve all factual conflicts in favor of the plaintiff." E.P.A. ex rel. McKeown v. Port Authority, 162 F. Supp. 2d 173, 183 (S.D.N.Y. 2001) (quoting 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure: Civil 2d § 1352 (1990 & Supp. 1999)); Burrell v. State Farm Fire & Cas. Co., No. 00 Civ. 5733, 2001 WL 797461, at *3 (S.D.N.Y. July 12, 2001) (stating that in deciding motion for improper venue "a court may consider facts outside the pleading" and should view facts viewed in light most favorable to plaintiff); see also Concesionaria DHM, S.A. v. Int'l Fin. Corp., 307 F. Supp. 2d 553, 555 (S.D.N.Y. 2004).

II. The relevant facts, as alleged in the Complaint and in the affidavits and declarations submitted by the parties in connection with the current motion, are as follows.

In 2008, WHI's President, Phil King, solicited business from MAS in Malaysia. (Zaini Decl. ¶ 3.) On June 20, 2008, WHI and MAS executed a Warranty Administration Services Agreement (the "Agreement"), pursuant to which WHI was to perform "warranty and guaranty administration services" on behalf of MAS. (Compl. ¶¶ 3-4, 14; Compl. Ex. A (hereinafter "Agreement")). King executed the Agreement on behalf of WHI at WHI's offices in Oklahoma. (King Aff. ¶ 3.) Representatives of MAS signed the agreement in Malaysia. (Zaini Decl. ¶ 3.) The Agreement provided that WHI would review and identify MAS's potentially valid warranty claims, process them, and submit them to the applicable warrantors. (Compl. ¶¶ 5, 14; Agreement at 1-2, 6.) In return, WHI would receive thirty-five percent (35%) of all the recoveries MAS received as a result of WHI's work. (Compl. ¶¶ 5, 14; Agreement at 1.) MAS was required to inform WHI of all of its communications with applicable warrantors and to provide all written communications with applicable warrantors regarding the status of the claims prepared by WHI if WHI requested such information. (Compl. ¶ 15; Agreement at 1-2.) The Agreement also contained a forum selection clause, providing:

The parties herein have mutually agreed that said warranty service contract contained herein, where applicable, shall be governed by the laws of the United Kingdom and the parties further agree that venue shall be proper under this agreement in the United Kingdom. (Agreementat 14.)

Although WHI employees traveled to Malaysia in order to review and identify potential warranty claims, WHI asserts that the preparation of warranty claims was conducted by approximately eight employees and/or independent contractors of WHI located in Rhode Island, Indiana, Arizona, and Oklahoma. (Zaini Decl. ¶ 4; Zaini Reply Decl. ¶ 3, attached as Ex. A to Lari Decl.; King Aff. ¶¶ 4-5.) WHI identified potentially valid claims against Boeing, totaling $1,750,902, Pratt & Whitney, totaling $24,516,149.59, and Rolls-Royce, totaling $200,038,372.62. (Compl. ¶¶ 16, 19-20.) WHI also allegedly discovered that MAS was entitled to warranty/guaranty credits from Pratt & Whitney and Rolls-Royce, totaling $53,986,963. (Compl. ¶ 25.)

Boeing approved and paid to MAS $684,7519.13 of the Boeing claims, and MAS paid WHI thirty-five percent of that amount in compliance with the Agreement. (Compl. ¶¶ 17-18.) WHI submitted a portion of claims to Rolls-Royce and Pratt & Whitney directly as required by the Agreement. (Compl. ¶¶ 17-20.) Before WHI submitted the remaining claims, the Manager of Warranty Contracts at MAS, Aznita Ahmad Zaini, informed WHI that MAS would submit the remaining claims to Rolls-Royce and Pratt & Whitney, but assured WHI that WHI would receive payment for any recovery paid for the claims, and that MAS would keep WHI informed all of relevant communications. (Compl. ¶ 21.) MAS allegedly submitted the remaining claims to the offices of Pratt & Whitney and Rolls-Royce in Malaysia, and directed Pratt & Whitney and Rolls-Royce not to communicate with WHI regarding the claims. (Compl. ¶¶ 22-23; Zaini Decl. ¶ 5; See King Aff. ¶ 12.) MAS alleges that all communications between MAS and Pratt & Whitney and Rolls-Royce occurred in Malaysia. (Zaini Decl. ¶5.)

The plaintiffs allege, on information and belief, based in part on WHI's historical recovery rate, that MAS recovered between seventy-five and eighty percent of the claims submitted to Rolls-Royce and Pratt & Whitney, but failed to pay WHI anything for the claims. (Compl. ¶¶ 24, 31.) The plaintiffs also allege that MAS recovered all or a portion of the credits identified by WHI, but has failed to pay WHI in compliance with the Agreement. (Compl. ¶ 26.)

According to MAS, all relevant documents in MAS's possession and all MAS employees that could have information relating to this case, including the two MAS employees identified in the complaint, are located in Malaysia. (Zaini Decl. ¶¶ 7-8.) In addition, MAS contends that an agent of WHI who would possess information relevant to this dispute is a citizen of Malaysia. (Zaini Reply Decl. ¶ 4.) MAS also asserts that it was informed that its claims had been denied by employees of Pratt & Whitney and Rolls-Royce who were located in Malaysia. (Zaini Decl. ¶ 6; Zaini Reply Decl. ¶ 5.) MAS submits that the employee from Pratt & Whitney who informed it that the claims were denied was Ivan Yong, who works in Malaysia, and that the employee from Rolls-Royce who informed it that the claims were denied was Christopher Devall, who was in Malaysia but is now working in Thailand. (Zaini Reply Decl. ¶¶ 6-7.) MAS further contends that the Rolls-Royce employees who ultimately decide whether to deny a claim submitted to the Malaysia office are located in the United Kingdom. (Zaini Reply Decl. ¶ 8.)

The plaintiffs claim that the ultimate decision on claims submitted to the Rolls-Royce Malaysia office is made by employees located in the United Kingdom, or Virginia, and that claims submitted to the Pratt & Whitney Malaysia office are ultimately decided by employees in Pratt & Whitney's Connecticut office. (King Aff. ¶ 6.) The plaintiffs submit that approximately fourteen potential witnesses relevant to this dispute are located in the United States, while only four are located outside the United States, and that the only people with relevant information to this dispute residing in Malaysia are MAS employees. (King Aff. ¶¶ 7-8.) However, this list is plainly inflated. It includes only one identified individual, Phil King, the President of the plaintiffs, and ten unidentified "employees and/or independent contractors of WHI." (King Aff. ¶ 7.) The plaintiffs also submit that the potentially discoverable documents located outside of the United States are limited to MAS's internal notes and memoranda, and documents related to the submission of claims to Rolls-Royce if they cannot be located in the Virginia office. (King Aff. ¶ 10.)

III. The defendant moves to dismiss this action for improper venue pursuant to Rule 12(b)(3) based on the forum selection clause in the Agreement. The plaintiffs bear the burden of showing that venue is proper for each claim against the defendant. PI, Inc. v. Quality Prod., Inc., 907 F. Supp. 752, 757 (S.D.N.Y. 1995).

The defendant claims that the forum selection clause was mandatory and provided for the United Kingdom as the only proper venue for any action arising from the Agreement. The plaintiffs respond that the clause is not mandatory, but permissive, and that venue over all claims is proper in this district under 28 U.S.C. § 1391(a)(3) and(c).

The defendant argues that the clause is mandatory based on a standard laid out in the decision of the Tenth Circuit Court of Appeals in Milk 'N' More, Inc. v. Beavert, 963 F.2d 1342 (10th Cir. 1992). However, this Court must look first to the law determined by the Court of Appeals for the Second Circuit. The clause is not a mandatory forum selection ...

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