United States District Court, S.D. New York
MEMORANDUM AND ORDER
P. KEVIN CASTEL, District Judge.
Plaintiff Meyer Rosenbaum, a resident of Tel Aviv, Israel, brought an action in the Supreme Court of New York County to recover compensatory damages against DataCom Systems, Incorporated ("DataCom") based on a $200, 000 promissory note issued to him in July 2005 with a maturity date of July 2007 (the "Note"). Rosenbaum alleges that DataCom defaulted on the Note by failing to pay principal and accrued interest when due, and seeks to recover these amounts together with costs and attorneys' fees incurred in connection with his attempt to enforce the Note. DataCom, an Arkansas-based corporation, removed the case to this Court based on the parties' diversity of citizenship. Rosenbaum moves for summary judgment on his claim pursuant to Rule 56, Fed.R.Civ.P. DataCom cross-moves to dismiss the action for lack of personal jurisdiction pursuant to Rule 12(b)(2), Fed.R.Civ.P. For the following reasons, defendant's motion to dismiss is denied and plaintiff's motion for summary judgment is granted.
I. PERSONAL JURISDICTION
A. Jurisdictional Facts
Plaintiff Meyer Rosenbaum resides in Tel Aviv, Israel, and DataCom states on information and belief that he is a citizen of Israel. (Notice of Removal ¶ 5, Dkt. No. 1) Defendant DataCom is the corporate successor to a Delaware corporation also named DataCom Systems, Inc. ("DSI"); DSI was the issuer of the promissory note in dispute here. (Bailey Decl. ¶ 2, Dkt. No. 18) In 2007, DataCom was incorporated in Nevada, and DSI merged into DataCom at that time. Id . DataCom's principal place of business is Arkansas. Id.
In March 2005, DSI retained a consulting company, Crystal Finance, Inc. ("CFI") to solicit the participation of qualified investors in a securities offering. (Def. Response to Rule 56.1 Statement, Response 1, Dkt. No. 20) In connection with DST's securities offering, CFI provided at least three documents to prospective investors: a convertible promissory note, a subscription agreement, and an executive summary of DST's business. ( Id., Response 5) The Note that is the subject of this action was one of several convertible promissory notes issued under individual subscription agreements in connection with DST's securities offering. ( Id., Response 6) Rosenbaum's subscription agreement is specifically referenced in the Note. ( Id., Response 7; Bailey Aff. Ex. 1) Rosenbaum avers that he participated in the Note offering in reliance on the executive summary, subscription agreement, and Note. (Rosenbaum Aff. ¶ 3, Dkt. No. 11)
In connection with the issuance of the Note, Rosenbaum signed the subscription agreement and transmitted $200, 000 to the escrow account specified in that agreement. (Def. Response to Rule 56.1 Statement, Response 8) The subscription agreement names David Appel as escrow agent; Appel is an attorney whose law offices were located in New York at the time the Note was issued. (Bailey Aff. Ex. 2 at 1; Gallic Aff. ¶ 2) Paragraph 12 of the subscription agreement further provides that the agreement "shall be governed by and construed in accordance with the laws of the State of New York and the undersigned hereby consents to the jurisdiction of the courts of... the Southern District of New York United States District Court." (Bailey Aff. Ex. 2 at 11) The undersigned in this context include Meyer Rosenbaum and Jack Bailey, who signed the agreement on behalf of DataCom. Id. at 13.
B. Legal Standard
When served with a Rule 12(b)(2) motion to dismiss, the plaintiff bears the burden of establishing that the court has jurisdiction over the defendant. Whitaker v. Am. Telecasting, Inc. , 261 F.3d 196, 208 (2d Cir. 2001) (citing Robinson v. Overseas Military Sales Corp. , 21 F.3d 502, 507 (2d Cir.1994)). A plaintiff carries this burden "by pleading in good faith... legally sufficient allegations of jurisdiction, i.e., by making a prima facie showing' of jurisdiction." Id . (citations omitted) A plaintiff can make such a showing through affidavits and other supporting materials "containing an averment of facts that, if credited... would suffice to establish jurisdiction over the defendant." Id . (citations and quotations omitted). "Where the issue is addressed on affidavits, all allegations are construed in the light most favorable to the plaintiff and doubts are resolved in the plaintiffs favor." Id . (quoting A.I. Trade Finance, Inc. v. Petra Bank , 989 F.2d 76, 79-80 (2d Cir. 1993)).
"As a general rule, the amenability of a foreign corporation to suit in a federal court in a diversity action is determined in accordance with the law of the state where the court sits, with federal law' entering the picture only for the purpose of deciding whether a state's assertion of jurisdiction contravenes a constitutional guarantee." Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez , 171 F.3d 779, 784 (2d Cir. 1999) (citation and quotations omitted).
Under New York law, "parties to a contract may freely select a forum which will resolve any disputes over the interpretation or performance of the contract." Brooke Group Ltd. v. JCH Syndicate 488 , 87 N.Y.2d 530, 534 (1996); see also Blair & Co. v. Gottdiener , 462 F.3d 95, 103 (2d Cir. 2006) ("Parties can consent to personal jurisdiction through forum selection clauses in contractual agreements."). Forum selection clauses "are prima facie valid" and "are enforced because they provide certainty and predictability in the resolution of disputes." Sterlin Nat. Bank as Assignee of Norvergence, Inc. v. Eastern Shipping Worldwide, Inc. , 826 N.Y.S.2d 235, 237 (1st Dep't 2006) (citations omitted). Such clauses "are not to be set aside unless a party demonstrates that the enforcement of such would be unreasonable and unjust or that the clause is invalid because of fraud or overreaching, such that a trial in the contractual forum would be so gravely difficult and inconvenient that the challenging party would, for all practical purposes, be deprived of his or her day in court." Id . (citations and quotations omitted). Forum selection clauses may be either mandatory, designating an exclusive forum, or permissive. See John Boutari and Son, Wines and Spirits, S.A. v. Attiki Importers and Distributors, Inc. , 22 F.3d 51, 52-53 (2d Cir. 1994).
Rosenbaum relies upon the terms of the subscription agreement pursuant to which the Note was issued. The terms of the subscription agreement govern the Note, which, by its own terms, was issued "pursuant to Confidential Offering Materials issued by the Company." (Bailey Aff., Ex. 1, at 1) The "Offering Materials consist of a Subscription Agreement, Investor Questionnaire, and exhibits thereto..." Id . Further, defined terms not otherwise defined in the Note "shall have the meanings set forth in the Offering Materials." Id.
There is no dispute that the subscription agreement governs the Note. DataCom admits that Rosenbaum signed a subscription agreement and transmitted $200, 000 to the account specified in that agreement. ( Id., Response 8 ("Plaintiff apparently signed a subscription agreement and transmitted a total of $200, 000 to the escrow account that was specified in that agreement")) DataCom further admits that the Note was issued under an individual subscription agreement. (Def. Response to Rule 56.1 Statement, Response 6 ("the [Note] that is the subject of this action was one of several convertible promissory notes that were issued by DST... after each investor executed his or her own subscription agreement")) DataCom does not argue, and has submitted no evidence to show, that the subscription agreement does not control the Note. To the contrary, both parties have submitted nearly identical versions of the subscription agreement and the Note as exhibits. (Bailey Aff, Ex. 1 and 2; Rosenbaum Aff., Ex. B and C). The text of these documents is identical; the only difference among the ...