United States District Court, S.D. New York
OPINION & ORDER
J. Peck United States Magistrate Judge.
instituted this action on May 17, 2017 to enforce an
agreement effectuating acquisition of defendants'
corporate assets. (Dkt. No. 1: Compl. ¶ 1.) On April 10,
2017-forty-seven days before this case was filed-defendants
had instituted a parallel action in the High Court of Hong
Kong seeking to declare the same agreement null and void.
(Dkt. No. 37: Lo Aff. ¶ 5; Dkt. No. 35: Go Fun Br. at
3.) Presently before the Court is defendants' motion to
dismiss this suit pursuant to the abstention doctrine and/or
forum non conveniens. (Dkt. No. 34: Go Fun Notice of
Mot.) The parties have consented to decision of this case by
a Magistrate Judge pursuant to 28 U.S.C. § 636(c). (Dkt.
No. 31.) For the reasons set forth below, defendants'
motion is DENIED.
Global Tech Industries Group, Inc. ("GTII") is a
holding and operating company incorporated in Nevada with its
principal place of business in New York City. (Dkt. No. 7:
Compl. ¶¶ 14-16.) GTII also "is a fully
reporting company that is publicly traded on the
Over-the-Counter-Market." (Dkt. No. 27: GTII Opp. Br. at
4.) Plaintiff GT International Group, Inc. is a Wyoming
corporation and subsidiary of GTII. (Compl. ¶ 17.) GTII
and GT International Group share office space in New York
City. (Id. ¶ 18.) GTII Chief Executive Officer
David Reichman is a United States citizen with his primary
residence in New York City. (Id. ¶ 19.)
Go Fun Holdings Ltd. ("Go Fun") is a British Virgin
Islands corporation with its principal place of business in
Hong Kong. (Id. ¶ 20; Dkt. No. 35: Go Fun Br.
at 2.) Defendant Go F&B Holdings Ltd. ("Go
F&B") is a Hong Kong corporation with its principal
place of business in Hong Kong. (Compl. ¶ 21; Go Fun Br.
at 2.) GTII alleges that Go Fun is "the sole
shareholder, director, decision maker & control
party" of Go F&B. (Compl. ¶¶ 20-21; GTII
Opp. Br. at 6.) GTII further alleges that Go F&B "is
the owner and sole shareholder of" four food/beverage
and restaurant "target companies" whose corporate
assets are the subject of the at-issue agreement. (Compl.
¶¶ 23-25; GTII Opp. Br. at 4, 7.) Individual
defendants Tam Yiu Cheun a/k/a Sam Tam and Cheung Yee Man
a/k/a Elaine Cheng are directors of Go F&B. (Compl.
¶¶ 5, 26-27; Go Fun Br. at 3.) Tam and Cheng are
residents of Hong Kong. (Compl. ¶¶ 26-27.)
alleges that negotiations between the parties began when
defendants "vocalized a desire to 'go public'
and access the U.S. Capital Markets through a small/micro cap
listing on the [Over-the-Counter-Market] by being acquired by
a traded company and being spun off after 366 days by the
acquiring parent." (GTII Opp. Br. at 4.) Communications
between the parties were in English, and "[p]rior to and
after entering into the December 30, 2016 agreement, Go Fun
was advised by and information was exchanged through their
U.S. based lawyer" licensed in New York. (Id.)
The parties met in person in Hong Kong in February, April,
July and December 2016. (Dkt. No. 36: Fong Aff. ¶ 8; Go
Fun Br. at 4 & n.4; see also GTII Opp. Br. at
8.) Fong Yiu Yuen asserts that he "personally
participated [in] all of the negotiations" on behalf of
Go Fun and "attended all meetings between the"
parties, and that GTII's "representative at each
such meeting was David Reichman; [Go Fun] had several
attendees, including [Fong], at such meetings most of whom do
not speak English." (Fong Aff. ¶ 8.)
produced two preliminary agreements dated February and April
2016 (GTII Opp. Br. at 4; see also Dkt. No. 27-1:
2/8/16 Agreement; Dkt. No. 27-2: 4/18/16 Agreement), both of
which contain clauses specifying "the state and federal
courts in the City of New York" as the proper forum for
resolving disputes arising under those agreements (2/8/16
Agreement ¶ 9; 4/18/16 Agreement ¶ B-12). In
December 2016, Reichman traveled to Hong Kong to execute the
final Stock Purchase Agreement (the "Agreement") on
which this case is based. (Compl. ¶¶ 29-30; GTII
Opp. Br. at 4, 7-8; Go Fun Br. at 3-4; see also
Stock Purchase Agreement.) Unlike the preliminary agreements,
the Stock Purchase Agreement states only that it should
"be governed by and construed in accordance with the
laws of the State of Nevada"; it does not contain a
forum selection clause. (See Stock Purchase
Agreement ¶ 11.) The Agreement contains an integration
clause, stating that the Agreement supercedes "any prior
understanding or representation of any kind preceding the
date of th[e] Agreement." (Id. ¶ 10.)
Further, individual defendants Tam and Cheng agreed to
indemnify GTII in certain situations. (Compl. ¶¶ 5,
56; Dkt. No. 7-1: Stock Purchase Agreement, Schedule B,
to the Agreement, Go Fun paid a $126, 000 deposit to GTII.
(Compl. ¶ 32.) The Agreement provided for monthly
payments of $91, 667 to GTII, but Go Fun ceased making such
payments in January or February 2017. (See Compl.
¶ 31; GTII Opp. Br. at 8.) "The destination of said
funds was New York." (GTII Opp. Br. at 13.) Go Fun also
"was to provide substantive materials to GTII relating
to the target companies, " such as corporate business
plans and financial information. (Compl. ¶ 33; see
also Stock Purchase Agreement, Schedule B.) Such
information was "to be prepared in English for filing
with U.S. regulators and for inclusion in Global Tech
disclosure filings." (GTII Opp. Br. at 15.) Although Go
Fun apparently contacted an auditor with expertise in
compiling such materials (see Dkt. No. 27-8: 9/21/16
UHY Letter), the materials never were disclosed to GTII as
required under the Agreement (Compl. ¶ 33; GTII Opp. Br.
March 23, 2017, GTII sent a notice of default to Go Fun and
its representatives. (GTII Opp. Br. at 8; see also
Dkt. No. 27-9: 3/31/17 Go Fun Letter.) On March 31, 2017, Go
Fun acknowledged receipt of the notice of default and
requested that GTII "withhold commencing any legal
action" until April 10, 2017 while Go Fun consulted with
counsel. (3/31/17 Go Fun Letter; GTII Opp. Br. at 8.) Go Fun
filed its parallel action against GTII in the High Court of
Hong Kong on April 10, 2017. (Dkt. No. 37: Lo Aff. ¶ 5;
Go Fun Br. at 3.)
GO FUN'S MOTION TO DISMISS PURSUANT TO THE ABSTENTION
DOCTRINE IS DENIED
Standards Governing Motions Under Federal Rule Of Civil
Procedure 12(b)(1) And The Abstention
in this Circuit consider a "motion to dismiss based on
the abstention doctrine . . . as a motion made pursuant to
Rule 12(b)(1)." Kingsley v. N.Y.C.
Hous. Auth., 16 Civ. 0169, 2016 WL 5939359 at *2 n.2
(S.D.N.Y. Oct. 6, 2016); 5B Charles A. Wright & Arthur R.
Miller, Fed. Prac. & Proc. Civ. § 1350 (3d ed. 2017)
("Courts have recognized a variety of other defenses
that one normally would not think of as raising
subject-matter jurisdiction questions when considering a Rule
12(b)(1) motion, such as claims that . . . the subject matter
is one over which the federal court should abstain from
exercising jurisdiction."). In considering a Rule
12(b)(1) motion, a court "may refer to evidence outside
the pleadings." Makarova v. United
States, 201 F.3d 110, 113 (2d Cir. 2000).
Colorado River, the Supreme Court provided guidance
on when a federal court should abstain from exercising
jurisdiction due to a parallel state proceeding. Colorado
River Water Conservation Dist. v. United
States, 424 U.S. 800, 817-19, 96 S.Ct. 1236, 1246-47
(1976); see also, e.g., Garfield
v. Ocwen Loan Servicing, LLC, 811 F.3d 86,
93 (2d Cir. 2016) (Colorado River "created a
limited abstention doctrine in the context of ongoing,
parallel state proceedings"). The doctrine is a narrow
one given the "virtually unflagging obligation of the
federal courts to exercise the jurisdiction given them."
Colorado River Water Conservation Dist. v.
United States, 424 U.S. at 817, 96 S.Ct. at 1246.
"[T]he existence of a parallel foreign proceeding does
not negate that obligation." Kitaru Innovations
Inc. v. Chandaria, 698 F.Supp.2d 386,
390 (S.D.N.Y. 2010); see also, e.g.,
Royal & Sun All. Ins. Co. of Canada v.
Century Int'l Arms, Inc., 466 F.3d 88, 92 (2d
Cir. 2006) ("The mere existence of parallel foreign
proceedings does not negate the district courts'
'virtually unflagging obligation . . . to exercise the
jurisdiction given them.'").
Royal & Sun Alliance, the Second Circuit applied
Colorado River abstention principles in the context
of parallel foreign proceedings. The court opined that
"[g]enerally, concurrent jurisdiction in United States
courts and the courts of a foreign sovereign does not result
in conflict" that raises comity concerns. Royal
& Sun All. Ins. Co. of Canada v.
Century Int'l Arms, Inc., 466 F.3d 88
at 92. "Rather, [p]arallel proceedings in the same in
personam claim should ordinarily be allowed to proceed
simultaneously, at least until a judgment is reached in one
which can be pled as res judicata in the other."
Id. (quotations omitted). Thus,
[t]he task of a district court evaluating a request for
dismissal based on a parallel foreign proceeding is not to
articulate a justification for the exercise of
jurisdiction, but rather to determine whether exceptional
circumstances exist that justify the surrender of that
jurisdiction. The exceptional circumstances that would
support such a surrender must, of course, raise
considerations which are not generally present as a result of
parallel litigation, otherwise the routine would be
considered exceptional, and a district court's unflagging
obligation to exercise its jurisdiction would become merely a
Id. at 93 (citations omitted).
deciding whether to abstain "[i]n the context of
parallel proceedings in a foreign court, a district court
should be guided by the principles upon which international
comity is based: the proper respect for litigation in and the
courts of a sovereign nation, fairness to litigants, and
judicial efficiency." Id. at 94.
The Second Circuit in Royal and Sun Alliance
instructed courts to use a non-exhaustive list of factors
when contemplating a stay in favor of a foreign proceeding,
including: (1) the similarity of the issues; (2) the order in
which the actions were filed; (3) the adequacy of the
alternate forum; (4) the potential prejudice to either party;
(5) the convenience of the parties; (6) the connection
between the litigation and the United States; and (7) the
connection between the litigation and the foreign
C.D.S., Inc. v. Zetler, 198
F.Supp.3d 323, 331 (S.D.N.Y. 2016) (citing Royal &
Sun All. Ins. Co. of Canada v. Century
Int'l Arms, Inc., 466 F.3d at 94). "The
abstention decision rests on a careful balancing of the
important factors . . . as they apply in a given case, with
the balance heavily weighted in favor of the exercise of
jurisdiction." Kitaru Innovations Inc.
v. Chandaria, 698 F.Supp.2d at 390
asserts that the Court should abstain in favor of the Hong
Kong action because: the parties are identical apart from the
addition of individual defendants Sam Tam and Elaine Cheng in
this suit (Dkt. No. 35: Go Fun Br. at 6-7); both actions
concern enforcement of the Stock Purchase Agreement and
defenses thereto (id. at 7); the Hong Kong action
was filed forty-seven days before GTII commenced this action
(id. at 7-8); all defendants in this action are
based in Hong Kong (id. at 8); the Stock Purchase
Agreement was negotiated and executed in Hong Kong, and it
concerns the assets of Hong Kong-based corporations
(id. at 8-9); GTII could "raise each and every
one of its common law claims for relief under existing Hong
Kong law" and "the Hong Kong court [would] have the
authority to provide Plaintiffs the full range of remedies
substantially similar to those available under U.S. law"
(id. at 9-10); Hong Kong "has a bilingual
system" and the individual defendants and some
"key" witnesses do not speak English (id.
at 10); and if both actions proceed, there is a risk of
inconsistent rulings and resulting comity concerns
responds that although the Hong Kong action was filed first,
that action "has not been served upon the Plaintiffs
(GTII), no parties have appeared to defend, none have
retained counsel and there is no indication that service
outside of Hong Kong . . . was authorized in accordance with
the Rules of The High Court." (Dkt. No. 27: GTII Opp.
Br. at 10-12.) In this action, on the other hand, GTII has
served defendants; defendants have retained counsel that has
entered an appearance on behalf of the corporate defendants
and a "special appearance" on behalf of the
individual defendants; and the parties have briefed the
instant motion challenging venue. (Id. at 11-12;
see also Dkt.: 9/29/17 Minute Entry.) GTII also
argues that to the extent U.S. and Hong Kong courts ...