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Horn v. Home & Garden Imports by Terracotta Sales, Inc.

United States District Court, E.D. New York

December 15, 2017

MONICA HORN, individually and derivatively on behalf of nominal defendant
v.
BRIAN KIREY Defendant, HOME & GARDEN IMPORTS BY TERRACOTTA SALES, INC., Plaintiff, and HOME & GARDEN IMPORTS BY TERRACOTTA SALES, INC., a New York Corporation, Nominal Defendant.

          CAMPANELLI & ASSOCIATES, P.C. BY: AMANDA R. DISK.EN, ESQ. Attorneys for Plaintiff

          FABRICANT LIPMAN & FRISHBERG, PLLC BY: NEIL D. FRISHBERG, ESQ. Attorneys for Defendant

          MEMORANDUM AND ORDER

          LEONARD D. WEXLER, UNITED STATES DISTRICT JUDGE

         Before the Court is Defendant's motion to dismiss for improper venue, pursuant to Federal Rule of Civil Procedure 12(b)(3), on the grounds that the parties' shareholders agreement contains a forum selection clause mandating that this action should proceed in the state courts of New York. Plaintiff opposes the motion on the grounds that enforcing the forum selection clause would be unreasonable and unjust. For the following reasons, Defendant's motion is granted.

         BACKGROUND

         Plaintiff, Monica Horn ("Horn"or "Plaintiff), and Defendant, Brian Kirey ("Kirey" or "Defendant"), each own fifty percent of all outstanding shares of Nominal Defendant Home & Garden Imports by Terracotta Sales, Inc. ("HGI"), a New York corporation. (Compl. ¶ 1.) Horn and Kirey also comprise the Board of Directors of HGI. (Id.) Jurisdiction is based on diversity here as Horn resides in New York and Kirey resides in Florida. (Id. ¶¶ 6-7.) HGFs principal place of business is New York. (Id. ¶ 8.)

         In 2009, Horn and Kirey formed HGI, which is engaged in the business of importing, exporting and selling various home and garden related products. (Id. ¶ 10.) On October 4, 2014, Horn and Kirey entered into a written shareholders agreement (the "Agreement"), which included a covenant not to compete with HGI, as well as an agreement to work together until at least 2025. (Id ¶ 12; Kirey Decl., Ex. D.)

         In February 2016, Kirey created a new company, Lawn and Garden Imports, Inc. ("LGI"), a Florida Corporation. (Id. ¶ 14.) Kirey built and profited from LGI behind Horn's back and at the expense of Horn and HGI, by, among other things, incurring expenses for LGI while reimbursing himself through HGI. (Id. ¶ 15.) For example, Kirey took various all expenses paid business trips, including two to the Far East, on HGI's account, while there to acquire business forLGI. (Id.)

         Moreover, Kirey has cashed checks made payable to HGI for his own personal or business reasons. (Id. ¶ 16.) Kirey has instructed HGFs clients to make payments directly to LGI and has altered HGI invoices such that the letterhead identifies LGI as the contractor, rather than HGI. (Id.) In addition, Kirey has solicited and acquired business from HGI clients and diverted it to LGI. (Id. ¶17.)

         Kirey has also made false statements about Horn to HGI clients and has prevented Horn from carrying out HGI business by moving the domain name without Horn's knowledge or consent and forwarding Horn's emails to his own private account. (Id. ¶ 19.) Finally, Kirey deleted Horn's entire corporate email account. (Id.)

         Horn commenced the within action on February 16, 2017, alleging ten causes of action, all brought pursuant to New York State law: (1) breach of fiduciary duty to HGI; (2) breach of fiduciary duty to Horn; (3) conversion; (4) wrongful diversion; (5) usurpation of corporate opportunities; (6) breach of contract; (7) breach of the implied covenant of good faith and fair dealing; (8) removal of Kirey as an officer, pursuant to New York Business Corporation Law § 716; (9) attorney's fees and costs, pursuant to New York Business Corporation Law § 626(e); and (10) defamation. Kirey now moves to dismiss the action for improper venue, pursuant to Federal Rule of Civil Procedure 12(b)(3), based on the forum selection clause contained in the parties' Agreement, which mandates that any action be brought in New York State court. Horn opposes the motion on the grounds that this case requires the broad subpoena power of the federal courts and that being forced to litigate in state court will effectively deprive her of her day in court.

         DISCUSSION

         I. Legal Standard

         "The [Supreme] Court [has] held that generally 'the appropriate way to enforce a forum-selection clause pointing to a state or foreign forum is through the doctrine of forum non conveniens.'" AMTO. LLC v. Bedford Asset Mgmt. LLC. 168 F.Supp.3d 556, 563 (S.D.N.Y. 2016) (quoting Martinez v. Bloomberg LP,740 F.3d 211, 216 (2d Cir. 2014)) (additional citation omitted) (alterations in original). Here, Kirey brings his motion pursuant to Federal Rule of Civil Procedure 12(b)(3). As Horn points out, and has the Supreme Court has held, this is not the proper mechanism for enforcing a forum selection clause. See Atlantic Marine Constr. Co. v. U.S. Dist. Ct. for the W. Dist. of Tex.. 134 S.Ct. 568, 580 (2013). However, "[b]ecause the Supreme Court's decision in Atlantic Marine merely clarified the procedural vehicle through which forum selection clauses are enforced and did not significantly alter the substantive analysis of the clauses, the Court will deem [Kirey's] motion to ...


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