Carestream Health (Near E.) Ltd. v Lindustry (Offshore) S.A.L.

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Carestream Health (Near E.) Ltd. v Lindustry (Offshore) S.A.L. 2017 NY Slip Op 32521(U) November 27, 2017 Supreme Court, New York County Docket Number: 655491/2016 Judge: Marcy Friedman Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. [* 1] INDEX NO. 655491/2016 NYSCEF DOC. NO. 96 RECEIVED NYSCEF: 11/30/2017 SUPREME COURT OF THE STATE OF NE\V YORK COlJNTY OF NEVI YORK--- PART 60 PRESENT: HQ!1,__N!fig.):~.f_riedma11, J.S.C --------~--~-------~-------------------------------------------------------------x CARESTREAM HEAL TH (NEAR EAST) LTD., Index No.: 655491/2016 Plaintiff, -againstLlNDUSTRY (OFFSHORE) S.AL, DECISION/ORDER Defendant. x This is an action for declaratory and injunctive relief and for damages for breach of contract. Plaintiff Carestream Health (Near East) Ltd. (Carestrearn) moves for a preliminary injunction enjoining defendant Lindustry (Off<:.;hore) S.AL (Lindustry) from initiating or continuing to prosecute any lawsuit against Carestream in any court outside the State of New York, including the lawsuit initiated by Lindustry currently pending in Lebanon,JjvJJ.g§.tLL.C.Pff-: Action). Carestrearn also seeks to enjoin Lindustry from enforcing an order issued by the Executory Bureau of the Baabda District, Lebanon, entered May 23, 2016 (the Freeze Order), directing Carestream's customers to withhold payment on "all what is due" to Carestrearn. (AfI of Emile Kanaan [plaintiffs Lebanese counsel], Ex. 4 [Kanaan Aff.].) By separate motion, Carestream moves for a judgment by default against Lindustry on all of the claims in the amended complaint (complaint). By order dated November 23, 2016, this Court (Shenvood, J.) directed that service of the summons and complaint in this action be made by mail, with a copy to defendant's Lebanese counsel. This directive was made based on the Court's finding that Lindustry is a Lebanese corporation and that Lebanon is a non-signatory to the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. (Nov. 23, 2016 Order to 2 of 11 [* 2] INDEX NO. 655491/2016 NYSCEF DOC. NO. 96 RECEIVED NYSCEF: 11/30/2017 Show Cause [Aff. of Rebecca Brazzano (PL's Atty), Ex. A] [Brazzano Aff.J,) The affidavit of service demonstrates that service was made on November 23, 2016 pursuant to the Court's order. (Aff. of Service, sworn to on Nov. 23, 2016 [Brazzano A.ff,, Ex. B].) Service was follo-vved up by delivery of the summons and complaint by DHL express mail to defendant and its Lebanese counsel. (Af£ of Service, sworn to on Dec. 5, 2016 [Brazzano Aff., Ex. DJ,) The motion for a default judgment was served by DHL expn.~ss mail on February 21, 2017. (Aff. of Service, S\vom to on March 15, 2017 [NYSCEF Doc No 91],) In the passage of time since service was made, Lindustry has failed to appear in the action or to oppose the motions, although it has had ample opportunity to do so. The facts relevant to the detennination of plaintiffs motions are as follows: By Distributor Agreement dated January 1, 2005, between plaintiffs predecessor-in-interest Kodak (Near East) Inc. (Kodak) and Lindustry, Lindustry agreed "to act as a non-exclusive distributor" of Kodak for x-ray film and film printers in Iraq. (Compt,,, 4; Distributor Agreement,§§ Ll, 13 [Compl., Ex. A1,) The Distributor Agreement was effr.:ctive for a minimum term of one year and would continue "on a year by year basis unless either party terminat[ed] th[e] Agreement by written notice to the other on three months \Vritten notice .... " (Id., § 13.1.) Under the Agreement, Kodak was not "liable in any manner v.rhatsoever on account of termination of th[ e] Agreement even though thereafter Kodak or another distributor or any other may complete any transaction commenced by the Distributor [Lindustry]." (Id,, § 13,6.) Schedule B Part 2 of the Agreement, entitled "General Tem1s of Business for Export," governed the terms for "shipment and insurance of the Products and passing of title and risk in the Products!' (Id., § 8,3,) The "\Varranty and Limitation of Liability" section of the Schedule sti:ited: "The customer shall on no account have a claim for compensation of damage that does not affect the Prod.ucts as such, as 2 3 of 11 [* 3] INDEX NO. 655491/2016 NYSCEF DOC. NO. 96 RECEIVED NYSCEF: 11/30/2017 for instance loss of production, loss of use, lost orders, profit loss or any other direct or consequential damage. This exclusion of liability shall not apply insofar as mandatory law provides othervvise." mJ:_, Schedule B Part 2.) The Distributor Agreement further provided that the Agreement is "governed by the laws of the State of New York without giving effect to its rules on conflict oflaw. Except as provided in this clause, th(~ New York courts shal.I have exclusive jurisdiction in the event of any disputes between the parties hereunder. Kodak shall, however, be entitled to bring action against the Customer before any other competent court." (Id,, § 19.) Kodak terminated the agreement by letter dated August 27, 2006, et1ective December 31, 2006. (Aff. of Laith Bazzoui fCar(~stream's business manager], Ex. 2 [NYSCEF Doc No 36].) Carestream claims rights under the Distributor Agreement as the successor in interest of Kodak (~~~- Compl., ii 3 n l; Emergency Aff of Rebecca Brazzano, ii 7 fNYSCEF Doc No 34_] [Brazzano Emergency Aff ]; Aff. of Scott H. Rosa [Controller for Carestream Health, Inc. (Carestream's parent company)], 4'fi! 2~4 [NYSCEF Doc No 38].) In 2007, Lindustry initiated the Lebanese Action in which it aUeged that Lindustry was the exclusive distributor for Kodak and Carestream in Iraq. (Compl., ~· 1O; Petition, dated July 4, 2007 [Aff. of Rania Gamal (translator), Ex. 2 (annexed to CompL, Ex. B) (Gamal Aff:)].) In response, Kodak and Carestream argued that, pursuant to Lebanese lmv and the choice of lav,,' and forum provision of the Distributor Agreement, the courts of Lebanon lacked jurisdiction. (Initial Plea [Gamal Aff, Ex. 4].) By decision issued on May 27, 2009, the Court of First Instance in Baabda, First Chamber, dismissed the case for lack ofjurisdiction. (Gama! Aff., Ex. 6.) By Decree issued on February 21, 2012, the Court of Appeal in Jabal Lebanon, Fourth Chamber, affirmed the Court of First Instance's decision and dismissed the action for lack of 3 4 of 11 [* 4] INDEX NO. 655491/2016 NYSCEF DOC. NO. 96 RECEIVED NYSCEF: 11/30/2017 jurisdiction. (Id., Ex. 8.) By Decree issued on January 22, 2015, the Fourth Chamber of the Court of Civil Cassation reversed the lower court decisions. (Id., Ex. 10.) The Court held that the lower courts had misinterpreted Lebanese law and that further investigation is needed to detem1ine whether the Court does in fact have jurisdiction. (Id,, 1"[ 12.) Further, the Court appears to have directed an investigation of the merits of Lindustry's claims, including its claims for damages, The Comi thus "mandate[d] ... the 'lvidening of the investigation to recognise the conditions behind tenninating the representation Agreement under dispute, value of compensation money, and the elements of damage claimed." (Id.) On May 23, 2016, the Executory Bureau of the Baabda District entered the Freeze Order directing four of Can.~stream' s customers to vvitbhold payment of existing accounts receivable and to retain any future payn1ents that may become due to Carestrearn. (Kanmm Aff., ir 31; Freeze Order [Kanaan Aff., Ex. 4] ["[\V]e order to precautionary freeze all what is due to the defendant by the third parties: Intermedic S.A.L, Samco Group, Printken, Dynagraph for Printing Industry, in security of the claimant debt estimated in the amount of il.600.0001 U.So Dollars, in addition to the con.necting costs estimated in the amount of /160,000/ U.S. Dollars, and notii)' whom is concerned"].) Subsequently, Carestream moved, in a different chamber of the Court of Civil Cassation, for reconsideration of that Court's January 22, 2015 Decree. (Kanaan Aft:, i;,f 28-29,) As of the date of the Kanaan affirmation, November 17, 2016, there had not been a determination of this appeal, (Id,, 411 29,) This court has not to date been infom1ed of any decisiou of the appeal or of any final judgment in the Lebanese action. Care stream makes a prima facie shmving of the merit of its claim for injunctive relief based on the parties' Distributor Agreement As discussed above, that Agreement required 4 5 of 11 [* 5] INDEX NO. 655491/2016 NYSCEF DOC. NO. 96 RECEIVED NYSCEF: 11/30/2017 Lindustry to litigate any issues regarding its termination as distributor in the courts of New York, under the laws of New York Moreover, the Agreement precluded Lindustry from seeking damages such as lost profits, upon termination, unless othenvise provided by "mandatory law." Under New York law, \vhich is the mandatory law pursuant to the choice of law provision of the Agreement, a contractual provision precluding damages upon tem1ination of an at-wi.U contract will be enforcei:.L As also discussed above, hov·.Iever, it appears that the Lebanese appellate court is considering the award of damages such as lost profits. This court accordingly holds that further prosecution ofthe Lebanese action and enforcement of the Freeze Order should be enjoined. The principle of international comity does not require a different result This principle "refers to the spirit of cooperation in which a domestic tribunal approaches the resolution of cases touching the lmvs and interests of other sovereign states," (M2.rg:~ntlm1tY__Ayj_g_g_,R;;!_~Q_t!tC:~~ Ltd., 11 NY3d 383, 389-390 [2008] [internal quotation marks and citation omitted].) Comity is not offended by an injunction against :further prosecution of the Lebanese action, "in light of New York's long-standing public policy of enforcing forurn selection clauses in international _yJ&wYQ9JW~?.-r.H9~gjJW§YlY ..U~;L, 143 AD 3d 418, 419 [ l st agreements." (M!144~nJThtJ,_,_lJd, _ Dept 2016] [Madden]; Jv,q95_µ~zJntLfin,_,__~_,:V:,..Y...N§tjg_r1~.U3:~.§~rY~..~-?J:lli:, 304 AD2d 429, 430 [1st Dept 2003]; .~5'.~ fil~Q (m__QU __~__Qp,5_,Jm:;.,..Y.Iw:hine Q.~!lerntig,ii_~-~IY§:~.J•. L,.~~, 150 AD3d 586, 587 [1st Dept 2017] [affim1ing injunction against sister state litigation, based on forum selection clause].) The parties' choice of law provision also supports the injunction. (J_nqQ5-ll~?': !n!t.Ein:oJtY~, 304 AD2d at 430.) Absent an injunction, the parties' negotiated agreement to apply New York law to their dispute \vould be vitiated, as it appears that the Lebanese Corui will entertain a claim for damages that would be prohibited under New York law, 5 6 of 11 [* 6] INDEX NO. 655491/2016 NYSCEF DOC. NO. 96 RECEIVED NYSCEF: 11/30/2017 Finally, although the Lebanese action has been pending for a protracted period, Carestream has challenged the Lebanese Court's jurisdiction throughout that period. As discussed above, the jurisdictional issue was still under appeal as of the time of service of the motions. Under these circumstances, the court does not find that Carestream waived its right to enforce the forum selection clause in the instant action. (See ~~l§fl~1~n_, 2016 NY Slip Op 50061 [U], 2016 \\TL 237637, * 7 [Sup Ct, NY County 2016], g~]g QX! QJDS'.r grn_s;m4~, 143 AD3d 418, supra.) The court accordingly holds that plaintiff is entitled to an injunction enjoi11ing Lindustry from further prosecuting the Lebanese Action and from enforcing the Freeze Order issued by the Lebanese Court imd any other order issued in connection with the Lebanese Action. To the extent that plaintiffs second cause of action for an injunction seeks additional injunctive relief (CompL, ~l 58), the court holds that such request is overbroad and should be denied. The court further holds that plaintiff is entitled to judgment as to liability on its third cause of action for breach of contract. Plaintiff has demonstrated that Lind us try breached the frmim selection cause of the Distributor Agreement by bringing the Lebanese Action. Plaintiff has not demonstrated on this record, which lacks affidavits of merit from individuals with personal km_n:vledge of the events, that Lindustry breached obligations under the Agreement by competing with plaintiff and failing to provide product maintenance. The only damages identified by plaintiff for breach of contract are its attorney's foes for prosecuting the instant action and for defending the Lebanese Action. It is '\vell settled that in fixing attorney's fees, the trial court "has the authority and responsibility to determine that the claim for fees is reasonable." (t:VUNP Hol4iDitfLL1,..Q _ __ rrydm~g, 154 AD3d 558, 559 [1st Dept _y 20171 [internal quotation marks omitted]; -~,I_,,A,J~-1!!-:king__~~Qg\_YL~ni:_t;_rJxrn,__ (Q_,, 128 AD3d 6 7 of 11 [* 7] INDEX NO. 655491/2016 NYSCEF DOC. NO. 96 RECEIVED NYSCEF: 11/30/2017 479, 480 [1st Dept 2015].) Factors to be considered in determining the reasonableness of fees include "time and labor required, the difficulty of the questions involved, and the skill required to handle the problems presented; the lawyer's experience, ability and reputation; the amount involved and benefit n.~sulting to the client from the Sf.~rvices; the customary fee charged by the Bar for similar services; the contingency or certainty of compensation; the results obtained; and the responsibility involved." (M_~!t~r__gfJrn~m@, 34 NY2d 1, 9 (1974],) Fees should not be mvarded for unduly protracted litigation. (See M<':ltt~LQLB-9_h\'!_\:k, 196 AD2d 496, 498 [2d Dept 1993],) As held above, the litigation of the Lebanese Action does not bar the instant action. Plaintiff is not, However, entitled to legal fees for that Action, as plaintiff could have sought an anti-suit injunction in this court at a considerably earlier date, instead of engaging in a protracted defense of the Lebanese Action. Fees will, hovvever, be awarded for the instant action upon a shovving of reasonableness. The court is constrained to award such foes based on the Appellate Division's holding in attorney's foes are available for breach of a forum. selection clause, It is noted that this holding has been repeatedly questioned in light of the American Rule, under which attorney's fees are ordinarily available only if provided for by contract or statute. (See e.g. $_1,1rni~-~LQnh_gm_~~fa::_LJn£.~, 2014 \VL 3439620, l?rn1Y!.tRuf.in!fk",11P,J'. * 13-14 (SD NY, No. 13-CV-4348 (JMF), July 230, 242-244 [SD NY 2011]; Q~.QiL~JJ.<::t§_,Jg.£,, 2016 NY Slip Op 50825 [U], 2016 WL 3043808, * 5 n 5 (Sup Ct, NY County 20161, affi.i on other grnimsl§, 150 AD3d 586, suprn.) 8 of 11 [* 8] INDEX NO. 655491/2016 NYSCEF DOC. NO. 96 RECEIVED NYSCEF: 11/30/2017 FinaHy, the court holds that plaintiff is not entitled to judgment on its first cause of action for a judgment declaring, among other things, that the forum selection clause in the Distributor Agreement is enforceable and that plaintiff is not liable to Lindustry for termination of that Agreement (CompL, ir 50.) A declaratory judgment requires "a genuine, concrete dispute between adverse parties, not merely the possibility of hypothetical, contingent, or remote prejudice to the plaintiff." O~r~mig~..R~~1Qrnti.9n~ ..t?fN~.'Y..Y0x.~J;.o._n\.YN~w.Y9.r.k.: . St~te... P.e.nL0.f ~JQJ.QJ.j(eh§~, 127 i\D3d 1049, 1049 [2d Dept 2015].) Moreover, a declaratory judgment claim "'is unnecessary and inappropriate"' vvhere the plaintiff has "'an adequate, alternative remedy in another form of action, such as breach of contract"' CNM.C.. R~~Jgg_aj_.Qwn~.rnh~P..L.~L.C~..Y..F~S.~ ~~f:mk.N.@.tL!\i?.§!"b 153 AD3d 284, 290 [1st Dept 2017], quoting ,._111ete.Js~fggt?.~Jn~~,,:LC~eiJgJ Ke..c.0r9-.~,Jriy., 137 AD2d 50, 54 [1st Dept 1988].) Here, the declaratory judgment cause of action is not maintainable given the availability of the breach of contract cause of action. It is accordingly hereby ORDERED that the motlon of plaintiff Carestream Health (Near East) Ltd. (Carestream) for a default judgment on aH causes of action pleaded in the amended complaint (Motion Seq. No. 003) is hereby determined as follows: 1. It is ORDERED, ADJUDGED, and DECLARED that plaintiff Care stream's first cause of action for a declaratory judgment is dismissed; and it is further 2. ORDERED that plaintiff Carestrearn's second cause of action is granted to the following extent: Defondant Lindustry (Oflshore) S.A.L (Lindustry), its agents, and any persons acting on its behalf or in concert with it are enjoined ( 1) from continuing to prosecute the lawsuit initiated by Lindustry currently pending in Lebanon, Lindu%l1D'. LQ[f:~lmI~}S.~!\l:,_y_l);9_Q._aj~Jt'.Lt;;MJ~_~§.t.}_,.Jnf.~ ..?-P.:9: ..~~-?!~?.t.r~grr:.U~@Hh..G\.e.wJ~.?:~tJL~4-. (the Lebanese Action); (2) from enforcing an order issued by the Executory Bureau of 9 of 11 [* 9] INDEX NO. 655491/2016 NYSCEF DOC. NO. 96 RECEIVED NYSCEF: 11/30/2017 the Baabda District, Lebanon, entered May 23, 2016 (the Freeze Order); and (3) from enforcing any other order issued in connection with the Lebanese Action; and it is further 3, ORDERED that plaintiff Carestream is granted judgment as to liability on its third cause of action for breach of contract to the extent that this cause of action is based on defendant Lindustry' s violation of the furum selection clause of a Distributor Agreement dated January 1, 2005, between Lindustry and plaintiffs predecessor-ininterest Kodak (Near East), Inc., by cmmnencing the Lebanese Action; and it is further 4. ORDERED that the issue of the amount of plaintiff Carnstream's reasonable attorney's fees is referred to a Special Referee to hear and report with recommendations, except that, in the event of and upon the filing of a stipulation of the parties (in the event Lindustry appears), as permitted by CPLR 4317, the Special Referee, or another person designated by the parties to serve as referee, shaH determine the aforesaid issue; and it is further 5. ORDERED that, within 15 days from the date of entry of this order, plaintiff Carestream shall serve a copy of this order with notice of entry, a note of issue and statement of readiness upon defendant by first class international mail and by international courier, addressed to: Lindustry (Offshore) S.A.L., Choueifat, Tiro Street, Rassa.mny Youness Building, Beirut, Lebanon, '\Vith a copy to be served by first class international mail and by international courier service to Lindustry's designated Lebanese counsel in the Lebanese Action, addressed to: Uthrnan Arakji & Partners, Iheza Building, Fradan Street, P .0. Box 113-5631, Beirut, Lebanon, attention: Uthman i\mkji; and it is further 9 10 of 11 [* 10] INDEX NO. 655491/2016 NYSCEF DOC. NO. 96 RECEIVED NYSCEF: 11/30/2017 6, ORDERED that, within 30 days of the date of entry of this order, plaintiffCarestream shall serve a copy of this order with notice of entry on the Clerk of the Special Referee's Office (Room 119) to arrange a date for the reference to a Special Reforee; and it is further 7. ORDERED that plaintiff Carestream shaH give notice to defendant Lindustry of the date of the hearing befixe the Special Referee by serving such notice upon Lindustry at least 30 days before the hearing by first class international mail and international courier service at the address set forth above, with a copy to Lindustry' s Lebanese counsel as set forth above; and it is further 8. ORDERED that a motion to confirn1 or reject the report of the Special Referee shall be made within 15 days of the filing of the report; and it is further ORDERED that plaintiffs motion for a preliminary injunction (Motion Seq. No. 001) is denied as moot This constitutes the decision and order of the court Dated: New York, New York November 27, 2017 JO 11 of 11

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