Devos Ltd. v RX Recalls, Inc.

[*1] Devos Ltd. v RX Recalls, Inc. 2005 NY Slip Op 52311(U) [12 Misc 3d 1186(A)] Decided on December 2, 2005 Supreme Court, Suffolk County Emerson, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on December 2, 2005
Supreme Court, Suffolk County

Devos Ltd., d/b/a Guaranteed Sales, and GRX Holdings, LLC, Plaintiffs,

against

RX Recalls, Inc., f/k/a RXReverse, Inc., f/k/a Easy Returns Worldwide, Inc., and Mogil Corp., f/k/a Easy Returns, Inc., Defendants.



13016-05



Charles A. Singer, Esq.

Attorney for Plaintiffs

500 Bi-County Boulevard, Suite 112N

Farmingdale, New York 11735

Rivkin Radler LLP

Attorneys for Defendants

926 EAB Plaza

Uniondale, New York 11556

Elizabeth Hazlitt Emerson, J.

ORDERED that the motion by the defendants for an order pursuant to CPLR 327(a) and 3211(a)(1) dismissing the complaint is granted; and it is further

ORDERED that motion by the plaintiffs for a preliminary injunction is denied as academic.

In 2003, the plaintiffs purchased the assets of the defendants' Missouri-based businesses pursuant to an asset purchase agreement. Although the asset purchase agreement does not contain a forum-selection clause, the two promissory notes executed by the plaintiffs pursuant to that agreement contain the following forum selection clauses: The undersigned agree that any legal action initiated against or by it or them with respect to this Note shall be instituted in the Eastern District of the United States District Court for Missouri sitting in St. Louis, Missouri, or in any Missouri State court sitting in any City or County in which the property is located, and the undersigned hereby submits to the jurisdiction of such court in any such action.

The two promissory notes were exhibits to the asset purchase agreement, which contains the following incorporation-by-reference language: This Agreement, and Exhibits, and Schedules and other writings referred to herein and delivered pursuant hereto which form the parts hereof contain the entire understanding of the parties with respect to the subject matter hereof....All Exhibits and Schedules hereto are incorporated herein by reference and made a part hereof.

In addition, both the asset purchase agreement and the promissory notes provide that they shall be governed and construed in accordance with the laws of the State of Missouri.

The plaintiffs commenced this action for reformation of the purchase price and for declaratory and injunctive relief after the defendants notified them by a letter dated June 1, 2005, that they were in default of their obligations under the promissory notes. The defendants now move to dismiss the complaint based on the forum selection clause contained in the notes. The plaintiffs contend, in opposition, that its three causes of action arise out of the asset purchase agreement only and not the promissory notes, that the asset purchase agreement contains no forum selection clause, and that the forum-selection clause found in the promissory notes is inapplicable to the asset purchase agreement.

Although once disfavored by the courts, it is now recognized that parties to a contract may freely select a forum which will resolve any disputes over the interpretation or performance of the contract. Such clauses are prima facie valid and enforceable unless shown by the resisting party to be unreasonable (see, Brooke Group v JCH Syndicate, 87 NY2d 530, citing The Bremen v Zapata Off-Shore Co., 407 US 1). Public policy supports a broad reading of forum [*2]selection clauses (see, Travelers Prop. Cas. Co. of Am. v Centimark Corp., 2005 WL 1038842 [SD Ohio], at 2), and parties seeking to avoid their enforcement must make a "strong showing" (see, Bell Constructors v Evergreen Caissons, 236 AD2d 859; see also, Mercury West A.G. v R.J. Reynolds Tobacco Co., 2004 WL 421793 [SDNY]), at 3).

The plaintiff's contention's to the contrary notwithstanding, this action is not based on the asset purchase agreement only. The plaintiff's first cause of action seeks a downward modification of the purchase price based on paragraph 2(c)(iii) of the asset purchase agreement. However, the language of paragraph 2(c)(iii) is also found in the promissory notes. The plaintiff's second cause of action seeks to stay the appropriate cure period under the asset purchase agreement and promissory notes and to enjoin the defendants from declaring that the plaintiffs are in default of the asset purchase agreement and promissory notes. The third cause of action seeks reformation of the purchase price to reflect what should have been the actual purchase price had correct financial information been disclosed. Reformation of the purchase price would require reformation of both the asset purchase agreement and the promissory notes.

The plaintiffs cite no authority for their narrow reading of the forum selection clause, and the court finds that such a reading is inappropriate. The promissory notes are part of the overall agreement between the parties. The forum selection clause provides for jurisdiction in Missouri for "any legal action...with respect to" the notes. The word "any" is all-encompassing language, indicating the parties' belief that all actions regarding their relationship will be governed by the forum selection clause (see, Travelers Prop. Cas. Co. of Am. v Centimark Corp., supra at 3). Moreover, the promissory notes are incorporated by reference into the parties' asset purchase agreement, which contains a clause specifying that it is to be governed by the laws of the State of Missouri (see, Alwinseal, Inc. v Travelers Ind. Co., 61 AD2d 803). Under these circumstances, the court finds that Missouri is the appropriate forum for determination of the issues raised by the parties. Accordingly, the motion is granted and the complaint dismissed.

DATED: December 2, 2005

J. S.C.