Mena Films, Inc. v Painted Zebra Prods., Inc.
Annotate this CaseDecided on October 10, 2006
Supreme Court, New York County
Mena Films, Inc., Plaintiff,
against
Painted Zebra Productions, Inc., Defendant.
601050/2006
Karla Moskowitz, J.
Plaintiff, Mena Films ("Mena"), and defendant, Painted Zebra Productions ("Painted Zebra"), dispute the distribution rights of a movie. In this motion (sequence number 001), defendant moves to dismiss this action pursuant to CPLR § 3211 for lack of subject matter jurisdiction and for lack of personal jurisdiction. (Defendant's Motion to Dismiss, p 1). On the record, however, defendant later withdrew that part of the motion to dismiss for lack of personal jurisdiction because it conceded having the required minimum contacts with New York. Defendant left only the motion to dismiss for lack of subject matter jurisdiction based on a contractual provision governing choice of law and jurisdiction. (Transcript of Oral Argument, dated June 29, 2006, at 2-3). For the following reasons, the court denies defendant's motion.
FACTS
The following facts are primarily derived from the Complaint and other papers the parties submitted on this motion.
In January 2004, Mena and Painted Zebra formalized an arrangement in which Mena gave Painted Zebra distribution rights to the film called Malevolence. (Complaint ¶ 3). In this Distribution Agreement, Mena and Painted Zebra stated how they would divide proceeds, how they would render accountings, how they would handle any sequels, and generally how Painted Zebra would execute the distribution and marketing of Malevolence. (See Complaint ¶¶ 4, 5, 28, 36). The parties released Malevolence on July 31, 2004 (Complaint ¶ 6), and, on May 31, 2006, plaintiff filed a law suit for breach of contract because of defendant's alleged failure to abide by the Distribution Agreement and for a judgment declaring the Distribution Agreement terminated (Complaint ¶ 45). Specifically, Mena contends that "[a]mong other things, Painted Zebra failed to remit monies due Mena Films, failed to provide contractually required accounting reports and refused to permit the contractually required audit of Painted Zebra's books and records as they relate to Malevolence." (Plaintiff's Memorandum of Law in Opposition to Defendant's Motion to Dismiss, p 1).
Defendant claims that the following provision of the Distribution Agreement wrests subject matter jurisdiction from this court:
12. Choice of Laws: This Agreement shall be governed by California Law and shall be subject to the jurisdiction of the Federal and State Courts located in Los Angeles County.[*2]
(Distribution Agreement for Malevolence, dated January 15, 2004, p 9, in Mena Aff.). Plaintiff responds that this contractual provision is not exclusive and therefore it can bring suit in New York. After analyzing the relevant New York and California case law, as discussed below, the court agrees with plaintiff that the Choice of Laws provision does not confer exclusive jurisdiction on California courts and thus jurisdiction in New York courts is proper.
DISCUSSIONNew York law requires this court to respect the parties' right to contract for choice of law and forum. "It is the well-settled policy of the courts of this State to enforce contractual provisions for choice of law and selection of a forum for litigation" (Boss v. Am. Express Fin. Advisors, Inc., 15 AD3d 306, 307 [1st Dept 2005] [internal quotations omitted], affd 6 NY3d 242 [2006]; see also Micro Balance Prods. Corp. v Hlavin Indus., 238 AD2d 284, 285 [1st Dept 1997]). Defendant asserts that, due to public policy reasons that defendant does not fully explain, the court must use New York, and not California, law to interpret choice of jurisdiction. (Transcript of Oral Argument, dated June 29, 2006, at 4). However, the court disagrees because governing law provisions in contracts prevail and the court must enforce these provisions. (See Paramedics Electromedicina Comercial Ltda v GE Med. Sys. Info. Techs., 2003 US Dist LEXIS 26928, *46 [SDNY 2003] ["The United States has a well-established public policy of enforcing forum selection agreements . . . ."] [citations omitted]). Thus, pursuant to the Distribution Agreement, California law governs and the court now turns to California law for how to read the second half of the Choice of Laws contractual provision that states the Agreement "shall be subject to the jurisdiction of the Federal and State Courts located in Los Angeles County." The question therefore becomes whether the contractual provision regarding jurisdiction is a mandatory and exclusive forum selection clause or whether it is simply a jurisdiction-conferring clause.
Though the California Supreme Court has held that forum selection clauses are valid and enforceable, unless unreasonable, "a distinction has been drawn between a mandatory and permissive forum selection clause for the purposes of analyzing whether the clause should be enforced." (Intershop Communications, A.G. v Superior Court of San Francisco, 127 Cal Rptr 2d 847, 850 [Cal Ct App 2002]). For example, clauses that confer jurisdiction with the words "to the extent permitted by applicable laws," "shall be litigated," "shall be prosecuted," or "shall have exclusive jurisdiction" are mandatory forum selection clauses. (See id. at 851 [internal quotations omitted]). In contrast, clauses that read a party "has submitted to the jurisdiction of" or a particular court "shall have jurisdiction over the parties" are permissive. (See id. [internal quotations omitted]). Unlike a mandatory forum selection clause, that names only one jurisdiction as "the single place" for litigation, a permissive clause confers jurisdiction because "the parties [have] merely agreed to submit to the jurisdiction of the named court but [have] not ruled out other jurisdictions." (Id.; see also Olinick v BMG Entertainment, 42 Cal Rptr 3d 268, 274 [Cal Ct App 2006] [concluding that a clause with the word "exclusive" is a mandatory clause because it "contains express language of exclusivity of jurisdiction, specifying a mandatory location for litigation"]; Berg v MTC Elec. Tech., 71 Cal Rptr 2d 523, 530 [Cal Ct App 1998] ["The mere granting of jurisdiction is insufficient to make a clause mandatory. Additional language giving exclusive jurisdiction to the forum is required. Clauses which merely grant jurisdiction to a designated forum do not prohibit litigation in other appropriate fora.").
In other words, to be mandatory, a forum selection clause must be "far more than an agreement to submit to [] jurisdiction." (Intershop Communications, 127 Cal Rptr 2d at 851). [*3]The Distribution Agreement between Mena and Painted Zebra is a permissive, jurisdiction-conferring clause because its words, "shall be subject to the jurisdiction of the Federal and State Courts located in Los Angeles County" resemble the language "shall have jurisdiction" or "has submitted to the jurisdiction" that California courts have found permissive. Absent from the Distribution Agreement are the mandatory words "exclusive," "shall be litigated" or "shall be prosecuted." Applying California law, the Ninth Circuit has interpreted forum selection clauses in the same manner as the California state courts. In Hunt Wesson Foods v. Supreme Oil Company, the Circuit concluded that the words "shall have jurisdiction over the parties in any action at law" did "not confer exclusive and mandatory jurisdiction on the Orange County Superior Court." (817 F2d 75, 78 [9th Cir 1987]; see also Northern California District Council of Laborers v Pittsburgh-Des Moines Steel Co., 69 F3d 1034, 1036 [9th Cir 1995] [finding the words "shall be enforceable" permissive because "[s]uch consent to jurisdiction . . . does not mean that the same subject matter cannot be litigated in any other court"]). In addition, the Ninth Circuit stated that exclusive and mandatory forum selection clauses must have language (e.g., the word "only") that "mandates that the designated courts are the only ones which have jurisdiction." (Hunt Wesson Foods, 817 F2d at 78). For the Distribution Agreement's Choice of Laws provision to be more than jurisdiction-conferring, it must "mandat[e] more than that a particular court has jurisdiction." (Id.). This court does not find any mandatory language and instead reads the provision as merely granting the Federal and State Courts located in Los Angeles County jurisdiction but not excluding jurisdiction elsewhere.
Even though the court has decided that California law controls here, it notes that the result under New York law likely would not differ. For example, in Boutari and Son, Wines and Spirits, S.A. v. Attiki Importers and Distributors, Inc., the Second Circuit ruled on a forum selection clause very similar to the one the Distribution Agreement contains. The clause in Boutari read:
This Agreement shall be governed and construed according to the Laws of Greece.
Any dispute arising between the parties hereunder shall come within the jurisdiction of the competent Greek courts, specifically of the Thessaloniki Courts.
(22 F3d 51, 52 [2d Cir 1994]). Following the rule that other circuit courts have applied, the Second Circuit decided that the clause did not deprive the Eastern District of New York of jurisdiction. (Id.). "The general rule in cases containing forum selection clauses is that when only jurisdiction is specified the clause will generally not be enforced without some further language indicating the parties' intent to make jurisdiction exclusive." (Id. [internal quotations omitted]). Thus, Boutari found use of the word "shall," by itself, insufficient to grant exclusive jurisdiction to the courts in Greece. (Id.). Likewise, the word "shall" in the Choice of Laws clause from this case does not grant California courts exclusive jurisdiction either.
Courts in New York have adhered to this rule as well. (See e.g. Heyco, Inc. v Heyman, 636 F Supp 1545, 1547-48 [SDNY 1986] ["shall be entitled" to seek relief is permissive and not mandatory]; Credit Alliance Corp. v Crook, 567 F Supp 1462, 1465 [SDNY 1983] ["agree to the venue and jurisdiction" is permissive]; Coface v Optique du Monde, 521 F Supp 500, 503, 506 [SDNY 1980] ["consent to the jurisdiction" is permissive]). Despite consistent rulings in the past that "shall" is permissive, some disagreement exists over whether the word might indeed confer exclusive jurisdiction. (See Babock & Wilcox Co. v Control Components, Inc., 614 NYS2d 678, 682 {161 Misc 2d 636} [Sup Ct, NY County 1993]). Regardless of the final interpretation of "shall," courts do insist that, to be mandatory and exclusive, "shall" must be in a [*4]forum selection clause with "[a]ny language that reasonably conveys the parties' intention to select an exclusive forum . . . ." (Id.).
Finally, in 2005 and with the Court of Appeals affirming in 2006, the First Department directed dismissal and upheld jurisdiction in Minnesota because plaintiffs' employment agreement gave Minnesota courts jurisdiction and stated plaintiffs "expressly waived any privileges contrary to this provision." (Boss, 15 AD3d at 307; see also LSPA Enterprise, Inc. v Jani-King of New York, Inc., 817 NYS2d 657, 658 {31 AD3d 394} [2d Dept 2006] [dismissing case in New York Supreme Court because forum selection clause stated jurisdiction and venue "exclusively" in Texas]; Hernandez v Cali, Inc, 32 AD2d 192, 193, 195 [1st Dept 1969] [granting sole jurisdiction to the courts of Panama because employment contract stated any disputes "shall be governed and determined exclusively" by Panamanian law and that any disputes "shall be submitted to and settled by the proper competent authorities of the Republic of Panama exclusively"] [emphasis added]). Thus, in Boss "[t]he parties . . . agreed to the jurisdiction of Minnesota courts to resolve any controversy and agreed that Minnesota law would apply." (Id.). Here, Mena and Painted Zebra did not waive "privileges contrary" to the Choice of Laws provision, so, unlike the plaintiffs in Boss, they do have the contractual right to demand proper interpretation of its terms under California law. Moreover, there is nothing more in their Distribution Agreement than "shall," and, as explained above, a contractual provision must contain more to be mandatory. Accordingly, because the court finds proper jurisdiction in New York pursuant to California law and cannot discern that New York law would interpret the Choice of Laws provision any differently, the court denies defendant's motion to dismiss for lack of jurisdiction.
To the extent defendant seeks dismissal based on forum non conveniens (see Murphy Aff. ¶¶ 5-13), it is denied. To support dismissal for forum non conveniens, "[t]he burden rests upon the defendant challenging the forum to demonstrate relevant private or public interest factors which militate against accepting the litigation." (Bank Hapoalim (Switzerland) Ltd. v. Banca Intesa S.p.A., 26 AD3d 286, 287 [1st Dept 2006]. Factors include burden on the court, potential hardship on the defendant, and lack of an alternative forum, but no one factor is dispositive. (Id.). In cases with a forum selection clause, New York courts will not dismiss "unless shown to be unreasonable." (Id. at 288). Finally, " It is well established that unless the balance is strongly in favor of defendant, the plaintiff's choice of forum should rarely be disturbed.'" (Creditanstalt Investment Bank AG v Chadbourne & Parke LLP, 778 NYS2d 863, 865 {4 Misc 3d 481} [Sup Ct, NY County 2003], quoting Waterways Ltd. v Barclays Bank, 174 AD2d 324, 327 [1st Dept 1991]).
Because the parties signed the Distribution Agreement in New York and the parties performed the Agreement in New York, New York courts have a public interest in retaining the action. Defendant also does not present any private interests that would justify dismissal. Indeed, in spite of its incorporation in California, the court finds defendant firmly established in New York because its contracts list a New York address, meetings transpired in New York, all correspondence has a New York address, and checks bear a New York address. (See e.g. Mena Aff. ¶¶ 8, 12 and Exhs. A, C, E; Mena Aff., ¶¶ 5-7, 16, 18; Mena Aff. ¶¶ 12-14 and Exhs. F, G; and Mena Aff. ¶ 15 and Exh. H). Even though defendant claims hardship because it alleges all books and records, as well as its accountants, are in California (Murphy Aff. ¶¶ 8, 11), books and records are "portable" and accountants can travel (see White Light Prods., Inc. v On the Scene Prods., Inc., 231 AD2d 90, 99 [1st Dept 1997] [denying a California partnership's motion to dismiss for forum non conveniens because it could bring both witnesses and records to New [*5]York, where partnership regularly did business in furtherance of its objectives]). The court does not see how the balance of factors could favor the defendant and would not grant a forum non conveniens motion should defendant make one formally, rather than suggesting the possibility in affidavits.
CONCLUSION
Accordingly, it is ORDERED that the motion of defendant Painted Zebra Productions, Inc. to dismiss is denied, and it shall serve and file an answer within 30 days of the date of this order.
Dated: October ____, 2006
ENTER:
_______________________
J.S.C.
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