Jalee Consulting Group, Inc. v. Xenoone, Inc. et al

Filing 33

OPINION AND ORDER: Defendant's motion to dismiss is granted in part and denied in part. XenoOne Korea's motion dismiss Plaintiffs claim for injunctive relief to compel arbitration in New York City is HEREBY GRANTED. XenoOne USA's moti on to dismiss Plaintiffs claims for breach of contract or, in the alternative, quasi-contractual relief, IS HEREBY DENIED. By October 31, 2012, the parties shall jointly submit to the Court a proposed case management plan and scheduling order. A temp late for the order is available at http://wwwl.nysd.uscourts.gov/judge_info.p hp?id=99. In light of this decision, it may be appropriate for the parties to conduct expedited discovery regarding the "intertwined-ness" of the alleged contracts between Plaintiff and XenoOne USA and the Agreement between Plaintiff and XenoOne Korea. The Clerk of the Court is respectfully directed to terminate the motion pending at Doc. No. 19. (Signed by Judge Richard J. Sullivan on 9/29/2012) (ago)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
_____________________
No. 11 Civ. 4720 (RJS) (JCF)
_____________________

JALEE CONSULTING GROUP, INC.,
Plaintiff,
VERSUS

XENOONE, INC., et al.,
Defendants.
___________________
OPINION AND ORDER
September 29, 2012

___________________
RICHARD J. SULLIVAN, District Judge:
Plaintiff Jalee Consulting Group, Inc.
brings this action under the Federal
Arbitration Act, 9 U.S.C. § 4, and New York
State common law against Defendants
XenoOne Co., Ltd. (“XenoOne Korea”) and
XenoOne Inc. (“XenoOne USA”). Plaintiff
seeks injunctive relief requiring that any
arbitration proceedings under Plaintiff’s
contract with XenoOne Korea occur in New
York City, rather than in Seoul, South
Korea, the location specified by the
contract’s terms.
Plaintiff also seeks
monetary relief against XenoOne USA for
breach of different contracts, or, in the
alternative, unjust enrichment or quantum
meruit.
Before the Court is Defendants’ motion
to dismiss pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure. For the

reasons set forth below, Defendants’ motion
is granted in part and denied in part.
I. BACKGROUND
A. Facts1
Plaintiff is a technology consulting and
software development firm organized under
New York State law and operating in New
York City. Defendant XenoOne Korea is a
foreign technology corporation organized
under the laws of the Republic of Korea
(“Korea”). Defendant XenoOne USA is a
corporation chartered in Delaware and
operating in New York City. (Am. Compl.
¶¶ 5-9.)
1

All facts are drawn from Plaintiff’s Amended
Complaint (Doc. No. 18) and from the Declaration of
John J. Zefutie, Jr. and supporting exhibits. (Doc.
No. 20.)

On October 5, 2010, Plaintiff entered
into a contract (the “Agreement”) with
XenoOne Korea to develop software for
computers and mobile devices. (Id. ¶ 15.)
The Agreement, which appears on Plaintiff’s
letterhead, referred to the work as “Project
Mu.” (Decl. of John J. Zefutie, Jr., dated
Nov. 9, 2011, Doc. No. 20 (“Zefutie Decl.”),
Ex. C.) In addition to the primary task of
developing a “fully functioning application,”
Plaintiff agreed to undertake “related
supportive tasks” as part of Project Mu.
(Id.) The Agreement gave several nonexclusive examples of such supportive tasks,
and, in vague language, it identified several
other tasks that it explicitly did not cover,
namely “Marketing Model,” “Business
Model,” and “Operation Model.” (Id.) The
Agreement also contained an arbitration and
forum selection clause providing: “Any
dispute, controversy, or difference which
may arise between the parties hereto, out of
or in relation to or in connection with this
Agreement, or any breach hereof . . . shall
be finally settled by arbitration in Seoul,
Korea” according to “the laws of [the]
Republic of Korea.” (Id.)

with Defendant XenoOne USA on
“additional matters related to the scope of
work established by the Agreement.” (Id. ¶
36.) Significantly, Plaintiff alleges that its
work with XenoOne USA on those
additional matters was pursuant to contracts
separate from and independent of the
Agreement governing Plaintiff’s work with
XenoOne Korea. (Id. ¶¶ 37, 42.) Those
contracts allegedly were memorialized in
“numerous e-mails and correspondence”
between Plaintiff and XenoOne USA. (Id.
¶¶ 36-38, 40-42.) For its services, Plaintiff
issued at least five invoices directly to
XenoOne USA demanding payments
totaling over $400,000.
(Id. ¶ 39.)
Plaintiff’s contract and quasi-contract claims
against XenoOne USA arise from unpaid
fees and expenses totaling $389,559.18. (Id.
¶¶ 43-45, 55-60.)
B. Procedural History
Plaintiff initially brought this action in
the New York State Supreme Court, New
York County, on June 27, 2011. Defendants
removed the action to federal district court
pursuant to the Federal Arbitration Act, 9
U.S.C. §§ 203, 205 and to 28 U.S.C. §§
1331, 1332, 1441(a), 1441(b), and 1446.
(Notice of Removal ¶¶ 8-17.) On October
11, 2011, with the Court’s leave, Plaintiff
filed an Amended Complaint. (Doc. No.
18.) Defendants then jointly filed a motion
to dismiss on November 9, 2011, and the
motion was fully briefed on December 22,
2011.

This litigation arises, in part, from
disputes between Plaintiff and XenoOne
Korea over the amounts XenoOne Korea
owes Plaintiff under the contract. (Am.
Compl. ¶ 20.) At the time Plaintiff initiated
this action, it was contemplating an
arbitration proceeding against XenoOne
Korea to resolve those disputes. (Id. ¶ 23.)
Plaintiff also alleges that XenoOne Korea
was contemplating initiating an arbitration
proceeding against Plaintiff for the same
purpose. (Id. ¶ 24.) Plaintiff now seeks to
invalidate the provision in the Agreement
requiring that any arbitration occur in Seoul
so that arbitration can proceed in New York.
(Id. ¶ 35.)

II. LEGAL STANDARD
Neither the Second Circuit nor the
Supreme Court has specifically designated a
single clause of Rule 12(b) as the proper
procedural mechanism for seeking dismissal
of a suit based upon a valid forum selection
clause. See Asoma Corp. v. SK Shipping
Co., 467 F.3d 817, 822 (2d Cir. 2006);

Plaintiff also alleges that, besides its
work for XenoOne Korea, it began working
2

CFirstClass Corp. v. Silverjet PLC, 560 F.
Supp. 2d 324, 326-27 (S.D.N.Y. 2008)
(“There is a split of authority in the Second
Circuit regarding the appropriate procedural
mechanism by which to enforce a forum
selection clause.”). At various times, the
Second Circuit has considered such motions
on grounds of lack of subject matter
jurisdiction pursuant to Rule 12(b)(1),
improper venue pursuant to Rule 12(b)(3),
and failure to state a claim pursuant to Rule
12(b)(6). See CFirstClass Corp., 560 F.
Supp. 2d at 327 (collecting cases).
Defendants bring their motion to dismiss
under Rule 12(b)(6), and Plaintiff does not
challenge that choice.

III. DISCUSSION
A. Enforceability of the Forum
Selection Clause
Federal law has a strong presumption in
favor of enforcing forum selection clauses.
The presumption is particularly powerful in
cases, like this one, that involve
international commerce and arbitral dispute
resolution. See Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S.
614, 631 (1985); M/S Bremen v. Zapata OffShore Co., 407 U.S. 1, 9 (1972). Forum
selection clauses are “prima facie valid and
should be enforced unless enforcement is
shown by the resisting party to be
‘unreasonable’ under the circumstances.”
M/S Bremen, 407 U.S. at 10. The Second
Circuit has recognized four circumstances in
which arbitral forum selection clauses may
be
unenforceable
due
to
their
unreasonableness:

To survive a motion to dismiss pursuant
to Rule 12(b)(6) of the Federal Rules of
Civil Procedure, a complaint must “provide
the grounds upon which [the] claim rests.”
ATSI Commc’ns, Inc. v. Shaar Fund,
Ltd., 493 F.3d 87, 98 (2d Cir. 2007).
Plaintiffs must also allege “enough facts to
state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). “A claim has facial
plausibility when the plaintiff pleads factual
content that allows the court to draw the
reasonable inference that the defendant is
liable for the misconduct alleged.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009). In
reviewing a Rule 12(b)(6) motion to
dismiss, a court must accept as true all
factual allegations in the complaint and draw
all reasonable inferences in favor of the
plaintiff. ATSI Commc’ns, 493 F.3d at 98.
However, that tenet “is inapplicable to legal
conclusions.” Iqbal, 556 U.S. at 678. Thus,
a pleading that only offers “labels and
conclusions” or “a formulaic recitation of
the elements of a cause of action will not
do.” Twombly, 550 U.S. at 555. If the
plaintiff “ha[s] not nudged [its] claims
across the line from conceivable to
plausible, [its] complaint must be
dismissed.” Id. at 570.

(1) if their incorporation into the
agreement was the result of fraud or
overreaching; (2) if the complaining
party will for all practical purposes
be deprived of his day in court, due
to the grave inconvenience or
unfairness of the selected forum; (3)
if the fundamental unfairness of the
chosen law may deprive the plaintiff
of a remedy; or (4) if the clauses
contravene a strong public policy of
the forum state.
Roby v. Corp. of Lloyd’s, 996 F.2d 1353,
1363 (2d Cir. 1993) (citations and internal
quotation marks omitted).
Plaintiff seeks to invalidate the
Agreement’s forum selection clause on each
of the four grounds established in Roby.2
2

Although at times it seems that Plaintiff is
challenging the arbitration provision in its entirety
(see, e.g., Am. Compl. ¶ 18 (alleging that Plaintiff

3

For the reasons set forth below, the Court
finds that Plaintiff has not stated a claim for
relief on any grounds and grants
Defendants’ motion to dismiss Plaintiff’s
claim for injunctive relief.

explain why the statements were
fraudulent.” Lerner v. Fleet Bank, N.A., 459
F.3d 273, 290 (2d Cir. 2006).
The Second Circuit has not definitively
stated whether Rule 9(b) applies to
allegations of fraud in the inducement
pertaining to a forum selection clause.
However, at least one district court within
the Circuit has recognized that “to overcome
the presumed validity of the [forum
selection] and [choice-of-law] clauses,
plaintiffs must plead specific fraudulent acts
or statements by which defendants induced
their consent to these clauses. As with all
claims of fraud, plaintiffs’ claims must be
pled with particularity under Rule 9(b) of
the Federal Rules of Civil Procedure.”
Stamm v. Barclays Bank of N.Y., 960 F.
Supp. 724, 729-30 (S.D.N.Y. 1997). The
Court agrees. It is well-established that Rule
9(b) applies to allegations of fraud in the
inducement regarding other types of
contractual terms. See, e.g., Sedona Corp. v.
Ladenburg Thalmann & Co., No. 03 Civ.
3120 (LTS) (THK), 2011 WL 4348138, at
*3 (S.D.N.Y. Sept. 15, 2011); Matsumura v.
Benihana Nat’l Corp., 542 F. Supp. 2d 245,
252 (S.D.N.Y. 2008) (“It is beyond cavil
that plaintiffs’ fraud in the inducement . . .
claims are subject to the rigors of Rule
9(b).”). Given the Second Circuit’s clear
command that arbitration is but “a creature
of contract,” Louis Dreyfus Negoce S.A. v.
Blystad Shipping & Trading Inc., 252 F.3d
218, 224 (2d Cir. 2001), the Court finds that
the Rule 9(b) pleading requirements apply to
fraud in the inducement claims concerning
forum selection clauses as well.

1. Fraud and Overreaching
Plaintiff offers two factual allegations in
support of its claim that XenoOne Korea
obtained the forum selection clause through
fraud and overreaching. First, Plaintiff
alleges that it was “forced” to accept
inclusion of the clause “[g]iven the scope
and breadth of the work to be performed by
[Plaintiff] pursuant to the Agreement, as
well as the fact that the Agreement was a
significant injection of funding into
Plaintiff.” (Am. Compl. ¶ 18.) Second, it
alleges that it “could not possibly receive a
fair, reasonable, and impartial arbitral
hearing” in Seoul because personnel from
Samsung Group, a Korean electronics
corporation headquartered there, are board
members and/or part owners in XenoOne
Korea, and Samsung Group exercises
“disproportionate and unfair influence” in
Seoul. (Id. ¶¶ 30-32.)
Plaintiff’s allegations are insufficient to
plead either fraud or overreaching. Rule
9(b) of the Federal Rules of Civil Procedure
establishes
heightened
pleading
requirements for allegations of fraud. A
party alleging fraud must “state with
particularity the circumstances constituting
fraud.” Fed. R. Civ. P. 9(b). More
specifically, Rule 9(b) requires a complaint
to “(1) specify the statements that the
plaintiff contends were fraudulent, (2)
identify the speaker, (3) state where and
when the statements were made, and (4)

Turning to the facts of this case, the
Court has little difficulty concluding that
Plaintiff has entirely failed to satisfy Rule
9(b)’s requirements. Neither in its Amended
Complaint nor in its Memorandum in
Opposition to Defendant’s Motion to
Dismiss (“Pl.’s Br.”) does Plaintiff identify a

“was forced to accept [XenoOne Korea’s] arbitration
provision”)), the fact that Plaintiff seeks to compel
arbitration in New York City suggests that its
challenge is limited to the forum selection portion of
the larger provision.

4

single allegedly fraudulent statement. Nor
does Plaintiff identify any speakers who
allegedly made fraudulent statements or
state where and when fraudulent statements
were made. The only specific information
Plaintiff provides is the name of one
Samsung employee who allegedly partly
owned and/or served on the board of
XenoOne Korea. Whatever the value of
such information, it is insufficient to meet
the heightened standard of Rule 9(b). Thus,
Plaintiff’s allegation that the forum selection
clause was fraudulently induced must be
dismissed.

of the successful Dove Air plaintiff is
unpersuasive. Plaintiff never claimed it was
in dire financial straits, merely that the
Agreement
with
XenoOne
Korea
represented a “significant injection of
funding” into its coffers. (Am. Compl. ¶
18.) Moreover, Plaintiff never alleged that
XenoOne Korea was aware of the
Agreement’s financial importance to it.
Finally, despite Plaintiff’s conclusory
allegation that it was “forced” to accept the
forum selection provision, it does not claim,
as the Dove Air plaintiff did, that there was
no bargaining whatsoever concerning the
Agreement. Indeed, Plaintiff’s Complaint
refers to “negotiation of the Agreement,”
(Am. Compl. ¶ 16) and the Agreement
appears on Plaintiff’s own letterhead.
(Zefutie Decl. at Ex. C.) In short, even
accepting as true all factual allegations in
the Complaint, as the Court must, Plaintiff
fails to establish that the Agreement was
anything other than an arm’s-length, freely
negotiated
contract
between
two
sophisticated parties. See Magi XXI, Inc. v.
Stato Della Città del Vaticano, 818 F. Supp.
2d 597, 603 (E.D.N.Y. 2011) (“The Second
Circuit gives ‘substantial deference’ to
forum selection clauses, especially when
‘the choice of [a] forum was made in an
arm’s-length negotiation by experienced and
sophisticated businessmen.’” (quoting New
Moon Shipping Co. v. MAN B & W Diesel
AG, 121 F.3d 24, 29 (2d Cir. 1997))); cf.
Interpharm, Inc. v. Wells Fargo Bank, Nat’l
Ass’n, 655 F.3d 136, 142 (2d Cir. 2011)
(“[A] mere demonstration of financial
pressure or unequal bargaining power will
not, by itself, establish economic duress.
The law demands threatening conduct that is
wrongful, i.e., outside a party’s legal rights.”
(citation and internal quotation marks
omitted)). Plaintiff thus fails to allege any
facts upon which a claim of overreaching
can survive a motion to dismiss.

Plaintiff’s allegation of overreaching
fares no better. In support of its argument
that Plaintiff’s financial vulnerability created
the conditions for XenoOne Korea’s
overreaching, Plaintiff relies entirely on a
solitary case from another circuit applying
North Carolina law. In that case, the district
court invalidated a forum selection clause on
grounds of overreaching where, at the time
the plaintiff entered into the agreement, he
was in “desperate financial condition,” the
defendant was aware of that condition, and it
“appear[ed] there was no bargaining at all”
over the agreement’s terms. Dove Air, Inc.
v. Bennett, 226 F. Supp. 2d 771, 775
(W.D.N.C. 2002). Instead, the court found
that there was “merely the presentation to
[the plaintiff] of the agreement which he had
to sign in order to do business with [the
defendant].” Id.
Dove Air is inapposite both for legal and
factual reasons. First, it applies North
Carolina law to the question of whether
overreaching occurred, see id., whereas
federal common law governs here, see
Phillips v. Audio Active Ltd., 494 F.3d 378,
384 (2d Cir. 2007) (“[F]ederal law should be
used to determine whether an otherwise
mandatory and applicable forum clause is
enforceable . . . .”). Furthermore, Plaintiff’s
effort to analogize its circumstances to those
5

2. Grave Inconvenience and Unfairness

appellant in Phillips, all the inconveniences
Plaintiff now alleges were perfectly
foreseeable when it entered the Agreement,
which stated that “[t]he development of
Project ‘Mu’ will be primarily held in New
York.” (Zefutie Decl. at Ex. C.) Plaintiff
cannot now renege on its consent to arbitrate
in Seoul because of conditions plainly
anticipated in the Agreement.
Those
inconveniences are “but the obvious
concomitants of litigation abroad.” Effron v.
Sun Line Cruises, Inc., 67 F.3d 7, 10 (2d
Cir. 1995) (citation omitted). “[W]here it
can be said with reasonable assurance that at
the time they entered the contract, the parties
to a freely negotiated private international
commercial agreement contemplated the
claimed inconvenience, it is difficult to see
why any such claim of inconvenience should
be heard to render the forum clause
unenforceable.” M/S Bremen, 407 U.S. at
16.

Plaintiff also argues that conducting
arbitration in Seoul would be so
inconvenient and unfair as to effectively
deprive it of its day in court. In support of
that claim, Plaintiff alleges that all
negotiations regarding the Agreement,
modifications to the scope of work required
by the Agreement, and work performed by
Plaintiff took place in New York City and
that most, perhaps all, of the witnesses and
evidence regarding the disputes between the
parties are located in the United States.
(Am. Compl. ¶ 26.) Plaintiff avers, in short,
that “not a single act . . . occurred outside of
New York State.” (Id.)
Second Circuit case law is clear that
mere difficulty and inconvenience is
insufficient
to
establish
the
unreasonableness of enforcing a forum
selection clause. For example, in Phillips v.
Audio Active Ltd., the Second Circuit upheld
enforcement of a forum selection clause
requiring the parties to litigate disputes over
their contract in England even though the
plaintiff alleged that “none of his witnesses,
documents, or any parties to the action are
located in England” and that “defendants
have proffered no evidence that their
relevant documents or witnesses are located
in England.” Phillips, 494 F.3d at 393. The
court noted that the plaintiff’s allegations
only establish that litigation in England
would be “more costly or difficult, but not
that it would be impossible.” Id. The court
found further reason to uphold the clause in
the fact that plaintiff failed to allege that any
of his claimed hardships “were not
foreseeable when he agreed to litigate” in
the forum he sought to avoid. Id.

The Court notes the similarities between
this action and Farrell v. Subway
International, B.V., No. 11 Civ. 08 (JFK),
2011 WL 1085017 (S.D.N.Y. Mar. 23,
2011). In that case, the district court upheld
a forum selection clause requiring a
franchisee of the Subway restaurant chain
located in Ireland to conduct arbitration in
New York City. Id. at *7. The franchisee
argued the clause was invalid because “the
dispute involve[d] events and parties in
Ireland,” and the “‘remoteness of evidence’
to New York is a ‘significant obstacle’ to his
presenting his case in New York.” Id. at *6.
The court rejected that argument, noting
that:
[Plaintiff] bargained for and agreed
to New York City as the site for
arbitration of any dispute between
himself and Subway; knowing that
he would operate sandwich shops in
Ireland, the inconvenience of a New
York forum should have been readily

Plaintiff’s allegations likewise fail to
establish that proceeding in Seoul would be
anything more than difficult, and certainly
not impossible.
Like the unsuccessful
6

apparent to him at the time he
entered into the Agreement. . . .
[Plaintiff] agreed to arbitral and
judicial forums located in the United
States. He cannot now turn around
and argue that he is disadvantaged
because his restaurant franchise is
located in Ireland. Parties may very
well be willing to arbitrate in an
inconvenient forum when they enter
into an Agreement, and the Court
should honor their right to make
those practical choices.

3. Fundamental Unfairness of the
Chosen Law
Plaintiff alleges that “[d]ue to the
extraordinary influence of Samsung Group
personnel in Seoul, Korea, and the fact that
these individuals of great influence are on
Defendant XenoOne (Korea)’s board and/or
employed by Defendant XenoOne (Korea),
it is clear that Jalee could not possibly
receive a fair, reasonable and impartial
arbitral hearing in Seoul, Korea.” (Am.
Compl. ¶ 32.)
Clearly, Plaintiff’s
“[u]nsupported statements . . . do not meet
the ‘heavy burden of proof’ required to set
aside a forum-selection clause,” Effron, 67
F.3d at 11, particularly given their
conspiratorial nature. Cf. Singh v. Choice
Hotels Int’l, Inc., No. 3:07-CV-0378-D,
2007 WL 2012432, at *4 (N.D. Tex. July
11, 2007) (finding that Plaintiff’s fears of
corporate eavesdropping and monitoring in
the forum location “border on the frivolous”
and fail to meet the burden of overcoming
the presumption of validity of forum
selection clauses).

Id. (citing Cortez Byrd Chips, Inc. v. Bill
Harbert Constr. Co., 529 U.S. 193, 201
(2000)).
Here, too, Plaintiff is a sophisticated
entity that agreed to a forum selection clause
designating Seoul despite knowing full well
that most of its work would occur in New
York City. Plaintiff cannot now avoid
honoring its contractual obligation simply
because it would prefer not to.3

To prevail on fundamental unfairness
grounds, Plaintiff must show that “the
application of the foreign law presents a
danger that [it] ‘will be deprived of any
remedy or treated unfairly.’” Roby, 996
F.2d at 1363 (quoting Piper Aircraft Co. v.
Reyno, 454 U.S. 235, 254-55 (1981)). “[I]t
is not enough that the foreign law or
procedure merely be different or less
favorable than that of the United States.” Id.
(holding forum selection clause enforceable,
even though plaintiff would have fewer
remedies in the chosen forum). Once again,
Plaintiff has failed to raise any argument
that would plausibly lead to the conclusion
that arbitration in Korea would deprive
Plaintiff of all remedies. Indeed, in what
can most generously be characterized as
refreshing candor, Plaintiff’s opposition
concedes that “Plaintiff’s current counsel is

3

Plaintiff relies mainly on a Ninth Circuit decision,
Jones v. GNC Franchising, Inc., 211 F.3d 495 (9th
Cir. 2000), to argue that its factual allegations are
sufficient to demonstrate that proceeding in Seoul
would be so inconvenient and unfair as to effectively
deprive it of its day in court. Unfortunately, Plaintiff
severely mischaracterizes the reasoning in Jones.
Contrary to Plaintiff’s interpretation, the Ninth
Circuit affirmed the district court’s finding that the
forum selection clause was invalid solely on the
grounds that California law expresses the “strong
public policy” of the state against enforcing such
clauses in franchise agreements. Id. at 498. The
factors to which Plaintiff attempts to analogize its
circumstances, such as the extent of the parties’
contacts with each of the possible forum states,
appear in a portion of the court’s decision discussing
whether a transfer of venue is appropriate under 28
U.S.C. § 1404. That is, those factors are entirely
unrelated to the court’s analysis of whether the forum
selection clause was enforceable.

7

(admittedly) not knowledgeable in the law
of the Republic of Korea.” (Pl.’s Br. 22.)
Accordingly, the Court finds that Plaintiff
has not pleaded sufficient facts to invalidate
the forum selection clause on fundamental
unfairness grounds.

Agreement
with
XenoOne
Korea,
Defendants argue that Plaintiff’s dealings
with XenoOne USA all were pursuant to the
Agreement and thus covered by its
arbitration and forum selection clauses. As
noted above, the Agreement plainly
contemplated “related supportive tasks” that
were to be “part of the [Agreement’s]
scope.” (Zefutie Decl. at Ex. C.) On the
other hand, the Agreement identified several
areas that were “not part of this ‘design and
development’ phase” and that were to be
negotiated through “later discussions.” (Id.)
Thus, the crux of the parties’ dispute is
whether Plaintiff’s work with XenoOne
USA was within the first category of
“related supportive tasks” or the second
category of matters beyond the contract’s
scope.

4. Public Policy
The final basis Plaintiff offers for
invalidating the forum selection clause is
that it contravenes “New York’s strong
public policy to provide a protective local
forum for local small businesses.” (Pl.’s Br.
20.) Unlike Plaintiff’s factual allegations,
this proposition is a legal conclusion that the
Court need not accept as true.
See
Iqbal, 556 U.S. at 678. Plaintiff cites no
authority that New York actually has such a
public policy. And, in fact, New York does
not. See, e.g., Gilbert v. Burnstine, 255
N.Y. 348, 357-58 (1931); see also
Intercontinental Packaging Co. v. China
Nat. Cereals, Oils & Foodstuff Imp. & Exp.
Corp., Shanghai Foodstuffs Branch, 559
N.Y.S.2d 302, 306 (N.Y. App. Div. 1990)
(enforcing a forum selection clause
mandating a foreign forum even where
“[n]umerous factors support the . . .
conclusion that New York is the more
convenient forum”).

As a threshold matter, the Court finds
that the Amended Complaint alleges the
necessary elements of a breach of contract
action. (Am. Compl. ¶¶ 38-43, 45.) Under
New York law, “[t]he elements of a cause of
action to recover damages for breach of
contract are (1) the existence of a contract,
(2) the plaintiff’s performance under the
contract, (3) the defendant’s breach of the
contract, and (4) resulting damages.”
Palmetto Partners, L.P. v. AJW Qualified
Partners, LLC, 83 A.D.3d 804, 806 (N.Y.
App. Div. 2011). Defendants do not appear
to contest that Plaintiff adequately pleaded
the final three elements. They dispute only
whether Plaintiff sufficiently pleaded that it
actually formed new contracts with
XenoOne USA, let alone ones independent
of the Agreement. Defendants maintain that
they did not, or, alternatively, that even if
they did, those contracts are sufficiently
connected to the Agreement to be covered
by its arbitration and forum selection clauses
as a matter of law.

Thus, Plaintiff has failed to sufficiently
plead any grounds on which to invalidate the
forum selection clause. The clause should
be enforced, and Defendants’ motion to
dismiss Plaintiff’s claim for injunctive relief
is granted.
B. Breach of Contract Claims
Defendants also seek to dismiss
Plaintiff’s breach of contract and quasicontractual claims against Defendant
XenoOne USA. Contrary to Plaintiff’s
assertions that those claims arise from
separate contracts independent of its
8

earlier position; 2) the party’s former
position has been adopted in some way by
the court in the earlier proceeding; and 3)
the party asserting the two positions would
derive an unfair advantage against the party
seeking estoppel.”
DeRosa v. Nat’l
Envelope Corp., 595 F.3d 99, 103 (2d Cir.
2010); see also New Hampshire v. Maine,
532 U.S. 742, 750–51 (2001). With respect
to the second prong of the test for judicial
estoppel, the precise meaning of “adopted”
is not well settled. Second Circuit case law
provides that a “favorable judgment”
constitutes adoption, see, e.g., Mitchell v.
Washingtonville Cent. Sch. Dist., 190 F.3d
1, 6 (2d Cir. 1999), but it has not defined
what actions short of final judgment
constitute adoption. The Supreme Court has
suggested in dicta that a final judgment is
not the only way a position may be adopted.
See Pegram v. Herdrich, 530 U.S. 211, 227
n.8 (2000) (“Judicial estoppel generally
prevents a party from prevailing in one
phase of a case on an argument and then
relying on a contradictory argument to
prevail in another phase.”). Lower courts
have found adoption in an order granting a
party’s motion to dismiss, see, e.g.,
Intellivision v. Microsoft Corp., 784 F.
Supp. 2d 356, 364 (S.D.N.Y. 2011); in a
grant of a temporary restraining order and
preliminary injunction, see Global NAPs,
Inc. v. Verizon New England Inc., 603 F.3d
71, 89-91 (1st Cir. 2010); and in an order
denying a new trial, see Minn. Mining &
Mfg. Co. v. Chemque, Inc., 303 F.3d 1294,
1303-04 (Fed. Cir. 2002). See generally
Charles Wright et al., Federal Practice &
Procedure § 4477 (2d ed.) (collecting cases).

1. The Existence of Separate
Contracts
Defendants argue that Plaintiff’s
allegations concerning the existence of
separate contracts between Plaintiff and
XenoOne USA are contradictory and thus
cannot support a breach of contract claim.
(Def.’s Br. 15-16.)
The evidence of
contradiction cited by Defendants is that
Plaintiff alleges both that it formed separate
contracts with XenoOne USA regarding
“additional matters related to the scope of
work established by the Agreement” (Am.
Compl. ¶ 36), and that “[a]ll of the
modifications to the scope of work required
by the Agreement were negotiated and
agreed-to in the United States” (id. ¶ 26b).
Defendants appear to infer that the matters
referred to in ¶ 36 are identical to those
referenced in ¶ 26b. Although Defendants’
inference is not unreasonable, it is not the
only reasonable inference that is possible.
An equally plausible inference, which would
support Plaintiff’s claims, is that
modifications to the scope of work are
different from additional matters merely
related to, but not actually within, the scope
of work. In considering a motion to dismiss,
the Court is required to accept as true all
factual allegations in the Complaint and
draw all reasonable inferences in Plaintiff’s
favor. ATSI Commc’ns, 493 F.3d at 98.
Thus, the Court finds that Plaintiff has pled
sufficient facts to support its claim for
breach of contract against XenoOne USA.
Defendants also argue that Plaintiff’s
prior, sworn representations to the New
York State Supreme Court that XenoOne
USA and XenoOne Korea are essentially
one and the same entity and are both subject
to the Agreement bar it under the doctrine of
judicial estoppel from asserting the opposite
positions in the instant litigation. Judicial
estoppel applies when “1) a party’s later
position is ‘clearly inconsistent’ with its

Defendants maintain that the New York
Supreme
Court
adopted
Plaintiff’s
representations concerning the unity of
XenoOne USA and XenoOne Korea when
the court entered an order directing
Defendants to show cause why an order
attaching their property should not be
9

1997). Under that presumption, “arbitration
of even a collateral matter will be ordered if
the claim alleged ‘implicates issues of
contract construction or the parties’ rights
and obligations under it.’” Louis Dreyfus
Negoce S.A., 252 F.3d at 224. A collateral
matter is “a separate, side agreement,
connected with the principal contract which
contains the arbitration clause.” Prudential
Lines, Inc. v. Exxon Corp., 704 F.2d 59, 64
(2d Cir. 1983).

granted to Plaintiff. Defendants, however,
produce no precedent for the proposition
that an order to show cause constitutes an
adoption for purposes of judicial estoppel,
and logic would seem to compel the
opposite conclusion. An order to show
cause is unlike the other decisions deemed
sufficient for judicial estoppel purposes, all
of which involved some judgment on the
merits following an adversarial proceeding.
A show-cause order, by contrast, is ex parte
and “is basically only a substitute for a
notice of motion.” David D. Siegel, New
York Practice § 248 (5th ed. 2011). For
these reasons, the Court finds that,
notwithstanding Plaintiff’s prior position
before the New York Supreme Court,
judicial estoppel does not bar Plaintiff’s
contractual claims against XenoOne USA.

Here, the Agreement’s arbitration clause
is sufficiently broad to trigger the
presumption of arbitrability for collateral
agreements. The provision, which covers
“[a]ny dispute, controversy, or difference
which may arise between the parties hereto,
out of or in relation to or in connection with
this Agreement” (Zefutie Decl. at Ex. C.
(emphasis added)), is similar to other
clauses that courts have deemed broad. See
Collins & Aikman Prods. Co. v. Bldg. Sys.,
Inc., 58 F.3d 16, 20 (2d Cir. 1995) (holding
that the “clause in this case, submitting to
arbitration ‘[a]ny claim or controversy
arising out of or relating to th[e] agreement,’
is the paradigm of a broad clause”).

2. Relationship Between the
Agreements
As an alternative to their position that
Plaintiff and XenoOne USA had no separate
contracts, Defendants argue that, to the
extent Plaintiff has alleged valid contract
claims against XenoOne USA, those claims
must be arbitrated in Seoul pursuant to the
terms of the Agreement between Plaintiff
and XenoOne Korea. Defendants’ argument
is based on their assertion that “any claims
Plaintiff may assert against [XenoOne USA]
for matters allegedly related to the
[Agreement]’s scope of work are
sufficiently
intertwined
with
the
[Agreement] so as to subject those claims to
the arbitration.” (Def.’s Br. 20.)

However, the breadth of the arbitration
clause is only part of the inquiry here
because XenoOne USA is not a signatory to
the arbitration agreement it seeks to enforce.
Where a non-signatory to an arbitration
agreement seeks to enforce it against a
signatory, the Court must undertake “a
careful review of ‘the relationship among
the parties, the contracts they signed . . . and
the issues that had arisen’ among them.”
JLM Indus., Inc. v. Stolt-Nielsen, S.A., 387
F.3d 163, 177 (2d Cir. 2004) (ellipses in
original) (quoting Choctaw Generation Ltd.
P’ship v. Am. Home Assurance Co., 271
F.3d 403, 406 (2d Cir. 2001)). A court
should find that a signatory to an arbitration
agreement is estopped from denying that
certain issues should be arbitrated when “the

Defendants are correct, in principle, that
an arbitration clause in one agreement may
apply to other, closely related agreements.
Reflecting the federal policy favoring
arbitration, courts have adopted a
“presumption of arbitrability” where an
arbitration clause is broad. See WorldCrisa
Corp. v. Armstrong, 129 F.3d 71, 74 (2d Cir.
10

“intertwined-ness” of the various contracts
at this stage of the proceedings. Moreover,
even the allegations that suggest a close
relationship are tempered by other
allegations regarding the existence of
separate invoicing and bookkeeping
functions at the two companies. (See, e.g.,
id. ¶ 41.)

issues the nonsignatory is seeking to resolve
in arbitration are intertwined with the
agreement that the estopped party has
signed.”
Id. (internal quotation marks
omitted). The “estoppel inquiry is fact
specific” and the Second Circuit has not
“specif[ied] the minimum quantum of
‘intertwined-ness’ required to support a
finding of estoppel.” Id. at 178. However,
the Circuit has tended to apply estoppel in
cases where “the non-signatory party
asserting estoppel has had some sort of
corporate relationship to a signatory party;
that is, [the Second Circuit] has applied
estoppel in cases involving subsidiaries,
affiliates, agents, and other related business
entities.” Ross v. Am. Express Co., 547 F.3d
137, 144 (2d Cir. 2008). The Second Circuit
has also applied estoppel in the absence of a
corporate relationship. In Choctaw, for
example, it found two contracts intertwined
where one incorporated the other by
reference and where resolution of the
dispute between the non-signatory and
signatory turned on many of the same
contract provisions as the dispute between
the two signatories. Choctaw Generation
Ltd. P’ship, 271 F.3d at 407.

Because Plaintiff has satisfied the
requirements to state a claim for breach of
contract, and Defendants have not
demonstrated as a matter of law that the
Agreement’s arbitration clause governs any
separate contracts Plaintiff entered with
XenoOne USA, Defendants’ motion to
dismiss the breach of contract claim is
denied.
C. Quasi-contract claims
In addition to seeking dismissal of
Plaintiff’s breach of contract claim,
Defendants seek dismissal of Plaintiff’s
alternative quasi-contract claims for unjust
enrichment
and
quantum
meruit.
Defendants’ arguments for dismissing these
claims rest entirely on the assertion that the
purported agreements between Plaintiff and
XenoOne USA are “part and parcel” of the
Agreement between Plaintiff and XenoOne
Korea. (Def.’s Br. 20.) That assertion,
however, begs the very question in dispute –
namely, whether Plaintiff and XenoOne
USA
entered
separate,
independent
agreements beyond the scope of the
arbitration clause governing the Agreement
between Plaintiff and XenoOne Korea.
Thus, Plaintiff’s claims for quasi-contractual
relief are sufficient to survive a motion to
dismiss.

The Court is not in a position to conduct
the “careful review” required of it based on
the parties’ pleadings. While the Amended
Complaint contains some allegations
regarding a close corporate relationship
between the two Defendants (see, e.g., Am.
Compl. ¶¶ 10, 12-13 (alleging that the two
entities share a principal officer and office
space)), that element is only one of the three
factors that must guide the Court’s analysis.
It is not possible to determine from the
pleadings the extent to which Plaintiff and
XenoOne USA’s contracts are intertwined
with the Agreement involving XenoOne
Korea.
The Amended Complaint
sufficiently pleads the existence of contracts,
but it simply lacks sufficient detail to permit
the Court to make a determination as to the

IV. CONCLUSION
For the foregoing reasons, Defendants’
motion to dismiss is granted in part and
denied in part. XenoOne Korea’s motion to
11

dismiss Plaintiffs claim for injunctive relief
to compel arbitration in New York City is
HEREBY GRANTED. XenoOne USA's
motion to dismiss Plaintiffs claims for
breach of contract or, in the alternative,
quasi-contractual relief, IS HEREBY
DENIED.

The Clerk of the Court is respectfully
directed to terminate the motion pending at
Doc. No. 19.

USDSSDNY
DOCUMENT
ELECTRONICALLY FILED
DOC#: ______~~--__
DATE FILED: 9.11_'1\ 7,.012-

By October 31, 2012, the parties shall
jointly submit to the Court a proposed case
management plan and scheduling order. A
template for the order is available at
http://wwwl.nysd.uscourts.gov/judge_info.p
hp?id=99. In light of this decision, it may
be appropriate for the parties to conduct
expedited
discovery
regarding
the
"intertwined-ness" of the alleged contracts
between Plaintiff and XenoOne USA and
the Agreement between Plaintiff and
XenoOne Korea.
SO ORDERED.

~~
~ilvA~Q
United States District Judge

Dated: September 29,2012
New York, New York
Plaintiff is represented by Robert Scott
DeLuca of Schrader, Israely, DeLuca &
Waters LLP, 2821 Wehrle Drive Suite 3,
Williamsville, New York 14221.
Defendants are represented by John B.
Zefutie, Jr. of Patton Boggs, LLP (NJ), The
Legal Center, One Riverfront Plaza,
Newark, NJ 07102; and Ugo Alfredo Colella
of Patton Boggs, LLP (DC), 2550 M St.
NW, Washington, D.C. 20037.

12