Octave-1 Fund Ltd. v. Morgan

Filing 13

MEMORANDUM OPINION AND ORDER re: 7 MOTION to Remand to State Court, filed by Octave-1 Fund Ltd. For the reasons stated above, the plaintiff's motion to remand is granted. The Clerk of the Court is directed to close this motion (Docket No. 7) and this case. SO ORDERED. (Signed by Judge Shira A. Scheindlin on 10/30/2013) (ja)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

------------------------------------------------------ )(
OCTAVE-l FUND LTD.,
Plaintiff,
- againstPAUL C. MORGAN,

MEMORANDUM OPINION
AND ORDER
13 Civ. 4607 (SAS)

Defendant.

------------------------------------------------------ )(
SHIRA A. SCHEINDLIN, U.S.D.J.:

I.

BACKGROUND

On February 11, 2008, defendant Paul C. Morgan entered into a
settlement agreement with Commodityfinance.com ("CF").! As part of that
agreement, Morgan and CF executed a promissary note (the "Note") requiring
Morgan to pay CF the sum of one million dollars within five years of the effective

See Settlement Agreement, Ex. 1 to 6/5/13 Affidavit of George
O'Dowd, Director of Octave-l , in Support of Plaintiffs Motion for Summary
Judgment in Lieu of Complaint ("O'Dowd Aff.") (attached as Ex. B to the 8/2/13
Declaration of Plaintiffs Attorney John M. Magliery in Support of Plaintiff
Octave-l Fund's Motion to Remand ("Magliery Decl.")).

date.2 On November 1, 2012, CF and plaintiff Octave-1 Ltd. (“Octave-1” )
executed an assignment agreement, in which CF assigned all of its interest in the
Note to Octave-1.3 The Note matured without payment on February 11, 2013.
On June 5, 2013, Octave-1 filed a motion for summary judgment in
lieu of a complaint in the Supreme Court of the State of New York, New York
County pursuant to New York Civil Practice Law and Rules (“CPLR”) § 3213,4
because this action is based upon an instrument for the payment of money only.
On July 3, 2013, Morgan removed this action to this Court, filing an
answer and counterclaim in response to Octave-1’s motion and claiming diversity
jurisdiction pursuant to 28 U.S.C. § 1332. Octave-1, invoking the Note’s forum
selection clause, seeks an Order remanding the case to New York State Supreme
Court. For the following reasons, plaintiff’s motion to remand is granted.
II.

APPLICABLE LAW
Removal jurisdiction is strictly construed in view of the significant

2

See Settlement Agreement, Ex. 1 to O’Dowd Aff. at 11-12.

3

See Assignment Agreement, Ex. 2 to O’Dowd Aff.

4

See Notice of Motion for Summary Judgment, Ex. A to Magliery

Decl.
2

federalism concerns it raises,5 and any doubts are resolved against removability.6
Defendants, as the parties seeking removal, bear the burden of establishing that
removal is appropriate.7
“Although courts once frowned upon enforcement of forum-selection
clauses, it is now settled law that parties may bargain in advance to select the
forum in which their disputes will be adjudicated.”8 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”9 or “invalid for such
reasons as fraud or overreaching.”10
5

See In re Methyl Tertiary Butyl Ether (“MTBE”) Prods. Liab. Litig.,
488 F.3d 112, 124 (2d Cir. 2007) (“[O]ut of respect for the limited jurisdiction of
the federal courts and the rights of states, [courts] must resolve any doubts against
removability.”) (internal quotation marks omitted).
6

See Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108 (1941);
California Pub. Employees’ Ret. Sys. v. WorldCom, Inc., 368 F.3d 86, 100 (2d Cir.
2004).
7

See Andrews v. Modell, 636 F. Supp. 2d 213, 219 (S.D.N.Y. 2008)
(citing United Food & Commercial Workers Union, Local 919 v. CenterMark
Props. Meriden Square, 30 F.3d 298, 301 (2d Cir. 1994)).
8

Design Strategy Corp. v. Nghiem, 14 F. Supp. 2d 298, 300 (S.D.N.Y.
1998) (citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 13, 32 (1972) and
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 590-96 (1991)).
9

M/S Bremen, 407 U.S. at 10.

10

Karl Koch Erecting Co., Inc. v. New York Convention Ctr. Dev. Corp.,
838 F.2d 656, 659 (2d Cir. 1988) (internal quotation marks and citations omitted).
3

In order for a forum selection to be enforceable, it must indicate the
parties’ intent to make jurisdiction exclusive. “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.’”11 This Court has stated that an agreement
“will not be interpreted as Excluding [sic] jurisdiction elsewhere unless it contains
specific language of exclusion, or it leaves it in the control of one party with power
to force on its own terms the appropriate forum.”12 The fact that the choice of
forum is left to the discretion of one party does not render the clause permissive
and thereby unenforceable.13
III.

DISCUSSION
The Note states that: “The Borrower hereby submits in any action

relating to this Note to the non-exclusive in personam jurisdiction of any state or
federal court of competent jurisdiction sitting in the State of New York and agrees
11

John Boutari & Son, Wines & Spirits, S.A. v. Attiki Importers &
Distribs., 22 F.3d 51, 52 (2d Cir. 1994) (quoting Docksider, Ltd. v. Sea Tech., Ltd.,
875 F.2d 762, 764 (9th Cir. 1989)).
12

City of New York v. Pullman Inc., 477 F. Supp 438, 442 n.11
(S.D.N.Y. 1979) (emphasis added).
13

See AGR Fin., L.L.C. v. Ready Staffing, Inc., 99 F. Supp. 2d 399, 402
(S.D.N.Y. 2000).

4

to suit being brought in such courts, as Plaintiff/Third Party Defendants shall
elect.”14 In the context of the settlement of the original lawsuit, this provision
granted the authority to select the forum to CF, the plaintiff in that lawsuit. That
authority was then transferred to Octave-1, pursuant to the November 1, 2012
assignment agreement.
Morgan argues that the use of the word “non-exclusive” renders the
forum selection clause permissive and not mandatory, undercutting its
enforceability.15 But this argument is unavailing. While Octave-1 is not compelled
to bring suit in either forum, once it chooses to do so, its decision is binding. The
Note states that “[Morgan] agrees to suit . . . in such court[s] as [Octave-1] shall
elect.”16 In other words, CF and its assignee Octave-1 had the right to force
Morgan to submit to the forum of their choice. As a result, the forum clause is
mandatory and enforceable.17

14

Settlement Agreement, Ex. 1 to O’Dowd Aff., at 11.

15

See Defendant’s Memorandum of Law in Opposition to Motion to
Remand (“Opp. Mem.”) at 3.
16

Settlement Agreement, Ex. 1 to O’Dowd Aff., at 11.

17

See AGR, 99 F. Supp. 2d at 402 (concluding that clause leaving choice
of forum to the discretion of one party was nonetheless mandatory and
enforceable). Cf. Congress Fin. Corp. v. Bortnick, No. 00 Civ. 6361, 2000 WL
1634248, at *1 (S.D.N.Y. Oct. 31, 2000) (declining to enforce forum selection

5

V.

CONCLUSION

For the reasons stated above, the plaintiffs motion to remand is

granted. The Clerk of the Court is directed to close this motion (Docket No.7) and
this case.

ID/'6 6

/1
Shira A.
.
U.S.D.I.

Dated:

New York, New York
October 30 ,2013

clause that did not specifY - contrary to the language in ADR
force defendants to submit to its choice of forum).

6

that plaintiff could

- Appearances -

For Plaintiff:
John Michael Magliery, Esq.
Meredith F. Berhman, Esq.
Kennedy Johnson Gallagher, LLC
99 Wall Street, 15th Flr.
New York, NY 10005
[phone]

For Defendant:
Marc Bogatin, Esq.
277 Broadway, 9th Flr.
New York, NY 10007
[phone]

7