Dean Street Capital Advisors LLC v. Otoka Energy Corporation et al

Filing 50

OPINION AND ORDER re: 44 MOTION to Dismiss or, in the Alternative, Motion for Summary Judgment filed by Buena Vista Biomass Development, LLC, Amador Biomass, LLC, Otoka Energy Corporation, Buena Vista Biomass Power, LLC. For the reasons set forth above, IT IS HEREBY ORDERED THAT Defendants' motion for summary judgment is granted, and this case is dismissed. The Clerk of the Court is respectfully directed to terminate the motion pending at docket number 44 and to close this case. (As further set forth in this Opinion and Order.) (Signed by Judge Richard J. Sullivan on 2/2/2017) (mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

DEAN STREET CAPITAL ADVISORS,
LLC,
Plaintiff,
No. 15-cv-824 (RJS)
OPINION & ORDER

-vOTOKA ENERGY CORP. et al.,
Defendants.

RICHARD J. SULLIVAN, District Judge:
Plaintiff Dean Street Capital Advisors, LLC (“Dean Street”) brings this diversity action
against Defendants Otoka Energy LLC (formerly Otoka Energy Corporation) (“Otoka”), Amador
Biomass, LLC (“Amador”), Buena Vista Biomass Power, LLC (“BVBP”), and Buena Vista
Biomass Development, LLC (“BVBD”), alleging that Defendants breached an oral agreement to
pay Plaintiff $200,000 in broker fees related to the financing of a power plant project in California.
(Doc. No. 21, Compl. ¶ 1.) On February 1, 2016, the Court issued an opinion and order denying
Defendants’ motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2) without
prejudice to renewal following jurisdictional discovery. (Doc. No. 31.) Now before the Court is
Defendants’ renewed motion for dismissal or summary judgment on the ground that Plaintiff
cannot invoke the forum selection clause in an agreement between Amador and BVBD. (Doc. No.
44.) Because the Court relies on evidence submitted by the parties that is outside of Plaintiff’s
pleading, the Court treats Defendants’ motion as one for summary judgment and, for the reasons
that follow, grants the motion.1

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The Court notes that, although Defendants seek summary judgment as an alternative to dismissal, neither they nor
Plaintiff have submitted a Local Civil Rule 56.1 statement. While “[f]ailure to submit such a statement may constitute
grounds for denial” of a summary judgment motion, Local Civ. R. 56.1(a), the Court finds denial unwarranted in light

I. BACKGROUND2
In 2012, Defendants Amador, BVBD, and Otoka, along with Antrim Corporation, a
subsidiary of State Street Bank & Trust, closed a $35 million deal to finance a power plant project
in Ione, California, near Sacramento. (Doc. No. 21, Compl. ¶ 16.) To memorialize their agreement
regarding the transaction, they executed two contracts: the Purchase and Sale Agreement (Doc.
No. 46-3, Hanson Decl. Ex. C (“PSA”)), and the Member Interest Purchase and Equity Capital
Contribution Agreement (“ECCA”).

The PSA states that the parties consent to personal

jurisdiction for disputes arising under the PSA in the state and federal courts of New York. (PSA
§ 11.15.) Plaintiff, a non-party to the contracts that provides consulting services to entities seeking
to raise capital, claims that it located funding for the power plant transaction and that Defendants
agreed to pay Plaintiff a $200,000 finder’s fee for that service. (Doc. No. 21, Compl. ¶ 2.)
Plaintiff commenced this action on February 4, 2015 (Doc. No. 1), and Defendants moved
to dismiss for lack of personal jurisdiction on May 15, 2015 (Doc. No. 24). On February 1, 2016,
as noted above, the Court denied that motion without prejudice to renewal, finding that (1) Plaintiff
could not establish personal jurisdiction under New York’s long-arm statute, but (2) Plaintiff might
be able to enforce the PSA’s New York forum selection clause if it could establish that the
contracting parties intended to confer third-party beneficiary status on Plaintiff. (Doc. No. 31.)3

of the relatively small number of exhibits and affidavits submitted by the parties that are relevant to the narrow issue
at hand. See Holtz v. Rockefeller & Co., 258 F.3d 62, 73 (2d Cir. 2001) (district courts have “broad discretion to
determine whether to overlook a party’s failure to comply with local court rules,” including a failure to file a 56.1
statement).
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The following facts are drawn from the documents submitted by the parties in connection with Defendants’ motion
and, for background purposes only, the amended complaint. In resolving the instant motion, the Court has also
considered Defendants’ memorandum of law in support of their motion to dismiss (Doc. No. 45), Plaintiff’s
memorandum of law in opposition (Doc. No. 48 (“Opp’n”)), and Defendants’ reply (Doc. No. 49), as well as the
documents submitted therewith.

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In its February 1 opinion and order, the Court also held that the ECCA “precludes Plaintiff from asserting jurisdiction
based on that [a]greement” (Doc. No. 31 at 10); accordingly, the Court does not further discuss that agreement here.

2

Specifically, as explained in the Court’s February 1 opinion and order, the PSA contains a
forum selection clause establishing personal jurisdiction over the parties to the PSA in “the courts
of the State of New York and the federal courts of the United States sitting in New York County.”
(PSA § 11.15.) While Defendants did not dispute that they would be subject to suit in the Southern
District of New York for disputes related to the power plant transaction brought by signatories to
the PSA, they argued that Plaintiff – a non-signatory third party – has no right to invoke the PSA’s
forum selection clause. In support of this argument, Defendants relied on the PSA’s “negating
clause,” which disclaims, with certain exceptions, any intent to confer third-party beneficiary
rights:
Section 11.12 No Third-Party Beneficiary. Except as
provided hereinbelow, the terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention
of the parties to confer third-party beneficiary rights upon any other
Person other than any Person entitled to indemnity under Article IX;
provided, however, that the Seller [BVBD] acknowledges that the
Class B Investor [Antrim Corporation] may enforce any rights
available to the Purchaser [Amador] hereunder.
(PSA § 11.12 (emphasis in original).)
Although the Court found that the foregoing provision was intended to exclude any thirdparty beneficiaries from the PSA unless an exception applies, the Court also found that the
“hereinbelow” clause arguably reflects the contracting parties’ intent to exempt Plaintiff from the
negating clause, in light of a reference to Plaintiff’s broker fee agreement in a schedule attached
to the PSA. Specifically, Schedule 3.19 of the PSA, entitled “Brokers,” states that, “[u]nder the
terms of a verbal commitment by [BVBD], [Plaintiff] is entitled to receive $200,000 upon the
closing of (1) the [PSA] and (2) the [ECCA].” (Doc. No. 46-4, Hanson Decl. Ex. D.) This schedule
is also referenced in Section 3.19 of the PSA, which states that, “[e]xcept as set forth in [Schedule
3.19], no broker, finder, investment banker, or other person is entitled to any brokerage, finder’s
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or other fee or commission in connection with the transactions contemplated under [the PSA].”
(PSA § 3.19.)
Based on its review of the terms of the PSA, the Court found that it was not clear whether
the word “hereinbelow” in Section 11.12 refers only to that section of the PSA, or whether the
word applies more broadly to all subsequent portions of the PSA, including the reference to
Plaintiff’s fee in Schedule 3.19 appended to the end of the PSA. (Doc. No. 31 at 9–10.)
Accordingly, the Court denied Defendants’ motion to dismiss without prejudice to renewal
following the completion of limited discovery regarding the intent of the contracting parties with
respect to the “hereinbelow” clause. (Id. at 10–11.) The parties completed jurisdictional discovery
on April 25, 2016. (Doc. No. 39.)
On May 31, 2016, Defendants filed a renewed motion for dismissal or in the alternative
summary judgment, arguing that jurisdictional discovery has confirmed that the “hereinbelow”
clause was not intended to exempt Plaintiff from Section 11.12’s disclaimer of third-party
beneficiary rights. (Doc. No. 44.) The motion was fully briefed by June 9, 2016. (Doc. No. 49.)
II. LEGAL STANDARD
Pursuant to Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment should
be rendered “if the movant shows that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). There is “no genuine
dispute as to any material fact” where (1) the parties agree on all facts (that is, there are no disputed
facts); (2) the parties disagree on some or all facts, but a reasonable fact-finder could never accept
the nonmoving party’s version of the facts (that is, there are no genuinely disputed facts), see
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); or (3) the parties
disagree on some or all facts, but even on the nonmoving party’s version of the facts, the moving

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party would win as a matter of law (that is, none of the factual disputes are material), see Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
In determining whether a fact is genuinely disputed, the court “is not to weigh the evidence
but is instead required to view the evidence in the light most favorable to the party opposing
summary judgment, to draw all reasonable inferences in favor of that party, and to eschew
credibility assessments.” Weyant v. Okst, 101 F.3d 845, 854 (2d Cir. 1996). Nevertheless, to show
a genuine dispute, the nonmoving party must provide “hard evidence,” D’Amico v. City of N.Y.,
132 F.3d 145, 149 (2d Cir. 1998), “from which a reasonable inference in [its] favor may be drawn,”
Binder & Binder PC v. Barnhart, 481 F.3d 141, 148 (2d Cir. 2007). “Conclusory allegations,
conjecture, and speculation,” Kerzer v. Kingly Mfg., 156 F.3d 396, 400 (2d Cir. 1998), as well as
the existence of a mere “scintilla of evidence in support of the [nonmoving party’s] position,”
Anderson, 477 U.S. at 252, are insufficient to create a genuinely disputed fact. A moving party is
“entitled to judgment as a matter of law” on an issue if (1) it bears the burden of proof on the issue
and the undisputed facts meet that burden; or (2) the nonmoving party bears the burden of proof
on the issue and the moving party “‘show[s]’ – that is, point[s] out . . . – that there is an absence
of evidence [in the record] to support the nonmoving party’s [position].” Celotex Corp. v. Catrett,
477 U.S. 317, 325 (1986).
III. DISCUSSION
Plaintiff bears “the ultimate burden of proving the court’s jurisdiction by a preponderance
of the evidence.” Beacon Enters., Inc. v. Menzies, 715 F.2d 757, 762 (2d Cir. 1983). To defeat
Defendants’ motion for summary judgment for lack of personal jurisdiction, Plaintiff must put
forth “‘an averment of facts that, if credited by the trier, would suffice to establish jurisdiction’”
over the Defendants. Dorchester Fin. Sec., Inc. v. Banco BRJ, S.A., 722 F.3d 81, 84–85 (2d Cir.
2013) (quoting Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990)).
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The only basis for personal jurisdiction asserted here is the PSA’s forum selection clause, and
Plaintiff argues that it is Defendants’ burden to “rebut the presumption of enforceability” of that
clause.

(Opp’n at 5.)

But Plaintiff has the law backwards:

a forum selection clause is

presumptively enforceable only if, among other requirements, “the claims and parties involved in
the suit are subject to the forum selection clause.” Martinez v. Bloomberg LP, 740 F.3d 211, 217
(2d Cir. 2014). Here, the parties dispute whether the PSA entitles Plaintiff to enforce the forum
selection clause; thus, it remains Plaintiff’s burden to establish that the forum selection clause
actually applies. The Court finds that Plaintiff has not done so.
“[G]enerally only parties in privity of contract may enforce terms of the contract such as a
forum selection clause.” Freeford Ltd. v. Pendleton, 53 A.D.3d 32, 38 (1st Dep’t 2008).4 Courts
make an exception, however, when a party qualifies as an intended third-party beneficiary of the
contract under which he seeks to bring suit. Madeira v. Affordable Hous. Found., Inc., 469 F.3d
219, 251 (2d Cir. 2006) (“[T]o succeed on a third party beneficiary theory, a non-party must be
the intended beneficiary of the contract, not an incidental beneficiary to whom no duty is owed.”);
Freeford Ltd., 53 A.D.3d at 39.

To determine whether a party is an intended third-party

beneficiary, a court “should consider the circumstances surrounding the transaction as well as the
actual language of the contract.” Bayerische Landesbank, N.Y. Branch v. Aladdin Capital Mgmt.
LLC, 692 F.3d 42, 52 (2d Cir. 2012).
Here, the negating clause in the PSA reflects the clear intent of the contracting parties to
disclaim any third-party beneficiary rights not covered by an exception to Section 11.12.
Moreover, the only exception arguably applicable to Plaintiff is the clause “[e]xcept as provided
hereinbelow” (PSA § 11.12), which – at least conceivably – was intended to reference not only the

4

Because the PSA includes a New York choice-of-law provision (PSA § 11.14), New York law applies to “interpretive
questions posed by” the forum selection clause. See Martinez, 740 F.3d at 217–18. The parties do not dispute this.

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specific exceptions carved out later in Section 11.12, but also any third-party rights discussed “later
in th[e] document,” see Black’s Law Dictionary 842 (10th ed. 2014) (defining “hereinafter”),
namely, Plaintiff’s broker fee referenced in Schedule 3.19 appended to the end of the PSA (Doc.
No. 46-4, Hanson Decl. Ex. D). While Defendants’ narrower reading of Section 11.12 is the more
plausible interpretation, the Court concluded in its February 1 opinion that the clause was
ambiguous and allowed Plaintiff to submit extrinsic evidence of a broader intent in light of the
Second Circuit’s holding in Bayerische Landesbank, in which the Circuit found “herein” to be an
ambiguous term that could be read to refer either to the section containing the term or to the whole
agreement, 692 F.3d at 53–54.
Following jurisdictional discovery, Defendants have submitted the declaration of Mark J.
Hanson in support of their narrow reading of Section 11.12. (Doc. No. 46.) Under penalty of
perjury, Mr. Hanson, an attorney who represented Defendants in connection with the drafting of
the PSA, states that the “hereinbelow” clause “was meant to except the indemnitees and the ‘Class
B Investor’” – i.e., the persons explicitly referenced in Section 11.12 – “from the negating language
of Section 11.12.” (Doc. No. 46, Hanson Decl. ¶¶ 2, 9.) Specifically, Mr. Hanson explains that
“[b]ecause the PSA indemnitees and Antrim, who is the Class B Investor, were not signatories to
the PSA, Milbank [who represented investors in the transaction] proposed an exception to the
negating language found in Section 11.12 that allowed the indemnitees and the Class B Investor –
Antrim – to sue under the contract as third-party beneficiaries.” (Id.) Thus, “[t]he ‘hereinbelow’
language in the clause was used only to flag the exception found at the end of the clause, and for
no other reason.” (Id.)
Plaintiff has offered no evidence that rebuts Mr. Hanson’s explanation or supports
Plaintiff’s contrary interpretation of Section 11.12. Its opposition focuses instead on evidence that
Plaintiff “was intimately involved in the details of the transaction from its inception,” “participated
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in the transaction’s negotiations,” and “was involved in closing discussions.” (Opp’n at 9–10.)
Even if true, however, these facts are largely irrelevant given the existence of the PSA’s negating
clause. Put simply, absent an exception to the negating clause, Plaintiff could have been the most
“intimately involved” broker in the history of brokered deals, but the PSA would entitle it to
nothing as a non-party. See India.Com, Inc. v. Dalal, 412 F.3d 315, 322 (2d Cir. 2005) (“[T]he
mention of [a third party] in the contract as a broker entitled to a commission is insufficient to
confer third-party status where the parties themselves are explicit that they did not intend to create
third-party beneficiaries.”). Thus, the only relevant evidence here is proof of the parties’ intent
with respect to Section 11.12’s “hereinbelow” clause.
On that issue, Plaintiff has submitted an affidavit from Noam Berk, sole member of
Plaintiff Dean Street Capital Advisors LLC, who, citing Black’s Law Dictionary, testifies
conclusorily that “‘[h]ereinbelow’ means anywhere later in this document” and “‘anything’ below
in the document.” (Doc. No. 47, Berk Aff. ¶ 26.) Mr. Berk does not claim to have been involved
in the drafting of the PSA and does not explain why he is competent to testify to the intent of those
who were. Nor does Mr. Berk assert that Defendants or their representatives ever told him that
the PSA would confer rights on Plaintiff or that the PSA’s negating clause would carve out a right
for Plaintiff to enforce the PSA. Since the Court can review Black’s Law Dictionary on its own,
the Court cannot (and will not) consider Mr. Berk’s otherwise conclusory and incompetent
testimony on the meaning of “hereinbelow.” See Fed. R. Civ. P. 56(c)(4) (“An affidavit or
declaration used to support or oppose a motion must be made on personal knowledge, set out facts
that would be admissible in evidence, and show that the affiant or declarant is competent to testify
on the matters stated.”); Patterson v. County of Oneida, 375 F.3d 206, 219 (2d Cir. 2004) (“[Rule
56]’s requirement that affidavits be made on personal knowledge is not satisfied by assertions

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