ICICI Bank Limited v. Essar Global Fund Limited et al

Filing 51

MEMORANDUM OPINION AND ORDER. For the foregoing reasons, Defendants' motion to transfer this case to the District of Delaware is DENIED. The Clerk of Court is directed to terminate the motion pending at Dkt. No. 19. So ordered. re: 19 MOTION to Transfer Case filed by Essar Steel Mauritius Limited, Essar Steel Asia Holdings Limited, Essar Global Fund Limited, Essar Steel Limited Mauritius. (Signed by Judge Gregory H. Woods on 1/12/2017) (rjm)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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ICICI BANK LIMITED, acting through its Singapore :
branch,
:
:
Plaintiff, :
:
-against:
:
ESSAR GLOBAL FUND LIMITED, f/k/a ESSAR:
Global Limited, ESSAR STEEL LIMITED
:
MAURITIUS, f/k/a ESSAR Steel Holdings limited, :
ESSAR STEEL ASIA HOLDINGS LIMITED, and :
ESSAR STEEL MAURITIUS LIMITED,
:
:
Defendants. :
----------------------------------------------------------------- X

USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: 1/12/17

1:16-cv-7836-GHW
MEMORANDUM OPINION
AND ORDER

GREGORY H. WOODS, United States District Judge:
Defendants removed this breach of contract action from state court pursuant to the federal
bankruptcy removal statute. They now seek an order transferring the action to the District of
Delaware pursuant to either the general change of venue statute, 28 U.S.C. § 1404(a), or the
bankruptcy change of venue statute, 28 U.S.C. § 1412. For the reasons that follow, Defendants’
motion to transfer this action is DENIED.
I.

BACKGROUND
A. The Guarantee Agreements, the Underlying Lawsuit, and ESML’s
Bankruptcy Petition
This suit arises from an iron ore project for which Essar Steel Minnesota LLC (“ESML”)

sought funding in 2010. As alleged in the complaint, Plaintiff ICICI Bank Limited, Singapore
Branch, as facility agent (“ICICI-Singapore” or “Plaintiff”), ICICI Bank Limited, New York Branch,
as Lender (“ICICI-New York”), and Essar Steel Minnesota (“ESML”), as Borrower executed a
Senior Secured Credit Agreement dated December 29, 2010 (the “Credit Agreement”). ECF No. 1,
Notice of Removal, Ex. 1 (“Compl.”), ¶¶ 1, 8. As subsequently amended, the Credit Agreement

extended to ESML a term loan facility totaling approximately $530 million, which was syndicated
among ICICI-New York; the State Bank of India, New York Branch; Canara Bank, London Branch;
Union Bank of India, Hong Kong Branch; and Syndicate Bank, London Branch (collectively, the
“Lenders”). Compl. ¶ 8. Each of the Defendant entities, who are affiliates of ESML, executed
guarantee agreements under which they “agreed to unconditionally and irrevocably guarantee the
prompt and complete payment of [ESML’s] obligations under the Credit Agreement.” Compl. ¶¶ 914. The guarantee agreements executed by Defendants Essar Global Fund Limited and Essar Steel
Limited Mauritius are dated as of December 29, 2010. Compl. ¶¶ 9-10. The guarantee agreements
executed by Defendants Essar Steel Asia Holdings Limited and Essar Steel Mauritius Limited are
dated as of March 28, 2014. Compl. ¶¶ 11-12.
On January 5, 2016, ESML issued to ICICI-Singapore a “material event notice” stating that
ESML was in default under the Credit Agreement because it had failed to make an interest payment
of $8,796,721.79 and to pay an agency fee of $25,000. Compl. ¶ 15. On April 25, 2016, ICICISingapore informed ESML that, in light of this and other defaults, it was accelerating the loan in
accordance with the Credit Agreement. Compl. ¶ 16. ICICI-Singapore demanded immediate
payment of principal, accrued interest, and fees. Id. Two days later, ICICI-Singapore notified
Defendants of the acceleration and demanded that they pay the amounts due by ESML pursuant to
their respective guarantee agreements. Compl. ¶ 17. In May 2016, ICICI-Singapore made two
additional demands for payment. Compl. ¶¶ 18-19.
On July 8, 2016, ESML filed a voluntary petition for bankruptcy in the United States
Bankruptcy Court for the District of Delaware. ECF No. 1, Notice of Removal, Ex. 3. ESML’s
bankruptcy petition lists Plaintiff as a creditor with an unliquidated claim of $529,957,247―the same
principal amount that Plaintiff seeks to recover from Defendants under the guarantee agreements in
this action. Id. at 10.
On September 2, 2016, Plaintiff initiated this lawsuit against Defendants in the Supreme
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Court of the State of New York, New York County. As of that date, the only payment made by any
of the Defendants was $4 million paid by Essar Steel Mauritius. Compl. ¶ 20. Accordingly, Plaintiff
asserts claims against each Defendant for breach of their respective guarantee agreements. Plaintiff
seeks $529,957,247.70 in principal, $28,885,256.18 in interest through August 2016, $481,948.98 in
attorneys’ fees pursuant to the Credit Agreement, interest for the period from September 1, 2016
through the date of judgment, and additional attorneys’ fees as permitted by the guarantee
agreements and applicable law, in an amount to be quantified. Compl. at 7-8.
B. Removal to This Court Pursuant to 28 U.S.C. § 1452(a)
On October 6, 2016, Defendants removed this case to the United States District Court for
the Southern District of New York pursuant to the federal bankruptcy removal statute, 28 U.S.C.
§ 1452(a), which provides:
A party may remove any claim or cause of action in a civil action other than a
proceeding before the United States Tax Court or a civil action by a governmental
unit to enforce such governmental unit’s police or regulatory power, to the
district court for the district where such civil action is pending, if such district
court has jurisdiction of such claim or cause of action under section 1334 of this
title.
28 U.S.C. § 1334(b) provides that federal courts “shall have original but not exclusive jurisdiction of
all civil proceedings arising under title 11, or arising in or related to cases under title 11.”
Defendants assert that removal is proper here because this case is “related to” the ESML bankruptcy
proceeding. ECF No. 1, Notice of Removal, ¶ 11. Plaintiff has not challenged the propriety of
Defendants’ removal of this action, nor have they sought to remand the action to state court on any
other grounds.
A case is within the court’s “related-to” jurisdiction if its outcome “might have any
‘conceivable effect’ on the bankrupt estate.” In re Cuyahoga Equip. Corp., 980 F.2d 110, 114 (2d Cir.
1992); see also In re Cavalry Constr., Inc., 496 B.R. 106, 111 (S.D.N.Y. 2013) (“[C]ivil proceedings are
‘related to cases under title 11’ if the outcome of those proceedings in any way impacts upon the
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handling and administration of the bankrupt estate.” (internal quotation marks and citation
omitted)). Because any recovery against Defendants in this action would offset the Lenders’ claim
against ESML’s estate in bankruptcy, and because Defendants may assert rights of subrogation,
indemnification, or contribution against ESML, the Court is satisfied that this case is “related to” the
ESML bankruptcy proceeding. See, e.g., Merrill Lynch Mortg. Capital Inc. v. Esmerian, No. 08-cv-5058
(NRB), 2008 WL 2596369, at *1 (S.D.N.Y. June 30, 2008) (“A creditor’s claim against the guarantor
of a bankrupt debtor’s obligations is a textbook example of a ‘related’ proceeding . . . .”).
Accordingly, removal of this case pursuant to 28 U.S.C. § 1452(a) was proper, and the Court has
jurisdiction over the case.
C. Defendants’ Counterclaims
On November 3, 2016, Defendants filed their answer to the complaint, interposing
numerous defenses and asserting counterclaims for equitable estoppel and fraudulent inducement.
ECF No. 12. Defendants seek dismissal of the complaint in its entirety, a judgment declaring that
the Lenders are estopped from seeking to enforce the guarantees against Defendants and that the
guarantees are deemed satisfied, and damages in an amount to be determined at trial. Id. at 15.
D. The Forum Selection and Choice of Law Clauses
The guarantee agreements executed by each of the Defendants contain identical venue
provisions, which read in relevant part:
The Guarantor . . . hereby irrevocably consents that any legal action, suit or
proceeding arising out of or relating to this Agreement or any of the Loan
Documents and any other document or instrument required to be executed in
relation thereto may be instituted in or (other than by the Guarantor) removed to
the U.S. federal and New York state courts located in the Borough of Manhattan,
City and State of New York . . . . The Guarantor hereby waives any objection it
may now or hereafter have to the laying of the venue of any such action, suit or
proceeding, and further waives any claim that any such action, suit or proceeding
brought in any of the aforesaid courts has been brought in any inconvenient
forum.
ECF No. 28, Decl. of Linda Phua in Supp. of Pl.’s Mot. for Summ. J. (“Phua Decl.”), Exs. 7, 10, 13,

4

14.1 The guarantee agreements also provide that they “SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.” Id.
E. Defendants’ Motion to Transfer
On November 17, 2016, Defendants filed a motion pursuant to 28 U.S.C. § 1404(a) and 28
U.S.C. § 1412 to transfer this case to the United States District Court for the District of Delaware,
whereupon, Defendants assert, the case would automatically be referred to the United States
Bankruptcy Court for the District of Delaware pursuant to that district’s standing order of reference
under 28 U.S.C. § 157(a). ECF No. 19; see also ECF No. 20, Defs.’ Mem. of Law in Supp. of Mot. to
Transfer (“Defs.’ Mem.”). Plaintiff opposes the motion, contending that it must be denied in light
of the Supreme Court’s holding in Atlantic Marine Construction Co. v. U.S. District Court for the Western
District of Texas, 134 S. Ct. 568 (2013). ECF No. 27, Pl.’s Mem. of Law in Opp’n to Mot. to Transfer
(“Pl.’s Mem.”), at 3-10. In the alternative, Plaintiff argues that the Court should exercise its
discretion in favor of keeping the case in New York. Id. at 10-15.
II.

DISCUSSION
As already noted, Congress has provided for the removal of bankruptcy-related claims or

actions to the federal district court for the district in which the state action is pending. 28 U.S.C.
§ 1452(a). Congress has also created a statutory scheme under which such claims or actions, once
removed, can be transferred from one federal district court to another under appropriate
circumstances. As the Court will discuss in further detail below, some motions to transfer are
governed by 28 U.S.C. § 1404(a), which provides: “For the convenience of parties and witnesses, in
the interest of justice, a district court may transfer any civil action to any other district or division
1 On November 21, 2016, the Court granted Plaintiff leave to move for summary judgment on its claims for breach of
the guarantee agreements. ECF No. 23. The Court set the deadline for Plaintiff’s motion to December 5, 2016. The
Court set the deadline for Plaintiff’s opposition to Defendants’ motion to transfer for the same date. Accordingly,
Plaintiff filed both sets of papers on December 5, 2016, and cites some of its summary judgment exhibits to support its
opposition to the transfer motion.

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where it might have been brought or to any district or division to which all parties have consented.”
Other motions to transfer are governed by 28 U.S.C. § 1412, which provides: “A district court may
transfer a case or proceeding under title 11 to a district court for another district, in the interest of
justice or for the convenience of the parties.”
Based upon that statutory scheme, Defendants argue without supporting authority that
“[t]he whole purpose of bankruptcy removal―and the legislative rationale for conferring federal
jurisdiction where it otherwise would not exist―is to bring the action within the jurisdiction of the
bankruptcy court presiding over the related bankruptcy case.” ECF No. 34, Defs.’ Reply Mem. of
Law in Supp. of Mot. to Transfer (“Defs.’ Reply Mem.”), at 1. Similarly, Defendants reference
“Congressional intent to allow bankruptcy related actions to be litigated in the district presiding over
the bankruptcy case”―again without citation. Id. at 2. The Court does not agree that Congress has
expressed such an intent, except to the extent that analysis under § 1404(a) or § 1412 would counsel
in favor of discretionary transfer.
“[T]he starting point for interpreting a statute is the language of the statute itself. Absent a
clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as
conclusive.” Consumer Prod. Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980); see also
Nixon v. United States, 506 U.S. 224, 232 (1993) (citing the “well-established rule that the plain
language of the enacted text is the best indicator of intent”). Congress could have enacted a statute
providing for the removal of cases to the district in which the related bankruptcy case is pending,
but it did not. Instead, Congress provided for removal to the district court for the district where the
related state court claim or cause of action is pending. 28 U.S.C. § 1452(a). The language of
§ 1452(a) is perfectly clear.
Similarly, Congress could have enacted a statute compelling the transfer of cases removed
pursuant to § 1452(a) to the district in which the related bankruptcy is pending, but it did not do
that, either. Instead, transfers are governed by §§ 1404 and 1412. Indeed, even § 1412, which
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contains bankruptcy-specific language, is discretionary and makes no specific reference to transfer to
the district in which the related bankruptcy case is pending; rather, it provides more generically that
a “district court may transfer a case or proceeding under title 11 to a district court for another district.” 28
U.S.C. § 1412 (emphasis added). Moreover, Congress has limited that discretion to instances in
which transfer would serve the “interest of justice” or the “convenience of the parties.” Id.
In one sense, Defendants are correct. The statutory scheme of §§ 1452(a), 1404(a), and 1412
do allow bankruptcy-related actions to be litigated in the district presiding over the bankruptcy case,
but only if the analysis under the applicable change of venue statute yields that result.
A. The Applicable Change of Venue Statute
Transfer of venue for non-core proceedings is governed by 28 U.S.C. § 1404(a). See, e.g.,
Credit Suisse AG v. Appaloosa Inv. Ltd. P’ship I, No. 15-cv-3474 (SAS), 2015 WL 5257003, at *7
(S.D.N.Y. Sept. 9, 2015); Bank of Am., N.A. v. Wilmington Tr. FSB, 943 F. Supp. 2d 417, 426 n.5
(S.D.N.Y. 2013); In re Northwest Airlines Corp., 384 B.R. 51, 60 (S.D.N.Y. 2008). Transfer of venue
for core proceedings as well as bankruptcy petitions themselves, on the other hand, is governed by
28 U.S.C. § 1412. See, e.g., Credit Suisse AG, 2015 WL 5257003, at *7; Bank of Am., N.A., 943 F.
Supp. 2d at 426 n.5; Northwest Airlines, 384 B.R. at 60 n.1.
In their Notice of Removal, Defendants indicate that they “believe the [action] is non-core.”
ECF No. 1, ¶ 14. The Court agrees with that assessment.2 Although the term “core proceeding” is
not statutorily defined, section 157(b)(2) of the Bankruptcy Code sets forth a non-exhaustive list of
such proceedings. 28 U.S.C. § 157(b)(2). A proceeding that involves “substantive rights created by

As noted above, Defendants removed this case on the ground that it was “related to” the ESML bankruptcy, which is
the least burdensome method of establishing jurisdiction under the bankruptcy removal statute. “Related to”
proceedings are non-core. See, e.g., In re Robert Plan Corp., 777 F.3d 594, 596 (2d Cir. 2015); In re Bernard L. Madoff Inv.
Securities LLC, No. 08-1789 (SMB), 2016 WL 7241397, at *6 (Bankr. S.D.N.Y. Dec. 14, 2016); 1-3 Collier on Bankruptcy
§ 3.01[3][e][ii] (16th ed. 2016). Nevertheless, because Defendants asserted only that they “believe” this proceeding is
non-core, the Court observes that they may not have intended to eliminate the possibility of a stronger connection to the
ESML bankruptcy than was required to establish removal jurisdiction. Accordingly, the Court will analyze whether the
proceeding is core or non-core rather than rest on the jurisdictional basis relied upon in the Notice of Removal.

2

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federal bankruptcy law” or that “would have no existence outside of the bankruptcy” is a core
proceeding. In re Robert Plan Corp., 777 F.3d 594, 596-97 (2d Cir. 2015). Conversely, a claim is noncore if it “does not depend on bankruptcy laws for its existence and . . . could proceed in a court
that lacks federal bankruptcy jurisdiction.” DeWitt Rehab. & Nursing Ctr., Inc. v. Columbia Cas. Co.,
464 B.R. 587, 591 (S.D.N.Y. 2012) (citation omitted).
The determination of whether a contract action is a core proceeding or a non-core
proceeding also requires consideration of “(1) whether [the] contract is antecedent to the
reorganization petition; and (2) the degree to which the proceeding is independent of the
reorganization.” Universal Oil Ltd. v. Allfirst Bank (In re Millenium Seacarriers, Inc.), 419 F.3d 83, 97 (2d
Cir. 2005) (internal quotations marks and citation omitted). With respect to timing, claims for prepetition contract damages are generally non-core. See In re Orion Pictures Corp., 4 F.3d 1095, 1102 (2d
Cir. 1993) (“It is clear that to the extent that the claim is for pre-petition contract damages, it is noncore.” (quoting Beard v. Braunstein, 914 F.2d 434, 443 (3d Cir. 1990))); In re Coudert Bros., No. 11-cv4949 (PAE), 2011 WL 7678683, at *5 (S.D.N.Y. Nov. 23, 2011) (“Where a contract sued upon was
formed prior to the bankruptcy petition, it will generally be highly unlikely that a proceeding based
on that contract turns on the bankruptcy laws.”). “The critical question in determining whether a
contractual dispute is core by virtue of timing is not whether the cause of action accrued post-petition,
but whether the contract was formed post-petition.” In re U.S. Lines, Inc., 197 F.3d 631, 637 (2d Cir.
1999). With respect to independence from the bankruptcy case, a proceeding can be considered
core “if either (1) the type of the proceeding is unique to or uniquely affected by the bankruptcy
proceeding, or (2) the proceeding directly affects a core bankruptcy function.” Universal, 419 F.3d at
97 (internal quotation marks and citation omitted).
Neither Plaintiff’s claim for breach of contract nor Defendants’ counterclaims for equitable
estoppel and fraudulent inducement fall within the non-exhaustive list of core proceedings set forth
in 28 U.S.C. § 157(b)(2). More generally, the claims do not involve rights created by the bankruptcy
8

laws, nor could the claims exist only in a bankruptcy case or in a court with federal bankruptcy
jurisdiction. Rather, those claims are creatures of state law that depend neither on bankruptcy law
nor on bankruptcy jurisdiction. They could properly have been brought—and indeed Plaintiff’s
claim was brought―in a state court proceeding. Further, the contracts at issue here, which are dated
2010 and 2014, significantly predate ESML’s 2016 bankruptcy petition. Finally, resolution of the
parties’ claims will not affect a core bankruptcy function, as would, for example, a contractual
subordination agreement affecting the priority of claims in the bankruptcy. See, e.g., In re Best Prods.
Co., 68 F.3d 26 (2d Cir. 1995). Accordingly, the Court determines that this is a non-core proceeding
and will apply 28 U.S.C. § 1404(a) to resolve Defendants’ motion to transfer.3
B. Legal Standard for a Motion to Transfer Pursuant to § 1404(a)
The party moving for change of venue bears the burden of showing by clear and convincing
evidence that transfer is warranted. N.Y. Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102,
114 (2d Cir. 2010). In considering a motion to transfer under § 1404(a), a district court first must
determine whether the case could have been brought in the proposed transferee district. Herbert Ltd.
P’ship v. Elec. Arts Inc., 325 F. Supp. 2d 282, 285 (S.D.N.Y. 2004). If the case could properly have
been filed in the proposed transferee district, the court determines whether transfer actually is
appropriate by weighing various private- and public-interest factors. In Atlantic Marine, the Supreme
Court wrote:
Factors relating to the parties’ private interests include “relative ease of access to
sources of proof; availability of compulsory process for attendance of unwilling,
In their reply brief, Defendants contend that there is a split of authority as to whether § 1404 or § 1412 should apply.
In support of that contention, Defendants cite a handful of district court cases from other circuits. The Court
recognizes that some courts do not use the core/non-core distinction, but rather apply § 1412 to motions to transfer a
case that is “related to” a bankruptcy. However, most courts in this circuit have followed the approach taken here, and
this approach is consistent with the text of § 1412, which refers to “a case or proceeding under title 11.” 28 U.S.C. § 1412
(emphasis added); see also, e.g., Credit Suisse AG, 2015 WL 5257003, at *7 (“By its terms, [§ 1412] applies to bankruptcy
cases as well as core proceedings.”); In re Thomson McKinnon Sec., Inc., 126 B.R. 833, 834 (Bankr. S.D.N.Y. 1991) (“It has
been held in this district that motions to transfer actions that are related to title 11 cases should be controlled by 28
U.S.C. § 1404, the general change of venue provision, rather than 28 U.S.C. § 1412 because the latter statute contains no
reference to related proceedings.”). In any event, the distinction makes little difference, because courts consider
substantially the same factors in determining whether to grant a motion under § 1404(a) and § 1412. See, e.g., ResCap
Liquidating Tr. v. PHH Mortg. Corp., 518 B.R. 259, 267 (S.D.N.Y. 2014); Bank of Am., N.A., 943 F. Supp. 2d at 426 n.5.
3

9

and the cost of obtaining attendance of willing, witnesses; possibility of view of
premises, if view would be appropriate to the action; and all other practical
problems that make trial of a case easy, expeditious and inexpensive.” Publicinterest factors may include “the administrative difficulties flowing from court
congestion; the local interest in having localized controversies decided at home;
[and] the interest in having the trial of a diversity case in a forum that is at home
with the law.” The Court must also give some weight to the plaintiffs’ choice of
forum.
134 S. Ct. at 581 n.6 (quoting Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241 n.6 (1981)).
Ordinarily, “adjudication of motions for transfer are within the discretionary authority of the
district courts, according to ‘an individualized, case-by-case consideration of convenience and
fairness.’” In re Manville Forest Prods. Corp., 896 F.2d 1384, 1391 (2d Cir. 1990) (quoting Stewart Org.,
Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988)). Courts in the Second Circuit generally consider the
following non-exclusive list of factors in determining whether transfer is appropriate in a given case:
(1) the convenience of the witnesses and the availability of process to compel the
attendance of unwilling witnesses; (2) the convenience of the parties; (3) the
location of relevant documents and the relative ease of access to sources of proof;
(4) the locus of operative facts; (5) the relative means of the parties; (6) the
comparative familiarity of each district with the governing law; (7) the weight
accorded to the plaintiff's choice of forum; and (8) judicial economy and the
interests of justice.
Bank of Am., N.A. 943 F. Supp. 2d at 426.
“The calculus changes, however, when the parties’ contract contains a valid forum-selection
clause, which ‘represents the parties’ agreement as to the most proper forum.’” Atl. Marine, 134 S.
Ct. at 581 (quoting Stewart, 487 U.S. at 31).
The presence of a valid forum-selection clause requires district courts to adjust
their usual § 1404(a) analysis in three ways.
First, the plaintiff’s choice of forum merits no weight. Rather, as the party
defying the forum-selection clause, the plaintiff bears the burden of establishing
that transfer to the forum which the parties bargained is unwarranted. . . .
Second, a court evaluating a defendant’s § 1404(a) motion to transfer based on a
forum-selection clause should not consider arguments about the parties’ private
interests. When parties agree to a forum-selection clause, they waive the right to
challenge the preselected forum as inconvenient or less convenient for themselves
or their witnesses, or for their pursuit of the litigation. A court accordingly must
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deem the private-interest factors to weigh entirely in favor of the preselected
forum. . . . As a consequence, a district court may consider arguments about
public-interest factors only.
Third, when a party bound by a forum-selection clause flouts its contractual
obligation and files suit in a different forum, a § 1404(a) transfer of venue will not
carry with it the original venue’s choice-of-law rules―a factor that in some
circumstances may affect public-interest considerations.
Id. at 581-82. As a result, “a proper application of § 1404(a) requires that a forum-selection clause
be ‘given controlling weight in all but the most exceptional cases.’” Id. at 579 (quoting Stewart, 487
U.S. at 33 (Kennedy, J., concurring)); see also id. at 582 (“Because [the public-interest] factors will
rarely defeat a transfer motion, the practical result is that forum-selection clauses should control
except in unusual cases.”).
In determining whether a forum-selection clause is valid and enforceable, courts in the
Second Circuit consider four factors:
(1) whether the clause was reasonably communicated to the party resisting
enforcement; (2) whether the clause is mandatory or permissive, i.e., . . . whether
the parties are required to bring any dispute to the designated forum or simply
permitted to do so; and (3) whether the claims and parties involved in the suit are
subject to the forum selection clause. If the forum clause was communicated to
the resisting party, has mandatory force and covers the claims and parties
involved in the dispute, it is presumptively enforceable. A party can overcome
this presumption only by (4) making a sufficiently strong showing that
enforcement would be unreasonable or unjust, or that the clause was invalid for
such reasons as fraud or overreaching.
Martinez v. Bloomberg LP, 740 F.3d 211, 217 (2d Cir. 2014) (internal quotation marks, alterations, and
citations omitted). The analysis of those four factors is governed by a mixture of federal law and the
law selected in the parties’ contractual choice-of-law clause: “The overriding framework governing
the effect of forum selection clauses in federal courts . . . is drawn from federal law. Furthermore,
federal law should be used to determine whether an otherwise mandatory and applicable forum
clause is enforceable . . , i.e., step four in our analysis.” Id. (internal quotation marks and citation
omitted). “In answering the interpretive questions posed by parts two and three of the four-part
framework, however, [courts] normally apply the body of law selected in an otherwise valid choice11

of-law clause.” Id. at 217-18 (citation omitted).
C. Application to Defendants’ Motion
As a threshold matter, the Court notes the somewhat atypical posture of this case. In the
typical scenario, a plaintiff has filed a case in contravention of a forum-selection clause, and a
defendant seeks to transfer to the forum designated in the clause. Here, the roles are switched.
Plaintiff has filed its case in accordance with the forum-selection clauses, and Defendants seek to
transfer the matter in contravention of those clauses. Nonetheless, the Court is aware of no reason
why the teaching of Atlantic Marine would not apply equally in this posture. See, e.g., BNY Mellon,
N.A. v. Lyell Wealth Mgmt., No. 16-cv-6896 (DAB), 2016 WL 7377235 (S.D.N.Y. Dec. 8, 2016)
(applying Atlantic Marine in the same posture). Indeed, Atlantic Marine reaffirmed the Supreme
Court’s earlier identification of a “strong federal public policy supporting the enforcement of forum
selection clauses,” see Martinez, 740 F.3d at 218-19, and that policy does not depend on the particular
posture of the case before the Court in Atlantic Marine.
The parties do not dispute that, absent a forum-selection clause, this case could have been
brought in the District of Delaware. Accordingly, the Court will begin by addressing the
enforceability and applicability of the forum-selection clauses before discussing the private- and
public-interest factors.
1. The Guarantee Agreements Contain Valid and Enforceable ForumSelection Clauses
Defendants do not contend that the forum-selection clauses in their guarantee agreements
were not reasonably communicated to them, nor do they contend that the claims and parties
involved in this suit are not subject to the clauses. They do, however, argue that the clauses should
not be enforced as against their desired transfer of venue because they are merely permissive in
nature. Defs.’ Mem. at 8; Defs.’ Reply Mem. at 6-7. This argument is not persuasive.
As noted above, the question of whether a forum-selection clause is mandatory or
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permissive is governed by the law contractually selected by the parties. See Martinez, 740 F.3d at 217.
Here, the guarantee agreements provide that they will be “governed by, and construed and
interpreted in accordance with” New York law. E.g., Phua Decl., Ex. 7, at 11 (§ 4.09). Under New
York law, the words and phrases used by the parties in a forum-selection clause “must, as in all cases
involving contract interpretation, be given their plain meaning.” Brooke Grp. Ltd. v. JCH Syndicate
488, 87 N.Y.2d 530, 534 (1996). Based upon their plain meaning, the Court concludes that the
clauses at issue here are mandatory or, more precisely, became mandatory once Plaintiff had filed
suit in one of the designated fora. It is true that the first portion of the clauses, which states that
“any legal action, suit or proceeding . . . may be instituted in or (other than by the Guarantor)
removed to the U.S. federal and New York state courts located in the Borough of Manhattan, City
and State of New York,” e.g., Phua Decl., Ex. 7, at 11 (§ 4.10) (emphasis added), is phrased in a
permissive fashion. That portion must not be read in isolation, however, because the remaining
portion of the clauses changes the nature of the parties’ bargain:
The Guarantor hereby waives any objection it may now or hereafter have to the
laying of the venue of any such action, suit or proceeding, and further waives any
claim that any such action, suit or proceeding brought in any of the aforesaid
courts has been brought in any inconvenient forum.
Id.
This language constitutes a waiver on Defendants’ part of challenges to venue and of
motions premised on the doctrine of forum non conveniens. Thus, even if the first portion of the
clauses is permissive, Defendants have, in the second portion, contracted away their right to
challenge the venue chosen by Plaintiff. Because Plaintiff laid venue in one of the two alternative
fora designated in the clauses, those clauses have now become mandatory. See Trump v. Deutsche
Bank Tr. Co., 887 N.Y.S.2d 121, 124 (App. Div. 2009) (finding there was not “any merit” to the
argument that a clause providing that “[a]ny legal suit, action or proceeding . . . may at lender’s
option be instituted in any federal or state court in New York County, New York, and borrower
13

waives any objections which it may now or hereafter have based on venue and/or forum non
conveniens” was “permissive or insufficiently mandatory”); accord Aguas Lenders Recovery Grp. v. Suez,
S.A., 585 F.3d 696, 700 (2d Cir. 2009) (declining to decide whether forum-selection clause, standing
alone, was mandatory or permissive, because “[a]t least one of the contracts . . . contains a waiver of
any claims of forum non conveniens in addition to a forum selection clause,” and “[t]he combination of
these clauses amounts to a mandatory forum selection clause at least where the plaintiff chooses the
designated forum”); Eastman Chem. Co. v. Nestle Waters Mgmt. & Tech., No. 11-cv-2589 (VM), 2011
WL 4005345, at *2 (S.D.N.Y. Aug. 29, 2011) (“Pursuant to controlling Second Circuit authority, a
forum selection clause that combines permissive forum selection language with an express waiver of
venue objections is deemed to be mandatory.” (citing Aguas Lenders, 585 F.3d at 700)).
Defendants further attempt to avoid the effect of the forum-selection clauses by arguing that
the guarantees “only purport[] to waive a challenge that New York is an improper venue, which is
not the basis for Defendants’ motion to transfer.” Defs.’ Reply Mem. at 6. Defendants cite no
authority for their assertion that “any objection . . . to the laying of the venue” refers solely to
objections premised on the chosen venue being improper as contemplated by 28 U.S.C. § 1406 and
Fed. R. Civ. P. 12(b)(3), and the Court declines to adopt such a strained reading. Plainly read,
Defendants have waived their rights to seek to alter the venue chosen by Plaintiff for this action.
Because they were reasonably communicated to Defendants, are mandatory in nature, and
apply to the claims and parties here, the forum-selection clauses in Defendants’ guarantee
agreements are presumptively enforceable. Defendants do not make a sufficient showing to
overcome this presumption. They do not argue that the clauses were procured by fraud or
overreaching, nor do they show that enforcement would be unreasonable or unjust.4

The Court will address Defendants’ argument that the forum-selection clause should not be enforced here due to the
connection between the claims in this case and the ESML bankruptcy in the following section of this decision.

4

14

2. Public-Interest Factors Do Not Weight Against Enforcing the ForumSelection Clauses
As already noted, Atlantic Marine provides that a valid forum-selection clause should be given
“controlling weight” in a transfer-of-venue analysis except in “the most exceptional cases” where
public-interest factors counsel otherwise. 134 S. Ct. at 579. This is not one of those exceptional
cases. Defendants rely almost entirely on the decision in Credit Suisse A.G, which Defendants cite to
support their arguments that “a forum selection clause does not prevent a transfer under 28 U.S.C.
§ 1404(a),” Defs.’ Mem. at 8, and that “Atlantic Marine [is] inapplicable to a bankruptcy removal
case.” Defs.’ Reply Mem. at 3.
Defendants misapprehend the Credit Suisse A.G. decision. The court made no such broad
holdings, but instead concluded―consistent with Atlantic Marine―that the forum-selection clause at
issue was not controlling in the case before it because public-interest factors counseled strongly in
favor of transferring the case to the district in which the related bankruptcy case was pending. See,
e.g., 2015 WL 5257003, at *11 (“The palpable conflict between this action and the Bankruptcy Case
evokes a public interest sufficient to outweigh the forum selection clause.”).
In Credit Suisse A.G., the court found that the claims asserted were “closely intertwined” with
the bankruptcy proceeding, and that the rights that the plaintiff sought to enforce under the contract
at issue were “in direct conflict with defendants’ status and rights under the Bankruptcy Code.” Id.
The court also found that the rights that the plaintiff sought to enforce “undercut the power of the
Bankruptcy Court and jeopardize the legitimacy of the Debtors’ reorganization.” Id.
The court did not reach that conclusion based upon a generalized, minor relationship to the
bankruptcy proceeding. Rather, the plaintiff (a creditor) brought claims in this district seeking to
limit the action of other creditors in a bankruptcy proceeding pending in Illinois. For example, the
plaintiff sought to enjoin the defendants, including all members of the Committee of Second
Priority Noteholders (the “Committee”) appointed by the United States Trustee “from taking any
15

action to challenge, contest or support any other person in contesting or challenging, directly or
indirectly, in any proceeding (including in [the] bankruptcy proceedings), the validity, perfection,
priority or enforceability of the Bank Debt Liens.” Id. at *5. The plaintiff also sought to enjoin the
defendants, including all members of the Committee, “from taking any action to enforce rights or
exercise remedies with respect to the Property Transfers or the B-7 Transaction.” Id.
In determining that the claims asserted presented such a conflict with the bankruptcy
proceeding that the public interest outweighed enforcement of the forum-selection clause, the court
explained:
Apart from impeding the functioning of a standing committee, compelling
defendants to take no action that runs contrary to plaintiff’s interests interferes
with the bankruptcy in other respects, including by undercutting the plan
confirmation process. Indeed, plaintiff’s attempt to cabin defendants’ conduct, or
ramping up their leverage by instituting this suit, is antithetical to the workout
process.
Id. at *11. The court also found that the relief sought related “directly to the ability of the
Committee Defendants to carry out their core duties under the Code.” Id. at * 8.
There simply are no such direct conflicts between the claims asserted here and the ESML
bankruptcy. Instead, there is a remote relationship that, while sufficient to support “related-to”
jurisdiction, is insufficient to overcome the forum-selection clauses. Plaintiff does not seek to limit
the conduct of the debtor, creditors, or committee members in the ESML bankruptcy case in any
respect. Instead, they bring a simple and relatively straightforward action to enforce a contract
under which Defendants agreed to guarantee a loan. Moreover, the Court does not perceive any
way in which a judgment in this case could “jeopardize the legitimacy” of ESML’s reorganization.
While it is true that Plaintiff has filed a proof of claim in the ESML bankruptcy case for the
amounts due under the Credit Agreement, its right to which would be eliminated if it were to win a
judgment against Defendants here, that fact is not likely to have any net effect on the bankruptcy
case. That is so because, as Defendants acknowledge in the Notice of Removal, they “may assert
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rights of subrogation, indemnification, or contribution against the Debtors” in the bankruptcy case.
ECF No. 1, ¶ 11. In other words, they would likely step into Plaintiff’s shoes and pursue the same
amounts originally claimed by Plaintiff.5
Defendants also assert that transfer is in the public interest because
the Delaware Bankruptcy Court . . . and the District Court in Delaware, are
familiar with and routinely adjudicate issues concerning sophisticated commercial
disputes, corporate loan documents and guaranties. The courts within the
District of Delaware are perfectly capable of deciding the issues of law that will be
presented in this action.
Defs.’ Mem. at 9-10. This Court does not doubt that the federal courts in Delaware would be
perfectly capable of resolving this case, but that is not the question. Defendants have made no
showing that those courts are better suited to resolve this case.
Defendants further argue that the interest in judicial economy weighs in favor of transfer.
This argument appears to relate largely to Defendants’ counterclaims. Specifically, Defendants
assert that
the adjudication of this action will require third party discovery from Debtors,
and the Delaware Bankruptcy Court is best suited to most efficiently supervise
that discovery . . . . In addition, the Delaware Bankruptcy Court is intimately
familiar with the Project, its financing, and its financial difficulties. That factual
knowledge will help streamline the administration of this action.”
Defs.’ Mem. at 8-9. The Court is not persuaded. Even assuming that a transfer of this case would
be efficient in the way that Defendants suggest, any such increase in efficiency would be marginal at
best. Defendants will have the opportunity to conduct discovery, as appropriate, in this Court, and
this Court can learn the factual underpinnings necessary to resolve Defendants’ counterclaims
without much ado. Indeed, even were this case to be transferred to the District of Delaware and

To the extent that Defendants argue that transfer is in the public interest because success on their counterclaims could
mean that a substantial sum of money would inure to the benefit of the estate, that is not enough to warrant disregarding
the parties’ bargained-for forum-selection clause. For one thing, because Defendants are distinct entities from ESML, it
is unclear how a judgment in Defendants’ favor here would augment ESML’s estate in any direct sense. And in any
event, if such a judgment were to augment the estate if entered by the Bankruptcy Court, it would likewise augment the
estate if entered by this Court.

5

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subsequently referred to the Delaware Bankruptcy Court, the bankruptcy court would not be
empowered to finally resolve this dispute. Because this is a non-core proceeding, the bankruptcy
judge would be required to submit proposed findings of fact and conclusions of law for de novo
review and entry of a final order or judgment by the district court. 28 U.S.C. § 157(c)(1). At that
point, the Delaware district court would need to learn the relevant factual underpinnings, just as this
Court can and will do.
Defendants also attempt to support their motion by reference to Winstar Holdings, LLC v.
Blackstone Group, No. 07-cv-4634 (GEL), 2007 WL 4323003, at *7 (S.D.N.Y. Dec. 10, 2007).
Defendants cite to Winstar for the proposition that “[t]here is no plausible rationale for removing the
case to federal court in order to decide it in a forum remote from the court where [the bankruptcy]
proceeding is pending.” Defs.’ Mem. at 5. Although the court in Winstar did grant a transfer
motion, that case does not help Defendants here for at least two reasons. First, it predates Atlantic
Marine. Second, and more importantly, the court in Winstar transferred the case to the venue designated
in the parties’ forum-selection clause, not away from the designated forum, as Defendants would have this
Court do.
Finally, Defendants cite Smartmatic USA Corp. v. Dominion Voting Systems Corp., No. 13-cv5349 (KBF), 2013 WL 5798986, at *3 (S.D.N.Y. Oct. 22, 2013), for the proposition that “the district
in which the underlying bankruptcy case is pending is presumed to be the appropriate district for
hearing and determination of a proceeding in bankruptcy.” Defs.’ Reply Mem. at 2. Defendants do
not engage with the fact that that presumption was articulated by the Second Circuit, and has
consistently been applied by district courts, in the context of transfer motions governed by 28 U.S.C.
§ 1412. See In re Manville, 896 F.2d at 1391; see also, e.g., Capmark Fin. Grp Inc. v. Goldman Sachs Credit
Partners L.P., No. 11-cv-7511, 2012 WL 698134, at *4 (S.D.N.Y. Mar. 5, 2012). As the Court has
already explained, § 1412 does not apply to the motion at issue here because this case is non-core.
But even if that presumption did apply, it would not be the only presumption at work.
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As other courts have recognized, that presumption can conflict with the “strong
presumption in favor of the plaintiff’s choice of forum.” E.g., Official Comm. Of Asbestos Claimants of
G-I Holding, Inc. v. Heyman, 306 B.R. 746, 750 (S.D.N.Y. 2004) (explaining that “[t]he two
presumptions effectively cancel each other out, and the motion will accordingly be decided on the
basis of the remaining factors”). Of course, no such conflict would arise where a defendant seeks to
transfer a case filed by a plaintiff in the district in which the related bankruptcy is pending. That was
the situation before the Second Circuit in In re Manville. 896 F.2d at 1390. But where, as here, a
defendant attempts to transfer a case away from the plaintiff’s chosen forum to the district in which
the related bankruptcy is pending, the conflict is clear. Defendants do not address how the Court
should resolve that conflict. Moreover, there is also a strong presumption in favor of the
enforcement of forum-selection clauses. See Atl. Marine, 134 S. Ct. at 579; M/S Bremen v. Zapata OffShore Co., 407 U.S. 1, 15 (1972) (“[A] forum clause should control absent a strong showing that it
should be set aside.”). Defendants do not address how this presumption should be reconciled with
the one it proffers, and because Smartmatic did not involve a forum-selection clause, it is of little help
in that regard.
In sum, Defendants have not carried their burden to show that this is the “exceptional case”
where public interest factors will override a valid and enforceable forum-selection clause.
D. The Court Would Reach the Same Decision Under § 1412.
In their reply brief, Defendants argue that Atlantic Marine is not controlling because it did not
involve a bankruptcy and because it applied § 1404(a), while § 1412 should apply here. Defs.’ Reply
Mem. at 3-5. As explained above, most courts in this circuit apply § 1404(a), but the distinction
between § 1404(a) and § 1412 is largely inconsequential, because “[t]he analysis under both statutes
is substantially the same.” ResCap, 518 B.R. at 267.
Defendants contend that some courts have stated that § 1412 is “more generous to the
moving party” than § 1404(a) because it is stated in the conjunctive rather than the disjunctive.
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Defs.’ Mem. at 4-5 (citing In re Adkins Supply, Inc., No. 11-10353-RLJ-7, 2015 WL 1498856, at *6
(Bankr. N.D. Tex. 2015)).6 It is true that § 1412 states that a “district court may transfer a case or
proceeding under title 11 to a district court for another district, in the interest of justice or for the
convenience of the parties.” 28 U.S.C. § 1412 (emphasis added). It is also true that, in general,
because those standards are phrased in the disjunctive, “transfer is appropriate even if only one is
met.” See Defs.’ Mem. at 4. But even so, the valid forum-selection clauses here would subsume any
consideration of “the convenience of the parties,” leaving the Court to consider only “the interest of
justice.” This result is no different in substance than the analysis the Court has conducted of publicinterest factors under § 1404(a).
Finally, Defendants argue that § 1412 is distinct from § 1404(a) because it takes into account
“the interests of the bankruptcy estate.” Defs.’ Mem. at 4. But, as explained earlier, the analysis
under § 1404(a) is not limited to a rigid set of non-specific factors. Instead, it requires
“individualized, case-by-case consideration” of various private- and public-interest factors, see In re
Manville, 896 F.2d at 1391, and is flexible enough to consider the interests of the bankruptcy estate
where, as here, such consideration is appropriate. In discussing and distinguishing the decision in
Credit Suisse AG, the Court has given substantial consideration to the interests of the bankruptcy
estate.7
As noted earlier, the Second Circuit recognized in In re Manville that “the district in which the
underlying bankruptcy case is pending is presumed to be the appropriate district for hearing and
determination of a proceeding in bankruptcy.” 896 F.2d at 1391. Although the Second Circuit did

Section 1412 may also be more generous to the moving party because, unlike § 1404(a), it does not require the
transferee court to be one in which the case could initially have been brought. That distinction makes no difference
here, because neither party disputes that this case could have been brought in the District of Delaware.
6

Although the parties do not raise the issue, the Court observes that some courts have applied a lesser burden of
proof―preponderance of the evidence―to motions for change of venue under § 1412 than under § 1404(a). See, e.g., In
re Enron Corp., 317 B.R. 629, 639 n.9 (Bankr. S.D.N.Y. 2004). That difference in the burden of proof would not have
changed the result here, particularly given the presence of a valid forum-selection clause and the presumption of
enforcement described in Atlantic Marine.

7

20

not state that the presumption applied only to motions governed by § 1412, courts have typically
applied it only in that context. As also noted earlier, the presumption articulated in In re Manville
conflicts in this case with the strong presumption in favor of the plaintiff’s choice of forum as well
as the strong presumption in favor of the enforcement of a valid forum-selection clause. Because
the connection between this case and the ESML bankruptcy is relatively thin, the Court would not
find that the § 1412 presumption trumps the other presumptions, even if it were to apply § 1412.
In addition, in response to Defendants’ argument that the holding of Atlantic Marine applies
to motions under § 1404 and not § 1412, the Court observes that Atlantic Marine was hardly the first
Supreme Court decision to express a heavy presumption in favor of the enforcement of valid forumselection clauses. See, e.g., Bremen, 407 U.S. at 15 (“[A] forum clause should control absent a strong
showing that it should be set aside.”); Giordano v. UBS, AG, 134 F. Supp. 3d 697, 702 (S.D.N.Y.
2015) (stating that Atlantic Marine “reconfirmed” this Bremen principle). Instead, the innovation of
Atlantic Marine was its holding that a forum-selection clause should be enforced by a motion to
transfer rather than a motion to dismiss for improper venue. See 134 S. Ct. at 575 (“The question in
this case concerns the procedure that is available for a defendant in a civil case who seeks to enforce
a forum-selection clause.”).
III.

CONCLUSION
For the foregoing reasons, Defendants’ motion to transfer this case to the District of

Delaware is DENIED. The Clerk of Court is directed to terminate the motion pending at Dkt. No.
19.
SO ORDERED.
Dated: January 12, 2017
New York, New York

_____________________________________
_____________________
_____ _ _________
__
GREGORY
GREGORY H. WOODS
GOR
RY
United States District Judge
Judg

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