Signature Financial LLC v. Neighbors Global Holdings, LLC et al

Filing 28

OPINION: For the reasons set forth above, the Court, on October 29, 2017, denied defendants' motion to dismiss plaintiff's complaint and defendants' motion to transfer venue. (Signed by Judge Jed S. Rakoff on 12/19/2017) (mml)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-------------------------------------x
SIGNATURE FINANCIAL LLC,
17 Civ. 6089
Plaintiff,
OPINION
-

v -

NEIGHBORS GLOBAL HOLDINGS, LLC, NEC
LUFKIN EMERGENCY CENTER, LP, NEC
GREELEY EMERGENCY CENTER, LP, NEC
WEST WARWICK EMERGENCY CENTER, LP,
NEC LUBBOCK EMERGENCY CENTER, LP,
NEIGHBORS LEGACY HOLDINGS, INC.
f/k/a NEIGHBORS HEALTH SYSTEM, INC.,
NEIGHBORS HEALTH, LLC f /k/a
NEIGHBORS HEALTH SYSTEM, LLC, and
NEC BELLAIRE EMERGENCY CENTER, LP,
Defendants.

-------------------------------------x
JED S. RAKOFF, U.S.D.J.
This is a breach of contract action involving finance leases
for

IT equipment and services extended by non-party All

Points

Solutions, Inc. d/b/a 3i International ("3i") to Neighbors Global
Holdings,
LP

LLC

("Neighbors Global"), NEC Lufkin Emergency Center,

("Lufkin"), NEC Greeley Emergency Center, LP

West Warwick Emergency Center,

LP

("Greeley"), NEC

("West Warwick"),

NEC Lubbock

Emergency Center, LP ("Lubbock"), Neighbors Legacy Holdings, Inc.
("Legacy Holdings"),

Neighbors Health,

LLC

("Neighbors Health"),

and NEC Bellaire Emergency Center, LP ("Bellaire")
"defendants" or "Neighbors").

1

(collectively,

Plaintiff Signature Financial LLC ("Signature") - an assignee
of 3i - brings a fifteen-count complaint arising from defendants'
non-payment of rent. See Dkt. 1, Ex. A.
Defendants,

on

plaintiff's complaint
York and,

September
for

6,

2017,

lack of personal

in the alternative,

moved

to

dismiss

jurisdiction in New

to transfer venue to the Southern

District of Texas pursuant to 28 U.S.C.

§

1404. See Dkt. 12. Upon

due consideration, by bottom-line Order dated October 29, the Court
denied

defendants'

motion

in

its

entirety.

See

Dkt.

24.

This

Opinion sets forth the reasons for that ruling.
The pertinent allegations are as follows:
Signature, a wholly-owned subsidiary of Signature Bank, a New
York-chartered bank, is a New York limited liability company with
its principal place of business

in New York.

See Affidavit

in

Opposition of David McGowan ("McGowan Affidavit") ! 2, Dkt. 16.
Legacy Holdings

is a

Texas corporation with

its principal

place of business in Texas and is wholly-owned by nine non-party
physicians who are residents of Texas.

See Affidavit of Francine

A. Elliot in Support of Defendants' Motion to Dismiss or Transfer
("Elliot Affidavit") !

5, Dkt. 14.

Neighbors Global is a Delaware limited liability company with
its principal place of business in Texas. Id. ! 4. Neighbors Global
is

a

wholly-owned subsidiary of Legacy Holdings.

Global owns Neighbors Health,

Id.

Neighbors

a Texas limited liability company
2

with its principal place of business in Texas.

Id.

<JI

7.

Lufkin,

Greeley, West Warwick, Lubbock, and Bellaire are all Texas limited
liability companies with their principal places
Texas. Id.

<JI

of business

in

6. They are each 99% owned by non-party Neighbors GP,

LLC, a Texas limited liability company, and 1% owned by non-party
NHS Emergency Centers,

LLC,

a

Texas

limited liability company,

both of which are owned by Neighbors Health. Id.

6.

<JI

Neighbors Health and its parent companies collectively own
and operate over thirty free-standing emergency medical centers in
Texas, Rhode Island, and Colorado. See id. Ex. A,

<JI

40.

On or about September 14, 2015, Neighbors Health entered into
a Master Equipment Lease Agreement
see Compl.

<JI

("Master Lease 960") with 3i,

76, a Texas corporation with its principal place of

business in Texas, see Elliot Affidavit
of Master Lease 960,
Equipment

Schedules)

Legacy Holdings as
McGowan Affidavit

computers,

960 was
~essee

<JI<JI

10. Pursuant to the terms

3i leased to Neighbors Health

other IT equipment. See Compl.
Master Lease

<JI

servers.,

routers,

(via separate
copiers,

and

76.

<JI

amended on November

6,

2015

to name

and Neighbors Health as co-lessee. See

15-16.

In May 2016, pursuant to the terms of Master Lease 960, Legacy
Holdings and Neighbors Health executed Equipment Schedule 41343964
with 3i, naming Bellaire as a co-lessee. Id.

3

<JI

18; id. Ex. J.

On or about July 15,
Master Equipment

2016,

Neighbors Global entered into a

Lease Agreement with 3i

("Master Lease 501"),

identical in all relevant respects to Master Lease 960.
In

September

2016,

Neighbors

Global

executed

four

Id.

~

4.

Equipment

Schedules with 3i, one each with co-lessees Lufkin, Greeley, West
Warwick,

and

Lubbock

(Equipment

Schedules
~~

41421644, and 41421656, respectively). Id.
Master Leases 501 and 960
"IF

THE

LESSOR

OR

ITS

41413430,

41421639,

6-9; id. Exs. B-E.

(the "Leases") each provide that:

ASSIGNEE

SHALL

COMMENCE

ANY

JUDICIAL

PROCEEDING IN RELATION TO ANY MATTER ARISING UNDER A LEASE, LESSEE
IRREVOCABLY

AGREES

THAT

ANY

SUCH

MATTER

MAY

BE

ADJUDGED

OR

DETERMINED IN ANY COURT OR COURTS IN THE STATE OF LESSOR'S OR ITS
ASSIGNEE'S PRINCIPAL PLACE OF BUSINESS, OR ANY COURT OR COURTS IN
THE LESSEE'S STATE OF RESIDENCE,

OR IN ANY OTHER COURT HAVING

JURSIDICTION OVER THE LESSEE OR THE LESSEE'S ASSETS, ALL AT THE
SOLE DISCRETION OF THE LESSOR. LESSEE HEREBY IRREVOCABLY SUBMITS
GENERALLY AND UNCONDITIONALLY TO THE JURSIDICTION OF ANY SUCH COURT
SO

ELECTED

BY

LESSOR

Affidavit, Exs. A, I

IN

RELATION

TO

SUCH

MATTERS."

McGowan

(hereinafter, the "Lease") ! 25.

The Leases further include choice of law clauses, specifying
New Jersey law,

Lease~

25, and provide that "Lessee's obligations

to pay Rent in full when due are absolute and unconditional and
shall

not

be

subject

to

any

abatement,

reduction,

set

off,

counterclaim, recoupment, defense or other right which Lessee may
4

have or assert against Lessor,

the supplier of the Equipment or

any other person or entity," id.

<Jr

4.

Additionally,

the Leases

contain assignment clauses stating: "Lessor may, without notifying
the

Lessee,

sell,

assign,

rights to the Equipment.

or transfer

this

Lease

and Lessor's

Lessee agrees that the new owner will

have the same rights and benefits that Lessor has now under this
Lease but not Lessor's obligations." Id.

'.IT

21.

3i, on or about July 20, 2015, assigned to non-party Everbank
Commercial Finance,

Inc.

("Everbank")

its rights and remedies in

and to Master Lease 960 and Master Lease 501, as well as in and to
Equipment Schedules

41343964,

41413430,

41421639,

41421644,

41421656 ("the Equipment Schedules"). See McGowan Affidavit

'.IT'.IT

and
10,

19; id. Ex. F.
Thereafter, pursuant to a Master Assignment Agreement by and
between Everbank and Signature dated May 23,

2012,

Everbank,

on

July 7, 2016, assigned to Signature its rights and remedies under
Equipment Schedule 41343964

and,

on October 13,

2016,

Everbank

further assigned its rights and remedies under Equipment Schedules
41413430,

41421639,

41421644,

Exs. G-H; see also Compl.

'.IT<Jf

and 41421656.

Id.

<Jf'.IT

11,

20;

id.

25, 39, 53, 67, 91.

In or around March 201 7,

Neighbors stopped making payments

due under the Schedules. See Compl.

1

'.IT'.IT

22, 40, 54, 68,

92.~

On July

In early 2017, Neighbors commenced an internal audit, which
"revealed excessive and improper billing." See Elliot Affidavit '.IT
5

7, Signature commenced the instant action for non-payment of rent
in New York state court, and on August 11, Neighbors removed the
case to this Court. See Notice of Removal, Dkt. 1.

DISCUSSION
Defendants now move to dismiss plaintiff's complaint for lack
of personal jurisdiction and, in the alternative, to transfer venue
to the Southern District of Texas. See Dkt. 12.
I.

Personal Jurisdiction
To meet its burden to demonstrate personal jurisdiction over

Neighbors in New York, see Penguin Grp.

(USA)

Inc. v. Am. Buddha,

609 F.3d 30, 34 (2d Cir. 2010), Signature invokes Paragraph 25 of
the Leases. As mentioned earlier, Paragraph 25 states, in relevant
part,

that " [ i] f

judicial

the lessor or its assignee shall

proceeding

irrevocably

agrees

determined" in,

in
that

relation"
any

such

to

the

matter

lease,
may

be

commence any
the

"lessee

adjudged

or

inter alia, "any court or courts in the state of

17. For example, though Neighbors was charged for certain IT
services, "3i never provided Neighbors with any professional
services." Id. Fol lowing the audit, "in early 201 7," Neighbors
"stopped making payments on certain disputed Agreements until an
accounting and reconciliation could be completed." Id. <JI 18. And,
on June 28, 2017, Neighbors brought suit in Harris County Court in
Texas against, inter alia, 3i, Everbank, and Signature alleging
fraud, negligence, unjust enrichment, and breach of contract,
seeking damages, fees, expenses, and a declaratory judgment
regarding the rights and responsibilities of the parties. See
Elliot Affidavit, Ex. 1.
6

lessor's

or

its

assignee's

principal

place

of

business[.]"

Paragraph 25 further provides that the "lessee hereby irrevocably
submits generally and unconditionally to the jurisdiction of any
such court so elected by lessor." Lease i

25.

Signature does not argue that this Court could or should find
personal jurisdiction over defendants in New York in the absence
of Paragraph 25. See, e.g., Dkts. 18, 20, 22. Signature does not
invoke New York's long-arm statute or argue that defendants have
purposefully availed themselves of the privilege of doing business
in

New

York.

sufficient

Signature

"minimum

does

not

contacts"

contend

with

New

that
York

defendants
such

that

have
the

"maintenance of the suit does not of fend traditional notions of
fair play and substantial

justice," or that defendants have any

contacts with New York at all. Int'l Shoe Co. v. Washington, 326
U.S. 310, 316 (1945). Indeed, there appears to be no relationship
between defendants and the state of New York aside from the fact
that

lessor's rights under the Leases

(which defendants signed)

were assigned to Signature and Signature is based in New York. 2
See Compl.

i

1. Thus,

the maintenance of this suit in New York

turns entirely on the enforceability of Paragraph 25.

Defendants represent that they do not maintain offices,
employees, property, bank accounts, mailing address, post office
boxes, telephone numbers, or registered agents in New York. See
Elliot Deel. 'lfi 33-35. Nor have defendants "solicited business
from or targeted advertisements to" anyone in New York. Id. i 36.

2

7

As a threshold matter, defendants contest the applicability
of

the

Lease

terms

Memorandum of

Law

to

in

the

instant

Support

dispute.

of Motion

Defendants'

Dismiss

to

See

Plaintiff's

Complaint For Lack of Personal Jurisdiction, or in the Alternative,
to Transfer Venue

("Def. Mem.")

14, Dkt.

13. Although defendants

concede that they signed the Leases and that this suit arises out
of their non-payment of rent, they argue that only the Equipment
Schedules,

and

not

the

Master

Leases,

have

been

assigned

to

Signature . Id.
While this may be true,

the Schedules expressly incorporate

the terms and conditions of the Leases.
Exs. B, C, D, E, and J
Lease

are

See McGowan Affidavit,

("All the terms and conditions of the Master

incorporated herein

and made

a

part

hereof.").

Thus

Paragraph 25 plainly applies to suits arising under the Schedules.
Defendants further contend that Paragraph 25 applies only "at
the sole discretion of the Lessor" - in other words, at the sole
discretion of 3i. See Def. Mem. 14. But this argument also fails.
The Lease clearly provides that 3i has the right

to assign the

Schedules and that, upon assignment, "the new owner will have the
same

rights

obtained

al 1

and
of

benefits"
3i' s

Schedules to Everbank,

as

rights

3i.
when

Lease
3i

<JI

21.

assigned

Thus,
the

Everbank

Leases

and

and Signature obtained all of Everbank's

rights when Everbank assigned the Schedules to Signature.

8

Defendants
Paragraph

find

25

special

mentions

significance

"lessor

or

in
its

the

fact

that

assignee"

in

contradistinction to "lessors" and grants the right to select a
forum only to
Defendants'

"lessor." See Reply Brief

in

Further Support

of

Motion to Dismiss Plaintiff's Complaint for Lack of

Personal Jurisdiction or,

in the Alternative,

to Transfer Venue

("Def. Reply") at 2-3, Dkt. 19. "At the sole discretion of lessor,"
defendants

argue,

must

simply refer

to

3i,

else why would the

contract specify "lessor or its assignee" two times in the first
half of the sentence? Likewise, defendants argue, the next sentence
requiring the lessee to submit to the jurisdiction of any court
"so elected by lessor" must mean 3i and not its assignees.
This clever argument, however, is also unavailing. The reason
"lessor" in the phrase "at the sole discretion of lessor" means
Signature is that the phrase names the holder of a
(here a

right belonging to "lessor")

legal

and Paragraph 21

right

empowers

"lessor" to assign its rights to a third-party. By contrast, the
phrase "lessor or its assignee" does not name the holder of a legal
right,

it merely describes

a

right

that

is

being conferred on

"lessor," namely, the right to choose fora for suit.
Other

courts

confronted with

the

same

or nearly the

same

provision have also concluded that it allows assignees to select
their principal place of a business as the forum for litigation.
See, e.g., Wells Fargo Fin. Leasing, Inc. v. NCH Healthcare Sys.,
9

Inc.,

756 F.

Supp.

Nat. Ass'n v.
2476

(JNE)

2d 1086,

1096-97

San Bernardino Pub.

(JJG),

(S.D.

Iowa 2010); U.S. Bank

Employees' Ass'n,

2013 WL 6243946, at *3

No.

13 Civ.

(D. Minn. Dec. 3, 2013)

(allowing an assignee to invoke a clause stating that "[i]f the
Lessor

or

its Assignee

shall

bring any

judicial proceeding

relation to any matter arising under the Agreement,

in

[the Lessee

agrees] any such matter may be adjudged or determined in any court
or courts in the state of the Lessor or its Assignee's principal
place of business .
Moreover,

all at the sole election of the Lessor").

defendants'

interpretation would render the first

half of Paragraph 25 meaningless, as defendants do not explain how
an assignee like Signature might commence a judicial proceeding,
while another party, 3i, exercised the right to choose the forum.
See Hardy ex rel. Dowdell v. Abdul-Martin, 965 A.2d 1165, 1169-70
(N.J.

2009)

(noting that under New Jersey law a contract should

not be read so as to render a term meaningless) .
Additionally,

defendants

adequately demonstrated

that

argue
it

is

that
the

Signature

valid

assignee

has
of

not
the

Schedules because it has not produced any documents showing that
3i assigned the Leases to Everbank. See Def. Reply at 3. However,
even though Signature ultimately "bears the burden of establishing
personal jurisdiction over [defendants] by a preponderance of the
evidence," at the outset Signature "need only make a prima facie
showing that

jurisdiction exists," Ball v.
10

Metallurgie Hoboken-

Overpelt,

S.A.,

omitted),

and

in

jurisdictional
construed,

902

F.2d

the

discovery,

and

any

of

"the

assignment

Sec.

&

(2d
an

Cir.

is

1990)

evidentiary

pleadings

ambiguity

(S.D.N. Y. 2012)

submitted

196

absence

plaintiff[,]" UTC Fire
366, 370

194,

and

resolved,

hearing

affidavits

in

Americans Corp.,

(citation

favor

844

F.

or
are

of

the

Supp.

2d

(quotation omitted). Signature here has

agreements

between

3i

and

Everbank

and

between Everbank and Signature. See McGowan Affidavit, Exs. F, G.
Thus, Signature has plausibly alleged that it is the assignee of
the Schedules,

see Comp!.

and, at this stage,

':lI 24-25,

38-39,

52-53,

66-67,

90-91,

the Court will apply the Lease terms to the

instant dispute for purposes of deciding defendants' motion.
Next,

defendants

applicable,

Paragraph

argue
25

that,

is

even if

the

unenforceable.

Lease

terms

Defendants

do

are
not

specify, however, which law they believe applies to this question.
Numerous
have

applied

selection

federal courts,

including courts in this Circuit,

federal

the

clause

is

law

to

enforceable

question
in

federal

Gordian Group, LLC v. Syringa Exploration,
575, 581-83 (S.D.N.Y. 2016)

of

whether

court.

a

forum

See,

e.g.,

Inc., 168 F. Supp. 3d

(applying federal law to the question

of whether a clause is enforceable in deciding a motion to dismiss
for lack of personal jurisdiction); Seneca Ins. Co. v. Henrietta
Oil Co., No. 02 Civ. 3535 (DC), 2003 WL 255317, at *3-4
Feb. 4, 2 0 0 3)

(same) .
11

(S.D.N.Y.

Moreover,

the

Supreme

Court

established

that

federal

law

applies to the question of whether such clauses are enforceable
for the purposes of evaluating motions to transfer pursuant to

§

1404(a). Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 32 (1988)
(holding

that

"federal

law,

specifically 28

U.S.C.

§

1404 (a),

governs the District Court's decision whether to give effect to
the parties' forum-selection clause" and transfer venue). See also
Martinez v.

Bloomberg LP,

740

F.3d 211,

217-18

(2d Cir.

2014)

(holding that "[t]he overriding framework governing the effect of
forum selection clauses
federal

law,"

and

that

in federal

courts

therefore

federal

is drawn
law

applies

from

to

the

question of whether venue is proper pursuant to Federal Rule of
Civil Procedure 12(b) (3) even in cases where a choice of law clause
specifies the law of another jurisdiction).
To be sure, neither the Supreme Court, nor the Second Circuit,
have addressed whether federal law should apply to the question of
whether these clauses are enforceable when they are being used, as
Judge Posner put it, "in an attempt to obtain personal jurisdiction
that would otherwise be unobtainable." IFC Credit Corp. v. Aliano
Bros.

Gen.

Contractors,

Inc.,

(noting that other "courts,
question whether federal

437 F. 3d 606,

609

(7th Cir.

2006)

including our own, have reserved the

law governs other than in the specific

context exemplified by the Stewart case"). Aside from Aliano Bros.
(which hedged and determined that the clause was enforceable under
12

both state and federal

law),

have directly addressed this
Sarasota Kennel

Club,

Inc.,

only the Sixth Circuit appears to
issue.
489

Preferred Capital,

F.3d 303,

308

Inc.

(6th Cir.

v.

2007)

(holding that,

as federal law would enforce the clause and Ohio

law would not,

"Ohio law should apply to the interpretation of

this forum selection clause. To apply federal law would undercut
both aims of the Erie test -

it would encourage forum shopping by

providing differing outcomes in federal and state court").
This Court adopts

the Sixth Circuit's

reasoning,

which

is

consistent with the clear rule in the Second Circuit that, "[i]n
diversity cases, the issue of personal jurisdiction is governed by
the law of the forum state." D.H. Blair & Co. Inc. v. Gottdiener,
462 F.3d 95, 104 (2d Cir. 2006). See also Erie R. Co. v. Tompkins,
304 U.S. 64, 78
The

(1938).

decisive

question,

then,

is

whether

Paragraph

25

is

enforceable under New York law. The Court finds that it is.
In New York, "parties to a contract may freely select a forum
which

will

resolve

any

disputes

performance of the contract.
and

enforceable

unless

over

the

interpretation

or

Such clauses are prima facie valid

shown

by

the

resisting

party

to

be

unreasonable[.]" Brooke Grp. Ltd. v. JCH Syndicate 488, 87 N.Y.2d
530,

534

U.S.

1

(1996)
(1972));

(citing M/S Bremen v.
see

also

Koob

v.

N.Y.S.2d 426, 433 (App. Div. 1995)
13

Zapata Off-Shore Co.,

IDS

Fin.

Servs.,

Inc.,

407
629

(citing Matter of Smith Barney

v. Luckie, 85 N.Y.2d 193, 201

(App. Div. 1995)

("It is the policy

of the courts of this State to enforce contractual provisions for
choice of law and selection of a forum for litigation").
New York courts have specifically found that forum selection
clauses can be relied upon to establish personal jurisdiction over
out-of-state defendants who otherwise would not be liable to suit
in New York.
Ltd.,

See,

e.g.,

686 N.Y.S.2d 44,

defendant's motion
grounds

that

State Bank of India v.
44

to

(App.

dismiss

defendant

Div.
for

consented

1999)

lack
to

Taj Lanka Hotels

(affirming denial of

of

jurisdiction on

jurisdiction).

However,

the
a

party can overcome the presumption of enforceability by showing
that a clause is "'unreasonable, unjust, in contravention of public
policy, invalid due to fraud or overreaching,' or 'that a trial in
the

selected

forum

would

[resisting party] would,

be

so

gravely

difficult

that

the

for all practical purposes, be deprived

of [their] day in court.'" Best Cheese Corp. v. All-Ways Forwarding
Int'l.

Inc.,

24 A.D.3d 580,

581

(N.Y.

App.

Div.

2005)

(quoting

Premium Risk Group v. Legion Ins. Co., 294 A.D.2d 345, 346 (N.Y.
App. Div. 2002)).
Defendants here argue

that

Paragraph 25

is

invalid,

among

other things, because it was "procured through fraud on the part
of

3i

and/or Everbank"

and,

under New York

law,

provisions

so

procured "will be set aside." See Def. Reply 4 (citing StudebakerWorthington

Leasing,

Corp.

v.

New
14

Concepts

Realty,

Inc.,

887

N.Y.S.2d 752, 757

(App. Div. 2009)

("New Concepts II"). But under

"the prevailing rule" in New York, "to invalidate a forum selection
clause on the ground of
specific

to

the

Worthington

.

jurisdictional

Leasing,

N.Y.S.2d 899

fraud

Corp.

v.

(Dist. Ct. 2007)

the fraud alleged must be
provision
New

itself."

Concepts

Realty,

("New Concepts I")

West Indies Guaranty Trust Co.,

Ltd.

v.

StudebakerInc.,

847

(citing British

Banque Internationale A

Luxembourg, 172 A.D.2d 234 (N.Y. App. Div. 1991); Zurich Insurance
Company v. R. Electric, Inc., 5 A.D.3d 338 {N.Y. App. Div. 2004);
Hunt v. Landers,

309 A.D.2d 900

{N.Y. App.

Div. 2003); Hirschman

v. National Textbook Co., 584 N.Y.S.2d 199 {App. Div. 1992)).
The only exception to this rule is where the fraud so pervades
the agreement as to render it void ab initio. DeSola Group v. Coors
Brewing Co., 199 A.D.2d 141, 141-42 {N.Y. 1993)
Metro.

Life Ins.

aff'd,

250 N. Y.

Co.,
528

223 A.O.
(1928)).

175,

177

{citing Telford v.

(N.Y.

As defendants,

App.

here,

Div.

1928),

do not argue

that the jurisdictional clauses themselves were procured through
fraud, nor have they shown that the agreements were void ab initio,
the Court,

at this stage,

declines to find Paragraph 25 invalid

due to fraud.
Defendants
would be

further

unreasonable,

policy. See Defendants'

argue
unjust,

that
and

enforcement
in

of

Paragraph 25

contravention

of

public

Supplemental Brief in Further Support of

Motion to Dismiss ("Def. Supp.") at 3, Dkt. 21. Specifically, they
15

contend that "New York courts have repeatedly and consistently
held that

forum selection clauses

like

the ones

in the Master

Leases are void and unenforceable because they lack specificity
and predictability, and compel a party to be subject to suit in an
unknown forum." Id.
But Paragraph 25 is not what one might call a "full" forum
selection clause - a contractual term governing where all parties
to a contract may bring suit. A full forum selection clause would
bind Neighbors and Signature to sue only in forums specified in
the

contract

and

would

therefore

allow

either

party

to

oust

jurisdiction if the other sued in a non-selected forum. This was
the type of clause at issue in M/S Bremen.
U.S.

at

13-14

inconvenience

See M/S Bremen,

407

("Manifestly much uncertainty and possibly great
to

both parties

could arise

if

a

suit

could be

maintained in any jurisdiction in which an accident might occur or
if

jurisdiction

were

left

to

any

Unterweser might happen to be found.

place

where

the

Bremen

or

The elimination of all such

uncertainties by agreeing in advance on a forum acceptable to both
parties

is

an

indispensable

element

in

international

trade,

commerce, and contracting."). More generally, in New York, as under
federal

law,

full

forum selection clauses are enforced "because

they provide certainty and predictability in the
disputes." Boss v. Am. Express Fin. Advisors,
247 (2006)

Inc., 6 N.Y.3d 242,

(citing Brooke Grp., 87 N.Y.2d at 534).
16

resolution of

Paragraph 25,

unlike a full forum selection clause, permits

Neighbors to bring a

case arising under the lease in any forum

that would otherwise be proper pursuant to 28 U.S.C. § 1391 or in
any

state

court

where

Neighbors

could

sustain

personal

jurisdiction over Signature. In other words, Paragraph 25 does not
empower Signature to oust jurisdiction in favor of New York in a
hypothetical suit brought by Neighbors in another state. Paragraph
25,

therefore,

is best understood as a "consent to jurisdiction"

clause - a clause that does not specify one forum where all suits
must be brought, but rather requires one or both parties to abandon
jurisdictional defenses when sued by the other party in certain
forums.
One

type

permissive

of

venue

consent

to

jurisdiction clause

clause.

These

clauses

provide

is
a

known as

a

non-exclusive

forum for dispute resolution by specifying, for example, that the
parties "agree to the venue and jurisdiction of any court in the
State

and

County

of

New

York

regarding

any

matter

arising

hereunder." See Orix Credit Alliance,

Inc. v. Mid-South Materials

Corp.,

(examining a

this

816 F.

term).

Supp.

This

230,

231

term ensures

(1993)
that

some

forum

contract with

is

available

to

resolve a dispute, without precluding the parties from arguing in
court that other forums would be more appropriate.
Paragraph

25,

by

contrast,

is

a

mandatory

consent

to

jurisdiction clause - it does not establish one possible forum for
17

the

resolution

of

disputes

arising

under

the

contract

it

guarantees to one party the right to bring cases in the forum of
its choice. Thus, it restricts Neighbors from moving to dismiss or
transfer venue in a case commenced by "lessor or its assignee" in
states where defendants would otherwise already be subject to suit
(e.g.

their state of residence or the state in which the lease

equipment is located) or in the state where Signature's principal
place

of

business

is

located.

And,

though

the

clause

allows

Signature to choose between these options, this does not make it
"permissive," as defendants argue, see Def. Reply at 7-9, because
it still requires the lessee to submit to jurisdiction in whichever
forum Signature chooses.
Mandatory

consent

to

jurisdiction clauses

serve

different

purposes from full forum selection clauses. New York courts enforce
mandatory consent to jurisdiction clauses because they help "avoid
litigation

over

application

of

personal
the

jurisdiction

long-arm

and

statute[.]"

disputes
National

over
Union

the
Fire

Insurance Company of Pittsburg, P.A. v. Williams, 223 A.D.2d 395,
397-398 (N.Y. App. Div. 1996).
Consistent

with

the

different

purpose,

New

York

courts,

rather than require that consent to jurisdiction clauses provide
the

same

sort

of "certainty and predictabi 1 i ty"

as

full

forum

selection clauses (which can be used to oust a plaintiff from his
or her chosen forum)

require only that consent to
18

jurisdiction

clauses be "clear and specific." New Concepts I,

847 N.Y.S.2d at

899. Thus, consent to jurisdiction clauses that force one party to
submit to suit anywhere are unenforceable.

See A.I. Credit Corp.

v. Liebman, 791 F. Supp. 427, 429 (S.D.N.Y. 1992)

(distinguishing

between clauses that define the proper forum based on known but
mutable

facts

and

those

in which

parties

"consent

to

be

sued

anywhere in the world"); Conopco, Inc. v. PARS Ice Cream Co., No.
13 Civ.
2013)

1083

(JSR), 2013 WL 5549614, at *5-6 (S.D.N.Y. Sept. 26,

(declining to enforce a clause requiring defendant to waive

jurisdictional and venue defenses); Brooke Grp., 87 N.Y.2d at 53435

(finding that a clause requiring one party to "submit to the

jurisdiction of a Court of competent jurisdiction within the United
States" did not require defendants to litigate plaintiff's claims
in New York) .
The question thus presented is whether, because Paragraph 25
is also a "floating" mandatory consent to jurisdiction clause
i.e. assignments change where Neighbors consents to being sued
it is therefore too "unclear" and non-specific to be enforced.
The

short

jurisdiction

answer

clauses

is
are

no.

Floating

enforced

in

mandatory
New

York

consent

because

to
they

facilitate the loan assignment market by allowing lenders to assign
loans to other lenders and still sue borrowers for non-payment of
rent in their home jurisdictions. The purpose of the clauses is
not to surprise or inconvenience defendants, but to lower the cost
19

of servicing lease portfolios. Lenders with large books of leases
bring

many

suits

for

non-payment,

and

they

can

manage

these

portfolios more efficiently if they can bring all such suits in
one place.
By enforcing these clauses, New York courts lower borrowing
costs for lessees by expanding the pool of capital available to
finance leases. Were New York courts to invalidate these clauses,
financial institutions in New York might refrain from buying leases
extended in other states, such as Texas, reducing access to capital
for individuals and businesses in these areas. The negative effects
may

be

particularly

pronounced

in

those

areas

with

lower

concentrations of banking assets.
Thus, as Judge Posner again explained, although clauses like
Paragraph 25

favor

one party,

the disfavored party was

likely

"compensated in advance" for conferring a benefit on the favored
party through the other terms of the contract such as the price.
As a result, were the Court to ignore the clause defendants would,
as Judge Posner put it,
F.3d at 610
378

'"reap a windfall.'" Aliano Bros.,

(quoting Nw. Nat.

Ins. Co. v.

Donovan,

437

916 F.2d 372,

(7th Cir. 1990)).
New

York

courts

do,

however,

recognize

that

the

use

of

mandatory consent to jurisdiction clauses can be abused in certain
circumstances, and where, as applied,

they are manifestly unfair

to the debtor, New York courts decline to enforce them.
20

For example, New York courts have dismissed a series of cases
arising out of a nationwide fraud perpetrated by a defunct firm
called NorVergence.

In these cases, the courts gave no effect to

mandatory consent to jurisdiction provisions where the defendants
were

small,

out-of-state,

local

businesses

ill-equipped

to

litigate in New York. See, e.g., New Concepts II, 887 N.Y.S.2d at
756-57

(finding that

business

[based

$150,000

and

in

the defendant "is a
Colorado]

$200,000

and

with
three

small,

gross

privately held

revenues

employees,"

of

which

between
"made

a

substantial showing, which was not contradicted by plaintiff, that
they were tricked .

into signing what was represented to be a

non-binding agreement,

which,

in reality,

was an unconscionably

one-sided contract from which they derived no benefits"); Sterling
Nat'l Bank v. David Stanley Consultants, LLC, No. 103573/2005 (N.Y.
Dist. Ct. Nov. 16, 2005)

(dismissing a NorVergence case involving

a fraudulently induced 60-month lease sold to a West Virginia firm
for $559.41 per month); Sterling Nat'l Bank v. Chang, 809 N.Y.S.2d
484,

484

(App.

Div.

2005)

(permitting an affirmative defense to

personal jurisdiction in a NorVergence case where plaintiff failed
to submit an affidavit regarding its knowledge or notice of fraudin-the-inducement alleged by defendant) .
But even

in the NorVergence cases,

where the parties were

sophisticated businesses, New York courts enforced the mandatory
consent to jurisdiction clauses. For example, the First Appellate
21

Division enforced a nearly identical clause to the one here in a
published, unanimous decision issued in 2006. Sterling Nat. Bank
as Assignee of NorVergence,
Inc.,

35 A.D.3d 222, 223

Inc.

v.

(N.Y. App.

Eastern Shipping Worldwide,
Div. 2006)

(finding that the

clause "clearly provides that if the lease has been assigned .
. then the venue of any legal action shall be in the state where
the principal headquarters of the assignee is located").
In another published opinion, a court in Nassau County, New
York,

applied Eastern Shipping Worldwide and enforced the

same

clause against a Colorado defendant under an agreement the rights
to

which

had been

assigned

to

a

New

York plaintiff.

3

See New

Concepts I, 847 N.Y.S.2d 899. New Concepts, in fact, made many of
the same arguments as Neighbors here (i.e. that it had no contacts
with New York, that there was no relationship between New York and
the underlying dispute, that it had no notice of where it might be
sued).

Id.

Nonetheless,

the Court concluded that the clause was

"clear and specific enough to be enforceable."

Id.

cases and citing,

Inc. v. Assocs.

inter alia,

Preferred Capital,

(collecting

in Urology, 453 F.3d 718, 723 (6th Cir. 2006)).

The court also conducted a survey of New York cases in this area
finding that "the majority of nisi prius decisions rendered on the
issue invalidated the clause, while the appellate decisions around
the country, both state and federal, by and large favor the
clause's validity." New Concepts I, 847 N.Y.S.2d 899.

3

22

Neighbors
locations

in

Affidavit,

Ex.

is

a

nation-wide

Colorado,
1

<JI

40.

Texas,

conglomerate
and

Rhode

with

over

thirty

Island.

See

Elliot

Their Chief Financial Officer signed the

Leases. Company executives likely knew that the Leases were going
to be assigned to a bank headquartered out of state, as the Leases
include assignment clauses and clauses specifying New Jersey law.
Paragraph 25 of the Leases

is

specific and clear;

it put

defendants "on notice at the time of contracting that they were
assuming the risk of litigating in a less convenient forum." IFC
Credit Corp. v. Rieker Shoe Corp., 881 N.E.2d 382, 391 (Ill. App.
Div. 2007). As discussed, "[t]here are legitimate business reasons
for this type of

forum selection clause,

which facilitates

the

marketability of commercial paper because financial institutions
can depend on selling it freely." Id.
Neighbors, it is fair to say, agreed to litigate this case in
the lessor or its assignee's principal place of business, and New
York

courts

enforce

such

bargains

when

they

are

made

between

sophisticated parties and where such enforcement would not deprive
the resisting party of its day in court. As Neighbors appears fully
capable of defending this suit in New York, the Court declines to
invalidate Paragraph 25 and therefore denies defendants' motion to
dismiss plaintiff's complaint.
II.

Venue

23

Defendants move the Court in the alternative to transfer this
case to the Southern District of Texas. See Def. Mem. at 16.
For the convenience of the parties and witnesses, and in the
interest of justice, a district court may transfer any civil action
to any other district or division where it might have been brought.
See 28 U.S.C. § 1404(a). The purpose of§ 1404 "is to prevent the
waste of time, energy and money and to protect litigants, witnesses
and the public against unnecessary inconvenience and expense." Van
Dusen v.

Barrack,

376 U.S.

612,

616

(1964)

(internal quotations

and citation omitted)
Defendants bear the burden of demonstrating by "clear and
convincing evidence" that a case should be transferred, New York
Marine & Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102, 11314 (2d Cir. 2010), and decisions when to transfer venue "lie within
the broad discretion of the district court and are determined upon
notices of convenience and fairness on a case-by-case basis," In
re Cuyahoga Equip. Corp., 980 F.2d 110, 117 (2d Cir. 1992).
A "motion to transfer venue requires a two-step inquiry: the
court

must

determine,

first

whether

the

action

sought

to

be

transferred is one that might have been brought in the transferee
court,
the

and,

second,

convenience

of

whether transfer is appropriate in light of
parties

and

witnesses

and

the

justice." P.E.A. Films, Inc. v. Metro-Goldwyn-Mayer,

24

interest

of

Inc., No. 14

Civ. 7263 (JSR), 2014 WL 6769377, at *l (S.D.N.Y. 2014)

(internal

quotations omitted).
The

second prong

of

the

inquiry

requires

that

the

consider nine factors: "(1) the convenience of witnesses;
location of

relevant

documents

and

re la ti ve

ease of

Court
(2) the

access

to

sources of proof; (3) the convenience of the parties; (4) the locus
of the operative facts;

(5) the availability of process to compel

the attendance of unwilling witnesses;
the parties;
(8)

(7)

(6} the relative means of

the forum's familiarity with the governing law;

the weight accorded the plaintiff's choice of forum; and (9)

trial

efficiency

and

the

interests

of

justice,

based

on

the

totality of the circumstances." Id. at *2 (quotation omitted).
"[A]
based

on

court evaluating a
a

forum-selection

§

1404(a) motion to transfer

clause[,]"

consider arguments about the parties'

however,

"should

not

private interests" as the

parties have "waive[d] the right to challenge the preselected forum
as inconvenient." ErGo Media Capital, LLC v. Bluemner, No. 15 Civ.
1377

(LGS),

2015

WL

6442252,

at

*5

(S.D.N.Y.

Oct.

23,

2015)

(quoting Atl. Marine Constr. Co., Inc. v. U.S. Dist. Court, 134 S.
Ct. 568, 581 (2013)); Atl. Marine, 134 S. Ct. at 581 (holding that
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").
25

Before
therefore,

considering

the

various

aforementioned

factors,

the Court first must determine whether to give effect

to Paragraph 25.
Unlike the question of whether to give effect to Paragraph 25
for

purposes

of

deciding

defendants'

12 (b) (2)

motion,

this

question is governed by federal law. See Martinez, 740 F.3d at 220
(holding that questions "'of venue and the enforcement of forum
selection

clauses

substantive,
federal
Cir.

in

law")

1990)

"federal

are

essentially

nature,'

and

therefore

(quoting Jones v.

specifically

28

should

Weibrecht,

(per curiam)); Stewart,
law,

procedural,

U.S.C.

be

governed

901 F.2d 17,

487 U.S.

at 32

19

by
(2d

(holding that

1404(a),

§

than

rather

governs

the

District Court's decision whether to give effect to the parties'
forum-selection clause") .
Under federal

law,

forum selection clauses are prima f acie

valid and regularly enforced.
103; Nat'l Equip. Rental,
(1964)

See D.H.

Ltd. v. Szukhent,

(noting that "it is settled

may agree

in advance

Blair

&

Co,

375 U.S.

462 F.3d at
311, 315-16

. . that parties to a contract

to submit to the

jurisdiction of a

given

court"). However, under certain circumstances, a federal court may
decline to enforce a forum selection clause if, for example, "trial
in

the

contractual

inconvenient

that

forum

[would]

be

so

[the resisting party]

gravely
will

difficult

and

for all practical

purposes be deprived of his day in court," M/S Bremen, 407 U.S. at
26

18, or "if enforcement would contravene a strong public policy of
the forum in which the suit is brought, whether declared by statute
or by judicial decision," id. at 15 (citation omitted).
Courts in this Circuit apply a multi-factor test to determine
whether to enforce a forum selection clause, weighing"' (1) whether
the

clause

enforcement;

was
(2)

reasonably

communicated

to

the

party

resisting

whether the clause is mandatory or permissive,

i.e., whether the parties are required to bring any .
to the designated forum or simply permitted to do

dispute
so;

and

(3)

whether the claims and parties involved in the suit are subject to
the forum selection clause[.]'" Starkey v. G Adventures, Inc., 796
F.3d 193, 196 (2d Cir. 2015)

(quoting Martinez, 740 F.3d at 217).

Defendants dispute only prong

(2),

contending that Paragraph 25

here is "permissive" not "mandatory."
It is once again critical to differentiate between full forum
selection clauses and consent to jurisdiction clauses. Under prong
(2), where the movant is seeking to oust jurisdiction, it must be
pursuant to a mandatory provision actually barring the plaintiff
from bringing suit in the forum.

Paragraph 25 here,

however,

is

not a full forum selection clause. Instead, it requires defendants,
the party opposing enforcement,

to submit to jurisdiction in New

York. The clause, therefore, has "mandatory force" for the purposes
of prong (2), and is presumptively enforceable. Id.

("'If the forum

clause was communicated to the resisting party, has mandatory force
27

and covers the claims and parties involved in the dispute,
presumptively enforceable'")

it is

(quoting Martinez, 740 F.3d at 217).

"'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.'" Id.

(quoting Martinez,

740 F.3d at 217).

rule in federal court is the same as the rule in New York:
the

fraud

alleged must

be

so

great

as

to

vitiate

the

The
that

entire

agreement or that it must relate to the inclusion of the clause
itself. See Jamco Prods., Inc. v. TopsyTail Co., Inc., No. 93 Civ.
3245

(MGC),

1993 WL 524916,

at

*2

(S.D.N. Y.

Dec.

14,

1993). As

discussed earlier, defendants make no such allegations here.
Defendants also argue that enforcement of Paragraph 25 here
would be

unreasonable.

They cite

four

district

court

cases

in

support of their argument: Nat' l City Commercial Capital Corp. v.
Gateway Pac.

Contractors,

3232440,

*5

at

(S.D.

Inc.,

No.

Ohio Oct.

31,

04 Ci v.
2007)

669

(SJD),

(applying

2007 WL

the

Sixth

Circuit's holding in Sarasota Kennel to a NorVergence lease); Lyon
Fin. Servs.,
5539 (JRT)

Inc.

v. Reno Sparks Ass'n of Realtors,

No.

03 Civ.

(FLN), 2004 WL 234405, at *1-2 (D. Minn. Feb. 4, 2004)

(transferring venue to another district despite forum selection
clause); In re NorVergence, Inc., 424 B.R. 663, 711 (Bankr. D.N.J.
2010)

(applying a Third Circuit test that considers the public

policy of the forum state and concluding that a clause like the
28

one here violated New Jersey public pol icy) ; 4 and Gordian Grp.,
LLC v. Syringa Expl., Inc., 168 F. Supp. 3d 575, 581-82 (S.D.N.Y.
2016)

(declining to enforce a forum selection clause because it

does not provide sufficient notice as to the forum being selected) .
All

of

these

cases

are

inapposite.

Nat' l

City Commercial

involves the application of Ohio law. The court in Lyon Fin. Servs.
weighs the private interest factors in favor of transfer, in effect
invalidating the clause. In re NorVergence applies a Third Circuit
test

that

differs

takes

from

into

both

New

account
York

New
and

Jersey
federal

public
policy.

policy,
And,

which

Gordian

explicitly notes that clauses like Paragraph 25 are enforceable.s
Defendants'

arguments

that

the

clause

is

unenforceable

because of uncertainty are of no moment as the clause does not

"A forum selection clause that does not provide a party with
adequate notice may be considered unreasonable and therefore
invalid under New Jersey law." In re NorVergence, 424 B.R. at 710
(citing Copelco Capital, Inc. v. Shapiro, 750 A.2d 773, 775-776
(N.J. App. Div. 2000) where a New Jersey Court "declined to enforce
a forum selection clause in which litigation was agreed to take
place 'in the state in which our or our assignee's principal
corporate offices are located.'").
5 Defendants also cite a Southern District case from 2003, Seneca,
2003 WL 255317, at *3-4. In Seneca, Judge Chin found that
"enforcement of the forum selection clause would be 'unjust'" where
all "the significant contacts were with Texas" and the only
"contact with New York" is that plaintiff is headquartered here.
Judge Chin reasoned that defendants "could not have knowingly
consented to jurisdiction in New York because . . . the application
form that [defendant] signed did not contain a forum selection
clause" only the policy, which defendant received weeks later
included such a clause. Id. But unlike in Seneca, here, defendants
are sophisticated businesspeople who were on notice of the
contractual terms when they executed the Leases.
4

29

limit

defendants'

choosing.

ability

Paragraph

25,

to

as

bring

suit

mentioned

in

a

forum

earlier,

is

of

their

designed

to

facilitate the assignment market and expand the supply of credit
to areas around the country by making it easier for creditors to
recover when debtors default.
13. Thus,

it "further [ s]

See Aliano Bros.,

437 F.3d at 612-

vital interests of the just ice system,

including judicial economy and efficiency[.]" Magi XXI,
Stato della Citta del Vaticano,

714 F.3d 714,

722

Inc.

v.

(2d Cir. 2013)

(quotation omitted).
Other circuits have enforced substantially similar clauses in
similar

circumstances,

e.g., Assocs.
defendant

as

in Urology,

have

numerous

district

453 F.3d at 723-24

courts.

See,

(holding that where

is "a commercial entity" it "should have realized the

implications of agreeing to

the

inclusion of a

forum selection

clause that did not identify an assignee or specified jurisdiction"
and, having "failed to object to the terms of the forum selection
clause" though defendant "may be dissatisfied with the litigation
forum, it is not our [the Court's] task to save Defendant from the
consequences
Bros.,

437

of

F.3d at

Excavating,

Inc.,

*4-5

Mo.

~~~~~~~~~

(E. D.

(S.D.N.Y.

an

1992)

agreement
612-13;

No.
June

it

1 62 5

2005);

(finding that

sued anywhere in the world,

entered

Popular Leasing USA,

4:04 Civ.

28,

freely

( CAS ) ,

Liebman,

into");
Inc.

v.

Aliano
Terra

2 0 0 5 WL 1 5 2 3 9 5 0 ,
791

F.

"Defendant did not

Supp.
consent

at

at
429

to be

but only in the jurisdiction of the
30

partnership's principal place of business or in the jurisdiction
of a transferee's domicile or principal place of business"); A.I.
Credit Corp. v. Djiounas, No. 91 Civ. 6234
at

*l

(S.D.N.Y.

Bernardino Pub.

June

2,

1992);

Employees' Ass'n,

(JSM), 1992 WL 131783,

U.S.

Bank

Nat.

No.

13 Civ.

Ass'n

2476

v.

(JNE)

San

(JJG),

2013 WL 6243946, at *3 (D. Minn. Dec. 3, 2013).
As

Paragraph

regarding

the

disregarded

25

is

private

(e.g.

that

enforceable,
interest

Texas

is

defendants'

transfer
the

arguments

factors

location

of

must

the

be

critical

witnesses, the relevant books and records, and the final delivery
confirmations, and that venue would be more proper in Texas given
both parties'

presence in Texas,

see Def. Mem.

18-22).

Instead,

the Court must weigh all of the private interest factors in favor
of New York,

and consider arguments only regarding the relative

balance of the public interest factors.

See Atl. Marine,

134 S.

Ct. at 581 ("[a] court accordingly must deem the private-interest
factors to weigh entirely in favor of the preselected forum") .
Defendants point

to two public interest factors

argue weigh in their favor.
facilities

located in Texas

that

they

One is in ensuring that health care
remain operative and uninterrupted

while this dispute is resolved. See Def. Reply at 10. The other is
judicial
York's

efficiency.
interest

in

See

Def.

resolving

Mem.

at

disputes

22.

Plaintiff cites New

arising

out

of

leases

assigned to banks in New York, as New York is a center of national
31

and international banking, as well as the need for uniformity and
certainty

in

the

enforceability

jurisdiction clauses.

See

of

Plaintiff

mandatory

Signature

consent

Financial,

to

LLC' s

Memorandum of Law in Opposition to Defendants' Motion to Dismiss
Plaintiff's Complaint for Lack of Personal Jurisdiction or, in the
Alternative, to Transfer Venue ("Pl. Mem.") at 13, Dkt. 18.
None

of

these

factors

dramatically

outweighs

the

other

factors. Thus, on any balancing, taking into account the mandatory
force of Paragraph 25 of the Leases, plaintiff's choice of forum
must prevail. See Gross v. British Broad. Corp., 386 F.3d 224, 230
(2d Cir.

2004)

(plaintiff's

entitled to substantial

choice

of

forum

is

"presumptively

deference" and should not be disturbed

"unless the balance is strongly in favor of" defendant's motion to
transfer)

(quotations omitted).

III. CONCLUSION
For the reasons set forth above,

the Court,

on October 29,

2017, denied defendants' motion to dismiss plaintiff's complaint
and defendants' motion to transfer venue.

Dated:

New York, NY
December
2017

[j_,

RAKOFF I

32