Mclarty Capital Partners SBIC, L.P., v. Brazda et al
Filing
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MEMORANDUM OPINION & ORDER re: 19 FIRST MOTION to Remand to State Court New York filed by Mclarty Capital Partners SBIC, L.P 7 MOTION to Change Venue . filed by Seth Mercantel, Steven Brazda. The defendants' Marc h 30 motion to transfer is denied. McLarty's April 23 motion to remand the action to state court is granted. The Clerk of Court is directed to remand the action to the New York State Supreme Court, County of New York. (As further set forth in this Order.) (Signed by Judge Denise L. Cote on 6/20/2018) (cf)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
MCLARTY CAPITAL PARTNERS SBIC, L.P., on :
its own behalf and in its capacity as :
Agent for Caleura Limited,
:
:
Plaintiffs,
:
:
-v:
:
STEVEN BRAZDA and SETH MERCANTEL,
:
:
Defendants.
:
:
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18cv2599(DLC)
MEMORANDUM OPINION
& ORDER
APPEARANCES
For the plaintiffs:
Frank T. Spano
Polsinelli, PC
600 Third Avenue, 42nd Floor
New York, New York 10016
For the defendants:
Christopher M. Rodriguez
Wilson Elser Moskowitz Edelman & Dicker, LLP
150 East 42nd Street
New York, New York 10017
Kent M. Adams
Two Houston Center
909 Fannin Street, Suite 3300
Houston, Texas 77010
DENISE COTE, District Judge:
Defendants Steven Brazda and Seth Mercantel move to
transfer this action to the United States District Court for the
Western District of Louisiana, Lafayette Division.
Plaintiff
McLarty Capital Partners SBIC, L.P. (“McLarty”) moves to remand
the action to the New York State Supreme Court, New York County.
For the following reasons, the motion to transfer is denied and
the motion to remand is granted.
Background
The following facts regarding the underlying transaction
are as alleged in the complaint and are taken from documents
integral to the complaint.
The descriptions of those facts
relevant only to the motion to transfer are taken from the
parties’ submissions in connection with the motion to transfer.
Plaintiff McLarty Capital Partners SBIC, L.P. (“McLarty”)
is a Delaware limited partnership with an office located in New
York, New York.
Its members are citizens of New York, Arkansas,
Alabama, and Connecticut.
McLarty acted, in the transaction
underlying this dispute, as an agent and co-lender for Caleura
Limited (“Caleura”).
McLarty lent money to Deepcor Marine, Inc.
(“Deepcor”), a now-defunct commercial diving company
headquartered in Broussard, Louisiana, that provided diving
services, primarily on the Gulf Coast, to customers in the oil
and gas industry from June 2014 to December 2016.
Defendants
Steven Brazda and Seth Mercantel are citizens of Louisiana who
worked for Deepcor.
Brazda was its President and CEO; Mercantel
was its Vice President of Finance.
In June 2014, Deepcor entered into a loan agreement (the
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“Original Loan”) with McLarty for $12,400,000.
months, Deepcor was in default.
Within a few
In November 2014, the
defendants travelled to New York for two meetings with McLarty,
where the defendants presented market information, the value of
Deepcor’s assets and accounts receivable, and projections of the
company’s future performance.
When Deepcor failed to comply with the minimum liquidity
requirement of the Original Loan for the second time, in March
2015, Brazda requested a “revolving credit facility to solve its
cash flow problems.”
Relying on the information provided by
Brazda and Mercantel during the November 2014 meetings, McLarty,
on April 24, 2015, entered into an Amended Loan and Security
Agreement with Deepcor (the “Amended Loan”), a modified version
of the Original Loan.
The Amended Loan Agreement contained the
following forum selection clause:
14.8 CHOICE OF LAW; VENUE. THE VALIDITY, INTERPRETATION
AND ENFORCEMENT OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK WITHOUT REFERENCE TO CONFLICTS EXCEPT TO THE EXTENT
THAT ANY OTHER LOAN DOCUMENT INCLUDES AN EXPRESS ELECTION
TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION. EACH
BORROWER AND AGENT HEREBY CONSENTS TO THE JURISDICTION OF
ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK, NEW
YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS
SHALL BE LITIGATED IN SUCH COURTS.
Brazda signed the Amended Loan Agreement as President of
Deepcor.
The “borrower” and “agent” are defined in the Amended
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Loan Agreement as Deepcor and McLarty, respectively.
By June
30, 2015, Deepcor defaulted on the Amended Loan.
The defendants attended two additional meetings with
McLarty in New York in 2014, on May 27 and December 3.
Shortly
after the December 3 meeting, McLarty entered into another loan
agreement with Deepcor that increased the loan commitment to
$15,000,000 (the “New Loan”).
Deepcor defaulted on the New Loan
in March 2016.
Throughout this time, Brazda and Mercantel served as
McLarty’s primary contacts at Deepcor, providing McLarty with
ongoing reports on the company’s financial health from Deepcor’s
office in Broussard, Louisiana.
McLarty claims that these
reports, along with several statements regarding Deepcor’s
accounts receivable and the value of its assets, materially
misrepresented Deepcor’s business and induced McLarty to loan
money to Deepcor.
Both Brazda and Mercantel live and work in Louisiana and
claim to lack the resources to litigate in New York.
The
defendants have listed a number of Louisiana-based individuals
they contend will likely be called as witnesses in this case,
including former employees of Deepcor, a representative from an
equipment appraiser, and former Deepcor customers.
The location
of relevant documents and sources of proof is in dispute.
Defendants claim that all relevant documents and sources of
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proof are located in a storage unit in Louisiana, while McLarty
asserts that this evidence “is all in New York or under
McLarty’s control.”
On February 20, 2018, McLarty sued the defendants in New
York state court, in their individual capacities, alleging
fraud, aiding and abetting, and negligent misrepresentation and
seeking damages in excess of $3,000,000.
On March 23, the
action was timely removed to federal court on the basis of
diversity jurisdiction.
The defendants moved on March 30 to
transfer the case to the Western District of Louisiana,
Lafayette Division, under 28 U.S.C § 1404(a).
McLarty opposes
the transfer motion and moved on April 23 to remand the action
back to state court pursuant to the forum selection clause in
the Amended Loan Agreement.
The motion to transfer became fully
submitted on May 2, and the motion to remand became fully
submitted on May 14.
Discussion
“When the parties have agreed to a valid forum-selection
clause, a district court should ordinarily transfer the case to
the forum specified in that clause” unless “extraordinary
circumstances unrelated to the convenience of the parties”
exist.
Atl. Marine Constr. Co. v. U.S. Dist. Court, 571 U.S.
49, 62 (2013).
“[T]he fact a party is a non-signatory to an
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agreement is insufficient, standing alone, to preclude
enforcement of a forum selection clause.”
Aguas Lenders
Recovery Grp. v. Suez, S.A., 585 F.3d 696, 701 (2d Cir. 2009).
The Second Circuit has held that a non-signatory “may enforce
[a] forum selection close against a signatory when the nonsignatory is closely related to another signatory.”
Magi XXI,
Inc. v. Stato della Citta del Vaticano, 714 F.3d 714, 723 (2d
Cir. 2013) (citation omitted).
It has not yet resolved,
however, the extent to which a signatory may enforce a forum
selection clause against a non-signatory when the non-signatory
is not a successor in interest of a signatory.
n.10.
See id. at 723
Other Circuits have enforced a forum selection clause
against a non-signatory where the non-signatory is closely
related to the signatory.
See, e.g., Marano Enters. of Kan. v.
Z-Teca Rests., L.P., 254 F.3d 753, 757 (8th Cir. 2001) (A
shareholder, officer, and director); Hugel v. Corp. of Llyod’s,
999 F.2d 206, 209-10 (7th Cir. 1993) (President of two signatory
companies, chairman of each signatory’s board, and owner of 99%
of each signatory).
The closely-related test looks at the “the
relationship between the non-signatory and [the] signatory” to
determine whether they are “sufficiently close that . . .
enforcement of the forum selection clause is foreseeable.”
XXI, 714 F.3d at 723 (citation omitted).
“Parties are free to bind themselves to forum selection
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Magi
clauses that trump what would otherwise be a right to remove
cases to federal courts.”
72, 76 (2d Cir. 2009).
Yakin v. Tyler Hill Corp., 566 F.3d
“[T]he meaning of a forum selection
clause is a matter of contract interpretation.”
Id. at 75.
A
forum selection clause that uses “mandatory rather than
permissive” language indicates that the parties “intend[ed] to
make jurisdiction exclusive.”
John Boutari & Son, Wines &
Spirits, S.A. v. Attiki Importers & Distributors Inc., 22 F.3d
51, 52-53 (2d Cir. 1994) (citation omitted).
A court may remand
an action even where diversity jurisdiction exists if a forum
selection clause exclusively authorizes suit in state court.
See Karl Koch Erecting Co. v. N.Y. Convention Ctr. Dev. Corp.,
838 F.2d 656, 659 (2d Cir. 1988).
The forum selection clause in the Amended Loan Agreement is
enforceable against Brazda and Mercantel because the defendants
are closely related to the signatory, Deepcor, and McLarty’s
claims against both defendants arise out of a series of
transactions that include the Amended Loan Agreement, which
contains the forum selection clause.
Brazda and Mercantel were
both officers of Deepcor, and Brazda signed the agreement
containing the forum selection clause on Deepcor’s behalf.
Moreover, McLarty alleges that the defendants made
misrepresentations to McLarty in order to obtain the loans
governed by the document in which the forum selection clause is
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found.
In light of these circumstances, it was foreseeable to
Brazda and Mercantel that they could be sued in New York for
claims arising out of the loan agreements they procured,
allegedly through misrepresentations, on Deepcor’s behalf.
Accordingly, the Court will enforce the forum selection clause
and deny the defendants’ motion to transfer.
The parties have also addressed at length in their motion
papers the private and public factors a court must weigh in
evaluating a § 1404 transfer motion.
See, e.g., N.Y. Marine &
Gen. Ins. Co. v. Lafarge N. Am., Inc., 599 F.3d 102, 112 (2d
Cir. 2010).
If it were necessary to reach such factors, the
defendants have failed to carry their burden to show that these
factors outweigh the significant deference to which the
plaintiff’s choice of a New York forum is entitled in this
action.
See Atl. Marine, 571 U.S. at 62 n.6.
Indeed, the
defendants have not argued that McLarty’s selection of a New
York forum was motivated by forum shopping or another improper
motive.
See Iragorri v. United Tech. Corp., 274 F.3d 65, 71-72
(2d Cir. 2001) (discussing, in related forum non conveniens
context, that deference is owed to plaintiff’s choice of forum
where the “choice of forum has been dictated by reasons that the
law recognizes as valid”).
The forum selection clause in the Amended Loan Agreement
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provides as follows:1
Each borrower and agent hereby consents to the
jurisdiction of any state or federal court located
within New York, New York and irrevocably agrees that,
subject to agent’s election, all actions or
proceedings arising out of or relating to this
agreement or the other loan documents shall be
litigated in such courts.
The clause “subject to agent’s election” unambiguously allows
the “agent,” defined in the Amended Loan Agreement as McLarty,
to select a New York venue for any dispute governed by the
clause.
McLarty filed this action in New York state court, and
the defendants do not suggest that, in the event the forum
selection clause is enforceable against them, this case should
not be remanded.
As a result, McLarty’s motion to remand is
granted.
Conclusion
The defendants’ March 30 motion to transfer is denied.
McLarty’s April 23 motion to remand the action to state court is
Through this clause, Deepcor also consented to jurisdiction in
New York. The defendants have not moved to dismiss for lack of
personal jurisdiction over them.
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granted.
The Clerk of Court is directed to remand the action to
the New York State Supreme Court, County of New York.
SO ORDERED:
Dated:
New York, New York
June 20, 2018
____________________________
DENISE COTE
United States District Judge
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