Opinion
23423/06.
Decided May 19, 2008.
Richard V. Singleton, II, Esq., Blank Rome, LLP, New York, NY, Attorney for Plaintiff.
George M. Chalos, Esq., Chalos O'Connor Duffy, LLP, Washington, NY, Attorney for BMT Nigel.
Maureen Fogel, Esq., Herzfeld Rubin, PC, New York, NY, Attorney for Atlantic Detroit.
Attorney for Derektor Robert E. Derecktor, Inc., Simon Harter, Esq., New York, NY.
This is an action by plaintiff operator of a commercial ferry service in New York harbor for damages alleged to have resulted from the negligent or defective design and negligent manufacture of vessels by Derecktor Shipyards Conn., LLC and Robert E. Derecktor, Inc. ("Derecktor"). Derecktor brought a third-party action for contribution and indemnification against BMT Nigel Gee LTD ("Nigel Gee"), based in the United Kingdom, which provided design services to Derecktor, Atlantic Detroit Diesel Allison, LLC ("Atlantic"), based in New Jersey, which supplied propulsion systems, including engines, for the vessels, and Poseidon, B.V. ("Poseidon"), based in the Netherlands, which provided the propeller systems for three of the vessels.
Third-party-defendant Nigel Gee has moved, pursuant to CPLR § 3211, for dismissal of the complaint against it in reliance upon a provision in the contract with Derecktor that "The contract is to be governed by English Law and both parties are required to submit to the jurisdiction of the English Courts", contending that such provision constitutes a binding forum selection clause which divests this court of subject matter jurisdiction. Nigel Gee further relies upon an arbitration provision contained within a Settlement Agreement previously entered with Derecktor that similarly provides that English law governs and requires the submission of any dispute to arbitration in London. Finally, Nigel Gee, as a foreign corporation, disputes this court's jurisdiction over its person.
Nigel Gee has further moved for the dismissal of the cross-claim of third-party-defendant Atlantic for contribution and indemnification based upon the lack of jurisdiction.
The threshold issue in both motions is whether this court has personal jurisdiction over Nigel Gee as a foreign corporation.
Long-Arm Jurisdiction
As movant itself notes, CPLR § 302(a)(1) grants jurisdiction over a non-domiciliary as to a cause of action arising out of a contract to supply goods or services in the state and CPLR § 302(a)(3)(ii) provides for such jurisdiction where the non-domiciliary commits a tortious act outside the State causing injury within the State, where such defendant reasonably should expect that its tortious conduct would have such consequences within the State, and the defendant "derives substantial revenue from international commerce." The gravamen of the complaint herein is tortious negligence in the performance of professional services in the United Kingdom which were known to have ultimate consequences in New York State where the allegedly defectively designed vessels were intended and designed to be used. . The only issue is whether Nigel Gee derives income from sources outside the United Kingdom, and particularly in New York State, sufficient to warrant requiring it to defend litigation in New York.
In opposition to the motion, Peter Doering, Derecktor's Project Manager (Doering), states that his company has multiple outstanding contracts with Nigel Gee for the design of other vessels to be built by Derecktor for delivery in the United States and cites to the terms of the settlement previously reached between the parties which reflects credits applied by Nigel Gee against balances due it from Derecktor on other contracts as indicating that Nigel Gee "derives substantial revenue from international commerce". In its subsequent reply papers, Nigel Gee does not dispute that this is so.
In LaMarca v. Pak-Mor Manufacturing Co., 95 NY2d 210, 214, the Court of Appeals set forth the criteria for conferral of jurisdiction under CPLR 302(a)(3)(ii) as including five elements:
the commission of a tortious act outside the State, out of which the cause of action arises, causing injury within the State of New York, which was reasonably foreseeable, and that substantial revenue is derived from interstate or international commerce. The Court explained that the fifth element, revenue derivation, "is designed to narrow the long-arm reach to preclude the exercise of jurisdiction over nondomiciliaries who might cause direct, foreseeable injury within the State but "whose business operations are of a local character'", citing Ingraham v. Carroll, 90 NY2d at 599. As evidenced by the undisputed Doering Affidavit representations, Nigel Gee is an international designer of marine vessels which provides its services all over the world and, in furtherance of its contractual responsibilities, enters a foreign jurisdiction to confer with the contracting parties, as it has done with respect to its several contracts with Derecktor. There is no risk here that a strictly local company is being unreasonably forced to litigate in New York in violation of due process. Nigel Gee's argument that Derecktor has failed to establish that it is doing business in New York pursuant to CPLR 301 and 302 is without moment as that is not the basis for the exercise of long-arm jurisdiction applicable here.
Choice of Law and Forum Clause
Nigel Gee further contends that paragraph 16 of the "Terms and Conditions" of the "QUOTATION" for the subject watertaxis, submitted to Derecktor on Nigel Gee's letterhead, and which apparently serves as the contract between the parties, requires dismissal of the third-party action against it for lack of subject-matter jurisdiction. The paragraph reads:
LAW
The contract is to be governed by English law and both parties are required to submit to the jurisdiction of the English Courts.
Nigel Gee contends that this provision constitutes a mandatory exclusive forum selection clause which divests this court of jurisdiction.
Contrary to Nigel Gee's argument that because the contract specifies that English law is to govern, the law of England must determine the interpretation and enforceability of this provision, it is well settled that "[q]uestions of venue and the enforcement of forum selection clauses are essentially procedural, rather than substantive, in nature'" ( Korean Press Agency, Inc. V. Yonhap News Agency, 421 F. Supp.2d 775, 778 [SDNY 2006], quoting Jones v. Weibrecht, 901 F2d 17, 19 [2d Cir. 1990]), and must be determined by the law of the forum( Gambar Enterprises, Inc. V. Kelly Services, Inc., 69 AD2d 297,304 [2d Dept, 1979]; Education Resources Institute, Inc. V. Piazza, 17 AD2d 513 [2d Dept, 2005]). The provision requiring the application of English law "operated only to import the substantive law of [England]" ( Sears, Roebuck Co. V. Enco Associates, Inc., 43 NY2d 389,397 [1977]). There is no doubt that the clause requires the application of English law to the substantive issues herein; however, as movant concedes, this is not an impediment to this court's jurisdiction as "[New York] courts are frequently called upon to apply the laws of foreign jurisdictions" ( Intertec Contracting A/S v. Turner Steiner International, SA, 6AD3d 1, 6 [1st Dept, 2004]).
In support of its argument that the law of England should be applied in interpreting the forum selection clause herein, movant has provided the Affidavit of Patrick R. Williams, an English solicitor. Interestingly, a review of Mr. Williams analysis of English law regarding the mandatory exclusivity of the subject clause suggests that the application of English law, conceded to be "uncertain", might well lead this court to the same result as that reached herein based upon New York law, as the factors to be considered are similar. The advisory opinions of Mike Lax, also an English solicitor, submitted by Derecktor, further support this suggestion, but Mr. Lax adds that an English court might not enforce an exclusive venue provision, even if mandatory under the terms of the contract, if the designated jurisdiction is inappropriate given the location of the parties and the evidence or where the enforcement of the provision would result in the fragmentation of litigation creating the possibility of inconsistent decisions, citing Konkola Copper Mines PLC v. Coromin Ltd,[2006] 1 Lloyd's Rep page 410. In this case, were this court to grant dismissal of the third-party action against Nigel Gee based on paragraph 16 of the contract, the litigation would still proceed in this jurisdiction between plaintiff New York Trans Harbor and Derector, which would implicate the potential liability of Nigel Gee, thus requiring Nigel Gee to participate in this action in New York for its own protection.
While forum selection clauses are generally enforced, a determination as to the exclusivity of the choice of a particular forum depends upon the specific language of the contractual provision. See Boss v. American Express Financial Advisors, Inc., 6 NY2d 242, 246-247; Brooke Group Ltd. V. JCH Syndicate 488, 87 NY2d 530, 534. The election to apply the law of a particular jurisdiction is not dispositive; there must be an expressed mandate to litigate disputes only in the designated forum. A clause, like that herein, which merely provides that the contracting parties are "required to submit to the jurisdiction of "a specified court, does not bind the parties to litigate exclusively in that forum, but only requires submission to the authority of that forum if served with process to appear there. Such language only identifies a permissive, rather than a mandatory, venue. See Brooke at 534; John Boutari and Son, Wines and Spirits, SA v. Attiki Importers and Distributors Incorporated, 22 F3d 51 [2d Cir, 1994]; Steve Weiss Co., Inc. v. Inalco, SPA, 1999 WL 386653[SDNY]; Investools, Inc. v. Waltz, 2006 NY Misc LEXIS 3731 [Sup Ct, NY county 1993]. Thus, the clause in the contract between Derecktor and Nigel Gee does not mandate exclusive jurisdiction in the English courts and the motion to dismiss on that ground is denied.
Arbitration Clause
The original watertaxi design contract between Nigel Gee and Derecktor was entered on or about October 29, 2001; the contract between Derecktor and plaintiff was entered on or about January 31, 2002. The watertaxis were delivered between August, 2002 and September, 2003. Subsequently, plaintiff complained of defects relating to "vibration issues" claimed to be causing structural damage. Despite Derecktor's efforts to remedy the problems, the complaints continued and were finally submitted, on consent of the parties, to an "Expert Panel" to assess the cause. Based upon the findings of the Panel that the causes "were due to improper design of the vessels, faulty propulsion systems, improper design of the vessels' propellers and related equipment, and operational error by the NYWT" (Doering Affidavit, paragraph 10), Derecktor sought reimbursement from Nigel Gee for expenses it had incurred and anticipated costs of additional modifications. Following negotiation between Derecktor, Nigel Gee and Nigel Gee's insurer, a Settlement Agreement was reached, signed by Derecktor on April 20, 2006 and by Nigel Gee on May 2, 2006. Clause 1 of the Settlement Agreement states:
DSY [Derecktor] will accept the sum of USD 542,496.73, in full and final settlement of the Dispute and any and all known claims which DSY may have against NGA [Nigel Gee], in relation to the Vessels.
Thereafter, in mid-August of 2006, the instant suit was commenced by plaintiff against Derecktor. Nigel Gee argues that the settlement reached with Derecktor precludes the maintenance of the third-party action against it and seeks dismissal pursuant to CPLR 3211(a)(5) based upon payment of the settlement. Derecktor contends, based upon the negotiations and the language of clause1 that the settlement applied to "any and all known claims", that, because the instant additional claims of plaintiff had not been identified at the time of the settlement, the Settlement Agreement does not preclude its action against Nigel Gee.
Since this is a motion brought pursuant to CPLR 3211, in which the allegations of the complaint must be accepted as true and accorded every reasonable inference ( Leon v. Martinez, 84NY2d 83, 87 [1994]), and Derecktor has adduced sufficient evidence to create a factual issue regarding the intended scope of the Settlement Agreement, the court must deny the motion to dismiss based upon the terms of the Settlement Agreement alone.
However, Clause 10 of the Settlement Agreement reads: This Agreement shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with it shall be referred to arbitration in London before three arbitrators. . . . The arbitration to be governed by the Arbitration Act 1996 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provision of this Clause.
CPLR Article 75 reflects the long-standing policy of this State to encourage the resolution of disputes through arbitration and to enforce an unequivocal contractual agreement to arbitrate, like that here. See State of New York v. Philip Morris Incorporated , 8 NY3d 574; God's Battalion of Prayer Pentecostal Church, Inc. V. Miele Associates, LLP, 6 NY3d 371. This is particularly so where the arbitration provision is contained within a settlement since "it is the nature of a settlement to eliminate unpredictable litigation" ( State v. Philip Morris, 8 NY2d at 581; see also, Matter of Waks ( Waugh), 91 AD2d 575 [1st Dept, 1982], aff'd, 59 NY2d 723).
The provision contained in the Settlement Agreement is clear and unambiguous in directing that the resolution of any dispute between Derecktor and Nigel Gee regarding the interpretation of the settlement be by arbitration in London. Thus, the determination as to whether the Settlement Agreement precludes further recovery by Derecktor against Nigel Gee must be deferred to arbitration in London. The suggestion by Derecktor that, in moving for dismissal based upon the arbitration clause contained in the Settlement Agreement, Nigel Gee has waived its right to arbitration, is rejected. The court is advised that such arbitration has already been commenced and is hopeful that a decision will be forthcoming soon. In any event, the issue subject to arbitration will not be dispositive of the underlying suit here concerning whether Derecktor is liable to New York Trans Harbor. It is, therefore, not necessary to stay this matter pending the arbitration in London and discovery shall proceed in this action. Movant Nigel Gee, of course, remains subject to the jurisdiction of this court.Nigel Gee's motion to dismiss the third-party complaint of Derecktor is denied.
Having determined that Nigel Gee is subject to this court's jurisdiction, it's motion to dismiss the cross-claim of Atlantic is denied. As Atlantic was not a party to the Settlement Agreement, whatever the outcome of the arbitration in London, Atlantic would retain any rights it has with respect to Nigel Gee.
The foregoing constitutes the decision and order of the Court.