S.K.I. Beer Corp. v. Brewery

• Decision Date: 20 July 2010
• Docket Number: Docket No. 06-3501-cv.
• Citation: 612 F.3d 705
• Parties: S.K.I. BEER CORP., Plaintiff-Appellant,v.BALTIKA BREWERY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

612 F.3d 705

S.K.I. BEER CORP., Plaintiff-Appellant,v.BALTIKA BREWERY, Defendant-Appellee.

Docket No. 06-3501-cv.

United States Court of Appeals Second Circuit.

Argued: Oct. 18, 2007.

Decided: July 20, 2010.

Gary Ettelman, Ettelman & Hochheiser, P.C. (Mark S. Pomerantz and Amy Klie, on the brief), Garden City, NY, for Plaintiff-Appellant.

Stephen P. Davidson, DLA Piper US, LLP (Stephanie K. Vogel, on the brief), New York, NY, for Defendant-Appellee.

Before KEARSE, SACK, HALL, Circuit Judges.

HALL, Circuit Judge:

Plaintiff-appellant S.K.I. Beer Corp., a New York beer wholesaler, appeals from the judgment of the United States District Court for the Eastern District of New York (Glasser J.), dismissing its action against defendant-appellee Baltika Brewery, a Russian brewer, based on a forum selection clause in the parties' agreement. See S.K.I. Beer Corp. v. Baltika Brewery, 443 F.Supp.2d 313 (E.D.N.Y.2006). On appeal, S.K.I. Beer Corp. argues that the forum selection clause is unenforceable because: (1) New York Alcoholic Beverage Control Law § 55-c (hereinafter “ § 55-c”), governing agreements between brewers and beer wholesalers, applies to the parties' relationship; (2) applying § 55-c to the parties' relationship would not violate the dormant Commerce Clause; and (3) the forum selection clause is unenforceable because it violates its right under § 55-c “to bring a judicial action in New York for violations of the act,” and “contravenes a strong public policy of the forum state” of protecting beer wholesalers, which is embodied in the statute.¹

BACKGROUND

In 2000, defendant-appellee Baltika Brewery (“Baltika”), the owner of various beer brands, designated plaintiff-appellant S.K.I. Beer Corp. (“SKI”) as its exclusive brand agent in New York State; it did so by a letter to the State of New York Division of Alcoholic Beverage Control Wholesale Bureau. In 2003, Baltika and SKI entered into a written agreement for the purchase and sale of $200,000 worth of Baltika beer and non-alcoholic beverages. According to the agreement, SKI purchased the beverages “on the terms FCA (3, 6-th Verkhniy Pereulok, St. Petersburg, Russia).” ² The agreement provided: “All disputes or differences which may arise in the course of fulfillment of, or in connection with, the present Contract, shall be considered by the Arbitration Court of St. Petersburg and the Leningradskaya Oblast. Awards of the said Court shall be final and binding upon both Parties.” ³ In December 2003, the parties supplemented their agreement, extending it until July 1, 2004.

SKI commenced an action in district court claiming that Baltika had stopped performing under the contract by refusing to fill SKI's order, in violation of both § 55-c and the parties' written agreement. Baltika moved to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(6), arguing inter alia, that the forum selection clause in the parties' agreement mandated dismissal. SKI opposed the motion, claiming that dismissal was precluded by § 55-c because Baltika established a contractual relationship with a New York licensed wholesaler for purposes of having Baltika beer distributed in New York State. SKI also argued that the forum selection clause is unreasonable because it contravenes New York's public policy interest in protecting its licensed beer wholesalers and, if enforced, the clause would deprive SKI of its statutory rights under § 55-c.

The district court granted the motion to dismiss the complaint “based upon the mandatory forum selection clause.” S.K.I. Beer Corp., 443 F.Supp.2d at 325. The court concluded that § 55-c did not apply because “it regulates only those sales and deliveries which take place in the State of New York,” none of the sales or deliveries under the contract occurred in New York, and Baltika was not a brewer subject to the statute. Id. at 322-23. The court determined that even if the contract fell within the scope of § 55-c, the forum selection clause is enforceable because SKI failed to show that the enforcement of the forum selection clause “would impair rights protected by the Statute” and that such rights are “substantial enough to constitute a ‘strong public policy.’ ” Id. at 323.

On appeal, SKI argues three points. It contends that: (1) “Baltika's relationship with SKI is governed by New York's Alcoholic Beverage Control Law;” (2) “applying section 55-c to the relationship between Baltika and SKI would not violate the dormant Commerce Clause;” and (3) “the forum selection clause is unenforceable” because “Section 55-c precludes pre-dispute agreements containing a clause requiring a forum outside of New York,” and “when a state legislative [ sic ] provides for and believes that an in-state forum is necessary to vindicate the rights afforded under a statute, the public policy is sufficiently elevated to overcome the presumed validity of the forum selection clause.”

DISCUSSION

I. Standard of Review

“On an appeal of a district court's dismissal based on a forum selection clause, we review factual findings for clear error and legal conclusions de novo.” Asoma Corp. v. SK Shipping, Co., 467 F.3d 817, 822 (2d Cir.2006).

II. Merits

A. Whether the Forum Selection Clause Is Presumptively Enforceable

This Court has explained that “[d]etermining whether to dismiss a claim based on a forum selection clause involves a four-part analysis” that proceeds in the following manner:

The first inquiry is whether the clause was reasonably communicated to the party resisting enforcement. The second step requires us to classify the clause as mandatory or permissive, i.e., to decide whether the parties are required to bring any dispute to the designated forum or simply permitted to do so. Part three asks whether the claims and parties involved in the suit are subject to the forum selection clause.

If the forum selection clause was communicated to the resisting party, has mandatory force and covers the claims and parties involved in the dispute, it is presumptively enforceable. The fourth, and final, step is to ascertain whether the resisting party has rebutted the presumption of enforceability by 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.”

Phillips v. Audio Active Ltd., 494 F.3d 378, 383-84 (2d Cir.2007) (quoting Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972)) (emphases in original) (citations omitted). In determining whether the forum selection clause is mandatory, “our initial focus is on the language of the contract.” Id. at 386. “A forum selection clause is viewed as mandatory when it confers exclusive jurisdiction on the designated forum or incorporates obligatory venue language.” Id. “ ‘When only jurisdiction is specified the clause will generally not be enforced without some further language indicating the parties' intent to make jurisdiction exclusive.’ Of course if mandatory venue language is employed, the clause will be enforced.” John Boutari & Son, Wines & Spirits, S.A. v. Attiki Imps. & Distribs. Inc., 22 F.3d 51, 52-53 (2d Cir.1994) (quoting Docksider, Ltd. v. Sea Tech., Ltd., 875 F.2d 762, 764 (9th Cir.1989)) (alteration and citations omitted).

Here, there is no dispute that the nature of the forum selection clause in the parties' agreement is mandatory. Nothing in the record indicates, and SKI does not contend, that the forum selection clause was not reasonably communicated to it. The parties do not dispute that SKI's claims arise directly from the agreement containing the forum selection clause and involve the parties to that agreement. In sum, the district court properly concluded that the forum selection clause is presumptively enforceable.

B. New York Alcoholic Beverage Control Law § 55-c

We do not need to decide whether the agreement between SKI and Baltika is subject to § 55-c because, even if § 55-c did apply to the agreement, it does not bar the forum selection clause at issue here.

First, we examine the language of § 55-c. According to the statute, the purpose of § 55-c is as follows:

It is hereby declared to be the policy of this state, that the sale and delivery of beer by brewers to beer wholesalers shall be pursuant to a written agreement. That further, the regulation of business relations between brewers and beer wholesalers is necessary and appropriate to the general economy and tax base of this state and in the public interest.

N.Y. Alco. Bev. Cont. LawW § 55-c(1). The statute also provides, in pertinent parts:

Except as provided for in subdivision ten of this section, beer offered for sale in this state by a brewer to a beer wholesaler shall be sold and delivered pursuant to a written agreement which conforms to the provisions of this section and which sets forth all essential and material terms, requirements, standards of performance and conditions of the business relationship between a brewer and a beer wholesaler. Such agreement may be cancelled, terminated, materially modified or not renewed for good cause as defined in this section, provided the brewer has acted in good faith.

Id. § 55-c(3).

If a brewer fails to comply with the provisions of this section, a beer wholesaler may maintain a civil action in a court of competent jurisdiction within this state for damages sustained in accordance with the laws of this state which shall govern all disputes arising under an agreement or by reason of its making and performance.

Id. § 55-c(6).

SKI contends that § 55-c “grants the wholesaler the right to sue in New York” and the written agreement “takes that right away by requiring a Russian forum.” ⁴ SKI argues that “the right afforded wholesalers to bring a civil action in New York cannot be ‘altered, waived or modified’ prior to a genuine dispute.” Contrary to SKI's contentions, however, while § 55-c(11) states that “[t]he requirements of this section may not be altered, waived or modified by written or...