Karl Koch Erecting Co., Inc. v. NY CONVENTION CTR. DEV.

Citation656 F. Supp. 464
Decision Date19 March 1987
Docket Number86 Civ. 9055 (RWS).,No. 86 Civ. 8943 (RWS),86 Civ. 8943 (RWS)
PartiesKARL KOCH ERECTING CO., INC., Plaintiff, v. NEW YORK CONVENTION CENTER DEVELOPMENT CORPORATION, Defendant, NEW YORK CONVENTION CENTER DEVELOPMENT CORPORATION, Plaintiff, v. KARL KOCH ERECTING CO., INC. and Federal Insurance Company, Defendants.
CourtU.S. District Court — Southern District of New York

Max E. Greenberg, Cantor & Reiss, New York City, for New York Convention Center Development Corp.; Jerome Reiss, Joseph P. Dineen, of counsel.

Berman, Paley, Goldstein & Berman, New York City, for Karl Koch Erecting Co., Inc. and Federal Ins. Co.; Tony Berman, Roger Markowitz, Howard Burger, of counsel.

OPINION

SWEET, District Judge.

New York Convention Center Development Corporation ("NYCCDC") has moved for relief in these related cases charging breach of contract in connection with the construction of the Jacob K. Javits Convention Center (the "Convention Center"). In 86 Civ. 9055, NYCCDC, as plaintiff, has moved to remand the action back to the Supreme Court of the State of New York, County of New York, on the grounds that 1) the parties agreed by contract that the legal forum for resolving disputes would be the state forum, and 2) the Eleventh Amendment bars suits in a federal forum against NYCCDC, a creature of the state. In 86 Civ. 8943, NYCCDC, as defendant, has moved to dismiss the action brought by Karl Koch Erecting Co., Inc. ("Koch") on these grounds and, in addition, on the ground that the prior state court action is pending. For the reasons set forth below, both motions are granted.

The facts relevant to this motion are undisputed. NYCCDC is a public benefit corporation, a subsidiary of the New York State Urban Development Corporation organized by the New York State Legislature to plan, design, construct and develop a convention center in the City of New York. NYCCDC receives its funding from both the City and the State of New York. Koch, a Delaware corporation with its principal place of business in New Jersey, is primarily engaged in the construction business, including the construction and erection of bridges, buildings and other major public structures and facilities.

On or about September 5, 1980, NYCCDC and Koch entered into a written contract wherein Koch agreed to perform certain work and services in connection with the construction of the space frame for the Convention Center. Article 30.10 of the contract, entitled "Limitations on Actions," provides in relevant part that "no action or proceeding shall be commenced by Contractor Koch against Owner NYCCDC except in the Supreme Court of the State of New York, County of New York" (the "Selection Clause"). During the course of erecting the Convention Center, problems arose relating to the work performed by Koch. These contractual disputes are the subject of the two cases at present before this court.

On November 14, 1986, NYCCDC commenced an action against Koch in the Supreme Court of the State of New York, County of New York, by the service of a summons with notice claiming damages for breach of contract, breach of express and implied warranties, negligence, fraud and misrepresentation. Federal Insurance Company, Koch's performance bond surety on the project, was also named as a defendant and served with the summons with notice on November 20, 1986.

On November 20, 1986, Koch commenced a separate diversity action against NYCCDC in this court, 86 Civ. 8943. On November 25, 1986, it served on NYCCDC a notice of the filing of a petition for removal and a removal bond, which removed NYCCDC's action from Supreme Court, New York County to this court, 86 Civ. 9055. Since NYCCDC had never served a formal complaint in the state court action, Koch then served NYCCDC with a notice of appearance and demand. Thereafter, NYCCDC made the instant motions. There is no suggestion that diversity jurisdiction is lacking.

Although NYCCDC has raised several issues in its motions to dismiss and remand, the dispositive issues concern the interpretation and validity of the Selection Clause. The first of those issues is whether the clause applies to Koch's removal of the state court action to federal court. While the provision that "no action or proceeding shall be commenced by Contractor against Owner except in the Supreme Court ..." explicitly applies to the action filed by Koch against NYCCDC in this court, the language "commenced by Contractor against Owner" does not so clearly preclude removal by the Contractor of a state court action brought by the Owner.

The only authorities cited by the parties which explicitly address this issue are District No. 1Pacific Coast Dist. v. Trinidad Corp., 583 F.Supp. 262 (S.D.N.Y.1984), and Pelleport Investors, Inc. v. Budco Quality Theatre, Inc., 569 F.Supp. 612 (D.Cal.1983), aff'd, 741 F.2d 273 (9th Cir. 1984). In Trinidad Corp., this court held that removal was barred by virtue of a valid and enforceable forum selection clause. In so holding, the court stated that parties may contract in advance to waive their right to remove an action from state to federal court. See id. at 265. The language of the contract was explicit, however, providing that:

It is expressly agreed that neither the Company nor the Union will seek the removal from the courts of the State of New York to the federal courts of any such proceeding ... and both the Company and the Union hereby expressly waive their right to seek such removal or institute proceedings ... in any forum other than the courts of the State of New York.

In Pelleport, the court remanded a case removed by the defendant exhibitor on the basis of a forum selection clause which read: "Exhibitor expressly agrees that any and all disputes arising out of or in connection with this Agreement shall be litigated only in the Superior Court for Los Angeles, California...." Therefore, while removal was not explicitly prohibited, the language "shall be litigated only in state court" directly implied that result. These cases are not controlling here, since the language of the contracts were more explicit with respect to a bar to removal than that which obtains in the present case.

To determine the applicability of the clause at issue here to an attempt to remove, a court must construe it in light of its actual purpose, as manifested by an objective consideration of the language of the contract. See, e.g., In re Robertson Class Plaintiffs, 479 F.Supp. 657, 668-69 (S.D.N.Y.1979), aff'd in part, rev'd in part, 625 F.2d 407 (2d Cir.1980). The language "no action or proceeding shall be commenced by Contractor" is necessarily aimed at preventing Koch from dragging NYCCDC into a court other than the one selected by the agreement. Whether or not the contract envisioned the possibility of NYCCDC suing in federal court, it did not permit Koch to choose a forum other than state court when initiating an action. Koch's diversity action clearly violates the Selection Clause.

To allow Koch to remove the action brought by NYCCDC in state court would permit Koch to choose the forum, albeit by different procedural means. The act of removing a state court action constitutes the commencement of the federal court action, and as such is covered by the Selection Clause. While a strict reading of the Selection Clause might result in the removal of the NYCCDC action with a bar to any counterclaim by Koch, such a fragmentation of fora to resolve the issues between the parties would be contrary to the obvious intent of the clause, as well as the well-recognized...

To continue reading

Request your trial
10 cases
  • Ritchie v. Carvel Corp.
    • United States
    • U.S. District Court — Southern District of New York
    • June 20, 1989
    ...Bense v. Interstate Battery System of America, Inc., 683 F.2d 718, 721-22 (2d Cir.1982); Karl Koch Erecting Co. v. New York Convention Center Development Corp., 656 F.Supp. 464, 467 (S.D.N.Y.1987), aff'd, 838 F.2d 656 (2d A forum selection clause is to be enforced, except where the clause i......
  • Paribas Corp. v. Shelton Ranch Corp.
    • United States
    • U.S. District Court — Southern District of New York
    • July 6, 1990
    ...Ltd. Partnership v. Leon-Dielmann Invest. Partnership, 681 F.Supp. 1062, 1064 (S.D.N.Y.1988); Karl Koch Erecting Co. v. New York Convention Center Dev. Corp., 656 F.Supp. 464, 467 (S.D.N.Y.1987), aff'd, 838 F.2d 656 (2d Cir.1988). Forum selection clauses are valid and enforceable consents t......
  • J.B. Harris, Inc. v. Razei Bar Industries, Ltd.
    • United States
    • U.S. District Court — Eastern District of New York
    • August 11, 1998
    ...(Pl.'s Mem. at 10 (emphasis removed).) Plaintiff employs a "seven factor test" utilized by Judge Sweet in Karl Koch Erecting Co. v. New York Convention Ctr. Dev. Corp., 656 F.Supp. 464, aff'd, 838 F.2d 656 (2d Cir.1988), which, according to Plaintiff, represents the proper analysis for exam......
  • Heck-Dance v. Inversiones Isleta Marina, Inc.
    • United States
    • U.S. District Court — District of Puerto Rico
    • August 10, 2005
    ...purpose, as manifested by an objective consideration of the language of the contract". Karl Koch Erecting Co., Inc. v. New York Convention Center Development Corp., 656 F.Supp. 464, 466 (S.D.N.Y.1987) (citations omitted). Likewise, the Court must likewise examine whether the forum selection......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT