Cruise v. Castleton, Inc., 77 Civ. 5855 (RLC).

• Decision Date: 03 May 1978
• Docket Number: No. 77 Civ. 5855 (RLC).,77 Civ. 5855 (RLC).
• Citation: 449 F. Supp. 564
• Parties: Jimmy CRUISE and Mary Doolittle, Plaintiffs, v. CASTLETON, INC. and United States Trotting Association, Defendants.
• Court: U.S. District Court — Southern District of New York

449 F. Supp. 564

Jimmy CRUISE and Mary Doolittle, Plaintiffs, v. CASTLETON, INC. and United States Trotting Association, Defendants.

No. 77 Civ. 5855 (RLC).

United States District Court, S. D. New York.

May 3, 1978.

COPYRIGHT MATERIAL OMITTED

Greco & Faraldo, Kew Gardens, N.Y., for plaintiffs; Joseph A. Faraldo, Kew Gardens, N.Y., of counsel.

Marshall, Bratter, Greene, Allison & Tucker, New York City, for defendant Castleton, Inc.; James M. Bergen, New York City, of counsel.

Donovan, Leisure, Newton & Irvine, New York City, for defendant United States Trotting Association; A. Vernon Carnahan, Robert L. Magielnicki, New York City, of counsel.

OPINION

ROBERT L. CARTER, District Judge.

Defendant United States Trotting Association ("USTA") moves to dismiss for lack of venue. F.R.Civ.P. 12(b)(3).¹ The basis for the motion is that plaintiffs are members of the USTA, and Article I, § 7 of the USTA's By-Laws provides, in its entirety:

"Every applicant for membership and every member shall be confined in any action at law or in equity against this Association to the jurisdiction of the courts, Federal or State, within which the principal office of the Association is situated."

The principal office of the USTA is in Columbus, Ohio, in the Southern District of Ohio.

Facts

The plaintiffs, New York residents, own, train and race horses. Defendant Castleton is also involved in many aspects of the horse racing business, including the operation of farms where it boards and cares for the horses of other owners. Defendant USTA is a not-for-profit membership corporation. Its purposes are

"to improve the breed of trotting and pacing horses and promote the best interests of harness racing in the United States. USTA's activities include compiling and maintaining extensive and comprehensive breeding, registration and performance records of the standard race horse, and adopting racing rules and standards of competence for participants in the sport of harness racing."²

In furtherance of these goals and activities, the USTA operates a tattoo identification program, whereby members of the Association can have their horses tattooed with a USTA registration number so that there can be no dispute as to the identity and ownership of the horse in question.

This suit, brought under diversity jurisdiction, concerns the accidental switching and misidentification of two horses. According to the complaint, a filly of plaintiffs named Singh was boarded at one of Castleton's farms in Kentucky beginning in June, 1975. It is alleged that sometime thereafter, Castleton negligently mislabeled Singh with the name of another horse called Dream Renevaeh, also in Castleton's possession at that time, thereby switching the identity of these two horses. Around December, 1976, Castleton gave Dream Renevaeh, under the name "Singh," to plaintiffs and gave Singh, then tagged "Dream Renevaeh," to the owners of Dream Renevaeh. It is further alleged that in April, 1977, the USTA negligently tattooed Dream Renevaeh's registered identification number on Singh, completing and solidifying the name switch. Plaintiffs claim that following the discovery of the switch they were compelled to purchase Dream Renevaeh from its proper owner, and that because Singh was tattooed with the wrong identification number it was disqualified from competition, all to the detriment of plaintiffs.

Discussion

The sole ground for USTA's motion to dismiss is that a USTA by-law provides, in effect, that a suit by a member against the USTA can only be brought in Ohio. Plaintiffs argue initially that the by-law is inapplicable to the instant suit because the bylaw should be construed to extend only to actions brought "pursuant to" the by-laws themselves, and not to tort actions between members and the Association.

The gist of plaintiffs' argument is that it would be unreasonable to read the by-law in question literally and apply it to "all conceivable litigation between members and the Association." However, whatever the merits of this position as a general proposition, it is not tested in this case, for a fair reading of the provision is that it was intended to encompass suits which arise out of the membership relationship or the official activities of the USTA. The present suit against the USTA concerns the allegedly negligent tattooing of a horse by the Association. The tattooing program is an official function of the USTA, and the right to have one's horse tattooed is a privilege available only to members of the USTA. Regardless of whether it can be said that this suit is brought "pursuant to" the bylaws, it is within the scope of the forum-selection provision at issue here.

In Wm. H. Muller & Co. v. Swedish American Line Ltd., 224 F.2d 806 (2 Cir.), cert. denied, 350 U.S. 903, 76 S.Ct. 182, 100 L.Ed. 793 (1955),³ a suit in admiralty, the Second Circuit held that the enforceability of a forum-selection clause "depends upon its reasonableness. . . . If the agreement is not unreasonable in the setting of the particular case, the court may properly decline jurisdiction and relegate a litigant to the forum to which he assented." Id. at 808. In The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), the Supreme Court adopted the Muller approach toward such clauses and expanded upon it. The Court there held that, at least in admiralty suits, forum-selection clauses "are prima facie valid," id. at 10, 92 S.Ct. 1907, and should be enforced unless the party resisting application of the clause can "clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." Id. at 15, 92 S.Ct. at 1916. While both Muller and Bremen concerned international maritime agreements, where the argument for enforcing a choice of forum clause is especially cogent, see The Bremen v. Zapata Off-Shore Co., supra, 407 U.S. at 12-14, 92 S.Ct. 1907, the "reasonableness" test that those cases propound is also applicable in purely domestic cases. See, e.g., Central Contracting Co. v. Maryland Casualty Co., 367 F.2d 341 (3d Cir. 1966); Jack Winter, Inc. v. Koratron Co., 326 F.Supp. 121 (N.D.Cal. 1971).

Under Bremen, the party resisting enforcement has the burden of establishing that, "notwithstanding its prima facie validity, the forum clause should not be enforced." Gaskin v. Stumm Handel GmbH, 390 F.Supp. 361, 364 (S.D.N.Y.1975) (Cannella, J.). And the burden so placed on the resister is to show either that under the ordinary principles of contract law the clause is voidable for reasons such as fraud or overreaching, or that enforcement of the forum clause which is valid as a matter of contract law would, under the particular circumstances of the case, be unreasonable and unjust. Ibid.

It is far from clear, however, whether a court sitting in diversity should follow the Bremen approach towards forum-selection clauses or whether, by virtue of the Erie doctrine, it must apply state law on this question. The issue is a complex one, Matthiessen v. National Trailer Convoy, Inc., 294 F.Supp. 1132, 1134 n.3 (D.Minn.1968), about which "it would probably be possible to write at length . .." Geiger v. Keilani, 270 F.Supp. 761, 765 (E.D. Mich.1967).⁴ The issue need not be reached in this case, however, for, if Erie does mandate the application of state law with regard to forum-selection provisions, the state law that would govern here — New York law⁵ — is in substantial conformity with the federal approach of Bremen and would lead to the same result. Since there is no significant difference between the federal and state rule, it is not necessary to choose between them. See Central Contracting Co. v. Maryland Casualty Co., supra, 367 F.2d at 344-45.

The New York Court of Appeals does not appear to have addressed the question of the enforceability of choice of forum clauses; there are, however, several lower court opinions on the issue. In 1961, the Fourth Department of the Appellate Division held that the precise by-law at issue here was unenforceable on the grounds that "a contract . . . which attempts to confer exclusive jurisdiction upon the courts of another state . . . to the exclusion of the New York courts will be declared void as against public policy." Kyler v. United States Trotting Association, 12 A.D.2d 874, 210 N.Y.S.2d 25, 26-27. The Kyler rule was followed and applied in Arsenis v. Atlantic Tankers Ltd., 39 Misc.2d 124, 240 N.Y.S.2d 69 (Civ.Ct. N.Y. County 1963). But since 1963, the New York courts, perhaps influenced by the general trend towards acceptance of the validity of forum clauses, have themselves been much more accepting of such provisions. In 1966, the First Department departed radically from the Kyler rule.

"Although we may not be required to give effect to a contractual provision which ousts our courts from jurisdiction citing, inter alia, to Kyler, we are not precluded from enforcing it where it would be right and proper so to do.. .

There is an increasing disposition on the part of courts to recognize the existence of . . . exceptional circumstances and to give effect to it. Instead of the contract stipulation being unenforceable, whether it should be enforced is now a matter resting in the sound discretion of the court . . .,"

citing to Wm. H. Muller & Co. v. Swedish American Lines Ltd., supra. Export Insurance Co. v. Mitsui Steamship Co., 26 A.D.2d 436, 274 N.Y.S.2d 977, 980. Under Mitsui, the court should exercise its discretion if "the circumstances . . . clearly indicate that fairness and convenience dictate that our courts yield to the foreign jurisdiction." 274 N.Y.S.2d at 981. And in 1969, the Fourth Department, while declining to enforce a forum agreement since it was by its terms inapplicable to the suit at hand, also said that enforcement of such clauses was a discretionary question for the court; the court did not reiterate the position it had earlier taken in Kyler. Hodom...