ENVIROLITE ENTERPRISES v. Glastechnische Industrie, 84 Civ. 7617 (RLC).

• Citation: 53 BR 1007
• Decision Date: 03 October 1985
• Docket Number: No. 84 Civ. 7617 (RLC).,84 Civ. 7617 (RLC).
• Parties: ENVIROLITE ENTERPRISES, INC., Plaintiff, v. GLASTECHNISCHE INDUSTRIE PETER LISEC GESELLSCHAFT M.B.H., Defendant.
• Court: U.S. District Court — Southern District of New York

53 B.R. 1007 (1985)

ENVIROLITE ENTERPRISES, INC., Plaintiff, v. GLASTECHNISCHE INDUSTRIE PETER LISEC GESELLSCHAFT M.B.H., Defendant.

No. 84 Civ. 7617 (RLC).

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

October 3, 1985.

Brown, Raysman & Millstein, New York City (Peter Brown, New York City, of counsel), for plaintiff.

Wender, Murase & White, New York City (W. Jeffrey Garson, New York City, of counsel), for defendant.

OPINION

ROBERT L. CARTER, District Judge.

On June 9, 1982, plaintiff Envirolite Enterprises, Inc. ("Evirolite") and defendant Glastechnische Industrie Peter Lisec Gesellschaft M.B.H. ("Lisec") entered into an agreement under which Lisec would sell to Envirolite certain equipment used in the manufacture of glass windows. The equipment was delivered in late 1982, and installed by Lisec at Envirolite's plant.

Printed on the reverse side of page one of the agreement, in German, was a set of terms and conditions of sale and delivery of the equipment. Paragraph eleven of the terms and conditions reads as follows, as translated by Lisec:

Place of Performance and Competent Court

Place of performance for payments is Ulmerfelt-Hausmening; for delivery of goods the applicable plant of Seller. Exclusive jurisdiction for disputes arising out of manufacture and delivery contracts with domestic or foreign customers is the court within whose jurisdiction Lisec\'s principal place of business is located i.e. Amstetten-Hausmening, Austria. Austrian law shall be applied.

Plaintiff accepts defendant's translation for purposes of this motion (Brown Affidavit in Opposition to Motion to Dismiss ¶ 5).

In March, 1984, Envirolite filed a voluntary petition for reorganization under Chapter Eleven of the United States Bankruptcy Code, 11 U.S.C.A. § 101 et seq., in the Bankruptcy Court for the Southern District of New York. Envirolite has continued in operation of its business as a debtor-in-possession, and no trustee has been appointed. In its schedule of liabilities filed with the Bankruptcy Court, Envirolite listed Lisec as a disputed creditor.

On October 22, 1984, Envirolite filed a complaint against Lisec in this court alleging breach of contract, fraud in the inducement, and breach of warranty. Lisec answered on December 28, 1984, denying all liability, raising certain compulsory counterclaims, and asserting, inter alia, the defense of improper venue.

Plaintiff filed its first set of interrogatories on December 12, 1984. On January 2, 1985, defendant informed plaintiff that it (defendant) was planning to move to dismiss for improper venue, and suggested that discovery be deferred until after the court ruled on that motion. Plaintiff demurred, and defendant filed its first set of interrogatories on January 15, 1985.

On February 5, 1985, Lisec moved the Bankruptcy Court under 11 U.S.C. § 362 to lift the automatic stay preventing Lisec from attempting to regain possession of the equipment delivered to Envirolite. A hearing was held on February 14, 1985, at which Lisec appeared and presented evidence, and the motion was granted.

The case is currently before the court on Lisec's motion to dismiss for improper venue pursuant to 28 U.S.C. § 1406(a).

DISCUSSION

Lisec argues that venue is improper in New York because the purchase and sale agreement contains a forum selection clause requiring that all litigation arising out of the agreement be brought in Austria.

Envirolite argues that the forum selection clause does not apply to this action because this action does not "arise out of" the sales agreement between it and Lisec. Envirolite notes that the forum clause by its terms governs only those "disputes arising out of manufacture and delivery contracts" between Lisec and its customers. Envirolite contends that this suit is not such a dispute because the complaint includes claims for fraudulent inducement and breach of warranty, matters outside the four corners of the contract.

The difficulty with Envirolite's reasoning "is that it ignores the reality that the . . . contract is the basic source of any duty to Envirolite. There is no evidence suggesting that the clause was not intended to apply to all claims growing out of the contractual relationship. If forum selection clauses are to be enforced as a matter of public policy, that same public policy requires that they not be defeated by artful pleading of claims such as negligent design, breach of implied warranty, or misrepresentation. . . . We agree with those courts which have held that where the relationship between the parties is contractual, the pleading of alternative non-contractual theories of liability should not prevent enforcement of such a bargain." Coastal Steel Corp. v. Tilghman Wheelabrator, Ltd., 709 F.2d 190, 203 (3d Cir.), cert. denied, 464 U.S. 938, 104 S.Ct. 349, 78 L.Ed.2d 315 (1983) (emphasis in original). See also Bense v. Interstate Battery System of America, Inc., 683 F.2d 718 (2d Cir.1982); Cruise v. Castleton, Inc., 449 F.Supp. 564 (S.D.N.Y.1978) (Carter, J.); Full-Sight Contact Lens Corp. v. Soft Lenses, Inc., 466 F.Supp. 71 (S.D.N.Y.1978) (Pierce, J.).¹

The two cases cited by Lisec to support its position are inapposite. In Fantis Foods, Inc. v. Standard Importing, 63 A.D.2d 52, 406 N.Y.S.2d 763 (1st Dep't 1978), reversed on other grounds, 49 N.Y.2d 317, 425 N.Y.S.2d 783 (1980), the Appellate Division did not enforce a forum selection clause governing "any eventual difference or discord . . . that may arise from the present agreement," but in that case the only cause of action was the tort of conversion, truly unrelated to any contract between the parties. And in Hodom v. Stearns, 32 A.D.2d 234, 301 N.Y.S.2d 146 (4th Dep't), appeal dismissed, 25 N.Y.2d 722, 307 N.Y.S.2d 225 (1969), the forum selection clause governed "all suits . . . commenced under the Agreement." The court ruled that a suit containing a count for fraudulent inducement was not commenced under the agreement, and therefore did not enforce the forum selection clause. But the court also took pains to emphasize that the language "commencing under" is more restrictive than the language "arising out of" — the language in the instant case. Id. at 236, 301 N.Y.S.2d at 148.

Consequently, the court holds that the forum selection clause in the agreement between Envirolite and Lisec by its terms applies to this litigation.

Envirolite further argues that Lisec waived its objections to venue in the Southern District of New York by moving the Bankruptcy Court in this district for the lifting of the stay on the equipment it delivered to Envirolite, and by serving Lisec with interrogatories in the instant action.

Envirolite relies heavily on In re Lombard-Wall, Inc., 44 B.R. 928, 936 (Bankr.S. D.N.Y.1984), in which Bankruptcy Judge Ryan concluded that where a creditor files a proof of claim with the bankruptcy court, the creditor thereby consents to bankruptcy court jurisdiction over the debtor's objections or counterclaims that are necessary for adjudication of the claim. Envirolite concedes that Lisec filed no proof of claim in this case,² but asserts that Lisec's motion to lift the automatic stay, its participation in the stay hearing, and its offer of proof on issues relating to the parties' rights under their agreement are for all practical purposes the equivalent of the proof of claim relied on in Lombard-Wall. Plaintiff argues that Envirolite's claims against Lisec in this court, arising out of the same transaction upon which Lisec based its actions in Bankruptcy Court, is a counterclaim as to which Lisec has given implied consent to be sued on in the Bankruptcy Court for this district. Under the Bankruptcy Amendment and Federal Judgeship Act of 1984, 28 U.S.C. §§ 151, 157, the Bankruptcy Court for this district constitutes a unit of this court. Therefore, Envirolite concludes, Lisec has effectively consented to adjudication of this action in this court.³

The rule in Lombard-Wall, however, does not govern this case. Lombard-Wall deals with consent to the Bankruptcy Court's jurisdiction. In the instant motion, Lisec does not contest the court's jurisdiction, but rather claims venue is improper. Venue may be improper even where there concededly is jurisdiction. The distinction between jurisdiction and venue in this context is highlighted by the Third Circuit's recent observation in Coastal Steel Corp. v. Tilghman Wheelabrator, Ltd., supra, 709 F.2d at 204: "We know of no authority supporting the proposition that the filing of a proof of claim is a waiver of . . . a forum selection clause" (emphasis added).

Second, and more importantly, Lisec's actions in the instant matter do not, as a matter of law, constitute waiver of its objections to venue. Under the Bankruptcy Code, the filing of Envirolite's bankruptcy petition in March, 1984, put in place a stay preventing, inter alia, "any act to obtain possession . . . of property from the estate." 11 U.S.C. § 362(a)(3). On January 31, 1985, Lisec inspected the equipment in which it claims it has a security interest. Lisec found that the equipment was being stored out of doors, where it was rusted, and in some instances, covered with snow (Stay Hearing Transcript at 34-36). Lisec found that the equipment's remaining value was rapidly being destroyed, and concluded that immediate action was required. It moved, therefore, for the stay to be lifted.

Under these circumstances, there was no waiver of the parties' contractual forum selection clause. Lisec did not choose to litigate in this forum and then, at a later time, seek to disavow its voluntary choice of forum. To the contrary, it was Envirolite who chose to file for bankruptcy in the Southern District of New York, and Lisec simply acted to protect itself.

A much closer analogy exists between this case and M.S. Bremen v. Zapata OffShore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). That case was in part a proceeding in rem against a foreign tug. During the...