P.S. Fin., LLC v. Eureka Woodworks, Inc.
| Docket Number | 2019–08723,Index No. 150833/17 |
| Decision Date | 15 February 2023 |
| Citation | 184 N.Y.S.3d 114 |
| Parties | P.S. FINANCE, LLC, etc., respondent, v. EUREKA WOODWORKS, INC., defendant, Parker Law Firm, Ltd., et al., appellants. |
| Court | New York Supreme Court — Appellate Division |
Richard A. Rosenzweig, Staten Island, NY, for appellants.
Raul J. Sloezen, Yonkers, NY, for respondent.
FRANCESCA E. CONNOLLY, J.P., LINDA CHRISTOPHER, WILLIAM G. FORD, BARRY E. WARHIT, JJ.
CONNOLLY, J.P.
This appeal presents novel questions related to jurisdiction, as well as arbitration and forum selection provisions in agreements. The first question is whether, upon reviewing an agreement and determining that an arbitration provision governs, a court should, sua sponte, direct the parties to arbitrate. We hold that a court should not direct parties to arbitrate absent a request from one of the parties.
The second question requires us to examine the circumstances under which non-signatories to an agreement containing a forum selection provision may be bound by that provision consistent with due process. We hold that non-signatories to an agreement may be bound by that agreement's forum selection provision when they are signatories to a related agreement, which forms part of the same transaction, and are closely related to both the transaction and one of the signatories to the agreement containing the forum selection provision.
The defendant Eureka Woodworks, Inc. (hereinafter Eureka), was a Texas corporation, located in Texas, and was in the business of designing and manufacturing beach furniture and wooden advertising displays. On April 20, 2010, the Deepwater Horizon oil rig spilled large quantities of oil into the Gulf of Mexico. Eureka alleged that its revenue and profits decreased due to the effects the oil spill had on the hotel industry along the Gulf of Mexico. As a result, Eureka filed a claim for damages with the Gulf Coast Claims Facility (hereinafter the GCCF). The defendant Timothy S. Parker and his law firm, the defendant Parker Law Firm, Ltd. (hereinafter the Parker Law Firm; hereinafter together with Parker the attorney defendants), as well as nonparty Watts Guerra, LLP (hereinafter Watts Guerra), represented Eureka in connection with its claim with the GCCF.
The plaintiff, P.S. Finance, LLC (hereinafter PSF), was a New York limited liability company in the business of advancing funding to plaintiffs in litigation, including personal injury litigation and commercial claims. According to PSF, in exchange for the funds that PSF advanced to plaintiffs in litigation, the plaintiffs agreed to pay a portion of the potential proceeds of their litigation to PSF. However, if the plaintiffs did not recover money from their litigation, then the plaintiffs were not obligated to pay PSF.
On March 14, 2012, PSF and Eureka entered into an agreement entitled "Plaintiff's Agreement to Pay Proceeds Contingent on Successful Settlement, Judgment or Verdict and Receipt of Proceeds: Agreement to Assign Proceeds" (hereinafter the Agreement to Pay). The Agreement to Pay defined Eureka as the "Plaintiff." Pursuant to the Agreement to Pay, PSF agreed to provide the total sum of $120,250 to Eureka in connection with the "Litigation," a term which was defined to include Eureka's claim with the GCCF and any other related actions or claims. In section 2 of the Agreement to Pay, Eureka agreed to repay PSF the sum advanced, plus specified interest, from the proceeds of the settlement, judgment, and/or verdict in the Litigation. However, the next sentence provided that "PSF is to be paid only if such proceeds are received through settlement, judgment or verdict." Section 3(b) provided that "in the event there is no recovery from settlement, judgment or verdict in the [Litigation], [Eureka] will owe no money to PSF and [Eureka] shall have no liability whatsoever to PSF."
The Agreement to Pay provided that it was governed by New York law. Section 9 of the Agreement to Pay contained a forum selection clause, providing that Eureka acknowledged and agreed that "all disputes that arise concerning the terms, conditions, interpretation or enforcement of this agreement shall be determined in a Court of competent jurisdiction in New York."
Section 10 of the Agreement to Pay provided that "[a]ny controversy or claim arising out of or relating to this contract, including without limitation the interpretation, validity, enforceability or breach thereof, shall be settled by final, binding arbitration administered by the American Arbitration Association in accordance with its commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof."
In section 14, PSF and Eureka agreed that the Agreement to Pay, Eureka's "Irrevocable Grant of Lien, Assignment of Proceeds and Lien Payment Instructions" (hereinafter the Irrevocable Lien), and the "Attorney Acknowledgment of Explanation of Terms to Plaintiff of Irrevocable Lien and Assignment" to PSF (hereinafter the Attorney Acknowledgment) "constitute the entire agreement of the parties hereto." The Agreement to Pay was signed by a representative of PSF and by Harry Wilk, the president of Eureka.
In the Irrevocable Lien, Eureka granted PSF an irrevocable assignment of its "settlement, verdict and/or judgment proceeds in connection with" the Litigation. The Irrevocable Lien further provided that Eureka authorized and directed its attorney, Parker, to pay PSF in accordance with the terms of the Agreement to Pay, the Irrevocable Lien, and the Attorney Acknowledgment. Wilk signed the Irrevocable Lien on behalf of Eureka on March 14, 2012.
The first sentence of the Attorney Acknowledgment provided that the undersigned attorney for Eureka acknowledged receipt of the Agreement to Pay and the Irrevocable Lien. In the next sentence, the attorney agreed to distribute any proceeds of the "Litigation," a term which was defined to include Eureka's claim with the GCCF and any other related actions or claims, in accordance with the terms of all agreements signed by Eureka in favor of PSF. The Attorney Acknowledgment provided that:
The Attorney Acknowledgment further provided that the "ATTORNEY ACKNOWLEDGES THAT I HAVE REVIEWED THE CONTRACT AND EXPLAINED TO [EUREKA] THE TERMS CONTAINED THEREIN, INCLUDING, BUT NOT LIMITED TO, THE ANNUALIZED RATE OF RETURN SET FORTH IN THE DISCLOSURE STATEMENT ON PAGE 1 OF [THE AGREEMENT TO PAY]." On March 14, 2012, Parker signed the Attorney Acknowledgment before a notary public in Arkansas. Wilk signed the Attorney Acknowledgment on behalf of Eureka.
In April 2017, PSF commenced this action in the Supreme Court, Richmond County, against Eureka and the attorney defendants by summons and motion for summary judgment in lieu of complaint pursuant to CPLR 3213. PSF alleged that, in exchange for $120,250, Eureka and the attorney defendants assigned to PSF a portion of the proceeds of Eureka's claim with the GCCF, and despite Eureka and the attorney defendants receiving settlement funds from the GCCF, they failed to pay PSF its portion of the proceeds. In an attorney affirmation in support of its motion, PSF requested that the court grant PSF summary judgment on its causes of action based on breach of contract, breach of the covenant of good faith and fair dealing, and breach of fiduciary duty in handling trust funds. Attached to the affirmation was the Agreement to Pay, the Irrevocable Lien, and the Attorney Acknowledgment, as well as receipts for wire payments totaling $120,000 from PSF to Eureka, an email from Wilk with an attached letter from the GCCF dated January 13, 2012, offering Eureka a final payment of $376,016.44 on its claim, and an email exchange between Maria Franco of Watts Guerra and Carmen DeSantis of PSF, in which Franco described Eureka's receipt of two payments from the GCCF, one on April 9, 2012, in the amount of $176,727.73, and another on May 3, 2012, in the amount of $137,595.14 (hereinafter the subject payments).
On May 12, 2017, Eureka and the attorney defendants opposed PSF's motion for summary judgment in lieu of complaint, and submitted, among other things, affidavits from Wilk, Parker, and Mikal Watts, an attorney with Watts Guerra, as well as a memorandum of law.1 In their affidavits, Wilk, Parker, and Watts averred, among other things, that the subject payments were emergency or "interim payments" from the GCCF. However, they averred that neither of the subject payments stemmed from any "judgment, settlement or verdict," that Eureka never received a settlement, judgment, or verdict in its favor in connection with the Litigation, and that Eureka's claim for damages arising from the Deepwater Horizon oil spill was ultimately denied because Eureka was located outside the geographic area eligible for compensation under the program.
In his affidavit, Parker additionally averred that neither of the attorney defendants were a party to the agreement between PSF and Eureka. He also averred that he was not licensed to practice law in New York, and that neither he individually, nor the Parker Law Firm, owned any property in New York, had any clients in New York, or had any offices in New York. Parker further averred that, in the last 35 years, he had only been in New York once, for a couple of hours, for a connecting flight. Eureka and the attorney defendants’ joint...
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