Silverman v. Carvel Corp.

• Decision Date: 27 June 2001
• Docket Number: No. 00-CV-6454L.,00-CV-6454L.
• Parties: Walter SILVERMAN, Plaintiff, v. CARVEL CORPORATION, Defendant.
• Court: U.S. District Court — Western District of New York

Page 1

192 F.Supp.2d 1

Walter SILVERMAN, Plaintiff, v. CARVEL CORPORATION, Defendant.

No. 00-CV-6454L.

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

June 27, 2001.

K. Wade Eaton, Chamberlain, D'Amanda, Oppenheimer & Greenfield, Rochester, NY, for Plaintiff.

Gregory J. Ligelis, Robinson & Cole, LLP, Hartford, CT, for Defendant.

DECISION AND ORDER

LARIMER, Chief Judge.

Plaintiff, Walter Silverman, commenced this action against defendant Carvel Corporation ("Carvel") on September 15, 2000, alleging contractual and tort claims relating to a franchise agreement that formerly existed between Silverman and Carvel. Subject matter jurisdiction is premised on diversity of citizenship under 28 U.S.C. § 1332. Carvel has moved to dismiss the complaint for improper venue pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure.

FACTUAL BACKGROUND

The complaint alleges that in 1989, the parties entered into a franchise agreement ("the agreement"), pursuant to which Silverman was to operate a Carvel retail ice cream store in Rochester, New York, for a period of ten years. See Complaint Ex. A. The agreement also contained a forum selection clause, which forms the basis for defendant's motion to dismiss. The forum selection clause stated, in part:

It is mutually understood and agreed that this Agreement shall be deemed to have been made in the State of New York, County of Westchester, and that any and all performance, or breach thereof shall be interpreted, governed and construed pursuant to the laws of the State of New York. Licensee [i.e., Silverman] consents to the jurisdiction of the courts of the State of New York and waives any claims of forum non conveniens to an action brought against Licensee by Carvel in such courts either during the term of this Agreement or thereafter. As to any legal action that Licensee may bring against Carvel or any officer, director or employee of Carvel, either during the term of this Agreement or thereafter, where only the federal courts have jurisdiction over the subject matter of such legal action it is agreed and understood that such legal action shall only be brought in the United States District Court for the Southern District of New York and that such court shall be deemed to be the court of sole and exclusive venue for the bringing of such action. As to any other legal action that Licensee may bring against Carvel or any officer, director or employee of Carvel, either during the term of this Agreement or thereafter, it is understood and agreed that any such action shall only be brought in the Supreme Court of the State of New York in the County of Westchester and that such Court shall be deemed to be the court of sole and exclusive venue for the bringing of such action.

Complaint Ex. A ¶ 28.

At the time that the parties entered into the agreement, Carvel sold its products exclusively through its franchised retail outlets, as it had for several decades. Around November 1992, however, Carvel established a new distribution program ("the supermarket program"), under which Carvel products would also be sold in supermarkets, restaurants, and other outlets, through wholesale accounts owned by Carvel.

Plaintiff's factual allegations concerning these matters need not be recited in detail for purposes of the present motion to dismiss. Suffice it to say that plaintiff alleges that Carvel's implementation of the supermarket program caused plaintiff to suffer lost profits because customers who wanted to purchase Carvel ice cream products were able to find it not only at Carvel retail stores like plaintiff's, but at supermarkets and other outlets as well. In effect, the program allegedly divided the ice cream cake into more, and smaller, slices. Because of the continued reduction of his sales due to competition from supermarkets and other outlets, plaintiff decided to go independent when the 1989 franchise agreement expired in October 1999.

Plaintiff subsequently commenced the instant action, alleging causes of action for breach of contract and for tortious interference with plaintiff's existing and prospective business relationships. Both claims arise out of Carvel's implementation of the supermarket program in the Rochester area.

Defendant contends that this action falls within the scope of that part of the forum selection clause addressing "any other legal action that Licensee may bring against Carvel ...," which, according to the agreement, "shall only be brought in the Supreme Court of the State of New York in the County of Westchester," which "shall be deemed to be the court of sole and exclusive venue for the bringing of such action." Accordingly, defendant asserts, the instant action should be dismissed for improper venue, or, in the alternative, transferred to Supreme Court, Westchester County.

DISCUSSION

I. Enforceability of Forum Selection Clause¹

Plaintiff contends that the forum selection clause in this case is unenforceable because it lacks mutuality, i.e., it restricts venue only in actions brought by Silverman against Carvel, and contains no similar restriction on venue in actions brought by Carvel against Silverman. Specifically, the agreement provides that "where only the federal courts have jurisdiction over the subject matter" of an action by Silverman against Carvel, such action may only be brought in the United States District Court for the Southern District of New York, and that "[a]s to any other legal action" by Silverman against Carvel, such action may only be brought in the Supreme Court of the State of New York in the County of Westchester. The agreement also implicitly provides that Carvel may bring an action against Silverman in a state court anywhere in New York State, since it states that Silverman "consents to the jurisdiction of the courts of the State of New York and waives any claims of forum non conveniens to an action brought against [him] by Carvel in such courts ...."²

Forum selection clauses-the enforceability of which is governed by federal law, see Jones v. Weibrecht, 901 F.2d 17, 19 (2d Cir.1990); Licensed Practical Nurses, Technicians and Health Care Workers of New York, Inc. v. Ulysses Cruises, Inc., 131 F.Supp.2d 393, 396 (S.D.N.Y.2000)-are presumptively enforceable. See New Moon Shipping Co., Ltd. v. MAN B & W Diesel AG, 121 F.3d 24, 29 (2d Cir.1997) (noting plaintiff's burden "to make a `strong showing' in order to overcome the presumption of enforceability" of a forum selection clause). The Supreme Court has stated that forum selection clauses "are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be `unreasonable' under the circumstances." M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). The Court has itself upheld the validity of forum selection clauses in a number of cases. See, e.g., Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 589-95, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n. 14, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985); Bremen, 407 U.S. at 8-18, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).

In accordance with these principles, the Second Circuit has stated that "it is well-established that [forum selection] clauses will be enforced unless it clearly can be shown that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching." Karl Koch Erecting Co. v. New York Convention Ctr. Dev. Corp., 838 F.2d 656, 659 (2d Cir.1988) (internal quotation marks and citations omitted). In Roby v. Corporation of Lloyd's, 996 F.2d 1353 (2d Cir.), cert. denied, 510 U.S. 945, 114 S.Ct. 385, 126 L.Ed.2d 333 (1993), the court listed the following factors for courts to consider in determining if a forum selection clause is unreasonable:

(1) if their incorporation into the agreement was the result of fraud or overreaching ...; (2) if the complaining party "will for all practical purposes be deprived of his day in court," due to the grave inconvenience or unfairness of the selected forum ...; (3) if the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy ...; or (4) if the clauses contravene a strong public policy of the forum state.

Id. at 1363 (citations omitted).

As explained, the basis for Silverman's contention that the clause at issue is unenforceable is its nonmutuality. The Second Circuit addressed this subject in Karl Koch, 838 F.2d 656. There, a forum selection clause expressly barred the plaintiff from commencing suit in a forum other than state court, but it was silent as to whether the defendant's choice of forum was also so limited. The plaintiff argued that a forum selection clause that expressly limits only one party is unenforceable, basing this argument on the then-existing New York rule that arbitration agreements binding only one party are not valid. Id. at 659; see, e.g., Cored Panels, Inc. v. Meinhard Commercial Corp., 72 A.D.2d 544, 420 N.Y.S.2d 731 (2d Dep't 1979); Firedoor Corp. of Am., Inc. v. R.K. & A. Jones, Inc., 47 A.D.2d 878, 366 N.Y.S.2d 443 (1st Dep't 1975).

The Second Circuit rejected the plaintiffs argument, for two reasons. First, the court stated, "it [wa]s not at all clear that this particular forum-selection clause lacked mutuality." 838 F.2d at 660. The court stated that one could have interpreted the clause to mean that all disputes arising out of the parties' contract had to be litigated in state court, irrespective of which party commenced suit. Id. Second, the court said, even if the forum selection clause applied only to the plaintiff, "arbitration agreements and forum-selection clauses involving the judicial system are quite distinguishable. In the former case, the parties `trade[] the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration,'" id. (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.,...