Tate & Lyle Ingredients Ams., Inc. v. Whitefox Techs. USA, Inc.

• Decision Date: 07 August 2012
• Citation: 2012 N.Y. Slip Op. 05888,949 N.Y.S.2d 375,98 A.D.3d 401
• Court: New York Supreme Court — Appellate Division
• Parties: TATE & LYLE INGREDIENTS AMERICAS, INC., Plaintiff, v. WHITEFOX TECHNOLOGIES USA, INC., et al., Defendants. Whitefox Technologies USA, Inc., et al., Defendants–Counterclaim Plaintiffs–Respondents, v. Tate & Lyle PLC, Additional Defendant on Counterclaim–Appellant.

98 A.D.3d 401

949 N.Y.S.2d 375

2012 N.Y. Slip Op. 05888

TATE & LYLE INGREDIENTS AMERICAS, INC., Plaintiff,

v.WHITEFOX TECHNOLOGIES USA, INC., et al., Defendants.

Whitefox Technologies USA, Inc., et al., Defendants–Counterclaim Plaintiffs–Respondents,

v.Tate & Lyle PLC, Additional Defendant on Counterclaim–Appellant.

Supreme Court, Appellate Division, First Department, New York.

Aug. 7, 2012.

Winston & Strawn LLP, Chicago, IL (Terry M. Grimm of the bar of the State of Illinois, admitted pro hac vice, of counsel), for appellant.

Clifford Chance U.S. LLP, Washington, DC (Stephen M. Nickelsburg of the bar of the District of Columbia, admitted pro hac vice, of counsel), for respondents.

GONZALEZ, P.J., SWEENY, MOSKOWITZ, RENWICK, RICHTER, JJ.

Order, Supreme Court, New York County (Eileen Bransten, J.), entered April 22, 2011, which, insofar as appealed from, denied Tate & Lyle PLC's (Tate PLC) motion to dismiss all counterclaims as against it for lack of personal jurisdiction, unanimously affirmed, without costs.

The court properly denied the motion to dismiss. The general rule under New York law is that parent corporations may not enforce, or have enforced against them, terms of a contract, including forum selection clauses, signed by their separately existing subsidiaries ( see Freeford Ltd. v. Pendleton, 53 A.D.3d 32, 38, 857 N.Y.S.2d 62 [2008],lv. denied12 N.Y.3d 702, 876 N.Y.S.2d 350, 904 N.E.2d 505 [2009] ).

There are three sets of circumstances where a nonsignatory can enforce a forum selection clause. First, a third-party beneficiary of the contract may enforce a forum selection clause. Second, parties to an integrated, global transaction, who are not signatories to a specific agreement within the transaction, may nonetheless benefit from a forum selection clause in one of the other agreements ( id., at 38–39, 857 N.Y.S.2d 62). Neither the first or second circumstance are at issue in this case. As a third circumstance, Freeford states that “a nonparty that is ‘closely related’ to one of the signatories can enforcea forum selection clause” ( id. at 39, 857 N.Y.S.2d 62 [emphasis supplied] ). We find this circumstance applicable here.

While there are many New York cases allowing a forum selectionclause to be enforced by or against nonsignatory plaintiffs, Whitefox cites no case allowing enforcement against a nonsignatory defendant where that defendant is not an employee, successor or alter ego of the signatory. Nevertheless, the federal courts permit a forum selection clause to bind a nonsignatory defendant that has a sufficiently close relationship with the signatory and the dispute to which the forum selection clause applies ( see e.g. Hugel v. Corporation of Lloyd's, 999 F.2d 206, 209 [1993];Manetti–Farrow, Inc. v. Gucci Am. Inc., 858 F.2d 509, 514 n. 5 [9th Cir.1988] [“(w)e agree with the district court that the alleged conduct of the non-parties is so closely related to the contractual relationship that the forum selection clause applies to all defendants”]; see also Universal Grading Service v. eBay, Inc., 2009 WL 2029796, *16, 2009 U.S. Dist. LEXIS 49841, *58 [2009] [“(t)he same standard applies to the determination whether non-signatory defendants are bound by a forum selections clause as applies to non-signatory plaintiffs”] ). Delaware applies a similar test to evaluate whether a forum selection clause can be used to join a nonsignatory defendant into the action ( see e.g. Weygandt v. Weco LLC, 2009 WL 1351808 *5, 2009 Del. Ch. LEXIS 87, *18–19 [Del. Ch. 2009] [“(s)everal cases suggest that when a control person agrees to a forum, it is foreseeable that the entities controlled by that person which are involved in the deal will also be bound to that forum”] ). The rationale behind binding closely related entities to the forum selection clause is to “ promote stable and dependable trade relations” ( id. [internal quotation marks omitted] ). “[I]t would be inconsistent with that policy to allow the entities through which one of the parties chooses to act to escape the forum selection clause” ( id.).

An important consideration in determining whether the nonsignatory is “closely related” to the signatory and the agreement from which the dispute arises is whether “the nonparty's enforcement of the forum selection clause is foreseeable by virtue of the relationship between the nonparty and the party sought to be bound” ( Freeford Ltd. v. Pendleton, 53 A.D.3d at 40, 857 N.Y.S.2d 62;see also Dogmoch Intl. Corp. v. Dresdner Bank, 304 A.D.2d 396, 397, 757 N.Y.S.2d 557 [2003] ).

There is no dispute as to the corporate identities and relationships of the parties to this action. There is also no dispute that the only connection to New York is the choice of law and forum selection clause in the contract signed by plaintiff and defendant. The record amply demonstrates that additional counterclaim defendant Tate PLC, ...