Party May Invoke Forum Selection Clause Against Non-Signatory Closely Related to a Signatory

On August 29, 2017, the First Department issued a decision in Universal Investment Advisory SA v. Bakrie Telecom PTE, Ltd., 2017 NY Slip Op. 06344, holding that parties that did not sign an agreement could nonetheless be bound by the agreement's forum selection clause, explaining:

[T]he motion to dismiss the third, fifth and seventh causes of action should have been denied without prejudice and the parties permitted to conduct jurisdictional discovery because plaintiffs have demonstrated that facts may exist in opposition to the motion to dismiss and are therefore entitled to the disclosure expressly sanctioned by CPLR 3211. Under New York law, a signatory to a contract may invoke a forum selection clause against a non-signatory if the non-signatory is closely related to one of the signatories such that enforcement of the forum selection clause is foreseeable by virtue of the relationship between the signatory and the party sought to be bound. If the nonsignatory party has an ownership interest or a direct or indirect controlling interest in the signing party, or, the entities or individuals consulted with each other regarding decisions and were intimately involved in the decision-making process, then, a finding of personal jurisdiction based on a forum selection clause may be proper, as it achieves the rationale behind binding closely related entities to the forum selection clause which is to promote stable and dependable trade relations.

Here, plaintiffs allege that the individual defendants, by virtue of their senior management positions, power and decision-making authority, and B & B, as the parent company of BTEL and as a principal shareholder of 39.6% of BTEL's stock, had actual knowledge at the time of the offering that BTEL was insolvent and would be incapable of meeting its obligations under the notes; that they authorized, participated in, and promoted the offering; and that they caused the offering memoranda to be distributed into the marketplace. This is enough, at this stage, to permit jurisdictional discovery as to the nature of B & B's and the individual defendants' actual knowledge and role in the offering of the notes, and their responsibilities connected thereto, because this information, which may result in a determination that the nonsignatories are indeed closely related to the signing parties, is a fact that cannot be presently known to plaintiffs, but rather, is within the exclusive control of defendants.

(Internal quotations and citations omitted) (emphasis added).