Forum Selection Clause Insufficient to Warrant Dismissal Where Litigation Does Not Arise Out of Contract Including Clause

On January 12, 2023, Justice Melissa A. Crane of the New York County Commercial Division issued a decision in Meltzer v. Kentucky Hi Tech Greenhouses LLC, 2023 N.Y. Misc. LEXIS 160, dismissing in part and granting in part defendants’ motion to dismiss. The Court denied the motion insofar as it sought dismissal of the entire action pursuant to CPLR 3211(a)(1) based on a forum selection clause in the defendant’s operating agreement or the forum selection clause in a settlement agreement between the parties. The Court held that neither forum selection clause applied because each related solely to specific issues that were not the issues in the pending action, explaining:

The Operating Agreement relates to matters such as the formation of KHTG (Operating Agreement, Art. I), capital contributions and distributions for KHTG (Operating Agreement, Arts. and the management of KHTG (Operating Agreement, Art. IV). While the Operating Agreement does contain a section on management compensation, that section merely describes the process for approval of compensation for managers (Operating Agreement, Art. V ["Management fees may be paid to a Manager in such amounts as are approved by the Members"]). The Operating Agreement does not actually set forth the compensation due to Plaintiffs that is the subject matter of this case; the Resolutions do.

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Nor does the Settlement Agreement establish that forum in New York is improper. The Settlement Agreement relates to a dispute regarding "business opportunities being pursued by Green Ag . . . that should have been made available to [KHTG]" (Settlement Agreement). The Settlement Agreement makes no reference to the compensation disputes at issue in this case. Additionally, the Settlement Agreement was signed between June and July of 2018, pre-dating the Resolutions that determined amounts owed to Meltzer. Therefore, the forum selection clause in the Settlement Agreement, that states "[a]ny controversy or claim arising out of or relating to this Release Agreement shall be brought in a state or federal court located in Jefferson County, Kentucky" (Settlement Agreement, § 17), is irrelevant and does not require dismissal of this action.

While courts will enforce contractual forum selection clauses, they will do so only where the subject matter of the dispute falls within the scope of that clause. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning the enforcement of forum selection clauses or the proper jurisdiction for your dispute.