ALVAREZ MARSHAL VALUATION SERVICES LLC v. SOLAR ECLIPSE INVESTMENT FUND III LLC (2023)

Order, Supreme Court, New York County (Joel M. Cohen, J.), entered on or about June 10, 2022, which, to the extent appealed from, granted defendants' motion to dismiss the complaint as against 24 of the defendants (dismissed defendants) pursuant to CPLR 3211(a)(4) and (8), unanimously affirmed, with costs.

Plaintiff has failed to satisfy its burden of demonstrating personal jurisdiction over the dismissed defendants (see CRT Invs. Ltd. v. BDO Seidman, LLP, 85 A.D.3d 470, 471, 925 N.Y.S.2d 439 [1st Dept. 2011]).  Plaintiff's sole alleged basis for personal jurisdiction over the dismissed defendants is found in the jurisdiction and forum selection provisions of the parties' pre-November 2016 engagement letters, in which the parties agree “that any Federal Court sitting within the Southern District of New York shall have exclusive jurisdiction over any litigation arising out of this Agreement;  to submit to the personal jurisdiction of the Courts of the United States District Court for the Southern District of New York;  and to waive any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of New York for any litigation arising in connection with this Agreement” (exclusive jurisdiction provision).

It is uncontested that New York federal courts do not have subject matter jurisdiction over this dispute, as there is no diversity of citizenship or federal question presented.  Under these circumstances, Supreme Court properly determined that it could not maintain jurisdiction over defendants who signed the pre-November 2016 engagement letters based on the third clause of the exclusive jurisdiction provision, namely, that they had “waive[d] any and all personal rights under the law of any jurisdiction to object on any basis (including, without limitation, inconvenience of forum) to jurisdiction or venue within the State of New York.” The third and final clause of the exclusive jurisdiction provision merely clarifies what the clauses preceding it set forth:  that the parties cannot avoid jurisdiction in the federal court (which is located within New York state) by raising personal jurisdiction or venue objections there;  the waiver clause does not apply to a state action (see Bank of Tokyo–Mitsubishi, Ltd., N.Y. Branch v. Kvaerner a.s., 243 A.D.2d 1, 5, 671 N.Y.S.2d 905 [1st Dept. 1998]).

Supreme Court also providently dismissed the action against the dismissed defendants on the alternative ground that there is a pending action in California.  CPLR 3211(a)(4) vests a court with “broad discretion” in determining whether to “dismiss an action on the ground that another action is pending between the same parties on the same cause of action” (Whitney v. Whitney, 57 N.Y.2d 731, 732, 454 N.Y.S.2d 977, 440 N.E.2d 1324 [1982]).  Here, the California action involves a broader set of parties and issues than the instant action, which was commenced before the New York action, discovery is already underway in the California action, and the indemnification cross-claims filed by plaintiff in the California action were compulsory (see E D & F Man Sugar Ltd. v. Gellert, 202 A.D.3d 475, 476, 158 N.Y.S.3d 827[1st Dept. 2022]).  If this action were permitted to proceed, identical parties would be litigating identical claims based on identical provisions in the engagement letters, in two different states, presenting a risk of inconsistent judgments.  Thus, the court properly exercised its discretion in dismissing the complaint as against the dismissed defendants on the additional ground that there was a prior pending – and more comprehensive – action in California (id.).

We have considered plaintiff's remaining contentions and find them unavailing.