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Fasano v. Yu

United States Court of Appeals, Second Circuit

April 12, 2019

Joe Fasano, Individually and on Behalf of All Others Similarly Situated, Altimeo Optimum Fund, Individually and on Behalf of All Others Similarly Situated, Altimeo Asset Management, Individually and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants,
v.
Peggy Yu Yu, Dangdang Holding Company Limited, E-Commerce China Dangdang, Inc., Kewen Holding Company Limited, Science & Culture International Limited, First Profit Management Limited, Danqian Yao, Lijun Chen, Min Kan, Defendants-Appellees, Guoqing Li, Ruby Rong Lu, Ke Zhang, Xiaolong Li, Defendants.

          Argued: March 12, 2019

          On Appeal from the United States District Court For the Southern District of New York

         Appeal from a judgment of the United States District Court for the Southern District of New York (Failla, J.), dismissing plaintiffs-appellants' complaint on the ground of forum non conveniens. We conclude that the district court abused its discretion by failing to consider the forum selection clause contained in the relevant documents and its impact on the forum non conveniens analysis.

         Vacated and Remanded.

          Samuel J. Lieberman (Ben Hutman, on the brief), Sadis & Goldberg, LLP, New York, New York, for Plaintiffs-Appellants.

          Abby F. Rudzin (Asher L. Rivner and Seth Aronson, on the brief), O'Melveny & Myers LLP, New York, New York, and Los Angeles, California, for Defendants-Appellees.

          Before: Wesley, Chin, and Sullivan, Circuit Judges.

          PER CURIAM

         Plaintiffs-appellants Altimeo Asset Management, Altimeo Optimum Fund, and Joe Fasano (collectively, "Plaintiffs") appeal from a judgment of the district court entered January 2, 2018, dismissing their complaint against defendants-appellees E-Commerce China Dangdang, Inc. ("Dangdang") and its directors, executives, controlling shareholders, and affiliated companies (collectively, "Defendants"). Suing on behalf of a putative class, Plaintiffs asserted claims for damages under federal and state law in connection with a "going private merger" by which certain controlling defendants purchased American Depositary Shares ("ADSs") from Dangdang's minority shareholders. Plaintiffs contend that the consideration paid by Defendants was below market and grossly unfair. By opinion and order entered December 29, 2017, the district court granted Defendants' motion to dismiss on the ground of forum non conveniens, holding that the Cayman Islands provided an adequate alternative forum. We assume the parties' familiarity with the underlying facts, procedural history, and issues on appeal.

         We review dismissals of a complaint for forum non conveniens for abuse of discretion. Martinez v. Bloomberg LP, 740 F.3d 211, 216 (2d Cir. 2014); Norex Petroleum Ltd. v. Access Indus, Inc., 416 F.3d 146, 153 (2d Cir. 2005). Factual findings are reviewed for clear error and legal conclusions de novo. See Martinez, 740 F.3d at 217; Asoma Corp. v. SK Shipping Co., 467 F.3d 817, 822 (2d Cir. 2006). "A district court abuses its discretion in dismissing on the ground of forum non conveniens when its decision '(1) rests either on an error of law or on a clearly erroneous finding of fact, or (2) cannot be located within the range of permissible decisions, or (3) fails to consider all the relevant factors or unreasonably balances those factors.'" Aguas Lenders Recovery Grp. v. Suez, S.A., 585 F.3d 696, 699-700 (2d Cir. 2009) (quoting Pollux Holding Ltd. v. Chase Manhattan Bank, 329 F.3d 64, 70 (2d Cir. 2003)).

         In general, we have recognized that when a defendant moves to dismiss on the ground of forum non conveniens, courts assess: (1) the deference to be accorded the plaintiffs choice of forum; (2) the adequacy of the alternative forum proposed by the defendants; and (3) the balance between the private and public interests implicated in the choice of forum. Norex Petroleum, 416 F.3d at 153. Where the parties have contractually selected a forum, however, the forum selection clause "substantial[ly] modifi[es]" the forum non conveniens doctrine and the "usual tilt in favor of the plaintiffs choice of forum gives way to a presumption in favor of the contractually selected forum." Martinez, 740 F.3d at 218 (citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12 (1972)).

         Nevertheless, the presumption of enforceability is not automatic. Instead, a district court must consider three factors in determining whether the presumption of enforceability applies to a forum selection clause: whether (1) the clause was reasonably communicated to the party resisting its enforcement; (2) the clause is mandatory or permissive; and (3) the claims and parties to the dispute are subject to the clause. Magi 714 F.3d at 721 (citing Phillips v. Audio Active Ltd., 494 F.3d 378, 383-84 (2d Cir. 2007)). If the district court concludes that the presumption applies, it must then consider a fourth factor - whether the presumption of enforceability has been properly rebutted by "a sufficiently strong showing that 'enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching."' Id. (quoting Phillips, 494 F.3d at 384).

         With respect to the deference afforded to Plaintiffs' choice of forum, Defendants acknowledge that the receipts for the ADSs contained a mandatory forum selection clause, which provides that certain controversies, claims, or causes of action arising out of the ADSs "shall be litigated in the Federal and state courts in the Borough of Manhattan, The City of New York." J. App'x 389.[1] If the presumption of enforceability applies, Plaintiffs' choice of forum controls unless Defendants can show that the forum selection clause is unreasonable, unjust, fraudulent, or an overreach. Cf Magi, 714 F.3d at 720-21 ("[F]orum selection clauses are prima facie valid and should be enforced unless enforcement is shown by the resisting party to be unreasonable under the circumstances . . . or unless the forum selection clause 'was invalid for such reasons as fraud or overreaching'" (citation omitted)); Carey v. Bayerische Hypo-Und Vereinsbank AG, 370 F.3d 234, 237 (2d Cir. 2004) (holding that the forum non conveniens doctrine is a "discretionary device" that permits dismissal "when an alternative forum has jurisdiction to hear [a] case, and when trial in the chosen forum would establish . . . oppressiveness and vexation to a defendant . . . out of all proportion to plaintiff's convenience." (internal quotation marks omitted)). However, the district court did not address or even mention the forum selection clause and did not consider whether enforcement of the clause would be unreasonable or unjust. Instead, it engaged in the traditional forum non conveniens analysis, without any consideration of the forum selection clause. This was an abuse of discretion. See Aguas Lenders, 585 F.3d at 701.

         On appeal, Defendants make two arguments with respect to the forum selection clause. First, they claim that Plaintiffs waived their reliance on the forum selection clause by failing to raise the issue in the district court. Second, they argue that even if Plaintiffs did not waive their reliance on the forum selection clause, the scope of the clause does not cover the key defendants and claims here. ...


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