Arial Technologies, LLC v. Aerophile S.A., No. 14 CIV 4435 (S.D.N.Y. Mar. 31, 2015) [click for opinion]

Plaintiff Arial Technologies, LLC (“Arial”) and Defendant Aerophile S.A. (“Aerophile”) had concluded a contract in 2005 regarding the sale, installation and servicing of a passenger helium balloon at the San Diego Zoo.  The underlying contract contained two provisions that addressed the resolution of disputes.  The first, Section 10.3, stated that disputes relating to "the interpretation or performance" of the contract would be resolved through mediation in France, after which "either party may file suit for resolution of the dispute in the SENLIS Courts" in France, "which shall have exclusive jurisdiction."  Section 10.5 then provided that 

"[j]urisidiction for VENDOR insurance issues shall be Paris - France and for all other legal matters shall be New York USA."  The agreement further contained a choice-of-law clause selecting French law.

In 2011, after the balloon became inoperable, Aerophile allegedly began to negotiate directly with the zoo to provide passenger balloon services, in violation of its contract with Plaintiff, leading to the non-renewal of Plaintiff's contract with the zoo.  In August 2012, Plaintiff initiated an action in the Supreme Court of New York, which the court dismissed without prejudice, finding that Plaintiff had not fulfilled its contractual obligation to mediate in France before bringing suit.

The parties proceeded to mediation, which was declared unsuccessful in November 2013.  Aerophile immediately filed an action in French courts asking for a declaratory judgment that the contract was invalid.  Arial appeared through counsel in July 2014, and the French court set November 4, 2014 as the date for Arial to respond to the complaint.

In June 2014, Plaintiff filed its action in the Southern District of New York.  Aerophile moved to dismiss on forum non conveniens grounds and pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, arguing that the contract gave exclusive jurisdiction to the Senlis courts in France.  The court first noted that, based on recent Supreme Court and Second Circuit precedent, the motion was properly before the court underforum non conveniens rather than under Rule 12(b), which had previously been used as a vehicle to dismiss cases based on forum selection clauses pointing to another forum.

The court further noted that the analysis for enforcing a forum selection clause remained unchanged, and that dismissal is proper if (1) the clause was communicated to the party resisting enforcement; (2) the clause is mandatory rather than permissive; (3) the claims and parties are subject to the clause; and (4) the opposing party cannot make a strong showing that the clause is unreasonable or unjust, or was the result of fraud or overreaching.  Applying this criteria, the court found that the forum selection clause in Section 10.3 was reasonably communicated to Arial, was mandatory, that the parties and claims were subject to the clause, and that Arial had not rebutted the presumption of enforceability: while it could be difficult to summon witnesses to France, the court held this was not a sufficiently strong showing of unreasonableness to invalidate the clause.

The court then addressed Plaintiff’s argument that Section 10.5 was the “final governing forum selection clause” and was intended to abrogate Section 10.3, making New York the proper venue for all matters other than insurance.  The court disagreed, holding that canons of both French and U.S. contract law require an interpretation that gives a reasonable and effective meaning to all terms of a contract.  The court thus adopted Defendant’s reading of Sections 10.3 and 10.5, wherein: (1) disputes related to the “interpretation or performance” of the contract are to be litigated in the Senlis courts, “which shall have exclusive jurisdiction” (Section 10.3); (2) if any “insurance issues” arise, jurisdiction for those disputes “shall be Paris - France” (Section 10.5); and (3) if any “other legal matters” arise, jurisdiction “shall be New York USA.” (Section 10.5).

As the case dealt with the interpretation or performance of the contract, the court held that the forum selection clause in Section 10.3 applied and granted Aerophile's motion to dismiss.

Derek Soller of the New York office contributed to this summary.