Costa v. PureFacts Fin. Sols.

1

Grace Costa and Michael McCann v. PureFacts Financial Solutions, Inc., et al.

No. 218-2022-CV-00585

Superior Court of New Hampshire

October 30, 2022

ORDER

David A. Anderson Judge

Plaintiffs have brought this action against Defendants for claims arising out of the alleged breach of a number of contracts between the parties. Presently before the Court is Plaintiffs' motion to declare a forum selection clause in one of the contracts unenforceable. Defendants object. The Court held a hearing on October 12, 2022. For the reasons that follow, Plaintiffs' motion is DENIED.

Factual Background

In 2013, Plaintiffs founded VennScience, LLC in New Hampshire. In 2020, defendant PureFacts Financial Solutions, Inc. approached Plaintiffs about acquiring VennScience. Plaintiffs agreed to the acquisition and the parties entered into a series of contracts.

For the sale of Plaintiffs' interest in VennScience to PureFacts the parties entered into a Membership Interest Purchase Agreement (MIPA) on May 1, 2020. Under the MIPA, VennScience remained a New Hampshire LLC but PureFacts USA, Inc. became its sole member and Robert Madej, PureFacts' CEO and Chairman of the Board of Directors, became its sole manager. Following closing of the acquisition, and as a condition thereof, PureFacts offered Plaintiffs employment, the terms of which were set forth in a pair of Employment Agreements. (See generally Compl., Ex 1.) Under these Employment Agreements, PureFacts retained McCann as President of VennScience and Costa as Senior Vice President of Client Success. (Id.) Plaintiffs also acquired equity in PureFacts that was governed by an Employee Share Ownership Plan (ESOP) Agreement. (Compl., Ex. 3.)

Each of the foregoing contracts contains different choice of law and forum selection clauses. In negotiating the MIPA, each party sought to have the contract governed by the law of the jurisdiction of their residence, with Plaintiffs arguing for New Hampshire law and Defendants arguing for Ontario law. The parties eventually reached a compromise whereby New York law would govern the MIPA. As a result, the MIPA provides, in pertinent part:

(1) This Agreement is governed by and will be interpreted and construed in accordance with the laws of the State of New York and the federal laws of the United States applicable therein.

(2) Except in connection with any Third Party Claim brought against an Indemnified Party, each Party irrevocably attorns and submits to the exclusive jurisdiction of the provincial and federal courts located in New York, New York (and appellate courts therefrom) and waives objection to the venue of any proceeding in such court or that such court provides an inappropriate forum.

(Compl., Ex. 2 § 8.11.)

In contrast, each of the Employment Agreements provides "This Agreement shall be governed by the internal laws of the State of New Hampshire. The parties hereby submit to the exclusive jurisdiction of the state or federal courts located in the State of New Hampshire for the resolution of any disputes hereunder." (Id. § 11.1.) Finally, Ontario law governs the ESOP and disputes arising out of same are subject to mandatory arbitration under Ontario's Arbitration Act of 1991. (Compl., Ex. 3 §§ 11.01 & 11.03.)

Plaintiffs claim that PureFacts failed to fulfill their obligations under the agreements and hindered Plaintiffs' ability to meet their own obligations and performance benchmarks. PureFacts eventually terminated Plaintiffs' employment, and have since failed to pay severance and earn-out consideration as contemplated under the above contracts. PureFacts claims it properly terminated Plaintiffs for cause, partly based on Plaintiffs' failure to complete a project involving a client.

On July 18, 2022, the parties met in New York and unsuccessfully attempted to mediate these issues. Plaintiffs initiated this suit on July 25, 2022, alleging a number of claims arising out of the Employment Agreements, the MIPA, and the ESOP Agreement. On August 5, 2022, PureFacts filed an action in New York state court alleging claims under the MIPA. Plaintiffs subsequently removed the action to the Federal District Court for the Southern District of New York, where it remains pending.

Analysis

Plaintiffs now move for the Court to declare the forum selection clause contained in the MIPA unenforceable. As a threshold matter in determining the enforceability of the forum selection clause, the Court must determine whether the clause is governed by New Hampshire or New York law. In doing so, the Court must consider whether forum selection is procedural or substantive. See Bartlett v. Commerce Ins. Co., 167 N.H. 521, 526 (2015). Plaintiffs argue that forum selection is procedural and therefore New Hampshire law governs. Defendants argue the Court need not decide this issue because the forum selection clause in the MIPA is enforceable under both New Hampshire and New York law. The Court will therefore assume that New Hampshire law applies for purposes of this order.^[1]

"New Hampshire has, by statute, sanctioned the enforcement of forum selection clauses . . . ." Strafford Tech., Inc. v. Camcar Div. of Textron, Inc., 147 N.H. 174, 176 (2001). Pursuant to RSA 508-A:3:

If the parties have agreed in writing that an action on a controversy shall be brought only in another state and it is brought in a court of this state, the court will dismiss or stay the action, as appropriate, unless:

I. The court is required by statute to entertain the action;

II. The plaintiff cannot secure effective relief in the other state, for reasons other than delay in bringing the action;

III. The other state would be a substantially less convenient place for the trial of the action than this state;

IV. The agreement as to the place of the action was obtained by misrepresentation, duress, the abuse of economic power, or other unconscionable means; or

V. It would for some other reason be unfair or unreasonable to enforce the agreement.

"The purpose of RSA 508-A:3 is to enforce forum selection clauses that are bargained for by contracting parties, provided that they confer exclusive jurisdiction." Strafford Tech., 147 N.H. at 177. "A party seeking to avoid a contractual forum-selection clause bears a heavy burden of showing that the clause should not be enforced." Turcheck v. Amerifund Financial, Inc., 725 N.W.2d 684, 689 (Mich. Ct. App. 2006). More specifically, "the party arguing that the forum selection clause is unfair or unreasonable bears a heavy burden of showing that trial in the chosen forum would be so seriously inconvenient as to deprive the party of a meaningful day in court." Bank of America, NA v. Miller, 33 P.3d 91, 93 (Wash.Ct.App. 2001).

Plaintiffs argue the MIPA forum selection clause is unenforceable under paragraphs III and V of RSA 508-A:3. Plaintiffs articulate the following reasons that trying the MIPA claims in New York would be substantially inconvenient and unreasonable: (1) no parties are located in New York; (2) no acts related to the litigation occurred in New York; (3) no key witnesses reside in New York; (4) no documentation, electronically stored information, or other materials relevant to discovery are located in New York; (5) claims arising under the Employment Agreements will be tried in New Hampshire and will have impacts on the MIPA claims. (See Doc. 5 ¶ 29.)

As an initial matter, the cases Plaintiffs cite in support of the above claims are all distinguishable. In Berlin Station, LLC v. Babcock & Wilcox Const. Co., No. 214-2014-CV-14, 2014 WL 10077418 (N.H. Super. Ct. May 13, 2014), the issue before the court was a simple forum non conveniens argument, not the enforceability of a forum selection clause.^[2] In the other cases relied upon by Plaintiffs- In re Estate of Mullin, 169 N.H. 632 (2017), Vazifdar v. Vazifdar, 130 N.H. 694 (1988), and Leeper v. Leeper, 116 N.H. 116 (1976)-there was no forum selection clause at all. Therefore, these cases' findings that New Hampshire was an appropriate forum because certain parties, witness, and/or discovery materials were located in the state are not relevant to the instant matter.

Plaintiffs' arguments are largely based on the fact that New York bears no relation to the parties or the MIPA. As before, however, the cases on which Plaintiffs rely are distinguishable because they all interpret choice of law provisions, for which a relationship to the chosen jurisdiction is relevant, not forum selection clauses. See, e.g., Allied Adjustment Serv. v. Heney, 125 N.H. 698, 700 (1984) ("Where parties to a contract select the law of a particular jurisdiction to govern their affairs, that choice will be honored if the contract bears any significant relationship to that jurisdiction."); Hobin v. Coldwell Banker Residential Affiliates, Inc., 144 N.H. 626, 628 (2000) (same); CCR Data Sys., Inc. v. Panasonic Commc'n & Sys. Co., No. CIV. 94-546-M, 1995 WL 54380, at *4-5 (D.N.H. Jan. 31, 1995) (same). RSA 508-A:3, the governing authority for forum selection clauses in New Hampshire, does not include a requirement that there be a significant relationship between the parties and/or the contract and the chosen forum. Moreover, none of the New Hampshire cases applying RSA 508-A:3 consider such a factor. Therefore, the fact that neither party has a connection to New York does not affect the enforceability of the MIPA's forum selection clause.

Plaintiffs also argue that conducting trial in New York would result in substantial inconvenience to both parties, invoking RSA 508-A:3, III. However, "[w]hen parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses, or for their pursuit of the litigation." Atlantic...