MBC Financial Services Ltd. v. Boston Merchant Financial, Ltd.

16-3704-cv
MBC Fin. Servs Ltd. v. Boston Merch. Fin. Ltd.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION ASUMMARY ORDER@). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New
York, on the 23rd day of August, two thousand seventeen.
PRESENT: PIERRE N. LEVAL,
REENA RAGGI,
RAYMOND J. LOHIER, JR.,
Circuit Judges.
MBC FINANCIAL SERVICES LTD.,
Plaintiff-Appellant,
v. No. 16-3704-cv
BOSTON MERCHANT FINANCIAL, LTD., BOSTON
MERCHANT FINANCIAL, LLC, PAVEL “PAUL”
BELOGOUR,
Defendants-Appellees,
FUNDADMINISTRATION, INC.,
Defendant.
APPEARING FOR APPELLANT: NATHAN P. PEREIRA (Marc S. Koplik, on
the brief), Henderson & Koplik LLP, New
York, New York.
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APPEARING FOR APPELLEES: JAMES L. TUXBURY (Kelley A. Jordan-
Price, on the brief), Hinckley, Allen & Snyder
LLP, Boston, Massachusetts.
Appeal from a judgment of the United States District Court for the Southern
District of New York (Deborah A. Batts, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the judgment entered on October 5, 2016, is AFFIRMED.
Plaintiff MBC Financial Services Ltd. (“MBCFX”), a foreign currency exchange
market brokerage company incorporated and licensed in the British Virgin Islands
(“BVI”), brought this action against Boston Merchant Financial, Ltd. (“BMFN”), a
foreign currency broker incorporated and registered in the BVI; BMFN’s President and
CEO, Pavel Belogour; and Boston Merchant Financial, LLC, a now-defunct limited
liability company organized under the laws of Delaware with its principal place of
business in Boston, Massachusetts (collectively, “defendants”). MBCFX asserts claims
for violations of the Commodity Exchange Act (“CEA”) as to BMFN and Belogour, and
claims for common law fraud, breach of fiduciary duty, constructive trust, negligence,
conversion, and accounting as to all defendants. MBCFX also seeks a declaratory
judgment that the corporate defendants are alter egos of Belogour. MBCFX now appeals
the dismissal of its complaint based on the forum selection clause in the Corporate Client
Agreement governing the parties’ relationship.
Atlantic Marine Construction Co. v. United States District Court for the Western
District of Texas, 134 S. Ct. 568, 581 (2013), holds that forum non conveniens is the
proper mechanism for enforcing a forum selection clause at the motion to dismiss stage.
2
This circuit has yet to resolve whether the interpretation and application of a forum
selection clause is reviewed for abuse of discretion, as is typical of forum non conveniens
dismissals, or de novo, as is typical of forum selection clause dismissals. See Martinez v.
Bloomberg LP, 740 F.3d 211, 217 (2d Cir. 2014). We need not resolve that question here
because under either standard, we identify no error. In conducting our review, we
assume the parties’ familiarity with the facts and procedural history of this case, which
we reference only as necessary to explain our decision to affirm.
1. Enforcement of the Forum Selection Clause
“When the parties have agreed to a valid forum-selection clause, a district court
should ordinarily transfer the case to the forum specified in that clause.” Atlantic Marine
Constr. Co. v. U.S. Dist. Court for W. Dist. of Tex., 134 S. Ct. at 581. Determining
whether to dismiss a claim based on a forum selection clause involves a four-part
analysis. At the first three steps, a court asks (1) whether the clause was reasonably
communicated to the party resisting enforcement; (2) whether the clause is mandatory,
i.e., whether the parties are required to bring any dispute to the designated forum; and
(3) whether the claims and parties involved in the suit are subject to the forum selection
clause. If the answer to all three questions is yes, the clause is “presumptively
enforceable.” Phillips v. Audio Active Ltd., 494 F.3d 378, 383 (2d Cir. 2007). At the
final step, a court asks (4) whether the resisting party has rebutted that presumption by
making “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. at
383–84 (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972)).
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The forum selection clause in the Corporate Client Agreement reads as follows:
Client agrees that any civil action, arbitration or other proceeding between
BMFN and its employees or agents and Client arising out of or relating to
this Agreement shall be commenced, heard and resolved only by a tribunal
located in Switzerland.
App’x 100. Insofar as MBCFX raises various challenges to this clause for the first time
on appeal, it is axiomatic that our review is limited to issues first raised in the district
court. See Mhany Mgmt., Inc. v. Cty. of Nassau, 819 F.3d 581, 615 (2d Cir. 2016)
(stating “well-established general rule” that arguments available, but not raised, by
parties before district court will not be entertained on appeal unless “necessary to avoid a
manifest injustice” (internal quotation marks omitted)). MBCFX offers no explanation
for its forfeiture and makes no argument that consideration of these issues is “necessary
to avoid a manifest injustice.” Id. (internal quotation marks omitted). As such, we
consider only two contentions, preserved in the district court and relating to steps three
and four of the forum selection clause inquiry: (1) the Corporate Client Agreement does
not govern any of MBCFX’s causes of action; and (2) in any event, enforcement of the
forum selection clause is unreasonable because it deprives MBCFX of due process and is
against public policy.
MBCFX argues that, under BVI law,1 its claims are not subject to the forum
selection clause.2 The plain language of the forum selection clause and governing
1
The Corporate Client Agreement choice of law provision stipulates BVI law. Under our
precedent, contractual choice of law governs the interpretation of a forum selection
clause, i.e., steps two and three of the inquiry, whereas federal law determines its
enforceability, i.e., step four of the inquiry. See Phillips v. Audio Active Ltd., 494 F.3d at
384–85. We have not yet decided and do not here decide which body of law applies to
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precedent are clearly to the contrary. Courts in the BVI rely on Fiona Trust & Holding
Corp. v. Privalov, [2007] 2 Lloyd’s Rep. 267, see, e.g., Vento v. Martin Kenney & Co.,
Claim No. BVIHCV 2014/0061, which holds, in the context of an arbitration clause, that
“[t]he words ‘arising out of’ should cover every dispute except a dispute as to whether
there was ever a contract at all,” Fiona Tr. & Holding Corp. v. Privalov, [2007] 2 Lloyd’s
Rep. 267. Skype Technologies SA v. Joltid Ltd., [2009] EWHC (Ch) 2783, confirms that
this principle applies with equal force to forum selection clauses. As such, BVI
precedent requires us to read the forum selection clause at issue broadly to encompass all
claims “arising out of or relating to” the Corporate Client Agreement. App’x 100.
Accordingly, because MBCFX’s claims all arise out of allegedly unauthorized trades on
the account provided to it pursuant to the Corporate Client Agreement “in connection
with the purchase and sale of . . . Forex and any similar instruments . . . which may be
purchased or sold by or through BMFN for [MBCFX’s] account[s],” id. at 99, they are all
subject to the forum selection clause.
MBCFX’s remaining enforceability challenges relate to public policy and the
convenience of litigating in Switzerland. The presumption of a forum selection clause’s
enforcement will be overcome if “(1) its incorporation was the result of fraud or
the first prong of the analysis. See Starkey v. G Adventures, Inc., 796 F.3d 193, 196 n.1
(2d Cir. 2015). We assume, as the district court did, and as the parties do not
meaningfully dispute, that federal law applies to the first prong.
2
MBCFX also argues that its claims are not subject to the forum selection clause because
there is a dispute as to whether any contract existed at all, and if a contract existed, it is
ambiguous and contradictory, and therefore cannot be enforced. These arguments were
not raised before the district court; accordingly, we decline to reach them on appeal. See
Mhany Mgmt., Inc. v. Cty. of Nassau, 819 F.3d at 615.
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overreaching; (2) the law to be applied in the selected forum is fundamentally unfair;
(3) enforcement contravenes a strong public policy of the forum in which suit is brought;
or (4) trial in the selected forum will be so difficult and inconvenient that the plaintiff
effectively will be deprived of his day in court.” Martinez v. Bloomberg LP, 740 F.3d at
228 (internal quotation marks omitted). These exceptions are “interpreted narrowly.”
S.K.I. Beer Corp. v. Baltika Brewery, 612 F.3d 705, 711 (2d Cir. 2010). MBCFX does
not base any challenge on the first two exceptions.
As to the third exception, MBCFX argues that enforcement would contravene the
United States’ strong public policy of protecting financial markets insofar as defendants
operate within the United States. To overcome the presumption of enforcement on this
exception, however, MBCFX must demonstrate “that available remedies [under BVI law]
are insufficient to deter [BVI] issuers from exploiting American investors through fraud,
misrepresentation or inadequate disclosure.” Roby v. Corp. of Lloyd’s, 996 F.2d 1353,
1365 (2d Cir. 1993); see id. at 1363 (“[I]t is not enough that the foreign law or procedure
merely be different or less favorable than that of the United States.”). MBCFX makes no
such showing. It merely points to the purpose of the CEA, without either asserting that it
would be deprived of comparable remedies if forced to litigate in Switzerland under BVI
law or explaining how the purpose of the CEA would be undermined if plaintiff were
limited to the remedies available in Switzerland. See Martinez v. Bloomberg LP, 740
F.3d at 229 (holding that mere inability to pursue United States statutory cause of action
in England did not defeat enforcement of forum selection clause). Accordingly, the
public policy exception does not apply in this action.
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As to the fourth exception, MBCFX contends that litigating in Switzerland would
“deny it access to evidence, witnesses and, ultimately, its day in court and the chance for
justice to be done.” Appellant’s Br. 29–30. MBCFX did not adduce any evidence in
support of this argument or explain the relevance of the purportedly inaccessible
witnesses’ testimony to its case. “Unsupported statements such as these do not meet the
heavy burden of proof required to set aside a forum-selection clause on the ground of
inconvenience.” Effron v. Sun Line Cruises, Inc., 67 F.3d 7, 11 (2d Cir. 1995) (internal
quotation marks omitted); see also id. (“Although appellee would prefer the relative
comfort of a court in New York or Florida, she agreed to have her claim adjudicated in
Greece. This agreement should not be negated unilaterally by plaintiff’s conclusory
assertions that she cannot afford to travel to Greece, that she would be afraid to stay at a
strange city, that she does not know any Greek lawyers, etc.”). As the Supreme Court has
explained, “where[, as here,] it can be said with reasonable assurance that at the time they
entered the contract, the parties to a freely negotiated private international commercial
agreement contemplated the claimed inconvenience, it is difficult to see why any such
claim of inconvenience should be heard to render the forum clause unenforceable.” M/S
Bremen v. Zapata Off-Shore Co., 407 U.S. at 16. Indeed, although plaintiff asserts that
enforcement of the forum selection clause “would effectively be a death knell to this
action,” Appellant’s Br. 31, in the absence of any evidence that it would be unable to
present its case in Switzerland, plaintiff has not carried its burden under this exception,
see Phillips v. Audio Active Ltd., 494 F.3d at 393; see also S.K.I. Beer Corp. v. Baltika
Brewery, 612 F.3d at 712 (reasoning that “speculation” as to availability of legal
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remedies and protection of rights in foreign forum was inadequate to defeat forum
selection clause presumption of enforceability).
We therefore conclude that the forum selection clause is enforceable and
applicable to plaintiff’s claims, and we affirm the district court’s ruling to that effect.3
2. Conclusion
We have considered MBCFX’s remaining arguments and conclude that they are
without merit. Accordingly, the district court’s October 5, 2016 judgment is
AFFIRMED.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
3
Because we affirm the dismissal on forum non conveniens grounds, we need not reach
any of the alternative bases for dismissal discussed by the district court.
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