The Pharma Partners, LTD v. Liposeuticals Inc.
- Alison Nathan
- 1:19-cv-05735
- U.S. District Court · Southern District of New York
- 4
In The Pharma Partners v. Liposeuticals, Judge Nathan granted dismissal because an arbitration clause did not establish personal jurisdiction for this contract lawsuit.
The Pharma Partners, LTD’s contract lawsuit against Liposeuticals Inc. was dismissed because the court found it lacked personal jurisdiction over Liposeuticals.
What happened
The Pharma Partners, LTD sued Liposeuticals Inc. for allegedly failing to pay money owed under a business-advisory agreement involving work in China. The agreement required disputes to be settled by binding arbitration in New York, but both parties sought to litigate rather than arbitrate this dispute.
The court held that the arbitration clause did not show Liposeuticals had agreed to be sued in New York. Such a clause may support court proceedings enforcing the arbitration agreement, but it does not by itself establish authority over the defendant for an ordinary contract lawsuit.
The court granted Liposeuticals’s motion to dismiss, dismissed the action for lack of personal jurisdiction, directed the Clerk to enter judgment and close the case, and resolved Docket No. 13. Judge Alison J. Nathan issued the order.
The detailed version
- The Pharma Partners, LTD v. Liposeuticals Inc. · No. 1:19-cv-05735
- Alison Nathan
- June 1, 2020
Background
The Pharma Partners, LTD brought a breach-of-contract action against Liposeuticals Inc. The Pharma Partners alleged that it agreed to act as Liposeuticals’s strategic business-development adviser in China under a January 6, 2015 contract, and that Liposeuticals later failed to pay money owed under that agreement. The contract stated that disputes arising from the agreement would be resolved through binding arbitration in New York.
The Pharma Partners alleged that it initially tried to arbitrate the dispute, but Liposeuticals did not respond to its arbitration demands. The Pharma Partners then sought to litigate the matter in court. The opinion states that Liposeuticals also did not seek arbitration.
Personal Jurisdiction
Liposeuticals moved to dismiss, arguing in part that the court lacked personal jurisdiction. Personal jurisdiction is a court’s authority over a defendant. The court treated that issue as a threshold matter and explained that, at this stage, The Pharma Partners needed to make a preliminary showing that jurisdiction existed.
The only asserted basis for jurisdiction was the contract’s arbitration clause selecting New York as the arbitration location. The Pharma Partners relied on cases holding that an arbitration clause selecting a state can support jurisdiction for proceedings directly related to arbitration, such as a petition to compel arbitration or an application to vacate an arbitration award.
The court distinguished those cases. It held that agreeing to arbitrate in a particular state may establish consent to jurisdiction for proceedings enforcing the arbitration agreement, but does not amount to consent to ordinary litigation in that state over the underlying dispute. Because neither party sought to arbitrate this dispute, the court found that the concern about making the arbitration clause unenforceable was not present.
Disposition
The court concluded that it lacked personal jurisdiction over Liposeuticals. It granted Defendant’s motion to dismiss, dismissed the action for lack of personal jurisdiction, directed the Clerk of Court to enter judgment and close the case, and stated that the order resolved Docket No. 13. Judge Alison J. Nathan signed the order.
Read the full 4-page opinion on CourtListener, the free public archive maintained by the Free Law Project.