Knowyourmeme.com Network v. Nizri

Background

The plaintiffs began the action in New York State Supreme Court, alleging that the defendants breached a letter of intent concerning a potential transaction involving Knowyourmeme.com Network and Literally Media. The defendants removed the case to federal court based on diversity jurisdiction and moved to dismiss.

The letter of intent included a forum-selection clause stating that an action based on the letter or seeking to enforce it could be brought exclusively in the courts of Israel. The plaintiffs asserted claims including fraudulent inducement or fraudulent misrepresentation, negligent misrepresentation, interference with a contractual relationship, intentional interference with prospective business advantage, and unjust enrichment.

Magistrate Judge James L. Cott recommended granting the motion to dismiss. The plaintiffs filed timely objections, which District Judge George B. Daniels reviewed.

Removal to Federal Court

The court held that removal was proper. Defendants submitted an affidavit stating that Literally Media’s corporate citizenship and principal place of business were in Israel, while the plaintiffs had not provided authenticated evidence showing a lack of diversity.

The plaintiffs argued that removal was defective because the defendants did not identify Elia Media as a parent corporation in their corporate disclosure statement under Federal Rule of Civil Procedure 7.1. The court rejected that argument, explaining that Rule 7.1 is a procedural disclosure requirement and that the plaintiffs cited no authority showing that a failure to comply with it invalidates removal or eliminates federal jurisdiction. The court therefore overruled this objection.

Forum-Selection Clause

The court explained that a forum-selection clause identifies the court or country where a dispute must be heard. A clause selecting a foreign forum is generally enforced through the doctrine of forum non conveniens, which allows dismissal when another forum is the appropriate place to resolve the dispute.

The court applied the four-part test used in the Second Circuit: whether the clause was reasonably communicated, whether it was mandatory or permissive, whether the claims and parties were covered, and whether enforcement would be unreasonable, unjust, fraudulent, or the product of overreaching.

The court found that the clause covered the plaintiffs’ claims because they depended on the letter of intent and the contractual relationship between the parties. Although some claims were labeled as tort claims, the court held that they still arose from the letter because resolving them required interpreting the letter or determining the parties’ rights and obligations under it.

The court also held that the clause covered Defendant Jacob Nizri because it expressly applied to Literally Media’s officers, directors, shareholders, and representatives, and the opinion identified Nizri as Literally Media’s chairman. The court stated that Defendants’ evidence described We Endeavor as a trade name used by Nizri rather than a separate corporate entity; alternatively, the complaint alleged that We Endeavor acted as a representative of Literally Media, which also brought it within the clause.

Because the court found that removal was proper and that the forum-selection clause applied to all claims, it dismissed the plaintiffs’ remaining objections as moot.

Disposition

The court adopted Magistrate Judge Cott’s Report and Recommendation and overruled the plaintiffs’ objections. It granted the defendants’ motion to dismiss under the doctrine of forum non conveniens. It denied as moot the defendants’ motion to dismiss for failure to prosecute, denied the plaintiffs’ motion to remand, and denied the plaintiffs’ motions to amend the complaint to add non-diverse parties and for leave to submit a sur-reply. The Clerk was directed to close the motions and the case.