SpeedFit LLC v. Woodway USA, Inc.

Background

Speedfit LLC, Aurel A. Astilean, Woodway USA, Inc., and Douglas Bayerlein were parties to a 2020 settlement agreement concerning disputes over patents for a non-motorized treadmill. After an alleged breach, Speedfit LLC and Aurel A. Astilean filed a complaint against Woodway USA, Inc. and Douglas Bayerlein in the Supreme Court of the State of New York, Westchester County.

The defendants removed the case to the Southern District of New York based on diversity jurisdiction. They moved to dismiss the complaint or, alternatively, to transfer the case to the Eastern District of New York. The plaintiffs moved to remand the case to state court, arguing that removal was untimely and that the case had been assigned to the wrong courthouse.

Motion to Remand

The court denied the plaintiffs’ motion to remand. It held that the defendants’ removal was timely. The complaint and summons were sent by Federal Express on April 28, 2022, but New York law required service by first-class mail for service by mail. The defendants had also not returned an acknowledgment of receipt as of April 28. The earliest date on which service might have been effective was May 10, 2022, when defense counsel agreed by email to accept service. Because the defendants removed the case on June 6, within 30 days of May 10, removal was timely.

The court also rejected the argument that the case had been removed to the wrong division. The Southern District of New York does not have divisions, although its local rules required this case to be assigned to White Plains rather than Manhattan. The court stated that this local-rule issue was not grounds for remand and was moot because the case had already been reassigned to White Plains.

The plaintiffs also argued in a reply brief that the defendants had waived their right to remove. The court declined to consider that argument because it was raised for the first time in reply. The court added that the settlement agreement did not contain a waiver provision that would support the argument.

Rule 12(b)(3) Motion

The court denied the defendants’ motion to dismiss under Federal Rule of Civil Procedure 12(b)(3), which concerns improper venue. The court explained that the ordinary federal venue statute does not govern cases removed from state court; the removal statute governs venue in such cases. The case had been properly removed to the Southern District of New York because it came from a state court located within that federal district.

The court also explained that a forum-selection clause is enforced through a motion to transfer under 28 U.S.C. § 1404, not through a motion to dismiss for improper venue merely because the plaintiff filed in a forum not contemplated by the clause.

Transfer Under the Settlement Agreement

The court granted the defendants’ motion to transfer the case to the Eastern District of New York. The settlement agreement contained several provisions addressing forums. The introduction referred to enforcement by any competent state or federal court in New York, and paragraph 14 referred to seeking remedies in any court of competent jurisdiction. But paragraph 20 stated that the parties agreed to the exclusive jurisdiction of the Eastern District of New York and that claims or proceedings relating to the settlement agreement would be brought only there.

Applying New York contract-interpretation principles, the court held that paragraph 20 was the more specific provision and controlled to the extent it conflicted with the more general provisions. The court then considered whether the forum-selection clause was enforceable. It found that the clause was reasonably communicated because it appeared in the main body of the agreement and used clear language. It was mandatory because it used the terms “exclusive” and “only.” It covered the plaintiffs’ claims because those claims concerned an alleged breach of the settlement agreement.

The court therefore treated the clause as presumptively enforceable. The plaintiffs did not make a convincing showing that enforcing it would be unreasonable or unjust. The court rejected the plaintiffs’ arguments based on the location of the alleged breach and an allegedly retaliatory lawsuit in the Eastern District, noting that one argument was raised for the first time in reply and that neither argument showed that enforcement would be unreasonable or unjust.

Personal Jurisdiction and Disposition

Because the court granted transfer, it did not reach the merits of the defendants’ motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2), which addresses whether the court has power over the defendants. The court denied that motion without prejudice to renewal in the transferee court.

The final dispositions were: the plaintiffs’ motion to remand was denied; the defendants’ Rule 12(b)(3) motion to dismiss was denied; the defendants’ motion to transfer was granted; and the defendants’ Rule 12(b)(2) motion to dismiss was denied without prejudice to renewal in the Eastern District of New York. The clerk was directed to transfer the case.