Kevin M. Hogan and Sean C. McPhee Co-Author Article Published in The Daily Record

This article originally appeared in The Bulletin, the official publication of the Bar Association of Erie County. It is reprinted here with permission.

Western District Case Notes

Mandatory forum selection clause

In Rochester City School Dist. v. Aramark Educ. Serv’s, LLC, No. 17-CV-6572-DGL-MWP (Nov. 13, 2017), plaintiff commenced an action in New York State Supreme Court for breach of contract. Defendant removed the action on diversity grounds, and plaintiff sought remand based on a clause in the contract providing that all actions arising out of it “shall be brought in the appropriate courts of the State of New York.”

According to plaintiff, this meant that the parties had agreed to make the New York State courts the exclusive forum for resolving disputes under the contract. Defendant opposed, arguing that the clause was geographical rather than jurisdictional, and that any action arising out of the contract could be brought in either state or federal court so long as it was located in New York. To resolve the motion, the Court first observed that agreements selecting a particular forum for litigation will be enforced “absent extraordinary or unusual circumstances such as fraud or overreaching.”

Next, the Court noted that, where the contract contains language indicating an intent to make a designated forum exclusive, the clause is considered mandatory, and the parties are required to litigate disputes in the designated forum. The Court then found that, if the parties had not intended to make the New York State courts the exclusive forum for actions arising out of their contract, they could have easily stated that any action had to be commenced in an appropriate court “in” New York State, rather than an appropriate court “of” New York State.

Finally, the Court rejected defendant’s argument that, even if the action had to be brought in a New York State court, it could nonetheless be removed, because such an interpretation would render the forum selection clause pointless. As a result, the matter was remanded to New York State Supreme Court.

Rooker-Feldman and Younger abstention doctrines

In Herbert v. Cattaraugus County, No. 17-CV-248-WMS (Nov. 13, 2017), plaintiff brought suit under 42 U.S.C. § 1983 against a retired Cattaraugus County Family Court Judge, other officers of that court, and the County itself, seeking damages and injunctive relief for allegedly incarcerating him and denying him access to his son based on racial animus. Defendants moved to dismiss, arguing first that the Court lacked subject matter jurisdiction under the Rooker-Feldman doctrine, which precludes a federal district court from reviewing a state court judgment, as well as any claim that is inextricably intertwined with that judgment.

The Court agreed that three of plaintiff’s claims would require it to review and reject the Family Court’s decision to incarcerate plaintiff and, accordingly, dismissed those claims. Next, the Court evaluated plaintiff’s claim brought under the double jeopardy provisions of the Fifth and 14th Amendments, and found that it related to ongoing Family Court proceedings. As a result, the claim was dismissed under the Younger abstention doctrine, which requires federal courts to abstain from exercising jurisdiction over claims that implicate ongoing state proceedings.

Finally, although plaintiff’s remaining claim was not barred by Rooker-Feldman or Younger, the Court found that dismissal as against the individual defendants was appropriate on grounds of judicial and prosecutorial immunity, and that it could not be stated against the County because there were no factual allegations to support liability against the municipality on a respondeat superior basis.

Contract interpretation

In Armstrong Pump v. Hartman et al., No. 10-CV-446-WMS (Nov. 26, 2017), a dispute arising out of a license agreement, all parties objected to the Magistrate Judge’s Report and Recommendation concluding that the operative language in the contract was ambiguous because it was susceptible two equally possible and irreconcilable interpretations, in which case the license agreement would not be valid and enforceable. In their objections, none of the parties to the contract argued for the construction of the license advanced by the Magistrate Judge.

The Court observed that, “at some point virtually every agreement can be said to have a degree of indefiniteness,” and that, when confronted with an ambiguously worded contract, the Court should interpret the language whenever possible in a manner that renders it legal and enforceable. The Court thus held that the interpretation offered by the Magistrate Judge was not consistent with the remainder of the contract’s language or the general rule that presumes the legality enforceability of the contract. The Court granted the objections to the extent the Report and Recommendation called into question the parties’ mutual assent to contract and remanded the matter for further proceedings.

Real Estate Settlement Procedures Act

In Jackson v. Bank of America, N.A., No. 16-CV-787-FPG-HBS (Nov. 21, 2017), a putative class action against a mortgage loan servicer, plaintiffs claimed that defendant failed to properly and timely process their mortgage assistance applications in order to charge them excessive loan delinquency fees in violation of the Real Estate Settlement Procedures Act (RESPA) and New York General Business Law (GBL) § 349. Defendant moved to dismiss on the ground that plaintiffs had failed to state a claim, and the motion was granted in part and denied in part.

With respect to the RESPA claims, the Court noted that mortgage servicers are not required to comply with procedures and deadlines for processing mortgage assistance applications if the borrower has previously been evaluated for loss mitigation options by the same servicer. Thus, because defendant admittedly evaluated plaintiffs for mortgage assistance in October 2014, their RESPA claims based on events allegedly occurring after that evaluation were dismissed. Notwithstanding the dismissal of those claims, and although “discovery may eventually discredit Plaintiffs’ allegations,” the Court found that plaintiffs sufficiently alleged that defendant violated RESPA in connection with its handling of plaintiffs’ initial application for mortgage assistance by allegedly asking plaintiffs on numerous occasions for documents they had already submitted, and by failing to specify which documents defendant claimed had not been submitted.

Regarding plaintiffs’ claims under GBL § 349, which prohibits deceptive business acts or practices, the Court found that plaintiffs’ accusations failed both because they were conclusory, and because plaintiffs had not plausibly alleged that defendant misled or deceived them. As a result, the GBL § 349 claims were dismissed with leave to file an amended complaint in order to cure any pleading deficiencies.

Insurance coverage

In Harleysville Worcester Insurance Co. v. MGB Building, Inc. et al., No. 16-CV-6135-CJS-JWF (Nov. 16, 2017), plaintiff brought a declaratory judgment action disclaiming insurance coverage on a truck involved in a personal injury action. The truck was owned by one defendant; according to the defendants, it was on loan to the owner’s company, which employed the owner’s son, to whom the truck had been assigned for use in his employment. The owner’s son was driving the truck at the time of the accident, which happened after a company party.

Plaintiff disclaimed coverage on the grounds that truck was not owned by the insured and was being driven for personal use and not in furtherance of the insured’s business. The Court denied plaintiff’s motion for summary judgment and granted defendant’s cross-motions for summary judgment, and held that plaintiff was obligated to provide insurance coverage to the defendants up to the limits of the policy. In analyzing the language of the policy, the Court found that coverage extended to any vehicle “borrowed” by the insured, and that whether the truck was being driven in the course of the insured’s business was not an element in the coverage equation.

The Court also noted that the policy expressly provided that an employee who is using his own vehicle was considered an insured under the policy only if the use of such vehicle was in furtherance of the insured’s business, but no such qualification extended to covered vehicles that the insured borrowed. The policy’s language thus contradicted Plaintiff’s argument that a business use requirement applied to all covered vehicles, including ones that were borrowed by the insured.

Motion for reconsideration

In Gainer v. United Automobile Aerospace Agricultural Implement Workers’ (UAW) Region 9 et al., No. 08-CV-501-WMS (Dec. 14, 2017), after the Court had granted summary judgment dismissing plaintiff’s disparate impact and retaliation claims, but denied summary judgment to dismiss her failure to hire claims, plaintiff filed a motion for reconsideration under Rules 59 and 60 and, alternatively, sought entry of a final judgment on the disparate impact and retaliation claims under Rule 54 so that she could file an immediate appeal. Unconvinced that its prior order must be revisited, the Court denied plaintiff’s motion for reconsideration.

The Court held that Plaintiff failed to identify any persuasive matters or controlling case law that had been overlooked or any clear error or manifest injustice in the prior order, which was required under Rule 59(e) to obtain reconsideration. Likewise, not only had a final judgment not been entered, but plaintiff did not identify any extraordinary circumstance, mistake or highly convincing evidence that would warrant a change in the Court’s prior decision, as required under Rule 60. The Court also denied plaintiff’s alternative request for entry of judgment on the dismissed claim so she could bring an interlocutory appeal. The Court found nothing unusual about the circumstances of the case that would warrant a departure from the general rule that final judgments be entered only after all claims have been adjudicated.