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Friday, November 4, 2005

Fiduciary Breach Claim Covered By Forum Selection Clause

United_states_flag_1 A contractual choice of forum clause that applies to “any dispute hereunder” applies to claims for breach of fiduciary duty, according to a recent decision by a federal district court in Texas.

In the case, William Noble Rare Jewels turned over a valuable sapphire ring to the Christie’s auction house for sale.  Both Noble and Christie’s had obtained appraisals that indicated that the sapphire was of Kashmir origin, which made it especially valuable.  At the auction, the ring was sold to a buyer, one John Doe.  Doe subsequently got four appraisals on his own.  Two were inconclusive and the other two concluded that the sapphire was from Ceylon, not Kashmir.  Christies’ allegedly allowed the buyer to rescind the sale and refused to sell it again as a Kashmir.  Noble sued in Texas, although the Christie’s contract provided that all actions must be brought in New York.  Everyone apparently conceded that the breach of contract claim was covered by the forum selection clause:

This Agreement shall be governed by and construed in accordance with the laws of the State of New York. In the event of any dispute hereunder, . . . the parties hereby consent to the exclusive jurisdiction of the courts of the State of New York and the Federal courts of the United States of America located in the Southern District of New York . . . .

But Noble argued that his action for breach of fiduciary duty was not contractual, and thus was properly brought in Texas. The court disagreed.  The court, applying federal common law to the question, concluded that the breach of fiduciary duty action was related to the contract claim, since Christie's duty was contractual and the claimed breach was a failure to perform under the contract.  Since a problem of performance was a “dispute under” the contract, the forum selection clause precluded the Texas courts from hearing the case.

William Noble Rare Jewels v. Christie's Inc., 2005 U.S. Dist. LEXIS 24601 (N.D. Tex. Oct. 24, 2005).

[Frank Snyder]

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