Thursday, March 16, 2017

Case of the Day: Xiao Wei Yang Catering Linkage in Inner Mongolia Co. v. Inner Mongolia Xiao Wei Yang USA, Inc., 2017 U.S. Dist. LEXIS 17077 (D.Mass. Feb. 6, 2017)

Summary:

Plaintiffs entered into an agreement with the defendant, a famous chain restaurant in China, to open the restaurants in the United States through a complicated deal structure that involved establishing several subsidiary corporations whose shares were to be transferred on a schedule. Plaintiff then had a dispute with the defendant. The defendant moved to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, pointing to the forum selection clause in the agreement that would place the case in China.

The court found that Rule 12(b)(6) was the proper mechanism to enforce a forum selection clause. Although forum selection clauses were more commonly enforced through a forum non conveniens motion, a 12(b)(6) motion was also fine. Accordingly, the court found the forum selection clause applied, and dismissed the case.

Takeaway:

For those who enjoy Chinese food: Xiao Wei Yang is the company behind the Little Sheep Mongolian Hot Pot, which has more than 20 locations around the United States. One of the unexpected side effects of running this blog is that I end up getting hungry!

At any rate, here is another object lesson on how valuable forum selection clause is.  It probably was sloppy lawyering to enforce the forum selection clause through a 12(b)(6) motion, but because courts favor forum selection clauses so much, that minor misstep became inconsequential. It is an important lesson for transactional attorneys also.

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