Navigator Business Services LLC v. Chen

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF NEW YORK

NAVIGATOR BUSINESS SERVICES LLC,

MEMORANDUM & ORDER

Plaintiff, 20-CV-06159 (HG) (MMH)

v.

AIGUANG CHEN and JIN WU YU,

Defendants.

HECTOR GONZALEZ, United States District Judge:

Plaintiff has filed a motion for summary judgment seeking to collect a loan of $2.5

million in principal, plus accrued interest, which Defendants guaranteed. ECF No. 43.

Defendants have moved to dismiss Plaintiff’s claims, pursuant to Rule 12(b)(1), arguing that

Plaintiff has failed to plead or to prove its state(s) of citizenship and, therefore, failed to invoke

the Court’s diversity jurisdiction. ECF No. 44. Alternatively, Defendants have moved to

dismiss this case or to transfer it to the U.S. District Court for the District of New Jersey because

the parties entered into security agreements at the same time as their guaranty agreements that

had New Jersey forum selection clauses. Id. For the reasons set forth below, the Court denies

Defendants’ motion to dismiss for lack of subject matter jurisdiction and denies Defendants’

request to dismiss or transfer the case based on the forum selection clauses. The Court grants

Plaintiff’s motion for summary judgment to the extent it seeks to enforce Defendants’ payment

obligations but denies Plaintiff’s request for attorneys’ fees and costs and for specific

performance to enforce the financial disclosure obligations in the parties’ guaranty agreements.

FACTUAL BACKGROUND1

Plaintiff and non-party SH 168, LLC entered into a Commercial Loan Agreement (the

“Loan Agreement”) in August 2019, pursuant to which SH 168 borrowed $2.5 million from

Plaintiff. ECF No. 48-9 ¶ 6. At the same time, SH 168 signed a promissory note (the “Note”)

requiring SH 168 to pay Plaintiff the $2.5 million principal on the Note’s maturity date of

February 12, 2020, along with an annual interest rate of 13.5%. Id. ¶ 9. SH 168 was required by

the Note to make monthly interest payments of $28,125 commencing on September 12, 2019,

and ending with a final payment of interest and principal in the amount of $2,528,125 on

February 12, 2020. Id. ¶ 10.

Pursuant to the terms of the Loan Agreement, SH 168’s failure to make payment in full

when due would be an event of default. ECF No. 48-9 ¶ 8. In the event of a default, the Note

provided that the post-default interest rate would increase to an annual rate of 25% or the

maximum amount permitted by law. Id. ¶ 10. Defendants are members of SH 168, and at the

same time SH 168 signed the Loan Agreement and the Note, each Defendant signed an

agreement entitled “Guaranty,” through which each Defendant guaranteed SH 168’s payment

obligations under the Loan Agreement. Id. ¶¶ 6, 11.

Each Guaranty that Defendants signed contains a choice-of-law clause stating that it is

governed by New Jersey law, but neither Guaranty contains a forum selection clause. ECF No.

43-5 § 14; ECF No. 43-6 § 14. Each Guaranty also contains an integration clause saying that it

“is the complete and final expression of the agreement” between Plaintiff and each Defendant.

1 Unless a fact in this section is expressly described as Plaintiff’s contention, these facts are

based on the facts that Defendants have not disputed in their response to Plaintiff’s Local Rule

56.1 statement (ECF No. 48-9), the contracts between the parties that Defendants have not

disputed that they entered into, and exhibits supplied by Defendants in opposition to Plaintiff’s

summary judgment motion (ECF Nos. 48-1 to 48-8).

ECF No. 43-5 § 15; ECF No. 43-6 § 15. The Loan Agreement and the Note similarly contain

New Jersey choice of law clauses and no forum selection clauses. ECF No. 43-3 § 11; ECF No.

43-4 § 14. At the same time the parties executed the Guaranties, however, Plaintiff and

Defendants entered into separate agreements, each entitled “Security Agreement,” that gave

Plaintiff a security interest in various forms of property that Defendants owned. ECF No. 1-7 §§

2–3. Each Security Agreement not only contains a New Jersey choice of law clause, but also a

forum selection clause providing that, “[i]n the event of a dispute, the exclusive forum, venue

and place of jurisdiction will be in New Jersey, unless otherwise required by law.” ECF No. 1-7

§ 14. Plaintiff has amended its complaint, however, to withdraw all claims that Plaintiff

previously asserted based on the parties’ Security Agreements, and Plaintiff is not seeking

summary judgment on any claim arising under the Security Agreements. See ECF No. 37;

Minute Entry dated June 7, 2022.

Defendants do not dispute that SH 168 did not make the principal or interest payment due

on the Note’s originally-scheduled maturity date of February 12, 2020, or that Defendants failed

to make that payment pursuant to the Guaranty. ECF No. 48-9 ¶¶ 15, 17. However, the Note

permitted SH 168 to extend the maturity date by six months by paying an extension fee of

$25,000 on January 12, 2020, “together with one lump sum prepayment of 6 (six) months

interest in the amount of $168,750.00.” Id. ¶ 19; ECF No. 43-4 § 9. After the deadline to extend

the maturity date had passed, on a date not specified by the parties, SH 168 paid Plaintiff

$50,000—i.e., more than the amount of the modification fee required by the Note but less than

the combined amount of the modification fee and the prepayment of six months of interest. ECF

No. 48-9 ¶ 20. However, Defendants do not contend that they or SH 168 made a full payment of

$193,750, as required by the terms of the Note to obtain an extension, on or before January 12,

2020. Id. ¶¶ 20–22.

Instead, Defendants contend that they complied with their obligations under the

Guaranties because SH 168 entered into a new agreement with Plaintiff entitled Modification

and Extension of Mortgage and Note (the “Modification Agreement”). If the Modification

Agreement were an enforceable contract, it would have provided for a new maturity date of

November 12, 2020, in exchange for a series of four payments totaling $272,208.22, starting

with an initial payment of $75,000 on July 10, 2020. ECF No. 48-3 at 10.

On July 10, 2020, SH 168 sent Plaintiff a version of the Modification Agreement, signed

by Defendant Chen on the company’s behalf, and wired Plaintiff the initial payment of $75,000.

ECF No. 48-3. Defendants’ counsel followed up with Plaintiff’s representatives several times,

asking for a counter-signed version of the Modification Agreement signed on behalf of Plaintiff.

ECF No. 48-7. Although one of Plaintiff’s employees told Defendants’ counsel in an email on

July 23, 2020, that she “w[ould] try to email [him] a copy tomorrow,” see ECF No. 48-4 at 2,

and Plaintiff’s attorney told Defendants’ counsel in an email on August 12, 2020, that “[t]he

documents have been executed,” see ECF No. 48-7 at 3, Defendants concede that “Plaintiff

never provided a fully signed [Modification] Agreement to the Borrower,” see ECF No. 48-1 ¶

26.

Plaintiff contends that it never signed the Modification Agreement because, among other

reasons, Plaintiff learned from a title report that SH 168 had failed to pay real estate taxes on real

property that was secured by a separate mortgage agreement between the parties and had failed

to provide proof that it had maintained insurance for the property, as required by the Loan

Agreement. ECF No. 48-9 ¶ 25. The version of the Modification Agreement that SH 168 signed

incorporated the representations and warranties from the Note and Loan Agreement, and

required those representations and warranties to be true as of the date of the Modification

Agreement. ECF No. 48-3 at 10. Plaintiff contends that these alleged failures by SH 168 were

breaches of those representations. ECF No. 48-9 ¶ 25.

LEGAL STANDARD

With respect to Defendants’ motion to dismiss for lack of subject matter jurisdiction,

Plaintiff, as the party invoking the Court’s jurisdiction, has the burden of “prov[ing] jurisdiction

by a preponderance of evidence.” Platinum-Montaur Life Scis., LLC v. Navidea Biopharms.,

Inc., 943 F.3d 613, 617 (2d Cir. 2019).2 “[A] Rule 12(b)(1) motion challenging subject matter

jurisdiction may be either facial, i.e., based solely on the allegations of the complaint and

exhibits attached to it, or fact-based, i.e., based on evidence beyond the pleadings.” Harty v. W.

Point Realty, Inc., 28 F.4th 435, 441 (2d Cir. 2022). If “jurisdictional facts are placed in

dispute,” then the Court “has the obligation to decide issues of fact by reference to evidence

outside the pleadings, such as affidavits.” Id.

Although the Court may decide to hold a hearing to resolve jurisdictional facts, the Court

is required to “leave the jurisdictional issue for the trial” only if “the overlap in the evidence is

such that fact-finding on the jurisdictional issue will adjudicate factual issues required by the

Seventh Amendment to be resolved by a jury.” Alliance for Env’t Renewal, Inc. v. Pyramid

Crossgates Co., 436 F.3d 82, 88 (2d Cir. 2006). The Second Circuit has emphasized that the

existence of such an overlap requiring the “deferral of a jurisdictional issue until trial is an

extremely unusual situation.” Broidy Cap. Mgmt. LLC v. Benomar, 944 F.3d 436, 444 n.7 (2d

2 Unless noted, case law quotations in this order accept all alterations and omit internal

quotation marks, citations, and footnotes.

Cir. 2019). Instead, “the Seventh Amendment’s guarantee of the right to the ultimate

determination of issues of fact by the jury, does not extend to the threshold issues that courts

must address to determine whether litigation is being conducted in the right forum at the right

time,” such as issues of subject matter jurisdiction. Messa v. Goord, 652 F.3d 305, 309 (2d Cir.

2011) (emphasis in original).

With respect to Plaintiff’s motion, summary judgment is appropriate “if the movant

shows that there is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a). In other words, a court should grant

summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there is no genuine issue as to any material fact

and that the moving party is entitled to a judgment as a matter of law.” Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 247 (1986). The moving party has the burden of demonstrating that

there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

“Where the moving party demonstrates the absence of a genuine issue of material fact, the

opposing party must come forward with specific evidence demonstrating the existence of a

genuine dispute of material fact.” Brown v. Eli Lilly & Co., 654 F.3d 347, 358 (2d Cir. 2011).

When deciding a summary judgment motion, any ambiguities and inferences drawn from

the facts must be viewed in the light most favorable to the nonmoving party. LaFond v. Gen.

Physics Servs. Corp., 50 F.3d 165, 171 (2d Cir. 1995). Although “courts must refrain from

assessing competing evidence in the summary judgment record and avoid making credibility

judgments,” a party must defeat summary judgment by putting forth “evidence on which the jury

could reasonably find for the non-moving party.” Saeli v. Chautauqua Cty., 36 F.4th 445, 456

(2d Cir. 2022) (emphasis in original) (affirming summary judgment dismissing claims).

When a plaintiff moves for summary judgment on its claims and asks the court to strike

the defendant’s affirmative defenses in doing so, “whatever evidence there is to support an

essential element of an affirmative defense will be construed in a light most favorable to the non-

moving defendant,” but “there is no express or implied requirement in Rule 56 that the moving

party support its motion with affidavits or other similar materials negating the opponent’s

claim.” Avail 1 LLC v. Varlas, No. 19-cv-1922, 2023 WL 4373540, at *4 (E.D.N.Y. July 6,

2023) (quoting Fed. Deposit Ins. Corp. v. Giammettei, 34 F.3d 51, 54 (2d Cir. 1994)) (granting

summary judgment striking affirmative defenses). Instead, “where a plaintiff’s motion for

summary judgment would be meritorious absent the assertion of an affirmative defense, in order

to avoid summary judgment, the defendant must adduce evidence which, viewed in the light

most favorable to and drawing all reasonable inferences in favor of it, would permit judgment for

it on the basis of that defense.” Townsquare Media, Inc. v. Regency Furniture, Inc., No. 21-cv-

4695, 2022 WL 4538954, at *20 (S.D.N.Y. Sept. 28, 2022) (finding that defendants had

“abandoned” their affirmative defenses by not presenting arguments in favor of their validity in

opposition to plaintiff’s motion for summary judgment); see also In re 650 Fifth Ave. & Related

Props., 830 F.3d 66, 97 n.29 (2d Cir. 2016) (explaining that “controlling Supreme Court and

Second Circuit case law sets forth the principle that a non-moving party must have some

evidence permitting a reasonable juror to find in its favor with respect to an affirmative

defense”).

DISCUSSION

The Court denies Defendants’ motion to dismiss the complaint for lack of subject matter

jurisdiction and also denies Defendants’ request to dismiss or transfer this case based on the

forum selection clauses in the parties’ Security Agreements. The Court grants Plaintiff’s motion

for summary judgment as to Defendants’ payment obligations under the Guaranties, strikes

Defendants’ affirmative defenses, and dismisses Defendants’ counterclaim. However, the Court

denies, at this stage, Plaintiff’s request for specific performance to enforce the financial

disclosure obligations in Defendants’ Guaranties and for attorneys’ fees and costs.

I. Defendants’ Motion to Dismiss or Transfer the Case Fails

A. Plaintiff Has Proven Diversity of Citizenship and Subject Matter

Jurisdiction

Defendants have admitted in their answer that they are each citizens of New York. ECF

No. 41 ¶¶ 3–4. However, they challenge the following allegation in Plaintiff’s amended

complaint as insufficient to identify Plaintiff’s citizenship and, therefore, to demonstrate

diversity of citizenship between the parties:

At all times relevant herein, Plaintiff had one member, which is a

limited partnership organized and existing under the laws of the

State of Delaware and which maintains a principal place of

business in the State of New Jersey. The sole member of each

partner of the limited partnership which is a limited liability

company is an individual who was a citizen of the State of New

Jersey at the time when this action was filed. Each partner of the

limited partnership which is not a limited liability company is

comprised of one or more individuals who were citizens of the

State of New Jersey at the time when this action was filed. Plaintiff

is not a New York State regulated bank or servicer or a federally

backed mortgagee.

ECF No. 37 ¶ 2. As further explained in this section, this allegation is sufficient to demonstrate

that Plaintiff is a citizen of New Jersey and that diversity jurisdiction exists. The evidence

submitted by the parties reinforces this conclusion, and the Court is entitled to weigh that

evidence rather than present it to a jury for the reasons explained above. See Broidy Cap. Mgmt.,

944 F.3d at 444 n.7 (explaining that “deferral of a jurisdictional issue until trial is an extremely

unusual situation”).

Since Plaintiff is a limited liability company, it “takes the citizenship of all of its

members” for the purpose of determining diversity jurisdiction. Platinum-Montaur, 943 F.3d at

615. Similarly, the limited partnership that is Plaintiff’s sole member “takes the citizenship of all

of its partners.” Id. Plaintiff has submitted a declaration, made under penalty of perjury,

explaining in greater detail that the limited partnership that is Plaintiff’s sole member has, in

turn, five partners: (i) non-party Richard Han; (ii) two limited liability companies, of which Mr.

Han is the sole member; (iii) a fiduciary trust for which Mr. Han and his father are the sole

trustees; and (iv) a fiduciary trust for which Mr. Han’s wife and Mr. Han’s mother are the sole

trustees. ECF No. 43-27 ¶ 1. The identity of these partners is also corroborated by the limited

partnership’s tax return for the year 2020. ECF No. 43-28.

The U.S. Supreme Court has not definitively decided how to determine the citizenship of

a fiduciary trust for the purpose of determining diversity jurisdiction, but the Second Circuit has

interpreted various Supreme Court decisions addressing the citizenship of trusts to mean that, for

a fiduciary trust, “it is the trustees’ citizenship that must determine diversity.” Raymond Loubier

Irrevocable Tr. v. Loubier, 858 F.3d 719, 729–31 (2d Cir. 2017). Although Defendants assert

that “[t]he citizenship of trusts could be the citizenship of its trustee(s), its beneficial owner(s), or

both,” see ECF No. 44-5 at 7, they rely on an inapposite case that dealt with the citizenship of

“an unincorporated statutory trust that services residential mortgage loans.” MSR Tr. v.

Nationstar Mortg. LLC, No. 21-cv-3089, 2022 WL 392405, at *1 (S.D.N.Y. Feb. 9, 2022). The

Second Circuit expressly held in Loubier that the criteria that determine the citizenship of such

trusts “do[] not apply to a traditional trust that establishes only a fiduciary relationship.”

Loubier, 858 F.3d at 729.

Plaintiff’s citizenship is, therefore, determined by the citizenship of Mr. Han, his wife, his

father, and his mother at the time Plaintiff filed this case. See Van Buskirk v. United Grp. of

Cos., 935 F.3d 49, 53 (2d Cir. 2019) (explaining that “[f]or purposes of diversity jurisdiction, the

relevant domicile is the parties’ domicile at the time the complaint was filed”). Mr. Han’s

declaration explains that, at that time, each of these individuals was a citizen of New Jersey, had

resided in New Jersey “for many years” prior to this case, had submitted income tax returns to

New Jersey, was registered to vote in New Jersey, and had a New Jersey driver’s license. ECF

No. 43-27 ¶¶ 1–2. This evidence is adequate to demonstrate that these individuals are citizens of

New Jersey and that Plaintiff is likewise a citizen of New Jersey and no other state. See

Krechmer v. Tantaros, 747 F. App’x 6, 10–11 (2d Cir. 2018) (holding that district court properly

relied on similar evidence about defendant’s residence, voter registration, tax filings, and driver’s

license to determine defendant’s state of citizenship); Maitland v. Fishbein, 712 F. App’x 90, 92

(2d Cir. 2018) (relying on plaintiffs’ driver’s licenses to determine their state of citizenship).

Defendants have attacked Plaintiff’s assertion of jurisdiction on two grounds, one of

which is based on the pleadings and the other of which is based on evidence. First, Defendants

argue that Plaintiff’s allegation that diversity of citizenship exists is facially invalid because the

amended complaint does not identify each partner of the limited partnership that owns Plaintiff.

ECF No. 44-5 at 7. The amended complaint does, however, explain that each partner is either an

individual who is a citizen of New Jersey or an entity that draws its citizenship from individuals

who are citizens of New Jersey. ECF No. 37 ¶ 2. This level of detail is sufficient because a

limited liability company is not “require[d] . . . to specifically identify the names and locations of

each individual member of the LLC” in order to invoke diversity jurisdiction. Jean-Louis v.

Carrington Mortg. Servs., LLC, 849 F. App’x 296, 298 (2d Cir. 2021) (affirming refusal to

remand case to state court because defendant limited liability company had adequately, through

sworn affidavit, “traced [defendant’s] ownership and identified the citizenship of its member

limited liability companies, limited partnerships (general and limited partners included), and

private individuals” without specifically identifying the members). Defendants’ facial attack on

Plaintiff’s pleading of diversity jurisdiction therefore fails.

Defendants’ second attack on diversity jurisdiction is fact-based and derived from

supposed contradictions between Mr. Han’s declaration and his deposition testimony. The first

of these alleged contradictions is Mr. Han’s testimony that he “believe[d]” Plaintiff’s sole

member was a limited liability company, see ECF No. 44-4 at 11, rather than a limited

partnership, as stated in his declaration, see ECF No. 27 ¶ 1. Mr. Han further testified that

Plaintiff’s sole member was owned by “[m]yself, my wife, or entities that are affiliated with me,

or my wife,” including the two trusts described in his declaration, but his declaration does not

identify his wife as a direct partner of the limited partnership. ECF No. 44-4 at 11–12. Since

Mr. Han expressly caveated that his testimony was based on his limited recollection and

accurately testified about the basic contours of Plaintiff’s ownership, the Court deems this to be

an instance in which a deponent’s subsequent declaration has “amplifie[d]” previously

“ambiguous” testimony, rather than contradicted that testimony, thereby making it appropriate

for the Court to consider Mr. Han’s declaration. See Ridge v. Davis, No. 18-cv-8958, 2022 WL

357020, at *6–7 (S.D.N.Y. Feb. 7, 2022) (permitting plaintiff to submit affidavit in opposition to

summary judgment motion, even though he had been deposed). Relying on Mr. Han’s

declaration is also appropriate because the ownership structure it describes is consistent with the

tax return filed by the limited partnership that owns Plaintiff. ECF No. 43-28; see Hallett v.

Stuart Dean Co., 517 F. Supp. 3d 260, 274 n.51 (S.D.N.Y. 2021) (explaining that “[the

plaintiff’s] memory lapse” during a deposition “fail[ed] to create a genuine dispute” about fact

that was proven by documentary evidence). Furthermore, the discrepancy in Mr. Han’s

testimony about whether Plaintiff’s sole member was a limited liability company or a limited

partnership has no practical impact on the issue of diversity jurisdiction because either type of

entity is a pass-through entity for the purpose of determining Plaintiff’s states of citizenship. See

Platinum-Montaur, 943 F.3d at 615 (explaining that states of citizenship for limited liability

companies and limited partnerships are derived from their members and partners, respectively).

Defendants similarly argue that Mr. Han testified during his deposition that the two

fiduciary trusts within Plaintiff’s ownership structure were also limited liability companies,

despite the fact that Mr. Han also consistently referred to those entities as “trusts” throughout the

deposition. ECF No. 50 at 4. However, Mr. Han made clear during the deposition that this too

was only his “belie[f],” that he did not “know clearly” under what state’s law the trusts were

organized, and that they were set up by a law firm on his behalf more than ten years ago. ECF

No. 44-4 at 15–19. Since the tax return for the limited partnership that owns Plaintiff identifies

both entities as trusts, rather than limited liability companies, the Court concludes that the

description in Mr. Han’s declaration is accurate and that Plaintiff has adequately proven that

diversity jurisdiction exists. ECF No. 43-28 at 14, 20.3

3 Mr. Han also testified that he and his wife were the trustees of the two trusts that

determine Plaintiff’s citizenship without mentioning that his parents were also trustees. See ECF

No. 44-4 at 19–20. That discrepancy between his deposition testimony and his declaration does

not defeat Plaintiff’s assertion of diversity jurisdiction because, even if his deposition testimony

were accurate, all of the trustees in either scenario would be citizens of New Jersey.

B. The Forum Selection Clauses in the Security Agreements Do Not Apply to

Plaintiff’s Claims for Defendants’ Breach of the Guaranties

The Court rejects Defendants’ request to dismiss or transfer this case based on the forum

selection clauses in the parties’ Security Agreements. As an initial matter, venue in this District

is proper because “[a] civil action may be brought in a judicial district in which any defendant

resides, if all defendants are residents of the State in which the district is located.” 28 U.S.C. §

1391(b)(1). Both Defendants concede in their answer to Plaintiff’s amended complaint that they

reside in this District. ECF No. 41 ¶¶ 3–4. Since “venue is proper so long as the requirements of

§ 1391(b) are met, irrespective of any forum-selection clause,” the proper means of enforcing a

forum selection clause is through a request to transfer the case to another federal court pursuant

to 28 U.S.C. § 1404. Atl. Marine Constr. Co., Inc. v. U.S. Dist. Court for W. Dist. of Tx., 571

U.S. 49, 57, 59 (2013). Alternatively, if a forum selection clause identifies a state court as the

exclusively appropriate forum, a federal court may enforce the forum selection clause by

dismissing the case pursuant to the doctrine of forum non conveniens. Id. at 60–61.

When a forum selection clause applies to a particular dispute, a federal court must

enforce the clause unless the party opposing its enforcement can “clearly show that enforcement

would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or

overreaching.” M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972); see also Rabinowitz

v. Kelman, 75 F.4th 73, 81 (2d Cir. 2023) (describing non-enforcement of a forum selection

clause as a “rare case” in which “the resisting party” must satisfy a “heavy burden”). Where, as

here, the parties have argued that different contracts govern forum selection, “and the parties do

not dispute the facts which gave rise to those two conflicting contracts,” then the court must

decide which contract applies as a matter of law. Lazare Kaplan Int’l, Inc. v. KBC Bank N.V.,

528 F. App’x 33, 35 (2d Cir. 2013) (remanding case to district court for further consideration of

which contract applied); see also Asoma Corp. v. SK Shipping Co., 467 F.3d 817, 822 (2d Cir.

2006) (holding that “the court must decide as a matter of law on the agreed facts which forum

selection clause governs”).

The forum selection clauses in the Security Agreements do not apply to Plaintiff’s claims

for Defendants’ alleged breaches of their Guaranties. As described above, the Guaranties, the

Loan Agreement, and the Note do not contain forum selection clauses, although they each

contain a New Jersey choice of law clause. ECF No. 43-3 § 14; ECF No. 43-4 § 14; ECF No.

43-5 § 14; ECF No. 43-6 § 14. Only the Security Agreements contain forum selection clauses

requiring the parties to bring claims asserted pursuant to those agreements in a court located in

New Jersey. ECF No. 1-7 § 14.4 Plaintiff has voluntarily withdrawn all claims previously

asserted pursuant to the Security Agreements. See ECF No. 37 (Plaintiff’s amended complaint

withdrawing claims based on Security Agreements); Minute Entry dated June 7, 2022

(describing Plaintiff’s agreement reached during pre-motion conference to withdraw claims

based on Security Agreements).

When choosing between multiple contracts to determine whether a particular forum

selection clause applies, a court must consider whether one “agreement contains a merger clause

that designates it as the document that fully embodies the parties’ rights and obligations.”

Alfandary v. Nikko Asset Mgmt. Co., Ltd., 337 F. Supp. 3d 343, 358 (S.D.N.Y. 2018) (declining

to dismiss lawsuit based on forum selection clause in separate agreement because agreement that

plaintiff alleged defendants had breached contained a different forum selection clause and an

integration clause). Both of the Guaranties contain integration clauses stating that those

4 The forum selection clauses in the Security Agreements do not specify whether any such

lawsuit must be brought in state or federal court. ECF No. 1-7 § 14.

agreements fully embody the parties’ rights and obligations thereunder. ECF No. 43-5 § 14;

ECF No. 43-6 § 14. In light of these integration clauses, and since Plaintiff is suing based on

alleged breaches of the Guaranties, the Court concludes that the Security Agreements’ forum

selection clauses do not apply to this dispute.

II. Plaintiff Is Entitled to Summary Judgment on the Issue of Defendants’

Payment Obligations

A. Defendants Breached the Guaranties Because the Parties Never Modified

the Loan Agreement

Plaintiff has proven all the elements of its claims that Defendants breached the

Guaranties by failing to pay SH 168’s unpaid loan to Plaintiff. To prevail on a breach of contract

claim, plaintiffs have “the burden to prove four elements: first, that the parties entered into a

contract containing certain terms; second, that plaintiffs did what the contract required them to

do; third, that defendants did not do what the contract required them to do, defined as a breach of

the contract; and fourth, that defendants’ breach, or failure to do what the contract required,

caused a loss to the plaintiffs.” Globe Motor Co. v. Igdalev, 139 A.3d 57, 64 (N.J. 2016); see

also Woytas v. Greenwood Tree Experts, Inc., 206 A.3d 386, 392 (N.J. 2019) (describing same

elements).5 Interpreting a contract by determining the parties’ intent, “in an appropriate setting,

is a purely legal question that is particularly suitable for decision on a motion for summary

judgment.” Globe Motor, 139 A.3d at 64.

Defendants do not dispute that Plaintiff and SH 168 entered into the Loan Agreement and

the Note and that Plaintiff and Defendants entered into the Guaranties. ECF No. 48-9 ¶¶ 6, 9, 11.

They do not dispute that Plaintiff performed by funding the loan. Id. ¶ 7. Nor do Defendants

5 As described above, the Guaranties, the Loan Agreement, and the Note each contain a

New Jersey choice of law clause. ECF No. 43-3 § 14; ECF No. 43-4 § 14; ECF No. 43-5 § 14;

ECF No. 43-6 § 14.

dispute that failure to pay the loan when due was an event of default and, therefore, a breach of

the agreements. Id. ¶ 8. Nonpayment would obviously cause Plaintiff a loss. The only element

that Defendants dispute is whether they performed because, although they concede that they have

not paid the full amount required by the original Loan Agreement, Note, and Guaranties,

Defendants contend that their partial, post-default payments totaling $125,000 complied with the

Modification Agreement, to which they contend the parties agreed. Id. ¶¶ 15–16.

However, the undisputed facts demonstrate as a matter of law that Plaintiff never agreed

to the Modification Agreement. New Jersey’s applicable statute of frauds “requires a writing

signed by a lender if a loan exceeds $100,000,” and that writing requirement also “appl[ies] to a

loan modification.” JPMorgan Chase Bank, N.A. v. Shivaram, No. A-4275-18T4, 2020 WL

1026933, at *3 (N.J. App. Div. Mar. 3, 2020) (rejecting affirmative defense that lender had

agreed to modify mortgage agreement). Additionally, the Loan Agreement, Note, and

Guaranties each included a provision that required all amendments or modifications to be in

writing and “executed by” Plaintiff. ECF No. 43-3 § 13; ECF No. 43-4 § 16; ECF No. 43-5 §

15; ECF No. 43-6 § 15. Although Defendant Chen signed the Modification Agreement on behalf

of SH 168, see ECF No. 48-3, Defendants concede that Plaintiff never signed the Modification

Agreement in response, see ECF No. 48-1 ¶ 26. Instead, Defendants rely on the emails

exchanged among Defendants’ counsel, Plaintiff’s counsel, and one of Plaintiff’s employees, to

contend that Plaintiff’s representatives conveyed Plaintiff’s assent to the Modification

Agreement by email. ECF No. 48-10 at 3–4.

New Jersey law permits parties to reach a written agreement that complies with the

statute of frauds through an exchange of emails even if “neither party actually signed a separate

written document embodying the terms set forth in the emails.” CAM Tr. v. Revere High Yield

Fund, LP, No. A-1250-17T3, 2018 WL 5810296, at *4 (N.J. App. Div. Nov. 7, 2018). However,

an exchange of emails is not sufficient if the parties conditioned their agreement by email “on the

parties subsequently reducing its terms to writing in a separate document.” Id. at *5. Those are

the exact circumstances that existed here because Plaintiff’s attorney advised Defendants’

attorney, before SH 168 signed the Modification Agreement and made a $75,000 payment,

purportedly pursuant to that agreement, that the payment “w[ould] be applied to [SH 168’s]

outstanding balance” on the Note. ECF No. 49-1 at 2. Plaintiff’s attorney further explained that

Plaintiff would not consider the payment to be performance of the contemplated Modification

Agreement “until such time that a formal agreement has been duly executed and delivered.” Id.

Accordingly, since Plaintiff never executed and delivered the Modification Agreement, no

modification of the Loan Agreement, the Note, or the Guaranties ever occurred.

B. Defendants’ Remaining Affirmative Defenses and Counterclaim Fail

Other than Defendants’ affirmative defense that Plaintiff agreed to modify the terms of

the Loan Agreement, Defendants have not proffered any evidence to support the affirmative

defenses asserted in their answer or made arguments in support of those defenses in their brief in

opposition to Plaintiff’s motion for summary judgment. As explained above, Defendants have

therefore abandoned those affirmative defenses. Townsquare Media, 2022 WL 4538954, at *20–

21 (holding on summary judgment that defendants had “abandoned” their affirmative defenses

under similar circumstances). The Court, therefore, will not discuss Defendants’ seventeen

affirmative defenses in full, but a few are worth mentioning to illustrate their lack of merit.

SH 168 is not a necessary party that Plaintiff was required to name as a defendant

because “[i]n cases involving guarantees, the beneficiary of a guarantee typically may choose to

sue the guarantor alone, without the principal debtor.” PNJ Cap. Corp. v. Bauco, No. 16-cv-

6242, 2018 WL 485973, at *5 (S.D.N.Y. Jan. 18, 2018). This is especially true where, as here,

the guarantors are the owners “of a company that was not joined in the action” and are, therefore,

“certainly able to adequately represent the company.” Id.; see also Barr & Morgan v. Eljamal,

No. 19-cv-1455, 2020 WL 3630421, at *4 (D. Conn. July 2, 2020) (refusing to dismiss claim to

enforce a guaranty because defendant guarantor’s company was not a necessary party).

Defendants make the conclusory assertion that whether they “entered into the [Guaranty]

agreements voluntarily and without coercion or duress are triable issues of fact,” but they have

not cited to any evidence supporting the existence of coercion. ECF No. 48-9 ¶ 13. There is no

apparent source of coercion other than Defendants’ or SH 168’s financial distress, and under

New Jersey law, “feeling pressure about personal finances does not constitute economic duress

in the legal sense, which has been defined as a wrongful or unlawful act that deprives the victim

of his or her unfettered will.” Dean v. Provisor, No. A-1199-20, 2022 WL 2711255, at *6 (N.J.

App. Div. July 13, 2022) (affirming summary judgment in favor of plaintiff on breach of contract

claim).

Defendants’ defense of usury also fails. With respect to New Jersey’s civil prohibition

against usury, N.J.S.A. 31:1–1, the statute contains an exemption that applies to loans of more

than $50,000. N.J.S.A. 31:1–1(e)(1). Additionally, Defendants cannot assert the defense of civil

usury because the statute says that “[n]o corporation, limited liability company or limited

liability partnership shall plead or set up the defense of usury.” N.J.S.A. 31:1–6. “[A]n

individual who personally guarantees the corporate obligation is also prohibited from asserting

usury as a defense or counterclaim.” Khrakovskiy v. Denise, No. 06-cv-1033, 2009 WL

3380326, at *5 (D.N.J. Oct. 19, 2009) (granting summary judgment dismissing usury

counterclaim); see also Pegasus Blue Star Fund, LLC v. Canton Prods., Inc., No. 08-cv-1533,

2009 WL 3246616, at *2 (D.N.J. Oct. 6, 2009) (dismissing usury counterclaim for same reason).

In any event, New Jersey’s civil usury statute, “does not apply to interest on defaulted

obligations,” such as the post-default interest rate at issue here. Westdale Constr., Ltd. v. Liberty

State Fin. Holdings Corp., No. 09-cv-2973, 2010 WL 1380380, at *3 (D.N.J. Apr. 1, 2010)

(granting summary judgment on breach of contract claim). New Jersey’s criminal prohibition

against usury does not preclude Plaintiff’s efforts to collect Defendants’ Guaranties because it

applies only to loans with interest rates higher than 30% made to individuals and interest rates

higher than 50% made to corporate entities, both of which exceed the 25% annual interest rate

applicable to the Note and Defendants’ Guaranties. N.J.S.A. 2C:21–19(a)(2).

Finally, Defendants cannot invoke executive orders promulgated by the Governor of New

York that prohibited evictions or foreclosures, which were in place at the time this action was

commenced but have since expired, because Plaintiff’s claims seeking to enforce a payment

guaranty do not involve eviction or foreclosure. See ECF No. 41 ¶ 52. Defendants have not

even attempted to cite a single legal authority suggesting that these executive orders apply to the

circumstances of this case, and the Court has not identified any such authority.

Plaintiff also moves for summary judgment dismissing Defendants’ counterclaim, which

simply asserts that “[t]his action was brought in bad faith, [and] Defendants are entitled to

recover attorney’s fees in defending this action.” ECF No. 41 ¶ 67. Defendants have not argued

against the dismissal of that counterclaim in their opposition brief or provided any legal authority

that would support an award of attorneys’ fees, see ECF No. 49-10, but New Jersey’s “Frivolous

Litigation Statute,” N.J.S.A. 2A:15–59.1, “permits a court to award reasonable counsel fees and

litigation costs to a prevailing party in a civil action if the court determines that a complaint,

counterclaim, cross-claim or defense of the nonprevailing person was frivolous.” Toll Bros., Inc.

v. Township of W. Windsor, 918 A.2d 595, 599 (N.J. 2007). This authority to award attorneys’

fees is a “limited exception[] to the American Rule for civil justice, whereby litigants are

expected to bear their own counsel fees.” Bove v. AkPharma Inc., 213 A.3d 948, 962 (N.J. App.

Div. 2019). Accordingly, “the Frivolous Litigation Statute is interpreted restrictively,” and

“[t]he burden of proving that the non-prevailing party acted in bad faith is on the party who seeks

fees and costs.” Id. at 964.

Granting summary judgment dismissing Defendants’ counterclaim is appropriate because

Defendants are not the prevailing party since the Court is ordering Defendants to pay their

unpaid Guaranties. Additionally, even though the Court is not granting Plaintiff’s request for

specific performance of the Guaranties’ financial disclosure obligations, for the reasons further

explained below, Defendants have not met their burden of demonstrating that Plaintiff acted in

bad faith in seeking that form of relief. See Sun Chem. Corp. v. Fike Corp., No. 13-cv-4069,

2018 WL 3492143, at *3–4 (D.N.J. July 20, 2018) (holding that sanctioning plaintiff under New

Jersey’s Frivolous Litigation Statute was not warranted even though defendants had obtained

summary judgment dismissing plaintiff’s claims).

C. Plaintiff Has Not Demonstrated a Need for Specific Performance of

Defendants’ Financial Disclosure Obligations

Each Guaranty includes a provision pursuant to which each Defendant agreed that he

would “provide [Plaintiff] any financial statement or information [Plaintiff] request[ed].” ECF

No. 43-5 § 18; ECF No. 43-6 § 18. After Defendants’ default, Plaintiff’s counsel sent a letter to

each Defendant requesting various financial information. See ECF Nos. 43-7 & 43-8. Plaintiff

alleges that Defendants never complied, and although Defendants “den[y] receiving such written

demand,” they have presented no evidence to support that assertion, such as a sworn denial by

either Defendant. ECF No. 48-9 ¶ 18. Plaintiff therefore seeks summary judgment “to enforce

the financial information requirement” in the Guaranties, see ECF No. 43-31 at 4, and Plaintiff’s

amended complaint has asserted each Defendant’s alleged breach of this provision as a separate

cause of action, see ECF No. 37 ¶¶ 26–30, 40–44.

Under New Jersey law, however, “specific performance is a remedy, and not an

independent cause of action.” ADP, LLC v. Capote, No. 15-cv-1355, 2015 WL 13447655, at *1

n.2 (D.N.J. July 28, 2015); see also Callas v. Callas, No. 14-cv-7486, 2021 WL 3400861, at *8

(D.N.J. Aug. 4, 2021) (declining to grant plaintiff summary judgment on specific performance

cause of action for that reason). The Court therefore directs summary judgment dismissing the

second and eighth claims in Plaintiff’s amended complaint, which seek to assert standalone

claims for specific performance. See ECF No. 37 ¶¶ 26–30, 40–44. Rule 56(f) permits the Court

to “grant summary judgment for a nonmovant,” see Fed. R. Civ. P. 56(f)(1), and the Second

Circuit has authorized granting such relief without notice against a party that has moved for

summary judgment in its favor if that party “suffer[s] no procedural prejudice.” Bridgeway

Corp. v. Citibank, 201 F.3d 134, 139 (2d Cir. 2000); see also Medacist Sols. Grp., LLC v.

CareFusion Sols., LLC, No. 19-cv-1309, 2021 WL 293568, at *4 (S.D.N.Y. Jan. 28, 2021)

(describing same standard). Plaintiff has not been procedurally prejudiced by this dismissal

because it can pursue the same relief as part of its claims that Defendants breached their

Guaranties.

However, “[u]nder New Jersey law, specific performance is not an automatic remedy for

a breach of contract, but rather a matter within the trial court’s discretion which must be

exercised on the basis of equitable considerations.” TD Auto Fin. LLC v. Cinema Car II, Inc.,

No. 13-cv-4230, 2016 WL 7319674, at *7 (D.N.J. Dec. 14, 2016). “In any suit seeking specific

performance, a grant of equitable relief is available only as a substitute in the absence of an

adequate remedy at law.” Meng v. Du, No. 19-cv-18118, 2023 WL 2625274, at *7 (D.N.J. Mar.

24, 2023). “A party seeking specific performance must establish the legal right to such relief by

showing that: (1) the contract at issue is valid and enforceable; (2) the terms of the contract are

clear, such that the court can determine with reasonable certainty, the duties of each party and the

conditions under which performance is due; and (3) an order compelling performance would not

be harsh or oppressive.” TD Auto Fin., 2016 WL 7319674, at *7.

Plaintiff’s motion for summary judgment neither addresses the applicable standard for

granting specific performance under New Jersey law nor attempts to explain why, if the Court

were to grant summary judgment awarding damages for the unpaid amounts under Defendants’

Guaranties, Plaintiff would lack an adequate remedy at law in the absence of specific

performance. See ECF No. 43-31. Under these circumstances, the Court declines to find at this

stage that specific performance is warranted. See N.Y. Cmty. Bank v. Est. of Paraskevaides, No.

18-cv-3987, 2019 WL 3024703, at *6 (S.D.N.Y. July 11, 2019) (declining after bench trial to

award specific performance for similar financial disclosure provision in guaranty agreement

where court had ordered defendants to pay the money owed under the guaranty).

D. Calculation of Plaintiff’s Damages

Defendants have not offered any evidence or argument to dispute Plaintiff’s calculation

of damages, other than their insistence that Plaintiff agreed to modify the Loan Agreement and

their assertion that the applicable interest rate is usurious. ECF No. 48-9 ¶ 16(a). The Court

finds that Plaintiff’s calculation that Defendants owed $3,671,875 as of February 28, 2022,

properly accounts for both the payments Defendants do not dispute that they missed and the

$125,000 in post-default payments that Defendants made. See ECF No. 43-17. Although

Plaintiff has not explained how it has calculated the ongoing daily interest accrual of $1,736.11,

see ECF No. 48-9 ¶ 16(a), the Court’s own calculations indicate that Plaintiff calculated this

amount by applying the Note’s 25% annual default rate to the $2.5 million principal amount of

the Note, without applying it to any already-accrued interest, based on the 360-day year method

provided by the Note, see ECF No. 43-4 § 3. The Court deems this method of calculation

appropriate. After applying that daily interest, Defendants owe a combined total of

$4,647,568.82 as of September 13, 2023.

The Guaranties authorize Plaintiff to recover “reasonable attorneys’ fees, court costs and

other legal expenses” if Defendants have defaulted. ECF No. 43-5 § 11; ECF No. 43-6 § 11. As

with Plaintiff’s standalone claims for specific performance, the Court directs summary judgment

dismissing the sixth and twelfth claims in Plaintiff’s amended complaint, which seek attorneys’

fees and costs as standalone claims. See Mass v. Greg Cohen Promotions, LLC, No. 18-cv-2239,

2023 WL 2267354, at *3 (S.D.N.Y. Feb. 28, 2023) (explaining that court had dismissed

plaintiff’s claim for “attorney’s fees and costs” “as separate causes of action, without prejudice

to [p]laintiff seeking attorney’s fees and costs as a prevailing party as provided in” the parties’

contract); JP Morgan Chase Bank, N.A. v. Reifler, No. 11-cv-4016, 2014 WL 11350916, at *4

(S.D.N.Y. Mar. 16, 2014) (denying motion for summary judgment on plaintiff’s separate cause

of action to collect attorneys’ fees owed pursuant to guaranty agreement but still “consider[ing]

attorneys’ fees as damages related to [d]efendant’s breach”).

The Court declines at this stage to award Plaintiff fees and costs as damages because

Plaintiff’s calculation of its attorneys’ fees and costs includes fees that Plaintiff has incurred as

part of separate lawsuits pending in this District asserting claims for fraudulent conveyances

against Defendants and others. See ECF No. 43-1 ¶¶ 39, 45, 48; ECF No. 43-19. Those claims

have not been adjudicated on the merits, and Plaintiff has provided no legal authority explaining

why, even if the claims in those separate cases were resolved in Plaintiff’s favor, Plaintiff would

be entitled to collect those fees and costs pursuant to the Guaranties. If Plaintiff wishes to

continue pursuing its request for attorneys’ fees and collection costs, it must submit supplemental

briefing addressing the proper amount of these damages, and Defendants will not be entitled to a

jury trial on this issue. See McGuire v. Russel Miller, Inc., 1 F.3d 1306, 1313 (2d Cir. 1993)

(explaining that “when a contract provides for an award of attorneys’ fees,” a jury is entitled to

decide disputes of fact related to liability under the contract, but “the judge is to determine a

reasonable amount of fees”).

CONCLUSION

For the reasons set forth above, the Court DENIES Defendants’ motion to dismiss this

case for lack of diversity jurisdiction or to dismiss or transfer the case pursuant to the forum

selection clause in the parties’ Security Agreements. ECF No. 44.

The Court GRANTS in part Plaintiff’s motion for summary judgment, strikes

Defendants’ affirmative defenses, and dismisses Defendants’ counterclaim. ECF No. 43. The

Court grants summary judgment on the first and seventh claims in Plaintiff’s amended complaint

for breach of Defendants’ Guaranties, and Defendants are jointly and severally liable for

$4,647,568.82, as of the date of this order. The Court dismisses the second and eighth claims in

Plaintiff’s amended complaint seeking specific performance and declines at this time to impose

injunctive relief requiring Defendants to comply with the financial disclosure obligations in the

Guaranties. The Court also dismisses the sixth and twelfth claims in Plaintiff’s amended

complaint seeking attorneys’ fees and costs as standalone claims. Plaintiff has already

voluntarily withdrawn all of its remaining claims. See ECF No. 37.

Plaintiff may submit a supplemental letter no longer than five pages on or before

September 27, 2023, accompanied by any necessary exhibits documenting Plaintiff’s fees and

costs, providing factual and legal support for Plaintiff’s request for specific performance and for

attorneys’ fees and costs incurred up through the date of that letter. Alternatively, Plaintiff may

submit a letter on or before that same date stating that Plaintiff has decided to waive its request

for such relief and instead seeks entry of judgment against Defendants for their breach of their

payment obligations. If Plaintiff decides not to waive its requests for such relief, Defendants

may file a responsive letter no longer than five pages on or before October 11, 2023.

SO ORDERED.

/s/ Hector Gonzalez

HECTOR GONZALEZ

United States District Judge

Dated: Brooklyn, New York

September 13, 2023