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SRL Mondani, LLC v. Modani Spa Resort, Ltd.

Superior Court of Delaware

April 28, 2017


          Submitted: January 31, 2017

         Upon Defendants' Motion to Dismiss DENIED.

          Gregory E. Stuhlman, Esquire, and Brittany M. Giusini, Esquire, Greenberg Traurig, LLP, Wilmington, Delaware. Attorneys for SRL Mondani, LLC.

          Chad S.C. Stover, Esquire, and Regina S.E. Murphy, Esquire, Barnes & Thornburg LLP, Wilmington, Delaware. Attorneys for Modani Spa Resort, Ltd., Neil Kaye, and Judy Kaye.

          Eric M. Davis, Judge


         This breach of contract action is assigned to the Complex Commercial Litigation Division of the Court. Plaintiff SRL Mondani LLC's ("SRL") filed its Complaint on April 1, 2016. Through the Complaint, SRL seek repayment of a loan and interest from Defendants Modani Spa Resort, Ltd., Neil Kaye, and Judy Kaye (collectively, "Defendants").

         On July 13, 2016, Defendants moved to dismiss the Complaint, and filed their Opening Brief in Support of Defendants' Motion to Dismiss (the "Motion"). Defendants allege that the parties' various contracts mandate Israeli jurisdiction and application of Orthodox Jewish law and this mandate overrides all other forum selection clauses. Alternatively, Defendants argue for dismissal on forum non conveniens grounds-e.g., litigating in Delaware is an extreme hardship, as the parties' sole collective tie to Delaware is SRL's incorporation here. SRL opposes the Motion, submitting its Plaintiff's Answering Brief in Opposition to Defendants' Motion to Dismiss (the "Answer"). Defendants responded to the Answer on September 26, 2016 with their Defendants' Reply in Support of Their Motion to Dismiss filed on October 31, 2016 (the "Reply").

         The Court held a hearing and heard oral argument on the Motion, Answer, and Reply on January 31, 2017. At the conclusion of the hearing, the Court took the Motion under advisement. This is the Court's decision on the Motion. For the reasons set forth below, the Court DENIES the Motion.


         SRL is a Delaware limited liability company.[1] Modani Spa Resort Ltd. ("Modani") is a company organized under the State of Israel.[2] Mr. Kaye and Ms. Kaye are Israeli residents.[3]Defendants wanted to build a resort in Israel.[4] SRL lent Defendants $1.5 million to assist in the building of that resort.[5]

         On September 4, 2015, the parties executed three agreements in conjunction with the loan. First, the parties executed a Bridge Financing Agreement ("Agreement").[6] Under the Agreement, Modani agreed to repay the full principal plus interest by January 2, 2016.[7] Second, Modani executed a $1.5 million promissory note (the "Note").[8] In connection with the financing, Mr. Kaye and Ms. Kaye also signed a personal guarantee (the "Guarantee"), promising to repay the loan in the event Modani did not.[9]

         The parties also signed two related agreements. First, the parties signed the Iska Contract.[10] The Iska Contract provides, among other things, that (i) Defendants received $1.5 million from SRL to be used for business purposes;[11] (ii) Defendants were obligated to use the funds in a manner they believed would generate profits;[12] and (iii) any profits realized or losses sustained shall be shared equally between SRL and Defendants.[13] Second, the parties entered a Share Issuance Agreement, whereby Defendants issued 44, 859, 130 ordinary shares of Modani stock to SRL in exchange for SRL's lending Modani shareholder loans and capital notes.[14]

         Modani did not repay the loan by January 2, 2016.[15] On January 4, 2016, SRL notified Modani that it was in default, and demanded full payment of principal and interest within fourteen days.[16] SRL also notified Mr. Kaye and Ms. Kaye, as Guarantors.[17] Modani did not repay the loan within the fourteen day mandate.[18] On January 13, 2016, SRL demanded payment from Mr. Kaye and Ms. Kaye.[19] Mr. Kaye and Ms. Kaye did not pay under the Guarantee.[20]


         Superior Court Civil Rule 12(b)(3) ("Civil Rule 12(b)(3)") governs a motion to dismiss or stay on the basis of improper venue. Under Civil Rule 12(b)(3), the Court should give effect to private agreements' terms to resolve disputes in a contractually-designated judicial forum, out of respect for the parties' contractual designation.[21] The Court can grant dismissal prior to discovery, on the basis of affidavits and documentary evidence, if the plaintiff cannot make out a prima facie case in support of its position.[22] The Court generally will allow discovery in connection with Civil Rule 12(b)(3) motion when the plaintiff advances a non-frivolous legal argument that would defeat the motion if the facts turn out to be as alleged.[23]


         For purposes of the Motion, the Court finds that the relevant agreements are the Agreement and the Guarantee. The Agreement contains a forum selection clause, which states:

This Agreement shall be governed by and construed according to the laws of the State of Delaware, without regard to the conflict of laws provisions thereof. Any dispute arising under or in relation to this Agreement shall be resolved in the competent courts situated in Delaware, and each of the parties hereby submits irrevocably to the exclusive jurisdiction of such court.[24]

         Further, the Guarantee also contains a mandatory Delaware forum selection clause, which states:

[T]he law applicable to this Guarantee and to any matter in connection with and relating to it shall be law of the state of Delaware without regard to provisions regarding choice of laws. Exclusive jurisdiction on any matter relating to this Guarantee shall be vested in the competent court situated in Delaware.[25]

         Defendants contend the Iska Contract supersedes the Agreement's and Guarantee's forum selection clauses. The Iska contract's forum selection clause states: "[A]ny dispute which may arise in connection with this agreement shall be submitted before the courts of Israel."[26] Even if Iska Contract were applicable, Defendants have not cited, and the Court cannot locate, any case law showing an Iska or any contract comporting with Jewish law supersedes other, concurrent contracts. The Court has found, however, ...

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