Gifts of the Magi Are No Match for Vatican Choice of Forum Clause
If you’re in the business of making Catholic-branded gifts, it seems like you wouldn’t want to irk the Vatican. But Magi XXI decided that it wasn’t getting a fair shake in a sublicensing deal with Vatican Publishing, so it actually sued the Holy See.
The Vatican, however, doesn’t answer to just any higher power; it litigates in its own courts, governed by its own laws.
In 2000, the Vatican entered into a Master License Agreement with Second Renaissance, granting Second Renaissance the rights to produce and market specific lines of products based on reproductions of artifacts in the Vatican Library and, subject to certain conditions, to sublicense those rights.
The Master License Agreement provided that Second Renaissance would have the right to sell, sublicense or assign the rights if the sublicensee or assignee agreed to be bound by the Master License terms and conditions, and the Vatican approved of the sublicensee in writing. The Master License Agreement also contained a forum selection clause and choice of law clause stating that conflicts would be resolved in Vatican City and be governed by Vatican law.
In 2001, Second Renaissance entered into seven sublicense agreements with Magi for production of candles, chocolates, confections, flowers, stamps, wrapping paper/gift bags, and fundraising materials, which would all bear the name, logo, and seal of the Vatican Library. The Sublicense Agreements were approved by the Vatican Office of Publications, and contained the pro-Vatican forum selection and choice of law clauses.
In 2007, Magi sued Second Renaissance and the Vatican in a federal court in New York alleging fraud, negligence, breach of contract, unjust enrichment, and conversion. That, of course, presented a problem with the choice of forum and choice of laws provisions. The district court granted the Vatican's motion to dismiss for improper venue on the basis of the forum selection clauses in the Sublicense Agreements. The Second Circuit Court of Appeals affirmed that ruling this week.
Reviewing the validity of the forum selection clause, the Second Circuit held that a non-signatory to a contract containing a forum selection (here, the Vatican) clause may enforce the forum selection clause against a signatory (Magi) when the non-signatory is "closely related" to another signatory (Second Renaissance).
In such instances, the relationship between the non-signatory and that (latter) signatory must be sufficiently close that the non-signatory's enforcement of the forum selection clause is foreseeable to the signatory against whom the non-signatory wishes to enforce the forum selection clause.
Here, the Vatican State was closely related to Second Renaissance by virtue of the Master License Agreement. In addition, the Vatican State's relationship with Second Renaissance was sufficiently close with regard to the licensing of reproductions of items in the Vatican Library collection that it was foreseeable to Magi that the Vatican State would seek to enforce the forum selection clauses in the Sublicense Agreements.
- Magi XXI, Inc. v. Stato della Città del Vaticano (Second Circuit Court of Appeals)
- Choice of Forum in Franchise Agreements Still Subject of Debate (FindLaw)
- Dismissal Based on Forum Selection Clause Affirmed (FindLaw's Second Circuit Blog)
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