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A DISMISSAL WITHOUT PREJUDICE IS NOT A FINAL DETERMINATION ON THE MERITS AND IS NOT SUBJECT TO THE DOCTRINE OF RES JUDICATA; ATTORNEY’S FEES ARE APPROPRIATE DAMAGES IN AN ACTION FOR BREACH OF A FORUM SELECTION CLAUSE (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff’s (Wormser’s) action for breach of the forum selection clause seeking attorney’s fees could go ahead. The defendant’s (L’Oreal’s) New Jersey action had been dismissed “without prejudice,” which was not a determination on the merits, and therefore Wormser’s action was not precluded by the res judicata doctrine:

Plaintiff (Wormser) asserts a claim for breach of the forum selection clause contained in the parties’ agreement, which requires disputes to be brought before the courts of New York City, and for attorneys’ fees incurred in the actions that defendant (L’Oréal) brought against it in New Jersey. After the New Jersey court had dismissed its complaint “with prejudice within the jurisdiction of New Jersey,” L’OrÉal commenced an action against Wormser in Supreme Court, New York County. Subsequently, a New Jersey appellate court amended the New Jersey trial court’s orders to make the dismissal “without prejudice” … , and Wormser brought this action.

Wormser’s claim is not barred by the doctrine of res judicata, because the dismissal was without prejudice by the New Jersey appellate court and therefore was not a final determination on the merits ,,, ,

Wormser’s claim for attorneys’ fees may proceed, as “damages may be obtained for breach of a forum selection clause, and an award of such damages does not contravene the American rule that deems attorneys’ fees a mere incident of litigation” … . Wormser Corp. v L’Oréal USA, Inc., 2022 NY Slip Op 03093, First Dept 5-10-22

Practice Point: A dismissal without prejudice is not a final determination on the merits and is not therefore subject to res judicata.

Practice Point: Attorney’s fees are properly demanded as damages in an action for breach of a forum selection clause.

 

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