Holy See Contract Spat Booted to Vatican City

MANHATTAN (CN) - Vatican City is the proper venue for contract claims related to reproduction of the Holy See's artwork and artifacts, the 2nd Circuit ruled.

In 2001, Magi XXI Inc., a New York company, entered into a sublicense agreement with a company called Second Renaissance to produce "candles, chocolates, confections, flowers, stamps, wrapping paper/gift bags, and fundraising materials" that "bear the name, logo, and seal of the Vatican Library."

The sublicense stemmed from a master license the Vatican had with Second Renaissance, granting it "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," according to the ruling.

The agreement maintains that the Vatican has ownership and control of all artwork, artifacts and manuscripts in its possession, and that "any disagreements between [Second Renaissance] and [Magi] shall be resolved exclusively in the Sovereign State of Vatican City."

In 2007, Magi sued the Vatican and Second Renaissance for fraud and breach of contract in U.S. District Court for the Eastern District of New York.

Magi alleged that the parties "did not provide Magi with the contracted-for access to artwork and commercially usable images of the materials," and that they had misrepresented both "the availability of certain images in the Vatican Library" and their relationship, which constituted a breach of the sublicense agreement.

The Vatican State moved in 2010 to dismiss the claims on the basis of subject-matter jurisdiction or the forum-selection clauses.

A federal judge in Brooklyn concluded that the forum-selection clauses of the sublicense agreements were indeed controlling.

A three-judge panel of the 2nd Circuit affirmed Tuesday.

Magi agreed to a forum-selection clause in the Sublicense Agreement, and the Vatican, as a nonsignatory in that agreement, has the right to "enforce the forum selection clause against a signatory when the non-signatory is 'closely related' to another signatory," Judge Christopher Droney wrote for the panel.

The master license agreement constitutes such a close relationship between the Vatican and Second Renaissance, according to the ruling.

Droney added how it was "foreseeable" to Magi that the Vatican would enforce the clause because it signed the sublicense agreement stating that the rights to recreate the artwork, though granted by Second Renaissance, "were subject to the approval of the Vatican State" and that it maintained ownership of all the images.

Therefore, "the Vatican State was known by Magi as the source of the contractual authority," according to the opinion," Droney wrote. "What's more, the agreement "provided for the extensive and continuing involvement of the Vatican State in the execution of the agreement."

Magi had also argued on appeal that "the choice of law clauses in the Sublicense Agreements have a broader ambit than the forum selection clauses and so this dispute is not covered by the latter."

Since Magi failed to argue this issue before the District Court, the appellate court "will not consider an issue raised for the first time on appeal," according to the ruling.

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