Capture the Flag: Winning With Forum Selection Clauses

• Publication year: 2020
• Author: By Jim Wagstaffe

Capture the Flag: Winning With Forum Selection Clauses

By Jim Wagstaffe

James (Jim) M. Wagstaffe handles a diverse range of litigation matters. His practice focuses on complex litigation, professional and governmental representation, will and trust disputes, legal ethics, and First Amendment matters. Jim is also the author of The Wagstaffe Group Practice Guide: Federal Civil Procedure Before Trial, published by Lexis Nexis.

So much of litigation can be territorial. After all, where an action is commenced (or transferred) can have massive impacts on who wins the case (e.g., assigned judge, governing procedural rules, jury pools, geographic conveniences, etc.). Thus, well-crafted and enforceable forum selection clauses play a vital role in winning the "capture the flag" aspect of modern litigation disputes.

As a trial attorney, Civil Procedure professor and practice guide author, I am keenly aware that forum selection clauses involve one of the most dynamic areas in all of civil litigation. Mastering the explosion of recent case law and related statutory developments addressing forum selection clauses necessarily includes awareness of the "hot issues" in this area, including: (1) disputes about scope, (2) validity and enforceability, (3) impact of clause-cancelling state public policies, (4) applicability to non-signatories, (5) impact on removal rights, and (6) how best to draft and enforce such provisions.

Capturing the Venue Flag: A Contract Is a Contract

It has long been settled that parties may contract to select the forum for potential future disputes. Yet for decades, courts nevertheless were reluctant to enforce such private agreements when the alternative forum chosen by the plaintiff made more sense in terms of third-party witnesses and protection of forum-state residents. And then came the Supreme Court's decision in Atlantic Marine Construction Co. v. U.S. District Court (2014) 571 U.S. 49, holding that valid and enforceable forum selection clauses will be given controlling weight in all but the most exceptional cases. An argument can be made that Atlantic Marine is the most significant procedural ruling in the last decade because it enforced a forum selection clause requiring litigation in Virginia even though the entire dispute revolved around a construction project over 1,500 miles away in Texas. At its most elemental, Atlantic Marine provided enormous litigation advantage to contracting parties who are able to control location through tactically inserted forum selection clauses.

In Atlantic Marine, the Court held that a valid forum selection clause is presumptively enforceable, it trumps the plaintiff's choice of venue, and eliminates any judicial reliance on the private interest factors including even the convenience of third-party witnesses or the location of evidence. Simply put, Justice Alito's opinion in Atlantic Marine tells us that when it comes to forum selection clauses "a contract is indeed a contract."

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California also strongly favors contractual forum selection clauses so long as they are entered into freely and voluntarily, and enforcement would not be unreasonable. (See, e.g., Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 495; CQL Original Products, Inc. v. NHL Players' Assn. (1995) 39 Cal.App.4th 1347, 1354.) However, such judicial deference applies to mandatory forum selection clauses (limiting claims in "shall" or "must" terms exclusively to a designated forum) and not to permissive clauses (allowing but not mandating such designation through use of words such as "may"), which are analyzed under ordinary forum non conveniens standards. (Korman v. Princess Cruise Lines, Ltd. (2019) 32 Cal.App.5th 206, 215; The Wagstaffe Group Practice Guide: Fed. Civ. Proc. Before Trial, § 12-III[H][7][c] (hereinafter TWG).)

Flag Not Captured if Claims Beyond Scope of Clause

Often the threshold question is whether the claims under consideration are even within the scope of the forum selection clause itself. Whether one or more of a plaintiff's causes of action is covered by a forum selection clause depends on whether the matters are within the scope of the coverage language in the provision. Careful drafting and reading of such clauses, therefore, can be essential.

As to both venue selection and arbitration clauses, courts have been willing to find a claim to be within the provision's scope if those claims have their roots in the relationship between the parties which was created by the contract. The common phrase "arising out of" has been equated with origination, growth, or flow from the event. (See Central Pathology Service Medical Clinic, Inc. v. Superior Court (1992) 3 Cal.4th 181, 187-188; Palmer v. Agee (1978) 87 Cal. App.3d 377, 386; TWG, su...