Defending your client's choice of forum: careful focus and precise drafting pay off.

AuthorConn, Russell F.

Forum selection and choice of law clauses can be effective, but they must be precise and raised as defenses as early as possible

FORUM selection clauses--contract language in which the parties specify in advance the jurisdiction in which future disputes are to be litigated--have become a prominent feature on the modern commercial landscape. Eliminating uncertainty and ensuring a convenient locus for the adjudication of disputes, these clauses are being used increasingly in all varieties of contracts.

Forum selection clauses are no longer attackable on their face, but plaintiffs' attorneys have attempted to use a wide variety of pleading tactics to avoid enforcement of clauses that specify unfavorable fora. While not universally successful, defense attorneys have often succeeded in resisting such efforts.

BREMEN CLEARS THE WAY

Revolutionary when it was decided more than two and a half decades ago, M/S Bremen v. Zapata Off-shore Co.(1), set forth what has become widely accepted across the United States as the standard governing the enforcement of forum selection clauses. The Court noted that these clauses historically had been looked on with disfavor, with many courts declining to enforce them because they were "contrary to public policy" or operated to "oust the jurisdiction" of the court in which suit was brought. But the Court concluded that it is now axiomatic in most jurisdictions that forum selection clauses are "prima facie valid."

In deciding The Bremen, the Court relied in part on the similar rule articulated a year earlier by the American Law Institute in the Restatement (Second) of Conflict of Laws, which the Court said in a footnote had been advanced by other "noted scholars." The original formulation in Section 80 of the Restatement provided that the "parties' agreement as to the place of the action cannot oust a state of judicial jurisdiction, but such an agreement will be given effect unless it is unfair or unreasonable." But in the 1988 revision, that section was changed to read: "The parties' agreement as to the place of the action will be given effect unless it is unfair or unreasonable."

Forum selection agreements embody the parties' consent to the personal jurisdiction of the specified tribunal.(2) Modern courts are reluctant to disturb them. Courts have imposed a "heavy burden of proof" on parties challenging them.(3)

A forum selection clause will generally be enforced unless the resisting party shows that enforcement would be "unreasonable or unjust, that the clause [is] invalid for such reasons as fraud or overreaching," or that "enforcement would contravene a strong public policy of the forum in which suit is brought," to quote The Bremen. At least one court has held, "No satisfying reason of public policy has been suggested why enforcement should be denied a forum selection clause appearing in a contract entered into freely and voluntarily by parties who have negotiated at arms' length."(4)

CHARACTERISTICS AND SCOPE

Forum selection clauses are now an established component of modern commerce. What has remained unsettled is the question of their effective scope. Unsatisfied with specified fora, some plaintiffs' attorneys have attempted to limit the types of claims subject to the clauses. Others have attempted to cloak contract claims with the trappings of tort in their efforts to avoid the agreed-on forum. Still others have attempted to join unnecessary parties as defendants in order to defeat forum selection clauses. All of these tactics can be resisted successfully.

  1. Contracts of Adhesion

    That a contract contains forum choice language was entered into on a "take-it-or-leave-it" basis and was not the subject of bargaining generally is a relevant consideration in determining whether to enforce the clause, according to Comment c to Section 80 of the restatement. But even forum selection language contained in a contract of adhesion is not ordinarily avoidable in the absence of specific evidence that the clause is fundamentally unfair.(5)

    Generally, mere inclusion of the clause in a contract of adhesion will not defeat its enforcement unless the resisting party can show that the clause resulted from the "unfair use of superior power to impose the contract upon the other party" or it was not within the reasonable expectations of that party.(6) An "unfair" imposition of such a term would likely involve the imposition of a forum selection clause as a means of discouraging legitimate claims.(7)

  2. Drafting

    A plaintiff's success in avoiding the agreed-on forum generally depends on the precision with which the clause was drafted. The effective scope of forum selection language depends in large part on the clause that is negotiated. For example, it is well-settled that a choice of law clause does not operate as a forum selection clause in the absence of language expressly specifying the jurisdiction in which disputes are to be resolved.(8) If a party wants to specify a forum in which disputes are to be resolved, it should directly and unequivocally specify that forum, as well as the types of disputes to be adjudicated there.

    Obviously...

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