FORUM SELECTION CLAUSES, NON-SIGNATORIES, AND PERSONAL JURISDICTION.

• Author: Coyle, John F.

INTRODUCTION 189 I. THE PROBLEM OF NON-SIGNATORIES 194 A. Agency and Contract Law 194 1. Traditional Doctrines 194 2. Equitable Estoppel 195 3. Third-Party Beneficiaries 197 B. The Closely-Related-and-Foreseeable Test 198 1. Origins 198 2. Modern Usage 200 C. Three Scenarios 205 1. Non-Signatory Defendant Invokes Clause Against Signatory Plaintiff 906 2. Non-Signatory Plaintiff Invokes Clause Against Signatory Defendant 208 3. Signatory Defendant Invokes Clause Against Non-Signatory Plaintiff 909 II. PERSONALJURISDICTION AND NON-SIGNATORY DEFENDANTS 212 A. Minimum Contacts and the Doctrinal Role of Relatedness 214 B. The Foreseeability Trap 219 C. Agency and Corporate Alter Egos 223 III. TOWARD A MINIMUM CONTACTS STANDARD FOR FORUM SELECTION CLAUSES 227 A. Uncovering the Historical Basis for the Conceptual Confusion 228 B. Possible Conceptual Frameworks 230 1. Consent as Minimum Contacts 231 2. Consent as Due Process 232 3. Consent as Conceptually Outside of Due Process 232 B. The Case for Minimum Contacts 234 1. Protecting Non-Signatory Defendants 234 2. Plugging the Due Process Cracks 235 3. Improving Minimum Contacts 239 CONCLUSION 240 INTRODUCTION

In 1992, Robert Romano entered into a franchise agreement with Aamco Transmissions, Inc. (AAMCO). (1) Romano was a resident of Florida. AAMCO was a Pennsylvania corporation. The agreement contained an exclusive forum selection clause selecting the state and federal courts of Pennsylvania. Twenty-one years later, in 2013, Romano and AAMCO mutually agreed to terminate the franchise agreement. Pursuant to the termination agreement, Romano promised that he would not engage in the transmission repair business within ten miles of any AAMCO repair center for at least two years. (2) In 2014, AAMCO sued Romano and his wife, Linda, in the U.S. District Court for the Eastern District of Pennsylvania, alleging violations of the covenant not to compete. Linda appeared pro se to argue that the court lacked personal jurisdiction over her. (3) The court disagreed. It held that Linda was subject to personal jurisdiction in Pennsylvania by operation of the forum selection clause in the franchise agreement. (4) Since Robert was a party to the agreement, the court reasoned, and since Linda was closely related to Robert, Linda was bound by the clause even though she herself was not a party to the agreement.

This anecdote encapsulates the modern puzzle of forum selection clauses. (5) These provisions bring a welcome measure of efficiency and predictability to litigation arising out of contractual relationships. At the same time, their existence has the potential to generate fragmented litigation proceedings. (6) If Linda Romano is not bound by the forum selection clause, then AAMCO may have to bring two suits--one in Pennsylvania against Robert, the other in Florida against Linda--to enforce its rights. Such parallel litigation is inefficient and a waste of scarce judicial resources. To avoid this outcome, the courts will sometimes enforce forum selection clauses against contract non-signatories like Linda, thereby allowing the entire dispute to be resolved in the chosen forum. (7)

The willingness of courts to enforce forum selection clauses against non-signatories, however, creates tension with other important values enshrined in U.S. law. The first value is personal autonomy. The law has long recognized that parties are generally free to contract with one another. (8) The law also recognizes, however, that parties are likewise free not to contract if they do not wish to do so. (9) When the courts conclude that a litigant must abide by a provision in a contract that she never signed, the freedom not to contract comes under attack. (10) The second value is due process. The Due Process Clause of the Fourteenth Amendment imposes limits upon a court's power to assert personal jurisdiction over an out-of-state defendant. (11) When a court asserts personal jurisdiction over a defendant on the basis of a forum selection clause in an agreement that she did not sign, it is not at all clear that this assertion of judicial power is consistent with due process. (12)

Courts have been quietly but consistently grappling with these issues for nearly four decades with minimal input from scholars and no direct guidance from the U.S. Supreme Court. This Article fills that gap. It is the first to identify the tension between litigation efficiency, on the one hand, and personal autonomy and due process, on the other, in cases where the courts are asked to enforce forum selection clauses by or against non-signatories. It is also the first scholarly work to propose a conceptual framework for reconciling these competing values, thereby allowing courts to promote litigation efficiency without doing undue harm to principles of personal autonomy and due process. Drawing upon an exhaustive review of the existing caselaw addressing the enforceability of forum selection clauses against non-signatories, the Article maps the many different legal doctrines that the courts have invoked to determine when a clause may be given effect. It identifies scenarios where such clauses are routinely enforced and explains that the propriety of enforcing forum selection clauses against non-signatories will vary depending upon who, precisely, is invoking the clause and for what purpose.

The Article then goes on to argue that the most problematic cases are those in which a signatory plaintiff invokes the forum selection clause to obtain personal jurisdiction over a non-signatory defendant like Linda Romano. (13) In contemporary practice, the courts rely on a new legal doctrine--the closely-related-and-foreseeable test--to decide whether a non-signatory is bound by a forum selection clause. Unlike the trajectory of minimum contacts analysis, in which courts have imposed an ever-escalating set of hurdles in front of plaintiffs who wish to connect the actions of a non-resident defendant to a harm or result in the forum state, the closely-related-and-foreseeable test constitutes a parallel due process universe. In that universe, casual contacts and breezy assertions of foreseeability can connect a defendant to a forum selection clause in a way that would be, at best, highly scrutinized were they construed as potential minimum contacts with the forum. The curious feature of this new test is that it reads like a wish list of everything that progressive commentators want that for the minimum contacts test to be, but currently is not. Hiding in plain sight is a doctrine of nearly unlimited jurisdiction.

In this parallel due process universe, we argue, the enforcement of forum selection clauses by or against third parties exists in a doctrinal "uncanny valley" of due process jurisprudence. The various standards and jurisprudential landscape are not a picture of uniformly bad or incorrect decisions. The results and reasoning in many of these cases are, in many instances, both correct and desirable. The problem, however, is that the doctrine, as a whole, is out of sync with the larger approach to due process considerations in personal jurisdiction. Judges confronting the problem of non-signatories in cases involving forum selection clauses have created a doctrine that is a rough facsimile of "ordinary" personal jurisdiction cases, but still out of alignment with the doctrinal approach of post-International Shoe jurisprudence.

The question of whether a forum selection clause is enforceable has been historically evaluated through the lens of "consent" rather than "minimum contacts." To address the concerns outlined above, we argue that the enforceability of a clause should be evaluated within the rubric of minimum contacts for three reasons. First, it would better protect the rights of non-signatory defendants and, in so doing, promote the values of personal autonomy and due process. Second, it would replace the rubric of consent with the more familiar minimum contacts test, thereby serving to plug one of several cracks in the existing due process framework. Third, and finally, analyzing forum selection clauses through the lens of minimum contacts carries with it the potential to improve that doctrine." Instead of trying to bring the flexible jurisdictional inquiry exemplified by the closely-rclated-and-foreseeable test into line with narrow Supreme Court precedents, we argue, the courts should consider expanding these precedents to bring them into alignment with the closely-related-and-foreseeable test.

Part I of this Article provides a comprehensive overview of the traditional agency and contract doctrines that allow nonparties to be bound or advantaged by a contract and explains how they are used to bind non-signatories to forum selection clauses. It then offers a detailed account of the rise of the closely-related-and-foreseeable test and discusses the propriety of using this test across a number of different scenarios. Part II details the doctrinal problems that arise when the courts invoke the closely-related-and-foreseeable test to enforce forum selection clauses against non-signatory defendants. The rules governing the assertion of personal jurisdiction in this context, we argue, are generally inconsistent with the rules applied to ordinary non-resident defendants. Non-signatories are instead subjected to a different constitutional standard because of proximity to a forum selection clause that they did not sign. In Part III we suggest that courts can best align the application of the closely-related-and-foreseeable test with accepted contract principles--as well as due process--by bringing forum selection clauses within the framework of International Shoe's minimum contacts analysis. The Article concludes by suggesting how these observations can contribute to a broader reimagining of the role of consent in the minimum contacts framework.

1. THE PROBLEM OF NON-SIGNATORIES

   The courts have historically addressed the...