Keeping Litigation at Home: The Role of States in Preventing Unjust Choice of Forum.

Author:Reichard, Cara
 
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NOTE CONTENTS INTRODUCTION 869 I. NARROWING ACCESS TO THE COURTS: THE ANTI-LITIGATION TREND AND THE IMPOTENCE OF STATES AFTER CONCEPCION 873 II. CHOICE OF FORUM AND ITS IMPLICATIONS 876 A. Defining Choice of Forum 876 B. Stacking the Odds in Favor of Corporate Actors 878 C. Identifying Unjust Choice of Forum 881 III. EXISTING STATE ACTION AGAINST CHOICE OF FORUM 883 A. Overview of State Anti-Choice-of-Forum Statutes 884 B. Case Study: Choice of Forum in the Construction Industry 886 C. Choice of Forum and Arbitration 888 IV. CHOICE OF FORUM AT THE COURTS 890 A. The Supreme Court's Choice-of-Forum Doctrine: Leaving the Door Open for State Action 890 1. The Bremen v. Zapata: The Initial Affirmation of Choice of Forum 891 2. Stewart v. Ricoh: Venue Transfer and the Introduction of the Erie Question 892 3. Carnival Cruise Lines v. Shute: Extending The Bremen to Domestic Consumer Contracts 895 4. Atlantic Marine v. U.S. District Court: Clarifying Procedure 896 5. The Court's Choice-of-Forum Doctrine Today 897 B. Choice of Forum in the Lower Courts 898 1. State Courts 898 2. Federal Courts 900 C. Anti-Choice-of-Forum Laws and the FAA 902 V. IMPLICATIONS FOR STATE LEGISLATURES: KEEPING LITIGATION AT HOME 905 CONCLUSION 908 APPENDIX: STATE ANTI-CHOICE-OF-FORUM STATUTES 909 INTRODUCTION

For an individual in the United States today, harmed at the hands of a corporate actor, the path to justice has never been narrower. Our modern system of civil justice pushes parties into pretrial settlement, imposes significant barriers on class-action certification, and frequently holds up alternative forms of dispute resolution as superior to courtroom adjudication. This systematic dismantling of civil justice is helped along by the ubiquity of standard-form contracts, which utilize, among other tools, mandatory arbitration agreements to keep would-be plaintiffs out of the courtroom. (1) All of these trends make the prospect of success a daunting one for an individual litigant going up against a corporate defendant. But perhaps nothing more directly impacts the first-level issue of access to the justice system, in the most literal sense, than the geographic location of the proceedings. A large corporation can deploy its agents to any forum in the world; an individual litigant likely cannot. As a result, a prohibitively distant forum may preclude a civil action altogether.

Choice-of-forum clauses, a prevalent feature of standard-form contracts, dictate the forum in which any dispute resolution between two contracting parties must occur. (2) These provisions can create a significant obstacle for potential litigants--particularly employees, consumers, or other relatively powerless individuals who might be wronged at the hands of a corporate entity. Tremendous power and resource disparities are typically already at play when an individual brings a legal challenge against a corporate actor. Shuttling that challenge into a forum that is, almost by definition, less convenient for the claimant and more convenient for the defendant can serve as a significant obstacle to the claimant's chances of a favorable resolution. (3)

In 2016, the California Legislature attempted to address this issue by enacting Section 925 of the California Labor Code. The new provision made it unlawful for an employer to require an employee who lives and works in California, "as a condition of employment, to agree to a provision that would...[r]equire the employee to adjudicate outside of California a claim arising in California." (4) The law made any contractual term that violates this rule "voidable by the employee." (5) State and local commentators described the law as "unprecedented" at the time of its enactment. (6)

The law is quite far-reaching, covering the whole field of employment contracts. But it is by no means unique in its goal of using state contract law to prohibit unfair choice-of-forum clauses. (7) A similarly sweeping Louisiana statute, for example, voids any choice-of-forum clause in an employment contract, unless the clause is "expressly, knowingly, and voluntarily agreed to and ratified by the employee after the occurrence of the incident which is the subject of the civil or administrative action." (8) In fact, dozens of state laws today impose limits, if not outright bans, on contractual choice of forum in a wide range of contracts. But to date, there has been no comprehensive study of these laws, their origins, or their aggregate effect.

Not all of the laws are so far-reaching as those enacted in California and Louisiana, with many focusing instead on narrower categories of contracts. At least seventeen states, for example, have enacted laws limiting or prohibiting choice-of-forum clauses in construction contracts; others have legislated against choice of forum in motor-vehicle sales or franchise agreements. These are just a few examples of the nearly fifty anti-choice-of-forum statutes this Note uncovers. (9)

Crucially, states do have the power to regulate choice-of-forum clauses through general contract law. While the Federal Arbitration Act (FAA) has largely preempted state laws regulating arbitration agreements, (10) leaving states powerless to legislate against mandatory arbitration, (11) no equivalently far-reaching federal statute applies to choice of forum. The Supreme Court has considered the validity of choice-of-forum clauses on several occasions, but the resulting doctrine has been, at best, inconclusive. The Court has not held definitively whether federal or state law applies to determine the validity of a choice-of-forum clause. (12) Forum-selection clauses are presumptively valid when federal law clearly applies--for example, in admiralty jurisdiction. But the question of what law governs at other times--for example, when federal courts exercise diversity jurisdiction--remains unresolved. (13)

As a result, state anti-choice-of-forum laws have been met with a mixed reception in the lower courts. While not universally upheld, these laws enjoy regular success in state courts and at least occasional success in federal courts. This makes them a powerful tool in the hands of state governments looking to take a stand against the ever-narrowing path to justice for civil litigants.

This Note argues that state anti-choice-of-forum laws represent not only one of the few remaining tools for states to fight back against the constriction of judicial access for individuals harmed by corporations, but also an opportunity to take a stand against a pernicious form of power imbalance. Restricting adjudication to a forum far from the homes or jobs of would-be plaintiffs can place justice, quite literally, beyond their reach. States may be effectively powerless to stop the tide of mandatory arbitration, but they can still act to ensure individuals have the right to adjudication in a convenient forum.

State action carries particular importance given the power and resource disparities between corporate actors and individual plaintiffs. Large corporate powers today have nearly every advantage over the individuals with whom they contract, not least because they prescribe the terms of those contracts. Anti-choice-of-forum laws, including those already adopted by many states, offer a rare opportunity to redistribute power by ensuring that, in the event of a legal claim, the forum is one that does not disadvantage the relatively powerless individual. In litigation against corporate entities, individuals already face enough challenges. (14) When the individual must navigate the legal process far from home, the chance of seeing justice served drops even further. By enacting legislation to keep legal challenges close to home, states can begin to even the playing field between corporations and individuals.

Regulating choice of forum should not and need not be a partisan issue. While expanding access to the courts might be viewed, at first glance, as a progressive cause, states' regulation of choice of forum also carries significant federalism implications. Among the Supreme Court's opinions on the subject, Justice Scalia gave the most full-throated support of any Justice to the authority of state contract law, not federal law, to determine the validity of choice-of-forum clauses. (15)

The Note proceeds as follows: Part I describes the current trend away from civil litigation, with a focus on the ubiquity of mandatory arbitration clauses as a useful comparison to choice of forum. Part II lays out a simple definition of choice of forum and describes the effects that choice-of-forum clauses have on access to justice. This Part shows that choice-of-forum clauses can, and in many cases do, effectively insulate corporations from liability. Part III surveys existing state legislation targeting choice of forum, and offers a case study of anti-choice-of-forum statutes in the construction industry. Part IV describes the four major Supreme Court decisions on choice of forum, showing that the Court has not closed the door on state action regulating choice of forum. It then examines how lower courts have treated these anti-choice-of-forum statutes. Finally, Part V lays out the policy implications of this Note, suggesting that states should more deliberately and thoughtfully enact anti-choice-of-forum statutes, and offering suggestions for how they might do so.

  1. NARROWING ACCESS TO THE COURTS: THE ANTI-LITIGATION TREND AND THE IMPOTENCE OF STATES AFTER CONCEPCION

    Over the last several decades, the civil justice system has experienced a severe constriction of access to the courts. A series of Supreme Court decisions narrowed the path to class-action certification, cutting off a powerful tool for litigants unable or unwilling to bring suit on their own. (16) Plaintiffs who do manage to file claims frequently find themselves shuttled away from the courtroom and into forms of alternative dispute resolution--ranging from settlement to negotiation to...

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