New York is Pro-Choice on Forum Selection Clauses

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In Somerset Fine Home Building, Inc. v. Simplex Industries, Inc., the Appellate Division of the Second Department in New York upheld a dismissal based on the plaintiff’s breach of the parties’ forum selection clause. Somerset Fine Home Building entered into a sales contract with a modular home supplier for the purchase of a home. The sales contract included a forum selection clause specifying Pennsylvania as the location for any lawsuit or arbitration.

Somerset later filed a lawsuit for breach of contract in New York, and the modular home supplier moved to dismiss the suit based on the parties’ forum selection clause. The trial court agreed and dismissed Somerset’s lawsuit. On appeal, Somerset argued the forum selection clause was invalid.

The appellate court rejected Somerset’s argument. Per the appellate court, the forum selection clause was valid and enforceable absent a showing the clause was unreasonable, unjust, in contravention of public policy, or obtained by fraud. Additionally, the clause could be invalidated if Somerset showed that the selected forum imposed such great difficulty or expense on Somerset that Somerset would be practically deprived of access to a court. The appellate court found Somerset failed to provide any evidence that would satisfy the requirements for invalidating the party’s forum choice provision. Without such a showing, freedom of contract prevailed, and the appellate court affirmed the trial court’s dismissal.

Lessons from Somerset

Forum selection clauses can be overlooked during the contracting process, especially when such provisions are part of form terms and conditions attached to a purchase order or supply agreement. The result in Somerset, even though it is a consumer case, should be a reminder to review forum selection clauses carefully before executing any agreement. This can be especially true in complex construction projects involving multiple layers of contracts, subcontracts, purchase orders and other agreements, where consistency in forum selection across contracts can be important in managing disputes involving multiple parties on a project.

Note, some states have passed legislation to bar forum selection clauses that provide for out-of-state resolution of construction disputes, so you should also be aware of that potential consideration when negotiating over choice of forum.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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