The Case For Reasonableness: Enforcing Forum Selection Clauses In Business Disputes

by Adler Pollock & Sheehan P.C.
Contact

For companies that do business across state or national lines, forum selection clauses are more than mere boilerplate or afterthought provisions to a business transaction. Forum selection clauses can reduce uncertainties in a business transaction and potentially obviate having to litigate in a foreign jurisdiction. Although the parties to a business transaction presumably will strive to faithfully perform their contractual obligations, disputes arising from the timing or quality of performance, interpretation of terms, or a multitude of potential other issues may nonetheless occur. Even if the parties attempt informally to resolve their disputes, the absence of a forum selection clause could create the proverbial “race to the courthouse,” fueled by each party’s incentive to file a complaint (however premature) in that party’s preferred jurisdiction to lock in home field advantage.

For the out-of-state defendant who loses out on this race, the consequences of litigating in a foreign jurisdiction could be considerable. The defendant may need to hire local counsel, navigate unfamiliar rules and judges, and make travel arrangements for its officers, employees and agents to be deposed hundreds or even thousands of miles away. In view of these potential burdens, parties to a business transaction should seriously consider including a forum selection clause. A carefully drafted forum selection clause that designates the forum for any litigation arising from the contract would substantially reduce the uncertainty that promotes the “race to the courthouse” scenario described above. Indeed, both federal and state laws favor enforcing forum selection clauses to avoid disrupting the parties’ agreed expectations. See, e.g., Atlantic Marine Constr. Co. v. United States District Court for the Western District of Texas, 134 S. Ct. 568 (U.S. 2013); Tateosian v. Celebrity Cruise Servs., Ltd., 768 A.2d 1248, 1250 (R.I. 2001); Taylor v. E. Connection Operating, Inc., 988 N.E.2d 408, 410 (Mass. 2013).

A forum selection clause serves no purpose, however, if it is not enforceable. The party resisting enforcement of a forum selection clause carries a heavy burden to convince the court that it should not be enforced. Tateosian, 768 A.2d at 1250. Although forum selection clauses are presumed to be valid, M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 9-10 (1972), they are subject to judicial scrutiny for fundamental fairness (i.e., reasonableness). Tateosian, 768 A.2d at 1250. In determining whether a forum selection clause is reasonable (i.e., whether the court will enforce the forum selection clause or permit the litigation to proceed in the forum in which the plaintiff filed the lawsuit), courts in Rhode Island routinely analyze the following nine factors (in no order of importance):

• which state’s law governs the contract;
• where the contract was executed;
• where the contract is performed;
• availability of remedies in the forum designated by the forum selection clause;
• public policy of the state where the plaintiff filed;
• location of the parties, convenience of the prospective witnesses, and accessibility of evidence;
• comparative bargaining power of the parties and the circumstances surrounding their dealings;
• presence or absence of fraud, undue influence or other circumstances; and
• the conduct of the parties.

D’Antuono v. CCH Computax Sys., Inc., 570 F. Supp. 708, 712 (D.R.I. 1983).

However, “[w]hile each of these factors has some degree of relevance and some claim to weight, there are no hard-and-fast rules, no precise formulae.” Id. at 712. Because the question of reasonableness is a fact-laden inquiry, it is difficult to predict with certainty how a court would rule on the enforceability of any given forum selection clause.

Nevertheless, the following principle can be distilled from the cases: to be enforceable, a forum selection clause must be fundamentally fair and the designated forum must bear some connection to the parties and/or the underlying transaction. Accordingly, a party should avoid over-reaching by designating a desired forum that has no connection to the parties’ transaction or the parties themselves. If the parties agree on a fair and reasonable forum that has some relation to themselves and/or their transaction, the parties could avoid expensive, collateral litigation over which court will adjudicate their dispute. Litigation can be time-consuming and expensive; a well-crafted forum selection clause can avoid fighting about where to fight.

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.

© Adler Pollock & Sheehan P.C. | Attorney Advertising

Written by:

Adler Pollock & Sheehan P.C.
Contact
more
less

Adler Pollock & Sheehan P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.