No. 3:08cv445, 2009 U.S. Dist. LEXIS 49056
(N.D. Fla. June 10, 2009)
We all enter into contracts everyday. Every time we buy a product, get a gym membership, or even renew a home insurance policy we sign and enter into contracts. What we usually don’t do, however, is read the fine print. More often than not, these contracts we enter into everyday are what we like to call "form contracts." Form contracts contain standard terms of legal mumbo jumbo that most people think nothing about and proceed to sign without reading. Often the legal mumbo jumbo includes forum selection clauses. Forum selection clauses dictate where any litigation surrounding the contract will take place. Not only can this clause shlep any old person across the country to litigate a contract dispute, but this clause can be mandatory and dictate which jurisdiction’s law will be controlling in the suit and consequently whether or not a court has jurisdiction to hear the case. Recently, one court stressed a forum selection clause’s importance.
The United States District Court for the Northern District of Florida, granted Providence Property & Casualty Insurance Company’s Motion to Transfer Venue from the Northern District of Florida to the Western District of Oklahoma pursuant to 28 U.S.C. § 1404(a) based on the policy’s forum selection clause in a diversity jurisdiction case. 28 U.S.C. § 1404(a) provides, in pertinent part,
"(a) For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought."
28 U.S.C. § 1404(a) (2009).
In other words, Section 1404(a) allows a party to transfer the venue of a lawsuit to any venue where jurisdiction was proper. Here, the court explained that not only does Section 1404(a) allow the transfer, but a forum selection clause can mandate the transfer so long as the transfer was not "unreasonable or unjust and the clause was not the product of fraud or overreaching." Pyramid Diversified Servs., Inc. v. Providence Prop. & Cas. Ins. Co., 2009 U.S. Dist. LEXIS 49056 (N.D. Fla. June 10, 2009). Basically, forum selection clauses are the "get out of jail free" cards for venue selection and transfer.
The Pyramid court explained that forum selection clauses were enforceable by federal courts, and federal law, rather than state law, governed the determination of whether to enforce a forum selection clause in a diversity jurisdiction case. The court further explained that forum selection clauses are:
"generally considered either mandatory, in which there is a clear, unequivocal expression of the parties’ intent to exclusively limit the forum to a particular venue of court, or permissive, in which there is no clear expression of exclusivity but rather an understanding that the parties have consented to venue or jurisdiction in a particular forum."
Pyramid Diversified Servs., Inc., 2009 U.S. Dist. LEXIS 49056 at *1.
After reviewing the forum selection clause at issue in Pyramid, the court concluded that the clause was mandatory rather than permissive. The clause read:
"The parties agree that any legal action, suit or proceeding relating to this Agreement or the transactions contemplated hereby, shall be instituted in a federal or state court sitting in Oklahoma County, Oklahoma, which shall be the exclusive jurisdiction and venue of said legal proceedings."
Pyramid Diversified Servs., Inc., 2009 U.S. Dist. LEXIS 49056 at *1.
The court concluded the clause to unambiguously demand that litigation would take place in Oklahoma County, Oklahoma. The court further noted that the action might have been brought in the Western District of Oklahoma and jurisdiction was proper. Accordingly, the court granted Providence’s Motion for venue transfer from the Northern District of Florida to the Western District of Oklahoma.
So, the lesson here is to read those pesky forum selection clauses. If not, you could find yourself litigating in Western Oklahoma and possibly dealing with an unfamiliar body of law. So, just remember, forum selection clauses are kind of a big deal.
To read the full opinion, click here.
