Understanding and Litigating Forum Selection Clauses

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In business transactions, drafters oft en include certain “boilerplate” terms within the transaction documents, including forum selection or venue clauses. These provisions typically attempt to mandate the location where any litigation arising from the transaction must occur. However, when not clearly drafted, these provisions can lead to the initial stages of litigation becoming consumed in a battle over where the case may proceed.

No matter what substantive law applies to the merits of the case, Florida courts apply Florida law in addressing forum selection clause disputes. See Golden Palm Hospitality, Inc. v. Stearns Bank Nat. Ass’n, 874 So.2d 1231 (Fla. 5th DCA 2004) (Florida courts look to Florida law in resolving validity of forum selection clause, even if the contract contains a choice of law provision applying the law of another jurisdiction).

Whether a forum selection clause is enforced by the court typically turns on whether the clause is permissive or mandatory. While it seems that careful draft ing should significantly reduce the risk of disagreement over whether a venue clause is permissive or mandatory, this issue is litigated with surprising frequency in Florida.

The essential question in discerning whether a forum selection clause is mandatory or permissive is whether the clause, by its express terms, provides that suit may be filed only in the forum named in the clause. If the venue clause unambiguously restricts the parties to a particular forum or geographic region within which to litigate, then the clause is mandatory. However, if the forum selection clause is ambiguous, or merely provides for consent to a specific jurisdiction or venue without expressly excluding litigation in another forum or venue, then the clause is permissive. The critical inquiry is whether the plain language of the agreement indicates “exclusivity.”

If a venue selection contains mandatory language or “words of exclusivity,” then Florida courts will enforce the provision absent showing that it is unreasonable/ unjust. Words such as “must” and “shall,” used properly, will demonstrate the venue selection clause is mandatory. For example, the court held as mandatory a clause stating that “[a]ny proceeding of any nature arising out of this Agreement shall be instituted only in the courts by the State of New Jersey.” Estate of Stern v. Oppenheimer Trust Co., 134 So.3d 566 (Fla. 3d DCA 2014). Similarly, a clause stating “This Agreement … shall be governed by and construed in accordance with the laws of the State of Florida. The parties hereto consent to Broward County, Florida as the proper venue for all actions that may be brought pursuant hereto.” was found to be mandatory. See Golf Scoring Sys. Unlimited, Inc. v. Remedio, 877 So. 2d 827 (Fla. 4th DCA 2004). Another example of a mandatory forum selection clause is “[a]ny controversy relating to this agreement … shall be held in Minneapolis, Minnesota. The parties hereby submit to jurisdiction for any enforcement of this agreement in Minnesota.” See Sonus-USA v. Thomas W. Lyons, Inc., 966 So. 2d 992 (Fla. 5th DCA 2007).

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Conversely, permissive language, such as use of the term, “may,” without any language of exclusivity, or a simple consent to jurisdiction without excluding litigation in another forum will usually defeat an argument that a venue provision is mandatory. For example, a provision providing, “[i] f there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of STEARNS County, the State of Minnesota” was found to be permissive and not mandatory. See Golden Palm Hospitality, Inc. v. Stearns Bank Nat. Ass’n, 874 So.2d 1231 (Fla. 5th DCA 2004). A provision stating, “[a]ny litigation concerning this contract shall be governed by the law of the State of Florida, with proper venue in Palm Beach County,” was ruled to be permissive. See Regal Kitchens, Inc. v. O’Connor & Taylor Condo. Constr., Inc., 894 So. 2d 288 (Fla. 3d DCA 2005). Also, the clause, “[t]his instrument shall be construed in accordance with the laws of Massachusetts. The Guarantor hereby consents to the jurisdiction of the state and federal courts of the Commonwealth of Massachusetts,” was found permissive. See Shoppes Ltd. P’ship v. Conn, 829 So. 2d 356 (Fla. 5th DCA 2002).

Finally, even presuming the venue provision contains mandatory language, it may be found invalid if the court determines it was based upon fraud, was the product of overwhelming bargaining power of one party and was sole basis upon which jurisdiction was conferred. See Golden Palm Hospitality, Inc. v. Stearns Bank Nat. Ass’n, 874 So.2d 1231 (Fla. 5th DCA 2004). This is challenging to prove, as one must demonstrate that the clause itself was the product of fraud.

Obviously, this discussion underscores the importance of diligent draft ing on the front end. However, this analysis hopefully confirms that should litigation arise, careful attention should immediately be directed to the language of any forum selection provision and considered in developing litigation strategy. Michael L. Duncan, Esq.

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