By: Jeffrey M. Kraft
A common term of any contract today is the “forum-selection clause,” meaning a clause whereby the parties agree that any legal action related to the contract must be brought in a specific jurisdiction and/or venue. The chosen jurisdiction/venue can be a specific state, county, or even a particular court, and they are intended to provide predictability for the parties in the event a dispute related to the contract needs to be litigated. Because forum-selection clauses are ancillary to the substance of the parties’ agreement and may only appear in preprinted boilerplate, they can be overlooked in the contract negotiation process. This would be a mistake, because forum-selection clauses are generally enforceable – even in form contracts – such that an inattentive party may find itself required to litigate a dispute in a remote jurisdiction that otherwise has no connection to the parties’ dealings or the dispute.
The Indiana Court of Appeals’ opinion in Carmeuse Lime & Stone v. Illini State Trucking, Inc., 986 N.E.2d 271 (Ind. Ct. App. 2013), provides an example of such a situation. The litigation in Carmeuse Lime & Stone arouse out of chemical burns sustained by an employee of Nick’s Transport on the premises of Carmeuse Lime & Stone and Carmeuse Lime, Inc. (collectively, “Carmeuse”) in Lake County, Indiana. Id. at 272. Nick’s Transport was a subcontractor of Illini State Trucking, Inc. (“Illini”), with whom Carmeuse had contracted. Id. After settling with the injured employee, Carmeuse filed suit against Illini in Lake County Superior Court seeking indemnification pursuant to Carmeuse’s contract with Illini. Id. at 273-74. However, the trial court dismissed the suit on grounds that the parties’ contract contained a forum-selection cause identifying Allegheny County, Pennsylvania as the agreed jurisdiction and venue for any legal action arising out of the contract. Id. at 274-75.
On appeal, Carmeuse argued in part that enforcement of the forum-selection clause was improper because:
- neither Carmeuse nor Illini were located in Pennsylvania;
- the parties’ counsel practiced in Indiana;
- the lawsuit and its underlying facts had virtually no connection to Pennsylvania;
- no witnesses relevant to the case were located in Pennsylvania; and,
- litigating in Pennsylvania would needlessly force the parties to incur significant additional costs and travel expenses.
Id. at 277.
However, the Indiana Court of Appeals observed that proving a forum-selection clause to be so unjust and unreasonable as to render it unenforceable required the challenging party to show that “trial in the contractual forum will be so gravely difficult and inconvenient that they will, for all practical purposes, be deprived their day in court.” Id. at 278. Consequently, “[e]ven where the forum-selection clause establishes a remote forum for resolution of conflicts, the party claiming [unfairness] should bear a heavy burden of proof.” Id. The Indiana Court of Appeals found that Carmeuse’s arguments failed to satisfy this heavy burden of proof. See id. at 728-29. First, although the Carmeuse premises where the injury at issue occurred were in Indiana, the Indiana Court of Appeals noted: (a) that the parties’ contract listed a Pittsburgh, Pennsylvania address for Carmeuse; and (b) that Carmeuse previously identified Pennsylvania as the location of its principal place of business. See id. at 728. Second, the Indiana Court of Appeals found that the distance between Lake County, Indiana and Alleghany County, Pennsylvania, which could be travelled by car in several hours, was not so great that the time and expense required to litigate in Alleghany County, Pennsylvania would effectively deny Carmeuse its day in court. See id. at 729. Accordingly, the Indiana Court of Appeals held that it could not say that the parties’ forum-selection clause was so unjust and unreasonable as to render it unenforceable, and thus it affirmed dismissal of Carmeuse’s suit in Lake County, Indiana. See id. at 729-30. See also Adsit Co., Inc. v. Gustin, 874 N.E.2d 1018, 1022-24 (Ind. Ct. App. 2007) (holding that the forum-selection clause in an Indiana company’s online clickwrap agreement requiring legal action be brought in Delaware County, Indiana was enforceable against online purchasers of the company’s products residing in Texas and Alabama).
As the above cases illustrate, a forum-selection clause can have a substantial impact on a party’s ability to either bring or defend against litigation arising out of the contract, even potentially forcing the party to litigate in a remote, unfamiliar forum hundreds of miles away from the party or any witnesses or evidence relevant to the case. Consequently, parties would do well to verify that forum-selection clauses in the contracts they negotiate actually select forums that are relevant and convenience to the parties’ dealings and potential disputes. Likewise, parties involved in current or anticipated legal action arising out of a contract should factor in the existence and enforceability of any forum-selection clause into their analysis.
If you have questions about forum-selection clauses, please contact your DSV attorney or Jeffrey M. Kraft at firstname.lastname@example.org.
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