Friday, May 20, 2011

forum selection clause

NJ Dept. of Treasure v. Merrill Lynch - 3d Cir. - May 18, 2011

The court held that a forum selection clause that provides: "exclusive jurisdiction . . . shall lie in the appropriate courts of the State [of] New Jersey" should be interpreted to be a waiver of the right to remove the litigation to the federal district courts in New Jersey, rejecting defendant's argument that the clause contemplates jurisdiction in either the state or the federal courts located in New Jersey.

The court noted that

- the "parties in this case, sophisticated organizations both, were represented by counsel during the negotiation and adoption of the forum selection clause at issue." While contra proferentem may be the general rule, "[a]pplication of the rule may be . . . limited by the degree of sophistication of the contracting parties or the degree to which the contract was negotiated." The doctrine of construing a document against the interests of the party who drafte dit is "inapplicable where parties, both sophisticated entities, had equal bargaining power in drafting agreement."

- every Court of Appeals confronted with a similar forum selection clause "ha[d] ruled that the reference to courts of the state . . . limits jurisdiction to state rather than federal tribunals." The "vast majority of our sister circuits have held that forum selection clauses like the one at issue here required remand to the state court."

- a defendant can contractually waive his right to remove . . . an action brought . . . in a state court. Such waivers are usually upheld if they are reasonable and voluntary and if their enforcement is not inconsistent with public policy. A forum selection clause is unreasonable where party makes "strong showing" that inconvenience of designated forum will effectively deprive him of day in court or that clause resulted from fraud or duress.