Is Your Forum Selection Clause Mandatory or Permissive: How to know the difference and why you should.
Drafting an agreement that includes a forum selection clause? Preparing to litigate an agreement that includes a forum selection clause and wondering how to argue?
The United States District Court, relying on a recent Fourth Circuit opinion offered some help to your analysis in Allstate Crane Rental, Inc. v. Paramount Equipment, LLC 2018 WL 2048361 (May 2, 2018).
Generally, a defendant seeking to enforce a forum selection clause should move to dismiss pursuant to the forum non conveniens doctrine. In such an instance, the defendant’s burden is substantial – the defendant must prove that an alternative forum is available, adequate and more convenient than the plaintiff’s chosen forum. That burden shifts, however, with a mandatory forum selection clause; one that requires litigation to be held in a specific forum, expressly to the exclusion of others. A mandatory clause that includes the requisite exclusion language reverses the presumptions favoring a plaintiff’s forum choice. When facing a mandatory forum selection agreement, the plaintiff has the significant burden of establishing why the agreement should not be enforced, made more challenging against the backdrop of a strong federal public policy in support of the enforcement of such clauses.
A forum selection clause is permissive if it permits litigation to occur in a particular forum but does not foreclose the possibility of the litigation occurring elsewhere. Such a clause does not support dismissal on the basis that plaintiff filed in a forum other than the one designated in the clause. Rather, a defendant arguing against the plaintiff’s choice of forum must undertake the substantial burden of showing the chosen forum is highly inconvenient and that there exists an equally acceptable forum, more convenient in light of public and private interests involved in the litigation.
When drafting, interpreting or advocating for or against forum selection clauses, the threshold consideration should be whether the clause is mandatory or permissive. Be aware – in determining whether the clause is mandatory or permissive, the court is going to look carefully at the specific language. For example, if the clause includes language indicating the chosen forum is the “only” or the “exclusive” forum, or if it provides the chosen forum is the “sole” forum, the court will conclude the provision is mandatory. If this critical analysis results in the determination the clause is mandatory, requiring litigation in a particular forum to the exclusion of others, there is assurance the court will presume the clause is enforceable, and the plaintiff must overcome a substantial burden. If, however, the clause is permissive, the court will apply the traditional forum non conveniens test, requiring the defendant to labor under that burden.
Cheryl D. Shoun is a trial attorney and certified mediator whose experience includes construction law, insurance defense, personal injury defense, employment litigation and medical malpractice. As a frequent writer, she serves as editor for Nexsen Pruet's TIPS: Torts, Insurance and Products Blog.
About Nexsen Pruet
Nexsen Pruet serves clients from nine offices across the Southeast. With more than 200 lawyers and professionals, the firm provides regional, full-service capabilities with international strengths.