Forum Selection Clauses in Contracts

In Yakin v. Tyler Corp, a case reported in last week’s NY Law Journal, the US Court of Appeals upheld a contract provision which limited the litigation of any dispute between the parties to Nassau County, NY.

There is nothing particularly unique about this decision. It simply got me thinking of forum selection clauses. We here at Tolmage Peskin have increasingly come across these contract provisions in our commercial practice. Its now routine for me to ask a potential client in the first few minutes of the initial consultation if their contract has a forum selection clause.

People have to be very careful about the contracts they sign. The general principle in NY is that forum selection clauses are valid and enforceable. In short, if you sign a contract limiting your ability to bring a suit to California, you’re going to California in all likelihood.

For both litigants and lawyers, the implications of these clauses are profoundly felt. Practically speaking, the NY may not be able to take the case. The potential client has to have a lawyer who is licensed to practice in the forum designated by the contract. If the NY lawyer isn’t admitted to the contractual forum’s bar, the potential client is forced to look elsewhere.

In my opinion, forum selection clauses make it prohibitively difficult for individuals and consumers to bring suits; that is why these clauses can be so dangerous. If you’re a consumer signing a contact: 1) you probably don’t have any input on the contact’s drafting and 2) you don’t have the resources to travel and litigate. Indeed, very few individuals or consumers can travel for litigation, even if the chosen forum is only several states away from NY (you try driving back and forth to, say, Delaware and see how costly and problematic it becomes). We had a case where the forum designated was London, England. Our client was an elderly woman; she wasn’t going to London. She could not afford the travel costs, the food and lodging costs, plus the legal fees and strain of travel. Our challenge was to keep the case here in NY. The case was resolved without having to go to London. If the case was removed to London, the defendants would have for all intents and purposes, won.

Are forum selection clauses going to disappear? No; courts and corporations like them because they provide a bright line as to where disputes are to be litigated. As a consumer, you must protect yourself. Ask if there is a forum selection clause in the contract. Ask where that forum is. See if you can negotiate a more convenient forum for yourself. Or simply walk away from the contract. You may well be better off in the long run.

-Matthew Lombardi, Associate Attorney