GA Court Enforces Forum Selection Clause in Restrictive Covenants

Posted by Daniel H. Park on

Forum-selection clauses are often included in restrictive covenant agreements when companies have employees located in different states other than the state where the company is headquartered, to try to allow the company to litigate non-compete disputes on its home turf. However, even if the parties have entered into a valid and enforceable forum-selection clause, non-compete and trade secrets disputes often still involve a threshold battle over where the case should be litigated.

In Pickvet v. Viking Grp., Inc., No. 1:17-CV-320-WSD, 2017 WL 460895 (N.D. Ga. Feb. 3, 2017), Judge William S. Duffey of the Northern District of Georgia granted the defendants’ motion to transfer venue based on a forum-selection clause in the former employee’s restrictive covenant agreement.  Pickvet, a citizen of Georgia, was employed by Supply Network, Inc. (“Supply Network”), a subsidiary of Viking Group, Inc. (“Viking”), and entered into an employment agreement with Viking in 2009.  The employment agreement was entered into in Georgia, and Pickvet lived and worked under the contract in Georgia.  It contained non-competition and non-solicitation covenants, and a forum-selection clause providing that any dispute arising under the agreement would be filed in either Kent County, Michigan Circuit Court or the Western District of Michigan. 

On January 23, 2017, Pickvet terminated his employment and began working for a company that competes with Viking.  That same day, he filed suit against Supply Network and Viking in the Superior Court of Fulton County, seeking a declaratory judgment that the restrictive covenants were not enforceable and did not restrict his employment with his new employer.

Supply Network and Viking removed the action to the Northern District of Georgia and filed their motion to transfer venue.  In their motion to transfer, they argued that the forum-selection clause is enforceable, that Pickvet was required to bring the action in Michigan, and that the action should be transferred to Michigan. Judge Duffey agreed, granting the motion to transfer.

In reaching his decision, Judge Duffey relied on Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S. Ct. 568 (2013), which addresses the analysis applicable to a motion to transfer based on a forum selection clause.

Normally, district courts evaluate both the private interests of the parties and public interest considerations when considering a motion to transfer under 28 U.S.C. section 1404(a).  These considerations include factors related to both private interests – such as the locations of witnesses and evidence and the parties’ contact with the forum – and public interests – such as the forum’s interest in expending the time and resources necessary to adjudicate the dispute.  However, the Supreme Court in Atl. Marine held that, where the parties have executed an agreement containing a valid forum-selection clause, the forum-selection clause should be given controlling weight, speaking conclusively as to the parties’ private interests, and no analysis of private interests is merited.

Judge Duffey applied this analysis in Pickvet, and based on the presence of a valid forum-selection clause, refused to consider the parties’ private interests, considering only public-interest factors.  Further, Judge Duffey found that the party acting in violation of the forum-selection clause must meet the burden of showing that the public-interest considerations overwhelmingly disfavor a transfer. 

Notwithstanding Georgia’s “public policy that historically disfavors restrictive covenants,” Judge Duffey held that Pickvet failed to meet his burden to demonstrate that the Michigan District Court would apply Michigan law rather than the more restrictive Georgia law governing restrictive covenants.  To the contrary, based on the applicable Michigan choice of law doctrine, the judge held that Michigan was likely to apply Georgia law.  Given this finding, he found that the public-interest considerations did not overwhelming disfavor transferring the case.

Non-compete and trade secret litigators must always prepare for the battle of which jurisdiction should hear and decide the merits of a dispute.  Drafters should also carefully consider whether their clients would benefit from including forum selection clauses in restrictive covenant agreements.  Pickvet gives guidance on how federal courts may address the presence of a forum selection clause in a restrictive covenant agreement following the U.S. Supreme Court’s decision in Atl. Marine