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BFV Perspectives, Georgia Business Disputes, | Jan 08, 2014

We Have to Litigate Where?

Agreements between businesses frequently contain forum-selection clauses.  These clauses allow parties to choose ahead of time where any disputes between them will be litigated – for example, in the U.S. District Court for the Northern District of Georgia.  The drafter of the contract will usually select the forum that is most convenient for himself, and it is important for anyone entering into a to contract think carefully about where litigation might occur.  Would you rather go to court in your own state, or on the other side of the country?

A recent case from the United States Supreme Court strongly supports the enforcement of forum-selection clauses.  In the past, where a forum-selection clause designated litigation in a very inconvenient forum, a party to the agreement could make a showing to the Court that litigating elsewhere would better serve the public interest and the private interests of the parties. 

Now, however, a federal court faced with a forum-selection clause will treat the contract language as the conclusive statement of what is convenient for the parties; after all, they agreed to it.  Where there is a forum-selection clause, then, parties may no longer make the same showing that another forum would be more convenient to the private interests of the parties. 

On one hand, a forum-selection clause can save the parties time and money by resolving this most basic element of a legal dispute ahead of time and, given that they are now likelier than before to be enforced by a federal court, including them in an agreement between two partners or two businesses makes good business sense. 

On the other, these clauses can become a thorn in the flesh of employees who unwittingly agree to them.  Accordingly, an employee signing a contract with a new employer should be careful to look for a forum-selection clause.  If the clause designates that disputes shall be litigated in a far-flung forum, this is something the employee should raise ahead of time to avoid surprises later.  Litigating in a distant forum may prove prohibitively expensive and fighting a forum-selection clause after a dispute arises adds to that expense for what is now a diminished prospect of success.

In short, fight on your own turf when you can.  If you must fight in your adversary’s backyard, know that before the fight begins. 

 

BFV Perspectives, Georgia Business Disputes, | Jan 08, 2014