Where Shall We Dance? Forum Selection Clauses in North Carolina
This post may seem to be geared toward lawyers but it really does affect anyone who signs contracts…….hey! That could be any of us. Listen up….
In the recently decided case of LendingTree LLC v Anderson the North Carolina Court of Appeals reaffirmed the general rule in North Carolina that a forum selection clause in a contract can be enforceable. Translation: if a contract states where a lawsuit arising out of the contract must be brought (a/k/a the forum) this mandatory selection could be applied by a court and the lawsuit would be sent to the pre-selected venue and jurisdiction. A few other points are worth mentioning also.
First, the forum selection clause must have clear language that leaves no doubt the forum selected is the only place where suit may be filed. Use of words like “exclusive”, “sole”, and “only” when referring to the forum are typically needed for a court to apply the forum selection clause.
Second, the forum selection clause must bear some relationship to the parties and/or the subject matter of their relationship. A company in New York that contracts with a North Carolina resident for the delivery of goods shipped from Tennessee may not be able to enforce a forum selection clause mandating all actions be brought in the state of New Jersey.
Note the forum selection clause can be waived by a party’s action (continuing to participate in a case pending in a venue the party believes to be the wrong venue) or inaction (ex: failing to file a motion to change venue or motion to dismiss or other responsive pleading asserting the clause; failing to follow up with a “timely” request for hearing on the motion). So if you are seeking to avoid the apparent effect of such a clause be sure to read this case and take note of the opposition’s actions in developing your defense.
A disappointing fact of life is that these and many other non-consumer friendly clauses appear in many of the contracts that we confront in daily life. Credit card agreements, vehicle purchase documents, loan documents, and many other contracts have purported forum selection clauses. There are also mandatory arbitration clauses, “if company wins it recovers attorneys’ fees” clauses, and choice of law clauses—to name a few. Recent United States Supreme Court decisions seem to clear the way for these less-than-favorable clauses to continue to creep into our business relationships. Unfortunately the consumer or individual typically lacks the ability to negotiate the language or existence of these clauses so preventive measures are almost never an option. Reactive measures—-asserting a challenge to these clauses when sued or a claim is made against you—are the usual recourse……and I use the word “recourse” gingerly here.
So what have we learned? There can be purpose and value to having a forum selection clause in a contract which is presumably why they exist in so many form agreements. In fairness if you are drafting a contract you may want to consider the inclusion of a forum selection clause to protect your interests. If you find yourself involved in a case where this issue arises you should contact an experienced civil litigation or business attorney for help.