Recent Court Decisions: Choosing Where You Litigate
Many contracts, especially those of big corporations like your cell phone provider, go on for dozens if not hundreds of pages with excessive wording and small font. While it may not be fair to claim that they are hiding things from you, it is clear that they want you to sign their contract without actually reading it entirely. One ordinary inclusion in these daunting contracts is a forum selection clause.
A forum selection clause allows the parties to a contract to decide where they will go to court if there is someday a lawsuit relating to the contract. These clauses are generally enforceable, as parties to a contract have the ability to negotiate or decline if they did not agree to the forum selected. However, courts across the country have long declined to respect the validity of a forum selection clause if doing so would be unreasonable under the circumstances. This has often been a saving grace for parties faced with the possibility of being forced to use a court far from home or unrelated to the contract between the parties.
On July 5, 2023, the Western District of Texas issued a ruling in Sobel v. Thompson that declined to protect a party from a burdensome forum selection clause. The parties agreed in their contract to settle all disputes between themselves in Delaware state court. The claims by the plaintiff included both state law claims and federal law derivative claims against company directors. Importantly though, the federal law issues could only be brought in federal court, not Delaware state court. This meant that the court could either enforce the forum selection clause and prevent the plaintiff from ever trying his federal law issues, or rule that this made the forum selection clause unreasonable under the circumstances.
The Western District of Texas decided that the forum selection clause would prevail, substantially impacting the plaintiff’s possible path to recovery. Even though courts have traditionally respected the use of forum selection clauses, Sobel v. Thompson perhaps indicates an increasing reluctance of courts to overrule forum selection in the interest of justice. This could lead to parties being forced into court far from home or losing their opportunity to recover due to a misunderstanding of their situation. Further, as this ruling was made by the Western District of Texas in Austin, this trend has the real possibility of impacting contracts here in Texas.
Because of this, it is important that any contract you or your business enter into is carefully drafted and reviewed to ensure that it is tailored to your needs. Waldron & Schneider’s team of attorneys has the specialized knowledge necessary to ensure that all of you and your business’s contracts are drafted according to your needs or reviewed before signing to ensure your interests are protected. We understand the common pitfalls and dangers other parties commonly attempt to utilize and ensure that our clients are fully informed and shielded from such issues. Call our office to schedule a meeting with an attorney who can draft the contract you need or review a contract that you intend to sign.
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