Enforcing Outbound Forum Selection Clauses in State Court

67 Pages Posted: 8 Mar 2020 Last revised: 25 Sep 2020

See all articles by John F. Coyle

John F. Coyle

University of North Carolina School of Law

Katherine C. Richardson

McGuire Woods, LLP

Date Written: February 29, 2020

Abstract

Forum selection clauses are a staple of modern business law in the United States. Parties agree, ex ante, on where they can sue one another and then rely on the courts to enforce these agreements. Although the number of contracts containing forum selection clauses has skyrocketed in recent years, there is a dearth of empirical information about enforcement practice. Are there any states that refuse to enforce these clauses? Among states that recognize the presumptive validity of these clauses, how frequently are they enforced? Under what circumstances, exactly, will state courts deem these clauses unenforceable? The existing literature provides few answers to these questions.

This Article aims to fill that gap. It surveys more than 175 state statutes and nearly 900 state cases involving outbound forum selection clauses to contribute to the scholarly discussion in two important ways. First, it provides a much-needed, and heretofore missing, empirical account of when outbound forum selection clauses will be enforced in state courts. Among other things, the Article shows that state courts refuse to uphold outbound forum selection clauses in nearly a quarter of all cases. In addition, the Article offers a rich descriptive account of why outbound forum selection clauses sometimes go unenforced. It shows that state courts refuse to enforce these clauses for reasons ranging from 1) underlying public policy rationales; to 2) claims of unreasonableness, a famously malleable term that encompasses a relatively stable subset of reasons; to 3) standard contract defenses invoked by the resisting party.

The data presented in this Article offers important insights to actors who interact with forum selection clauses on a regular basis—litigators, judges, and scholars. Armed with this information, litigators can take care to avoid pitfalls that may result in a clause being deemed unenforceable. Judges can gain a better sense for how their colleagues in other states are addressing the myriad challenges posed by these clauses. And scholars can evaluate whether there exists a difference between state and federal practice in this area and, if so, whether this difference presents a problem under the Supreme Court’s seminal decision in Erie Railroad Co. v. Tompkins.

Keywords: contracts, commercial litigation, choice of law, private international law

Suggested Citation

Coyle, John F. and Richardson, Katherine C., Enforcing Outbound Forum Selection Clauses in State Court (February 29, 2020). Indiana Law Journal (Forthcoming 2020), UNC Legal Studies Research Paper, Available at SSRN: https://ssrn.com/abstract=3546669 or http://dx.doi.org/10.2139/ssrn.3546669

John F. Coyle (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919-843-9634 (Phone)

HOME PAGE: http://www.law.unc.edu/faculty/directory/coylejohnf/

Katherine C. Richardson

McGuire Woods, LLP ( email )

United States

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