Enforcing Outbound Forum Selection Clauses in State Court
67 Pages Posted: 8 Mar 2020 Last revised: 12 Jul 2021
Date Written: February 29, 2020
Forum selection clauses are a staple of modern business law. 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 at the state level. Are there any states that refuse to enforce them? How frequently are they enforced? Under what circumstances, if any, will these clauses be deemed unenforceable? The existing literature provides few answers to these questions.
This Article aims to fill that gap. It surveys more than 200 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. Second, the Article offers a rich descriptive account of why outbound forum selection clauses sometimes go unenforced. It shows that state courts generally refuse to enforce these clauses for one of two reasons: 1) they are contrary to public policy; or 2) they are unreasonable, a famously malleable term that encompasses a relatively stable subset of reasons.
The data presented in this Article offers important insights to actors who interact with outbound 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 address the myriad challenges posed by these clauses. And scholars can draw upon this data to 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
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