Financial Hardship and Forum Selection Clauses

Abstract

The U.S. Supreme Court has long held that a forum selection clause should not be enforced when a trial in the chosen forum would be “so gravely difficult and inconvenient” that the plaintiff “will for all practical purposes be deprived of his day in court.” The financial status of the plaintiff is obviously a factor that is relevant to this inquiry. Large corporations can usually afford to litigate a case in a distant court. Individual plaintiffs frequently lack the resources to do so. Nevertheless, the lower federal courts have repeatedly held that the plaintiff’s financial circumstances are not relevant to the question of whether a forum selection clause should be enforced.

The unsurprising result is a trail of abandoned lawsuits. In case after case, plaintiffs have been forced to relinquish their claims because they could not afford to litigate in the chosen forum. This outcome is particularly common when the forum selection clause selects a court in a foreign country. It is expensive to hire a foreign lawyer, arrange for foreign travel, transport witnesses and documents to a foreign nation, and translate materials into a foreign language. The accumulated weight of these difficulties, inevitably, will lead many plaintiffs to abandon their suits. In such cases, the forum selection clause does not serve to redirect the lawsuit to the courts of the chosen jurisdiction. It serves to immunize the defendant from all liability.

This Article urges courts to reimagine the role that financial hardship plays in the enforceability inquiry. It argues that U.S. judges can and should consider the financial resources available to plaintiffs in assessing whether they will be deprived of their day in court. If a plaintiff cannot afford to hire an attorney in the chosen jurisdiction, for example, then the forum selection clause should not be enforced. Although forum selection clauses serve a useful purpose, they should not operate to shield a defendant from liability for claims brought by impoverished plaintiffs. Under the current legal regime, they often do precisely that.

Keywords: forum selection clauses; enforceability; inconvenience; financial hardship