One issue that frequently arises in contract disputes is where to litigate the dispute. This particularly becomes an issue when the parties to the contract are located in different states or countries, but can also arise when the parties are situated in different counties within the same state.
Forum selection clauses generally determine which state or country is the permissible location for litigating disputes. Because the laws of states and countries vary, forum selection clauses are typically more about which choice of law will apply than about the physical location where the lawsuit will be brought. The courts have long held that forum selection clauses are generally enforceable. See The Bremen v. Zapata Off-Shore Company, 407 U.S. 1 (1972); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991).
Venue selection clauses are a slightly different animal. Venue selection clauses attempt to prescribe which location within a state will hear the dispute. Thus, venue selection clauses aren’t about choice of law, they are about the convenience to one or more of the parties of litigating in a certain county. If you have parties located in neighboring counties, the burden of litigating in one county versus the other is relatively small. However, if one party is located in Shasta County, for example, and the other is in Orange County, the travel costs for one of the party’s attorneys, clients, and witnesses can add significant expense to the cost of litigating.
Back in 1929, the California Supreme Court decided that venue selection clauses were unenforceable. General Acceptance Corp v. Robinson, 207 Cal. 285 (1929). The court reasoned that the legislature was tasked with determining the appropriate venue for lawsuits, and the parties to a contract couldn’t change that.
However, in Battaglia Enterprises v. Superior Court, 215 Cal. App. 4th 309 (2013), the Court of Appeal determined that if multiple venues would be appropriate under the Code of Civil Procedure, and one of those venues is the one designated by the contract’s venue selection clause as the exclusive venue for disputes, that Court would enforce the clause and require the parties to litigate in that venue.
In light of this recent development, companies and individuals should take a fresh look at their contracts and determine whether a venue selection clause would be helpful. The cost of having to litigate a dispute in a distant county could vastly outweigh the price of having an attorney review your key contracts in advance. Give us a call if you’d like some assistance in reviewing your key contracts.
Author: Amy Howse