Forum Selection and Choice of Law Clauses
A recent court decision reminds us that forum selection and choice of law clauses in contracts can have a big impact on where a lawsuit ends up. These types of clauses are common in complex business agreements, but many people don't realize how much legal power they carry. The case involved Northern Natural Gas Company, a Delaware Corporation based in Omaha, Nebraska, and Centennial Resource Production, a Delaware corporation with its principal place of business in Colorado. The two companies had a contract for Northern to transport Centennial's natural gas. The contract incorporated Northern's standard terms, which said any disputes would be governed by Nebraska law and heard in Nebraska courts. Later when there was a payment dispute, Northern sued Centennial in Nebraska. Centennial tried to get the case dismissed for lack of personal jurisdiction, arguing it didn't have enough connection to Nebraska to be sued there. But the Nebraska Supreme Court said no - Centennial had consented to Nebraska jurisdiction through the binding contract jurisdiction and forum selection clauses. The Court ruled that, under Nebraska’s Model Uniform Choice of Forum Act and Due Process Clause, generally, forum selection and choice of law clauses are valid as long as the court has power under state law to entertain the action and it’s a reasonably convenient place for the trial of the action. Here, the forum selection clause satisfied due process because Nebraska was not a gravely difficult or inconvenient forum for the pending action. The Court held that when a forum selection clause provides consent to jurisdiction, courts should analyze that basis before considering minimum contacts. This case shows that these clauses will likely be enforced as written in most situations. So next time you're signing a contract with forum selection or choice of law clauses, read them carefully. You may be agreeing to have future disputes handled in a court far from home.