Will a forum selection clause wash you out of a Maryland court?
Maryland's United States District Court reinforced long-standing law that a forum selection clause in a commercial agreement will be enforced absent fraud. It further held that broadly drafted language may include disputes that arose during the negotiation and formation of the contract.
On November 7, 2017 Judge Blake decided White Oak v. Alstom, a contract dispute arising from the construction of a power generation facility in Maryland. The plaintiff sued for fraud and various pre-contract actions of the defendant. The contract made by the parties had a forum selection clause-- it stated that all disputes arising from and related to the contract must be litigated in the courts of Virginia.
The plaintiff sued in Maryland's federal court, and the defendant made a motion to transfer based on the contract language.
Judge Blake made a quick and clear analysis of the existing cases to reach her result-- the case would be transferred to Virginia. The plaintiff was stuck with the broadly worded clause that encompassed not just performance issues during the existence of the contract, but formation issues that pre-dated the existence of the contract. The plaintiff could not wedge the facts of the case into any exception to the general rule.
Forum selection is an important issue that is often ignored when contracts are made by our clients before our involvement. Such language is often buried in the boilerplate of somebody's form agreement, and it is rarely negotiated unless a lawyer is involved. However, its operation can force an aggrieved party to litigate claims in a distant state, with application of unfamiliar procedures and substantive law. As the plaintiff learned in the White Oak case, several months spent in the wrong courthouse adds thousands of dollars in litigation expense to the claim. Isn't it better to assess that risk before the deal is struck?
When negotiating your next agreement with an out-of-state entity, be mindful of forum selection language. A little bit of research will lead you to a much better informed decision before you sign the contract.