New Jersey, et al. v. Merrill Lynch & Co., et al.  involves what the Court of Appeals called the “narrow” issue of the interpretation of forum selection clauses. In fact, in our experience, the issue is an important one for the development of international practice, both for the international litigator and for the corporate lawyer drafting agreements containing forum or dispute resolution clauses.

The language of the contractual provision at issue in the case provided: “exclusive jurisdiction . . . shall lie in the appropriate courts of the State [of] New Jersey”. The question was (a) whether the clause contemplated jurisdiction in either the state or the federal courts of New Jersey, or (b) whether what was contemplated was access exclusively to the state courts of New Jersey, with access to federal courts in New Jersey being waived.

Before answering the question, the Court of Appeals needed to determine whether it had subject matter jurisdiction over the appeal. That in turn depended on whether the appeal was from an order remanding a matter to state court; in such a case Congress precluded appeals. The Third Circuit held that the grounds for the appeal in this case were not grounds specified in § 1447(c); as a result, the appeal was properly brought.

Turning to the matter at hand, the Court of Appeals ruled that the contracting parties had advertently waived relief in federal court. Of great significance to the Court of Appeals was the fact that the contractual language provided for exclusive jurisdiction in the appropriate courts “of the State of New Jersey” rather than “in” the state of New Jersey. “Of” indicates a possessive relationship, said the Court citing Webster’s Third International Dictionary of the English Language. Quoting the Fifth Circuit, the Third Circuit stated that: “Federal district courts may be in [a state], but they are not of [that state]”, quoting Dixon v. TSE Int’l Inc., 330 F.3d 396 (5th Cir. 2003). The Third Circuit was unwilling to indulge in other non-linguistic arguments that sought to vary text that the Court of Appeals found to be unambiguous. In keeping with what it described as the “vast majority” of other Circuits, the Court affirmed the order remanding the case to state New York.