A decision by the Southern District of New York in the area of international litigation, Export-Import Bank of the U.S. v. Hi-Films de C.V., et al., 09 Civ. 3573 (S.D.N.Y. 24 Sept. 2010)(PGG), addressed the enforceability of a forum selection clause and serves as a brief primer on the subject (see the discussion in Topic 2 of our International Practice: Topic and Trends e-book).
Export-Import Bank involved a motion to dismiss on lack of personal jurisdiction and forum non conveniens against claims asserting a failure to pay on loans made to a Mexican entity and guaranteed by defendant Luna. The District Court rejected both defenses. Finding personal jurisdiction based on a forum selection clause, the District Court held:
- “Where an agreement contains a valid and enforceable forum selection clause, . . . it is not necessary to analyze jurisdiction under New York’s long-arm statute or federal constitutional requirements of due process”.
- So the question becomes whether the forum selection clause is enforceable. To answer that, the District Court applied the 4-part analysis set forth in the Second Circuit’s decision in Phillips v. Audio Active, Ltd., 494 F.3d 378, 383-84 (2d Cir. 2007). In the context of international litigation, the test reduces to the following: (i) was the forum selection clause reasonably communicated to the party resisting enforcement; (ii) is the clause mandatory or permissive (if mandatory, it is presumptively enforceable); (iii) are the claims and parties subject to the forum selection clause; and (iv) if presumptively enforceable — as the Court in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972) presumes they are in the context of mandatory clauses in international litigation – this final step asks whether the resisting party has rebutted the presumption of enforceability by making a sufficiently strong showing that “enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as fraud or overreaching”.
- On the issue of what law governs the question of enforceability, the District Court noted that, although the Second Circuit “has not decided the question of what law to apply to a forum selection clause when the contract also contains a choice of law provision”, if the “parties rely on federal precedent rather than the law cited in their choice of law provision, a court is free to ‘apply general contract law principles and federal precedent to discern the meaning and scope of the forum clause'”.
- The District Court relied on the Second Circuit’s decision in Aguas Lenders Recovery Group v. Suez, S.A., 585 F.3d 696 (2d Cir. 2009)(in which the author was lead counsel) to confirm that, in deciding if a forum-selection clause is permissive or mandatory (and thus entitled to the presumption of enforceability), “where a party waives any claims of forum non conveniens and agrees to a forum selection clause that permits the plaintiff to dictate the forum”, that “combination” “amounts to a mandatory forum selection clause[,] at least where the plaintiff chooses the designated forum”. Neither Aguas or Export-Import Bank explicitly addresses two questions: First, whether the international litigation context alone might be relevant and possibly sufficient to trigger the presumption of enforceability (Aguas cites Bremen for the proposition that the Bremen presumption does not apply if the forum selection clause is permissive, but it does not address the question whether some other means of finding a presumption should be found to exist). Second, and relatedly, what rules apply when no mandatory-clause presumption is available – that is, might a presumption arise by the fact that parties freely entered into a contract containing a choice of forum clause that the plaintiff is availing itself of.
- The District Court summarized controlling Circuit law that mere difficulties and cost are insufficient to rebut the presumption of enforceability – the Second Circuit has used the language of “impossibility”.
- Finally, having found jurisdiction proper based on the forum selection clause, the District Court rejected the forum non conveniens argument without separate analysis.