Be Wary of the Vague Forum Selection Clause

ImageAnother practice tip emerges from a May 16, 2012 opinion out of Florida’s Fourth District Court of Appeals.  In Lopez vs. United Capital Fund, LLC, 37 Fla. L. Weekly D1176b (Fla. 4th DCA May 16, 2012), the court affirmed a trial court’s refusal to enforce certain forum selection clauses based upon the conclusion that the clauses at issue were “totally unspecific” and did not “tie the selection of a forum to any mutable and identifiable fact.”  The clauses at issue stated, in relevant part:

Each of the parties hereto agrees that any such claim or cause of action shall be tried by a court trial without a jury in Seller’s county and state of choice. . . Buyer agrees that a legal mediation shall take place in county and state of Seller’s choice before any court trial . . . .

United Capital Fund, LLC, filed suit against multiple defendants in Martin County, its home county.  The defendants, who were “Sellers” under the contract, argued that the forum selection clause was valid and enforceable and sought to move the forum to Hillsborough County, their county of choice.  The trial court refused to enforce the forum selection clause.  The appellate court affirmed.

Acknowledging the judicial preference for forum selection clauses to “eliminate uncertainty as to the nature, location and outlook for the forum in which the parties might find themselves,” as quoted in Manrique v. Fabbri, 493 So. 2d 437, 440 (Fla. 1986), the appellate court found that the clauses at issue were founded in “total uncertainty.”  The court relied primarily on a Georgia Court of Appeals opinion interpreting a similar provision which set the forum in the “state of choice” of one of the parties.  See Central Ohio Graphics v. Alco Capital Resource, Inc., 472 S.E.2d 2 (Ga. Ct. App. 1996).

The Fourth District distinguished indefinite clauses like the one at issue from enforceable “floating forum” selection clauses, which set forum in a specific, but unidentified location.  The latter will “tie the selection of a forum to [a] mutable and identifiable fact” (i.e., the principal place of business, main office, or headquarters of a party).  The former is based upon the whim of the selecting party, which cannot be determined by the other party and is subject to change at any time. Therefore, the court said, there can be no meeting of the minds at the time of contract.

Accordingly, it is incumbant upon practitioners to understand the subtle distinction between a floating forum clause and an indefinite (and unenforceable) forum selection clause.  Where the location cannot be determined on the face of the contract or by the application of easily discernible facts, the clause will not pass muster.

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