Enforce This: Forum Selection Clauses

The following article was originally published in the December 2013 issue of The Federal Lawyer and is used with permission.

Forum selection clauses are commonly found in both consumer contracts and contracts negotiated by sophisticated parties. The different ways in which the federal courts interpret these clauses can create confusion and unintended negative results for practitioners. Being aware of the ways in which different federal circuits interpret them, as well as the different mechanisms used to reach the court specified in the agreement can avoid surprises and headaches.

Imagine you have a client, ABC MicroProcessors, Inc. (ABC), which has its principal place of business in Dallas, Texas. ABC sells and services microprocessors customized to specific industries, such as automotive, construction, aerospace, and finance, throughout the United States. Several years ago, ABC entered into a service agreement for consulting services with ConsultantSpeak Associates, which is located in Michigan. ConsultantSpeak’s role was to identify areas in which ABC’s automotive division, also located in Michigan, could improve its products and services. During the term of the agreement, ConsultantSpeak employees held regular meetings with the ABC automotive division in Michigan. They also traveled regularly to ABC in Dallas and to automotive manufacturers and suppliers throughout the United States. Payment was based on Consultant Speak achieving specific performance standards. Unfortunately, a dispute arose concerning the parties’ goals and payment.

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