Many businesses and individuals find themselves subject to being sued in another state in which they conduct business or reside, because of a “forum Selection Clause” stated in their boilerplate contract. Depending on the amount of the debt owed, it may be more money to hire an attorney, travel back and forth to fight against the lawsuit. If that occurs, then the victorious judgment creditor will likely come to your state under the Sister State Judgment Act to have that judgment empowered by the local court and for a lien to attach against real property.
In Bremen v. Zapata Off-Shore Co., the U.S. Supreme Court first held that forum selection clauses are prima facie valid and should not be set aside unless the party challenging enforcement of such a provision can show it is “‘unreasonable’ under the circumstances.” 407 U.S. at 10, 92 S.Ct. at 1913 (1972). The Supreme Court has construed this exception narrowly. A forum selection clause is unreasonable if (1) its incorporation into the contract was the result of fraud, undue influence, or overweening bargaining power,[1] Carnival Cruise Lines, Inc. v Shute ET VIR , 499 U.S. at 591, 111 S.Ct. at 1526; Bremen, 407 U.S. at 12-13, 92 S.Ct. at 1914; (2) the selected forum is so “gravely difficult and inconvenient” that the complaining party will “for all practical purposes be deprived of its day in court,” Bremen, 407 U.S. at 18, 92 S.Ct. at 1917; or (3) enforcement of the clause would contravene a strong public policy of the forum in which the suit is brought. Id. at 15, 92 S.Ct. at 1916.
“The undue influence and overweening bargaining power exceptions have been characterized as unconscionable conduct or overreaching. If a court finds that a forum selection clause was obtained by unconscionable means, it is likely that the court will refuse to enforce the clause on the ground that there was an absence of an real agreement between the parties,” 1 The Law of Transnational Business Transactions, ch. 8 at 32 (Ved P. Nanda ed., 1991), citing Gaskin v. Stumm Handel, 390 F.Supp. 361, 365 (S.D.N.Y. 1975)
Therefore, while the Forum Selection Clause can be overcome, a great amount of convincing evidence will be required to meet the US Supreme Court test.
[1] Author’s emphasis.