In addition to having a choice of law provision in a contract (a topic on which I posted last week), many contracts also include what is commonly known as a forum selection clause. Such clauses can be extremely important and can have an impact that goes well beyond simply setting up one party as the “home team” and the other an outsider.
For instance, even if a contract has a choice of law provision calling for the law of New York to apply to all contract disputes, if a forum selection clause requires suit to be brought in Massachusetts, the procedural law of Massachusetts applies. Consequently, while New York law does not have a trustee process attachment rule like we have in Massachusetts, a plaintiff should be able to obtain a freeze on the defendant’s bank account as long as a showing is made that the plaintiff is likely to succeed on the merits of its claim. The logic behind this is that, freezing a bank account (known as a “trustee process attachment”) is governed by procedural law (Rule 4.2 of the Massachusetts Rules of Civil Procedure), not by substantive law. Alternatively, if a suit was filed in New York, freezing the defendant’s bank account is very unlikely even if Massachusetts law were to apply, because New York procedural law does not have an analog to Massachusetts Rule 4.2. (For more on trustee process attachments, see my prior posts, Gain Leverage by Freezing Bank Accounts – Part I, Offense and Gain Leverage by Freezing Bank Accounts – Part II, Defense.
Forum selection can also be important to the substantive law that will apply if the choice of law provision has the following common language: “All claims of contract breach will be governed by the laws of the State of New York.” In this situation, if suit is brought in Massachusetts pursuant to a forum selection clause, and one of the claims asserted is a claim for tortious interference, a Massachusetts court would be well within its discretion to apply Massachusetts law because tortious interference is not a “claim of contract breach.”
Perhaps most important of all, keep in mind that there are two types of forum selection clauses: one mandatory and the other permissive. In other words, you can have a forum selection clause that requires all suits be filed in a particular locale or you can have one that merely identifies a proper forum, but does not eliminate other forums as also being proper. In this regard, a recent Massachusetts case Boland v. George S. May International, Co., highlights the importance of ensuring that the language used leaves no kernel of doubt as to which type of clause is intended. In that case, the forum selection clause stated:
Jurisdiction shall vest in the State of Illinois.”
While surprising to many, the Supreme Judicial Court ruled that this clause allowed, but did not require, suit to be filed in Illinois because there was “no plain statement that this jurisdiction should be exclusive.” Thus, if you want to ensure that suit only can be brought in one forum, be sure to use the following belt and suspenders language:
Jurisdiction of all disputes between the parties shall vest solely and exclusively in the State of Illinois and suit may not be filed in any other jurisdiction.”
As with other dispute related provisions in contracts, seeking the advice of a litigator before agreeing to a contract with a forum selection clause can help you avoid the foregoing and other traps for the unwary.