In my recent post, Ensuring Your Dispute is Resolved in the Forum You Want is Not Always Easy, I discussed various issues related to contractual forum selection clauses, i.e., clauses which dictate where parties can or must sue. If a contract does not have a forum selection clause, courts in each of the contracting parties’ home states might be able to exercise jurisdiction over a dispute. Further, and as many in-house counsel have experienced, the ultimate venue for litigation can create a substantial amount of leverage in favor of the home team and work to the detriment of the out-of-state party.
If you believe that your company is likely to be sued by another in some far off jurisdiction, consider the following advice:
I can’t emphasize enough the importance in evaluating whether you are going to be sued – as opposed to whether you might be sued. If you do not see any way to avoid litigation, following the above rule can pay real dividends, as it did for one of my clients several years ago. In that situation, I had been negotiating with a California attorney to settle a dispute and was told that a revised proposal would be forthcoming. I had no idea why the proposal kept getting delayed until I received it late on a Friday afternoon. As it turned out, the “proposal” came in two parts: the first amounted to a demand that my client completely capitulate; and the second was a threat that unless my client acceded, a complaint would be filed in California. To drive home the threat of a suit even further, opposing counsel actually enclosed a copy of the complaint she said she would be filing.
Once my client re-confirmed to me that it had no intention of capitulating, I spent the weekend drafting my own complaint (seeking a declaratory judgment that my client had done nothing wrong), and I filed that complaint Monday morning in the Massachusetts Superior Court. I then sent a “courtesy copy” of the complaint to the attorney with whom I had been negotiating and asked her if she would agree to accept service on behalf of her client. As you might imagine, this maneuver completely changed the playing field, and it ultimately enabled my client to obtain a much more favorable settlement than it likely would have achieved had it been forced to defend a suit in California.
So, the next time you are threatened with a lawsuit by an out-of-state adversary, consider whether it might make sense to take the bull by the horns and file first in your home forum.