While no in-house attorney drafting a business contract wants to focus on being in litigation with her business partner, as I discussed in a 2013 blog post, thinking like a litigator at the drafting stage is critical in order to avoid potential surprises. A good example of this comes in the context of crafting a forum selection clause that truly achieves your objectives.… Keep reading
forum selection clause
Porreca v. The Rose Group was a class action lawsuit brought by Carly Porreca and Charles Walton, alleging that their employer, Applebee’s Neighborhood Grill and Bar, had violated the Fair Labor Standards Act. After Porreca was dismissed from the lawsuit, the restaurant management company that owned and operated the Applebee’s at which Porreca and Walton worked, the Rose Group, sought a stay of the litigation as well as an order (i) compelling Walton to arbitrate his claim individually, and (ii) barring him from pursuing a class action in that arbitration. In support of this request, the Rose Group relied on the fact that Walton had signed an agreement binding him to the company’s Dispute Resolution Program, which specifically stated the following:
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The Company and I agree that all legal claims or disputes covered by the Agreement must be submitted to binding arbitration …. We also agree that any arbitration between the Company and me is of an individual claim and that any claim subject to arbitration will not be arbitrated on a collective or a classwide basis ….
Memorializing an agreement in a written contract serves two primary purposes. First and foremost, a written contract should clearly set out the deal terms so that there is little or no chance of a misunderstanding as to what the parties’ rights and obligations are. Further, to be sure that they get the deal terms right, in-house counsel often turn to business people involved in the deal because they are the experts on the deal terms.
The second reason to have a written contract is to set out the “Rules of Engagement” that will apply if a dispute arises between the parties. Such Rules, on which I have written in other posts, include choice of law provisions, forum selection clauses, liquidated damages provisions, and arbitration clauses, just to name a few. Surprisingly, however, and in contrast to in-house counsels’ willingness to consult with business people about the deal terms in a contract, in-house counsel often are reluctant to consult with experts on the Rules of Engagement, i.e., experienced litigators. Whether the reason for this is a psychological aversion to placing too much emphasis on what might go wrong with a deal before it is fully in … Keep reading
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 … Keep reading
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 … Keep reading