Contracting parties commonly include clauses that pre-select the court where they will litigate any dispute relating to their agreement. Such, “forum selection clauses,” are generally enforceable in North Carolina and elsewhere. However, a recent Court of Appeals decision highlights a distinction between forum selection clauses that attempt to designate venue in a specific North Carolina county and those that designate venue in a forum outside the State.
In A&D Environmental Services, Inc. v. Miller, No. 14-CVS-6328 (NC Ct. App. April 7, 2015), the Court of Appeals held that a forum selection clause designating a specific North Carolina county is only valid if that county is also a proper venue under the applicable North Carolina venue statutes. The holding does not affect forum selection clauses designating a venue outside North Carolina.
The A&D decision does not invalidate all forum selection clauses that designate venue in a specific North Carolina county, but the decision does narrow the parties’ choices as to acceptable venues. The end result is to make forum selection clauses most valuable where there are multiple potential venues, such as cases involving companies with many offices throughout the state. The reasoning expressed in the A&D opinion could also impact other common attempts to pre-select a preferable litigation forum, such as forum-selection clauses mandating that litigation be brought in the North Carolina Business Court. Under A&D, such clauses may only be enforceable if the Business Court has authority to hear the dispute independent of the forum-selection clause.
If you have any questions about this recent decision or the forum selection clauses in your company's important contracts, then feel free to contact the attorneys of Womble Carlyle below
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