Is a Contract’s Forum-Selection Clause Enforceable in Federal Court?

Of course it is, if it meets three tests:

  1. The clause must be reasonably communicated to the other party;
  2. The clause must make the forum selection mandatory, not merely permissive; and
  3. The claims and the parties involved in the lawsuit must be subject to the forum-selection clause.

If these three tests are met, the forum-selection clause will be presumptively enforceable. The opposing party can overcome this presumption only by a sufficiently strong showing that the clause is unreasonable or unjust, or is invalid because of fraud or overreaching. These “public interest” considerations will rarely defeat a forum-selection clause that is presumptively valid.

Photo by Pixabay on Pexels.com

The operation of these rules was recently demonstrated clearly in Jones v. Povant USA LLC, in a decision by Judge Naomi Reice Buchwald of the Southern District of New York. Plaintiff Kimberly Moffitt Jones, of California, booked round-trip ocean passage for herself, her two daughters, and her autistic son, from Ushuaia, Argentina, to Antarctica, from December 20, 2018, to January 5, 2019. The total cost for the ocean voyage for the four family members was $125,028, which Ms. Jones paid in advance. Because the autistic son was not able to fly commercially, Ms. Jones chartered a private jet to fly the family, and the son’s therapist, from California to Argentina. She paid $355,000 for the private round-trip air travel. She alleges that she told Povant about this necessary additional cost in order for the family to go on the trip to Antarctica.

Problems and delays arose after the family arrived in Argentina. An issue with the ship’s propeller not only caused delays, but it also resulted in a change of the port of embarkation. Frustrated, Ms. Jones canceled the trip and demanded return of both the ocean fare and the air fare. Povant agreed to return the ocean fare but refused to pay Ms. Jones for the private jet travel from California to Argentina. Ms. Jones brought suit against Povant in federal court in New York, with allegations including intentional and negligent misrepresentation. Povant moved to dismiss based upon the forum-selection clause in the line’s General Terms and Conditions, which states that “only” the courts in Marseilles, France, have jurisdiction to hear any proceeding initiated against the line.

Judge Buchwald analyzed and followed precedent from the Supreme Court and the Second Circuit Court of Appeals governing the enforcement of forum-selection clauses. She first found the existence of the clause was properly communicated to Ms. Jones in the line’s General Terms and Conditions, not only to Ms. Jones but also to her travel agents. The payment of the ocean fare is deemed to signify agreement to the terms and conditions. Second, Judge Buchwald found that the clause was mandatory: only the courts in Marselles, France, would have jurisdiction over disputes arising from the ocean contract. Finally, the court concluded that Ms. Jones’s claims, and the parties to the lawsuit, were subject to the forum-selection clause.

Thus, the forum-selection clause was presumptively enforceable. “If a forum-selection clause is valid, then the only remaining inquiry is whether certain public interest considerations outweigh its enforcement.” Judge Buchwald found that Ms. Jones raised no public interest considerations, such as fraud in the contracting, unavailability of a convenient forum in France, or fundamental unfairness of the application of French law militating against enforcement of the clause.

The court dismissed the New York complaint without prejudice to refiling in France.

Palais de justice de Marseille Photo by Philippe Alès / CC BY-SA (https://creativecommons.org/licenses/by-sa/3.0)

Our Courts Are Closed But We Will Be Working

The courts in New York and New Jersey have closed for hearings, conferences, and jury trials.  Our friends in Pennsylvania report many similar closings.  We even had a Philadelphia mediation postponed. Meetings of 50 or more are prohibited in New York and New Jersey, restaurants and bars are closed, and other non-essential businesses are encouraged to follow suit.  We will continue to work in the office unless ordered to stay home. We are fully able to work remotely without interruption.  Court filings in most of our courts are done electronically, and we receive orders and notifications from the courts in the same manner.  We will receive our emails, of course.  If we are out, or at night, our phones will route your calls to John (Press 2) or Peter (Press 3) at any time, with immediate connection to our cell phones.

We hope this will not last long.  Most important, we hope you all remain safe and healthy.

“Removal to Federal Court Changes the Field of Play, but not the Game Being Played.”

James A. Byrne U.S. Courthouse
Philadelphia, PA

With those words the Third Circuit rules that removal to federal court does not cure jurisdictional defects or waive any other defenses available in state court. Danziger & DeLlamo, LLP v. Morgan Verkamp, LLP, (January 15, 2020) is a battle between two law firms over a purported referral fee worth millions of dollars. Morgan Verkamp, an Ohio firm, succeeded in a qui tam action in Pennsylvania federal court. Danziger, a Texas law firm, says it referred the case to Morgan, for an orally agreed referral fee made by telephone between Texas and Ohio.

In a qui tam action a party, called a relator, pursues a claim on behalf of a government, which is deemed the real party in interest. If the government succeeds, the relator receives a share of the award. In this case, Morgan brought the case under the federal False Claims Act, and the U.S. government received a settlement for hundreds of millions of dollars; Morgan received several million dollars in attorneys’ fees. Danziger wants a share of those fees.

The two firms spent a year and a half conducting discovery in a procedure permitted by Pennsylvania state court rules before the filing of a complaint. When Danziger finally filed its complaint, Morgan Verkamp promptly removed the lawsuit to federal court and moved to dismiss, arguing that it was immune from personal jurisdiction in Pennsylvania. The district court agreed and dismissed the complaint. Danziger appealed, arguing that Morgan consented to personal jurisdiction by removing the case to federal court.

The Third Circuit disagreed:

We now adopt this rule.  On removal, a defendant brings its defenses with it to federal court. * * * Removal does not cure jurisdictional defects, so defendants can still challenge jurisdiction after removal.

The Third Circuit, which includes New Jersey, now joins the First, Second, and Eighth Circuits. “[T]he federal court takes up where the state court left off.” Nationwide Eng’g & Control Sys., Inc. v. Thomas (8th Cir. 1988). The governing case in the Second Circuit, which includes New York, is Cantor Fitzgerald, L.P. v. Peaslee (2nd Cir. 1996) (“Removal does not waive any Rule 12(b) defenses.”). Cantor continues to be cited by the New York federal courts.

We routinely remove cases to federal court in New York and New Jersey, with the confidence that our clients’ defenses to personal jurisdiction will remain intact in the federal forum.

Does Admiralty Law Permit Punitive Damages in a Seaman’s Injury Claim Based on Unseaworthiness?

The Supreme Court rules that it does not, in Dutra Group v. Batterton, decided on June 24, 2019.

“This case asks whether a mariner may recover punitive damages on a claim that he was injured as a result of the unseaworthy condition of the vessel.” With that introduction, Justice Alito began a fascinating history of maritime personal injury claims on behalf of merchant seamen. In maritime and admiralty cases, the federal courts sitting as courts of admiralty “proceed in the manner of a common law court,” as instructed by the Constitution. In Batterton, the Court exercised its jurisdiction to decide that punitive damages are not available in a mariner’s personal injury claim based upon unseaworthiness of the vessel.

Christopher Batterton worked as a deckhand on vessels owned by Dutra Group. His hand was injured when it was caught between a bulkhead and a hatch that blew off as a result of unventilated air accumulating and pressurizing with the compartment.

Continue reading

Is PIP Reimbursement Arbitration Mandatory for a Self-Insured in New Jersey?

An appellate court in New Jersey says that it is. In Liberty Mut. Ins. Co. v. Penske Truck Leasing, Co., CEVA Freight, LLC, and Michael Kika, a recently published decision, the Appellate Division ruled that a self-insured must submit to mandatory arbitration in regard to a PIP reimbursement claim. An arbitrator, not a court, will decide whether the self-insured was negligent and must reimburse the PIP carrier. The decision is important because it is the first such published opinion.

Continue reading

On This Date in SCOTUS History – June 13

photo by Jennifer Enberg

​In 1966, the landmark case of Miranda v. State of Arizona, 384 U.S. 436 (1966), was decided.  The 5-4 majority held that a person in custody must be informed of his right to counsel before and during questioning, and the right to not self-incriminate.  It further held that the suspect must not only understand these rights but, should the suspect choose to waive these rights, that it be done voluntarily.  While most are familiar with the case of Miranda v. Arizona, which gave rise to the term “Miranda rights,” did you know that three additional cases fell under this SCOTUS ruling?  Westover v. United States, Vignera v. New York, and California v. Stewart, had been consolidated with Miranda.


In 1967, Thurgood Marshall was nominated to the Court by President Johnson. He was confirmed on August 30, 1967, by a vote of 69-11, becoming the first African American to serve as an Associate Justice.  Justice Marshall, himself, won 29 out of the 32 cases he argued before the Supreme Court, the most famous being Brown v. Board of Education of Topeka, 347 U.S. 483 (1954).

Supreme Court Resolves Maritime Product Duty-to-Warn Issue

The United States Supreme Court is the final arbiter of the Maritime Law, a unique and large body of federal common law, tempered by any controlling Congressional enactments. So, in recently decided Air & Liquid Sys. Corp. v. DeVries, the Court addressed the scope of the duty of a marine product manufacturer to warn of a potential harm from a part that is required to be incorporated into its product. Here, the part to be added contained asbestos, and it allegedly led to the deaths of two Navy sailors. Their families sued the manufacturer of pumps, blowers, and turbines, but not the manufacturer of the asbestos-containing added part that actually caused the harm. The Supreme Court sided with the families.

Continue reading

Care, Custody, or Control, Water Damage Exclusion, Dominate Recent New Jersey Insurance Decisions

Mix a safe, a blowtorch, and $4,000,000 in pearls, and you have a dandy insurance coverage fight. Companion Trading Company, a New York business, purchased a safe from Mega Security Company, in New Jersey. Companion used the safe to store semi-precious jewelry, including pearls at its New York location. For some reason the safe door became immovable, and Companion called Mega in to investigate. Mega’s technician could not open the door, and so arranged to ship the safe back to New Jersey for further work. Over several days Mega employees and an outside technician worked on the safe in vain at Mega’s headquarters. Finally, they opened the safe by using a blowtorch. When Companion got it back and checked the contents, they saw that a valuable cache of pearls had been damaged.

Continue reading

Forum Selection Clause Alive and Well in the Second Circuit

by John C. Lane

This case involves an on-line retailer, E-Commerce China, and the plan of its majority shareholders to buy out the minority owners in a “going private merger.” The company is incorporated in the Cayman Islands. The minority shareholders brought suit in Manhattan federal court, urging that the purchase price was below market value and grossly unfair. The defendants moved to dismiss on the ground of forum non conveniens, claiming that the case should properly be brought in the Cayman Islands, the company’s home of incorporation.

Continue reading