Maritime Update: Will Your Contract Dispute Be Decided In Your Backyard?
On July 1, 2014, the Louisiana Supreme Court in the case Shelter Mutual Ins. Co. v. Rimkus Consulting Group, Inc. of Louisiana, et al, resolved a split among the Circuit Courts of Appeals regarding whether forum selection clauses violate public policy. This development is significant because it dispels the argument that all forum selection clauses executed prior to a suit being filed are unenforceable in Louisiana.
Shelter Mutual Property Insurance Company ("Shelter") retained Rimkus Consulting Group, Inc. ("Rimkus") to provide an engineering evaluation and expert witness services in connection with its defense of a claim for hurricane damages brought by a company insured by Shelter. In connection with the engagement, Rimkus sent Shelter a letter and enclosed non-negotiated "Terms and Conditions" which included a forum selection clause requiring any suit arising out of the contract to be initiated in Harris County, Texas.
Shelter sued Rimkus in Louisiana state court claiming Rimkus issued an erroneous opinion regarding the cause of property damage and negligently estimated repair costs. In response, Rimkus argued that pursuant to the forum selection clause, the suit must be brought in Texas. The trial court determined the forum selection clause was unenforceable. Rimkus sought review by the Supreme Court.
A forum selection clause is a provision in a contract which mandates a particular state, county, parish or court as the proper venue in which the parties must litigate any future disputes regarding the contract.
Rimkus argued that the forum selection clause was enforceable. It further maintained there is no blanket statutory pronouncement that all forum selection clauses are against public policy. Shelter countered that contractual waivers of venue requirements prior to suit being filed are prohibited in Louisiana, and statutory prohibitions against forum selection clauses should be viewed expansively.
The Supreme Court reversed the ruling of the trial court and held that forum selection clauses are generally enforceable and don't intrinsically violate Louisiana public policy. The Court instructed that it is clear the legislature has only declared forum selection clauses unenforceable and against public policy in very limited circumstances. The Court refused to expand public policy statements in specific statutes to all contracts and forum selection clauses.
Thus, in Louisiana forum selection clauses will be enforced except when a resisting party can clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching, or that enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute (e.g. see employment contracts and certain construction contracts) or by judicial decision.
Why is this Important?
- Carefully reviewing un-negotiated terms and conditions promptly is important since failure to timely object could result in acquiescence and enforcement of an objectionable forum selection clause.
- Maintaining the mistaken belief that all forum selection clauses in contracts governed by Louisiana law are against public policy and unenforceable could result in an unwelcome surprise if disputes arise.
- This opinion provides uniformity in how forum selection clauses in contracts governed by Louisiana law are to be treated.
- Winning the battle over where the fight will take place can help you win the war.
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