Everyone loves a home-field advantage. In sports, teams strive during the regular season to achieve the tangible and intangible benefits of home-field advantage over their opponents in the post-season playoffs. The fan support and friendly, familiar surroundings give the home team a definite advantage in its battle to come out on top.
The same may hold true for a business that finds itself engaged in litigation with an out-of-state opponent. Litigating a case in the local jurisdiction of one of the parties provides advantages to the hometown litigant in terms of convenience, familiarity, availability of witnesses, representation by the party’s regular in-state law firm, and conscious or subconscious preference in favor of the local party by local judges and juries. To lock in those advantages, more and more businesses are including forum selection clauses in their contracts. Consequently, more and more Wisconsin companies are faced with either drafting forum selection clauses or addressing them in contracts presented by out-of-state companies.
A forum selection clause is a contractual provision which requires that any litigation arising out of the contract be addressed in a specific court or in a specified county or state. The clause overrides statutes and other procedural rules that would otherwise govern where a lawsuit is filed. For example, under a contract between a Wisconsin seller and a California buyer with a forum selection clause requiring disputes to be litigated in Wisconsin, the parties would be required to litigate disputes over payment, warranty claims and other contract performance issues in Wisconsin, and not California. In that example, the Wisconsin business would achieve the home-field advantage over the California party in terms of cost and convenience. If the shoe was on the other foot, and the contract required disputes to be resolved in a California court, the Wisconsin business would be disadvantaged in the out-of-state litigation.
In Wisconsin, forum selection clauses are presumed to be valid, and they will be enforced unless the circumstances show them to be unreasonable. Wisconsin courts have refused to enforce such clauses where they are shown to be unconscionable or contrary to a statute or public policy. This means more than that the clause was buried in the fine print on the back page of a boiler-plate contract.
The time to focus on the validity, fairness and acceptability of a forum selection clause is when the contract is being created. One facing a proposed forum selection clause from an out-of-state business should not naively assume that a court will find the provision unconscionable. The proposed clause should be addressed head-on, to eliminate or modify it. On the other hand, if you can include a Wisconsin forum selection clause in your contract with an out-of-state business, it should be carefully drafted to maximize its enforceability.
FOS is well equipped to help you satisfactorily deal with this important issue. Give us a call.