Jiangsu Hongyuan Pharm. Co., Ltd. v. DI Global Logistics, Inc., No. 15-22306 (S.D. Fla. Feb. 5, 2016) [click for opinion]
In Jiangsu, Plaintiff, a Chinese company, executed an agency agreement with Defendant, a Florida corporation, under which Plaintiff granted Defendant exclusive rights to sell Plaintiff's chemical products in the United States and other nations. Defendant allegedly refused to pay a portion of one of Plaintiff's invoices totaling $210,000. Plaintiff then brought a suit for breach of contract against Defendant in the Southern District of Florida to collect the monies it was owed.
Defendant moved to dismiss Plaintiff's suit under the forum non conveniens doctrine. It argued that the parties' agency agreement contained a forum selection clause (labeled in the contract as a "governing law" provision) providing that, "[t]his agreement shall only be governed by Chinese law. In the event of any disputes between the parties the People's Court of Jiangsu (China) shall be empowered to take cognizance of it, unless coercive law prescribes another court." Defendant argued that the "governing law" provision compelled the Court to dismiss Plaintiff's action and force Plaintiff to bring its suit in China.
The court first analyzed whether the "governing law" provision was valid and enforceable, and determined that it was. According to the court, forum selection clauses in international contracts are only unenforceable if (i) their formation was induced by fraud; (ii) the plaintiff effectively would be deprived of its day in court because of the inconvenience or unfairness of the chosen forum; (iii) the fundamental unfairness of the chosen law would deprive the plaintiff of a remedy; or (iv) enforcement of such provisions would contravene a strong public policy. The court determined that none of those factors applied to the "governing law" provision, and, specifically, that enforcement of the forum selection clause would not contravene public policy because Defendant had a strong interest in limiting the fora in which it could be sued by contracting for the forum selection clause in its international agreement.
The court also considered whether the "governing law" provision was mandatory or permissive. The court was persuaded that the provision must be mandatory because it would serve no purpose if it was permissive. In other words, the parties would not have needed to draft a provision stating that they could bring suit in China, among other fora, when that would be the case even without that provision.
Finally, the court applied a modified forum non conveniens analysis and granted Defendant's motion. According to the court, under United States Supreme Court precedent, a valid forum selection clause "carries near-determinative weight" and compels the court to weigh all private interest factors in favor of the forum designated in the parties' agreement. In considering the remaining forum non conveniens factors, the court found that the public interest weighed in favor of dismissing the action because Chinese law would govern the case and Chinese courts are "infinitely more familiar" with Chinese law than U.S. courts. It is also determined that Chinese courts would provide an "adequate" forum for Plaintiff's lawsuit because Plaintiff failed to provide substantiated allegations of serious corruption or delay in Chinese courts. Plaintiff cited scholarly articles noting the corruption and delays in the Chinese legal system, but the court rejected this evidence on the grounds that plaintiffs must provide more than "anecdotal" evidence of corruption to meet their burden.