For years, we have been recommending that clients include a forum selection clause in their employment and other agreements as part of our habit of drafting agreement to provide the maximum possible protection against aggrieved or miscreant employees. We also have made numerous presentations - often to NASPP - on topics such as "Best Practices in the Design and Drafting of Employment Agreements" and "(More Than) 25 Ways to Improve Stock Plan Documents" [currently up to 50!].
In some cases, a forum-selection clause is a matter of convenience. The company is located in a city and would prefer to arbitrate or litigate any disputes or claims in that city. In other situations, the forum-selection clause and governing law provisions can be critical to the company's ability to enforce the terms of the agreement.
A case from 2010 involving a junior sports agent working in Minneapolis for Cleveland-based IMG Worldwide illustrates this second situation. The agent, who was part of IMG's team representing several top college and professional coaches, defected to Hollywood agency CAA (allegedly taking some 7,000 confidential files), and moved to California, where he sued IMG in federal district court to void the clause in his contract barring him for two years from soliciting IMG clients he had represented. He argued that as a resident of California—with a new apartment lease to prove it—he was entitled to the state's protections against such covenants.
Although CAA was not named in the litigation, a CAA lawyer initially said that California law did not allow employers to prevent their former employees from making a living in whatever industries they choose. There might have been some truth to IMG's allegations as to theft, because before the case was litigated, CAA "cut its ties" with the agent. In a settlement reached last September, the agent agreed to abide by the terms of his contract that will prevent him from soliciting IMG clients for one year, and IMG agreed to drop its suit against the agent for taking the proprietary information when he left.
In the next few days, I will talk about a March 2011 decision from the Eleventh Circuit Court of Appeals in a case on forum selection clauses.