Lane, a 16-year employee of food distributor Nash Finch Co. in Nebraska, was terminated in June 2011. He promptly filed a declaratory judgment suit in a Nebraska state court against his former employer, challenging the enforceability of non-competition clauses in a series of incentive compensation plans in which he was a participant. His challenge included, but was not limited to, the Minnesota forum selection and choice of law provisions -- Nash Finch was headquartered in Minnesota -- which were included in the 2010 Long-Term Incentive Program (LTIP) but in none of its predecessors. After removing the case to federal court based on diversity of citizenship, Nash Finch moved to dismiss for improper venue or, alternatively, to transfer the entire case pursuant to 28 U.S.C. §1404(a), including the dispute over the plans without forum selection and choice of law requirements, to the federal court in Minnesota as a more convenient forum. The Nebraska court denied the motion to dismiss but, over Lane’s objection, granted the motion to transfer.
Lane maintained that the non-competition clauses, as written, were not reasonably necessary to protect Nash Finch’s legitimate business interests and were unduly harsh and oppressive. He contended, among other things, that the clauses identified by name so many competitors for whom he was prohibited from working that he effectively was precluded from employment in the food distribution industry. He also insisted that (a) there was no consideration for the forum selection and choice of law provisions in the LTIP, and (b) the outcome of the case, if it was tried in a Minnesota court, would be contrary to Nebraska public policy because Minnesota permits blue penciling of restrictive covenants if necessary to protect a legitimate business interest whereas Nebraska courts do not. The Nebraska federal court declined to rule on the merits of those contentions. However, it reasoned that the Minnesota court would be obligated to follow the same Restatement (Second) of Conflicts of Laws rules as would a Nebraska court in deciding whether to enforce the choice of law provision. Lane v. Nash Finch Co., Case No. 8:11 CV 241 (D.Neb., Sept. 26, 2011).
Another interesting part of the opinion deals with denial of Nash Finch’s Federal Rule of Civil Procedure 12(b)(3) motion to dismiss for improper venue because of the forum selection clause. After examining the split of authority regarding such motions in similar circumstances, the court decided that venue was proper under 28 U.S.C. §1391. However, even though the other incentive programs did not contain a mandate that litigation must be filed in Minnesota, the court decided that judicial economy would be better served by resolution of all of Lane’s claims in a single forum.
This case involves an interesting application of Section 1404(a) to forum selection and choice of law provisions included in only the last of a series of employment agreements each of which contains a non-competition clause. The court decided that the plaintiff’s choice of a forum, in a lawsuit alleging that all of those clauses were unenforceable, was insufficient to prevent transfer to the federal court in the selected forum state even though only one of the agreement contained forum selection and choice of law provisions. As many seasoned non-compete litigators can attest, the forum selected for a non-compete action often plays a prominent role in whether the forum court will enforce the non-compete.