Rivera v. Kress Stores of Puerto Rico, Inc., No. 21-1331 (1st Cir. Mar. 29, 2022) [click for opinion]
In 2009, Plaintiff Zuleyka Rivera—the winner of the 2006 Miss Universe Title—entered into an agreement (the "Agreement") with Defendant Kress Stores of Puerto Rico, Inc. ("Kress")—a Puerto Rican retailer of women's apparel, fragrances, and accessories. Under the Agreement, Rivera granted Kress exclusive rights to use her name, pageant title, image, and likeness for the development and promotion of branded items in exchange for an annual payment of $125,000. The Agreement included a forum-selection provision, stating that "in case of any controversies or conflicts in relation with this agreement, the parties agree to voluntarily submit to the jurisdiction of the Court of First Instance, Superior Court of San Juan."
The parties orally agreed to extend the contract after the original two-year term expired, and this extension continued until 2018, at which time Kress failed to pay Rivera the stipulated annual stipend. After settlement negotiations failed, Rivera sued Kress in Puerto Rico's federal district court, alleging breach of contract and tort claims. Kress moved to dismiss, arguing that the suit was brought in contravention of the Agreement's forum-selection clause. Rivera argued that the forum-selection clause did not prohibit the prosecution of her action in the federal district court because it was permissive, not mandatory. The district court disagreed, holding that the forum-selection provision required the action to be prosecuted in the Puerto Rico Court of First Instance. Rivera appealed.
On appeal, the First Circuit noted that the threshold issue was whether the forum-selection provision was permissive or mandatory. A forum-selection provision is permissive if it "make[s] the designated forum merely available for resolution of disputes," and mandatory if it "make[s] [the forum] exclusive, at least in the sense that either side can insist upon it as the venue." Employing ordinary principles of contract interpretation, the court held that the forum-selection provision was permissive, merely authorizing litigation of covered claims in a designating forum, but not compelling resort to that forum.
According to the court, nothing in the provision suggested exclusivity of the forum. The court noted that the provision employed "nearly identical" language as a forum-selection clause in a previous case, which also reflected the parties' agreement to "submit to the jurisdiction" of a designated court. "That language . . . indicates only that the parties agreed to 'submit themselves to the jurisdiction of a particular court." A provision specifying that the parties agree to submit to the jurisdiction of a particular court merely signifies the parties' mutual assent to a particular court's jurisdictional authority—it is "not a negative exclusion of jurisdiction in other courts."
Ultimately, for a provision to be mandatory, it must "state in clear language that the parties agree to channel a particular suit or class of suits exclusively to a designated court for resolution." This provision, however, reflected only the parties' agreement to submit themselves to the jurisdiction of the Puerto Rico court. "That limited type of consent 'does not by its terms exclude jurisdiction in another court.'" Accordingly, the First Circuit vacated the district court's order of dismissal.
Shane Kelly of the Chicago office contributed to this summary.