The U.S. District Court for the Northern District of Texas has ruled that the breach of contract claims asserted by several of the company’s sales agents were covered by forum-selection clauses in their contracts, rejecting the sales agents’ argument that the clauses were unenforceable. The agents were independent contractors that provided sales services for Smith & Nephew, Inc. (Smith), a medical supplies company. When Smith terminated its contracts with the sales agents, the agents asserted a number of claims against Smith, including claims for breach of contract.
In its January 19 ruling, the district court granted Smith’s motion to transfer venue for the breach of contract claims to Tennessee, where Smith’s headquarters are located, pursuant to forum-selection clauses in the parties’ contracts. The agents had argued that the forum selection clauses were unenforceable on two primary grounds: (1) that Smith’s alleged material breach of the parties’ contracts prohibited it from enforcing the forum selection clauses and (2) the clauses were unreasonable and unjust because the majority of the witnesses were located in Texas, not Tennessee, and because the agents were coerced into accepting the clauses to secure employment with Smith. The court rejected each of these arguments.
First, the court held that a defendant’s alleged breach of contract will not invalidate the contract’s forum selection clause, particularly where the plaintiff was asserting claims under the same contract. Second, the court noted that the fact that the majority of witnesses were located in another forum did not, by itself, provide grounds for invalidating a forum selection clause. Finally, the court found that Smith’s insistence that the forum selection clauses be included in the parties’ contracts was a factor in favor of enforcement as it demonstrated that it was an important term that was the result of legitimate bargaining between the parties. As a result, the court enforced the forum-selection clauses and transferred the breach of contract claims to Tennessee, but retained jurisdiction over the agents’ other claims, which it dismissed with leave to replead. (Redden v. Smith & Nephew, Inc., Civ. No. 3:09-1380-L, 2010 WL 184428 (N.D. Tex. Jan. 19, 2010))