A forum selection clause is a commonly used contractual provision that allows the parties to specify where they will litigate in the event of a future dispute. Often times, a forum selection clause is combined with a choice of law provision, which allows the parties to designate the law that will govern a dispute, irrespective of where the dispute is litigated. These two distinct but related contractual provisions are effective and enforceable tools for controlling at least some of the many variables that arise in the unpredictable world of litigation.
As demonstrated, however, by Florida’s Third District Court of Appeal’s decision last week in John Michaluk, etc., v. Credorax (USA), Inc., etc., et al., Case No. 3D14-985 (May 13, 2015), unless special care is taken in drafting these provisions, they may not achieve their intended results—especially when the two provisions are combined into one.
In Michaluk, Credorax (Malta), Ltd., a Malta company, entered in to an “Introducer Agreement” with John Michaluk, a Canadian consultant. Pursuant to the Introducer Agreement, Credorax agreed to pay Michaluk a transaction fee in exchange for his assistance in soliciting new business and acquiring new clients. The Introducer Agreement included a provision of titled “Governing Law and Jurisdiction,” which stated:
This Agreement shall be governed by and construed in accordance with the Laws of Malta and each party hereby submits to the jurisdiction of the Courts of Malta as regards any claim, dispute or matter arising out of or in connection with this Agreement, its implementation and effect.
Following a dispute over the payment of certain fees, Michaluk filed a complaint in Miami-Dade County Circuit Court. Credorax moved to dismiss the complaint for improper venue, arguing that the forum selection clause was “mandatory,” and thus, Michaluk’s claims could only be brought in Malta. The trial court agreed that the language was mandatory, and entered a final order dismissing the complaint for improper venue.
On appeal, however, the Third District Court of Appeal reversed. After analyzing dozens of cases involving similar “governing law” provisions, the Court held that the word “shall” applied only to the choice of law portion of the provision. Absent additional mandatory language or words of exclusivity modifying the forum selection clause, this clause was merely “permissive.” Thus, although the Agreement indicated the parties’ consent to the jurisdiction of the courts of Malta, the Agreement did not effectively exclude jurisdiction in any other forum.
By contrast, the Third District Court of Appeal cited numerous Florida cases analyzing clauses with similar language as the instant clause—but containing additional words of exclusivity—which were deemed mandatory. See, e.g., Copacabana Records, Inc. v. WEA Latina, Inc., 791 So. 2d 1179 (Fla. 3d DCA 2001) (providing in pertinent part: “This agreement . . . shall be governed by the laws of the State of New York. . . . Copacabana agrees to submit to the jurisdiction of the Federal or State courts in New York City in any action which may arise out of this agreement and said courts shall have exclusive jurisdiction over all disputes between WEA Latina and Copacabana pertaining to this Agreement. . . .” (emphasis added)); Agile Assur. Group, Ltd. v. Palmer, 147 So. 3d 1017 (Fla. 2d DCA 2014) (providing in pertinent part: “Any legal suit, action, claim, proceeding[,] or investigation arising out of or relating to this Agreement may be instituted exclusively in the courts of Makati City and Employee waives any objections which he may now or hereafter have to such venue of any such suit . . .”) (emphasis added)); Ware Else, Inc., v. Ofstein, 856 So. 2d 1079 (Fla. 5th DCA 2003) (providing in pertinent part: “This agreement is accepted and entered into in Missouri and any question regarding its validity, construction, enforcement, or performance shall be governed by Missouri law. Any legal proceeding arising from or in any way regarding this Agreement shall have its venue located exclusively in the Circuit Court of St. Louis County, Missouri, and the parties hereby expressly consent and submit themselves to the personal jurisdiction and venue of the court.”) (emphasis added).
The Third District Court of Appeal’s recent decision should serve as a strong reminder: governing law provisions must be carefully drafted and mandatory and exclusive language must be used to modify forum selection clauses if the parties intend to limit litigation to a particular forum.