After Reilly Company terminated his employment, Plaintiff Jeff Reed brought claims against Reilly in Jackson County, Missouri Circuit Court. Reilly moved to dismiss the claims based upon an employment contract provision stating that all disputes between the parties calling for interpretation and enforcement of the contract must be brought in Johnson County, Kansas. Plaintiff argued that: (1) because he was not seeking to enforce the contract, the forum selection provision had no applicability to his common-law and statutory tort claims, (2) the forum selection clause, and the contract as a whole, were unenforceable because his employment was “at-will” and no additional consideration was given for the forum selection clause, and, finally, (3) the forum selection clause was unfair and unreasonable because it was procured by fraud and concealment and therefore unenforceable. The dismissal was affirmed by the Court of Appeals, and the Supreme Court affirmed, rejecting all of plaintiff’s arguments.
Reed sued in Missouri, seeking declaratory and injunctive relief based on his employment contract with Reilly, damages for alleged fraud including a Missouri Merchandising Practices Act claim of fraud in procuring the contract, and damages for wrongfully withholding commissions. Reilly moved to dismiss the claims, asserting that Reed’s lawsuit could only be brought in Johnson County, Kansas. The motion to dismiss was granted, and the Court of Appeals further affirmed the validity and enforcement of the forum selection clause. The Missouri Supreme Court accepted the case for review.
The Forum Selection Clause Was Enforceable Despite Allegations of Non-Contract Disputes
Reed argued that the trial court erred in enforcing the forum selection clause in the employment contract because the contract lacked precise language requiring him to bring his non-contract claims in Kansas. The provision at issue stated:
“In the event of a dispute, jurisdiction and venue to interpret and enforce any and all terms of the Agreement shall be the District Court of Johnson County, KS.”
The Court ruled that whether a forum selection clause applicable to contract actions also reaches non-contract claims depends upon whether resolution of the claims is dependent upon interpretation of the contract. The resolution of plaintiff’s claims in this matter necessarily required an inquiry into the terms and enforceability of the employment contract, and accordingly, the non-contract claims were subject to the forum selection clause. Plaintiff’s claims for injunctive and declaratory relief clearly sought determinations regarding the enforcement and validity of the contract as a whole, and therefore the forum selection clause was enforceable.
The Trial Court Was Not Required to Determine Whether the Employment Contract Was Wholly Enforceable and Supported By Appropriate Consideration, Before Ruling on the Forum Selection Provision
The Supreme Court held that the trial court was not required to determine whether the contract was valid and enforceable, before ruling on the enforceability of the forum selection clause. Such a determination would be absurd, particularly if the matter was sent to a different jurisdiction for the same analysis to be conducted. Also, assuming that additional consideration was required in exchange for the forum selection clause and no additional consideration was given by Reilly, as long as the contract terms were not arrived at under terms deemed “adhesive” the forum selection clause would be enforceable. Plaintiff Reed did not argue that the contract was adhesive.
Because resolution of Reed’s arguments that (1) at-will employment does not create an enforceable employment relationship and (2) Reilly breached the agreement were issues that could be addressed in the new venue, they did not void the forum selection provision.
The Forum Selection Clause Was Not Void Due to Unfairness, Fraud, or Misrepresentation.
The Court rejected Plaintiff’s assertion that the forum selection clause was void because the employment agreement, as a whole, was void due to fraud. Although a forum selection clause may be voided if procured by fraud, there was no evidence in the record concerning negotiation of the forum selection provision, and plaintiff’s arguments that the employment agreement was procured by fraud did not void the forum selection clause because plaintiff did not argue that the forum selection clause was specifically procured by fraud.
The Court likewise rejected plaintiff’s argument that the forum selection clause was unfair and unreasonable, because there was no evidence submitted that the contract was adhesive. Finally, the Court found that the chosen venue in the contract was a neutral forum for the parties’ dispute which cut against plaintiff’s fairness and reasonableness arguments.
Forum selection clauses that are not adhesive will be interpreted independently of the court’s determination of the enforceability and validity of the contract as a whole. When, as in this case, a contract specifies a forum for all disputes concerning the contract’s interpretation and enforcement, and the dispute between the parties involves those matters, the forum clause will be enforced. Parties drafting forum selection clauses should exercise care to avoid contracts that are adhesive – i.e. agreements reached without a realistic opportunity for bargaining – and to choose forums which will be considered “neutral” and not overly advantageous to the party drafting the agreement.