Commercial Litigation and Arbitration

Forum Selection Clause Does Not Prevent 28 U.S.C. § 1404 Transfer — When Non-Signatories Are Bound by Forum Selection Clause

The forum selection clause in Elite Sports Enters. v. Lococo, 2008 U.S. Dist. LEXIS 67472 (D.N.J. Sept. 5, 2008), provided:

13.2 Choice of Law and Selection of Venue. Except as provided in Paragraph 13.9 hereof, this Agreement shall be governed by the laws of the State of New Jersey . . . The parties further agree that any action at law or equity instituted against either party to this Agreement shall be commenced only in the courts of New Jersey or a United States District Court for the District of New Jersey.

Note that the clause failed to contain an agreement that no one would object to venue or seek to transfer it. The Court transferred the Ellis Sports action to California notwithstanding Section 13.2. Two points of interest in the opinion:

[1. Weight Accorded Forum Selection Clause.] A valid forum selection clause is a private interest that may be considered in the Court's analysis under Section 1404(a).*** Such a provision is not dispositive in the Court's determination, however. *** [The] decision to transfer is "a multi-factored test incorporating the forum selection clause as one facet of the convenience-of-the-parties consideration[.]"**** "[T]he ultimate balancing of factors and decision to transfer remain within the discretion of the court". ***

[2. Third-Party Beneficiary Bound by Forum Selection Clause.] [A] non-signatory to a contract may be bound by a forum selection clause found therein if the non-signatory has "a certain relationship to either the contract containing the forum selection clause or the parties thereto". *** Status as a third-party beneficiary to a contract may qualify as such a relationship.

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