Commercial Litigation and Arbitration

Does a Forum Selection Clause that Specifies a Particular County — But Not a Court System — Confer Jurisdiction on the Federal District Court that Encompasses, But Is Not Located in, the County? Circuit Split

From Nahigian v. Juno-Louduon, LLC, 2009 U.S. Dist. LEXIS 89133 (E.D. Va. Sept. 28, 2008):

[Geographic vs. Sovereign Restriction]

The Agreement provides that: "In connection with any litigation between Buyer and Seller arising out of this Agreement . . . [t]he sole venue for any litigation shall be Loudoun County, Virginia." ... To properly determine the meaning of this clause, the Court must first determine whether its "restriction is one of sovereignty or of geography." ***

A forum-selection clause that imposes a geographic restriction still permits litigation in the federal or state courts within that geographic area.... A forum-selection clause that identifies a specific sovereign "is more restrictive and requires that actions be filed in the courts of th[at] sovereign." ... In Ferri Contracting [v. Town of Masontown, No. 03-1303, 2003 U.S. App. LEXIS 19992, 2003 WL 22244905, at *1 (4th Cir. Sept. 29, 2003) (per curiam; unpublished)], the Fourth Circuit concluded that a forum-selection clause requiring lawsuits to be brought "'within the state' of West Virginia" was not ambiguous and was "plainly geographic." ***

The Court finds that the forum-selection clause in this case is not ambiguous and is "plainly geographic," as it contains only a reference to a location, with no reference to a specific court, court system, or sovereign. "[L]itigation is [thus] permitted in either a federal or state court within the specified geographic boundary" of Loudoun County, Virginia. ***

[State Court within Boundary vs. Federal Court Encompassing Area]

The Court must next address whether "a . . . court within the specified geographic boundary" includes (1) only courts physically located within that boundary, or (2) all courts having jurisdiction over that area. Neither Ferri Contracting, nor any of the cases it cites with approval, address a situation in which a forum selection clause refers to a specific town or county, rather than an entire state. This is therefore an issue of first impression in this Circuit.

Outside the Fourth Circuit, a split of authority exists on the following issue: whether a forum selection clause that sets jurisdiction in a particular county — but not a particular court system — gives jurisdiction to the federal district court that encompasses but is not located in the county. The Third, Seventh, Eighth, Ninth, Eleventh Circuits have held that it does not. [The word “not” in the previous sentence appears to be a typo. The following cases hold to the contrary.] See Xgel Tech., LLC v. C.I. Kasei Co., No. 4:09CV540 RWS, 2009 U.S. Dist. LEXIS 46459, 2009 WL 1576837, at *2 (E.D. Mo. Jun. 3, 2009) (construing forum-selection clause requiring venue "in Phelps County, Missouri" as a "geographical limitation" and not "waiv[ing] defendants' right to remove the case to this Court," which encompasses, but is not located in, Phelps County); Priority Healthcare Corp. v. Chaudhuri, No. 6:08cv425, 2008 U.S. Dist. LEXIS 47288, 2008 WL 2477623, at *2 (M.D. Fla. June 18, 2008) (rejecting argument that forum-selection clause designating venue in Seminole County precluded removal "because no federal court sits in Seminole County"); Epps v. 1.I.L., No. 07-02314, 2007 U.S. Dist. LEXIS 93335, 2007 WL 4463588, at *3 (E.D. Pa. Dec. 19, 2007) (construing a forum-selection "provision's plain language . . . permit[s] the action in any court of the county, including the federal court in the federal judicial district encompassing [the county], regardless of whether the federal court is physically located in the county"); Oldlaw Corp. v. Allen, No. 07-1070, 2007 U.S. Dist. LEXIS 70415, 2007 WL 2772697, at *6 (C.D. Ill. Sept. 24, 2007) (construing forum-clause specifying venue in Scottsdale, Arizona to include federal district court encompassing Scottsdale, even though no federal courthouse existed in Scottsdale); Merrell v. Renier, No. C06-404JLR, 2006 U.S. Dist. LEXIS 41145, 2006 WL 1587414, at *2 (W.D. Wash. Jun. 6, 2006). The Second Circuit, by contrast, finds that a clause setting jurisdiction in a particular county, but not in a specific court system, does exclude jurisdiction in the federal district court that encompasses the county, but has no courthouse within it. Yakin v. Tyler Hill Corp., 566 F.3d 72 (2d Cir. 2009) (finding that a forum-selection clause designating venue "in Nassau County, New York" precluded removal to the Eastern District of New York because no federal courthouse exists within Nassau County).

The Court finds the majority opinion both persuasive and the approach most likely to be applied in this Circuit. This decision holds to the distinction clearly set forth in Ferri Contracting: if a venue provision does not contain a reference to sovereignty, then a geographic restriction permits litigation in either the state or federal courts for that geographic region. *** The Agreement identifies only a geographical limitation, not a sovereign. The Court finds that, even if the Agreement's forum selection clause applies to suits that include parties, like RC, that did not join the Agreement, it still does not preclude removal to this Court — the federal court venue encompassing Loudoun County, Virginia.

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