Waiving the Right to Remove: Forum Selection Clauses and Removal to Federal Court
Generally, a forum selection clause mandating that disputes must be resolved in state court operates as a waiver of a party’s right to remove the then-pending action from state court to federal court. However, the Federal District Court for the District of New Hampshire was recently confronted as to whether the language of contractual agreement between the parties created exception to that general rule.
In Sky Dive Factory, Inc. v. Sky Dive Orange, Inc., 2013 DNH 033 (D.N.H. March 12, 2013), the plaintiff filed a breach of contract action in Strafford County Superior Court and the defendant, invoking diversity jurisdiction, removed to federal court. The plaintiff moved for remand back to state court saying that the parties’ contract required any dispute arising under the contract to be resolved in state court and in Strafford County.
The contractual agreement between the parties provided that: the “agreement shall be governed and construed in accordance with the laws of the State of New Hampshire any or [sic] disputes related to this agreement shall be filed in Strafford County, the States Courts of New Hampshire.” Judge McAuliffe, while describing the contract language as “somewhat clumsy and inartful in expression,” concluded that the forum selection clause adequately convey[ed] the parties’ agreement that exclusive jurisdiction over contractual disputes lies in the State Court.”
The Court reasoned that the defendant could not remove to federal court for at least two reasons: first, the forum selection clause memorialized the parties’ agreement that New Hampshire state courts had exclusive jurisdiction over the parties’ contractual disputes because it used mandatory language such as “shall” and “be filed.” Second, the agreement between the parties unambiguously identified the “State Courts of New Hampshire.”
With respect to the contractual limitation that would require litigation to be brought in Strafford County Superior Court (as opposed to another New Hampshire Superior Court), Judge McAuliffe concluded that given the jurisdictional mandate (i.e., jurisdiction was exclusive in New Hampshire state courts), he concluded that it follows that venue was only proper in Strafford County. As such, the federal court remanded the case back to Strafford County Superior Court.
The take-away lesson is that in drafting agreements between parties, as well as in initiating litigation, a statement of agreed-upon jurisdiction in a New Hampshire state court must be unequivocal to survive an attempt to remove to the case to the Federal District Court for the District of New Hampshire
Sulloway & Hollis’ Business Litigation Practice Group routinely provides litigation services to corporations and individuals seeking to enforce their rights under commercial contracts. For more information, please contact Irvin D. Gordon, Chair of the Business Litigation Practice Group.