Last year, I highlighted some of the risks involved with relying upon standard industry business contracts. You can see that article here.
The designation of a particular forum for disputes is one of many critical considerations. This issue must be addressed explicitly, following an analysis that considers the totality of the circumstances.
A recent decision by the United States District Court for the Northern District of California specifically illustrates some of the perils associated with glossing over forum selection clauses.
By way of factual background, in 2010, a company entered into an employment agreement with a U.S. citizen of Libyan national origin to work as a marketing professional for its Libyan entity. The agreement contained both Libyan venue and choice of clauses. With regard to the former, the 2010 agreement stated that “Libyan courts shall have jurisdiction to decide any dispute that may arise in the future between the parties involved in this agreement.”
In 2011, a second employment agreement was executed. The 2011 agreement contained a choice of law provision but had no express language regarding the forum in the event of a dispute.
An attempt by the company to reassign the employee was not received favorably. The employee was subsequently terminated.
Last January, the former employee filed a complaint in the United States District Court for the Northern District of California, alleging numerous labor law violations and a breach of the second employment agreement (Kedkad v. Microsoft Corporation, Inc., et al., Case No. 3:13-cv-00141-TEH (N.D. Ca. Jan. 10, 2013).
The company sought dismissal, claiming, in part, that the Libyan choice of law clause in the 2011 agreement implicitly granted Libyan courts jurisdiction over any disputes arising out of the employment relationship.
The court denied the company’s motion and its attempt to remove the case to the Libyan judicial system. In doing so, the court pointed to the 2010 employment agreement that contained an express venue provision and found that the omission of such language from the later employment agreement was reasonable confirmation that the 2011 employment agreement did not, in fact, imply the selection of a forum for disputes.
The court also found unpersuasive the company’s general determinations that California posed a substantial burden and that Libyan courts were better suited to hear the case.
Given the rapidly broadening international context of the performance marketing industry, this decision demonstrates the importance of professionally-drafted marketing agreements. A casual omission or mistaken analysis can, and often does, result in extended motion practice in a non-desirable forum with hostile laws and judges.
It is worth noting that forum selection clauses may not be automatically or uniformly enforceable. Consult with an advertising law attorney in order to reduce the risk of defending a lawsuit in an inconvenient forum.
Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. Consult with a legal professional for assistance with the preparation of business and marketing contracts.