Clause Confusion (Part I)

Image by Steve Buissinne from Pixabay

There are many things in life that resemble something else. Some people struggle to distinguish alligators from crocodiles. Others have a hard time telling the difference between butterflies and moths. I myself cannot taste the difference between Coke and Pepsi… a fact that horrifies my family. All of these mistakes are both understandable and forgivable.

It is less understandable—and borderline unforgivable, in this author’s view—that lawyers and judges in the United States consistently fail to distinguish choice-of-law clauses from forum selection clauses in their briefs and opinions. A choice-of-law clause selects a law to govern disputes between the contracting parties. A forum selection clause selects a court in which to resolve disputes. These are not the same thing. And yet there are many examples of lawyers and courts treating them as though they are.

In this blog post—the first of two—I recount a small portion of this sordid history. I identify five cases where lawyers argued that a choice-of-law clause was, in fact, a forum selection clause. In a subsequent post, I will discuss a number of cases where judges made similar mistakes. Each of these posts builds upon a prior post, Faux Forum Selection Clauses, where I discussed the persistent inability of lawyers and judges to distinguish forum selection clauses from other contract provisions. My hope is that this post will help everyone to avoid making this error in the future.

Arkansas

The defendant in Buffington v. Diamoind Transp. & Drilling (2011), a case decided by the Arkansas Court of Appeals, argued that the following provision was a forum selection clause: “16. Governing Law and Venue. This agreement shall be subject to, construed and enforced in accordance with the laws of the State of Louisiana.” The court disagreed. It noted that although the heading to the clause contained the word “Venue,” the “provision does not state that the parties agree to be heard only in one particular venue” and so concluded that “no valid forum-selection clause is present.” The court then went on to reject the defendant’s motion to dismiss the case in favor of a Louisiana forum.

Connecticut

In some cases, the lawyers seem completely unaware that choice-of-law clauses and forum selection clauses are different contract provisions. In Cofrancesco Chiropractic And Healing Arts v Maciewjewski (2014), the defendant argued that Connecticut was an improper venue in light of the language in the parties’ agreement. The plaintiff responded that the defendant had “confuse[d] the contract’s choice of law clause for a forum selection clause.” The Connecticut state court sided with the plaintiff:

As attached to the complaint, the contract in the present case expressly states, “This agreement shall be interpreted, construed and governed according to the laws of the State of Texas.” This is demonstrably a choice of law clause. Conversely, the contract does not contain a forum selection clause. Accordingly, Connecticut is not an improper venue.

This analysis is clearly correct. This is a choice-of-law clause, not a forum selection clause.

Georgia

Another example of lawyer confusion on this issue can be found in Kash v Precision Spine Inc. (2024), a case decided by a federal district court in Georgia. An employment agreement contained the following provision: “Choice of Law. This Agreement shall in all respects be interpreted, enforced and governed under the laws of the State of New Jersey.” The defendant’s attorneys asked the court to transfer the case to New Jersey on the ground that the clause was “in essence a choice of forum clause that selects New Jersey as an appropriate forum.” The court refused:

The employment agreement does not contain a forum selection provision. A choice of law provision is not the equivalent of a forum selection clause. A forum selection provision specifies the jurisdiction or venue in which an action may (if the clause is permissive) or must (if mandatory) be brought. A choice of law clause serves an entirely different purpose—specifying the applicable law. Here, the choice of law provision simply states that New Jersey law governs Plaintiff’s employment agreement. It says nothing whatsoever about where actions should be or must be brought. Thus, there is no forum selection clause at play in this case.

This analysis is both fulsome and plainly correct. A choice-of-law clause is not a forum selection clause, no matter how vociferously the defendant argues to the contrary.

New Mexico

The clause in TD Auto Fin., LLC v. Orozco (2022) was simply worded: “Federal and Texas law apply to this contract.” The defendant argued that this amounted to a forum selection clause mandating that any and all litigation occur in Texas. The New Mexico Court of Appeals disagreed. It observed (correctly) that this provision “specified the parties’ choice of applicable law, rather than their choice of forum or venue.” Accordingly, the court rejected as “nonviable” the defendant’s argument that the contract had “a forum selection clause that is mandatory.”

Texas

Conclusion

In cases where lawyers advance arguments along these lines, it is not always clear whether they are being disingenuous or whether they are genuinely confused. Did the attorneys litigating the cases above really believe that each choice-of-law clause was a forum selection clause? Or were they hoping that the judges hearing the cases would fail to recognize the difference and rule in their favor? There is no way to know for sure. There are, however, enough cases where judges failed to appreciate the distinction between the two provisions to understand why lawyers are sometimes tempted to make this argument. I discuss these cases in a subsequent post.