Additional Thoughts on Firexo

I have three thoughts to add to John Coyle’s insightful post on the U.S. Court of Appeals for the Sixth Circuit’s recent decision in Firexo, Inc. v. Firexo Group Limited: one on choice of law, one on jurisdiction, and one on forum selection.

Choice of Law

Even though the majority declines to apply the “closely related” federal common law rule, its opinion is not completely faithful to Erie Railroad Co v. Tompkins. The court first decides that it must apply whatever law Ohio courts would choose to resolve the issue of whether non-signatories can be bound by a forum selection clause. So far, so good under Erie.

But on that question—which sovereign’s law Ohio courts would choose—the court throws up its hands and actually applies federal common law. Under Klaxon Co. v. Stentor Elec. Mfg. Co., the court should have applied Ohio choice-of-law principles. Instead, the court cited its own precedent for the proposition that, when there’s no choice-of-law fight between the parties, federal courts need not conduct a choice-of-law analysis; they may simply apply the body of law proposed by one or more litigants.

I have argued that this practice—allowing parties to an existing lawsuit to agree to the governing law without considering whether forum state law would allow them to do so—is an exercise of federal common law inconsistent with Klaxon. If the majority fully adhered to Erie and its progeny, it would have asked whether, under Ohio law, the absence of a choice-of-law dispute between the parties settles the choice-of-law question.

The end result here is that a non-signatory to a contract choosing English fora and law, which was arguing it should not be bound by the contract’s forum selection clause, ends up having English law applied to it to its benefit.


The better argument for the British company might have been that the Ohio court lacked specific jurisdiction over it, not that the litigation was required to take place in England. Yes, the British company had sold 70 percent of its Florida subsidiary to an Ohioan. But the Florida subsidiary’s claims did not arise out of that transaction. Instead, the Florida subsidiary’s claims stemmed from an alleged breach of an oral distributorship agreement between it and the British company.

The only facts connecting Ohio to the litigation appear to be: (1) that the lawsuit was filed there; (2) that the plaintiff’s principal place of business was there; (3) that the plaintiff’s majority shareholder resided there; and (4) that the plaintiff’s majority shareholder and the defendant had entered into a separate contract, which was not directly at issue.

The British company likely directed electronic communications toward Ohio, but the Sixth Circuit disregards such “purely fortuitous” contacts that occur only because the Florida subsidiary “found it convenient to be present there.” The British company “presumably would have been pleased to communicate with” the Florida subsidiary wherever the subsidiary wanted. If the British company purposefully availed itself of the privilege of conducting activities in Ohio, it’s not clear how. The requisite connection between the forum and the underlying controversy is nowhere to be found on the facts as presented by the Sixth Circuit.

Forum Selection

I disagree that the Sixth Circuit could have resolved this case on the basis of the contract’s “no third party beneficiary” clause. In the cases cited in the original post, a non-signatory was attempting to enforce a forum selection clause even though the contracts prohibited third parties from benefiting from them.

In Firexo, though, a signatory attempted to enforce the forum selection clause against a non-signatory. The contract stated: “This agreement is made for the benefit of the parties and their successors and permitted assigns and is not intended to benefit, or be enforceable by, anyone else.” No non-party was attempting to benefit or enforce the agreement.