Clause Confusion (Part II)

Image by Steve Buissinne from Pixabay

In a prior post, I showed that lawyers sometimes fail to distinguish choice-of-law clauses from forum selection clauses. In this post, I provide several examples of cases where judges made precisely the same mistake. In some of these cases, these errors were harmless. In others, they were not.

Harmless Error

There are a multitude of cases in which the courts erroneously referred to a choice-of-law clause as a forum selection clause (and vice versa). In Infante v Namecheap Inc. (2025), a federal district court in Arizona observed that “[t]he parties’ choice of law provision mandates that ‘any action brought by you to enforce this Agreement … which relates to your use of the Services shall be brought exclusively in the United States District Court of Arizona, or if there is no jurisdiction in such court, then in a state court in Maricopa County.’” This provision is obviously a forum selection clause because it chooses a court in which to resolve disputes. It is not a choice-of-law clause because it makes no mention of any governing law.

In arrivia Incorporated v Rowley (2023), a different federal judge in Arizona made the same error. That judge observed that a settlement agreement “contained a Governing Law provision, stating that claims ‘arising out of or relating to this Settlement Agreement’ would be brought in the Court of Chancery of the State of Delaware.” Again, a provision mandating that claims be brought in a particular court is a forum selection clause. It is not a choice-of-law clause.

The list goes on. In Funding Metrics LLC v Lethas Pies LLC (2022), the Supreme Court of Arkansas (wrongly) observed that the “terms of the Merchant Agreement included a choice-of-law provision stating that any litigation relating to the agreement would be brought in the state or federal courts of New York.” In LaFondFX Inc. v Kopelman (2017), a federal district court in Colorado commented that the case had been transferred from Arizona to Colorado pursuant to “the parties’ choice of law provision within their Agreement.” In 2023, the Georgia Supreme Court specifically called out the careless language used by the lower appeals court in Motorsports of Conyers, LLC v. Burbach when it observed that “[t]hroughout its opinion, the Court of Appeals used the terms ‘forum-selection clause’ and ‘choice-of-law clause’ interchangeably, but these are different kinds of contract provisions.”

Reversible Error

In the cases discussed above, the mistakes made by the courts may be fairly characterized as embarrassing. They do not rise to the level of reversible error. The same cannot be said of the cases discussed below. In these cases, the courts’ failure to distinguish between the two types of clauses led them to apply the wrong legal standard for determining whether the clause should be enforced.

In many (but not all) states, the enforceability of a choice-of-law clause is determined under Section 187 of the Restatement (Second) of Conflict of Laws. That test requires a court first to ascertain whether (1) the chosen jurisdiction has a substantial relationship to the parties or the transaction, or (2) there is a reasonable basis for the parties’ choice. If either of these requirements is satisfied, the court will then consider whether enforcing the clause would be contrary to a fundamental policy of the state with a materially greater interest in the dispute whose law would govern the contract absent the clause.

In many (but not all) states, the enforceability of a forum selection clause is determined by applying the test articulated by the U.S. Supreme Court in The Bremen v. Zapata Off-Shore Company. This test posits that forum selection clauses are presumptively enforceable but that they may be disregarded if they are (1) unreasonable, or (2) contrary to the public policy of the forum. This test is not the same as the one used for choice-of-law clauses. Nevertheless, a number of courts have used it to ascertain whether a choice-of-law clause should be given effect.

In Pyott-Boone Electronics Inc v IRR Trust for Donald L Fetterolf Dated December 9 (2013), a federal district court in Virginia stated that “Virginia courts generally enforce choice-of-law clauses, ‘unless the party challenging enforcement establishes that such provisions are unfair or unreasonable, or are affected by fraud or unequal bargaining power.’” The quoted language accurately describes the test laid down by the Virginia Supreme Court to determine whether forum selection clauses are enforceable. It is not, however, the test that Virginia uses to assess whether choice-of-law clauses should be given effect.

A similar error occurred in FitzThors Engineering Inc v Kuka Robotics Corp. (2023). A federal district court in Georgia applied the following test to evaluate the enforceability of a Michigan choice-of-law clause:

Choice clauses will be found “unreasonable under the circumstances,” and thus unenforceable only when: (1) their formation was induced by fraud or overreaching; (2) the plaintiff effectively would be deprived of its day in court because of the inconvenience or unfairness of the chosen forum; (3) the fundamental unfairness of the chosen law would deprive the plaintiff of a remedy; or (4) enforcement of such provisions would contravene a strong public policy.

This is not the test that Georgia uses to evaluate the enforceability of choice-of-law clauses in diversity cases. It is the federal test that the Eleventh Circuit uses to evaluate the enforceability of forum selection clauses in federal question cases. The second element of the test makes this clear; there is no state of the world where the plaintiff will be “effectively deprived of its day in court because of the inconvenience or unfairness of the chosen forum” via a choice-of-law clause. Nevertheless, the court applied this test to evaluate whether a Michigan choice-of-law clause should be given effect.

A federal court in Arkansas fell into the same trap in Higgins v Vinita Express Inc (2025). Here is the relevant passage from that opinion:

Plaintiff’s policy also contains a choice of law provision stating that Florida state law applies when there is any disagreement as to the interpretation and application of any provision in the policy. Federal district courts sitting in diversity, like the Court in this case, must apply the forum state’s substantive law, including its conflict-of-law rules. The Court will “look to the choice-of-law principles of the forum state [in this case Arkansas] and then apply the same law to the case as the forum state would.” The Supreme Court of Arkansas has generally held “that choice-of-forum clauses in contracts are binding, unless it can be shown that the enforcement of the clause would be unreasonable and unfair.” There has been no claim that the relevant choice of law clause is unreasonable or unfair, thus the Court will apply Florida law when analyzing Plaintiff’s policy because there is an effective choice of law clause in [the] contact.

The passage begins on a promising note. The court correctly notes that federal district courts sitting in diversity must apply state law to determine whether a choice-of-law clause is enforceable. Things then take a turn. The court invokes a decision by the Arkansas Supreme Court about the enforceability of forum selection clauses to determine whether the choice-of-law clause should be given effect. This is a problem because the test applied by the Arkansas to evaluate whether a choice-of-law clause should be given effect is different from the test used to evaluate forum selection clauses. The test for choice-of-law clauses does not ask about whether enforcement would be “unreasonable and unfair.” It asks whether the chosen jurisdiction has a reasonable relation to the transaction and if applying the chosen law is contrary to forum public policy. Since this test was not applied, however, we have no way of knowing whether a reasonable relation existed on the facts presented.

Conclusion

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 courts treating them as though they are. In some instances, these mistakes are harmless. In others, they are not. Going forward, I would urge everyone—lawyers and judges alike—to pay careful attention to this issue. When these provisions are treated as equivalent, it upends deals struck by private actors relating to how disputes relating to their agreements should be resolved.