Forum Selection Clause Dismissal Not ‘On the Merits’ – Plaintiff Can Refile in Another State

Ancient_Forum

A forum selection clause is a contract term that specifies where (as in what state) a lawsuit must be filed if there is a future dispute.

In Fabian v. BCG Holdings, 2014 IL App (1st) 141576, Plaintiff sued his ex-employer (a spin-off of the Cantor Fitzgerald security firm whose NYC office was decimated in the 9.11 terror attacks) for breach of contract and under the Illinois Wage Payment and Collection Act (IWPCA) claiming unpaid trading commissions and owed stock shares plaintiff under a written partnership agreement.

The partnership agreement contained a Delaware forum-selection provision that fixed exclusive jurisdiction over any partnership dispute in Delaware courts.

The trial court dismissed the IWPCA claim with prejudice and the other complaint counts without prejudice to a future filing in Delaware court.  The plaintiff voluntarily dismissed or “non-suited” the remaining claims.  Plaintiff appealed the “with prejudice” dismissal of his IWPCA claim.

Held: Reversed.

Reasons:

The plaintiff argued that the Delaware forum-selection clause was void because it was forced upon him. He claimed he was given less than 24 hours to sign the partnership agreement in an adhesive take-it-or-leave-it manner.

Under Illinois law, a forum selection clause is generally valid and should be enforced unless (1) the opposing party shows that it would violate a strong public policy of the state in which the case is filed or (2) enforcing the clause would be unreasonable in that it is so inconvenient that it basically deprives the party of its day in court.

Illinois public policy favors enforcement of forum-selection clauses.  Commercially versed parties should be able to freely define the parameters of their private agreement without court interference.  And the fact a court of another state would have to interpret and apply an Illinois statute isn’t enough to void a forum clause on public policy grounds.

When a case is dismissed on forum-selection grounds, it’s not a dismissal on the merits.  That’s because it only resolves the issue of where a plaintiff can litigate his claim.  It doesn’t decide any underlying facts or apply them to the substantive legal issues involved in a given case.

Where a plaintiff non-suits claims after his other claims are (involuntarily) dismissed, he has one year to refile the non-suited claims. See 735 ILCS 5/13-217.  If he does refile, it is treated as a new case; not a continuation of the old case.  This rule is important for appeal purposes: once the plaintiff non-suits his remaining claims, an order previously dismissing another claim becomes final and appealable.

(¶¶16-24).

The Court here agreed with the trial court that there was nothing repugnant to Illinois law in enforcing the Delaware forum provision.  But the court still reversed the trial court’s with prejudice dismissal of the plaintiff’s IWPCA claim.

Since the dismissal of that claim (the IWPCA count) was based on the Delaware forum-selection clause, there was no determination of the merits of the claim.  That is, the court never determined whether the plaintiff was in fact owed money or stocks from his ex-employer. The forum-selection provision only addressed the proper location for plaintiff to sue.  As a result, the trial court’s “with prejudice” dismissal of the plaintiff’s IWPCA claim was improper.  The plaintiff should be allowed to file his IWPCA count in Delaware.

Afterwords:

– A forum selection clause will be upheld unless it violates a recognized policy of the state where suit is filed;

– A dismissal with prejudice is normally improper where merits of case aren’t reached;

– Just because a state has to apply the law of a foreign state isn’t enough to void a forum selection provision.

 

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PaulP

Litigation attorney at Fisher Kanaris, P.C. representing businesses and individuals in all types of commercial disputes.