Hedge Fund Solutions, LLC v. New Frontier Media, Inc., PICS Case No. 14-0393 (E.D. Pa. Feb. 28, 2014) Goldberg, J. (9 pages).

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CONTRACTS

Forum Selection Clauses

Hedge Fund Solutions, LLC v. New Frontier Media, Inc., PICS Case No. 14-0393 (E.D. Pa. Feb. 28, 2014) Goldberg, J. (9 pages).

In an action arising from an alleged failure to pay a "success fee" under a contract for consulting services, the Colorado based defendant filed a motion to dismiss based on the forum selection clause in the contract which provided that the agreement was subject to the laws of Colorado and that the parties agreed to submit to the jurisdiction of the courts of Colorado. Granted.

A consulting contract between Pennsylvania and Colorado corporations provided that the contract was "subject to the laws of the State of Colorado and the parties agree to submit to the jurisdiction of the courts of the State of Colorado for all disputes arising out of this Agreement." The defendant contended that the action must be dismissed because the forum selection clause requires the suit to be brought in Colorado state court. The plaintiff argued that the provision merely acknowledged an acceptable forum, but did not preclude bringing suit in an otherwise proper forum.

When the parties do not agree on the meaning of the forum selection clause, principles of state law contract interpretation control, specifically, Colorado's state court decisions governing contract interpretation. Colorado requires no specific words that must be included in a clause for it to be mandatory. However, Vanderbeek noted that clauses that identify an appropriate jurisdiction for "any", "every" or "all" lawsuits arising from the contract tend to be interpreted as mandatory. Permissive clauses "authorize suit in the designated forum, but do not prohibit litigation elsewhere." The clause in this case did not contain the strong explicit language of exclusivity common to many mandatory clauses, nor did it identify a specific venue. However, the clause also fit into the broad conception of mandatory clauses since the parties undisputedly designated the state of Colorado as a mutually acceptable place for litigation. Additionally, the "all disputes" language contained a measure of exclusivity.

The combination of permissive and mandatory elements made the clause difficult to categorize but the definition in Vanderbeek controlled. The clause identified the state of Colorado as a forum for litigation that was agreeable to both parties and the parties specified that Colorado was appropriate "for all disputes arising out of this Agreement." Thus, the clause satisfied Vanderbeek's definition of mandatory forum selection clauses.

Forum selection clauses are entitled to great weight, the parties agreed to litigate all disputes in Colorado and there was nothing in the record to suggest that the case contained exceptional circumstances to justify retaining the case in Pennsylvania. Thus, the motion to dismiss was granted.

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