A forum selection clause is a section in a contract specifying where the parties can sue each other if there is a dispute. Filing a lawsuit (or having a lawsuit filed against you) is a big deal, and the forum selection clause determines which jurisdiction’s laws will apply in a dispute. However, it’s one of those contractual clauses that is easily overlooked or disregarded at the time the contract is negotiated. Sometimes, it appears under a heading like “Governing Law” or “Jurisdiction and Venue.” Oftentimes, the forum selection clause will appear in the “miscellaneous” section of an agreement, nestled among boilerplate terms such as force majeure or assignment. But, as Stacey wrote in this blog post, boilerplate matters.
A typical forum selection clause might say something like this: “This Agreement shall be governed by the laws of the State of Washington. Any dispute arising from or in connection with this Agreement shall be subject to the exclusive jurisdiction of the state or federal courts located in King County, Washington.” The language is straightforward and seems to lack the ambiguity that can lead to litigation. And yet, choice of law can make a big difference in the outcome of a case. The laws of a particular jurisdiction can impact the claims a party might want to bring in relation to a contract, and parties can and do argue about the applicability of forum selection clauses in court.
Recently, the Washington Court of Appeals, Division I, issued an opinion in Culinary Ventures, LTD, d/b/a Bitemojo v. Microsoft Corporation, addressing the forum selection clause in a contract. The underlying dispute relates to whether Microsoft violated a subscription agreement for cloud-based data storage services provided by Microsoft Ireland when it deleted Bitemojo’s data after Bitemojo requested that its account be suspended. Bitemojo sued Microsoft in Washington, in King County Superior Court, alleging claims for breach of contract and violations of Washington’s Consumer Protection Act, although the forum selection clause in the agreement required any action to enforce the agreement be filed in Ireland.
The trial court dismissed Bitemojo’s claims as being filed in the improper venue, and the Court of Appeals agreed. In its opinion, the Court of Appeals considered the intent of the parties and whether Bitemojo’s “noncontract claims” were covered by the forum selection clause and concluded that because all Bitemojo’s claims related to the online services agreement, the intent of the parties was for Bitemojo to file any lawsuit related to those claims in Ireland. The result here: Bitemojo lost its ability to bring claims against Microsoft under Washington’s Consumer Protection Act. Because Washington’s Consumer Protection Act provides broad relief and may result in an award of up to triple the damages to the injured party, Bitemojo likely thought there would be an advantage to filing its lawsuit in Washington, rather than in Ireland.
The Bitemojo case provides a tidy example of why it is important to pay attention to both the substantive terms of a contract, such as the data retention policy at issue in the case, and the boilerplate terms, such as the forum selection clause. A contract should be the result of good-faith negotiations and thoroughly reviewed and understood by both parties.
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