Does application of the federal doctrine of forum non conveniens vary according to whether a forum selection clause calls for a state, federal or foreign forum?

This precise issue was addressed recently in AAP Implantate AG v. MI Global Grp. USA LLC, 2017 U.S. Dist. LEXIS 116167, Case No. 1:17-cv-21888-UU (S.D. Fla. July 24, 2017). There, the defendant in an international contract dispute arising under the United Nations Convention on the International Sale of Goods (“CISG”) filed a motion to dismiss a case filed in the U.S. District Court for the Southern District of Florida based on the doctrine of forum non conveniens.

The underlying dispute alleged the breach of an international distribution agreement in which the plaintiff German corporation appointed the defendant Florida company to act as its exclusive distributor in Venezuela. The contract called for application of German law to any ensuing dispute and further provided “Place of jurisdiction is Berlin, Germany.”

The German corporation filed suit to enforce the contract in the southern district of Florida. The Florida defendant then moved to dismiss the suit based on the German forum selection clause. The defendant argued, in part, that the clause was mandatory, and, therefore subject to dismissal pursuant to 28 U.S.C. §1404 (“Change of Venue”). The plaintiff responded that the clause was permissive and factors of convenience, among others, favored litigation in Florida.

The court first determined that 28 U.S.C. §1404(a) did not apply. The court relied on a 2013 U.S. Supreme Court decision holding that Section 1404 only applies to transfers between federal district courts. When transfer to a state or foreign forum is sought and “particularly when a foreign forum selection clause is present,” the analysis turns on application of the traditional doctrine of forum non conveniens.

Because the Defendant sought transfer to a foreign forum pursuant to the contract forum selection clause, the court declined to consider Section 1404. Rather than addressing whether the clause was mandatory or permissive along with public and private factors of 28 U.S.C. §1404, the Court instead addressed a different issue – whether the forum selection clause itself was valid and enforceable.

Given the presumptive validity of such clauses, the burden to defeat one is rather high. Essentially, “forum selection clauses in international contracts will be deemed unenforceable ‘only when: (1) their formation was induced by fraud or overreaching; (2) the plaintiff effectively would be deprived of its day in court 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.'” (citation omitted).

The Court held the contract, though ambiguous, was enforceable, construed that ambiguity against the plaintiff drafter, and dismissed the case in favor of proceedings in Germany.

*Ava J Borrasso is the principal of Ava J Borrasso, P.A., a Miami-based law firm that concentrates on business and international litigation and arbitration. She also serves as an arbitrator and is a member of the panel of arbitrators of the International Centre for Dispute Resolution and the American Arbitration Association’s commercial panel.