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Recent Equipment Lease Case Illustrates Importance of Forum Selection Clause – Glass & Goldberg | Financing, Property & Bankruptcy Law
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Recent Equipment Lease Case Illustrates Importance of Forum Selection Clause

usa map with statesForum selection clauses are provisions in a lease (or any other contract) in which it is agreed that, if the contracting parties have any dispute or need a provision of the lease interpreted, the case will be heard in the court of the specified state and controlled by the laws of that state.

In the case of Wada Farms, Inc. v. Jules and Associates, Inc., the plaintiff filed suit in Idaho District Court claiming that the defendant breached a provision of their lease that gave the plaintiff the opportunity to buy the equipment and vehicles being leased upon tender of 3% of the original cost of the equipment.

Defendant Jules submitted a motion to the Court to transfer venue pursuant to the forum selection clause contained in the lease agreement, which read:

“The parties agree that all actions or proceedings arising in connection with this lease and the schedules shall be tried and litigated only in the state and federal courts located in the county of Los Angeles, State of California . . . .”

Wada argued that the motion should not be granted based on Idaho Code § 29-110(1), which states that forum selection clauses requiring venues outside Idaho are “void as….against the public policy of Idaho.”

In its January 6, 2015, ruling, the Idaho District Court granted the defendant’s motion to transfer jurisdiction to the U.S. District Court for the Central District of California. The Idaho court cited a 2013 U.S. Supreme Court decision in Atlantic Marine Cons. Co., Inc. v. U.S. Dist. Court for the Western Dist. of Texas, which found:

“When the parties have agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the forum specified in that clause. Only under extraordinary circumstances unrelated to the convenience of the parties should a § 1404(a) motion be denied.”

The Idaho Court also cited a Ninth Circuit appeals court ruling that found courts must give great deference to forum selection clauses that pick a particular state because it reveals the intent of the parties at the time they contract together.

A forum selection clause is highly preferable in all contracts since it provides the parties with additional control over where a dispute might be litigated and prevents one party from dragging another to venues where the law is unfamiliar and legal costs could be higher for utilizing out-of-state counsel.

The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

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