[Updated 26 April 2023: See also this 3 May 2021 blog post about litigation in the Delaware Court of Chancery involving a consent-to-jurisdiction provision.]
Recently I devoted this post to John F. Coyle’s article on governing-law provisions. I’ve now gotten my hands on his recent article Interpreting Forum Selection Clauses (here). (I call them “jurisdiction provisions.” More on that later.)
In John’s words, jurisdiction provisions are “contractual provisions in which the parties agree to litigate their disputes in a specified forum.” Here’s an example:
If either party brings against the other party any proceeding arising out of this agreement or arising out of disclosure or use of Confidential Information, that party may bring that proceeding in the United States District Court for the Southern District of New York or in any state court of New York.
Unlike my post on John’s other article, I’m not going to provide an overview from the drafter’s perspective. That’s because before I had a chance to fully digest his new article, I unexpectedly got sucked into a broader issue—the relationship between jurisdiction provisions and consent-to-jurisdiction provisions.
Language of Exclusivity
Please bear with me while I tease this out.
One of the issues of interpretation that John addresses in his article is “whether the parties have agreed to litigate their dispute exclusively in the chosen forum or whether they have merely consented to jurisdiction or venue in that forum.” In other words, whether a jurisdiction provision is “mandatory” or “permissive.” (One could equally well use the terms “exclusive” and “nonexclusive.”)
Here’s how John describes the issue (footnotes omitted):
An exclusive forum selection clause may be usefully conceptualized as a form of waiver. By agreeing to litigate a dispute in a specified forum, the contracting parties waive their right to bring a lawsuit elsewhere. When a defendant argues that a contract contains an exclusive forum selection clause that requires the parties to litigate their dispute in a different court, therefore, the court must determine if the plaintiff has waived its right to sue elsewhere. While this task may seem straightforward in theory, it can be surprisingly complex in practice.
Naturally, courts hold that a jurisdiction provision is exclusive if it contains “language of exclusivity.” John again:
The canons relating to exclusivity posit that the parties have waived their right to sue elsewhere only when a forum selection clause contains “language of exclusivity.” Courts applying this test will look for certain “magic words” that signal the parties’ intent to litigate their disputes in the chosen forum to the exclusion of all other possible venues. The words “exclusive” or “sole” are generally recognized to convey this intent. Statements that a claim “must” be brought in a particular forum or that it may “only” be brought in that forum also suffice.
I make sure that my jurisdiction provisions are clearly exclusive or nonexclusive. I don’t want to get in a fight over that.
Consent-to-Jurisdiction Provisions
That brings us to the following from John’s article:
Consent-to-jurisdiction clauses and consent-to-venue clauses will often look a great deal like exclusive forum selection clauses. These clauses are distinguishable, however, because they lack the all-important language of exclusivity.
Here’s an example of a nonexclusive consent-to-jurisdiction provision:
Each party hereby submits to the jurisdiction of those courts for purposes of any such proceeding.
But here’s another example, from EDGAR (emphasis added):
The Company hereby submits to the exclusive jurisdiction of the U.S. federal and New York state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
See how it differs from the first example? Contrary to John’s general observation about consent-to-jurisdiction provisions, it contains language of exclusivity! If language of exclusivity occurs in both jurisdiction provisions and consent-to-jurisdiction provisions, how do they differ?
But wait, there’s more! Jurisdiction provisions and consent-to-jurisdiction provisions aren’t treated as alternatives—you can find both in a given contract. Here’s another example from EDGAR:
Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby may be instituted in the federal courts of the United States of America located in the Borough of Manhattan in the City of New York or the courts of the State of New York in each case located in the Borough of Manhattan in the City of New York (collectively, the “Specified Courts”), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court, as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding.
This example consists of a jurisdiction provision followed by a consent-to-jurisdiction provision, but only the consent-to-jurisdiction provision contains language of exclusivity.
And in the additional example below, also from EDGAR, the first sentence consists of a jurisdiction provision and the second sentence consists of a consent-to-jurisdiction provision (with another jurisdiction provision expressed using language of prohibition redundantly tacked on), with both sentences featuring language of exclusivity:
Any court action brought under or in connection with the subject matter of this Agreement shall be brought only in the United States District Court for the Southern District of New York or, if such court would not have jurisdiction over the matter, then only in a New York State court sitting in the Borough of Manhattan, City of New York. Each Party submits to the exclusive jurisdiction of these courts and agrees not to commence any legal action under or in connection with the subject matter of this Agreement in any other court or forum.
Redundancy
If a contract might feature both a jurisdiction provision and a consent-to-jurisdiction provision, or just one or the other, and both might feature language of exclusivity, how does one distinguish between the two kinds of provision?
I know of only one discussion on point, in Negotiating and Drafting Contract Boilerplate 137 (Tina L. Stark ed., 2004), in the chapter “Governing Law and Forum Selection,” by Brad S. Karp and Shelly L. Friedland:
Each subsection of the choice of forum provision that follows serves a different purpose. The first subsection establishes the discretionary authority of one party, as against the other, to commence a proceeding in a particular state or federal court. The sentence’s focus, therefore, is on the rights of the parties as potential plaintiffs. In the second subsection, however, the perspective flips, and the focus turns to the parties in their roles as potential defendants. Specifically, each party forfeits its right as a defendant to contest the court’s personal jurisdiction over it (except to the extent that there is insufficiency of process). The combined effect of the two subsections (assuming appropriate service of process and a waiver of venue provision) is to box the parties into at least one jurisdiction in which they may litigate a dispute.
Because I hadn’t had occasion to look into the matter myself, I was willing to go along with that notion. But the Stark book offers no support for its analysis, and now I say it’s just so much sophistry.
If I sign a contract containing a jurisdiction provision (whether exclusive or nonexclusive), I’m agreeing that either party may bring a claim in a given jurisdiction. It would be schizophrenic to suggest that it would be consistent with that for me to insist that as defendant I could object if the other party brings a claim in that jurisdiction.
There’s caselaw in which courts have reached the same conclusion as me. For example, the Supreme Court of Utah said the following in Jacobsen Construction Co. v. Teton Builders, 2005 UT 4, ¶ 39, 106 P.3d 719, 728:
We find the reasoning of the above-cited cases compelling and hold that forum selection clauses need not make specific mention of a consent to jurisdiction when the language of the clause makes the parties’ intention to resolve disputes in a particular forum evident.
And one finds cases in which a court equates jurisdiction provisions, as opposed to consent-to-jurisdiction provisions, with the notion of consent. For example, one court said, “Generally, a forum-selection clause operates as consent to jurisdiction in one forum, not proof that the Constitution would allow no other.” Michiana Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 792 (Tex. 2005).
More generally, this shouldn’t come as a surprise, as it isn’t the case that discretion granted to one party, or either party, under a contract is valid only if the other party consents to exercise of that discretion—that would be unworkable. The closest I get to that is recommending that if exercise of discretion by one party might in some way be contrary to the interests of the other party, it would be prudent to have the other party acknowledge as much. (See MSCD and this 2006 post.)
At some point, someone should look at the caselaw more closely. I did the next-best thing and consulted John Coyle about the notion expressed in the Stark book. He said, “I suppose there could be a technical difference between the two approaches. That said, I can’t recall ever seeing a court decision drawing this distinction in the course of reading many, many hundreds of cases dealing with forum selection clauses.”
In particular, courts haven’t distinguished between exclusivity expressed in a jurisdiction provision and exclusivity expressed in a consent-to-jurisdiction provision. Wherever exclusivity is expressed, courts have held that a claimant may file suit only in the jurisdiction in question. Or as John put it, “Once they see language of exclusivity, they drop the mic and get out.”
Regarding John’s article on interpreting jurisdiction provisions, it would have been helpful if John had recognized that exclusivity language isn’t limited to jurisdiction provisions. That might have led him to the notion that you can’t understand fully jurisdiction provisions without also considering consent-to-jurisdiction provisions.
Recommendation
So where does this leave us? Use only jurisdiction provisions; don’t use consent-to-jurisdiction provisions. In our exchange of emails, John said that using both “makes no sense” and that “It’s a great example of overdrafting to no real purpose.” Using jurisdiction provisions is the simpler way of expressing this idea.
Doing away with consent-to-jurisdiction provisions would be the death knell of that weird Canadian use of attorns instead of consents or submits in consent-to-jurisdiction provisions. That’s something I discuss in this 2012 post. Excuse me while I shed bitter crocodile tears.
Of course, not using consent-to-jurisdiction provisions leaves open the possibility of disgruntled contract parties arguing, as in Jacobsen Construction, that a jurisdiction provision isn’t enough for a court to have jurisdiction over a defendant. But if you draft so as to indulge every misguided notion, you end up with contracts full of nonsense. A better option would be to make the contracts community aware that you need only jurisdiction provisions. Consider this post a first step in that direction.
The Bigger Picture
We’re dealing with the most basic boilerplate, yet as far as I’m aware I’m the first to suggest that one variant, consent-to-jurisdiction provisions, is redundant. Assuming that I’m right, it’s mind-boggling that we’re all still wallowing in such basic dysfunction. But that’s what you get when you combine the legalistic mindset with generations of copy-and-pasting. Let’s do better.
Why am I now able to make this point about consent-to-jurisdiction provisions? Because I was able to build on John Coyle’s work. Little of the output of law-school contracts faculty is relevant to drafting better, clearer contracts. I wish more of them emulated John and focused on contract substance and how it’s expressed. That would make my task easier.
Terminology
Oh, and why do I use the term jurisdiction provision instead of forum-selection clause? Jurisdiction provisions and consent-to-jurisdiction provisions differ only in terms of whether you take the claimant’s perspective or the defendant’s perspective, so I don’t think it’s helpful to use completely different terms—forum and jurisdiction, respectively—for each. And I don’t think it’s necessary to add selection or choice of. And I prefer provision over clause, as clause has unrelated linguistic implications and also is used by English drafters to mean section or subsection. But I’m open to alternative ideas.
Related Posts
Jurisdiction Provisions, Part 2: Stop Using No-Objecting-to-Jurisdiction Provisions! (15 Dec 2020)
A few notions:
1/ One way of slicing up the complex matter of jurisdiction is into (a) personal jurisdiction, (b) territorial jurisdiction, and (c) subject matter jurisdiction (sometimes called competence or competency). Other words floating in the area are notice and service of process.
2/ Parties by agreement cannot give a court or take from a court subject matter jurisdiction. If parties agree to fight in a court that lacks subject matter jurisdiction of the dispute, the court will dismiss the case. The same may apply to territorial jurisdiction. The basic idea is that there are limits to what jurisdictional matters the parties can establish by contract.
3/ Service of process has its own nuances. If one party starts a suit against another, how does the court assure itself that it has in personam jurisdiction over the defendant? The usual method is by service and return of process or by the defendant’s filing an appearance in the action. The appearance operates as a submission to the jurisdiction of the court over the defendant’s person (with some exceptions not relevant here).
If the plaintiff must use ordinary service of process to get personal jurisdiction over the defendant, then the ‘jurisdiction provision’ is not as valuable as it could be — it merely specifies the forum.
But if the ‘jurisdiction provision’ specifies that the party submits to the personal jurisdiction of the agreed court, as long as the defendant is notified in a way the contract specifies (and the court deems such notice sufficient), then the parties have done as much as they can.
4/ If a party brings an action in a forum that is not an exclusive jurisdiction forum specified in the contract, the court may have territorial jurisdiction, subject matter jurisdiction, and the ability (through service of process) to get in personam jurisdiction.
But the court may nevertheless abstain from exercising its jurisdiction when it learns that the plaintiff agreed to sue elsewhere. The point is that the parties to the contract cannot alter any court’s subject matter or territorial jurisdiction. They can agree not to seek relief in any but one or more designated forums, but such a provision does not oust any court of its jurisdiction; it merely sets up a basis on which some courts may refuse to exercise jurisdiction they might unquestionably have.
5/ Drafter’s lessons? Have the parties make one or more forums clearly permissive (safe harbor forums) or mandatory (the parties agree to sue in no others) and have the parties submit to the personal jurisdiction of those forums over an agreed class of disputes, upon proof to the court that the plaintiff notified the defendant of the suit in the way the contract specifies
6/ I don’t know whether the foregoing matches up with your analysis. Maybe it does. It’s just that “jurisdiction” has so many meanings that clarity is sometimes hard. I look forward to the upcoming analysis of waivers of inconvenient forum.
Ken:
Suppose you pick a reverse-hometown provision, where each party must sue in the jurisdiction of the other’s headquarters. Each party as plaintiff agrees only to sue there. Each party as defendant agrees to be sued there. In that scenario, is it worth separating the jurisdiction provision from the consent to jurisdiction provision? I’m thinking not, but it seems like a good case near the edge.
Chris
There’s no slippery slope here: if A and B agree that A may bring suit in State X, then by definition B has consented to being sued there. The alternative makes no sense.
Suppose the other party is based in another country, and you prefer that your home court should be the forum. However, you can’t rule out the possibility that in some circumstances, the other court may be a better place to sue. Would “consent” to venue be appropriate, ie. I can waive my consent and sue in the other jurisdiction if I want to?
Keep it private? How about using private administrative process through a trained Notary Public who knows how to do it?