For LegalSifter, I’ve been taking a closer look at jurisdiction provisions. I’ve decided that they represent a dose of concentrated fucked-upness on a par with governing-law provisions.
The Context
The first shoe dropped last year, in my post Stop Using Consent-to-Jurisdiction Provisions! It says you should stop using this sort of thing:
Each party hereby submits to the jurisdiction of those courts for purposes of any such proceeding.
No-Objecting-to-Jurisdiction Provisions
Last night I reached the same conclusion about another standard component of jurisdiction provisions, what I’ve decided to call no-objecting-to-jurisdiction provisions. I’ve bolded the relevant language in the following examples:
The Company hereby waives any objection to such exclusive jurisdictionand that such courts represent an inconvenient forum.
Employee hereby voluntarily, unconditionally and irrevocably agrees and submits to the jurisdiction of the federal and state courts of the State of Washington and appellate courts from any thereof for any claim, action or dispute arising out of or related to this agreement, and waives and agrees not to assert any defense that any such court lacks jurisdiction, venue is improper, or the forum is inconvenient.
Why They Don’t Make Sense
Such provisions generally follow on the heels of something saying that one or more parties may bring a dispute in the courts of a specified jurisdiction. But it’s redundant to say in a contract No take-backs!—the whole point of contracts is that you’re making a binding commitment. If someone has committed to jurisdiction, they’ve committed to jurisdiction.
And if you want to address this concept once, the simpler and clearer way is to say where a party may bring a dispute, as opposed to using a no-objecting-to-jurisdiction provision.
If saying No take-backs! in contracts made sense, we’d see it used in every contract to bolster every other provision in that contract. (Incidentally, the same approach is on display in using a “covenant” not to sue for infringement of intellectual property instead of granting a nonexclusive license to that IP, but we’ll look at that some other time.)
A Counterargument
I ran my argument by someone knowledgeable. They agreed that the language appears redundant, but they thought that because U.S. courts don’t like to let litigants sue for damages when one party breaches a jurisdiction provision, no-objecting-to-jurisdiction provisions might improving the odds of a contract party getting their fees covered if the other party ignores a jurisdiction provision.
For three reasons, I don’t find that convincing. First, it seems speculative. Second, it would be the height of legalistic sophistry to offer different remedies depending on whether a party violated a contract provision or violated a No take-backs! version of that provision. And third, if you want something in a contract, make it explicit instead of playing games! In other words, if you want to be awarded legal fees if someone ignores a jurisdiction provision, then say so (although that seems like a weird idea).
What’s Going On?
I remain the only person saying don’t use consent-to-jurisdiction provisions. And now I’m the only person saying don’t use no-objecting-to-jurisdiction provisions. I suspect that’s because I’m the only person who studies contract language from a semantics perspective instead of primarily looking at caselaw.
But this is the first time I’ve written about no-objecting-to-jurisdiction provisions. I’m prepared to have you set me straight on stuff!
(By the way, expect a part 3 soon, on provisions waiving inconvenient-forum claims.)
Ken:
Surely, there’s a buried question about whether this is language of policy or language of obligation. Presumably there’s a valid argument that someone could want to get a counter party to agree to pay its legal fees for defeating jurisdiction in an improper forum. That ought not be mashed into the same sentence as the one expressing the policy on where suits can be heard.
Chris
We’re not dealing with subtle distinctions: in terms of the categories of contract language, the alternatives are all over the place. Yes, I’d use language of obligation to express paying expenses, but that just seems like an odd thing to fixate on.
Ken:
I’m mainly thinking of the situation where someone sues when they should have filed arbitration. Happens all the time and getting the dismissal to arbitration can be drawn out.
Chris
It would be interesting to know how expenses are handled in that situation, but I don’t think one could assume that no-objecting-to-jurisdiction provisions would apply. If someone is concerned about expenses, they should ask for a provision adopting the “English rule.” No?
Ken:
I suppose that would be one way. But take an employee separation agreement. The company is paying some amount of money for utter finality. If the employee Sue’s instead of starting arbitration, I want a one-way provision that gets me my fees without putting me at risk for the employees fees. And that’s actually fair in context because the employee is re-opening something we paid to close forever. So I think it is language of obligation — specifically an indemnity.
Chris
Chris
I see it differently in part.
Take the formula ‘Acme may sue Widgetco under this agreement in the courts of the State of Washington’. Under the categories of contract language, that is the equivalent of saying, ‘Widgetco [hereby] grants Acme discretion to sue Widgetco under this agreement in the courts of the State of Washington’.
The trouble is, Acme doesn’t need permission from Widgetco to sue Widgetco in the courts of Washington any more than Acme needs Widgetco’s permission to look up at the night sky. Nor is it within Widgetco’s power to grant Acme such discretion. So the provision as stated looks like surplusage.
It’s no defence to say that the provision impliedly means that ‘If Acme sues Widgetco under this agreement in the courts of the State of Washington, Widgetco [hereby] submits itself to the personal jurisdiction of those courts. If that’s the intent, better to say it directly.
The discretion provision says nothing about exclusive jurisdiction. If Acme sued Widgetco outside of the State of Washington, Acme would lack the benefit of Widgetco’s contractual submission to personal jurisdiction, and would have to serve Widgetco with process accordingly. The contract doesn’t forbid Acme from doing so.
I don’t think parties can by their agreement deprive a court of its jurisdiction. Parties can, however, agree not to sue anywhere except in certain places and before certain tribunals. If the parties so agree and a party thereafter breaks the agreement by suing elsewhere, the ‘wrong’ tribunal may enforce the agreement by throwing the suit out, but not for lack of jurisdiction.
If the parties want to agree at signing that a particular forum is not inconvenient and is proper as to venue, they can do so directly: ‘The parties acknowledge that the specified forum is proper as to venue and is convenient’. No need for things like ‘and the parties waive any argument to the contrary and shall not make any such argument, and agree and covenant and promise not to so so’.
A drafter can combine in one provision (1) agreement to sue nowhere but in Ruritania, (2) submission to personal jurisdiction there, and (3) acknowledgment of convenience and proper venue there, but they remain distinct objectives, each needing distinct expression.