A forum-selection clause is the term in a contract which “seeks to provide a court with ‘personal jurisdiction’ and to establish ‘venue.’”[1]  Put another way, it is an agreement by the parties as to where they would like to litigate the disputes between them arising out of the subject matter that is within the scope of the forum-selection clause.  What does that even mean?  Here is an example:

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All actions or proceedings arising directly or indirectly from this Agreement shall be litigated in courts located within Chicago, Illinois. The parties consent to the jurisdiction thereof and waive all objections to such choice of forum.

 

This clause can be dissected into three main sections: the scope, the location, and the consent to jurisdiction.[2]  Let’s dig into them.

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The Scope

The forum-selection clause starts out by telling the reader to what disputes it applies.  In the example here, that language is “[a]ll actions or proceedings arising directly or indirectly from this Agreement.”  As simple as this language seems, it has very important applications in litigation. 

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Part 1: “All actions or proceedings”

The meaning of this vague phrase has been heavily litigated for decades.  While there is no dispute that this language refers to litigation matters that are to take place in the court system, the courts are divided as to whether “all actions or proceedings” also includes alternative dispute resolution proceedings such as arbitration or mediation, which tend to be agreed to separately in one or more clauses relating specifically thereto (sometimes titled “Dispute Resolution Procedures”, “Mediation” or “Arbitration.”)[3] 

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The point of view this author will designate as the “majority view” interprets “all actions and proceedings” to mean only judicial proceedings which take place in the courts because the phrase is followed by the specification that the “actions and proceedings” are to be litigated in “the courts.”[4]  Mediation and arbitration are not litigated in courts, so they are logically excluded from the definition of “all actions and proceedings” in the forum selection clause.  When both an arbitration provision and a forum selection clause may apply to the same dispute, courts following the majority view will not find that the arbitration clause is invalidated due to the forum selection clause because the forum selection clause would be found to only apply to any parts of the proceeding that may take place before a court (ex. entering or enforcing a judgment consistent with the arbitrator’s findings.)[5]  An exception to this rule would be where the forum selection clause expressly states that the parties are waiving their right to arbitration.[6]  This majority view is followed by the 3rd, 4th, 5th, 6th, 7th, and 8th Circuit Courts and Illinois state courts, to name a few. [7]  

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There are, however, courts that take the opposite point of view.  These courts are primarily the 2nd and 9th Circuit Courts, as well as New York State courts.[8]  Under this minority view, in situations where an arbitration clause and a mandatory forum selection clause both apply to a dispute, courts are likely to hold that only one of the clauses is valid.[9]  For example, where the arbitration agreement was in one contract and the forum selection clause was in another related contract which was executed later in time between the same parties, it is likely that the arbitration agreement will be found to be superseded and invalid.[10]  The logic behind this interpretation is that because an arbitration cannot be litigated in court, and the forum selection clause specifically states that the “action or proceeding” must be brought before a specific court, then it must be the case that the parties intended to override the arbitration agreement by agreeing to the forum selection clause which calls for traditional litigation in the courts.[11]

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In order to avoid any confusion over what “actions and proceedings” the forum selection clause is intended by the parties to cover, clarification can be added at the drafting stage.  To clarify that a forum selection clause does not preclude arbitration, drafters can include a simple modification to state “all judicial actions and proceedings” or a carveout such as “all actions and proceedings, excluding arbitrations and mediations.”[12]  On the contrary, if you wish for your forum selection clause to preclude arbitration or mediation, then expressly stating so therein is critical if you are litigating in a court which follows the majority view.[13] 

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Part 2: “arising directly or indirectly from this Agreement”

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(Coming soon!)

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Sources

[1] https://www.law.cornell.edu/wex/forum_selection_clause, Jan. 8, 2025.

[2] Some contracts also include a jury waiver in this clause, but this blog will consider that as a separate topic.

[3] These specific clauses are not dissected here. 

[4] UBS Fin. Services, Inc. v. Carilion Clinic, 706 F.3d 319 (4th Cir. 2013).

[5] Id. at 328-30.

[6] Id.

[7] See, e.g., Id.; Reading Health Sys. v. Bear Stearns & Co., 900 F.3d 87 (3d Cir. 2018) (following Carilion Clinic); Pers. Sec. & Safety Sys. Inc. v. Motorola Inc., 297 F.3d 388 (5th Cir. 2002); Child Dimensions Ins. Co. v. Lexington Ins. Co., 5:09CV670, 2009 WL 10688226 (N.D. Ohio July 16, 2009), citing, Highlands Wellmont Health Network, Inc. v. John Deere Health Plan, Inc., 350 F.3d 568 (6th Cir. 2003) (detailing the requirement for a specific waiver of arbitration); Cedar Brook Fin. Partners Holdings, LLC v. Schlang, 2022-Ohio-3325, 198 N.E.3d 495; UBS Sec. LLC v. Allina Health Sys., CIV. 12-2090 MJD/JJG, 2013 WL 500373 (D. Minn. Feb. 11, 2013) (following Carilion Clinic); ChampionsWorld, LLC v. U.S. Soccer Fed'n, Inc., 487 F. Supp. 2d 980 (N.D. Ill. 2007); Applications Software Tech. LLC v. Kapadia, 18 CV 822, 2018 WL 3122173 (N.D. Ill. June 26, 2018); Geldermann, Inc. v. Stathis, 177 Ill. App. 3d 414, 532 N.E.2d 366 (1st Dist. 1988).

[8] See, e.g., Applied Energetics, Inc. v. NewOak Capital Markets, LLC, 645 F.3d 522 (2d Cir. 2011); Goldman, Sachs & Co. v. City of Reno, 747 F.3d 733 (9th Cir. 2014); Goldman, Sachs & Co. v. Golden Empire Sch. Fin. Auth., 764 F.3d 210 (2d Cir. 2014); Ruiz v. New Avon LLC, 18-CV-9033 (VSB), 2019 WL 4601847 (S.D.N.Y. Sept. 22, 2019).

[9] It is important to note that there are nuances which affect the court’s ruling on this issue, including whether the clauses are mandatory versus permissive, which clause was in the most recently executed contract, whether there is a merger clause in the subsequently executed contract, and whether the clauses are in the same or different contracts.  See, e.g., Bank Julius Baer & Co., Ltd. v. Waxfield Ltd., 424 F.3d 278 (2d Cir. 2005); Mobile Real Estate, LLC v. NewPoint Media Group, LLC, 460 F. Supp. 3d 457 (S.D.N.Y. 2020).

[10] Golden Empire, 764 F.3d at 216-18, citing, Applied Energetics, 645 F.3d at 525-26.

[11] Id.

[12] See, e.g. Blount v. Northrop Grumman Info. Tech. Overseas, Inc., 14-CV-498-CAB (WVG), 2014 WL 12577033, at *1 (S.D. Cal. July 23, 2014).

[13] See Carilion Clinic, 706 F.3d at 329-30; Reading Health, 900 F.3d at 103-04.