There is no question that the law of forum selection clauses can be complicated. There are, however, some issues that are relatively straightforward. When a legislature enacts a statute announcing that an outbound forum selection clause is void when written into a particular type of contract, for example, the clause is probably not enforceable. This sort of statute is only useful, however, if the lawyer representing the plaintiff knows about it in the first place.
In 1983, the State of Washington passed a law voiding outbound forum selection clauses when written into timeshare agreements. Almost thirty years later, in 2018, a Washington resident by the name of Brandon Bluhm found himself embroiled in a dispute with Wyndham Destinations, Inc. about a timeshare contract. Bluhm operated a business in which he purchased points and fractional interests from individuals who wished to exit their timeshare agreements. He then sold these points and interests to individuals who wished to stay at a particular property. At one point, Bluhm had accumulated more than 18,000,000 points entitling him to reside in various timeshare properties administered by Wyndham. Bluhm also had fractional interests in 68 additional timeshare contracts.
In 2017, Bluhm was unable to access the Wyndham reservation system for five months. He alleged that he had been excluded from the reservation system on purpose and had lost a substantial amount of rental income. Bluhm subsequently sued Wyndham in the U.S. District Court for the Western District of Washington, alleging violations of the Washington Timeshare Act. In response, Wyndham moved to transfer the case to Florida. In support of this motion, Wyndham noted that Bluhm had—as a Platinum Owner in Club Wyndham—previously agreed to a forum selection clause mandating that all disputes be resolved in the “State Courts in Orange County, Florida or the Federal District Courts for the Middle District of Florida.” The question before the court was whether this forum selection clause was enforceable.
At this point, one might have expected Bruhm’s counsel to argue that the clause was invalid on public policy grounds. The Washington state legislature had, after all, previously enacted a statute voiding all outbound forum selection clauses in timeshare agreements. The forum selection clause requiring disputes be resolved in Florida appeared in a timeshare agreement. By the plain terms of the statute, the clause was seemingly unenforceable. It was a slam-dunk legal argument.
This argument was, however, never made to the court. “While there may be bases to dispute the application of this forum-selection clause to Bluhm’s claims,” the court observed, “Bluhm did not provide them.” Since the statute went unmentioned, the court concluded that the forum selection clause was enforceable and ultimately transferred the case to Middle District of Florida. Had Bruhm’s counsel pointed out the existence of a statute specifically voiding forum selection clauses in timeshare contracts, it is very likely that the motion to transfer would have been denied. Since this argument was never made, however, Bruhm lost the tactical advantages that ordinarily accrue to the plaintiff by virtue of his ability to choose the forum in which to litigate the dispute.
This case highlights the importance of knowing all of the laws in your state that bear on the enforceability of a forum selection clause. While these invalidating statutes are most commonly applied to construction contracts and franchise agreements, they may also apply to student loan agreements, child support contracts, consumer loans, consumer leases, employment agreements, insurance contracts, and timeshare agreements, among others.
A list of more than 200 state statutes that specifically invalidate outbound forum selection clauses can be found here.
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