An exclusive forum selection clause gives a court a valid reason not to exercise its jurisdiction to hear a case. It cannot, however, take that jurisdiction away. Every now and then, judges get confused on this point. They start to think that an exclusive forum selection clause strips jurisdiction from other courts. This is not how it works. Private actors cannot eliminate a court’s power to hear a case via private agreement. The agreement merely gives that court a reason to abstain from exercising that jurisdiction if it sees fit. See Benson v. E. Bldg. & Loan Ass’n, 174 N.Y. 83, 86, 66 N.E. 627, 628 (1903) (“[J]urisdiction is prescribed by the Constitution of the state and the statutes passed under it. It can neither be added to nor subtracted from by the agreement of the parties.”)
A good example of a case where a court got confused is Mueller v. Sample, 2004-NMCA-075, ¶ 1, 135 N.M. 748, 750, 93 P.3d 769, 771 (2004). In that case, a New Mexico-based chartering company contracted with a Wisconsin-based travel agency. The agreement contained an exclusive forum selection clause requiring any disputes to be resolved in the courts of New Mexico. The agency sued the company in federal court in Wisconsin and obtained a default judgment. It then sought to enforce this judgment against the company’s assets in New Mexico. The company opposed the enforcement action on the grounds that the Wisconsin court lacked jurisdiction to render the judgment. Specifically, the company argued that the exclusive forum selection clause choosing the New Mexico courts deprived the Wisconsin court of jurisdiction.
This argument is deeply flawed. While the clause clearly gave the New Mexico courts personal jurisdiction over the contracting parties, it could not take jurisdiction away from the Wisconsin courts. And yet the argument ultimately prevailed. The New Mexico Court of Appeals held that the default judgment issued by the federal court in Wisconsin was not enforceable because the forum selection clause worked to deprive that court of jurisdiction. Unfortunately, this is not how it works.
The root of the confusion seems to lie in the fact that the language in many forum selection clauses purports to confer “exclusive” jurisdiction on a given court. Interpreted literally, this language produces the result reached by the New Mexico Court of Appeals. When the contracting parties lack the power to effectuate a particular result, however, the language in their agreement does not matter. No private agreement can deprive a court of jurisdiction. The Mueller court should have focused on whether the Wisconsin court had personal jurisdiction over the New Mexico company via the usual minimum contacts analysis. Instead, it hung its hat on the long-discredited notion that exclusive forum selection clauses strip jurisdiction away from other courts.
Boilerterms 