Will a South Dakota court enforce this forum-selection clause requiring suit to be filed in a particular court?
Yes, South Dakota gives effect to a forum-selection clause unless enforcement would be unfair or unreasonable. Klenz v. AVI International states the rule, quoting Green v. Clinic Masters, Inc.: "when the parties to a contract agree that actions arising from that contract will be brought in a particular jurisdiction, that agreement should be given effect unless it is shown that to do so would be unfair or unreasonable." Northland Capital Financial Services, LLC v. Robinson shows how a South Dakota court applies unambiguous, mandatory forum language: where a lease provided that "any suit by either of the parties pursuant to this Lease... shall be in Stearns County District Court, Stearns County, Minnesota," the court held the clause "unambiguously provides" for that forum, and "[t]he mandatory language for filing suit in Stearns County, Minnesota, applies to both parties": enforcing the clause to require dismissal of a suit the plaintiff had filed in South Dakota instead.
The trap
"Unfair or unreasonable" is a real, fact-dependent standard, not a rubber stamp: Klenz itself put the burden on the party resisting the clause and affirmed its enforcement for want of a showing (“We reverse Issue 2), but affirm Issue 3) on the basis that there is no sufficient showing that the forum selection clause is invalid”) while saying in the same opinion that “it remains difficult to determine whether the forum selection clause is unfair or unreasonable under South Dakota law because of the undeveloped record,” and the burden sentence is the court's own: "However, the burden is upon the challenger to show that the forum selection clause is unreasonable or unfair and thereby invalid under the circumstances. This burden has not been met and we must affirm this issue." Be precise about WHAT the record lacked. It was not the geography: on the four-factor test the majority found every factor pointed away from South Dakota: "First, the law governing the formation and construction of the contract is the law of France, not the law of South Dakota. Second, both parties are residents of Europe. Third, the place of execution and performance of the contract was Europe, if not France. Finally, the location of the parties and witnesses favors litigation in *740 France." What was missing was the money: "The record does not specify the litigation expenses being sought by Klenz as administratrix or the amount thereof. Nor does the record disclose whether the expenses incurred in the underlying wrongful death suit have been paid to trial counsel or whether Klenz is seeking reimbursement for litigation expenses already paid." The test itself is Klenz's four factors, taken from Baldwin v. Heinold Commodities: "1. The law which governs the formation and construction of the contract; 2. The residency of the parties; 3. The place of execution and/or performance of the contract; and, 4. The location of the parties and witnesses involved in the litigation." So the standard is real, but the party invoking it has to build the record; a bare objection loses. A drafter should not read Northland Capital's easy enforcement of a mandatory, unambiguous clause between two commercial parties as meaning every forum clause will be enforced regardless of the circumstances; Green v. Clinic Masters' own authority (quoted within Klenz) cautions that such clauses "are less likely to be sustained if they appear in adhesion contracts prepared in advance by one of the parties, and will generally *739 be disregarded if genuine inconvenience or inadequacy of remedy would ensue from them." Mandatory language ("shall be in") matters to the analysis, as Northland Capital shows: a permissive clause naming a forum without requiring suit to be brought only there presents a different question this rule does not address.
11 authorities
The words that state the rule
when the parties to a contract agree that actions arising from that contract will be brought in a particular jurisdiction, that agreement should be given effect unless it is shown that to do so would be unfair or unreasonable.
The words that state the rule
The forum selection clause in the Lease unambiguously provides that “any suit by either of the parties pursuant to this Lease . . . shall be in Stearns County District Court, Stearns County, Minnesota.”
The words that state the rule
The mandatory language for filing suit in Stearns County, Minnesota, applies to both parties.
The words that state the rule
We reverse Issue 2), but affirm Issue 3) on the basis that there is no sufficient showing that the forum selection clause is invalid.
The words that state the rule
it remains difficult to determine whether the forum selection clause is unfair or unreasonable under South Dakota law because of the undeveloped record and incomplete reasoning on the part of the trial court.
The words that state the rule
The modern cases say that contracts limiting judicial jurisdiction will be respected if there is nothing unfair or unreasonable about them, but will be disregarded if they are unfair or unreasonable. They are more likely to be sustained if they related to disputes already arisen or contemplated, but that is not a rigid limitation. They are less likely to be sustained if they appear in adhesion contracts prepared in advance by one of the parties, and will generally *739 be disregarded if genuine inconvenience or inadequacy of remedy would ensue from them.
The words that state the rule
A forum selection clause may be unreasonable in light of this Court's factors for determining reasonableness: 1. The law which governs the formation and construction of the contract; 2. The residency of the parties; 3. The place of execution and/or performance of the contract; and, 4. The location of the parties and witnesses involved in the litigation.
The words that state the rule
Under these factors, the forum selection clause may be reasonable. First, the law governing the formation and construction of the contract is the law of France, not the law of South Dakota. Second, both parties are residents of Europe. Third, the place of execution and performance of the contract was Europe, if not France. Finally, the location of the parties and witnesses favors litigation in *740 France. Klenz, AVI and Chubb are located in Europe and only Klenz's attorney is located in South Dakota.
The words that state the rule
The record does not specify the litigation expenses being sought by Klenz as administratrix or the amount thereof. Nor does the record disclose whether the expenses incurred in the underlying wrongful death suit have been paid to trial counsel or whether Klenz is seeking reimbursement for litigation expenses already paid.
The words that state the rule
However, the burden is upon the challenger to show that the forum selection clause is unreasonable or unfair and thereby invalid under the circumstances. This burden has not been met and we must affirm this issue.
The words that state the rule
We reverse and remand with directions for the circuit court to dismiss the action in Spink County.