Will a Virginia court enforce the forum-selection clause in our contract?
Yes, presumptively: Virginia embraced the modern view in 1990, the Court describing the ouster doctrine as the view of "most American courts" and its own new rule as "consistent with the rule in Virginia, established in a similar context". "According to the modern view, which we now embrace, contractual provisions limiting the place or court where potential actions between the parties may be brought are prima facie valid and should be enforced, unless the party challenging enforcement establishes that such provisions are unfair or unreasonable, or are affected by fraud or unequal bargaining power" (Paul Business Systems, Inc. v. Canon U.S.A., Inc.). One statutory carve-out cuts the other way, and it is written by geography rather than by subject matter: where a party whose principal place of business is in the Commonwealth enters into a contract on or after July 1, 1997 to design, manage construction of, construct, alter, repair, maintain, move, demolish or excavate, or to supply goods, equipment or materials for that work, on a building, structure, appurtenance, road, bridge or tunnel "which is physically located in the Commonwealth", the action may be brought where the project is or where venue is otherwise proper, and "Any provision in the contract mandating that such action be brought in a location outside the Commonwealth shall be unenforceable" (Va. Code § 8.01-262.1(A)). The companion subsection does the same for arbitration in such a contract entered into on or after July 1, 1991.
The trap
Paul Business Systems puts the burden on the party resisting the clause, and it lists three grounds (unfair or unreasonable, fraud, unequal bargaining power), and Paul shows how little weight inconvenience carries: the plaintiff’s objections that the witnesses were all Virginians, that the co-defendant was probably not subject to New York jurisdiction, and that its Virginia statutory conspiracy claim had no New York equivalent were all rejected, because they "all should have been foreseen by the plaintiff"; the Court also found no Virginia public policy against such clauses at all. Section 8.01-262.1 is the Virginia-specific override, and every element of its scope has to be checked before it helps: the contract must be one of the listed construction or supply contracts, the project must be physically located in Virginia, a party to the contract must have its principal place of business in the Commonwealth (the statute says "a party", not the party invoking the section), and the contract must be on or after the section's date. Note also that it voids a clause MANDATING an outside forum; it does not by its words reach a permissive one. One thing this answer does not reach is claim scope, whether tort and statutory claims arose "under" an agreement, so that its forum clause captures them. Paul held they did on its facts, but three Justices wrote separately to disassociate themselves from that holding, and nothing here settles it.
9 authorities
- case240 Va. 337Paul Business Systems, Inc. v. Canon U.S.A., Inc.Va.decided 1990read it at the source ↗
The words that state the rule
According to the modern view, which we now embrace, contractual provisions limiting the place or court where potential actions between the parties may be brought are prima facie valid and should be enforced, unless the party challenging enforcement establishes that such provisions are unfair or unreasonable, or are affected by fraud or unequal bargaining power.
- statuteVa. Code § 8.01-262.1enactment date not established
The words that state the rule
Where a party whose principal place of business is in the Commonwealth enters into a contract on or after July 1, 1997, to design, manage construction of, construct, alter, repair, maintain, move, demolish, or excavate, or supply goods, equipment, or materials for the construction, alteration, repair, maintenance, movement, demolition, or excavation of a building, structure, appurtenance, road, bridge, or tunnel which is physically located in the Commonwealth, any cause of action arising under such contract may be brought in the jurisdiction where the construction project is located, or such other jurisdiction where the venue is proper under the provisions of this chapter. Any provision in the contract mandating that such action be brought in a location outside the Commonwealth shall be unenforceable.
- statuteVa. Code § 8.01-262.1enactment date not established
The words that state the rule
The forum for any arbitration proceedings required in such a contract entered into on or after July 1, 1991, shall be in this Commonwealth. If the contract provides for arbitration proceedings outside the Commonwealth, such provision is unenforceable and arbitration proceedings shall be in the county or city where the work is to be performed, unless the parties agree to conduct the proceedings elsewhere within the Commonwealth. The enforceability of the remaining provisions of the arbitration agreement and the method of selecting a forum for the conduct of the arbitration proceedings are as provided in this Code, the Federal Arbitration Act, and any applicable rules of arbitration.
- case240 Va. 337Paul Business Systems, Inc. v. Canon U.S.A., Inc.Va.decided 1990read it at the source ↗
The words that state the rule
Agreements 2 and 5 contained a forum selection clause with language slightly different from the other four. We have italicized the different language. "This Agreement shall be governed by and construed in accordance with the laws of the State of New York, and Dealer consents to the jurisdiction and venue of any local, state or federal court located within the State of New York upon service of process made in accordance with the statutes of New York and the United States, and further agrees that any and all causes of action whether or not arising under this Agreement by and between the parties hereto shall only be brought in a local, state or federal court situated within the State of New York.
- case240 Va. 337Paul Business Systems, Inc. v. Canon U.S.A., Inc.Va.decided 1990read it at the source ↗
The words that state the rule
Rejecting these contentions, we hold that the plaintiff has failed to establish that enforcement of the forum selection provisions would be unfair or unreasonable.
- case240 Va. 337Paul Business Systems, Inc. v. Canon U.S.A., Inc.Va.decided 1990read it at the source ↗
The words that state the rule
Because the causes of action asserted arose "under" the agreements, the plaintiff will not be heard to claim unfairness and unreasonableness when at least three, and probably four, of the agreements were executed by the plaintiff's president after the causes of action arose. There is no claim that plaintiff's chief executive officer was inexperienced and, as stated, there is no claim of fraud or overreaching on the part of Canon's representative. The alleged inconvenience of litigation in New York, the anticipated difficulty in joining Dyna-Fax in a New York suit, and the likelihood of this action for intentional conduct stemming from the agreements, all should have been foreseen by the plaintiff which, with full knowledge of the existence of these causes of action, voluntarily entered into the agreements, at least one of which provided for a New York forum "whether or not" the causes of action arose under the agreement. Finally, we do not agree that enforcement of the forum provisions would violate "a strong public policy of Virginia." The plaintiff has pointed to no Virginia case or statute which suggests that Virginia policy rejects forum selection clauses, and we have found none. Indeed, today we have expressly sustained the validity of such provisions, approved their use, and enforced them. For these reasons, the judgment of the trial court will be Affirmed.
- case240 Va. 337Paul Business Systems, Inc. v. Canon U.S.A., Inc.Va.decided 1990read it at the source ↗
The words that state the rule
In the past, forum selection clauses were viewed with disfavor in most American courts. These clauses, purporting to confer jurisdiction on specifically named courts for adjudication of future controversies, were viewed as unenforceable as "contrary to public policy" and as an effort to "oust the jurisdiction" of the forum court.
- case240 Va. 337Paul Business Systems, Inc. v. Canon U.S.A., Inc.Va.decided 1990read it at the source ↗
The words that state the rule
Our preference for the foregoing view is consistent with the rule in Virginia, established in a similar context, that where parties to a contract have expressly declared that the agreement shall be construed as made with reference to the law of a particular jurisdiction, we will recognize such agreement and enforce it, applying the law of the stipulated jurisdiction.
- case240 Va. 337Paul Business Systems, Inc. v. Canon U.S.A., Inc.Va.decided 1990read it at the source ↗
The words that state the rule
The plaintiff assigns three reasons, however, why the clauses should not be enforced. First, the plaintiff says that enforcement under these facts would be "unreasonable and unjust as a matter of law." Elaborating, the plaintiff argues that the "case has nothing to do with any contract existing between plaintiff and defendant, Canon." It argues that the case "would exist if there were no contract" because the charge is that defendants conspired to damage and destroy plaintiff's business in violation of Code §§ 18.2-499 and -500. Additionally, plaintiff asserts that no equivalent to § 18.2-499 exists in New York "and the acts allegedly violating it were committed in Virginia and within a 30-mile radius of Hampton." Also, plaintiff says that "Dyna-Fax, the other corporate defendant, is almost certainly not subject to the jurisdiction of the New York courts for purposes of this suit." Finally, plaintiff asserts that all of the non-party witnesses are Virginians, not subject to subpoena in New York.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.