One Way to Escape a Forum Selection Clause in New York
In the context of non-compete agreements, we noted that New York's Federal courts have adopted a 4-part test to determine whether they will enforce a forum selection clause. (For more on this, please see "Why the Forum Where You Litigate a Non-Compete Dispute is So Important").
So, the question is, have New York's State courts set forth any different, practical ways you can get around a forum selection clause?
New York's State courts have weighed in on this issue as follows:
"A contractual forum selection clause is enforceable unless it is shown by the challenging party to be unreasonable, unjust, in contravention of public policy, invalid due to fraud or overreaching, or it is shown that a trial in the selected forum would effectively deprive the challenging party of his or her day in court." Brooke Group Ltd v. JCH Syndicate, 87 N.Y.2d 530, 534(1996); British West Indies Guaranty Trust Co. v. Banque Internationale A Luxembourg, 172 A.D.2d 234 (1st Dep't 1991).
The last category set forth above does yield one interesting avenue for contesting the forum, because some courts have vitiated forum-selection clauses when enforcement of the provision would essentially extinguish an otherwise reasonable claim, such as where the costs and inconvenience of forcing a party to litigate a case in a foreign state would effectively end the case before it began. See, e.g., Scarcella v. America Online, Inc., 11 Misc 3d 19, 20 (App Term, 1st Dep't 2005).
One word of caution is in order here: The last category should in no way give anyone confidence that they will be able to defeat a forum selection clause in court. Anyone contesting a contractually agreed upon forum selection clause faces a very serious uphill climb.