Court: Supreme Court of Louisiana; December 9, 2013; Louisiana; State Supreme Court
The court reversed the lower courts' judgments regarding the enforceability of a forum selection clause in a contract dispute involving Foreign Classic Auto Centre, Inc. and British Parts International (BPI). The Fidelaks had filed a petition for damages against Foreign Classic in Caddo Parish, Louisiana, claiming a defective engine was sold to them. Foreign Classic sought reimbursement from BPI, which invoked a forum selection clause stipulating that disputes be resolved in Harris County, Texas, based on terms purportedly found on an invoice and BPI's website.
Foreign Classic contested the enforceability of the clause, arguing that it was not part of their contract, as the terms were not discussed during the engine purchase and were only found later on a website. The district court initially upheld BPI's claim of improper venue, asserting the clause was valid due to the parties' established business relationship. However, the appellate court highlighted that under Louisiana law, a third party defendant cannot contest venue if the principal action is filed in the proper venue. Therefore, the court determined that the forum selection clause could not be enforced in this case, sidestepping the broader question of its validity under Louisiana law.
A third-party demand, such as the claim by Foreign Classic against BPI, is classified as an incidental demand under Louisiana law (La. C.C.P. art. 1031). The primary action, initiated by the Fidelaks against Foreign Classic, was correctly filed in Caddo Parish, where Foreign Classic's principal business is located, thus establishing proper venue according to La. C.C.P. art. 42. Consequently, BPI, as the third-party defendant, cannot contest the venue since the principal action was properly instituted. The lower courts incorrectly upheld BPI's venue objection, leading to a decree that reverses their judgments and remands the case for further proceedings.
The enforceability of forum selection clauses in Louisiana, previously discussed by the Court, has not been specifically addressed in relation to La.C.C.P. art. 44. In Lejano v. Bandak, the Court ruled that federal law governs such clauses in admiralty cases, affirming their general enforceability. In Sawicki v. KJS Stavanger Prince, the Court interpreted La. R.S. 23:921, which limits the enforceability of forum selection clauses in employment contracts, concluding that it could be applied retroactively. The Court emphasized Louisiana's public policy favoring local adjudication, stating that valid claims filed in Louisiana are adjudicated here unless the forum selection clause was knowingly and voluntarily agreed to after the incident that prompted the lawsuit.
The Court’s position in Sawicki reiterated this public policy, asserting that Louisiana courts should adjudicate claims properly invoking their jurisdiction. Additionally, in Power Marketing Direct, Inc. v. Foster, the Court referred to Lejano, noting that forum selection clauses are generally enforceable unless proven unreasonable or unjust. However, the enforceability of such a clause was not the primary issue in Power Marketing, making this reference merely dicta and incorrectly citing Lejano, which pertains to federal law enforcement of forum selection clauses.
Louisiana's appellate courts exhibit a division regarding the enforceability of forum selection clauses. The First and Second Circuits consistently support their enforcement, as evidenced by cases such as Rising Resources Control, Inc. v. Kie Commodities and Finance, L.L.C., Vallejo Enterprise, L.L.C. v. Boulder Image, Inc., and others. In contrast, the Fourth and Fifth Circuits have recently declined to enforce such clauses, citing strong public policy concerns, although these concerns were not specifically related to forum selection. Key cases in this context include Gerrets v. Gerrets and Aquatic Lodging, LLC v. Bayou Boys Boat Rental, LLC. Additionally, the Third Circuit has also ruled against the enforcement of a forum selection clause in a construction contract, as seen in Thompson Tree Spraying Service, Inc. v. White-Spunner Const. Inc. This ongoing split among the circuits highlights uncertainty in Louisiana law regarding the enforceability of these clauses.
