When was the last time you looked at the boilerplate venue clause in your or your client’s standard operating contract? It’s worth taking a peek and making sure it does not inadvertently push the signers out of the legal arenas you would expect to be available in the event of a dispute.
Venue clauses provide for the location of where a dispute, claim, or controversy will be litigated if there is a conflict. They are often short, standard, and, as a result, easily read over amongst the other specific details or industry nuances present in each contract.
In 2019, the Ninth Circuit of the United States Court of Appeals decided the City of Albany v. CH2M Hill, Inc. (924 F3d 1306). The parties had negotiated a contract with a venue clause that said: “Venue for litigation shall be in Linn County, Oregon.” CH2M Hill removed the case from state court to federal court, but the City of Albany (the “City”) moved to remand back to state court, citing the venue selection clause as limiting CH2M Hill exclusively to state court because there is no federal courthouse in Linn County, Oregon. While Linn County is under the purview of the Eugene Division of the District of Oregon, which sits in Lane County just to the south, “[a]n agreement limiting venue for litigation to a particular county unambiguously prohibits litigation in federal court when there is no federal courthouse located in the designated county.” The Ninth Circuit concluded that the purpose of that venue clause—selecting a specific county—is to “ensure that litigation occurs within the geographic boundaries of that county[.]”
There is yet another example of the perils of a county-specific venue clause: federal court would likely still not be available to the parties even where there was once a federal courthouse in the selected county but at the time of litigation, it had been permanently closed. Yakin v. Tyler Hill Corp., 566 F.3d. 72 (2d Cir. 2009).
And this summer, an Eighth Circuit affirmance flagged yet another way boilerplate language could unwittingly exclude federal court. In Boyd v. Deadwood Tobacco Co. (178 F.4th 1132), the venue clause in question said that for any dispute arising out of the contract, it would be litigated “in Lawrence County, South Dakota, and the circuit court in Lawrence County, South Dakota shall have jurisdiction[.]” When the plaintiffs filed in federal district court in Florida, it dismissed the action because the use of “circuit court” in the venue selection clause categorically “eliminate[d] a federal district court” as a jurisdictional possibility.
So, as you and your clients proceed with any venue-selection language, always give it a thorough read to ensure it means what it says and says what it means, and, for good measure, double check where the nearest federal courthouse is located and if they are still open for business.
– Elissa R. Karim
