Review Contracts and Agreements with Out-of-State Companies to Keep Your 'Home Team' Advantage in Litigation

By Mark S. Fusco and Sara R. Cooper

Unfortunately, all other options have failed and your company is forced to file suit against an out-of-state vendor or customer. For a variety of reasons - not the least of which is cost - you would like to keep this lawsuit in state court rather than federal court. In fact, you have added a 'forum selection clause' to all of your contracts with vendors and customers requiring all disputes to be resolved in the county where your company is located, in accordance with Ohio law. Unfortunately, despite this seemingly clear provision, your lawsuit has been removed to federal court anyway and your 'home team' advantage wiped away.Why?

While Ohio law permits your company to specify where you want disputes to be heard, Federal law allows defendants to remove a lawsuit to federal court if the case was filed in a state court other than their home state and the amount at issue is more than $75,000. Defendants may waive their right to remove a case to federal court, but the waiver must be 'clear and unequivocal.' Unfortunately, this means that the forum selection clause you drafted may not be enough to keep your case from being removed to federal court. How clear does my company have to be?

The Sixth Circuit Court of Appeals has determined that a defendant has not 'clearly and unequivocally' waived the right to remove the case to a federal court if the language in a forum selection clause such as that noted above does not (a) mention the possibility of the case being removed to federal court or (b) specifically say that the defendant can remove the case to federal court in certain situations unless this right is waived, and require a waiver of this right. Ohio businesses relying on forum selection clauses that do not expressly mention this right and require a waiver may find themselves in federal court even though their contracts specify that disputes must be settled in state courts. So, what can my company do?

Review your contacts and agreements with out-of-state vendors or customers if you would like to keep your 'home field' advantage and make sure you are not subjecting your business to litigation in federal court.

Walter | Haverfield attorneys regularly assist businesses in reviewing their day-to-day corporate documents to make sure these documents are meeting the needs and expectations of the business. For more information on this or other business litigation issues, please contact the Walter | Haverfield attorney with whom you regularly work, or any of the attorneys in the Business Litigation Group in our office.