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Posted: February 10, 2015

Forum Selection Clause Enforced Despite Questions Concerning Law to be Applied in Chosen Forum

On January 30, 2015, Justice Scheinkman of the Westchester County Commercial Division issued a decision in USA-India Export-Import, Inc. v. Coca-Cola Refreshments USA, Inc., 2015 NY Slip Op. 50091(U), enforcing a forum selection clause.

Put simply, USA-India’s claim was that Coca-Cola was violating New York’s Bottle Bill and GBL § 349 by passing the costs of bottle deposits onto its distributors. Coca-Cola moved to dismiss based upon a forum selection clause in the parties’ agreement which provided that: “This Agreement and any dispute arising out of or relating to it will be governed by and construed in accordance with the laws of the State of Georgia without reference to its conflict of law rules . . . . The exclusive venue for litigation will be in the federal or state courts located in Atlanta, GA . . . .”

USA-India opposed the motion on the grounds that the phrase “without reference to its conflict of law rules” would prohibit a Georgia court from considering the New York statutory causes of action asserted in the complaint, and that such a result would violate New York’s public policy and the Bottle Bill’s specific prohibition of “contracts or agreements made in derogation of the statute.”

As an initial matter, the court held that under New York law, questions regarding “the enforceability and scope” of forum selection clauses are a procedural question to be resolved under New York law.

The court then analyzed the parties’ positions on the merits of the dispute and ruled in favor of Coca-Cola, citing several New York cases that held that objections to a choice of law clause were not a valid basis to deny enforcement of a forum selection clause because such arguments “concern choice of law, not choice of forum, and [they] may properly be raised before a court in the forum chosen by the parties [ ] i.e. objections to a choice of law clause are not a warrant for failure to enforce a choice of forum clause.” Applying the law to the facts, the Court found that:

Here, the Plaintiffs’ real issue is not so much with the forum in which they agreed to litigate their disputes with Defendant; it is their fear that a court sitting in Georgia will enforce the parties’ choice of law clause and find that New York’s [Bottle Bill] has no applicability to the parties’ dispute . . . . [I]t is up to the courts in the parties’ selected forum to decide whether or not the choice of law clause bars any such claim—not this Court. Because it is only the choice of law clause, and not the forum selection clause, that would potentially violate the public policy of this State, the Court shall enforce the parties’ agreement with regard to their selected forum for litigation.

This case illustrates the degree of favorable treatment given to choice-of-law and choice-of-forum clauses in New York. By separating the two, the court avoided any consideration of plaintiff’s argument that the application of Georgia law would violate New York public policy as set forth in a New York statute. Instead, a Georgia court (applying Georgia law without reference to its conflicts of law rules) is to decide whether the choice-of-law provision violates New York’s public policy.

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