Freight Troubles? How To Avoid Getting Stuck In Out-of-State Litigation

When something goes wrong in freight transportation, it’s not uncommon for everyone involved to be from different states. Add to that all the states the cargo traveled through, and potential locations for resulting litigation can stack up quickly. With a little planning and careful contract review, you can both choose the state for claims you decide to litigate against other parties, and also limit, or even eliminate, the chance that you will be forced to litigate claims brought against you in an out-of-state court.

Choice of Venue (or Choice of Forum) clauses are used in contracts to determine where litigation is permitted or required. They are often found in bills-of-lading, carrier-shipper contracts, broker-carrier contracts, broker-shipper contracts, rate confirmations, lease agreements, or virtually any other contract. Here are a few examples of choice of venue clauses (with slight modifications) pulled from contracts that I have recently reviewed, together with some explanation and tips:

Example 1

The parties agree that this Agreement was entered in the City of [CITY], the State of [UTAH], whose State courts shall have exclusive jurisdiction and venue for any litigation arising from this Agreement.

This is a simple provision designed to require litigation in a particular state (usually the state where the party who drafted the contract is located). It is a very inflexible (mandatory) standard, and doesn’t give you the option of litigating in other courts (such as federal courts, or the courts of another state which may have laws or rules that are more favorable to you in a particular case). Courts will generally enforce this type of provision absent circumstances which would make it “gravely”[1] inconvenient or impossible for one of the parties to litigate in the selected state.

Example 2

The Parties expressly submit to the jurisdiction of the Courts of the State of [UTAH] and the United States District Courts for the District of [UTAH] and agrees that jurisdiction and venue shall be permitted in such Courts; and, the Parties waive any claim or defense that such Courts will be an inconvenient forum.

This is a more flexible (permissive) standard. Unlike the first example, this one permits, but does not require, litigation in the selected state. In that sense, it is a sword, but not a shield, giving you the option of suing in the state you select, but not preventing others from suing you in another state. It also comes with language designed to prevent other parties from asking the court to find that the state you selected is “inconvenient,” making it more likely a court will enforce your choice.

Example 3

CHOICE OF VENUE: This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of [UTAH] without giving effect to any choice or conflict of law provision or rule that would cause the laws of any other jurisdiction to apply.

This provision was deceptively labeled as a choice of venue because it’s NOT a choice of venue clause; it is a choice of law clause. All this provision does is specify that the laws of a particular state will be used to decide the case. For example, you could litigate in California and have the California courts apply the law of Utah to decide particular issues in the case.

There are countless other versions of these provisions, and courts will interpret each according to the specific language used. Sometimes it isn’t clear whether the provision is mandatory, permissive, or even if it’s a choice of venue provision at all. Talking to an experienced attorney can help you analyze that language, or to come up with the best solution for you.

If you have any questions, feel free to give me a call.

[1]  See Prows v. Pinpoint Retail Systems, 868 P.2d 809, 812 (Utah 1993).

Skoubye, Nielson, Johansen Attorneys Salt Lake City Utah

Mark B. Thornton

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