December 3, 2010 - 12:15am
Fourth Circuit Embraces Forum Selection Rule Posted by:

In FindWhere Holding, Inc. v. Systems Environment Optimization, LLC., (“SEO”), (No. 09-2155), the Fourth Circuit held that the forum selection clause found in the parties’ contract limited jurisdiction to the state courts of Virginia. 

 

The case arose when FindWhere (a company that sells global positioning systems and provides follow-up tracking services) filed suit against SEO, and its parent company, Homeland Security Networks, Inc., for breach of contract.  FindWhere filed suit in the Circuit Court for Loudon County and SEO, subsequently, removed the action to the Eastern District of Virginia based on diversity of citizenship.  FindWhere moved to remand the case based on the contract’s forum selection clause, which provided, inter alia, that “[j]urisdiction and venue of any dispute or legal action brought by either party . . . shall lie exclusively in, or be transferred to, the Courts of the State of Virginia, USA.”

 

The parties’ arguments concentrated on the meaning of the phrase “or be transferred to, the courts of the State of Virginia.”  SEO contended that the presence of the phrase indicated that a federal court would have concurrent jurisdiction because a state court cannot “transfer” a case from one state to another, whereas federal courts may transfer cases under 28 U.S.C. § 1404(a).  FindWhere countered that the term “transfer” should be read in accordance with its ordinary meaning, which is to go to or to be taken from one place to another; and, thus, the term “remand” would fall within the span of its definition—as a remand order would cause the case to go from one forum to another, i.e., from federal court to state court.  The trial court found FindWhere’s argument convincing and remanded the case back to state court.

 

The Fourth Circuit affirmed the district court and, in doing so, adopted the “widely accepted rule that forum selection clauses that use the term ‘in [a state] express the parties’ intent as a matter of geography, permitting jurisdiction in both the state and federal courts of the named state, whereas forum selection clauses that use the term ‘of [a state]’ connote sovereignty, limiting jurisdiction over the parties’ dispute to the state courts of the named state.” Id. at 5; accord Doe 1 v. AOL, LLC, 552 F.3d 1077, 1082 (9th Cir. 2009). Because the forum selection clause stated that jurisdiction and venue would lie exclusively in the courts ‘of’ the State of Virginia, the contract language referred to sovereignty rather than geography.

 

Note:  The Fourth Circuit also took note that the general prohibition of appellate review for remand orders contained in 28 U.S.C. § 1447(d) did not extend to remand orders based on the interpretation and application of a forum selection clause.  Section 1447(d)’s proscription extends only to remand orders based on a lack of subject matter jurisdiction or a timely raised defect in removal procedure.  See also Global Satellite Comm’c v. Starmill, 378 F.3d 1269, 1271 (11th Cir. 2004).