Forum Selection Clause Requiring Litigation in Russia Upheld

Agreements often contain forum selection clauses whereby parties can agree on a forum where any disputes would be litigated. Absent certain exceptions, New Jersey courts will uphold a forum selection clause as valid and enforceable. In Ogorodnikov v. Dikker, 2016 N.J. Super. Unpub. LEXIS 1388 (App. Div. June 17, 2016), the Appellate Division upheld a forum selection clause which provided that any disputes would be litigated in Russia.

New Jersey courts will uphold the parties’ choice of a forum selection clause unless the clause fits into one of three exceptions to the general rule: “(1) the clause is a result of fraud or “overweening” bargaining power; (2) enforcement would violate the strong public policy of New Jersey; or (3) enforcement would seriously inconvenience trial.” Caspi v. Microsoft Network, 323 N.J. Super. 118 (App. Div. 1999).

None of these exceptions applied in this case. The complaint concerned a commercial deal that the parties negotiated in Russia, involving property located in Russia. Further, the contract was drafted by plaintiff’s attorney in Russia and was signed in Russia. Also, important witnesses and public records concerning the case were all located in Russia.

In this case, it was the plaintiff seeking to invalidate the clause based upon the concern that the defendant, who now resides in New Jersey, would be unwilling to return to Russia to participate in the litigation there. He had additional concerns over whether a Russian complaint could be subject to dismissal based upon lack of in personam jurisdiction over the defendant, as well as the enforceability of any Russian judgment in New Jersey.

However, the Appellate Division noted that the plaintiff cited to no Russian statutes or cases or offered a Russian legal expert to support his supposition that the Russian courts would not have jurisdiction over the defendant merely because he now resides in New Jersey. Further, at the oral argument in this case, the defendant’s counsel conceded that his client would not raise the defense of lack of personal jurisdiction. By agreeing to the forum selection clause, he admitted that his client had waived that defense.

The trial court had dismissed the complaint without prejudice to the plaintiff’s right to file his complaint in a Russian court, as provided in the forum selection clause. The Appellate Division agreed with the trial court’s decision and affirmed.

This case points out the importance of some of the “boilerplate” clauses found in agreements. Clauses in a contract such as choice of law, forum selection, and arbitration provisions can impact and/or limit a party’s ability to litigate a dispute, should one arise. One must carefully read not only the substantive terms of a contract but also pay close attention to these boilerplate type of provisions, typically placed at the end of an agreement. Otherwise, you may get stuck litigate with the court applying law from another state, litigating in another state (or country!), or giving up your rights to litigate in a court of law and be forced to arbitrate your dispute. Before you sign, read your contract closely and be certain you understand the significance of these “boilerplate” clauses.

Tags: Appellate Division, clause, forum selection, personam jurisdiction