Most commercial contracts contain a choice of law and forum selection clause. If the contract says that disputes between the parties will only be heard in Delaware courts, the defendant can move to dismiss based on documentary evidence – the contract and the forum selection clause. Similarly, if a plaintiff files a breach of contract case in New York and the contract says that Delaware law applies (but is silent as to where the case should be heard), a New York court can hear the case and apply Delaware law to decide the issues. “Generally, courts will enforce a choice-of-law clause so long as the chosen law bears a reasonable relationship to the parties or the transaction.” Welsbach Elec. Corp. v. MasTec N. Am., Inc., 7 N.Y.3d 624, 629 (2006). But the Court of Appeals explained that New York courts should not apply another state’s law if it would violate some fundamental New York public policy. This is difficult to show. The exception is generally reserved “for those foreign laws that are truly obnoxious.” Id.

So if a contract contains a forum selection and choice of law clause, can a plaintiff avoid being sent out of state by arguing that the law of that other state conflicts with New York public policy? Justice Alan Scheinkman considered that in USA-India Export-Import, Inc v. Coca-Cola Refreshments USA, Inc., Index No. 53047/2014.

In that case, Plaintiff sued on behalf of a putative class alleging that Coca-Cola violated New York’s Returnable Container Act (the “Bottle Bill”) by imposing a charge for returnable containers (the bottle deposit). Plaintiffs alleged that Coca-Cola was not permitted to pass this charge on to them and, by doing so, it violated New York law and policy. Coca-Cola moved to dismiss on the ground that its contract with Plaintiffs required them to litigate any claim related to the contract in Georgia.

The first question the Court addressed was whether New York or Georgia law governed the enforcement of the forum selection clause. Finding the question more procedural than substantive, Justice Scheinkman determined that “the Court shall apply New York law in determining the enforceability and scope of the forum selection clause.”

Applying New York law, Justice Scheinkman found that the case should be heard in Georgia courts, which were free to apply New York law. “Here, the Plaintiffs’ real issue is not so much with the forum in which they agreed to litigate their disputes with Defendant.” Instead, “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.” Justice Scheinkman found no reason to believe that Georgia courts would be indifferent to claims based on New York law. “That Georgia does not have a bottle bill does not mean that the courts in Georgia will inevitably be hostile to fair consideration of claims based on the laws of states which have such bill.”

Thus, if the contract contains both a choice of venue and choice of law provision, and the choice of venue is somewhere other than New York, a defendant can move to dismiss based on documentary evidence. In that case, the Court will not consider whether the choice of law provision – or the substantive law of the other jurisdiction – violates New York public policy. That determination will be made by the court that the parties agreed to have hear the case in.

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Photo of Gregory Blue Gregory Blue

Greg Blue is Of Counsel to the firm. Greg focuses his practice on complex business litigation, with an emphasis on disputes involving financial fraud and misconduct, corporate governance, real estate investments, insurance coverage, and employment matters.

Greg is a 1995 graduate of The…

Greg Blue is Of Counsel to the firm. Greg focuses his practice on complex business litigation, with an emphasis on disputes involving financial fraud and misconduct, corporate governance, real estate investments, insurance coverage, and employment matters.

Greg is a 1995 graduate of The George Washington University Law School, where he was a member of the Law Review. He is admitted to practice in New York, New Jersey and California.