Media McKasson & Klein

Media

Beware of filing a lawsuit in your hometown when you previously agreed to a different forum

Beware of filing a lawsuit in your hometown when you previously agreed to a different forum. You might be kicked out and sent packing to the proper venue, having wasted a lot of time and legal fees

In Stoneville USA, Inc. v. Compacstone USA, Inc. (March 2020), a California distributor and a Spanish supplier with a Florida subsidiary negotiated and entered into a “Memorandum of Understanding” (similar to “heads of agreement” used by European entities before final agreements are drafted), which contained a forum selection clause requiring that disputes be resolved in Florida court under Florida law. 

The California distributor decided that since the MOU had expired and was not signed by both parties, it would ignore the forum selection clause and file suit in federal court in the Central District of California.

In its complaint, the distributor referenced and relied on the parties’ “agreement” as the basis for its breach of contract claims, but cleverly failed to reference the forum selection and choice of law clauses specifying Florida venue, jurisdiction and law, or to attach the MOU to the complaint! 

The problem for the California distributor was that both parties had abided by the terms and conditions of the MOU during its term, and even thereafter. The court found that since the parties had acted upon the agreement they were bound by its forum selection clause, and ordered the case transferred to the Florida courts. Lesson learned: you can’t be “ too cute by half,” as they say. 

McKassonKlein (Neil Klein & Rocio Ashby) represented the Florida entity, in its successful motion to transfer venue. See the full ruling by the court attached. 

Interestingly, in confirming that California has a “strong policy in favor of enforcing forum selection clauses,” the court relied on a 9th Circuit Court of Appeals decision in which Neil and Rocio successfully represented a defendant at the trial court level. Applied Medical Distribution Corp. v. Surgical Co. (2009).