This opinion is subject to revision before final
publication in the Pacific Reporter
2014 UT 13
IN THE
SUPREME COURT OF THE STATE OF UTAH
ENERGY CLAIMS LIMITED,
Petitioner,
v.
CATALYST INVESTMENT GROUP LIMITED, TIMOTHY ROBERTS,
ARM ASSET-BACKED SECURITIES, S.A., CHARLES P. BAKER,
THOMAS DEPETRILLO, CHARLES BECKER, and ROBERT BEURET,
Respondents.
No. 20120156
Filed May 9, 2014
On Certiorari to the Utah Court of Appeals
Third District, Salt Lake Dep’t
The Honorable Tyrone E. Medley
No. 090900505
Attorneys:
Jefferson W. Gross, Salt Lake City, for petitioner
Charles D. Shmerler, James H. Neale, Jami Mills Vibbert,
James L. Barnett, and Darren G. Reid, Salt Lake City, for respondents
Catalyst Investment Group Limited, Timothy Roberts, and
ARM Asset-Backed Securities, S.A.
Reid W. Lambert and Anthony M. Grover, Salt Lake City,
for respondents Christopher P. Baker, Thomas DePetrillo,
Charles Becker, and Robert Beuret
CHIEF JUSTICE DURRANT authored the opinion of the Court, in which
ASSOCIATE CHIEF JUSTICE NEHRING, JUSTICE DURHAM,
JUSTICE PARRISH, and JUSTICE LEE joined.
CHIEF JUSTICE DURRANT, opinion of the Court:
INTRODUCTION
¶1 Energy Claims Limited (ECL), a British Virgin Islands
company, filed suit in Utah district court, asserting a now defunct
ENERGY CLAIMS v. CATALYST INVESTMENT
Opinion of the Court
Utah corporation’s claims against that corporation’s former
directors, Catalyst Investment Group Limited (Catalyst),
Mr. Timothy Roberts, and ARM Asset-Backed Securities, S.A.
(ARM). All of the defendants reside, or have their principal place of
business, outside of Utah. The district court dismissed ECL’s claims
against the former directors, Catalyst, and Mr. Roberts on the basis
of forum non conveniens. It also dismissed the claims against ARM
for improper venue based on a forum selection clause. The court of
appeals affirmed these dismissals.
¶2 We granted certiorari to consider (1) whether we should
adopt a threshold choice-of-law inquiry before undertaking a forum
non conveniens analysis; (2) whether the court of appeals erred in
affirming dismissal of ECL’s claims against the directors, Catalyst,
and Mr. Roberts for forum non conveniens; and (3) whether the
court of appeals erred in affirming dismissal of ECL’s claims against
ARM for improper venue. As discussed below, we decline ECL’s
invitation to adopt the threshold choice-of-law test. But we
nevertheless conclude that the court of appeals erred in affirming
dismissal on the basis of forum non conveniens and on the basis of
improper venue. Accordingly, we remand this case for further
proceedings consistent with this opinion.
BACKGROUND 1
¶3 ECL is a British Virgin Islands company and has its
principal place of business in Tortola, British Virgin Islands. It is the
assignee of certain claims of Eneco, Inc. (Eneco), a now defunct Utah
Corporation. Eneco incorporated under Utah law in 1991 and
eventually focused its research and development on thermal chip
technology. A group of lenders, referred to by the parties as the
“2005 Noteholders,” provided millions of dollars in initial loans,
which were secured by patent rights that Eneco had previously
obtained.
¶4 In 2006, however, Eneco’s board of directors (Eneco’s
Board), which then consisted of Mr. Harold Brown, Mr. Max
Lewinsohn, Mr. Patrick Murrin, and Mr. Charles Becker, determined
1 When reviewing a motion to dismiss, “we view the facts and
construe the complaint in the light most favorable to the plaintiff and
indulge all reasonable inferences in his favor.” Prows v. Pinpoint
Retail Sys., Inc., 868 P.2d 809, 810 (Utah 1993) (internal quotation
marks omitted). We accordingly recite the facts consistent with
ECL’s complaint.
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Opinion of the Court
that Eneco would need an additional $5 million to develop a
commercially viable product. To this end, Eneco engaged the
services of Catalyst, a United Kingdom (UK) company whose
principal place of business is in London, England. The result of this
engagement was an agreement (Catalyst Agreement) for Catalyst to
provide general corporate financial advice and to assist Eneco in the
issuance of $40 million in convertible corporate bonds. Catalyst
represented that it would raise a minimum of $5 million for Eneco by
September 30, 2006. The Catalyst Agreement contained a forum
selection and choice-of-law provision, which provided that the
“[a]greement shall be governed by, and construed in accordance
with the Laws of England, and the parties hereto submit to the
exclusive jurisdiction of the Courts of England and Wales.”
¶5 Catalyst further proposed that the bonds being sold to raise
funds for Eneco would also benefit ARM, a joint-stock company
incorporated under the laws of the Grand Duchy of Luxembourg
and based principally in Luxembourg. Catalyst, acting as ARM’s
agent, recommended that Eneco issue an investment bond, the C3
Bond, that would in turn be made up of other bonds issued by Eneco
and ARM. It further advised Eneco to form two subsidiaries: Eneco
Assets, Ltd. (Eneco Assets) and Eneco Europe, PLC (Eneco Europe).
Catalyst advised Eneco to sell the right to use Eneco’s patents in the
UK to Eneco Assets. Eneco Europe would purchase shares of Eneco
Assets, and Catalyst would in turn sell shares of Eneco Europe to
third-party investors. Catalyst represented that this approach would
raise the $5 million Eneco needed to develop its product.
¶6 To facilitate this approach, Catalyst advised Eneco to
convert the debt it owed to the 2005 Noteholders into equity. Eneco
informed Catalyst, ARM, and Mr. Timothy Roberts—a UK resident
and an executive director for Catalyst as well as a director and agent
for ARM--that the 2005 Noteholders would be unlikely to go along
with the conversion absent assurances of Catalyst’s success in raising
funds for Eneco. Mr. Roberts accordingly provided written
assurances that Catalyst had raised the $5 million necessary for
Eneco. ECL alleges that these assurances were false and that, in
reliance on these false assurances, Eneco treated the 2005
Noteholders’ loans as having been converted to equity.
¶7 In early 2007, Eneco’s Board became concerned when
Catalyst failed to deliver the funds as promised. Eneco hired legal
counsel in the UK to investigate Catalyst and others for fraud and
breach of the Catalyst Agreement. In response, Catalyst, ARM, and
Mr. Roberts approached Mr. Becker, a resident of Texas, to seek his
cooperation in reconstituting Eneco’s Board in an effort to relieve
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Opinion of the Court
Catalyst and ARM of Eneco’s claims. Catalyst offered to pay
Mr. Becker or his company $300,000 toward development of Eneco’s
technology to secure his cooperation. ECL alleges that Catalyst,
ARM, Mr. Roberts, and Mr. Becker then recruited Mr. Christopher
Baker, Mr. Robert Beuret, and Mr. Thomas DePetrillo, who were
each investment bankers familiar to Catalyst, as acceptable additions
to Eneco’s Board. Mr. Baker and Mr. Beuret are both residents of
Massachusetts, and Mr. DePetrillo is a resident of Rhode Island.
Mr. Becker did not disclose to Eneco’s Board his agreement with
Catalyst, ARM, and Mr. Roberts.
¶8 Mr. Becker, Mr. Baker, Mr. DePetrillo, and Mr. Beuret
(collectively, the Director Defendants) then secretly acquired proxies
from Eneco’s shareholders to successfully reconstitute Eneco’s Board
and gain a controlling vote.2 ECL alleges that, “once in control,” the
Director Defendants sought “to accommodate their own interests
and the interests of Catalyst, ARM and [Mr.] Roberts at the expense
of Eneco.” Specifically, ECL alleges that the Director Defendants
listed Eneco’s shares publicly, enriched themselves with fees, and
declined to conduct a special shareholders meeting as required by
law—all pursuant to a conspiracy financed by Catalyst, ARM, and
Mr. Roberts.
¶9 By late 2007, Eneco was in default to the 2005 Noteholders.
Eneco had no means to cure the default, and its Board acknowledged
that the previous conversion of the debt to equity was improper.
Mr. Lewinsohn, acting through Maximillian & Co. (Maximillian), an
English sole proprietorship, notified Eneco that the 2005 Noteholders
had appointed Maximillian as their collateral agent. Maximillian
then made a number of proposals to resolve the default favorably to
Eneco and to reconstitute Eneco’s Board, all of which were rejected
by the Defendant Directors. As a result, Mr. Lewinsohn and
Mr. Murrin resigned as directors of Eneco. Further, Mr. Lewinsohn
and Maximillian, on behalf of the 2005 Noteholders, began
procedures to foreclose on Eneco’s patent rights.
¶10 Also at this time, Eneco Europe went “into administration
under the laws of the United Kingdom due to its insolvency.” This
was apparently detrimental to Catalyst’s business reputation, so
Catalyst sought to make Eneco Europe solvent again. ECL alleges
that Mr. Roberts and Catalyst accomplished this effort by inducing
2 With the addition of the Director Defendants, Eneco’s Board
then consisted of Mr. Baker, Mr. Becker, Mr. Beuret, Mr. DePetrillo,
Mr. Brown, Mr. Lewinsohn, and Mr. Murrin.
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Opinion of the Court
the Director Defendants, without consideration, to forgive Eneco
Europe’s debt to Eneco.
¶11 In early January 2008, the Director Defendants entered into
an agreement with Catalyst, ARM, and Mr. Roberts (Subscription
Agreement) in which ARM agreed to finance Eneco’s expected
bankruptcy by purchasing $225,000 worth of shares in Eneco in
return for a release of any prior commitment for ARM to provide
funding to Eneco. The Subscription Agreement “supercede[d] and
revoke[d]” any prior commitments from Catalyst, ARM, and
Mr. Roberts. The Subscription Agreement contained a forum
selection clause providing that “[a]ny dispute, controversy or claim
arising out of or related to the agreement shall be brought
exclusively before the courts of England [and] Wales.” It also
contained a choice-of-law provision, which stated that the
“agreement shall be governed by, and construed and enforced in
accordance with the laws of England [and] Wales.” ECL alleges that
the Director Defendants “essentially caused Eneco to release million
dollar claims against the Defendants for fraud and breach of contract
in exchange for $225,000.”
¶12 Eneco subsequently filed for Chapter 11 bankruptcy in the
United States Bankruptcy Court of the District of Utah. In June 2008,
Eneco’s court-appointed trustee converted the case to a Chapter 7
bankruptcy and liquidated Eneco’s assets. And in November 2008,
the trustee assigned Eneco’s causes of action to ECL in exchange for
$750,000.
¶13 ECL then filed three claims in the Third Judicial District
Court of Utah on January 9, 2009, including (1) a claim for breach of
fiduciary duty against the Director Defendants; (2) a claim for civil
conspiracy against the Director Defendants, Catalyst, ARM, and
Mr. Roberts; and (3) a claim for aiding and abetting breaches of
fiduciary duty against Catalyst, ARM, and Mr. Roberts. All of the
parties named in the complaint reside, or have their principal place
of business, outside of Utah.
¶14 Catalyst and Mr. Roberts filed separate motions to dismiss
ECL’s complaint based on forum non conveniens. ARM also moved
to dismiss for lack of personal jurisdiction and improper venue
based on the Subscription Agreement’s forum selection clause. 3 The
Director Defendants later joined in Catalyst’s and Mr. Roberts’s
3 The district court did not reach ARM’s lack of personal
jurisdiction claim, and it is not before us on appeal.
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Opinion of the Court
motion to dismiss on forum non conveniens grounds and consented
to the jurisdiction of English courts.
¶15 The district court granted the motions. It dismissed ECL’s
claims against Catalyst, Mr. Roberts, and the Director Defendants for
forum non conveniens. In so doing, it analyzed and balanced five
factors to conclude that England is a more appropriate forum for this
dispute: (1) the location of the parties; (2) the primary location of the
fact situation creating the controversy; (3) the location of evidence
and witnesses; (4) the enforceability of any judgment; and (5) the
burden on the court of litigating matters that may be of limited local
concern.
¶16 The court also dismissed the claims against ARM for
improper venue, concluding that the forum selection clause in the
Subscription Agreement is sufficiently broad to encompass ECL’s
tort claims. The court of appeals affirmed as to both motions to
dismiss. 4 We granted certiorari and have jurisdiction pursuant to
section 78A-3-102(3)(a) of the Utah Code.
STANDARD OF REVIEW
¶17 “On certiorari we review the decision of the court of
appeals, not the decision of the trial court. In doing so, we review for
correctness, giving the court of appeals’ conclusions of law no
deference.” 5 Additionally, we “apply the same standard of review
used by the court of appeals.” 6
ANALYSIS
¶18 We first consider ECL’s proposal that we adopt a choice-of-
law inquiry as a threshold to our forum non conveniens analysis.
Next, we consider whether the court of appeals erred in affirming
dismissal as to the Director Defendants, Catalyst, and Mr. Roberts
for forum non conveniens. Finally, we consider whether the court of
appeals correctly upheld the dismissal of ARM based on the forum
selection clause in the Subscription Agreement.
I. WE REJECT ECL’S PROPOSED THRESHOLD CHOICE-OF-LAW
INQUIRY BECAUSE IT IS INCONSISTENT WITH THE NEED TO
4 Energy Claims Ltd. v. Catalyst Inv. Grp. Ltd., 2012 UT App 32,
¶ 55, 275 P.3d 257.
5 Grand Cnty. v. Rogers, 2002 UT 25, ¶ 6, 44 P.3d 734 (internal
quotation marks omitted).
6 Coulter & Smith, Ltd. v. Russell, 966 P.2d 852, 855 (Utah 1998).
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Opinion of the Court
RETAIN FLEXIBILITY IN OUR FORUM NON CONVENIENS
ANALYSIS
¶19 ECL invites us to adopt a threshold choice-of-law inquiry
that would require Utah courts to first determine whether Utah law
applies to a given dispute and, if so, bar dismissal on forum non
conveniens grounds without undertaking a forum non conveniens
analysis. ECL’s proposed test comes from the Tenth Circuit. In
Gschwind v. Cessna Aircraft Co., the Tenth Circuit stated that “[t]here
are two threshold questions in the forum non conveniens
determination: first, whether there is an adequate alternative forum
. . . and second, whether foreign law applies. If the answer to either
of these questions is no, the forum non conveniens doctrine is
inapplicable.” 7 The first prong of the threshold test is
uncontroversial. All courts consider the availability of an adequate
alternative forum at the outset of a forum non conveniens analysis. 8
¶20 The Tenth Circuit goes a step further, however, by requiring
a second threshold determination that foreign law applies to the
dispute. It is apparently the only federal circuit court to require this
threshold determination in cases not governed by federal statutes. 9
And even when a federal statute does govern the dispute, not all
circuits require the threshold determination.10 We decline to follow
7 161 F.3d 602, 605–06 (10th Cir. 1998) (citations omitted).
8 Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254 n.22 (1981) (“At the
outset of any forum non conveniens inquiry, the court must determine
whether there exists an alternative forum.”); see also Kish v. Wright,
562 P.2d 625, 627–28 (Utah 1977) (stating “that the pre-requisite
required [for forum non conveniens] is that another alternate,
available forum is still open to the plaintiff”).
9 See Lonny Sheinkopf Hoffman & Keith A. Rowley, Forum Non
Conveniens in Federal Statutory Cases, 49 EMORY L.J. 1137, 1182 (2000)
(analyzing federal approaches to forum non conveniens in disputes
governed by federal statute and recognizing that the Tenth Circuit
has gone a step beyond other courts by “requiring a finding that
foreign law governs as a prerequisite to conducting [a forum non
conveniens analysis]—even in non-federal statutory cases” (footnote
omitted)).
10 See, e.g., Allstate Life Ins. Co. v. Linter Grp. Ltd., 994 F.2d 996,
1002 (2d Cir. 1993) (citation omitted) (“While . . . United States courts
have an interest in enforcing United States securities laws, this alone
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Opinion of the Court
the Tenth Circuit and instead conclude that ECL’s proposed test is
inconsistent with the need to retain flexibility in the forum non
conveniens analysis.
¶21 Our decision on this point is supported by the United States
Supreme Court’s analysis in Piper Aircraft Company v. Reyno. 11 In
Piper, the Supreme Court held that “the possibility of an unfavorable
change in law should not, by itself, bar dismissal” on forum non
conveniens grounds. 12 The case involved a wrongful-death action
stemming from a plane crash in Scotland. 13 The plane and its
propellers were manufactured in the United States, and the plaintiff
filed suit in California because United States tort law was more
favorable than Scotland’s. 14
¶22 After the case was transferred to Pennsylvania, the
defendants moved to dismiss for forum non conveniens, and the
district court concluded that Scotland provided a more appropriate
forum for the dispute. 15 The Third Circuit reversed. It determined
that dismissal for forum non conveniens was inappropriate if it
worked a change in the applicable law unfavorable to the plaintiff.16
The Supreme Court disagreed and concluded that “[t]he possibility
of a change in substantive law should ordinarily not be given
does not prohibit them from dismissing a securities action on the
ground of forum non conveniens.”).
11 454 U.S. at 238. While federal authority of course does not
control our decision in this case, we consider it highly persuasive
given our sparse case law on the doctrine of forum non conveniens.
Since we first applied the doctrine in Mooney v. Denver & R.G.W.R.
Co., 221 P.2d 628 (Utah 1950), we have only revisited the issue twice.
See Summa Corp. v. Lancer Indus., Inc., 559 P.2d 544 (Utah 1977); Kish,
562 P.2d 625. In both instances, we cited heavily to federal authority.
See, e.g., Summa, 559 P.2d at 546 (citing the United States Supreme
Court’s decision in Gulf Oil v. Gilbert, 330 U.S. 501 (1947), for the
appropriate factors to consider when conducting a forum non
conveniens analysis).
12 Piper, 454 U.S. at 238.
13 Id. at 238–40.
14 Id. at 240.
15 Id. at 241.
16 Id. at 246.
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conclusive or even substantial weight in the forum non conveniens
inquiry.” 17
¶23 ECL correctly points out that Piper addressed the issue of a
change in law incident to a change in forum—not whether dismissal
is appropriate when the plaintiff files in a forum whose law applies.
But Piper applies persuasively to both situations. First, Piper
recognized that “[i]f substantial weight were given to the possibility
of an unfavorable change in law, . . . dismissal might be barred even
where trial in the chosen forum was plainly inconvenient.” 18 The
same is true for ECL’s proposed test. Dismissal would be barred
whenever Utah law applies to the dispute, regardless of whether
litigation in the chosen forum was plainly inconvenient.
¶24 Second, Piper emphasized the need to “retain flexibility” in
the forum non conveniens analysis and to avoid rigid rules: “[i]f
central emphasis were placed on any one factor, the forum non
conveniens doctrine would lose much of the very flexibility that
makes it so valuable.” 19 This point is also true for ECL’s proposed
test. If Utah law applies to a dispute, then ECL’s threshold test
would prevent us from considering any other factor that might
weigh strongly in favor of litigating the dispute in another
jurisdiction. This is the very rigidity that Piper rejected.
¶25 Finally, Piper recognized that “if conclusive or substantial
weight were given to the possibility of a change in law, the forum non
conveniens doctrine would become virtually useless” because
plaintiffs ordinarily “select that forum whose choice-of-law rules are
most advantageous.” 20 Likewise, our forum non conveniens analysis
will lose much of its application under ECL’s proposed test because
many disputes—like the instant case—are governed by choice-of-law
provisions. If one such provision favored Utah law, we would be
unable to dismiss under ECL’s threshold test regardless of how
inconvenient litigation in Utah might be. For all these reasons, we
conclude that ECL’s proposed threshold test is inconsistent with the
need to maintain flexibility in the forum non conveniens analysis
and accordingly decline to adopt it.
17 Id. at 247.
18 Id. at 249.
19 Id. at 249–50.
20 Id. at 250.
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II. THE COURT OF APPEALS FAILED TO GIVE ADEQUATE
DEFERENCE TO ECL’S CHOICE OF FORUM AND FAILED TO
BALANCE ECL’S POTENTIAL BURDEN OF HAVING TO
LITIGATE IN ENGLAND
¶26 “An evaluation of a motion to dismiss on the grounds of
forum non conveniens proceeds in several stages.” 21 At the first stage,
courts must determine whether the plaintiff’s choice of forum is
entitled to deference. 22 Next, courts “determine whether an adequate
alternative forum exists.” 23 If an adequate alternative forum exists,
courts then proceed to the final stage “and balance factors of
[convenience] to decide, based on weighing the relative hardships
involved, whether the case should be adjudicated in the plaintiff’s
chosen forum or in the alternative forum suggested by the
defendant.” 24
¶27 We review a dismissal on forum non conveniens grounds
for an abuse of discretion. 25 We reverse only if (1) “the district court
relied on an erroneous conclusion of law” or (2) “there was no
evidentiary basis for [its] ruling.” 26 While this standard is highly
deferential, it requires us to reverse when a lower court fails to
“follow the governing legal standards.” 27
¶28 ECL argues that reversal is appropriate in this case because
the court of appeals failed to follow the governing legal standard in
affirming the district court’s dismissal for forum non conveniens. It
argues that the court of appeals (1) gave too little deference to its
choice of forum and (2) failed to consider its potential burden of
having to litigate in England. 28 We discuss these points in turn and
21 Pollux Holding Ltd. v. Chase Manhattan Bank, 329 F.3d 64, 70 (2d
Cir. 2003).
22 Id.
23 Id.
24 Id.
25 Kish v. Wright, 562 P.2d 625, 628 (Utah 1977).
26 Kilpatrick v. Bullough Abatement, Inc., 2008 UT 82, ¶ 23, 199 P.3d
957 (internal quotation marks omitted).
27Iragorri v. United Techs. Corp., 274 F.3d 65, 72 (2d Cir. 2001) (en
banc).
28 ECL presents three additional arguments in support of its claim
that the court of appeals erred in affirming dismissal on the basis of
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conclude that the court of appeals erred both in assigning less
deference to ECL’s choice of forum than it would were ECL a Utah
corporation and in failing to properly consider and balance its
potential burden of having to litigate in England. Having clarified
the applicable legal standard, we leave the final decision as to the
appropriate outcome of the forum non conveniens analysis to the
district court on remand. But to assist the court in this respect, we
offer some instruction on the convenience factors we articulated in
Summa Corporation v. Lancer Industries, Inc. 29
A. Because This Case Has a Bona Fide Connection to Utah, the Court of
Appeals Erred in Assigning Less Deference to ECL’s Choice of Forum
¶29 The court of appeals concluded that “courts typically afford
significantly less deference to the choice of forum by a foreign
plaintiff” than to a resident plaintiff because that choice “is not
obviously convenient.” 30 But ECL contends that, because it is
asserting the claims of a Utah corporation in Utah, the court of
appeals erred in affording less deference to its choice of forum. We
agree.
¶30 As a general matter, a plaintiff’s choice of forum is entitled
to deference when the plaintiff has brought suit in its home
jurisdiction. 31 A foreign plaintiff who sues in the United States,
however, is generally entitled to less deference. 32 But these general
forum non conveniens. First, it argues that the evidence of
inconvenience to the Director Defendants, Catalyst, and Mr. Roberts
was inadequate and that, more specifically, the court of appeals
erred by looking to ECL’s complaint for evidence of inconvenience.
Second, it contends that the court of appeals’ decision conflicts with
the Open Courts provision in the Utah Constitution. And finally, it
claims that, even if dismissal was appropriate as to Catalyst and
Mr. Roberts, the court of appeals erred in not requiring the district
court to allow ECL to proceed against the Director Defendants in
Utah. Because we base our decision on the legal errors discussed
above, we decline to reach these arguments.
29 559 P.2d 544 (Utah 1977).
30 Energy Claims Ltd. v. Catalyst Inv. Grp. Ltd., 2012 UT App 32,
¶ 29, 275 P.3d 257.
31 Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255–56 & 256 n.23
(1981); Koster v. (Am.) Lumbermens Mut. Cas. Co., 330 U.S. 518, 524
(1947).
32 Piper, 454 U.S. at 255–56.
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rules do not address the unique issue presented in this case: a
foreign plaintiff asserting the claims of a Utah corporation in that
corporation’s home jurisdiction.
¶31 For guidance on this issue, we turn to the Second Circuit’s
decision in Iragorri v. United Technologies Corp. There, the court
addressed the level of deference required for a United States
plaintiff’s choice of forum in a United States district other than that
of the plaintiff’s home district. 33 The court explained that the general
rules of deference discussed above are based on the idea that “a
plaintiff’s choice of her home forum . . . is presumed to be
convenient.” 34 The same is not true for a foreign plaintiff, whose
choice of a United States forum is more likely related to reasons that
have nothing to do with convenience, such as forum shopping for
higher damages awards. 35 But the court rejected the idea that
“deference is given to the plaintiff’s choice of forum only when the
plaintiff sues in the plaintiff’s home district” and warned against
using citizenship as a “proxy” for convenience. 36
¶32 It determined instead that the general rules of deference
outlined above stand for a broader principle “that we give greater
deference to a plaintiff’s forum choice to the extent that it was
motivated by legitimate reasons.” 37 It concluded:
the greater the plaintiff’s or the lawsuit’s bona fide
connection . . . to the forum of choice and the more it
appears that considerations of convenience favor the
conduct of the lawsuit in the United States, the more
difficult it will be for the defendant to gain dismissal
for forum non conveniens. 38
¶33 We agree with the Second Circuit’s reasoning and
accordingly analyze whether ECL’s choice of Utah as its forum for
litigating its claims was motivated by legitimate reasons. Iragorri tells
us that one such legitimate reason is the “plaintiff’s or the lawsuit’s
33 274 F.3d at 71.
34 Id.
35 Id.
36 Id. at 72, 74.
37 Id. at 73.
38 Id. at 72 (footnotes omitted).
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bona fide connection . . . to the forum of choice.” 39 Here, ECL, as a
British Virgin Islands company, did not have the option of bringing
suit in its home jurisdiction of Tortola because that jurisdiction had
no connection to the facts of this case. After Eneco went into
bankruptcy and ECL purchased its claims, ECL was forced to choose
between Utah and England as the jurisdictions with the strongest
factual connections to Eneco’s claims. It was entirely reasonable and
legitimate for ECL to select Utah as its forum of choice. Utah was,
after all, Eneco’s home jurisdiction and presumably the jurisdiction
Eneco itself would have chosen if it were suing on its own behalf.
We accordingly conclude that ECL’s choice of Utah is entitled to
deference given ECL’s lawsuit’s bona fide connection to Utah.
¶34 Another factor that “necessarily affects a plaintiff’s choice of
forum is the need to sue in a place where the defendant is amenable
to suit.” 40 In selecting its forum, ECL was faced with the task of
securing personal jurisdiction over both the Catalyst Defendants and
the Director Defendants, whose residences and principal places of
business are scattered among London, Luxembourg, Massachusetts,
Rhode Island, and Texas. At the outset of litigation, Utah appeared
to be the only jurisdiction in which ECL could properly sue all the
defendants. 41 Therefore, ECL’s choice of Utah is also legitimate and
entitled to deference on the ground that it appeared necessary to sue
here to obtain jurisdiction over both the Catalyst and Director
Defendants. We accordingly conclude that the court of appeals failed
to give adequate deference to ECL’s selection of Utah as its forum of
choice.
B. The Court of Appeals Failed to Properly Consider and Balance ECL’s
Potential Burden of Having to Litigate in England
¶35 The appropriate level of deference for a plaintiff’s choice of
forum is merely the first step in the forum non conveniens analysis.
Regardless of the level of deference due, courts must still analyze
and weigh the convenience factors we set forth in Summa. 42 ECL
39 Id.
40 Id.
41The defendants later consented to jurisdiction in England for
purposes of their motions to dismiss.
42 See id. at 73 (“The deference given to a plaintiff’s choice of
forum does not dispose of a forum non conveniens motion. It is only
the first level of inquiry. Even after determining whether the
(continued)
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Opinion of the Court
challenges the court of appeals’ analysis of the Summa factors on the
ground that it failed to properly analyze and consider ECL’s
potential burden of having to reinstate its suit in England. Again, we
agree.
¶36 In Summa, we outlined five factors to guide a court’s forum
non conveniens analysis. 43 These factors include (1) “the location of
the primary parties”; (2) the location “where the fact situation
creating the controversy arose”; (3) “the ease of access to proof,
including the availability and costs of obtaining witnesses”; (4) “the
enforceability of any judgment that may be obtained”; and (5) “the
burdens that may be imposed upon the court in question in litigating
matters which may not be of local concern.” 44 These factors,
however, are not exclusive. 45 We stress again that the forum non
conveniens analysis is a flexible one and should take account of all
relevant considerations. 46
¶37 Even in Summa we recognized that, in addition to the five
factors outlined above, courts must take into account the practical
burden plaintiffs will face in filing a new action after dismissal for
forum non conveniens. 47 Although we did not explain exactly how
consideration of the plaintiff’s burden should factor into the overall
analysis, we now clarify that it should be considered as one of the
relevant factors in the overall balance of convenience. In Summa, for
example, we balanced the defendant’s alleged inconvenience of
having to litigate in Utah—“the logistics of arranging for testimony,
and/or depositions of witnesses from Florida and California”—
against the plaintiff’s burden of “again going through [the] total
process in another state” of “engaging counsel [and] initiating and
plaintiff’s choice is entitled to more or less deference, a district court
must still conduct the analysis [of the convenience factors].”).
43 559 P.2d at 546.
44 Id.
45 See id. (stating that the five factors are merely “among the
factors proper to be considered”).
46 Piper, 454 U.S. at 249–50.
47 Summa, 559 P.2d at 547; see also Pollux, 329 F.3d at 75 (stating
that courts must “weigh defendant’s hardships if jurisdiction is
retained in the forum of plaintiff’s choice against plaintiff’s
hardships if the motion to dismiss is granted and plaintiff is forced
to begin suit anew in a different forum”).
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getting the action under way.”48 This is consistent with the approach
taken by the majority of federal courts that “a plaintiff’s financial
hardships . . . [are] one factor to be weighed in determining the
balance of convenience.” 49 Accordingly, the court of appeals should
have analyzed whether the district court properly considered and
balanced ECL’s potential burden of having to litigate in England.
¶38 ECL alleges that, if forced to litigate in England, it would
(1) be deprived of its choice of counsel and ability to pursue its
claims on a contingent fee basis; (2) lose its claim under Utah law for
punitive damages; and (3) need to post a bond sufficient to cover the
defendants’ attorney fees. Although the district court properly
recognized that it should weigh the Summa factors against
considerations favoring ECL in its forum non conveniens analysis, it
never specifically analyzed or balanced ECL’s alleged hardships.
And the court of appeals discussed ECL’s burden exclusively in
terms of whether “England is an inadequate alternative forum” or
whether “ECL [could] obtain an enforceable judgment in the English
courts.” 50 But, as discussed above, the adequacy of England as an
alternative forum is a separate inquiry distinct from the question of
ECL’s potential burden, which should be considered as a single
factor in the overall convenience analysis. 51 The court of appeals
accordingly erred in failing to properly consider and balance ECL’s
alleged burden.
C. Instructions for Remand
¶39 While we leave it to the district court on remand to
reexamine the defendants’ motion to dismiss for forum non
conveniens in light of the clarifications we make above, we take the
opportunity to make two points concerning the convenience factors
we articulated in Summa. First, in analyzing the third Summa factor—
“the ease of access to proof”52—both the district court and the court
48 Summa, 559 P.2d at 547.
49 See Murray v. British Broad. Corp., 81 F.3d 287, 292 (2d Cir. 1996)
(discussing federal authority and concluding that a majority of
courts treat the plaintiff’s financial hardship as one factor to be
weighed in the balance of convenience).
50 Energy Claims, 2012 UT App 32, ¶ 43.
51 Murray, 81 F.3d at 292 (stating that plaintiff’s financial hardship
should be weighed as a single factor “after the court determines that
an alternative forum is available”).
52 Summa, 559 P.2d at 546.
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Opinion of the Court
of appeals commented on the location of documentary evidence.53
We clarify that the location of documentary evidence is of little
relevance to the overall forum non conveniens analysis. Given that in
today’s world litigants can easily transport electronic documents to
virtually any forum of litigation, the location of documentary
evidence will rarely, if ever, tip the scale of convenience in favor of a
given jurisdiction.
¶40 Next, both the district court and the court of appeals
analyzed the fifth Summa factor—“the burdens that may be imposed
upon the court in question in litigating matters which may not be of
local concern” 54—and concluded that “the court and the citizens of
Utah would be taking on . . . what amounts to an enormous burden
of time, expense and resources to maintain this litigation” in light of
the “minimal local interest” involved.55 We clarify now that the
relevance of this factor hinges on the level of deference afforded the
plaintiff’s choice of forum. If a plaintiff chooses Utah for legally
legitimate reasons, as we have concluded ECL has done here, then
the burden on the court in question carries little weight.
¶41 Thus, if the plaintiff can offer legally legitimate reasons for
selecting Utah as the forum of choice and has established personal
jurisdiction over the defendant, that is sufficient to outweigh any
burden the courts or citizens of Utah might face in litigating the
matter. With these clarifications, we remand to the district court for
further analysis of the defendants’ motion to dismiss for forum non
conveniens.
III. IF THE DISTRICT COURT DETERMINES THAT THE FORUM
SELECTION CLAUSE IS ENFORCEABLE, IT SHOULD INCLUDE
THE CLAUSE AS AN ADDITIONAL FACTOR IN ITS FORUM
NON CONVENIENS ANALYSIS
¶42 In addition to the factors discussed above, there is another
wrinkle in this case, as one of the defendants, ARM, relies upon a
forum selection clause in its opposition to ECL’s choice of forum. We
will now consider what role this clause should play in the district
court’s forum non conveniens analysis.
53 Energy Claims, 2012 UT App 32, ¶ 34.
54 Summa, 559 P.2d at 546.
55 Energy Claims, 2012 UT App 32, ¶ 44 (alteration in original)
(internal quotation marks omitted).
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¶43 The court of appeals concluded that the plain language of
the forum selection clause in the Subscription Agreement
encompassed ECL’s tort claims against ARM. 56 It also concluded that
the district court did not exceed its discretion in enforcing the forum
selection clause and sending ECL’s claims against ARM to
England. 57 The court of appeals’ decision on this point was
influenced heavily by its forum non conveniens ruling that would
have sent ECL’s claims against the Director Defendants, Catalyst,
and ARM to England as well. The court stated that “[a] refusal to
enforce the forum selection clause in the Subscription Agreement
would have resulted in multiple litigations in separate
jurisdictions.” 58 That is, ECL would have had to proceed against
ARM in Utah and against all the other defendants in England.
According to the court of appeals, that result was unacceptable
because it would “increase[] the cost of litigation” and “contravene[]
the objective of modern procedure, which is to litigate all claims in
one action if . . . possible.” 59
¶44 Our decision above to remand the forum non conveniens
issue to the district court for a reevaluation of the convenience
factors, however, renders the court of appeals’ concerns hypothetical
at this point. Depending on the outcome of the district court’s forum
non conveniens analysis—which, as explained below, should also
include consideration of the forum selection clause in ARM’s
contract—ECL’s claims against the Director Defendants, Catalyst,
and Mr. Roberts could either remain in Utah or be sent to England.
But the court of appeals’ concerns are nevertheless well founded.
Our decision as to the scope of the forum selection clause—one way
or the other—could force ECL to litigate in both Utah and England,
just as the court of appeals feared. Nevertheless, despite the fact that
modern rules of procedure look unfavorably upon bifurcating trials
between two jurisdictions—particularly where those trials are based
upon the same set of operative facts—we conclude that the district
court should have the discretion to reach such a result based on the
outcome of its forum non conveniens analysis. We also conclude
that, if enforceable, ARM’s forum selection clause should be weighed
56 Energy Claims Ltd. v. Catalyst Inv. Grp. Ltd., 2012 UT App 32,
¶ 51, 275 P.3d 257.
57 Id. ¶ 53.
58 Id.
59 Id. (internal quotation marks omitted).
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Opinion of the Court
in the district court’s forum non conveniens analysis. Accordingly,
we conclude as follows regarding ARM’s forum selection clause.
A. The Court of Appeals Did Not Err in Its Conclusion that the Forum
Selection Clause Includes the Tort Claims
¶45 The clause at issue here governs “any dispute, controversy
or claim” that is “related to” the parties’ contract. 60 Both the district
court and the court of appeals determined that this broad language,
particularly the use of the term “any,” does not support a distinction
between contract claims and tort claims. We agree. As the court of
appeals observed, “ECL’s cause of action for breach of fiduciary duty
is based on terms embodied in the [contract.]” 61 Accordingly, ECL’s
claims clearly “relate to” the contract and fall within the broad
category of “any dispute, controversy or claim.” Thus, we agree with
the court of appeals’ conclusion that the forum selection clause is
sufficiently broad to cover the tort claims.
B. Prior to Including the Forum Selection Clause in Its Forum Non
Conveniens Analysis, the District Court Must Determine Whether It Is
Enforceable
¶46 Nevertheless, even if the forum selection clause’s scope is
broad enough to encompass ECL’s claims, before the district court
can include the forum selection clause in its forum non conveniens
analysis, it must first address the issue of whether that clause is
enforceable. ECL argues that the contract itself, including the forum
selection clause, is unenforceable because it was the product of a
civil conspiracy. Typically, on a motion to dismiss “we assume that
the factual allegations in the complaint are true and we draw all
reasonable inferences in the light most favorable to the plaintiff.” 62
We have also suggested that this standard may apply even where
the motion to dismiss is brought for lack of jurisdiction. 63 Under this
60 Energy Claims, 2012 UT App 32, ¶ 51 (internal quotation marks
omitted).
61 Id. ¶ 50.
62Berneau v. Martino, 2009 UT 87, ¶ 3, 223 P.3d 1128 (internal
quotation marks omitted).
63 In the case of In re Uintah Basin, we reviewed a district court’s
dismissal for lack of subject matter jurisdiction and noted that the
factual allegations taken from the petitioner’s compliant “must be
deemed true” and that “this court must consider all reasonable
inferences to be drawn therefrom in a light most favorable to
[petitioner].” 2006 UT 19, ¶ 14 n.7, 133 P.3d 410. Nevertheless, in that
(continued)
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Opinion of the Court
standard, it could be argued that ECL’s allegation of civil conspiracy
would be sufficient to render the forum selection clause
unenforceable. This issue—whether an allegation of civil conspiracy,
standing alone, is sufficient to render a forum selection clause
unenforceable—is a question of first impression for our court. For
the reasons stated below, we conclude that the district court should
analyze the forum selection clause based upon the standard
articulated below, holding an evidentiary hearing, if necessary.
Then, depending on the outcome of its analysis, the district court
should include an assessment of the forum selection clause as a
factor in its forum non conveniens analysis.
1. We Adopt the Minority Position Regarding the Issue of How a
District Court Should Treat Allegations of Fraud in the Face of a
Contract Containing a Forum Selection Clause
¶47 We have accepted the general principle that forum selection
clauses are enforceable and can limit a court’s jurisdiction. This
principle was adopted in Prows v. Pinpoint Retail Systems, Inc., where
we adopted section 80 of the Second Restatement of Conflict of
Laws: “The parties’ agreement as to the place of the action will be
given effect unless it is unfair or unreasonable.” 64 Under this
principle, forum selection clauses that “have been obtained through
freely negotiated agreements and are not unreasonable and unjust”
will be upheld as valid. 65 The party opposing enforcement of the
clause “bears the burden of proving that enforcing the clause is
unfair or unreasonable,” or “that (1) the choice-of-forum provision
was ‘obtained by fraud, duress, the abuse of economic power, or
other unconscionable means’; or (2) the courts of the chosen state
‘would be closed to the suit or would not handle it effectively or
case we also looked to other factual allegations outside the
complaint, as “set forth by the United States in its answer and
counterclaim filed in the federal court and attached as an addendum
to its brief.” Id. Furthermore, Uintah Basin did not involve a forum
selection clause. Thus, to the extent that footnote 7 of Uintah Basin is
inconsistent with the standard we articulate today, we repudiate it.
64868 P.2d 809, 812 (Utah 1993) (quoting RESTATEMENT (SECOND)
OF CONFLICT OF LAWS § 80 (Supp. 1988)).
65 Phone Directories Co. v. Henderson, 2000 UT 64, ¶ 15 n.9, 8 P.3d
256 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 n.14
(1985)) (internal quotations marks omitted).
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Opinion of the Court
fairly.’” 66 Thus, we have adopted both the general principle that
forum selection clauses are enforceable and that there are exceptions
to that principle. 67
¶48 We have not directly addressed, however, what a plaintiff
must allege or prove to prevent enforcement of a forum selection
clause where it is claimed that the clause was “obtained by fraud,
duress, the abuse of economic power, or other unconscionable
means.” 68 Accordingly, we will look to our sister states for guidance
regarding this issue. 69
¶49 Other jurisdictions have adopted two ways of dealing with
the issue of a forum selection clause that is contained within an
allegedly fraudulent contract. 70 The first, and the majority
Prows, 868 P.2d at 812 n.5 (quoting RESTATEMENT (SECOND)
66 OF
CONFLICT OF LAWS § 80 cmt. c (Supp. 1988)).
67 There is a difference under Utah law between enforcing a
forum selection clause against plaintiffs and defendants. Generally,
when filing in another state is required by the parties’ agreement,
plaintiffs are barred from bringing suit in a Utah court unless they
can prove one of the listed exceptions. As against a defendant, a
forum selection clause requiring that a case be filed in Utah creates a
presumption that a Utah court has jurisdiction over a defendant as
long as the defendant cannot prove one of the exceptions and there is
a “rational nexus between the forum selected . . . and either the
parties to the contract or the transactions that are the subject matter
of the contract.” Henderson, 2000 UT 64, ¶ 14.
68 Prows, 868 P.2d at 812 n.5 (internal quotation marks omitted).
69 State v. Montiel, 2005 UT 48, ¶ 15, 122 P.3d 571 (observing that
“[b]ecause Utah case law is not fully developed on this issue, we
look to the case law from other jurisdictions for guidance” (internal
quotation marks omitted)).
70 ECL did not raise a fraud claim in its complaint but instead
claimed that Catalyst, the board members, and ARM entered into the
contract through “unconscionable means” in furtherance of a civil
conspiracy. The tortious conduct or “unconscionable means” alleged
by ECL here is the defendants’ breach of their fiduciary duties. Still,
ECL’s claim is analogous to the fraud cases we cite herein because
ECL is likewise claiming that the clause was obtained through
improper means. The fraud cases are largely based in contract, and
ECL’s claim is premised on allegedly tortious conduct, but the
exception we adopted in Prows encompasses both types of claims,
(continued)
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Opinion of the Court
approach, 71 is to require the plaintiff to make a specific claim,
supported by evidence, “show[ing] that the forum-selection clause
itself was procured through fraud.”72 This is the approach adopted
by California, Texas, and the Fifth and Tenth Circuits, 73 and it seems
since it relates to the issue of “overreaching” generally. See Prows,
868 P.2d at 812 n.5 (“A party might also show that . . . the choice-of-
forum provision was ‘obtained by fraud, duress, the abuse of
economic power, or other unconscionable means.’” (quoting
RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 80, cmt. c (Supp.
1988)); Pohl, Inc. of America v. Webelhuth, 2008 UT 89, ¶ 29, 201 P.3d
944 (noting that a civil conspiracy claim is a “separate and distinct
cause[] of action” but that it may be premised on tortious conduct).
So although we largely cite cases which discuss forum selection
clauses obtained by “fraud,” our analysis applies equally to all
allegations of overreaching that we referred to in Pohl, including
those of ECL.
71 Edge Telecom, Inc. v. Sterling Bank, 143 P.3d 1155, 1162 (Colo. Ct.
App. 2006) (observing that “every other court to have addressed this
issue has agreed that, to render a forum selection clause
unenforceable, the party seeking to avoid the clause must show that
the clause itself was procured by fraud” (emphasis added) (citing
cases)); see also Michael D. Moberly & Carolyn F. Burr, Enforcing
Forum Selection Clauses in State Court, 39 SW. L. REV. 265, 282 (2009)
(discussing Colorado’s adoption of this approach as the “view taken
by most other courts”).
72 In re Harris Corp., No. 03-13-00192-CV, 2013 WL 2631700, at *5
(Tex. Ct. App. June 4, 2013).
73 See AMS Staff Leasing NA, Inc. v. Superior Court, No. G032507,
2004 WL 1435928, at *2 (Cal. Ct. App. June 28, 2004) (unpublished)
(“[A] claim of fraudulent inducement does not defeat [a forum
selection clause] unless the fraud claim constitutes a separate and
distinct challenge to the . . . clause itself.” (internal quotation marks
omitted)); Holeman v. Nat’l Bus. Inst., Inc., 94 S.W.3d 91, 102 (Tex.
App. 2002) (“[A] court determining whether or not to enforce a
forum selection clause will not inquire into the enforceability of the
contract in which that clause is found.”) (abrogation on other
grounds recognized by Diamond Offshore (Bermuda), Ltd. v. Haaksman,
355 S.W.3d 842, 846 (Tex. App. 2011)); Haynsworth v. Corporation, 121
F.3d 956, 963 (5th Cir. 1997) (“Fraud and overreaching must be
specific to a forum selection clause in order to invalidate it.”); Riley v.
Kingsley Underwriting Agencies, Ltd., 969 F.2d 953, 960 (10th Cir. 1992)
(continued)
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Opinion of the Court
to stem from the Supreme Court’s decision in M/S Bremen v. Zapata
Off-Shore Co. 74 The best example of this approach was explained in
Afram Carriers, Inc. v. Moeykens, where the Fifth Circuit observed that
“[a]llegations that the entire contract was procured as the result of
fraud or overreaching are inapposite to our [forum-selection clause]
enforceability determination, which must . . . precede any analysis of
the merits [of the contract’s validity].” 75 Instead, the party is required
to make “a showing that the clause results from fraud or
overreaching.” 76
¶50 The reasoning for this approach was explained by the Texas
Court of Appeals:
A party cannot avoid enforcement of a forum-
selection clause by asserting that the contract
containing the clause was procured through fraud. As
one court explained, [t]o allow a party to avoid its
obligations under a presumptively valid contract with
a prima facie valid forum-selection clause simply
because the party might carry its burden at trial would
give the party an end run around the presumption
that the forum-selection clause is enforceable. 77
In other words, the majority approach is tailored to dispel the fear
that a party could avoid the enforcement of a forum selection clause
“by merely alleging fraud or coercion in the inducement of the
contract at issue.” 78 Thus, under this approach, all forum selection
(“A plaintiff seeking to avoid a choice provision on a fraud theory
must . . . plead fraud going to the specific provision.”).
74 407 U.S. 1, 15 (1972) (“The correct approach would have been to
enforce the forum clause specifically unless Zapata could clearly show
that enforcement would be unreasonable and unjust, or that the
clause was invalid for such reasons as fraud or overreaching.”
(emphases added)).
75145 F.3d 298, 301 (5th Cir. 1998) (alterations in original)
(emphasis added) (internal quotation marks omitted).
76 Id.
In re Harris Corp., 2013 WL 2631700, at *5 (alteration in original)
77
(emphasis added) (internal quotation marks omitted).
78 A.I. Credit Corp. v. Liebman, 791 F. Supp. 427, 430 (S.D.N.Y.
1992).
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Opinion of the Court
clauses are presumed 79 to be valid, even when the validity of the
entire contract is in question, and even when the validity of the
contract is central to the suit. 80
¶51 The second (and minority) approach is to allow a plaintiff’s
claim that the contract was entered into fraudulently to be sufficient
to render the forum selection clause unenforceable. At least three
states 81 have adopted this line of reasoning: New York, Georgia and
Tennessee. 82 The benefit of this approach is that it protects
defrauded plaintiffs from being forced to litigate fraudulent
contracts in a potentially inconvenient forum not of their choosing.
¶52 We now side with the minority approach on this issue. The
major flaw with the majority approach is that the district court must
accept as valid a provision in a contract despite the plaintiff’s
contention that the entire contract was induced by fraud. We also
find it problematic that the majority approach imposes upon the
79 Moberly & Burr, supra note 71, at 267 (observing that forum
selection clauses are “presumptively valid in most states”).
80 See, e.g., Clark, 192 S.W.3d at 800 (rejecting plaintiffs’ argument
that the forum selection clause should not be enforced “because a
successful suit would result in the contracts [at issue] being ruled
void”).
81 Missouri may also be leaning in this direction. See Burke v.
Goodman, 114 S.W.3d 276, 280 (Mo. Ct. App. 2003) (analyzing
enforcement of a forum selection clause by first determining whether
or not the contract was adhesive, stating that “the forum selection
clause must have been obtained through freely negotiated
agreements”).
82 See, e.g., DeSola Grp., Inc. v. Coors Brewing Co., 199 A.D.2d 141,
141–42 (N.Y. App. Div. 1993) (reversing a lower court’s decision that
had incorrectly followed the majority approach by stating that the
“plaintiff’s allegations of fraud pervading the Agreement would
render the entire Agreement void, [rendering] the forum selection
clause contained therein . . . unenforceable”); SRH, Inc. v. IFC Credit
Corp., 619 S.E.2d 744, 746 (Ga. Ct. App. 2005) (holding that “the trial
court erred in dismissing the case on the basis of a forum selection
provision in [a] contract alleged to have been procured
by fraud”); Lamb v. MegaFlight, Inc., 26 S.W.3d 627, 631 (Tenn. Ct.
App. 2000) (“[F]raud in the underlying transaction renders a contract
clause, such as the forum selection clause at issue here,
unenforceable.”).
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Opinion of the Court
plaintiff the burden of making a “separate and distinct challenge” to
the forum selection clause itself, when the only support the plaintiff
has—the allegation that the entire contract and all of the provisions
contained therein are fraudulent—is deemed to be necessarily
inadequate. The application of this approach may also result in
defrauded plaintiffs being forced to litigate a contract that is
ultimately deemed fraudulent in a different forum as the result of a
provision they never bargained for.
¶53 We recognize, however, that the majority approach does
have the effect of avoiding the task of determining whether a
contract is valid at the motion to dismiss stage. Instead, it reserves
that issue until further discovery can be done, at which point that
issue can be adjudicated on its merits with the benefit of full
discovery. This notwithstanding, we conclude that the minority
approach is more consistent with our case law 83 and with the
standard of review employed at the motion to dismiss stage. We are
also not persuaded that the minority approach will allow plaintiffs to
freely dodge forum selection clauses, since (a) they are required to
plead fraud with particularity, and (b) the district court has the
discretion to order an evidentiary hearing, both of which will assure
that valid forum selection clauses are not rejected based on the
pleadings alone.
83 We recognize that our cases could be construed as supporting
both the majority and minority approaches. For example, in Prows v.
Pinpoint Retail Systems, Inc., we seemed to prefer the majority
approach when we held that “a plaintiff who brings an action in
violation of the choice-of-forum provision bears the burden of
proving that enforcing the clause is unfair or unreasonable,” and that
“[a] party might also show that . . . the choice-of-forum provision was
obtained by fraud.” 868 P.2d 809, 812 & n.5 (Utah 1993) (emphases
added) (internal quotation marks omitted). On the other hand, in
support of the minority approach, we stated in Phone Directories Co.
v. Henderson that “the traditional defenses allowing one to avoid an
unfair or unreasonable contract, such as duress and fraud, are available
to parties litigating the validity of a forum,” and that such provisions
are only upheld when “obtained through freely negotiated
agreements.” 2000 UT 64, ¶ 15 & n.9, 8 P.3d 256 (emphases added)
(internal quotation marks omitted).
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2. The Requirement to Plead Fraud with Particularity Protects
Against Improper Rejection of a Forum Selection Clause Due To
“Artful Pleading”
¶54 When plaintiffs bring lawsuits in violation of forum
selection clauses, they must make a showing that there is an
acceptable reason not to enforce the clause. Specifically, they must
show that enforcement of the clause is “unfair or unreasonable,” or
“that (1) the choice-of-forum provision was obtained by fraud,
duress, the abuse of economic power, or other unconscionable
means; 84 or (2) the courts of the chosen state would be closed to the
suit or would not handle it effectively or fairly.”85 Should a plaintiff
attempt to argue that the clause is unenforceable due to fraud, the
plaintiff must then satisfy rule 9(b) of the Utah Rules of Civil
Procedure, which requires “the circumstances constituting fraud . . .
[to] be stated with particularity” in the complaint. Under this rule, a
plaintiff is required to provide a “sufficiently clear and specific
description of the facts underlying the [plaintiff’s] claim” of fraud.86
And under the approach we adopt today, a plaintiff is therefore
required to plead with particularity the circumstances leading to the
fraudulent inducement of the contract. This rule provides protection
against the possibility that plaintiffs could avoid forum selection
clauses by artfully pleading around them, as the trial judge can
review the complaint to ensure that the details provided by the
plaintiff truly constitute fraudulent inducement of the contract.
3. The District Court Has the Discretion to Hold an Evidentiary
Hearing on the Issues of Fraud or Overreaching
¶55 In addition to the particularity requirement, should the
district court deem it necessary, it has the discretion to hold an
evidentiary hearing on the allegations of fraud or overreaching
before deciding whether to enforce the challenged forum selection
clause. We recognize that there will be cases, like this one, where the
entire case may hinge on the enforceability of the contract, and thus,
84 This showing may be made by demonstrating that the entire
contract was so obtained. See supra ¶¶ 47–53.
85 Prows, 868 P.2d at 812 n.5 (internal quotation marks omitted).
86 Hill v. Allred, 2001 UT 16, ¶ 14, 28 P.3d 1271 (alteration in
original) (internal quotation marks omitted); see also Riley, 969 F.2d at
960 (holding that “[a] plaintiff seeking to avoid a choice provision on
a fraud theory” must plead fraud according to rule 9(b) of the
Federal Rules of Civil Procedure).
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Opinion of the Court
if ordered, the parties may be forced to litigate much of their case
before even exiting the pleading stage of litigation. But this may
nevertheless be necessary, since the forum selection clause must be
weighed in connection with the court’s overall forum non
conveniens analysis. Accordingly, the court must determine whether
that clause is enforceable, which may require evidence to be
gathered regarding the clause, particularly where there are
allegations that the clause was improperly obtained.
¶56 Accordingly, we remand this case to the district court for
further proceedings consistent with this opinion.
CONCLUSION
¶57 We decline ECL’s invitation to adopt a choice-of-law inquiry
as a threshold to our forum non conveniens analysis and reverse the
court of appeals’ decision to uphold dismissal as to Catalyst,
Mr. Roberts, and the Director Defendants. We also reverse the court
of appeals’ decision to uphold dismissal for improper venue as to
ARM. On remand, we instruct the district court to first determine
whether the forum selection clause is enforceable, and then to
perform a forum non conveniens analysis that is consistent with this
opinion.
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