Kennecorp Mtge. Brokers, Inc. v. Country Club Convalescent Hosp., Inc.

• Decision Date: 05 May 1993
• Docket Number: No. 92-767,92-767
• Citation: 66 Ohio St.3d 173,610 N.E.2d 987
• Parties: KENNECORP MORTGAGE BROKERS, INC., Appellee, v. COUNTRY CLUB CONVALESCENT HOSPITAL, INC. et al., Appellants.
• Court: Ohio Supreme Court

Page 173

66 Ohio St.3d 173

610 N.E.2d 987

KENNECORP MORTGAGE BROKERS, INC., Appellee, v. COUNTRY CLUB CONVALESCENT HOSPITAL, INC. et al., Appellants.

No. 92-767.

Supreme Court of Ohio.

Submitted March 9, 1993.

Decided May 5, 1993.

SYLLABUS BY THE COURT

Absent evidence of fraud or overreaching, a forum selection clause contained in a commercial contract between business entities is valid and enforceable, unless it can be clearly shown that enforcement of the clause would be unreasonable and unjust.

Plaintiff-appellee, Kennecorp Mortgage Brokers, Inc., is an Ohio corporation with its main office in Toledo, Ohio. Defendant-appellant, Country Club Convalescent Hospital, Inc., is a California corporation with its main office in Santa Ana, California. Defendants-appellants Isabel Hernandez and Julia Hernandez are officers of the defendant corporation, and both reside in California. On or about April 28, 1989, defendants entered into a contract with plaintiff, whereby plaintiff was to find a construction mortgage commitment for defendants on a piece of property located in Santa Ana. It appears the contract was drafted and signed by the defendant-officers in California, and forwarded to Toledo where it was accepted by an officer of plaintiff. In pertinent part, the contract provided a choice of law and forum selection clause as follows:

" * * * All laws pertaining to this agreement shall be goverened [sic ] by the laws of the state of Ohio, as well as jurisdiction shall be in the Ohio courts."

In its complaint filed in the Lucas County Court of Common Pleas, plaintiff alleged that it arranged a loan for defendants with the American Interstate Bank, but that as a result of the actions of defendants the loan was never closed. Plaintiff further alleged that "due to the wrongful actions of each and every Defendant * * * and their intentional interference with performance of the contract with Plaintiff, Plaintiff was harmed in the amount of $130,000.00."

Defendants filed a motion to dismiss the complaint for lack of personal jurisdiction, and in an opinion and judgment entry filed April 16, 1991, the trial court granted the motion and dismissed plaintiff's complaint with prejudice.

Upon appeal, the court of appeals reversed and remanded. The appellate court noted that "[t]he modern trend is to enforce a forum selection clause in a commercial contract entered into through arms length negotiations between sophisticated business entities if the term is reasonable and fair. The Bremen v. Zapata Off-Shore Co. (1972), 407 U.S. 1 [92 S.Ct. 1907, 32 L.Ed.2d 513]." The court of appeals then gave various reasons why it should enforce the instant forum selection clause, and concluded that since the parties appear to be sophisticated business entities and there was no evidence presented indicating that the terms of the contract were not negotiated freely and at arm's length, the forum selection clause is enforceable.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Patrick R. Millican, Sylvania, for appellee.

Manahan, Pietrykowski, Bamman & Delaney and H. William Bamman, Toledo, for appellants.

A. WILLIAM SWEENEY, Justice.

The determinative issue in this appeal is whether a forum selection clause contained in an arm's-length commercial transaction between two business entities is valid and enforceable, irrespective of the number of contacts involved with the forum state. For the reasons that follow, we hold such clauses in the commercial contract context to be valid and enforceable and, therefore, affirm the decision of the court of appeals below.

Defendants-appellants contend that the forum selection clause in the instant contract violates due process based on a lack of minimum contacts between defendants and Ohio. Defendants rely on the decision in Burger King Corp. v. Rudzewicz (1985), 471 U.S. 462, 478, 105 S.Ct. 2174, 2185, 85 L.Ed.2d 528, 544-545, for the proposition that an individual's contract with an out-of-state party alone cannot automatically establish sufficient minimum contacts. Defendants argue that this court should apply the test set forth in Schulke Radio Productions, Ltd. v. Midwestern Broadcasting Co. (1983), 6 Ohio St.3d 436, 6 OBR 480, 453 N.E.2d 683, which governs choice of law contract provisions, since at least one Ohio appellate court has held that "[f]orum selection clauses are enforceable under the same restrictions as choice of law clauses." United Std. Mgt. Corp. v. Mahoning Valley Solar Resources, Inc. (1984), 16 Ohio App.3d 476, 16 OBR 559, 476 N.E.2d 724, syllabus.

In our view, however, a minimum-contacts analysis as set forth in Internatl. Shoe Co. v. Washington (1945), 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, and its progeny, is not appropriate in determining the validity of forum selection clauses in commercial contracts. See Mut. Fire, Marine & Inland Ins. Co. v. Barry (E.D.Pa.1986), 646 F.Supp. 831.

In the cause sub judice, we are dealing with two apparently sophisticated commercial parties who have entered into a multi-million dollar financing arrangement. As the court noted in Burger King, supra, at 472, 105 S.Ct. at 2182, 85 L.Ed.2d at 540, fn. 14, the requirement that a court have personal...