Durdahl v. National Safety Associates, Inc.

• Decision Date: 15 October 1999
• Citation: 988 P.2d 525
• Parties: Ricky Earl DURDAHL and Todd Allen Durdahl, Appellants (Plaintiffs), v. NATIONAL SAFETY ASSOCIATES, INC., d/b/a NSA, Appellee (Defendant).
• Court: Wyoming Supreme Court

988 P.2d 525

Ricky Earl DURDAHL and Todd Allen Durdahl, Appellants (Plaintiffs), v. NATIONAL SAFETY ASSOCIATES, INC., d/b/a NSA, Appellee (Defendant).

No. 99-8.

Supreme Court of Wyoming.

October 15, 1999.

Representing Appellants: James Richard McCarty, Casper, WY.

Representing Appellant: John I. Henley of Vlastos, Brooks, Henley & Drell, P.C., Casper, WY.

Before LEHMAN, C.J., and THOMAS, MACY, GOLDEN, and HILL, JJ.

HILL, Justice.

Ricky Earl Durdahl and Todd Allen Durdahl appeal the dismissal of their action for breach of contract, promissory estoppel, and fraudulent misrepresentation against National Safety Associates, Inc., d/b/a NSA. The district court dismissed the action based on a forum selection clause in the annual distributorship agreements signed by the Appellants which specified that all claims involving the agreement between the parties were to be brought solely in the courts of Shelby County, Tennessee.

We affirm.

ISSUES

Appellants present three issues on appeal:

1. Whether Paragraph 8 of a 1994 "Annual Renewal Notice and Agreement" precluded the Appellants from bringing suit in Wyoming based upon breaches of contract relating to agreements between the parties prior to 1994.

2. Whether Paragraph 8 of a 1994 "Annual Renewal Notice and Agreement" precluded the Appellants from bringing suit in Wyoming based upon tort theories of promissory estoppel and detrimental reliance.

3. Whether the trial court erred in dismissing the Complaint in this matter based upon Paragraph 8 of the 1994 "Annual Renewal Notice and Agreement."

NSA reduces the issues on appeal to a single statement:

The contractual terms of private parties defining the choice of law and forum in the event of a dispute should be upheld.

FACTS

Appellants' relationship with NSA began in 1990 when they completed an "Independent Dealer/Distributor Application." Pursuant to their agreement, Appellants became "dealer sales representatives" or distributors for NSA products conditioned upon the filing of an annual renewal application and payment of the requisite fees. Commencing in 1994, the annual renewal agreements contained the following provision:

I understand that this agreement is to be governed by the laws of the State of Tennessee and that the parties hereto agree that any and all claims involving this agreement shall be brought solely in the courts of Shelby County[,] Tennessee. The parties hereto consent to venue and jurisdiction as proper in the courts of Shelby County[,] Tennessee.

NSA is located in Memphis, Shelby County, Tennessee. Appellants, without reading them, dutifully signed annual renewal agreements containing the forum selection provision in 1994, 1995, 1996, and 1997.

On May 26, 1998, Appellants filed a complaint against NSA alleging breach of contract, promissory estoppel, and fraudulent misrepresentation. NSA responded with a motion to dismiss based on the forum selection provision. The motion to dismiss was supported by copies of the annual renewal agreements signed by Appellants for the years 1994 through 1997 and the affidavit of the Assistant Secretary of NSA. Appellants filed a motion in opposition supported by their own affidavits. After a hearing on November 17, 1998, the district court granted the motion to dismiss enforcing the forum selection provision on the grounds that it was not unjust or unreasonable. Appellants have now appealed that ruling to this Court.

STANDARD OF REVIEW

This is a case of first impression in Wyoming. The sole issue is whether the forum selection clause of the annual renewal contracts should be enforced. Historically, forum selection clauses were viewed with disfavor because they purported "to confer jurisdiction on specifically named courts for adjudication of future controversies," and, accordingly, "were viewed as unenforceable as `contrary to public policy' and as an effort to `oust the jurisdiction' of the forum court." Paul Business Systems v. Canon U.S.A., 240 Va. 337, 397 S.E.2d 804, 807 (1990); see also, The Bremen v. Zapata Off-Shore Company, 407 U.S. 1, 9, 92 S.Ct. 1907, 1913, 32 L.Ed.2d 513 (1972). Today, however, most courts hold that forum selection clauses are prima facie valid and enforceable unless the opposing party demonstrates that enforcement would be unreasonable under the circumstances of the case or that it was the result of fraud or unequal bargaining power. Paul Business Systems, 397 S.E.2d at 807; Professional Insurance Corporation v. Sutherland, 700 So.2d 347, 349-50 (Ala.1997); Voicelink Data Services v. Datapulse, 86 Wash.App. 613, 937 P.2d 1158, 1160-61 (Div. 1 1997); Eads v. Woodmen of the World Life Insurance, 785 P.2d 328, 330-31 (Okl.App.1989); Volkswagenwerk, A.G. v. Klippan, GmbH, 611 P.2d 498, 503-04 (Alaska 1980). In order for a forum selection clause to be unreasonable, enforcement must contravene a strong public policy, or the chosen forum must be seriously inconvenient for trial of the action. Mellon First United Leasing v. Hansen, 301 Ill.App.3d 1041, 235 Ill.Dec. 508, 705 N.E.2d 121, 125 (2 Dist.1998) (quoting The Bremen, 407 U.S. at 15-16, 92 S.Ct. at 1916-17)).

The rationale behind the modern approach to enforcing forum selection clauses is that it "serves the salutary purpose of enhancing contractual predictability," Voicelink Data Services, 937 P.2d at 1160, and "comports with traditional concepts of freedom of contract and recognizes the present nationwide and worldwide scope of business relations which generate multi-jurisdictional litigation." Paul Business Systems, 397 S.E.2d at 807 (citing The Bremen, 407 U.S. at 11,92 S.Ct. at 1913). "Thus, even where a forum selection clause establishes a remote forum for resolution of conflicts, `the party claiming [unreasonableness] should bear a heavy burden of proof.'" Voicelink Data Services, 937 P.2d at 1161 (alteration in original) (quoting The Bremen, 407 U.S. at 17,92 S.Ct. at 1917). Therefore, when reviewing a motion to dismiss based on a forum selection clause, the court does not accept the pleadings as true; rather, the party challenging enforcement of the clause must present evidence justifying its nonenforcement. Voicelink Data Services, 937 P.2d at 1161.

We adopt the modern approach and hold forum selection clauses are prima facie valid and will be enforced absent a demonstration by the party opposing enforcement that the clause is unreasonable or based upon fraud or unequal bargaining positions. This is consistent with our rule whereby we will enforce provisions of a contract between the parties declaring that any disputes will be settled with reference to the law of a foreign jurisdiction so long as that law is not contrary to Wyoming law, public policy, or the general interests of Wyoming's citizens. Resource Technology Corporation v. Fisher Scientific Company, 924 P.2d 972, 975 (Wyo. 1996).

Initially, we must address Appellants' contention that the district court erred in granting the motion to dismiss because NSA was subject to Wyoming jurisdiction. Appellants argue NSA had the requisite minimum contacts with this state, and venue in the district court was proper under our statutes. This argument misses the point. The issue before us is not whether Wyoming has jurisdiction over this matter, but whether Wyoming should exercise its discretion to decline jurisdiction over the matter by giving effect to the parties' intent as expressed in their contract.¹ This concept was succinctly set forth by the Oklahoma Court of Appeals:

Although it is true "that the parties may not deprive courts of their jurisdiction over causes by private agreement ... courts possess discretion to decline to exercise jurisdiction in recognition of the parties' free and voluntary choice of a different forum." Smith, Valentino & Smith, Inc. v. Superior Court, 17 Cal.3d 491, 495, 551 P.2d 1206, 1209, 131 Cal.Rptr. 374, 377 (1976) (in bank). Thus, a court in its discretion may refuse to exercise jurisdiction by necessarily respecting the intent of contracting parties. Crowson v. Sealaska Corp., 705 P.2d 905, 911 (Alaska 1985).

Eads, 785 P.2d at 330-31. On appeal, therefore, we will confine our review to a determination of whether the district court has abused its discretion by electing to enforce a forum selection clause in light of the factors enunciated above.

DISCUSSION

Appellants challenge enforcement of the forum selection clause in three ways. First, they claim that the original 1990 distributorship contract constituted "the entire agreement between the [Appellants] and NSA" and, consequently, the forum selection clause was added to the 1994 annual renewal agreement without any consideration. Appellants also argue that the cause of action accrued, at least in part, prior to inclusion of the clause in the 1994 annual renewal agreement. The flaw in this argument is that it fails to recognize that pursuant to the original 1990 distributorship agreement, Appellants' continued relationship with NSA was specifically conditioned upon their signing annual renewal agreements. Appellants signed the 1994 annual renewal agreement and all subsequent ones which contained the choice of forum clause, the consideration for which was Appellants' right to continue to distribute NSA's products. Appe...