High Life Sales Co. v. Brown-Forman Corp.

• Decision Date: 28 January 1992
• Docket Number: No. 73494,BROWN-FORMAN,73494
• Citation: 823 S.W.2d 493
• Parties: HIGH LIFE SALES COMPANY, Plaintiff-Respondent, v.CORPORATION, Defendant-Appellant.
• Court: Missouri Supreme Court

Page 493

823 S.W.2d 493

HIGH LIFE SALES COMPANY, Plaintiff-Respondent, v. BROWN-FORMAN CORPORATION, Defendant-Appellant.

No. 73494.

Supreme Court of Missouri En Banc.

Jan. 28, 1992.

Thomas E. Wack, Thomas Walsh, Mark Leadlove, St. Louis, for defendant-appellant.

Paul V. Herbers, Barbara B. Davydov, Kansas City, for plaintiff-respondent.

THOMAS, Judge.

In this case we face the issue of whether the Missouri courts should continue to refuse to enforce forum selection clauses that provide that any action brought on the contract shall be brought outside Missouri on the grounds that such a clause is against public policy and void, per se. We adopt, in place of the old rule, the proposition that such a clause should be enforced unless it is unfair or unreasonable to do so. We affirm the trial court's decision not to enforce the forum selection clause in the present case because we believe it would be unreasonable to require this particular case to be brought in Kentucky pursuant to the forum selection clause, and we affirm the substantive decision of the trial court that § 407.413, RSMo 1986, is applicable and prohibits termination of the Distributorship Agreement involved herein.

High Life Sales Company (High Life), the plaintiff below, has been engaged in the distribution of alcoholic beverages, principally beer, for many years. It is the exclusive distributor in the Jackson County, Missouri, area for all products of Miller Brewing Company, which constitute the vast majority of its sales (approximately 98%). In 1983, High Life began distributing a low alcohol wine cooler product known as "California Cooler" under an oral agreement with California Cooler, Inc. ("CCI"), whose principal place of business is in California. Subsequently, High Life and CCI negotiated through their respective counsel and, on July 15, 1985, entered into a written Distributorship Agreement.

The Distributorship Agreement provided that any termination must be in accordance with §§ 407.405 and 407.413. Section 407.413.2 provides that "[n]otwithstanding the terms, provisions and conditions of any franchise, no supplier shall unilaterally terminate" any franchise with the wholesaler except for good cause as defined in section § 407.413.5. Despite this provision, the agreement purported to modify the meaning of "good cause." The agreement also contained a forum selection clause providing that any action for payment for goods sold and delivered may be brought where title to the goods passed to the buyer and that any other action on or related to the agreement shall be brought only in the judicial district containing the defendant's principal place of business.

Later in 1985, Defendant Brown-Forman, whose principal place of business is in Louisville, Kentucky, acquired the assets of CCI, including the assignment of the Distributorship Agreement from CCI to Brown-Forman. High Life consented to this sale and assignment.

During 1987, Brown-Forman decided to consolidate all of its Missouri distribution for all of its products in a single distributor, Paramount Liquor Company ("Paramount"), a Missouri corporation not subject to suit in Kentucky. In September 1987, Brown-Forman gave ninety days written notice of termination to all thirty-one of its Missouri distributors, including High Life. The termination was effective December 31, 1987. On November 3, 1987, High Life sued Brown-Forman and Paramount in the Circuit Court of Jackson County, Missouri, claiming the termination violated § 407.413. High Life sought injunctive relief, which was denied, and damages.

Brown-Forman filed a motion to dismiss claiming that (1) § 407.413 is inapplicable and (2) the forum selection clause requires that the action be brought in Kentucky. The trial court overruled Brown-Forman's motion to dismiss. Thereafter, Paramount filed a motion to dismiss, and High Life filed a motion for summary judgment claiming that § 407.413 is applicable, that its requirements of good cause for termination were not met and that the termination was unlawful. Brown-Forman also filed a motion for summary judgment on the ground that § 407.413 has no application. After briefing and oral arguments, the trial court granted High Life's motion for summary judgment on the issue of liability and overruled Brown-Forman's motion for summary judgment. The court also granted Paramount's Motion to Dismiss. The issue of damages was tried to a jury in February of 1990; the jury returned a verdict in High Life's favor for $91,000. Brown-Forman appeals primarily on the issues of the enforceability of the forum selection clause and the applicability of §§ 407.400 to 407.420.

We must first decide whether this case can properly be decided by the Missouri courts in view of the parties' agreement that it would be brought in Kentucky, the principal place of business of the defendant, Brown-Forman. Two cases represent the primary authority in Missouri on this issue; they are Reichard v. Manhattan Life Ins. Co., 31 Mo. 518 (1862), and State ex rel. Gooseneck Trailer Mfg. Co., v. Barker, 619 S.W.2d 928 (Mo.App.1981). Reichard was a suit on a life insurance policy claiming misrepresentations as to alcohol use and present state of health in the application for life insurance by the insured. The insurance contract contained a provision that the insured waived all right to bring any action on the policy except in the courts of New York. Missouri had a statute, enacted in 1855, that required any life insurance company doing business in Missouri to authorize any person having a claim against the company growing out of the contract of insurance to sue the insurance company in any court in Missouri. The Reichard court held that this waiver clause (a form of forum selection clause) would not be enforced both because it violates public policy and because of the statute.

Gooseneck cites Reichard and states that the state courts are not obligated to follow precedent ¹ of the federal courts, which have questioned the validity of Reichard; Gooseneck held that the forum selection clause was not a sufficient basis for granting plaintiff's motion to dismiss in the Missouri court.

There is virtually no case authority in Missouri during the 119 years between Reichard, which defendant Brown-Forman argues is not applicable, and the Gooseneck decision by the Court of Appeals, Southern District. In State ex rel. Marlo v. Hess, 669 S.W.2d 291 (Mo.App.1984), the Eastern District distinguished the Gooseneck situation, which involves an outbound forum selection clause (one providing for trial outside of Missouri) from the inbound clause (one providing for trial in Missouri) at issue in Marlo; the Marlo court held that an inbound clause should be enforced so long as doing so is neither unfair nor unreasonable. See also Chase Third Century Leasing Co., Inc. v. Williams, 782 S.W.2d 408 (Mo.App.1989), where the court again enforced an inbound clause. In Medicine Shoppe Int'l, Inc. v. Browne, 683 F.Supp. 731 (E.D.Mo.1988), the federal court, applying Missouri substantive law, summarized the distinction between Missouri's treatment of outbound and inbound clauses as follows:

Missouri law on the enforceability of forum selection clauses is clear: forum selection clauses which purport to prevent courts within the State of Missouri from exercising their jurisdiction to hear actions brought by Missouri citizens are void as against the Missouri public policy of providing Missouri citizens with access to courts within the State of Missouri. In contrast, forum selection clauses which designate the State of Missouri or a particular court within the State of Missouri as the exclusive forum in which to bring actions are enforceable so long as the clauses are not unfair and are not unreasonable.

Id. at 732 (citations omitted). In Medicine Shoppe, the federal court held that the forum selection clause that required any action arising from the franchise agreement be brought in Federal District Court for the Eastern District of Missouri was fair, reasonable and, therefore, enforceable under Missouri law.

We conclude that Missouri should no longer treat outbound forum selection clauses as per se violations of public policy. Our reasons include: first, there is considerable doubt whether Reichard was based solely upon the public policy aspects of enforcing a forum selection clause since it was based in part upon the 1855 Missouri statute specifically authorizing foreign insurance companies to be sued in Missouri. The refusal in that case to enforce the clause that required all litigation on the policy to be brought in New York is a far cry from the issue of whether this Court should generally enforce the type of forum selection clause involved in the present case. Second, the public policy of allowing and encouraging freedom of contract and enforcing the parties' agreement whether they be citizens of Missouri or elsewhere, so long as doing so is neither unfair nor unreasonable, outweighs any public policy involved in guaranteeing Missouri citizens a right to the Missouri courts when they have entered into an arm's length agreement that provides otherwise. Third, the one-way nature of Missouri's decisions in refusing to enforce outbound agreements while enforcing inbound agreements must be premised on the assumption that the Missouri courts have a corner on fair and just trials. We are proud of the Missouri courts but not so much as to override a valid agreement entered into by our citizens to litigate elsewhere. Finally, the one-way enforcement of the Missouri rule, because of its uneven impact, may well add to any overcrowding condition in the Missouri courts in circumstances where the parties, by their agreement, have indicated a willingness to litigate elsewhere.

The early cases in many jurisdictions that refused to enforce outbound forum selection clauses often relied upon an "ouster of jurisdiction" theory as the specific public policy...