Jacobson v. Mailboxes Etc. U.S.A., Inc.

• Decision Date: 02 March 1995
• Docket Number: No. SJC-06692,SJC-06692
• Citation: 419 Mass. 572,646 N.E.2d 741
• Parties: Carl M. JACOBSON & another 1 v. MAILBOXES ETC. U.S.A., INC., & another. 2
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 741

646 N.E.2d 741

419 Mass. 572

Carl M. JACOBSON & another ¹ v. MAILBOXES ETC. U.S.A., INC., & another. ²

No. SJC-06692.

Supreme Judicial Court of Massachusetts,

Middlesex.

Argued Dec. 6, 1994.

Decided March 2, 1995.

David C. Hawkins, Boston, for plaintiffs.

Donnalynn B. Lynch Kahn, Gary R. Greenberg and Louis J. Scerra, Jr., Boston, with her, for defendants.

Before LIACOS, C.J., and WILKINS, ABRAMS, NOLAN and LYNCH, JJ.

WILKINS, Justice.

In the latter part of February, 1989, the plaintiffs executed a franchise agreement with Mailboxes Etc. U.S.A., Inc. (Mailboxes), under which the plaintiffs were licensed to operate a Mailboxes facility in Needham. The endeavor was not a success.

In April, 1992, the plaintiffs commenced this action, alleging in their amended complaint that Mailboxes had failed to fulfil various obligations of the franchise agreement; that Mailboxes and its agent, the defendant Ovian, had violated a fiduciary duty owed to the plaintiffs; that the defendants were liable for deceit that induced the plaintiffs to sign the franchise agreement; and that the defendants had engaged in unfair or deceptive acts or practices prohibited by G.L. c. 93A (1992 ed.).

In their answer to the amended complaint (and to the original complaint), the defendants alleged that the franchise agreement contained a forum selection clause that required the plaintiffs to bring any such action in California. ³ It is undisputed, on the record before us, that the franchise agreement provided that "Venue and Jurisdiction for all actions enforcing this agreement are agreed to be in the City of San Diego, County of San Diego, California." The agreement also provided, as applicable to this case, that it "is to be construed under and governed by the laws of the State of California."

After considerable discovery, the defendants moved for summary judgment. The motion judge denied the motion, because he believed that there were disputes of material fact on the substantive merits. He concluded further, relying on the holding in Nute v. Hamilton Mut. Ins. Co., 72 Mass. 174, 6 Gray 174 (1856), that Massachusetts would not enforce the forum selection clause. The motion judge recognized, however, that recent decisions had placed the holding of the Nute opinion in doubt, and, therefore, he reported his ruling on the forum selection clause, but no other ruling, to the Appeals Court. ⁴ We transferred the report to this court on our own motion.

Although for many decades Massachusetts did not enforce forum selection clauses except in special cases (see Nute v. Hamilton Mut. Ins. Co., supra, 6 Gray at 184; Nashua River Paper Co. v. Hammermill Paper Co., 223 Mass. 8, 19, 111 N.E. 678 [1916] ), more recent opinions indicate that such clauses are not inherently inappropriate (see W.R. Grace & Co. v. Hartford Accident & Indem. Co., 407 Mass. 572, 582 n. 13, 555 N.E.2d 214 [1990]; Ernest & Norman Hart Bros. v. Town Contractors, Inc., 18 Mass.App.Ct. 60, 65, 463 N.E.2d 355 [1984] ). See Lambert v. Kysar, 983 F.2d 1110, 1116-1118 (1st Cir.1993). Our Appeals Court recently stated that this court's opinion in W.R. Grace & Co. v. Hartford Accident & Indem. Co., supra, overruled the Nute and Nashua River Paper Co. cases, cited above. Simplex Time Recorder Co. v. Federal Ins. Co., 37 Mass.App.Ct. 947, 947-948 (1994). In The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), the Supreme Court announced the Federal common law rule that forum selection clauses are valid and enforceable, except when it is shown that enforcement would be unreasonable. We accept the modern view that forum selection clauses are to be enforced if it is fair and reasonable to do so. See Restatement (Second) of Conflict of Laws § 80 (1988 revision) ("The parties' agreement as to the place of the action will be given effect unless it is unfair or unreasonable") ⁵; Annot., Validity of Contractual Provision Limiting Place or Court in which Action may be Brought, 31 A.L.R.4th 404, 409 (1984 & Supp.1994).

What we have just stated about Massachusetts law does not, however, answer the question whether the motion judge properly ruled not to enforce the agreement's forum selection clause. The agreement stated that it "is to be construed under and governed by the laws of the State of California." Therefore, in the absence of any substantial Massachusetts public policy reason to the contrary, Massachusetts's attitude toward the forum selection clause is unimportant, and we should turn to the law of California to determine the effect of that clause. See Morris v. Watsco, Inc., 385 Mass. 672, 674-675, 433 N.E.2d 886 (1982); Lambert v. Kysar, supra at 1118-1119; Smith, Valentino & Smith, Inc. v. Superior Court, 17 Cal.3d 491, 494, 131 Cal.Rptr. 374, 551 P.2d 1206 (1976); Restatement (Second) of Conflict of Laws § 187 (1971 & rev. 1989). In looking to California law, not only must we consider the enforceability of such a clause but we must also consider whether California would construe the particular clause in this case to apply not only to claims made under the agreement but also to claims of precontract deceit and other wrongs that allegedly induced the plaintiffs to sign the franchise agreement. The forum selection clause refers to "Venue and Jurisdiction for all actions enforcing this agreement." Thus the question arises whether language concerning actions enforcing the agreement extends to claims based on allegedly unlawful conduct that led the plaintiffs to execute the agreement. ⁶

California will enforce forum selection clauses in accord with the modern trend. See Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459, 464, 11 Cal.Rptr.2d 330, 834 P.2d 1148 (1992), adopting principles of the Restatement (Second) of Conflict of Laws § 187 (1988 revision); Smith, Valentino & Smith, Inc., supra at 496, 131 Cal.Rptr. 374, 551 P.2d 1206 (enforcing clause calling for Pennsylvania forum, citing The Bremen v. Zapata Off-Shore Co., supra); Cal-State Business Prods. & Servs., Inc. v. Ricoh, 12 Cal.App.4th 1666, 1679, 16 Cal.Rptr.2d 417 (1993) (provision for New York forum enforced). The more difficult problem is to determine the reach of the forum selection clause under California law. The judge did not advert to this issue, nor have the parties addressed it.

California uses substantially the same reasoning in construing the reach of forum selection clauses as it does in construing the reach of contractual choice of law provisions. See Cal-State Business Prods. & Servs., Inc. v. Ricoh, supra at 1676-1677, 16 Cal.Rptr.2d 417. In Nedlloyd Lines B.V. v. Superior Court, supra, the California Supreme Court held that a choice of law clause that provided that a contract was to be "governed by" the law of Hong Kong was enforceable and was "applicable to claims for breach of the implied covenant of good faith and fair dealing and for breach of fiduciary duties allegedly arising out of the contract." Id. 3 Cal.4th at 462, 11 Cal.Rptr.2d 330, 834 P.2d 1148. The court reasoned that parties, who were sophisticated commercial entities (id. at 468, 11 Cal.Rptr.2d 330, 834 P.2d 1148), would not rationally "intend that the laws of multiple jurisdictions would apply to a single controversy having its origin in a single, contract-based relationship." Id. at 469, 11 Cal.Rptr.2d 330, 834 P.2d 1148. It does not appear that the Nedlloyd Lines case involved any claim of fraud in the inducement or other precontract wrong. Three Justices of the California court dissented on the ground that the court gave too broad a sweep to the language of the choice of law clause. See id. at 472, 11 Cal.Rptr.2d 330, 834 P.2d 1148 (Panelli, J., dissenting, with whom Mosk, J., joined); id. at 474, 11 Cal.Rptr.2d 330, 834 P.2d 1148 (Kennard, J., dissenting). The dissenting opinions pointed out that the language of the clause in Smith, Valentino & Smith, Inc. v. Superior Court, supra (applying to any matter "growing out of this agreement") was broader in scope than the clause before the court ("This Agreement shall be governed by ..."). Id. 3 Cal.4th at 473, 11 Cal.Rptr.2d 330, 834 P.2d 1148. Id. at 490, 11 Cal.Rptr.2d 330, 834 P.2d 1148. ⁷

In Cal-State Business Prods. & Servs., Inc. v. Ricoh, supra, a forum selection clause applied to "any case of [sic ] controversy arising under or in connection with this Agreement." Id. at 1672 n. 4, 16 Cal.Rptr.2d 417. The complaint alleged restraint of trade, unfair trade practices, breach of contract, and both fraud and negligent misrepresentation leading the plaintiff to enter into the agreement. The court applied the forum selection clause to all claims asserted. Id. at 1677, 16 Cal.Rptr.2d 417. The court said, "The entire gist of the complaint in the present action relates to allegedly false promises made in the course of the negotiations (that culminated in contracts with integration clauses) and the subsequent conduct of the relationship between the parties created by the contracts." Id. The alleged wrongdoing that induced the plaintiff in that case to enter into the agreement could fairly be seen as involving a controversy "in connection with [the] agreement." See Lu v. Dryclean-U.S.A. of Cal., Inc., 11 Cal.App.4th 1490, 1494, 14 Cal.Rptr.2d 906 (1992) (forum selection clause applicable to "[a]ny and all litigation that may arise as a result of this Agreement" applies to fraudulent representations that induced plaintiffs to enter into agreement).

We conclude that California courts would not extend the reasoning of the bare majority in the Nedlloyd Lines case to apply the restrictive language of the clause before us to precontract wrongs. The forum selection clause by its terms relates only to actions to enforce the agreement and not to actions based on unlawful conduct that induced a franchisee to sign the agreement. An action to enforce an agreement no doubt includes not only an action for specific performance but also an action for...