Reeves v. Chem Indus. Co.

• Court: Supreme Court of Oregon
• Writing for the Court: DENECKE; Leflar; TONGUE
• Citation: 262 Or. 95,495 P.2d 729
• Parties: Richard L. REEVES, Appellant, v. The CHEM INDUSTRIAL COMPANY, Respondent. . Submitted on Appellant's Brief
• Decision Date: 06 December 1971

Page 729

495 P.2d 729 262 Or. 95 Richard L. REEVES, Appellant,
v.
The CHEM INDUSTRIAL COMPANY, Respondent. Supreme Court of Oregon, In Banc. Submitted on Appellant's Brief Dec. 6, 1971.
Decided April 4, 1972.
Rehearing Denied May 10, 1972.

[262 Or. 96]

Page 730

Donald H. Coulter and Myrick, Coulter, Seagraves & Nealy, Grants Pass, for appellant.

No appearance for respondent.

DENECKE, Justice.

The issue is whether the Oregon plaintiff can maintain a contract action in Oregon against the defendant, an Ohio corporation.

The parties contracted that plaintiff would act as defendant's distributor in southern Oregon and northern California. Plaintiff filed a complaint alleging defendant had failed to perform its contractual obligations and asked for the return of the amounts of money plaintiff had paid defendant. Defendant's registered agent was personally served in Ohio. Defendant moved to quash and dismiss and the trial court granted the motion. Plaintiff appeals.

The defendant urged two grounds for its motion: (1) that the cause of action alleged by plaintiff did not arise out of '(t)he transaction of any business within this state' and, therefore, jurisdiction could not be obtained under the long-arm statute, ORS 14.035(1)(a); and (2) that the parties had contracted that any litigation arising out of the contract would be brought in the courts of Ohio.

We hold that this contractual provision is enforceable and because of it the trial court was correct in dismissing the cause.

[262 Or. 97] The contract provides: 'It is agreed that the laws of the State of Ohio shall govern without reference to the place of execution or performance of same. Any and all legal action must be transacted or brought in the courts of Cleveland, Ohio.'

This court has held that an agreement to confer exclusive jurisdiction upon the courts of a particular jurisdiction is void. State ex rel Kahn v. Tazwell, 125 Or. 528, 543, 266 P. 238, 243, 59 ALR 1436 (1928):

'The stipulation of the parties contained in the contract of insurance is contrary to public policy and void. The law prescribed the jurisdiction of our courts, and it cannot be diminished or increased by the convention of the parties. The stipulation is in effect a legal opinion of the parties that only 'the courts of Karlsruhe' are competent for the fulfillment of the contracts. * * *.' ¹

That statement correctly reflected the state of the law at the time. Annotation, 56 ALR2d 300 (1957), 'Validity of contractual provision limiting place or court in which action may be brought.' The

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present trend of the law, however, with good reason, is to the contrary.

1 Restatement, Conflict of Laws (Second), as adopted by the American Law Institute in 1969, provides in § 80:

'The parties' agreement as to the place of the action cannot oust a state of judicial jurisdiction, but such an agreement will be given effect unless it is unfair or unreasonable.'

The comment states:

'* * * And the fact that the action is brought [262 Or. 98] in a state other than that designated in the contract affords ground for holding that the forum is an inappropriate one and that the court in its discretion should refuse to entertain this action. Such a provision, however, will be disregarded if it is the result of overreaching or of the unfair use of unequal bargaining power or if the forum chosen by the parties would be a seriously inconvenient one for the trial of the particular action. On the other hand, the provision will be given effect, and the action dismissed, if to do so would be fair and reasonable.'

The reporter for this Restatement, Professor Willis L. M. Reese, wrote, before the adoption of the Restatement by the American Law Institute: 'Choice of forum clauses should Prima facie be valid and enforceable. The burden should be upon the party who brings suit elsewhere than in the selected state to persuade the court that enforcement of the choice of forum clause would be unjust.' 13 American Journal of Comparative Law, 187, 189 (1964).

Judge Leflar in American Conflicts Law, 115 (1968), states: 'The modern cases say that contracts limiting judicial jurisdiction will be respected if there is nothing unfair or unreasonable about them, but they will be disregarded if they are unfair or unreasonable.'

In 1962 Professor Ehrenzweig in Conflict of Laws, 152 (1962), wrote: 'It would seem likely, therefore, that the compromise, long fore-shadowed in both English and American case law (supra), and now expressly adopted by the Second Circuit, will gradually become general law.' The Second Circuit holding to which he referred is Wm. H. Muller & Co. v. Swedish American Line Ltd., 224 F.2d 806, 808 (2d Cir. 1955), [262 Or. 99] cert. den. 350 U.S. 903, 76 S.Ct. 182, 100 L.Ed. 793, 56 ALR2d 295. The court there held: '* * * (I)n each case the enforceability of such an agreement (stating in what jurisdiction litigation is to be carried on) depends upon its reasonableness.'

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