A forum-selection clause is a structural provision of a contract that addresses the procedural requirements for dispute resolution. In other words, the contracting parties may choose which forum, i.e. which federal or state court, for prospective disputes to be filed. Courts must enforce forum-selection agreements unless they are shown to be unreasonable or unjust. Peter Mavrick is a Miami non-compete lawyer who has extensive experience with non-competition covenant litigation and claims for injunctive relief.
In Autonation, Inc. v. Derek Hall, 2019 WL 3712008 (S.D. Fla. May 29, 2019), Plaintiff Autonation, Inc. (Autonation) owned and operated hundreds of vehicle dealerships across 16 states, with its corporate headquarters in Fort Lauderdale, Florida. Derek Hall (Hall) was formerly employed as General Manager of AutoNation’s Memphis, Tennessee dealership. Hall entered into a Confidentiality, No-Solicitation/No-Hire and Non-Compete Agreement (Non-Compete Agreement) with AutoNation.
The Non-Compete Agreement contained a choice of law and venue provision that stated that: (1) the Agreement will be governed by and construed in accordance with the laws of the State of Florida, without regard to principles of conflict of laws; any action, suit or proceeding “shall be only be instituted only in the state or federal courts located in Broward County,” Florida; and each party waives any objection to venue or jurisdiction (including objections regarding lack of personal jurisdiction and objections to the convenience of the forum).
Hall allegedly emailed confidential, proprietary, and trade secret AutoNation information to his personal email address without Autonation’s authorization. The materials emailed included a modeling tool and financial pay plans containing confidential material not shared with AutoNation’s competitors or the public. Hall’s employment with AutoNation was terminated.
Hall signed a confidential Separation Agreement with AutoNation that partially revised the terms of his Non-Compete Agreement. The Separation Agreement was more restrictive than the Non-Compete because it precluded Hall from working for any competitive automobile dealership within 25 miles from the Ford Memphis dealership or within 10 miles from any other AutoNation dealership for a period of 6 months following the effective date of his Separation Agreement. The Separation Agreement also contained a forum selection clause, which stated that any suit, relating to the Separation Agreement “shall be brought in the courts of the State of Tennessee.”
Hall then accepted a General Manager position with Wolf Chase Chrysler Dodge Jeep Ram, a direct AutoNation competitor located less than 25 miles from the Ford Memphis dealership. AutoNation brought a lawsuit in Florida for misappropriation of trade secrets and breach of the Non-Compete Agreement. Hall moved to dismiss the Amended Complaint for lack of personal jurisdiction, for improper venue, in the alternative, transfer of the case to the Western District of Tennessee. Hall contended that the Florida forum selection clause in the Non-Compete Agreement is unenforceable. Hall insisted that the parties “mutually agreed to replace and supersede the Non-Compete Agreement, including the Florida [f]orum [s]election [c]lause therein, when they executed the Separation Agreement,” which required disputes relating to the Separation Agreement be brought in Tennessee. The crux of Hall’s argument is that the Separation Agreement covered all understandings relating to his employment and separation and effectively extinguished the Florida forum selection clause.
Autonation contended that the Non-Compete Agreement was not extinguished, rather it remained in full force and effect. Autonation contended that since it elected to sue under the Non-Compete Agreement and not the Separation Agreement, the Florida forum selection clause applied.
The Separation Agreement stated, in pertinent part:
Nothing in this Agreement shall limit or modify the rights of the Company or the obligations of Employee contained in any confidentiality agreement, non-compete agreement and/or restrictive covenants previously signed by Employee, as amended, modified and/or supplemented, as such provisions shall survive the execution of this Agreement and separation of employment.
(Separation Agreement ¶ 15(a)). Autonation contended that this provision “clearly and unambiguously reflects the parties’ mutual intent to not replace the Non-Compete Agreement with the Separation Agreement.”
Pursuant to Florida law, “where contractual terms are clear and unambiguous, the court is bound by the plain meaning of those terms.” Silveri v. N. Ins. Co. of New York, 2010 WL 11505223 (S.D. Fla. July 12, 2010). The trial court held that Clause 15(a) of the Separation Agreement “means what it says.” While it purportedly superseded prior agreements, it specifically excluded the Non-Compete Agreement. The trial court further held stated that parties to a contract may agree to submit to the jurisdiction of a given court.
The trial court analyzed further that “[w]here a forum selection clause exists, courts must first assess whether the clause is mandatory or permissive.” A mandatory clause “dictates an exclusive forum for litigation under the contract” whereas a “permissive clause authorizes jurisdiction in a designated forum but does not prohibit litigation elsewhere.” The forum selection clause in the Non-Compete Agreement contains mandatory wording by its use of the term “shall,” which prescribes a requirement.
The trial court held that a mandatory forum selection clause is “presumptively valid and enforceable” absent a “strong showing that enforcement would be unfair or unreasonable under the circumstances.” Krenkel v. Kerzner Int’l Hotels Ltd., 579 F.3d 1279 (11th Cir. 2009), was binding precedent on the trial court. Krenkel held that a forum selection clause can be invalidated when: “(1) its formation was induced by fraud or overreaching; (2) the plaintiff would be deprived of its day in court because of inconvenience or unfairness; (3) the chosen law would deprive the plaintiff of a remedy; or (4) enforcement of the clause would contravene public policy.”
Hall did not raise these factors in his Motion to Dismiss and did not assert that the forum selection clause should be invalidated on these grounds. The trial court therefore denied Hall’s Motion to Dismiss based on, among other reasons, that the forum selection clause was valid and enforceable.
Peter Mavrick is a Miami non-compete attorney. This article does not serve as a substitute for legal advice tailored to a particular situation.