Second Circuit confirms strong presumption for enforceability of forum selection clauses | Practical Law

Second Circuit confirms strong presumption for enforceability of forum selection clauses | Practical Law

Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), Lauren Mandell (Associate), White & Case LLP

Second Circuit confirms strong presumption for enforceability of forum selection clauses

Law stated as at 04 Aug 2010USA
Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), Lauren Mandell (Associate), White & Case LLP
The Second Circuit has affirmed the dismissal of a complaint in a contract dispute on the basis of a forum selection clause referring the matter to arbitration in St. Petersburg, Russia.
In S.K.I. Beer Corp. v Baltika Brewery, (2d Cir. July 20, 2010), the dispute arose from SKI's contract to purchase beer and non-alcoholic beverages for sale from Baltika Brewery. When Baltika allegedly failed to perform, SKI brought an action in the Eastern District of New York despite a forum selection clause in the contract that stated that "[a]ll disputes or differences which may arise in the course of fulfillment of, or in connection with, the present Contract, shall be considered by the Arbitration Court of St. Petersburg and the Leningradskaya Oblast." The plaintiff argued that the forum selection clause was unenforceable because the St. Petersburg forum would not provide adequate relief and because New York state law barred parties from choosing a forum outside New York for disputes involving contracts for the sale of beer by a brewery.
The Second Circuit held that the plaintiff failed to rebut the presumption that the forum selection clause was enforceable. The court considered the clause presumptively enforceable because it was mandatory, that is - it conferred exclusive jurisdiction on the St. Petersburg forum, and the plaintiff failed to rebut the presumption because it offered no evidence, just speculation, that the St. Petersburg forum would not offer a remedy. The court also held that New York state law did not bar the parties from contracting to resolve their dispute outside New York. The law stated that a beer wholesaler "may" maintain an action in a New York court, but did not preclude the wholesaler from contractually agreeing to a forum outside the state.
The decision confirms the strong presumption in the Second Circuit for the enforceability of forum selection clauses. In particular, the decision follows the Circuit's holding in Phillips v Audio Active, Ltd., 494 F.3d 378 (2d Cir. 2007) that mandatory forum selection clauses are presumptively enforceable and its holding in Roby v Corp. of Lloyd's, 996 F.2d 1353 (2d. Cir. 2003) that the party challenging enforcement must offer substantial evidence to prove that one of the limited exceptions applies.