Late last month, a North Carolina customer of Oracle Corporation found itself involuntarily headed for California to pursue its lawsuit against Oracle. This came to pass because the customer — probably without even knowing it — agreed to a forum-selection clause when it bought its Oracle software license.
The Forum Selection Clause
The customer apparently signed an order form which stated that its terms were governed by the Oracle License and Services Agreement. That agreement contained a fairly typical choice-of-law and forum-selection clause:
This agreement is governed by the substantive and procedural laws of California and [ACC] and Oracle agree to submit to the exclusive jurisdiction of, and venue in, the courts in California in any dispute relating to this agreement.
The customer, unhappy about something (the court’s opinion doesn’t say what exactly), sued Oracle in North Carolina despite the forum-selection clause.
The Court’s Analysis
The forum-selection clause didn’t automatically mean that the case would be transferred to California. The judge still had to go through a detailed, 11-factor analysis to determine whether the interests of justice and the convenience of the parties would be best served by transferring the case or by keeping it in North Carolina.
In the end, the judge concluded that the case should be transferred. He quoted a prior case that said that “once a mandatory choice of forum clause is deemed valid, the burden shifts to the plaintiff to demonstrate exceptional facts explaining why he should be relieved from his contractual duty.”
The customer now faces the increased expense and inconvenience of having to litigate its case across the continent from where it originally hoped. That likely will give Oracle some bargaining leverage.
(AC Controls Co. Inc. v. Pomeroy Computer Resources, Inc., No. 3:03CV302 (W.D.N.C. 09/29/2003))
Possible Lessons
1. Read all contracts before you sign them.
2. Know that, if your contract contains a forum-selection clause, you may well have to live with litigating your case in a courtroom far, far away.
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A quick spin around the corp law blawgosphere
Corp Law Blog shreds two recent “studies” of corporate governance. By No Other analyzes a recent decision validating a forum selection clause in a software license. My friend and UCLA law colleague Russell Korobkin has a recent paper that concludes: