If you’re going to do business with an Idaho company, then (1) don’t expect a court to enforce your forum-selection provision for either litigation or arbitration outside of Idaho, and so (2) if you get into a dispute, you’d better win a race to the courthouse in the agreed forum. We see this in an Idaho supreme court opinion this month where, with some head-scratching mental gymnastics, the supreme court held that a contract’s choice of California law required arbitration in Idaho — this, even though the contract also expressly required arbitration to be in California:
We hold that California law requires an examination of the public policy of the forum in which suit is brought, and that the forum selection clauses at issue violate the strong public policy of the State of Idaho.
We affirm the district court’s ruling that claims arising from the parties’ purchase agreement and LLC agreement must be arbitrated in Idaho.
Off-Spec Solutions, LLC v. Transp. Investors, LLC, No. 47940 (Idaho May 19, 2021) (emphasis and extra paragraphing added).
Look, it’d be one thing if the Idaho courts had relied on Idaho law to get to that result. The courts would have had a straightforward basis for doing so, namely Idaho’s forum-selection statute, which says in part:
(1) Every stipulation or condition in a contract, by which any party thereto is restricted from enforcing his rights under the contract in Idaho tribunals, or which limits the time within which he may thus enforce his rights, is void as it is against the public policy of Idaho.
Nothing in this section shall affect contract provisions relating to arbitration so long as the contract does not require arbitration to be conducted outside the state of Idaho.
Idaho Code § 29-110, quoted in Off-Spec Solutions, slip op. at 7 (extra paragraphing added).
But it’s just bizarre to assert that California’s law implicitly requires an Idaho court to concern itself with Idaho’s public policy. (The losing party had the better side of that argument; see id., slip op. at 6-7.)
Incidentally, this isn’t the first time the Idaho supreme court has engaged in such self-serving contortions: In an earlier case, the contract in suit expressly required arbitration in Dallas, but the state supreme court held that the agreement’s choice of Texas law required arbitration in Idaho. See T3 Enterprises, Inc. v. Safeguard Bus. Sys., Inc., 435 P.3d 518, 528-30 (Idaho 2019), cited in Off-Spec Solutions, slip op. at 7-8.
I agree 100%. This is a classic example of a court taking a very winding path to get to the right outcome.
It would have been much simpler if the Idaho Supreme Court had held (uncontroversially) that the question of whether a forum selection clause is enforceable is classified as “procedural” for choice-of-law purposes. Courts always apply the law of the forum to procedural issues. This is true even when the contract in question contains a choice-of-law clause selecting the law of another state; choice-of-law clauses are generally interpreted to select the substantive law of the chosen state but not its procedural law. If the court had followed this (simpler) path, there would have been no reason to discuss California law. Instead, it could have held that forum selection clause enforceability is a procedural issue governed by the law of Idaho, applied Section 29-110(1), and called it a day.
Great post. Thanks for flagging this.