Summary of a Recent
Judicial Development in
Commercial Transactions

Forum-Selection Clause Requires Dismissal for Lack of Personal Jurisdiction

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Bohl v. Hauke, No. 08CA10, 2009-Ohio-150, 2009 WL 104632 (Ohio Ct. App. Jan. 12, 2009), the Ohio Court of Appeals held that a plaintiff's breach of warranty claim was "sufficiently related" to his other claims so that dismissal of the breach of warranty claim pursuant to a valid forum-selection clause permitted dismissal of the remaining claims as well.

Background

Dairy farmers brought claims for breach of contract and breach of warranty against the contractors who constructed their dairy barns after discovering corrosion problems with the roof four years later. Id. at *1. The written warranty covering the roof contained a forum-selection clause that provided that Texas law would govern any disputes. Id. After the contractor denied their warranty claim, the plaintiffs brought suit against the contractor in Ohio. Id. The trial court dismissed the claims for lack of personal jurisdiction based on the forum-selection clause, and the plaintiffs filed a motion for clarification asking the court to declare that the decision dismissed only their cause of action for breach of warranty and not their other claims. Id. The court denied the motion and dismissed all the plaintiffs' claims without prejudice, and the plaintiffs appealed. Id.

Arguments

The plaintiffs argued that the trial court erred in dismissing all their claims, although its dismissal decision only addressed their breach of warranty claim. Id. at *2. They also argued that the forum-selection clause should not be enforced because it was unreasonable, unjust, and not fairly bargained for. Id.

Analysis and Holdings

The court explained that a forum-selection clause in a commercial contract "is prima facie valid as long as the parties freely bargained for it," and that absent evidence of fraud or overreaching, a court should enforce the clause "unless it can be clearly shown that enforcement of the clause would be unreasonable and unjust." Id. at *3. The court reasoned that just because the warranty was part of a standardized form contract did not mean that it could not be "freely bargained for." Id. The court further concluded that even if the plaintiffs were merely third-party beneficiaries of the warranty, as they apparently claimed, they were still bound by the forum-selection clause and could not selectively enforce certain provisions of the contract (i.e., enforce the warranty but avoid the forum-selection clause). Id. at *4. The court explained that a forum-selection clause is "unreasonable" if enforcement of the clause would be so "manifestly and gravely inconvenient" to the party seeking to avoid enforcement that it "will be effectively deprived of a meaningful day in court." Id. at *5. The court found no evidence that enforcement of the clause would have that effect. Id. Lastly, the court explained that "even where a forum selection clause does not explicitly govern a given cause of action, courts will inquire into whether the other claims are sufficiently related to the claim that is specifically covered by the clause." Id. at *6. The court concluded that the plaintiffs' other causes of action were "sufficiently related" to the breach of warranty claim that dismissal of all the claims was appropriate, and thus it affirmed the lower court's order of dismissal. Id.

The case was decided on January 12, 2009.