Location, Location, Location: Forum-Selection in International Litigation

by Andrew Flake

I once spent a week arbitrating a technology dispute in Helsinki, Finland, walking through the city center to our hearing each day in gusting snow. We were there because the parties’ contract specified a Finnish seat, and among other special aspects of preparation, most of our packing involved how we’d be keeping warm! But apart from the choice of pinstripe or parka, where a dispute gets litigated or arbitrated means much more, and the Eleventh Circuit, in an investor fraud dispute, affords us a recent example.

The facts of Don’t Look Media LLC v. Fly Victor Ltd involved the business of booking private jets, and a revenue-sharing agreement among the parties that took a sharp nose dive, so much so that DLM claimed it had been defrauded by the defendants, an English company and its owners. Their revenue-sharing agreement contained a forum-selection clause in favor of England, so when DLM then sued in the Southern District of Florida, Fly Victor predictably moved to dismiss.

Based on the forum-selection clause, the district court dismissed the action, and the Eleventh Circuit affirmed, rejecting among other argument’s DLM’s plea that English law did not have a RICO counterpart. Game over: If there was otherwise a RICO claim there, its outcome won’t be known.

That is not to say that DLM will not have its day in court. It just means that it will be under English law, and the parties’ contract will control, to the exclusion of U.S. tort claims, including claims against the directors and officers.

The opinion reminds us that location matters: Whether or not, as DLM claimed, there were pervasive misrepresentations and a pattern of fraud, comprising federal racketeering under RICO, those claims will never litigated.

The reason is that the revenue-sharing agreement (RSA) between the parties had the right ingredients for dismissal: choice of law, choice of forum (in this case, English courts), and mandatory language: the claims “shall” be heard in those courts, which have “exclusive” jurisdiction.

Could DLM have done anything differently? It would be unrealistic to expect, especially in the greening of a new relationship, for DLM to predict the conduct it claimed to be fraudulent. But it is very possible, and certainly would have been preferred, to ask the simple question: “What if things go wrong?” The stories of such “deals gone bad” are legion, and the reason clauses like these exist is to make the dispute resolution process more reasonable.

DLM might have negotiated the clause further. Fly Victor is an English company, and the RSA’s choice of law and forum clause put in on its home turf. That is almost certainly because Fly Victor prepared the Agreement.

Perhaps DLM did negotiate. Perhaps it tried and was unsuccessful. Assuming though that it simply accepted the language in a draft RSA uncritically, which will often happen in a company’s eagerness to do a deal, it missed an opportunity.

There are at least three areas where we can typically find some negotiating room. One is choice of law. If the parties cannot agree because they are in different jurisdictions, they will sometimes leave the agreement silent; that’s not necessarily advisable, because it eschews predictability for possible later litigation over choice of law. Another is the forum — we can negotiate where and in what country the claims are heard. And of course, we can consider an arbitration provision, often an attractive option for international parties because they can select a neutral seat and will have input over their decisionmakers.

The Aurora Borealis in Ruka, Finland. By Timo Newton-Syms from Helsinki, Finland & Maidenhead, Berkshire, UK – Northern Lights, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=70750325

Whatever the route, we need to be deliberate, and understand that location matters. Because the basic message of cases like Don’t Look Media is that when commercial parties pick where they want their dispute to be litigated, that choice is going to be enforced. And if you’re in Finland, bring your gloves, and don’t miss the Northern Lights.

[The case is Don’t Look Media LLC v. Fly Victor Ltd. et al., Case no. 20-10779 (in the Eleventh Circuit Court of Appeals, decided June 4, 2021).]

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