Practice Updates

Court of Appeals Applies Michigan Law to Forum-Selection Clause, Regardless of Parties’ Choice of Law

In a case of first impression, the Michigan Court of Appeals recently held that Michigan law applies to the interpretation of a contract’s forum-selection clause, regardless of whether the contract contains a choice of law clause for a different state.  In Barshaw v. Allegheny Performance Plastics, LLC, No. 350279 (Mich. Ct. App. November 24, 2020), the parties’ contract stated that it must be “interpreted in accordance with the laws of the State of Pennsylvania” and that Pennsylvania courts have jurisdiction to determine any dispute related to the contract.  The plaintiff filed a lawsuit in Michigan alleging a breach of the contract, and a dispute arose regarding the proper forum.  Under Pennsylvania law, the contract’s forum-selection clause granted exclusive jurisdiction to Pennsylvania courts.  However, under Michigan law, the forum-selection clause was permissive only.  The Michigan Court of Appeals noted that a forum-selection clause is similar to the doctrine of forum non conveniens; both present a “threshold, nonmerits issue” that is typically a procedural matter, not a substantive one.  The Court concluded, “[A] forum-selection clause may be considered separately from any choice-of-law provision that may also be in the contract, and in such cases, the Michigan court in which the action has been filed, shall apply Michigan law in determining the effect of the forum-selection clause.” 

The takeaway for contracting parties is that a forum-selection clause may not be enforceable even if the parties inserted a supporting choice of law provision.  Parties must consider all courts that may have jurisdiction over a claim when negotiating or enforcing an agreement.