Opinion ID: 1236111
Heading Depth: 1
Heading Rank: 1

Heading: The parties choice of law clause

Text: National contends that the clause in the employment contract specifying that Minnesota law governs the contract should be honored by this court because it does not violate fundamental Wisconsin public policy. National argues that Wisconsin ordinarily follows the same termination-at-will rule as Minnesota and that if indeed a franchise/dealership is involved, Minnesota law also protects franchises against unfair termination. Minnesota Stat. sec. 80C.14 Subd. 2(a) (1986). In contrast, Bush argues that whether he would receive protection under Minnesota's franchise law is highly debatable. National in fact concedes that Minnesota and Wisconsin law are not co-extensive. Bush points out that the Wisconsin legislature has declared the WFDL fundamental policy and has specifically provided that its effect cannot be varied by contract. This public policy, Bush contends, renders the choice of law clause in the employment contract unenforceable. We agree. [1] While Wisconsin courts have acknowledged that parties to a contract may expressly agree that the law of a particular jurisdiction shall control their contractual relations; Jefferis v. Austin, 182 Wis. 203, 205, 196 N.W. 238 (1923); Brown v. Gates, 120 Wis. 349, 97 N.W. 221 (1904); First Wis. Nat. Bank of Madison v. Nicolaou, 85 Wis. 2d 393, 397 n. 1, 270 N.W.2d 582 (Ct. App. 1978), this proposition is by no means unqualified. Though we recognize that the party autonomy principle, i.e., permitting parties to stipulate the applicable law in the contract and honoring that stipulation, promotes certainty and predictability in contractual relations, see Willis L. M. Reese, Choice of Law in Torts and Contracts and Directions for the Future, 46 Colum. J. Transnat'l L. 1, 22-24, it cannot be permitted to do so at the expense of important public policies of a state whose law would be applicable if the parties choice of law provision were disregarded. This qualification has been recognized by commentators and frequently invoked by courts. E.g., Barnes Group Inc. v. C & C Products, Inc., 716 F.2d 1023 (4th Cir. 1983) (public policy exception to party autonomy principle fully discussed and applied); Note, Effectiveness of Choice-of-Law Clauses in Contract Conflicts of Law: Party Autonomy or Objective Determination?, 82 Colum. L. Rev. 1659, 1669-74 (1982). (Hereinafter Effectiveness of Choice-of-Law Clauses. ) Thus, [w]hile contemporary doctrine recognizes a sphere of party autonomy within which contractual choice of law provisions will be given effect, it also limits the extent to which deft draftsmanship will be allowed to bypass legislative judgments as to basic enforceability or validity. Barnes, 716 F.2d at 1029. (Footnotes omitted.) A precise delineation of those policies which are sufficiently important to warrant overriding a contractual choice of law stipulation is not possible. In general, however, statutes or common law which make a particular type of contract enforceable, e.g., usury laws, or which make a particular contract provision unenforceable, e.g., laws prohibiting covenants not to compete, or that are designed to protect a weaker party against the unfair exercise of superior bargaining power by another party, are likely to embody an important state public policy. [1] Courts have recognized that fair dealership laws fall into this latter category. E.g., Southern Intern. Sales v. Potter & Brumfield Div., 410 F. Supp. 1339, 1341 (S.D.N.Y. 1976) (choice of law clause specifying application of Indiana law to a contract between an Indiana manufacturer and Puerto Rican dealer not given effect in light of fundamental policy expressed in Puerto Rican Dealers' Contracts Act); Business Incentives Co., Inc. v. Sony Corp. of Amer., 397 F. Supp. 63, 67 (1975) (choice of law clause in contract between New York manufacturer and New Jersey corporation specifying New York law is ineffective where New Jersey Franchise Practice Act evinced a strong public state policy to protect small businesses from more powerful commercial giants) cf. Cutter v. Scott & Fetzer Co., 510 F. Supp 905, 909 (E.D. Wis. 1981) (the general endorsement of forum-selection clauses must yield to the legislature's specific pronouncements regarding dealerships); see also Effectiveness of Choice-of-Law Clauses, supra p. 7 at 1674. For example, in Southern Intern. Sales, the court observed that the strong legislative policy to protect dealers manifested in the Puerto Rican Dealers' Contracts Act could easily be circumvented were the court to announce a rule that would allow a manufacturer, by wielding its economic might against a distributor, to exact a stipulation as to governing law compelling the distributor to forsake the protection afforded him by the Puerto Rican legislature. Southern Intern. Sales, 410 F. Supp. at 1342. [2] Similarly in this case, the Wisconsin legislature intended by enactment of the WFDL [t]o protect dealers against unfair treatment by grantors, who inherently have superior economic power and superior bargaining power in the negotiation of dealerships ..., sec. 135.025(2)(b), Stats. The statement of purpose and policy contained in the statute sec. 135.025(2), set forth in full below, [2] coupled with the explicit directive that the effect of the WFDL may not be varied by contract or agreement and [a]ny contract or agreement purporting to do so is void and unenforceable to that extent ..., amply support this court's conclusion that a strong public policy is implicated in this case. Section 135.025(3); see also 66 Op. Atty. Gen. 11 (1977) (explicit provision whereby parties contract that dealership agreement will be governed by the laws of a state which has no fair dealership law is invalid; provision's enforcement would defeat strong Wisconsin public policy). Therefore the court will not honor the parties' choice of law clause. National does not argue that absent an effective choice of law provision Minnesota law would still apply. Rather, at oral argument and in its brief to this court it contends that Bush does not meet the Wisconsin statutory definition of dealer. We view this as an acknowledgment by National that Wisconsin law applies if the choice of law clause is disregarded. We therefore proceed to consideration of the dealership issues raised by National.