Opinion ID: 1693770
Heading Depth: 1
Heading Rank: 3

Heading: Enforcement of the Outbound Forum-Selection Clause

Text: In their petition for a writ of mandamus, Procom, Leitch, and Crews contend that they have a clear legal right to have the outbound forum-selection clause enforced because, they say, Smith did not show that enforcement of the forum-selection clause would be unfair or unreasonable. This Court, in Ex parte Rymer, supra, stated: Alabama has adopted the majority rule that an outbound forum-selection clause should be enforced so long as enforcement is neither unfair nor unreasonable under the circumstances of the case. Professional Ins. Corp. v. Sutherland, 700 So.2d 347, 351 (Ala.1997). The party challenging the enforcement of such a clause has the burden of clearly establishing either `(1) that enforcement of the forum-selection clause[ ] would be unfair on the basis that the contract[]... [was] affected by fraud, undue influence, or overweening bargaining power or (2) that enforcement would be unreasonable on the basis that the chosen ... forum would be seriously inconvenient for the trial of the action.'  Sutherland, 700 So.2d at 352. 860 So.2d at 341. In Smith's response to the motion to dismiss, he asserted that the contract was affected by fraud because, he alleged, Crews and Leitch promised [him] at least one thousand ($1,000.00) per week. When they promised [him] that wage they did not intend to abide by the agreement. Smith also stated that [i]f permitted to proceed with discovery and trial of this issue [i.e., fraud], [he] will prove that the Defendants engaged in a consistent practice of shorting employees the agreed upon amount of wages. He stated in his affidavit that he knew of at least two other former employees of Procom whose employment contracts were breached in the same manner as [his] own and that he knew of three other former employees of Procom who never received the full amount of their reserve pay. In determining whether a contract has been affected by fraud, this Court has stated: [T]he proper inquiry is whether the forum-selection clause is the result of fraud in the inducement in the negotiation or inclusion in the agreement of the forum-selection clause itself. If the forum-selection clause is the result of fraud in the inducement, then the fraud exception to the enforceability of the clause applies. However, if the claim of fraud in the inducement is directed toward the entire contract, the fraud exception to enforcement of the forum-selection clause does not apply. Cf. Investment Mgmt. & Research, Inc. v. Hamilton, 727 So.2d 71, 78 (Ala.1999)(`[W]hen a claim of fraud in the inducement is directed toward the arbitration clause itself, the issue is adjudicated by the court. On the other hand, when a claim of fraud in the inducement is directed toward the entire contract ... the issue is subject to arbitration.'). Ex parte Leasecomm Corp., 879 So.2d 1156, 1159 (Ala.2003). Smith has not alleged that the forum-selection clause itself was affected by fraud; he has alleged only that he relied upon fraudulent statements pertaining to his salary when he entered into the employment contract. Therefore, he has failed to meet his burden of clearly establish[ing] that enforcement of the forum-selection clause was unfair because the clause was affected by fraud. Ex parte Rymer, 860 So.2d at 341. In his response to the defendants' motion to dismiss, Smith asserted also that the contract was affected by overweening bargaining power, stating in support of that assertion that Procom, Leitch, and Crews put the forum clause common in their Alabama employment contracts to disway [sic] employees and former employees from enforcing their employment agreements due to the cost of litigating the relatively small amounts at issue in Dallas, Texas. This conclusory statement does not establish that the employment contract was affected by overweening bargaining power; accordingly, Smith has failed to establish that enforcement of the outbound forum-selection clause would be unfair. Smith further contended in his response to the motion to dismiss that enforcement of the forum-selection clause would be unreasonable on the basis that Dallas, Texas would be seriously inconvenient for the trial of this action. Smith elaborated: Almost all of the relevant witnesses to this action are located in or about Jefferson County. Those who calculated payroll are located in Jefferson County. The relevant documents are all located in and around Jefferson County. Those who are aware of the day-to-day operations of [Procom] are located in Jefferson County. To try these issues in Dallas, Texas would require all of these witnesses and documentation located here to be transferred to Dallas. There are at least five witnesses that [Smith] will require to prove his case. The expense and time associated with transferring five people in addition to [Smith], and all relevant documents to Dallas to litigate makes trial of these issues thus seriously inconvenient. In Ex parte Rymer, supra, we stated: In order to demonstrate that the chosen forum is seriously inconvenient, the party challenging the clause must show that a trial in that forum would be so gravely difficult and inconvenient that the challenging party would effectively be deprived of his day in court. Ex parte Northern Capital Res. Corp., 751 So.2d [12] at 15 [(Ala.1999)]. `When an agreement includes a clearly stated forum-selection clause, a party claiming that clause is unreasonable and therefore invalid will be required to make a clear showing of unreasonableness. In determining whether such a clause is unreasonable, a court should consider these five factors: (1) Are the parties business entities or business persons? (2) What is the subject matter of the contract? (3) Does the chosen forum have any inherent advantages? (4) Should the parties have been able to understand the agreement as it was written? (5) Have extraordinary facts arisen since the agreement was entered that would make the chosen forum seriously inconvenient? We state these items not as requirements, but merely as factors that, considered together, should in a particular case give a clear indication whether the chosen forum is reasonable.'  Ex parte Northern Capital Res. Corp., 751 So.2d at 14. 860 So.2d at 342-43. First, Procom is a corporation, which, according to its petition for a writ of mandamus, hired Smith to supervise the activities of [its] sales force and to perform other duties to be determined from time to time by Procom. The record does not establish Smith's profession before his employment with Procom, but we can infer that he had sufficient business acumen so as to be qualified to be hired in a supervisory capacity. Second, the contract was an employment agreement between Procom and Smith. Third, Procom's headquarters are located in the chosen forum, Dallas, Texas, and according to its petition, witnesses and documents necessary for [Procom, Leitch, and Crews's] defense are located in Dallas County, Texas. Also, Leitch and Crews are residents of Dallas, Texas. Fourth, Smith does not allege that he was unable to understand the terms of the employment contract, and the outbound forum-selection clause is clearly and unambiguously written. Fifth, Smith does not allege that extraordinary circumstances have arisen that would make Dallas, Texas, seriously inconvenient as a forum. We conclude that a consideration of these five factors, as applied to this case, does not clearly indicate that a trial in Dallas, Texas, would be so difficult and inconvenient that it would effectively deprive Smith of his day in court. Ex parte Rymer, supra. As we have noted, the forum-selection clause also provides that the prevailing party shall be reimbursed by the other party for all costs and expenses (including, without limitation, attorney's fees and costs) incurred in connection with such action or proceeding. Accordingly, Smith failed to clearly establish that enforcement of the outbound forum-selection clause would be either unfair or unreasonable.