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Forum-selection and
choice-of-law clauses declared void

DePuy Synthes Sales v. Howmedica Osteonics (8th Cir 03/14/2022)
Sent to Custom Alerts™ subscribers on 03/15/2022

The 9th Circuit held that forum-selection and choice-of-law clauses requiring adjudication of contract disputes in New Jersey were void under California law.

WWaber was hired by Howmedica Osteonics Corp., and signed an employment contract with Howmedica’s parent company, Stryker Corporation. The contract included a restrictive one-year non-compete clause and forum-selection and choice-of-law clauses requiring adjudication of contract disputes in New Jersey.

Waber left Stryker to work at DePuy, a Howmedica competitor.

The court considered whether federal or state law governed the validity of a forum-selection clause. The court held that the state law applicable here, Cal. Labor Code 925(b), which grants employees the option to void a forum-selection clause under a limited set of circumstances, determined the question of whether Waber’s contract contained a valid forum-selection clause.

Section 925 as applied by the district court here is not a rule of state law that removed all discretion from a federal court on questions of venue. Rather, the provisions in 925 circumscribing the kinds of employment agreements permitted and allowing parties unrepresented by counsel to void a forum-selection cause under certain circumstances relate to the terms of the agreement between the parties and, at least to that extent, are contrary to or within the scope of 28 U.S.C. 1404(a). Waber’s voiding of the forum-selection clause in his employment contract under 925(b) excised the forum-selection clause from the agreement as presented to the district court. The court held that 1404(a) and Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988), did not broadly preempt all state laws controlling how parties may agree to or void a forum-selection clause.

Having found that Waber satisfied all the prerequisites of 925 and effectively voided the forum-selection clause under 925(b), the district court turned to the traditional 1404 factors under M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12–13 (1972), and held they favored denial of transfer.

The court held there was no error in applying the California choice-of-law rules here where there was no valid forum-selection clause. The court rejected Howmedica’s challenges. There was no error in the district court’s consideration of 925 as part of its transfer analysis. Howmedica was incorrect when it asserted that Bremen was inapplicable to adjudication of 1404(a) motions because Stewart limited Bremen to the context of forum non conveniens rather than transfer.

Finally, the district court did not abuse its discretion in finding that the forum-selection clause was void and unenforceable and that the modified Atlantic Marine Construction Co. v. United States District Court for the Western District of Texas, 571 U.S. 49, 62 n.5 (2013), analysis was thus inapplicable.

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