Civil Practice – Forum-Selection Clause – Sovereignty v. Geography

FindWhere Holdings Inc. v. Systems Environment Optimization LLC (Lawyers Weekly No. 10-01-1133, 7 pp.) (Davis, J.) No. 09-2155, Nov. 29, 2010; USDC at Alexandria, Va. 4th Cir. Click here for the full text of the opinion.

Holding: A forum selection clause choosing “the courts of the State of Virginia” means Virginia state courts, not federal courts in Virginia, and the 4th Circuit follows its sister circuits and upholds remand of this contract dispute to a Virginia state trial court.

Plaintiff FindWhere sells global positioning systems and provides follow-up tracking services. FindWhere and defendant Homeland Security Networks entered into a contract in May 2008 wherein Homeland agreed to act as FindWhere’s exclusive reseller in several countries in the Middle East. FindWhere sued Homeland in Loudoun County Circuit Court in Virginia for breach of contract. Homeland removed the case to federal court, and the district court remanded to state court, based on the forum selection clause in the parties’ contract.

That clause provided that disputes or legal actions arising out of the agreement “shall lie exclusively in, or be transferred to, the courts of the State of Virginia, USA.”

In remanding the case, the district court applied the widely accepted rule that forum selection clauses that use the term “in a [state]” express the parties’ intent as a matter of geography, permitting jurisdiction in both the state and federal courts of the named state, whereas forum selection clauses that use the term “of [a state]” connote sovereignty, limiting jurisdiction over the parties’ dispute to the state courts of the named state.

We think the rule is sound and join our sister circuits in adopting it here. The forum selection clause before us is unambiguously expressed in terms of sovereignty and therefore excludes jurisdiction in the federal courts in Virginia. As federal courts are not courts “of” the state of Virginia, the contract language at issue refers to sovereignty rather than geography and limits jurisdiction over the parties’ dispute to state court.

The district court did not err when it remanded this action to state court based on the forum selection clause before us.