Federated Financial Corp. of America v. Jenkins (Lawyers Weekly No. 11-07-0918, 16 pp.) (Cressie H. Thigpen Jr., J.) Appealed from Wake County Superior Court. (James E. Hardin Jr., J.) N.C. App. Click here for the full-text opinion.
Holding: Even though the credit card agreement at issue contains a forum selection clause that says related litigation is to take place in Utah, since there is no rational nexus between Utah and either the parties or the contract transactions, the forum selection clause is unenforceable.
We affirm the trial court’s denial of defendant’s motion to set aside the default judgment against him.
While defendant lived in California, he opened a credit card account with Advanta Bank Corp., a Utah corporation. The credit card agreement said it was to be governed by Utah law. It also contained a forum selection clause pursuant to which defendant consented to personal jurisdiction in Utah courts and agreed that any lawsuit pertaining to his credit card account could be brought only in Utah.
Defendant relocated to North Carolina, and his credit card account became delinquent. Advanta sold defendant’s delinquent account to plaintiff, a Michigan corporation.
Plaintiff filed this lawsuit to collect on defendant’s delinquent account.
The trial court eventually granted plaintiff’s motion for discovery sanctions and ordered default judgment against defendant. The trial court then denied defendant’s motion to set aside the default judgment, and defendant appealed.
Neither party challenges the credit card agreement’s choice of law provision, so we apply Utah law.
A forum selection clause will be upheld so long as there is a rational nexus between the forum selected and either the parties to the contract or the transactions that are the subject matter of the contract.
We believe the contract language, “either the parties to or the actions contemplated by the contract” should be interpreted to reference plaintiff, not Advanta, even though plaintiff is not the original party to the agreement, but a successor in interest. Therefore, we review to determine whether there is a rational nexus between either plaintiff or defendant and the State of Utah.
Defendant is a citizen and resident of North Carolina and formerly a resident of California. Plaintiff’s corporate headquarters is in Michigan. Charges on the credit card were mostly incurred in California and North Carolina.
The only evidence of a rational nexus to Utah is defendant’s assertion that plaintiff is “registered to do business in the state of Utah” and “uses a third party contractor as it[s] registered agent” in Utah. We believe, under Utah law, this is insufficient to establish a rational nexus.
Based on the facts of this case, we conclude there is no rational nexus between the State of Utah and the parties to or the actions contemplated by the agreement. Therefore, we conclude the forum selection clause in the agreement is unenforceable under Utah law, and Utah does not have personal jurisdiction.
Defendant resides in North Carolina and made an appearance in this case without contesting personal jurisdiction; our courts have personal jurisdiction over him. The contract dispute is a justiciable matter cognizable in our trial courts; therefore, our courts have subject matter jurisdiction over this action.
The record shows that defendant had notice of the hearing on plaintiff’s motions. The evidence supports the trial court’s finding that defendant’s failure to appear resulted from communications between defendant and his counsel.
In his appeal of the trial court’s denial of his N.C. R. Civ. P. 60 motion, defendant’s only argument was based on a supposed lack of notice. Because the record shows he received adequate notice of the hearing, the trial court did not abuse its discretion in denying defendant’s Rule 60 motion.